The following table is a summary of our lease activity for the year ended December 31, 2003, computed on a GAAP Basis and on a Cash Basis: Rental TI's/Lease Average Number Square Expiring New Rate Commissions Lease of Leases Footage Rates Rates Changes Per Foot Terms Lease Activity Lease Expirations Cash Basis 76 882,564 $ 23.44 - - - - GAAP Basis 76 882,564 $ 22.80 - - - - Renewed / Releasable Space Leased Cash Basis 37 519,724 $ 24.32 $ 23.78 -2.2% (1) $ 5.76 4.1 Years GAAP Basis 37 519,724 $ 23.60 $ 24.97 5.8% (1) $ 5.76 4.1 Years Month-to-Month Leases In Effect Cash Basis 17 64,510 $ 19.95 $ 20.04 0.5% - - GAAP Basis 17 64,510 $ 19.75 $ 20.04 1.5% - - Redeveloped/Developed/ Vacant Space Leased Cash Basis 29 265,366 - $ 22.43 - $ 6.40 4.5 Years GAAP Basis 29 265,366 - $ 23.77 - $ 6.40 4.5 Years Leasing Activity Summary Excluding Month-to-Month Leases Cash Basis 66 785,090 - $ 23.32 - - - GAAP Basis 66 785,090 - $ 24.56 - - - Including Month-to-Month Leases Cash Basis 83 849,600 - $ 23.07 - - - GAAP Basis 83 849,600 - $ 24.22 - - - Excluding a lease for 21,316 square feet in the San Francisco Bay market, rental rates for renewed or released space were on average 2.5% higher than expiring rates on a Cash Basis and 9.7% higher than expiring rates on a GAAP Basis. (1) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which we believe we are exposed is interest rate risk, which may result from many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control. In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, caps, floors and other interest rate exchange contracts. The use of these types of instruments to hedge a portion of our exposure to changes in interest rates carries addi- tional risks, such as counter-party credit risk and the legal enforceability of hedging contracts. Our future earnings, cash flows and fair values relating to financial instruments are primarily dependent upon prevalent market rates of interest, such as LIBOR. However, our interest rate swap agreements are intended to reduce the effects of interest rate changes. Based on interest rates at, and our swap agreements in effect on, December 31, 2003, we estimate that a 1% increase in interest rates on our unsecured line of credit and unsecured term loan, after considering the effect of our interest rate swap agree- ments, would decrease annual future earnings and cash flows by approximately $1.4 million. We further estimate that a 1% decrease in interest rates on our unsecured line of credit and unsecured term loan, after considering the effect of our interest rate swap agree- ments in effect December 31, 2003, would increase annual future earnings and cash flows by approximately $1.4 million. A 1% increase in interest rates on our secured debt and interest rate swap agreements would decrease their aggregate fair value by approx- imately $15.3 million. A 1% decrease in interest rates on our secured debt and interest rate swap agreements would increase their aggregate fair value by approximately $16.4 million. 31