P 5 At year-end, we had 17 properties in our value creation redevelopment pipeline, comprising a total of approximately 669,000 square feet which we are redeveloping, O P E R AT I O N A L R E V I E W A N D F I N A N C I A L H I G H L I G H T S Once again, and for every quar- ter as a publicly-traded company, our full-year growth in GAAP net operating income for our static pool of “same properties” was positive, (approximately 2.2% for the year ended December 31, 2004) which is impressive considering most other REITs have struggled in recent years to achieve positive same property results.These internal growth metrics represent broad-based solid performance in our markets. Contributing to this growth is the fact that approximately 89% of our leases have annual rental rate increases, generally ranging from 3% to 3.5%. Rental rate increases on the rollover of leases in our portfolio approximated 9%, on a GAAP basis, driving our internal core growth. Alexandria had a very strong year, signing a total of 78 leases for approximately 1,146,000 square feet of space, with solid average rental rate increases.As of December 31, 2004, we also reported total occupancy of approximately 95.2% for our operating portfolio. Among a wide variety of life science funding sources, it is estimated that pharmaceutical research and development expen- ditures have exceeded $38 billion in 2004, a 12% increase over the previous year. Biotechnology related research spending exceeded $20 billion in 2002. The budget for the National Institutes of Health more than doubled between 1998-2004, and is expected to approximate $29 billion in 2005. Separate life sci- ence related governmental expenditures, including the National Science Foundation, approximate $6 billion in fiscal year 2005. In addition, Project Bioshield, new legislation which Congress passed last year, provides $5.6 billion over ten years for research and procurement of defensive agents to chemical, biological and radi- ological weapons. science industry is increasingly becoming a significant compo- nent and beneficiary of our country’s critical bioterrorism research and development programs. JERRY M. SUDARSKY CHAIRMAN OF THE BOARD