JERRY M. SUDARSKY CHAIRMAN OF THE BOARD In December 2003, the Medicare modernization and drug coverage legislation was signed into law. Its six core principles for expanding coverage were incorporated into the law, as well as partial reversals to recent reimbursement cuts to dozens of important medicines. OPERATIONAL REVIEW AND FINANCIAL HIGHLIGHTS Our full-year growth in GAAP net operating income for our static pool of “same properties” approximated 1.8%, and cash net operating income for these properties grew by approximately 3.0%. These internal growth metrics represent broad-based solid performance in our markets. Contributing to this growth is the fact that approximately 93% of our leases have annual rental rate increases, generally with minimum annual increases approx- imating 3 to 3.5%. Rental rate increases on the rollover of leases in our portfolio approximated 6%, driving our internal core growth. During 2003, Alexandria signed a total of 66 leases for approximately 785,000 square feet of space, averaging consis- tent rental rate increases. As of December 31, 2003, we also reported total occupancy of approximately 93.9%, excluding our properties under redevelopment.  At year-end, we had ten properties in our value creation redevelopment pipeline, comprising a total of approximately 359,000 square feet that we are redeveloping. We have also identified approximately 411,000 square feet of additional redevel- opment opportunities embedded in our existing portfolio. In a very cost-conscious environment, we have continued to focus on effectively controlling the costs of our operations and have continued to maintain strong operating margins, which approx- imated a very healthy 79% during 2003, and have maintained strong year-end interest and fixed charge coverage ratios of 4.08 and 3.30, respectively. In addition, at year-end, we had a development land bank together with expansion opportunities embedded in our port- folio approximating 1,387,000 square feet. During 2003, we also benefited from external growth with the closing of approxi- mately $52 million in acquisitions, adding approximately 263,000 square feet to our portfolio. Our external growth strategies, once again, remained highly selective and focused on our key life science cluster markets as we continued to expand and strengthen our strategic franchise.  During 2003, we sold three properties at a net gain of approximately $8.3 million. These sales reflect our program to crit- ically evaluate the strategic value of all of our properties on an ongoing basis, and sell selected properties when appropriate, so that the resulting capital may be prudently recycled. These sales provided more than $42 million in recycled capital to be put to work on more strategic opportunities for growth in 2004 and beyond. We continued to execute our strategy of maintaining a strong, conservative, flexible and transparent capital structure. We have experienced solid growth while steadfastly maintaining balance sheet strength and flexibility. Funds From Operations (“FFO”) for the year 2003 was approximately $81.4 million on revenues of approximately $160.6 million. Our debt to total mar- ket capitalization at year-end approximated 37%.  OPERATION OUTREACH Alexandria is proud to have initiated its Operation Outreach program in 2003. Our goal was to reach out to the families of deployed soldiers (preferably National Guard or Reserve personnel who were activated and 14