During 2003, we raised our quarterly cash dividend on three separate occasions, representing a cumulative increase in our cash dividend per common share of 16%. These increases reflect our policy to seek managed growth in dividends while retain- ing a significant level of free cash flow. During 2003, we generated free cash flow (funds from operations less straight-line rent adjustments, capital expenditures and dividends on common stock) in excess of $30 million, providing substantial fund- ing for our core organic growth. Additionally, our dividend payout ratio remains among the industry’s lowest at approximately 52% for the year ended December 31, 2003. This will provide both near-term and long-term opportunities for increases in div- idends to our fellow shareholders. 

We believe that our performance has been consistently strong during substantially varying business cycles. Our growth has been accomplished without compromising our strong and flexible capital base. We take pride in the achievement of these significant milestones and in our quest to continually create and increase shareholder value. 

THE LIFE SCIENCE INDUSTRY New treatments and products are not only achieving breakthroughs in the lab, they are making growing contributions to our economy, our homeland and national defense, and helping us to live better, healthier, and safer lives. In 2003, the National Institutes of Health (“NIH”) instituted aggressive initiatives with the goal of acceler- ating medical discovery to ensure that the science being conducted in labspace translates directly into the overall enhancement of human health. The NIH Roadmap immediately addresses the need for increased speed with which knowledge from the lab is applied to the development of new and effective prevention strategies, diagnositics and treatments. The innovations resulting from a direct response to emerging needs, ultimately, transfer to the benefit of health care providers, and, in turn, to the public. 

The life science industry will advance the frontiers of medical science by continuing to more rapidly develop new life-sav- ing, cost-effective medicines, vaccines, and other therapies to predict, prevent, diagnose, treat and cure disease. New discov- eries will be made which will enable patients to lead longer, healthier, happier and more productive lives. We are comfortable with the sustainability of life science industry research and its economic drivers, and are optimistic about its future space requirements. It is important to note that the life science industry is becoming an increasingly significant component and ben- eficiary of our country’s critical bioterrorism research and development programs. 

It is estimated that pharmaceutical research and development expenditures exceeded approximately $33 billion in 2003, an increase over the previous year. Biotechnology related research spending exceeded $20 billion in 2002. The budget for the National Institutes of Health has doubled between 1998 and 2003, and is expected to approximate $28 billion in 2004. Separate life science related governmental expenditures, including the National Science Foundation, approximated $6 billion in fiscal year 2003. In addition, newly proposed governmental legislation should provide approximately $2.5 billion in the short term and a much larger, permanent, indefinite funding authority for research and procurement of defensive agents to chemical, bio- logical and radiological weapons. 

In 2003, the Food and Drug Administration made significant progress in implementing innovative, industry-friendly policies designed to improve efficiency and speed in the drug review process. 

