EQUITY RESIDENTIAL (EQR)

Total Shareholder Return. The Company achieved its relative Total Shareholder Return goal which was to place the Company’s Total Shareholder Return results at No. 1 or No. 2 among an agreed upon peer group that included five other large public multifamily REITs. The Company’s Total Shareholder Return (obtained from Bloomberg) for 2008 of -13.9% placed us at No. 1, or 5.4 percentage points above the No. 2 company. In addition, the Company placed No. 1 with its trailing 24-month return of -19.5% (7.8 percentage points above the No. 2 company) and with its trailing 36-month return of -4.5% (3.7 percentage points above the No. 2 company). The peer group consisted of

Apartment Investment & Management Company, AvalonBay Communities, Inc., BRE Properties, Inc., Camden Property Trust and UDR, Inc. These are the Company’s largest competitors with diversified apartment portfolios located in many of the Company’s core markets. While the Company outperformed on a relative basis, absolute Total Shareholder Return was negative in 2008, reflecting an unprecedented economic crisis and significant job losses for the year that pushed Total Shareholder Return for trailing 2-year and 3-year periods into negative territory as well.

Funds from Operations (“FFO”) and Dividend Growth. The Company provided original guidance for 2008 FFO of $2.45 – $2.60 per share, reflecting expected growth of 2.51% – 8.79%. Guidance was later revised to $2.48 – $2.53 per share. During 2008, the Company recorded an impairment charge of approximately $116.4 million to account for reductions in the value of certain of its land holdings. This charge negatively impacted FFO by $0.40 per share, reducing 2008 FFO to $2.18 per share. The Company’s pre-impairment FFO for the full year was $2.58 per share. In 2008, dividends totaled $1.93 per share, compared to $1.87 in 2007 and $1.79 in 2006.

Balance Sheet and Liquidity Management. The liquidity position achieved by the Company in the face of the credit crisis was its most significant accomplishment for 2008. The Company’s ongoing plan is to achieve its operating goals while maintaining a strong balance sheet and effectively managing liquidity. With the proceeds from three secured loans that closed in 2008, and by maintaining an aggressive disposition pace with a conservative acquisition and development strategy, the Company positioned itself to end the year with approximately $1.3 billion available on its revolving credit facility and approximately $1.02 billion of unrestricted cash and federally insured investment notes. This should allow the Company to fund its 2009 and 2010 debt maturities and construction obligations with no additional required capital market activities.

Capital Allocation. As noted above, the Company responded to rapidly changing market conditions by significantly reducing property acquisitions while continuing to dispose of assets. In 2008, the Company acquired seven properties with 2,141 apartment units for $380.7 million, and one uncompleted development property for $31.7 million, and sold 41 properties, consisting of 10,127 units, at an aggregate sale price of $896.7 million. The Company realized strong returns on these disposition assets, which generated an aggregate unlevered internal rate of return of 10.6%. The Company completed six developments with 1,558 units in core markets such as Southern California, Boston, Orlando and Seattle, generally on time and under budget. Capital costs for these projects approximated $422.2 million. In addition, 130 condominium units were sold for an aggregate sale price of $26.1 million, and one land parcel was sold for $3.3 million.

Same Store Results. The Company’s revenue goal was to deliver market leading same store growth in every submarket in which we operate. While the Company had a successful year-over-year increase in same store revenue of 3.2%, revenue growth in most submarkets significantly outperformed most multifamily operators for which data is available. An analysis of 65 head-to-head market comparisons with seven large competitors showed the Company’s results equaled or were better than competitors in 46 instances. The assessment was based on analysis of publicly available industry research and the Company’s market data by market and submarket. The same store expense goal was to deliver controllable expense growth within budget. Original guidance for same store expenses of 2.5 – 3.25% was reduced to 2.25% later in the year. The Company reported full-year actual results of only 2.2% expense growth over last year’s modest 2.1% growth. The Company increased net operating income by 3.8% for its 115,051 same store apartment units in 2008.

Leadership. Employee engagement and retention are the key metrics for assessing leadership performance. The Company increased its score to 82% on the 2008 employee engagement survey, compared to 79% in 2007. The Company’s employee retention reached an all-time high of 76.5% in 2008, an improvement of 7 percentage points over the previous year’s rate.

General and Administrative Costs (“G&A”). The Company recognizes its obligation to manage overhead, particularly in light of the significant reduction in apartment units under ownership/ management that has occurred in recent years. For 2008, we reported G&A costs totaling $44.98 million versus $46.78 million in 2007, a 3.9% decrease. Property management costs/overhead decreased in excess of $28 million from 2006 to 2008 as our number of units decreased by over 50,000 since the beginning of 2006.