EQUITY RESIDENTIAL (EQR)

Total Shareholder Return. In a year that saw negative returns from the entire residential REIT sector, the Company’s total shareholder return was -24.7%, as compared to a positive 35.7% the previous year. Our 2007 return out-performed that of our most comparable multi-family competitors.

Dividend Increase. The Company increased the dividend on common shares for the Fourth Quarter to $0.4825 per share, for a record-high annual dividend of $1.87 per share in 2007.

Financial Results. The Company increased Funds from Operations (FFO) to $2.39 per share compared to $2.27 per share for 2006. Revenue from same-store properties increased by 4.3%; same- store expenses increased by only 2.1%; and same-store net operating income increased by 5.6%.

Portfolio Transformation. The Company continued the transformation of its portfolio by selling assets, typically in smaller, second-tier markets, such as Charlotte, Minneapolis and Nashville, and buying assets in core markets, such as the New York metropolitan area and Southern California. These core markets share our target characteristics of high barriers to entry, higher than average job growth, large renter populations, an attractive quality of life, and high single-family home costs. In 2007, the Company acquired 36 properties with 8,167 apartment units for $1.7 billion, while selling 73 properties with 21,563 apartment units for $1.9 billion, generating an unleveraged internal rate of return of 11.1%. In addition, the Company sold 617 condominium units for $164.2 million.

Development. The Company completed four development projects: Mozaic in Los Angeles, CA (272 units); Vintage in Ontario, CA (300 units); Highland Glen II in Westwood, MA (102 units); and Bella Vista Phase III in Woodland Hills, CA (264 units). We started six projects with a total of 1,676 units located in the following locations: Brooklyn, NY; Orlando, FL; Montclair, NJ; South Miami/Coral Gables, FL; and Seattle, WA. Three completed development assets were stabilized at a combined average yield of 7.0%. We opened the first of our buildings at West End Apartments in Boston, leasing 90% of the apartments, as well as opening a new 556-space underground parking garage.

Strong Employee Engagement. The Company achieved a score of 79% on its 2007 employee engagement survey, substantially higher than the average of other national companies. The Company also better aligned property management leaders, both corporate and on-site, with an enhanced performance management program that increases focus on key performance drivers and gives more visibility to performance metrics.