UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              --------------------

                                    FORM 10-K
(Mark One)
  |X|       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1996

                                       OR

  |_|     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________ to ________

                         Commission file number 1-13256
                             ______________________

                       EVANS WITHYCOMBE RESIDENTIAL, INC.
             (Exact name of Registrant as specified in its charter)

           Maryland                                                86-0766008
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

   6991 East Camelback Road
      Scottsdale, Arizona                                           85251
(Address of Principal Executive                                  (Zip Code)
           Offices)

       Registrant's telephone number, including area code: (602) 840-1040
                            ________________________

           Securities registered pursuant to Section 12(b) of the Act:

                                                          Name of each exchange
     Title of each class                                   on which registered
     -------------------                                   -------------------
Common Stock, $.01 par value                             New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:
                                      None

Indicate  by check  mark  whether  the  Registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No 
                                             ---    ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  (based on the closing  price of such  stock,  as reported on the New
York Stock Exchange, on January 30, 1997) was approximately $293,000,000.

The number of shares outstanding of the Registrant's Common Stock, as of January
30, 1997, was 18,439,134 shares.
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item No.                                                                                            Page No.
<S>            <C>                                                                                      <C>
                      PART I

1.             Business ............................................................................     1
2.             Properties ..........................................................................     6
3.             Legal Proceedings ...................................................................     8
4.             Submission of Matters to Vote of Stockholders .......................................     8
4(a)           Executive Officers of the Registrant ................................................     8

                      PART II

5.             Market for the Registrant's Common Stock and Related Stockholder Matters ............     9
6.             Selected Financial Data .............................................................    11
7.             Management's Discussion and Analysis of Financial Condition and
                 Results of Operations .............................................................    13
8.             Financial Statements and Supplementary Data .........................................    23
9.             Changes in and Disagreements with Accountants on Accounting and
                 Financial Disclosure ..............................................................    23

                      PART III

10.            Directors and Executive Officers of the Registrant ..................................    23
11.            Executive Compensation ..............................................................    26
12.            Security Ownership of Certain Beneficial Owners and Management ......................    33
13.            Certain Relationships and Related Transactions ......................................    35
14.            Exhibits, Financial Statement Schedules and Reports on Form 8-K .....................    36
</TABLE>
<PAGE>
                                     PART I


ITEM 1. BUSINESS

General

Evans Withycombe  Residential,  Inc. was formed in August 1994 as a self-managed
and  self-administered  real estate  investment trust to continue and expand the
multifamily  apartment  operations  of  Evans  Withycombe.  Unless  the  context
otherwise  requires,  references  to the  "Company"  shall include the Company's
predecessor,  Evans  Withycombe,  Inc.,  and its  affiliates,  predecessors  and
partners (collectively, "Evans Withycombe"), Evans Withycombe Residential, L.P.,
Evans Withycombe Finance Partnership, L.P. and Evans Withycombe Management, Inc.
The Company is regionally focused in Arizona and Southern California.

The Company's portfolio consists of stabilized communities and communities under
construction and in lease-up:

o    Stabilized  Communities.  At December  31,  1996,  the  Company  owned  and
     managed 49  stabilized  apartment  communities  (a property  is  considered
     stabilized when it reaches 93 percent  occupancy) located in metro Phoenix,
     Arizona; metro Tucson, Arizona; and Riverside/San  Bernardino,  California.
     The stabilized  portfolio increased 2,852 units or 25.8 percent from 11,053
     units at December 31, 1995 to 13,905 units at December 31, 1996.

o    Communities Under Construction And In Lease-Up.  At  December 31, 1996, the
     Company owned five apartment communities under construction and in lease-up
     with a total of 1,078  apartments.  Three  of  these  communities  were new
     developments and two were expansions of existing  communities  owned by the
     Company.

Company Formation

The Company was incorporated on May 24, 1994 to develop, acquire, own and manage
upscale  multifamily  apartment  communities.  On August 17,  1994,  the Company
completed an initial public offering (the "Initial Public Offering") and engaged
in  various  formation  transactions  designed  to  transfer  ownership  of  the
communities  and other  assets of the  predecessor  company to Evans  Withycombe
Residential,  L. P. (the "Operating  Partnership") or Evans  Withycombe  Finance
Partnership, L.P. (the "Financing Partnership"). The Company is the sole general
partner of and owned a 79.7 percent  interest in the  Operating  Partnership  at
December 31, 1996.  The Company  also holds a  noncontrolling  interest in Evans
Withycombe Management, Inc. (the "Management Company").

The Company elected to be taxed as a real estate  investment  trust ("REIT") for
Federal income tax purposes. A corporate REIT is a legal entity which holds real
estate  interests  and,  through  payments  of  dividends  to  shareholders,  is
permitted  to  reduce  or avoid  the  payment  of  federal  income  taxes at the
corporate  level.  The Company was  incorporated  under the laws of the State of
Maryland in May 1994. The Company's  principal  executive offices are located at
6991  East  Camelback  Road,  Suite  A-200,  Scottsdale,  Arizona  85251 and its
telephone number is (602) 840-1040. To maintain the Company's  qualifications as
a REIT while  realizing  income  from its fee  management  and  related  service
business,   the  Company's  management  operations  are  conducted  through  the
Management Company pursuant to the terms of a management agreement.

Company Advantages

The Company believes that the following factors have accounted for the Company's
success and will contribute to the Company's prospects for future growth:

o        Regional  Focus.  The Company has focused on becoming a major  presence
         in each of its  markets,  allowing  it to  capitalize  on its  superior
         customer   service,   product  design  and  property   locations  while
         establishing and maintaining a strong brand identity. The Company seeks
         to operate in markets where population and employment  growth rates are
         expected to exceed the  national  averages and where it believes it can
         become  one  of the  regionally  significant  owners  and  managers  of
         multifamily apartment properties.
                                       1
<PAGE>
              Arizona.  The Company's size and prominence in its primary Arizona
              markets  provide  it  with a  number  of  competitive  advantages,
              including  superior  market  knowledge  resulting  in choice  site
              selection,  superior  employee  training  and  retention,  product
              differentiation,  economies of scale in operations and the ability
              to utilize specialized marketing techniques.

              California.  After  conducting  an extensive  study of a number of
              potential  markets  within its region,  the Company has determined
              that certain markets in Southern  California  present  significant
              opportunities for growth and attractive investment  opportunities.
              The Company has  acquired  1,900 units in this market and believes
              that  properties  continue  to be  available  for  purchase in the
              market at prices  below  replacement  costs which could  result in
              growth and attractive yields for the Company.

o        Property Locations. The Communities are located in growing  sub-markets
         in Phoenix and Tucson, Arizona and Southern California. The Communities
         are in  sub-markets  close to areas of employment,  transportation  and
         shopping,   principally   in   "in-fill"   areas  and  master   planned
         communities.

o        Reputation for Quality. As a long-term investor,  the Company  develops
         and  acquires its  communities  for  long-term  value.  The  properties
         developed  by  the  Company   share  an  innovative   design   approach
         characterized  by  high-quality  construction,   architectural  detail,
         attractive  landscaping,  extensive  amenities  and interior  features.
         Similarly,  in seeking acquisition  properties,  the Company identifies
         properties  which  after  refurbishment  meet the same  standards.  The
         Company's  reputation  for quality in its markets has led to success in
         obtaining development entitlements and brand name identification in its
         primary markets.

o        Experienced  Management  in  Fully-Integrated  Organization.   With  an
         average of over 18 years in the  multifamily  apartment  business,  the
         Company's   executive   management  team  has  extensive   development,
         construction,   acquisition,   refurbishment,  marketing  and  property
         management  experience,  and  has  gained  in-depth  knowledge  of  the
         multifamily  apartment  industry  and  the  Company's  markets.  Of the
         Stabilized Communities, the Company has developed 19 new properties and
         9 expansions to existing properties consisting of 5,682 apartments.  It
         has  acquired  and  refurbished  30  properties   consisting  of  8,223
         apartments.

o        Well-Trained Workforce. The Company believes that employee training and
         retention  have been  integral to its  success.  The  Company  conducts
         numerous  training  sessions  and  prides  itself  on the  quality  and
         experience of its employees.  The Company's size and  concentration  in
         its  market  provides   qualified   employees  with  opportunities  for
         advancement  within the Company and contributes to employee  retention.
         The Company believes employee stability  enhances operating  efficiency
         and productivity.

o        Service-Oriented Philosophy. The Company will continue its tradition of
         focusing on extensive  resident amenities and customer service designed
         to maintain  high  occupancy,  premium  rental  rates and low  resident
         turnover.  By  providing  efficient  service  and  soliciting  customer
         feedback,  the Company  believes it  maintains a high level of customer
         satisfaction  which results in lower turnover and more frequent  rental
         referrals by existing residents.  Emphasizing  product  differentiation
         and  customer  service,  the  Company  has  created  and  continues  to
         strengthen its brand image in its primary markets.

The above  statements  regarding the Company's  expectations  and projections of
population  and  employment  growth  rates  and  household  formations,  and the
availability  of properties for purchase are  forward-looking  and involve risks
and uncertainties  beyond the Company's control.  No assurance can be given that
actual results will meet such expectations and projections.
                                       2
<PAGE>
Growth Strategy

The Company's primary business  objectives are to maximize the current return to
shareholders through increases in cash flow available for distribution per share
and to increase long-term total returns to shareholders  through appreciation in
the value of the common  shares.  The Company  intends to grow by improving cash
flow from existing properties through intensive management, focusing on resident
satisfaction and retention,  increasing rents and community occupancy levels and
controlling  operating  expenses.  The Company's  strategy also includes  growth
through development and acquisition of multifamily properties which will provide
both favorable initial returns and long-term growth prospects.

o        Growth From Existing  Properties.  The Company  believes that cash flow
         from existing properties will improve as supply and demand of apartment
         units  stabilize  in Tucson and  certain  Phoenix  sub-markets,  as the
         Southern California rental market continues to improve, and through the
         Company's property  management  programs.  The property management team
         for  each  apartment   community   includes   on-site   management  and
         maintenance  personnel.  The property  management teams perform leasing
         and rent collection  functions and coordinate  resident  services.  All
         personnel are extensively  trained and are encouraged to continue their
         education through both Company-sponsored and outside training. Property
         management   personnel   utilize   state-of-the-art   on-site  computer
         management   systems  to  assist  in  the  timely   leasing  of  vacant
         apartments, collection of rents, maintenance management and delivery of
         services  to the  apartment  residents.  In  accordance  with  the REIT
         requirements  of the  Internal  Revenue  Code of 1986,  as amended (the
         "Code"),  certain of the services with respect to the  communities  are
         provided through independent contractors.

         The focus of the Company's on-site  management  program is on providing
         prompt,  courteous and responsive service to its residents. The Company
         believes  that a strong  resident  retention  program  that  emphasizes
         customer  service  reduces the  Company's  resident  turnover  rate and
         encourages  residents  to refer new  customers.  The  Company  solicits
         resident  feedback and responds to  maintenance  requests on a same day
         basis and provides 24 hour a day emergency maintenance services.

         The  Company  conducts  periodic  capital  and  preventive  maintenance
         programs  at  each   Community.   In  addition,   periodic   preventive
         maintenance  checks  are  made in each  apartment,  pursuant  to  which
         appliances,  heating and cooling  systems and  apartment  interiors are
         inspected  and serviced as necessary.  The Company  believes that these
         programs  lower  operating  costs  over  the  life of the  Communities,
         increase the  long-term  value and maintain the market  position of the
         Communities.

o        Development  Strategy.  The  Company  seeks to  develop  properties  in
         markets  where  it  discerns  a  strong   demand,   which  the  Company
         anticipates  will  enable it to  achieve  attractive  rates of  return.
         Communities  currently under construction and the number of communities
         stabilized  since the Initial Public Offering are specific  examples of
         the   Company's   implementation   of  its  growth   strategy   through
         development.

         The Company develops its communities in markets where resident profiles
         justify the development of high quality  apartments  offering extensive
         resident  amenities and services.  In evaluating  whether to develop an
         apartment  community in a  particular  location,  the Company  analyzes
         relevant demographic,  economic and financial data.  Specifically,  the
         Company considers the following  factors,  among others, in determining
         the viability of a potential new apartment community: (i) income levels
         and employment growth trends in the relevant market, (ii) uniqueness of
         location,  (iii)  household  growth and net  migration  of the relevant
         market's  population,  (iv) supply/demand  ratio,  competitive  housing
         alternatives,  sub-market occupancy and rent levels and (v) barriers to
         entry that would limit  competition.  The Company  currently intends to
         develop apartment communities in select sub-markets in the Phoenix area
         and  intends to develop  communities  in its  California  markets  when
         market conditions warrant. Based on current market conditions and until
         such  time  as  market  conditions  warrant,  the  Company  intends  to
         discontinue  development  in its  Tucson  market  upon  completion  and
         stabilization of the current two projects.

o        Acquisition  Strategy.  The Company believes that it is well positioned
         to take advantage of market timing  opportunities  in certain  Southern
         California markets,  which will permit it to acquire existing apartment
         properties at favorable prices.  The Company focuses on properties with
         below market  occupancies  and 
                                       3
<PAGE>
         rents,  so that it can benefit  both from  property  repositioning  and
         market  improvements.  The target acquisition  properties will often be
         under-managed,  but  fundamentally  sound  properties.  Improvements to
         landscaping,  recreational amenities, and apartment interiors,  coupled
         with more effective management and marketing, may result in significant
         revenue increases over revenue levels at the time of acquisition.  Such
         repositioning   may  require   substantial   expenditures  for  capital
         improvements, refurbishments and marketing.

         The  Company  believes  that  its  status  as a  publicly  traded  REIT
         conducting  business  through the  Operating  Partnership  enhances its
         ability  to  acquire  properties  or  development  sites  by  providing
         property sellers a means to defer federal income taxes on gains through
         the use of units of partnership  interest in the Operating  Partnership
         ("Units") as consideration for the acquisition.  Units were utilized in
         the  acquisition  of Acacia Creek in the first  quarter of 1995 and The
         Ashton in the fourth quarter of 1995. In addition, the Company's access
         to the capital markets  provides for additional  financing  flexibility
         for acquisitions.

o        Disposition Strategy: The Company may, from time to time, elect to sell
         certain  of its  properties  or  exchange  such  properties  for  other
         properties  in a tax-free  exchange  when it believes  that such assets
         could be better deployed elsewhere.

o        Third Party Fee Management Business. The Company succeeded to the third
         party property  management  activities of its predecessor.  Although it
         contributes  a small part of the  Company's  revenues,  the  Management
         Company  continues  to  manage  multifamily  properties  owned by third
         parties.   The  fee  management  business  is  highly  competitive  and
         fragmented.  The  Company's  competitors  include a  variety  of local,
         regional and national firms with no one firm  controlling a significant
         market share in the Company's markets.  The Company will take advantage
         of its  reputation  and  experience  as a property  manager  and accept
         property  management  assignments  that it expects to be profitable and
         which fit well with the Company's property portfolio.

The   Company's   growth   strategies   stated  above   include   estimates  and
forward-looking  statements  and prospects  regarding,  among other things,  the
stability of occupancy and rent levels in the Company's  markets and its ability
to  acquire   existing   apartment   communities  at  favorable   prices.   This
forward-looking   information   involves  risks  and  uncertainties  that  could
significantly  impact the  Company's  ability to  successfully  implement  these
strategies.  Among  the  factors  that  could  cause  actual  results  to differ
materially  from the  forward-looking  statements  above are:  the timing of the
Company's acquisitions and planned development of new, and expansion of existing
communities;   the  actual  costs   associated   with  such   acquisitions   and
developments;  the demand for  apartments  in its  markets;  the strength of the
local economies; and the Company's ability to successfully expand its operations
into  Southern  California,  a market  in  which  it did not have any  operating
experience prior to 1995.

Competition

The Communities  are located in areas that include other  apartment  communities
and that may include new apartment communities that are under construction.  The
number of competitive  communities in a particular  area could have an effect on
the Company's  ability to lease  apartments at the  Communities  or at any newly
developed or acquired  properties  and on the rents  charged by the Company.  In
addition,  other forms of housing,  such as single family  homes,  townhomes and
condominiums  provide  alternatives  to  potential  residents  of  high  quality
apartment complexes like the Communities.

Environmental Matters

Under  various  federal,  state and local  environmental  laws,  ordinances  and
regulations,  a current or  previous  owner or  operator  of real  estate may be
required to investigate and clean up hazardous or toxic  substances or petroleum
product  releases at such  property,  and may be held  liable to a  governmental
entity  or to third  parties  for  property  damage  and for  investigation  and
clean-up costs incurred by such parties in connection with the contamination.

The Company  believes  that the  Communities  are in  compliance in all material
respects  with all federal,  state and local laws,  ordinances  and  regulations
regarding hazardous or toxic substances or petroleum  products.  The Company has
not been notified by any governmental authority,  and is not otherwise aware, of
any material  
                                       4
<PAGE>
noncompliance,  liability or claim relating to hazardous or toxic  substances or
petroleum products in connection with any of its present properties.

Employees

As of January 15, 1997, the Company,  primarily through the Management  Company,
employed 583 persons.  The Management  Company and/or the Operating  Partnership
employ  substantially  all of the  professional  employees  that  are  currently
engaged in the residential  property  management,  development,  acquisition and
construction  businesses of the Company. The Company believes that its relations
with its employees are good.

Regulation

Apartment  communities are subject to various laws,  ordinances and regulations,
including laws,  ordinances and regulations  related to fair housing,  Americans
with disabilities and building safety.  The Company believes that each Community
has the  necessary  permits and  approvals to operate its business and that each
Community  is  in  material   compliance  with  present  laws,   ordinances  and
regulations.

Seasonality

The fall and winter months in the Company's Arizona markets generally experience
somewhat higher seasonal occupancies.
                                       5
<PAGE>
ITEM 2.  PROPERTIES

The following sets forth certain  information  regarding the current  Stabilized
Communities. All of the Communities are owned 100 percent in fee by the Company.
For a  description  of liens on certain of the  Communities  listed  below,  see
Schedule III - Real Estate  Investments  and  Accumulated  Depreciation  on page
F-17.
<TABLE>
<CAPTION>
                                                                                                             Physical
                                                                                    Average       Average   Occupancy
                                                                       Year            Unit      Physical       as of
                                                                     Developed         Size     Occupancy    December
                                          Number of   Developed/        or          (Square        During         31,
  Stabilized Communities       City      Apartments    Acquired      Acquired         Feet)      1996 (1)    1996 (1)
  ----------------------       ----      ----------    --------      --------         -----      --------    --------
Arizona:
--------
    Phoenix:
<S>                        <C>                <C>     <C>          <C>               <C>              <C>         <C> 
Acacia Creek                Scottsdale           508   Acquired        1995             910           97%         98%
Bayside at the Islands        Gilbert            272   Developed       1988             870           93%         94%
Country Brook (4)            Chandler            396    Acq/Dev    1991/1993/1996       961           93%         92%
Deer Creek Village            Phoenix            308   Acquired        1991             819           97%         92%
Gateway Villas              Scottsdale           180   Developed       1995             998           96%         97%
Greenwood Village              Tempe             270   Acquired        1993             884           96%         93%
Heritage Point                 Mesa              148   Acquired        1994             773           95%         91%
La Mariposa                    Mesa              222   Acquired        1990             928           95%         93%
La Valencia                    Mesa              361   Acquired        1990             950           92%         87%
Ladera                        Phoenix            248   Developed       1996           1,012           95%         98%
Little Cottonwoods             Tempe             379  Acq/Acq/Dev   1989/89/90        1,023           91%         85%
Los Arboles (2)              Chandler            232   Developed       1985             851           95%         92%
Mirador                       Phoenix            316   Developed       1996             987           85%         94%
Miramonte                   Scottsdale           151   Developed       1983             782           98%         99%
Morningside                 Scottsdale           160   Acquired        1992           1,019           95%         99%
Mountain Park Ranch           Phoenix            240   Developed       1995             961           93%         93%
Park Meadow (4)               Gilbert            224    Acq/Dev      1992/1996          880           96%         93%
Preserve at Squaw Peak        Phoenix            108   Acquired        1991             952           96%         90%
Promontory Pointe (3)         Phoenix            304   Acquired        1988             986           91%         83%
Rancho Murietta                Tempe             292   Acquired        1995             866           97%         87%
Scottsdale Courtyards       Scottsdale           274   Developed       1993           1,044           97%        100%
Scottsdale Meadows          Scottsdale           168   Developed       1984             888           95%         99%
Shadow Brook                  Phoenix            224   Acquired        1993           1,010           97%         98%
Shores at Andersen Springs   Chandler            299   Developed     1989/1993          889           97%         97%
Silver Creek                  Phoenix            174   Acquired        1991             775           98%         97%
Sonoran                       Phoenix            429   Developed       1995             965           93%         89%
Sun Creek                    Glendale            175   Acquired        1993             762           98%         98%
Superstition Vista             Mesa              316   Acquired        1995             950           97%         96%
The Enclave                    Tempe             204   Developed       1995             952           97%        100%
The Heritage                  Phoenix            204   Developed       1995             973           93%         92%
The Ingleside                 Phoenix            120   Developed       1995             987           96%         94%
The Meadows                    Mesa              306   Acquired        1987             809           94%         92%
The Palms                     Phoenix            132   Developed       1990           1,026           93%         96%
The Pines                      Mesa              194   Acquired        1992             887           96%         94%
Towne Square (4)             Chandler            584    Acq/Dev    1992/1995/1996       960           92%         90%
Villa Encanto                 Phoenix            382   Developed       1983             810           99%         99%
Village at Lakewood           Phoenix            240   Developed       1988             857           94%         98%
                                               -----   
                                               9,744
                                               -----
   Tucson:
Harrison Park (3)             Tucson             172   Acquired      1991/1996          809           87%         85%
La Reserve                  Oro Valley           240   Developed       1988             900           91%         92%
Orange Grove Village (4)      Tucson             400    Acq/Dev      1991/1996          714           93%         87%
Suntree Village             Oro Valley           424   Acquired        1992             831           91%         93%
The Arboretum                 Tucson             496    Acq/Dev      1992/1995          886           93%         89%
The Legends                   Tucson             312   Developed       1995           1,041           94%         94%
Village at Tanque Verde       Tucson             217    Acq/Dev      1990/1995          694           90%         83%
                                              ------
                                               2,261
                                              ------
Total Arizona                                 12,005
California:
-----------
The Ashton                 Corona Hills          492   Acquired        1995             850           94%         92%
Canyon Crest Views (5)       Riverside           178   Acquired        1996           1,193           97%         96%
Portofino (6)               Chino Hills          176   Acquired        1996             873           99%         98%
Parkview Terrace (6)         Redlands            558   Acquired        1996             801           96%         95%
Redlands Lawn & Tennis (7)    Redlands           496   Acquired        1996             795           89%         89%
                                              ------                                 ------
Total California                               1,900
                                              ======
               Total                          13,905                                 44,343
                                              ======                                 ======
               Weighted Average                  283                                    905
                                              ======                                 ======
</TABLE>
                                       6
<PAGE>
---------

(1)      Physical  occupancy  is  defined  as  apartments   occupied  or  leased
         (including models and employee  apartments) divided by the total number
         of leasable apartments within the Community, expressed as a percentage.

(2)      The  Company  owns  approximately  a 10 percent  interest  in the joint
         venture that owns Los Arboles II, as well as two promissory  notes with
         an  outstanding   balance  of   approximately   $760,000,   secured  by
         subordinated  liens on such  property.  Los  Arboles  II  contains  200
         apartments,  was  developed  in 1987,  has an average  unit size of 843
         square  feet  and had  average  physical  occupancy  during  1996 of 95
         percent and physical occupancy as of December 31, 1996 of 92 percent.

(3)      Another phase of this  community is currently  under  development.  See
         "Development and Construction Activity" below.

(4)      A new phase of this  community  was  completed  and reached  stabilized
         occupancy in 1996.

(5)      Property was acquired June 1996.

(6)      Property was acquired July 1996.

(7)      Property was acquired December 1996.

Of the current Stabilized  Communities  included in the table, 37 are located in
the  greater  Phoenix  area,  seven are  located in the Tucson area and five are
located  in  California.  All of the  Stabilized  Communities  are  managed  and
operated by the Company and have an average  size of 283 units.  The  Stabilized
Communities are primarily  oriented to upscale  residents seeking high levels of
amenities,  such as clubhouses,  exercise rooms, tennis courts,  swimming pools,
therapy pools and covered  parking.  The average unit size of the Stabilized and
Communities   under   Construction   combined  is  905  square  feet.  All  have
fully-equipped  kitchens with upgraded  cabinets,  individual  utility metering,
dishwashers,   microwave  ovens,  separate  dining  areas,  individual  storage,
spacious   patios  and   balconies,   and  ceramic  tile   entries.   Most  have
washers/dryers;  and many  offer high  ceilings,  fireplaces,  and alarm  system
prewiring.

Development and Construction Activity

The apartment Communities under Construction and in Lease-Up are listed below:
<TABLE>
<CAPTION>
                                                                             Actual        Actual or
                                                   Average   Estimated       Date of       Estimated      Estimated
                                                    Unit    Construction  Construction     Commence-       Date of
                                           Total    Size        Cost        Commence-       ment of       Stabilized
        Name                     City      Units  (Sq. Ft.)  (Millions)       ment         Lease-Up       Occupancy
--------------------------------------------------------------------------------------------------------------------
                                                                                            Quarter
                                                                          ------------------------------------------
<S>                             <C>        <C>        <C>   <C>               <C>            <C>            <C> 
Phoenix
-------
The Hawthorne                   Phoenix       276       904     $   17        4:95           3:96           3:97
The Isle at Arrowhead Ranch     Glendale      256       940         17        2:96           4:96           4:97
Promontory Pointe II
   Expansion                    Phoenix       120     1,013          8        4:95           3:96           2:97
                                           -------          -----------
                                              652                   42
Tucson
------
Bear Canyon                     Tucson        238       973         15        3:95           2:96           2:97
Harrison Park II Expansion      Tucson        188       974         10        3:95           2:96           2:97
                                           -------          -----------
                                              426                   25
                                           -------          -----------
     Total                                  1,078                $  67
                                           =======          ===========
</TABLE>
                                       7
<PAGE>
The  Company  owns  sites  intended  for  the  development  of  four  additional
multifamily apartment communities,  which, if completed, are expected to contain
approximately 1115 apartment units. There can be no assurance,  that the Company
will succeed in obtaining any necessary  governmental approvals or any financing
required to develop these  projects,  or that the Company will decide to develop
any particular project.

The information set forth in the table above is based upon a number of estimates
and  assumptions  that  are  inherently   subject  to  business,   economic  and
competitive  uncertainties  and  contingencies,  many of which  are  beyond  the
Company's   control.   The  actual   development   cost,   completion  date  and
stabilization  date of any project will be  dependent  upon a variety of factors
beyond the  control  of the  Company  including,  for  example,  labor and other
personnel costs, material costs, weather conditions, government fees and leasing
rates.

ITEM 3.  LEGAL PROCEEDINGS

Neither the Company,  the Operating  Partnership,  the Management  Company,  the
Financing  Partnership,  or any of  the  Communities  is  presently  subject  to
material  litigation  nor,  to  the  Company's  knowledge,   is  any  litigation
threatened  against the Company or any of the  Communities,  other than  routine
actions for negligence or other claims and administrative proceedings arising in
the  ordinary  course of  business,  some of which are expected to be covered by
liability  insurance  and all of which  collectively  are not expected to have a
material adverse effect on the business or financial condition of the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

There were no matters submitted to a vote of the Company's  stockholders  during
the fourth quarter of 1996.

ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT

The  following  table sets forth,  as of January 27, 1997,  the names,  ages and
positions of each of the Company's executive officers.

     Name                 Age                   Position
-----------------------  -----  -----------------------------------------------
Stephen O. Evans          51    Chairman of the Board and Chief Executive
                                     Officer
Richard G. Berry (1)      52    President, Chief Operating Officer and Director
Jay E. Northrop           51    Senior Vice President--Property Management
G. Edward O'Clair         53    Senior Vice President--Construction
Paul R. Fannin            40    Senior Vice President , Chief Financial Officer,
                                     Treasurer and Secretary


     (1) Richard G. Berry was appointed President and Chief Operating Officer on
January 21, 1997.

Stephen  O. Evans has served as the  Chairman  of the Board and Chief  Executive
Officer of the Company since its formation. Mr. Evans founded the predecessor of
the  Company in 1977 and  served as  Chairman  of the Board and Chief  Executive
Officer.  From 1973 to 1977,  Mr. Evans was  Investment  Vice  President of W.R.
Schulz &  Associates,  at that  time  Arizona's  largest  apartment  development
company.  He earned  his  Bachelor  of Science in  Business  Administration  and
Masters of Business  Administration  degrees from Arizona State  University.  He
also  served as an officer in the United  States Air Force for four  years.  Mr.
Evans affiliations include National Multi-Housing Council;  National Association
of Real  Estate  Investment  Trusts  (NAREIT);  Lambda  Alpha,  a National  Land
Economic Fraternity; and Urban Land Institute.
                                       8
<PAGE>
Richard G. Berry was  appointed  President  and Chief  Operating  Officer of the
Company  on  January  21,  1997.  Prior to that time,  Mr.  Berry  served as the
Executive  Vice  President and a director of the Company since its formation and
has served as the Executive Vice President of Evans Withycombe, Inc. since 1992.
From 1983 to 1992, Mr. Berry served as Chairman of the Board of Berry and Boyle,
a real estate investment and development  management company. Prior to 1983, Mr.
Berry served as Executive Vice President of Hutton Real Estate  Services and was
responsible  for that firm's real estate  investment and management  activities.
Mr.  Berry  earned a Bachelor of  Architecture  degree and a Masters of Business
Administration  degree from the  University  of  Michigan.  He also served as an
officer of a United States Navy mobile construction battalion for three years.

Jay E. Northrop has served as a Senior Vice President -- Property  Management of
the Company  since its  formation.  From 1981 to 1994,  Mr.  Northrop  served as
Senior Vice President -- Property Management of Evans Withycombe,  Inc. Prior to
that  time,  Mr.  Northrop  served  as a  District  Manager  for W.R.  Schultz &
Associates,  where he was  responsible  for the property  operations  of a large
number of apartment communities. Mr. Northrop holds a Bachelor of Science degree
in Business Administration from Arizona State University.

G. Edward O'Clair has served as the Senior Vice President -- Construction of the
Company since its formation. From 1978 to 1994, Mr. O'Clair served as the Senior
Vice President --  Construction of Evans  Withycombe,  Inc. Mr. O'Clair has been
involved in the construction management field since 1967. Prior to joining Evans
Withycombe's  predecessor in 1978, Mr. O'Clair  supervised the  construction  of
numerous residential and commercial projects for Stanley Development Company and
C.J.  Hassett  Corporation,  both located in Arizona.  Mr. O'Clair is a licensed
general  contractor  in the state of  Arizona  and holds a  Bachelor  of Science
degree in Business Administration from Arizona State University.

Paul R. Fannin has served as the Senior Vice President. Chief Financial Officer,
Treasurer  and  Secretary of the Company  since its  formation and was appointed
Secretary in 1996.  Prior to that time,  Mr. Fannin served as the Vice President
-- Asset Management of Evans Withycombe, Inc. since 1986. From 1983 to 1986, Mr.
Fannin  served as the Director of Finance of an Arizona real estate  development
firm for three years,  and was a member of the tax staff of a public  accounting
firm for a period of three years.  Mr. Fannin is a Certified  Public  Accountant
licensed  in the State of  Arizona  and holds a Bachelor  of  Science  degree in
Accounting   from  the   University   of  Arizona  and  a  Masters  of  Business
Administration degree from Arizona State University.


                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                  STOCKHOLDER MATTERS

(a) Market Information: The Company's Common Stock, $.01 par value, is traded on
the New York Stock  Exchange  under the symbol "EWR." The ranges of high and low
sales prices of the Company's  trading  reported on the New York Stock  Exchange
composite tape of each quarter in 1995 and 1996 have been as follows:

                                        Sale Prices
                                        -----------
                                    High           Low        Dividends Declared
                                    ----           ---        ------------------
1995
----
   First quarter                  $ 20 7/8       $ 19 1/2       $  .37
   Second quarter                   20 7/8         18 3/8          .37
   Third quarter                    20 3/8         18 1/2          .38
   Fourth quarter                   21 5/8         18 7/8          .38

1996
----
   First quarter                    23 1/4         20 3/4          .39
   Second quarter                   23 1/4         20 1/4          .39
   Third quarter                    21 7/8         19 3/4          .40
   Fourth quarter                   22 1/4         20 1/8          .40

                                       9
<PAGE>
On January 30, 1997, the last reported sale price of the Company's  common stock
on the New York Stock Exchange was $20 7/8 per share.

(b) Holders:  As of January 30, 1997, there were  approximately 232 stockholders
of record of the Company's Common Stock.  Such number does not include the total
number of beneficial holders of Common Stock.

(c)  Distributions:  The Company intends to pay regular  quarterly  dividends to
holders of shares of Common Stock and  distributions  to holders of Units in the
Operating  Partnership.  On December  31,  1996,  the  Company  paid a quarterly
dividend of $.40 per share for the fourth quarter to holders of shares of Common
Stock and Units of record on December  24,  1996.  Future  distributions  by the
Company will be at the  discretion  of the board of directors and will depend on
the actual  funds from  operations  of the  Company,  its  financial  condition,
capital  requirements,  the  annual  distribution  requirements  under  the REIT
provisions  of the Code and such other  factors as the board of directors  deems
relevant.

The Company  anticipates  that Funds from  Operations  will exceed  earnings and
profits due to non-cash expenses, primarily depreciation and amortization, to be
incurred  by the  Company.  Distributions  by the  Company  to the extent of its
current and  accumulated  earnings  and profits for Federal  income tax purposes
will be taxable to stockholders as ordinary  dividend  income.  Distributions in
excess of  earnings  and  profits  generally  will be treated  as a  non-taxable
reduction of the stockholder's  basis in the Common Stock (return of capital) to
the extent thereof, and thereafter as taxable gain. Such distributions will have
the effect of deferring  taxation until the sale of such Common Stock.  In order
to  maintain  its  qualification  as  a  REIT,  the  Company  must  make  annual
distributions  to  stockholders  of at least 95  percent of its  taxable  income
(which does not include capital gains).  Under certain  circumstances (which the
Company  does not  expect to  occur),  the  Company  could be  required  to make
distributions in excess of cash available for distribution in order to meet such
distribution requirements.
                                       10
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

The  following  table sets  forth  certain  financial  and  operating  data on a
consolidated basis for the Company and on a combined  historical basis for Evans
Withycombe.  The following information should be read in conjunction with all of
the consolidated  financial  statements and notes thereto included  elsewhere in
this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                 ----------------------------------------------------------------------
                                     1996            1995          1994          1993          1992
                                   (Amounts in thousands, except per share and property information)
<S>                              <C>                 <C>           <C>           <C>            <C>   
Operating Information:
  Revenues:
     Rental                            $94,350       $68,864       $51,097       $38,613       $26,876
     Third party management fees         1,157         1,268         1,668         2,213         2,204
     Interest and other                  6,195         4,478         4,424         3,112         2,373
                                 ----------------------------------------------------------------------
  Total revenues                       101,702        74,610        57,189        43,938        31,453
  Expenses:
     Repairs and maintenance            11,607         8,293         6,288         4,730         3,272
     Other property operating           12,713         8,699         7,834         6,593         4,684
     Advertising                         1,864         1,244           966         1,022           783
     Real estate taxes                   6,915         4,723         3,204         2,869         2,307
     Property management                 3,225         2,825         2,505         2,605         2,417
     General and administrative          1,698         1,588         1,409         1,466         1,360
     Interest                           24,225        12,650         7,836         6,361         5,909
     Depreciation and                   20,885        13,762        10,333        10,319         7,146
       amortization
     Write-down of real estate
       assets(1)                             -             -             -         1,361        10,284
     Other(2)                                -             -         5,233             -             -
                                 ----------------------------------------------------------------------
  Total expenses                        83,132        53,784        45,608        37,326        38,162
                                 ----------------------------------------------------------------------

  Income (loss) before minority
    interest and extraordinary item     18,570        20,826        11,581         6,612        (6,709)
  Minority interest (3)                 (4,010)       (4,594)       (1,548)            -             -
  Extraordinary item-gain on
    extinguishment of debt (1)               -             -             -         6,061        12,569
                                 ----------------------------------------------------------------------

  Net income                           $14,560       $16,232       $10,033       $12,673        $5,860
                                 ======================================================================

  Earnings per share (4)                 $0.84        $ 1.01
                                 ==============   ===========

  Earnings per share for the period
  August 17 to December 31, 1994 (4)                               $ 0.38
                                                                ===========
</TABLE>
                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                      1996             1995             1994             1993             1992
                                 ---------------- ---------------- ---------------- ---------------- ----------------
                                           (Amounts in thousands, except per share and property information)
<S>                                 <C>               <C>           <C>              <C>               <C>     
Other Information:
Cash flows from:
   Operating activities              $38,587          $ 36,531      $   21,609       $    20,897       $    13,271
   Investing activities             (129,461)         (118,061)       (211,651)          (79,511)          (61,829)
   Financing activities               89,808            82,725         190,003            57,417            50,792
Total stabilized communities              49                41              32                31                27
      (end of period)
Total number of apartments            13,905            11,053           7,924             7,695             6,502
   (end of period)
Physical occupancy (end of                93%               96%             97%               97%               97%
   period) (5)
Weighted average number of            12,887             9,798           7,740             6,641             4,998
   apartments (6)
Weighted average monthly                $715              $641            $586              $532              $498
   revenue per unit (7)
</TABLE>
<TABLE>
<CAPTION>
                                                                            December 31,
                                                  1996        1995        1994         1993         1992
                                              ---------------------------------------------------------------
                                                                    (Amounts in thousands)

<S>                                               <C>        <C>          <C>          <C>          <C>     
Balance Sheet Information:
Real estate, before accumulated depreciation      $761,550   $587,183     $399,987     $292,513     $215,549
Total assets                                       736,334    580,495      403,540      271,055      204,836
Total debt                                         436,172    297,456      127,787      106,545       64,792
Minority interest                                   56,592     64,487       52,626            -            -
Equity                                            $229,005   $198,148     $204,667     $142,886     $122,135
</TABLE>

-------

(1)      During 1993, the Company  negotiated a discounted  payoff of a mortgage
         loan secured by The Meadows and Promontory Pointe (1992). The excess of
         the amounts owed for principal and interest over the amount paid to pay
         off  the  loan  is   recorded   as  an   extraordinary   item-gain   on
         extinguishment of debt. The Company determined that the carrying values
         of the Communities  were in excess of net realizable  value. The excess
         of $1,361 and $10,284 was charged to write down of real estate assets.

(2)      In connection  with the repayment of existing  indebtedness at the time
         of  the  Initial  Public  Offering,  prepayment  penalties  and  lender
         participation (additional interest) totaling $2,594 were paid. Prior to
         the  Initial  Public   Offering,   an  Executive   Incentive   Deferred
         Compensation  Plan was  canceled  and the $2,639 that was funded by the
         Company was expensed during 1994.

(3)      Net income includes an adjustment for the 20.30 percent,  22.98 percent
         and 20.50 percent  minority  interest in the Operating  Partnership for
         the years ended  December  31, 1996 and 1995 and the period from August
         17 to December 31, 1994, respectively.

(4)      Net income per share is based on 17,409,897,  16,053,453 and 15,967,432
         weighted  average  number of  shares  outstanding  for the years  ended
         December  31,  1996 and 1995 and the period  from August 17 to December
         31, 1994, respectively.

(5)      Physical  Occupancy is defined as the number of apartments  occupied or
         leased (including models and employee  apartments) divided by the total
         number of leaseable  apartments  within the  Community,  expressed as a
         percentage. 
                                       12
<PAGE>
         Physical  occupancy  has  been  calculated  using  the  average  of the
         occupancy that existed on the last day of each month over each period.

(6)      Weighted  average number of apartments is the average of all apartments
         during the  period.  For  stabilized  properties,  all  apartments  are
         included in the calculation of the weighted average. For communities in
         the lease-up phase, only apartments that are completed and occupied are
         included in the weighted average calculation.

(7)      Weighted  average  monthly revenue per apartment is derived by dividing
         rental income by the weighted average number of occupied apartments.


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS
          (Amounts in thousands, except apartment data)


The following discussion, which is based primarily on the consolidated financial
statements  of Evans  Withycombe  Residential,  Inc. and the combined  financial
statements of its predecessor,  should be read in conjunction with the "Selected
Financial Data" and all financial  statements appearing elsewhere in this Annual
Report on Form  10-K.  The  consolidated  financial  statements  of the  Company
consist of the Communities and the Management Company.

Overview

When used in the  following  discussion,  the words  "believes,"  "anticipates,"
"expects,"  and similar  expressions  are  intended to identify  forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected, including,
but not limited to, the actual timing of the Company's planned  acquisitions and
developments,  the strength of the local  economies in the  sub-markets in which
the Company  operates,  and the  Company's  ability to  successfully  manage its
planned expansion into Southern  California.  Readers are cautioned not to place
undue reliance on these forward-looking  statements,  which speak only as of the
date  hereof.  The Company  undertakes  no  obligation  to publicly  release any
revisions  to these  forward-looking  statements  which  may be made to  reflect
events or  circumstances  after the date hereof or to reflect the  occurrence of
unanticipated events.
                                       13
<PAGE>
Results of Operations - Consolidated Financial Statements

The  results of  operations  for the years  ended  December  31,  1996 and 1995,
respectively,  were  significantly  affected by  acquisitions,  developments and
expansions.

Comparison of Results of Operations  for the Year Ended December 31, 1996 to the
Year Ended December 31, 1995
<TABLE>
<CAPTION>
                                                             Year Ended
                                                            December 31,          
                                                    ----------------------------    Percentage
                                                         1996          1995           Change
                                                     ------------  -----------     ------------
<S>                                                  <C>           <C>             <C>  
               Rental income                         $    94,350   $   68,864          37.0%
               Third party management fees                 1,157        1,268          (8.7)
               Interest and other                          6,195        4,478          38.3
                                                     -----------   ----------      ------------
                  Total revenues                         101,702       74,610          36.3
  
               Property operating and maintenance (1)     26,184       18,236          43.5
               Real estate taxes                           6,915        4,723          46.4
               Property management                         3,225        2,825          14.2
               General and administrative                  1,698        1,588           6.9
               Interest                                   24,225       12,650          91.5
               Depreciation and amortization              20,885       13,762          51.8
                                                     -----------   ----------      ------------
               Total expenses                             83,132       53,784          54.6
                                                     -----------   ----------      ------------
               Income before minority interest       $    18,570   $   20,826         (10.8)%
                                                     ===========   ==========      ============
               Weighted average monthly rental
                   revenue per unit                  $       715   $      641
                                                     ===========   ==========
               Weighted average number of apartments      12,887        9,798
                                                     ===========   ==========
               Economic occupancy (2)                       90.0%        91.6%
                                                     ===========   ==========
</TABLE>
             (1)  The Company defines property operating and maintenance expense
                  as repairs  and  maintenance,  other  property  operating  and
                  advertising expense.

             (2)  Stabilized properties only.

Rental revenues increased by $25,486 or 37.0 percent for the year ended December
31, 1996 as compared to the similar  period in 1995 as a result of  increases in
the weighted  average number of apartments and weighted  average monthly revenue
per occupied apartment.  The Company believes that the increase in rental income
was largely  attributable to the  acquisitions  and  stabilization of properties
developed by the Company in its rental markets.

Interest and other income  increased $1,717 for the year ended December 31, 1996
compared to the year ended  December 31, 1995  primarily as a result of the sale
of telephone servicing rights on certain properties and an increase in ancillary
income such as redecoration  and application fees as a result of the increase in
the weighted average number of apartments.

Third party  management  fees  decreased  $111 or 8.7 percent due to the sale of
several  properties  from the  management  portfolio.  Included  in third  party
management fees is a non recurring $500 fee received in exchange for terminating
the management contract on nine apartment communities containing 1,298 apartment
units in the second quarter of 1996.

Property operating and maintenance  expense increased due to the increase in the
weighted  average  number of apartments  for the year ended December 31, 1996 as
compared to the same period in 1995,  respectively.  Real estate taxes increased
primarily  due to the  increase in the number of  properties  for the year ended
December 31, 1996.
                                       14
<PAGE>
Interest   expense   increased  due  to  an  increase  in  debt  resulting  from
acquisitions  and the  increase  in  weighted  average  number  of  units in the
portfolio.  The  Company  capitalized  $2,714  of  interest  for the year  ended
December 31, 1996 compared to $5,048 for the year ended December 31, 1995 due to
a decrease in construction activity. Interest costs incurred during construction
of a  new  property  are  capitalized  until  completion  of  construction  on a
building-by-building basis.

"Same Store" Portfolio

The Company  defines  same store  portfolio  as those  communities  that reached
stabilized  occupancy prior to January 1, 1995. Same store portfolio consists of
32 stabilized properties containing 7,924 apartment units that were owned by the
Company for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
                                                             Year Ended
                                                            December 31,            
                                                     ---------------------------  Percentage
                                                         1996          1995         Change
                                                     ------------  ------------   ----------
<S>                                                  <C>           <C>            <C>   
                Rental income                        $    55,074   $   55,202        (.2)%
                Other income                               3,296        2,581       27.7
                                                     -----------   ----------     ----------
                                                          58,370       57,783        1.0
                Property operating and maintenance        16,134       14,619       10.4
                Real estate taxes                          3,995        3,906        2.3
                                                     -----------   ----------     ----------
                                                          20,129       18,525        8.7
                                                     -----------   ----------     ----------
                Property net operating income        $    38,241   $   39,258       (2.6)%
                                                     ===========   ==========     ==========
                Weighted average monthly rental
                    revenue per unit                 $       654   $      638
                                                     ===========   ==========    
                Economic occupancy                          89.7%        91.1%
                                                     ===========   ==========  
</TABLE>

Rental income for the year ended December 31, 1996 was comparable  with the same
period in 1995 as a result  of the  increase  in the  weighted  average  monthly
rental  revenue  per unit  being  offset by a decline  in the  average  economic
occupancy  during the year ended December 31, 1996 as compared to the year ended
December 31, 1995.  Other income for the year ended  December 31, 1996 increased
as a result of gains  from the sale of  telephone  servicing  rights at  various
communities.

Property operating and maintenance expense increased $1,515 or 10.4 percent over
1995 due to higher  apartment  turnover  and utility  costs  associated  with an
increased number of vacant  apartments and higher  advertising costs incurred by
the Company in its "same store" portfolio.
                                       15
<PAGE>
Communities Stabilized Less Than Two Years

Communities  stabilized  less than two years consist of the  development of five
new  apartment   communities  and  the  expansion  of  two  existing   apartment
communities  by the  Company,  containing  1,521  apartment  units that  reached
stabilized  occupancy during the year ended December 31, 1995.  Increases in the
year ended December 31, 1996 as compared to the year ended December 31, 1995 are
the result of the increase in the weighted average number of apartments.

                                                              Year Ended
                                                             December 31,
                                                     -------------------------
                                                         1996          1995
                                                     -----------  ------------
                Rental income                        $   12,606    $    7,113
                Other income                                680           541
                                                     -----------  ------------
                                                         13,286         7,654
                Property operating and maintenance       
                                                          2,532         1,734
                Real estate taxes                         1,011           407
                                                     -----------  ------------
                                                          3,543         2,141
                                                     -----------  ------------
                Property net operating income        $    9,743    $    5,513
                                                     ===========  ============
                Weighted average number of
                    apartments                            1,521           888
                                                     ===========  ============


Development and Lease Up Communities

Development  and  lease up  communities  consist  of the  development  of 13 new
apartment  communities  or  the  expansion  of  existing  apartment  communities
containing 2,522 apartment units that were in the "construction," "development,"
or "lease up" stage during 1996 and  therefore,  not considered to have achieved
stabilized  occupancy  for all of the periods  presented.  Increases in the year
ended  December 31, 1996 as compared to the year ended December 31, 1995 are the
result of an increase in the weighted average number of apartments.

                                                             Year Ended
                                                            December 31,
                                                     -------------------------
                                                         1996          1995
                                                     -----------   -----------
                Rental income                        $   11,276    $    1,281
                Other income                                720           128
                                                     ------------  -----------
                                                         11,996         1,409
                Property operating and    
                    maintenance                           3,203           700
                Real estate taxes                           790            30
                                                     ------------  -----------
                                                          3,993           730
                                                     ------------  -----------
                Property net operating income        $    8,003    $      679
                                                     ============  ===========
                Weighted average number of
                    apartments in lease-up                1,398           174
                                                     ============  ===========
                                       16
<PAGE>
Acquisitions

Acquisitions consist of eight properties containing 3,016 apartment units, which
have been acquired by the Company  since  January 1, 1995.  Increase in the year
ended  December 31, 1996, as compared to the year ended  December 31, 1995,  are
the result of the increase in the weighted average number of apartments.

                                                             Year Ended
                                                            December 31,
                                                     ------------------------
                                                        1996           1995
                                                     ----------     ---------
                Rental income                        $   15,394     $   5,268
                Other income                                727           193
                                                     ----------     ---------
                                                         16,121         5,461
                Property operating and 
                   maintenance                            4,315         1,183
                Real estate taxes                         1,119           380
                                                     ----------     ---------
                                                          5,434         1,563
                                                     ----------     ---------
                Property net operating income        $   10,687    $    3,898
                                                     ==========    ==========
                Weighted average number of
                apartments                                2,044           769
                                                     ==========    ==========

Comparison of Results of Operations  for the Year Ended December 31, 1995 to the
Year Ended December 31, 1994

Total Portfolio                           December 31,         Percentage
                                      1995          1994         Change
                                      ----          ----         ------
Rental income                        $68,864      $51,097         34.8%
Third party management fees            1,268        1,668        (24.0)%
Interest and other                     4,478        4,424          1.2%
                                   -----------  ------------  -----------
                                      74,610       57,189         30.5%

Property operating and
maintenance                           18,236       15,088         20.9%
Real estate taxes                      4,723        3,204         47.4%
Property management                    2,825        2,505         12.8%
General and administrative             1,588        1,409         12.7%
Interest                              12,650        7,836         61.4%
Depreciation and amortization         13,762       10,333         33.2%
Other                                      -        5,233            -
                                   -----------  ------------  -----------
                                      53,784       45,608         17.9%
                                   -----------  ------------  -----------
Income before minority interest      $20,826      $11,581         79.8%
                                   ===========  ============  ===========
Weighted average number of
apartments                             9,798        7,740
                                   -----------  ------------
Economic occupancy                      91.6%        92.3%
                                   ===========  ============

Rental revenues increased by $17,767 or 34.8 percent as a result of increases in
the weighted  average number of apartments and weighted  average monthly revenue
per occupied apartment. The Company believes that the increase in rental income,
other than that attributable to the acquisitions and developments,  was achieved
as a result of the Company's ability to capitalize on continuing  improvement in
the Company's rental markets.

The decrease in third party  management  fees of $400,  a 24.0 percent  decrease
from  the  1994  period,  is due to the  sale of  several  properties  from  the
management portfolio, including 508 units which the Company purchased.
                                       17
<PAGE>
Property  operating and  maintenance  expense  increased  $3,148 or 20.9 percent
(versus a 26.6 percent  increase in the weighted average number of units) due to
the increase in the number of properties.  Real estate taxes increased $1,519 or
47.4 percent (versus a 26.6 percent  increase in the weighted  average number of
units)  primarily  due to the  increase in the number of  properties  and higher
values placed on properties due to improved market conditions.

Property  management  expense increased $320 or 12.8 percent due to the increase
in the number of properties under management.

Interest  expense  increased  $4,814 or 61.4  percent due to an increase in debt
resulting from acquisitions and from more units under construction.  The Company
capitalized  $5,048 of  interest  in 1995  compared  to $2,724 in 1994 due to an
increase in construction  activity.  Interest costs incurred during construction
of a  new  property  are  capitalized  until  completion  of  construction  on a
building-by-building basis.

"Same Store" Portfolio

In 1995, the Company defined the same store portfolio as those  communities that
reached stabilization prior to January 1, 1994.

Same store portfolio consists of 30 stabilized operating  properties  containing
7,559  apartment  units  that were  owned by the  Company  for the  years  ended
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
                                                       December 31,                Percentage
                                                   1995             1994             Change
                                                   ----             ----             ------
<S>                                            <C>              <C>                 <C> 
Rental income                                    $52,940           $49,712            6.5%
Other income                                       2,568             3,180          (19.2)%
                                               -----------      ------------        -------
                                                  55,508            52,892            4.9%
Property operating and maintenance                14,213            14,589           (2.6)%
Real estate taxes                                  3,671             3,180           15.4%
                                               -----------      ------------        -------
                                                  17,884            17,769             .6%
                                               -----------      ------------        -------
Property net operating income                    $37,624           $35,123            7.1%
                                               ===========      ============        =======
Weighted average monthly rental revenue
per unit                                            $638              $586
                                               ===========      ============
Economic occupancy                                  91.5%             92.5%
                                               ===========      ============
</TABLE>

Rental  income for the year ended  December  31,  1995  increased  $3,228 or 6.5
percent as a result of an increase in the weighted  average  monthly revenue per
occupied unit which increased $52 or 8.9 percent which was partially offset by a
decline in the average  economic  occupancy  from 92.5  percent  during the year
ended  December  31, 1994 and 91.5  percent  during the year ended  December 31,
1995.

Property operating and maintenance  expense decreased $376 or 2.6 percent due to
the Company beginning to realize economies of scale from consolidated operations
of the integrated property portfolio.

Real estate taxes  increased $491 or 15.4 percent due to higher values placed on
properties due to improved market conditions and property values.
                                       18
<PAGE>
Development and Lease Up Communities

Development  communities  consist of 15  developments  or  expansion of existing
properties  containing  2,878  apartment  units that have been  developed by the
Company since the Initial Public  Offering in August 1994.  Increases in 1995 as
compared to 1994 is the result of  development  units  stabilized or in lease-up
increasing to 15 properties and 2,878  apartment  units in 1995 as compared to 3
properties and 661 apartment units in 1994.

                                                             December 31,
                                                        1995              1994
                                                      -------          -------
          Rental income                                $9,766           $1,248
          Other income                                    636               84
                                                     ---------        ---------
                                                       10,402            1,332
          Property operating and maintenance            2,604              459
          Real estate taxes                               560               18
                                                     ---------        ---------
                                                        3,164              477
                                                     ---------        ---------
          Property net operating income                $7,238             $855
                                                     =========        =========

Acquisitions

Acquisitions  consist of five properties  containing 1,756 apartment units which
have been  acquired by the Company since the Initial  Public  Offering in August
1994. Increases in 1995 as compared to 1994 are the result of the acquisition of
four  properties in 1995  consisting of 1,608  apartment  units  compared to one
property consisting of 148 apartment units in 1994.
                                                             December 31,
                                                        1995              1994
                                                      -------          -------
          Rental income                                $6,158             $137
          Other income                                    239                5
                                                     ---------        ---------
                                                        6,397              142
          Property operating and maintenance            1,419               40
          Real estate taxes                               492                6
                                                     ---------        ---------
                                                        1,911               46
                                                     ---------        ---------
          Property net operating income                $4,486              $96
                                                     =========        =========

Liquidity and Capital Resources

Liquidity

The  Company's net cash provided by operating  activities  increased  from $36.5
million for the year ended December 31, 1995 to $38.6 million for the year ended
December 31, 1996 principally due to increased rental operations from additional
properties acquired and developed subsequent to December 31, 1995. Net cash used
in  investing  activities  increased  from  $118.1  million  for the year  ended
December 31, 1995 to $129.5 million for the year ended  December 31, 1996.  Cash
used in investing  activities  largely relates to the Company's  development and
construction  of new apartment  communities  in Phoenix and Tucson,  Arizona and
acquisitions  of  apartment  communities  in its markets.  Net cash  provided by
financing  activities  increased  from $82.7 million for the year ended December
31,  1995 to $89.8  million  for the year  ended  December  31,  1996 due to the
proceeds from the sale of 2,088,889  shares of common stock and borrowings under
the  Revolving  Credit  Facility  which  were used to fund the  development  and
acquisition of apartment communities.

The Company  elected to be taxed as a REIT under Sections 856 through 860 of the
Internal  Revenue  Code of 1986,  as amended,  commencing  with its taxable year
ended  December 31, 1994.  REITs are subject to a number of  
                                       19
<PAGE>
organizational and operational  requirements,  including a requirement that they
currently distribute 95 percent of their ordinary taxable income.

The Company  expects to meet its short-term  liquidity  requirements,  including
capital expenditures relating to maintaining Stabilized  Communities,  generally
through its net cash  provided by  operations  and  borrowings  under its credit
arrangements and anticipates meeting long-term liquidity  requirements,  such as
scheduled debt maturities,  financing of construction and development activities
and possible  acquisitions through long-term unsecured  borrowings,  issuance of
additional  equity securities of the Company or debt securities of the Operating
Partnership,  or, possibly in connection  with  acquisitions of land or existing
properties,  Units of the Operating  Partnership.  The Company believes that its
net cash provided by operations  will be adequate and  anticipates  that it will
continue  to be  adequate  to meet both  operating  requirements  and payment of
dividends by the Company in accordance with REIT  requirements in both the short
and the long-term.

The  information in the immediately  preceding  paragraph is forward looking and
involves risks and uncertainties that could  significantly  impact the Company's
expected  liquidity  requirements  in the  short  and  long  term.  While  it is
impossible to itemize the many factors and specific events that could affect the
Company's outlook for its liquidity requirements, such factors would include the
actual  timing of the  Company's  planned  development  of new, and expansion of
existing,  communities;  acquisitions  of existing  apartment  communities;  the
actual  costs  associated  with  such  developments  and  acquisitions;  and the
strength  of the  local  economies  in the  sub-markets  in  which  the  Company
operates.  The  Company is  further  subject to risks  relating  to the  limited
geographic area in which it operates and its ability to successfully  manage its
planned expansion into Southern  California,  a market in which it does not have
any operating  history  prior to 1995.  Higher than  expected  costs,  delays in
development of communities, a downturn in the local economies and/or the lack of
growth of such  economies  could reduce the Company's  revenues and increase its
expenses,  resulting in a greater  burden on the Company's  liquidity  than that
which the Company has described above.

Capital Resources

At December 31, 1996, the Company's total debt was approximately  $436.2 million
and the Company's debt to total market capitalization  (Market Equity plus Debt)
was approximately 47.4 percent.  The Company received an investment grade rating
of "BBB-" from  Standards  and Poors,  "Baa3" from  Moody's,  " BBB-" from Fitch
Investor Services L.P. in December 1996.

Conventional Mortgage Loans

Conventional  mortgage  loans were comprised of six fixed rate loans at December
31,  1996,  each of  which  is  collateralized  by a first  mortgage  lien on an
apartment community included in real estate assets. The mortgages are payable in
monthly  installments  of principal  and  interest  and mature at various  dates
through  1997.  The  conventional  mortgage  loans  aggregated  $40.1 million at
December 31, 1996 with interest  rates ranging from 8.0 percent to 9.95 percent.
On January 9, 1997, the Company  extinguished  the debt on three  mortgages with
unpaid principal balances of approximately  $18.7 million with proceeds from the
Revolving  Credit  Facility.  As a result,  the Company incurred a loss from the
early  extinguishment of debt of approximately $1.2 million. The Company prepaid
a $6.2 million mortgage note on January 31, 1997 which resulted in an additional
loss from the early  extinguishment of debt of approximately $300. The loss from
the  early  extinguishment  of debt was  recorded  by the  Company  in the first
quarter 1997.

In December  1995,  the Company  entered into a ten year $50 million  fixed rate
loan from an  insurance  company  that  bears  interest  at 7.17  percent,  with
principal  and interest  due monthly  based on a 25-year  amortization  schedule
beginning  January 1, 1996 through  January 1, 2006,  and the  remaining  unpaid
principal  balance due  January 1, 2006.  The loan is secured by a first deed of
trust on five  apartment  communities.  Proceeds  from the loan were used to pay
down outstanding balances on the Revolving Credit Facility. The outstanding debt
was $49.5  million at December 31, 1996.  The loan is  convertible  to unsecured
upon the Company achieving an investment grade rating of BBB or better.
                                       20
<PAGE>
Mortgage Loan Certificates

The Company, through the Financing Partnership,  borrowed $102.0 million under a
securitized  loan in August 1994.  During January 1995, the Company borrowed the
balance of $29.0 million  (increasing the total to $131.0 million).  The loan is
secured by the first  mortgage liens on 22  Communities.  The $102.0 million was
issued at 99.97  percent of its face amount and the $29.0  million was issued at
97.9375  percent of its face amount and will mature on August 1, 2001.  Although
both amounts bear interest at 7.98  percent,  the $29.0 million has an effective
interest  rate  of  8.40  percent  due to the  discount.  The  weighted  average
effective  interest  rate of the total $131  million loan is 8.05  percent.  The
bonds have been rated "AA" by Standard and Poors.

Tax Exempt Bonds

Tax exempt bonds were  comprised of three  floating  rate bonds based on the tax
exempt note rate set by the respective  remarketing agents (or, at the option of
the Company at a fixed rate determined by the remarketing agents). The bonds are
secured by letters of credit which are secured by first  mortgage  liens on four
apartment communities.  The tax exempt bonds have monthly interest only payments
and mature at various dates through 2016.  The tax exempt bonds  aggregated  $64
million at December 31, 1996 with  interest  rates  ranging from 5.16 percent to
6.14 percent.

Revolving Credit Facility

On September 25, 1996, the Company expanded its existing $125 million  unsecured
Revolving  Credit  Facility to $225  million  with a Bank Group.  The  Revolving
Credit Facility bears interest at a floating rate of LIBOR plus 150 basis points
(or, at the option of the  Company,  at the prime rate  announced by the Banks).
The  interest  rate was reduced 25 basis  points upon the Company  achieving  an
investment grade rating of "Baa3" or "BBB-". The Revolving Credit Facility has a
term of three  years,  with an option to extend  for one year and  provides  for
monthly payments of interest only. It will be used to finance  acquisitions,  to
fund  construction and development and renovation costs, and for working capital
purposes.  At December  31,  1996,  there was $152  million  outstanding  on the
Revolving Credit Facility,  with an effective interest rate of 7.20 percent. The
Revolving  Credit Facility  contains  customary  representations,  covenants and
events of default,  including  a  limitation  which  restricts  dividends  to 95
percent of Funds From Operations,  as defined.  The Company does not expect that
the covenants  will affect its ability to pay  dividends in accordance  with its
current dividend policy or its ability to maintain a REIT status.

The table below  outlines the Company's  debt  structure as of December 31, 1996
(amounts in thousands).
<TABLE>
<CAPTION>
                                                                              Outstanding        Weighted Average
                                                                                Balance            Interest Rate
                                                                              -----------        ----------------
<S>                                                                       <C>                    <C>  
Fixed Rate Debt:
   Mortgage Debt
     Conventional....................................................     $         89,652              7.87%
     Mortgage Loan Certificates......................................              130,520              8.05
                                                                          ----------------       ----------------
         Total Fixed Rate Debt.......................................              220,172              7.98

Variable Rate Debt:
   Tax Exempt Bonds..................................................               64,000              5.70
   Revolving Credit Facility.........................................              152,000              7.20
                                                                          ----------------       ----------------
         Total Variable Rate Debt....................................              216,000              6.76
                                                                          ----------------       ----------------
         Total Debt..................................................     $        436,172              7.37%
                                                                          ================       ================
</TABLE>

The Company had 4,806  unencumbered  apartment  units related to the  Stabilized
Communities (including properties with debt that was repaid in January 1997) and
1,198 unencumbered apartment units related to the Communities Under Construction
and in Lease-Up at December 31, 1996.
                                       21
<PAGE>
Second Offering

In September  1995,  the Company filed a shelf  registration  statement with the
Securities  and  Exchange  Commission  (SEC)  for up to  $200  million  of  debt
securities, common stock, preferred stock and warrants.

In January 1997, the Company filed a shelf  registration  statement with the SEC
for up to $125 million of common stock, preferred stock and warrants issuable by
the  Company  and $200  million of debt  securities  issuable  by the  Operating
Partnership.  The  registration  statement,  which  has  not yet  been  declared
effective by the SEC includes  $125  million of available  securities  under the
September 1995 registration statement. These registration statements provide the
Company  with the  ability to issue and sell a portion of such  securities  from
time to time.

On May 28, 1996, the Company  completed a public offering of 4,500,000 shares of
its Common  Stock of which  2,000,000  shares  were sold by the  Company  and an
aggregate of 2,500,000 were sold by two institutional stockholders.  On June 25,
1996, the underwriters  exercised their over-allotment option for 200,000 shares
and the Company  issued an additional  88,889 shares of its Common Stock and the
institutional  stockholders  sold an  additional  111,111  shares  pursuant to a
partial exercise of the over-allotment  option granted to the underwriters.  Net
proceeds  to  the  Company  from  the  May  1996   Offering  was   approximately
$40,891,000.  The Company used the proceeds from the sale of Common Stock to pay
down its Revolving Credit Facility.

Inflation

Most of the leases at the communities are for a term of one year or less,  which
may enable the Company to seek increased  rents upon renewal of existing  leases
or commencement  of new leases.  The short-term  nature of the leases  generally
serves to reduce the risk to the Company of the adverse effects of inflation.

Funds From Operations

The Company and industry analysts  consider Funds from Operations  ("FFO") to be
an  appropriate  measure  of the  performance  of an equity  REIT  because it is
predicated on cash flow analyses.  The Company  computes FFO in accordance  with
standards  established  by the National  Association  of Real Estate  Investment
Trusts ("NAREIT").  FFO is defined as net income (loss) determined in accordance
with GAAP,  excluding  gains (or losses)  from debt  restructuring  and sales of
property plus depreciation and amortization,  excluding depreciation on non-real
estate  assets  and  amortization  of  deferred   financing  costs.  Funds  from
operations should not be considered as an alternative to net income  (determined
in accordance with GAAP) as an indicator of the Company's financial  performance
or to cash flow from operating  activities  (determined in accordance with GAAP)
as a measure of the  Company's  needs.  The  Company  believes  that in order to
facilitate  a  clear  understanding  of the  consolidated  historical  operating
results of the Company,  FFO should be examined in conjunction  with net income,
as presented in the  consolidated  financial  statements  and  elsewhere in this
document.
<TABLE>
<CAPTION>
                                                         Year ended December 31,

                                              1996        1995   1994 (a)        1993        1992
                                              ----        ----   --------        ----        ----
                                                         (Amounts in thousands)
<S>                                     <C>            <C>        <C>          <C>       <C>     
Income (loss) before extraordinary         $18,570     $20,826    $16,814      $6,612     $(6,709)
   items and minority interest
Depreciation and amortization               20,712      13,624     10,333      10,319       7,146
Amortization of executive deferred
    compensation expense                       390         693        267           -           -
                                        ----------------------------------------------------------
Funds from operations                      $39,672     $35,143    $27,414     $16,931        $437
                                        ==========================================================
</TABLE>

 (a)     1994 FFO has been adjusted to include other expenses ($5,233) that were
         incurred relating to the repayment of existing indebtedness at the time
         of  the  Initial  Public  Offering,  prepayment  penalties  and  lender
         participation  (additional  interest)  totaling  $2,594.  Prior  to the
         Initial Public Offering,  an Executive Incentive Deferred  Compensation
         Plan was  canceled  and the $2,639  that was funded by the  Company was
         expensed in 1994.  The Company  believes it is  
                                       22
<PAGE>
         appropriate  to add  back  other  expenses  to net  income  for the FFO
         calculation  in 1994 as these  expenses  represent  nonrecurring  costs
         directly  related to the Initial Public  Offering rather than recurring
         expenses from operations.

Number of Common Shares and Units

The Company had 22,184,395 and 20,590,873  weighted average number of shares and
units for the year ended December 31, 1996 and 1995, respectively.

Capitalization of Fixed Assets and Community Improvements.

The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially  extending the useful life of an existing asset.  All expenditures
necessary to maintain a community in ordinary  operating  condition are expensed
as incurred.

Acquisition of assets and community expenditures for the years ended December 31
are as follows:

                                                          1996           1995
                                                      -----------   ------------
          New community development                   $  82,177     $   107,223
          Acquisitions                                   88,648          77,895
          Nonrecurring capital expenditures
            Vehicle access control gates                    551               -
            Computer upgrade                                413             202
          Recurring capital expenditures:
            Community additions and
                improvements                              2,374           1,547
            Corporate additions and improvements            348             549
                                                     ------------   ------------
                                                      $ 174,511     $   187,416
                                                     ============   ============

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  Report of  Independent  Auditors,  Consolidated  Financial  Statements  and
Selected Quarterly  Financial  Information are set forth on pages F-1 to F-22 of
this Annual Report on Form 10-K.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
         ACCOUNTING AND FINANCIAL DISCLOSURE

There  were no  changes  in  accountants  or  disagreements  with the  Company's
accountants on accounting and financial disclosure matters in 1996.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Board of Directors of the Company is  currently  comprised of seven  members
divided into three classes serving staggered terms of three years each. Pursuant
to the  Company's  Charter  and  Bylaws,  the  term of  office  of one  class of
directors  expires each year and at each annual  meeting the  successors  of the
class  whose term is expiring in that year are elected to hold office for a term
of three years and until their  successors are elected and have  qualified.  The
current terms of two directors expire in this year, three expire in 1998 and two
expire in 1999.
                                       23
<PAGE>
                  Nominees for Election as Director at the 1997
                         Annual Meeting of Stockholders

<TABLE>
<CAPTION>
Name                       Age    Present Position With The Company                   Director Since
----                       ---    ---------------------------------                   --------------

<S>                        <C>    <C>                                                       <C> 
Richard G. Berry           52     President, Chief Operating Officer and Director           1994

Joseph W. O'Connor         51     Director                                                  1994
</TABLE>

Richard G. Berry was  appointed  President  and Chief  Operating  Officer of the
Company  on  January  21,  1997.  Prior to that time,  Mr.  Berry  served as the
Executive  Vice  President and a director of the Company since its formation and
has served as the Executive Vice President of Evans Withycombe, Inc. since 1992.
From 1983 to 1992, Mr. Berry served as Chairman of the Board of Berry and Boyle,
a real estate investment and development  management company. Prior to 1983, Mr.
Berry served as Executive Vice President of Hutton Real Estate  Services and was
responsible  for that firm's real estate  investment and management  activities.
Mr.  Berry  earned a Bachelor of  Architecture  degree and a Masters of Business
Administration  degree from the  University  of  Michigan.  He also served as an
officer of a United States Navy mobile construction battalion for three years.

Joseph W.  O'Connor  became a  director  of the  Company  concurrently  with the
closing of the Initial  Public  Offering in August 1994.  Mr.  O'Connor has been
active in real  estate  since 1970 and has served for 14 years as the  President
and Chief Executive Officer of Copley Real Estate Advisors, Inc. In 1996, Copley
Real Estate Advisors merged with Aldrich, Eastman and Waltch to form AEW Capital
Management L.P. where Mr. O'Conner is currently  Co-Chairman.  Mr. O'Connor is a
graduate of Holy Cross College and earned his Masters of Business Administration
Degree at Harvard Business School. He has lectured extensively and is affiliated
with numerous real estate  professional  organizations and community affairs. At
the present time, Mr.  O'Connor is either a Director or Trustee of the following
entities:  The Urban Land Institute,  Copley  Properties,  Inc., The New England
Aquarium,  Harvard Management  Company.,  Children's Hospital and the MIT Center
for Real Estate Development.

                         Directors Continuing in Office
<TABLE>
<CAPTION>
                                                                                         Director          Term
   Name                         Age         Present Position With The Company             Since           Expires
   ----                         ---         ---------------------------------             -----           -------
<S>                             <C>             <C>                                        <C>             <C> 
   Stephen O. Evans             51              Chairman of the Board and                  1994            1998
                                                 Chief Executive Officer

   F. Keith Withycombe          52                       Director                          1994            1999

   Joseph F. Azrack             49                       Director                          1994            1998

   G. Peter Bidstrup            66                       Director                          1994            1999

   John O. Theobald II          52                       Director                          1994            1998
</TABLE>

Stephen  O. Evans has served as the  Chairman  of the Board and Chief  Executive
Officer of the Company since its formation. Mr. Evans founded the predecessor of
the  Company in 1977 and  served as  Chairman  of the Board and Chief  Executive
Officer.  From 1973 to 1977,  Mr. Evans was  Investment  Vice  President of W.R.
Schulz &  Associates,  at that  time  Arizona's  largest  apartment  development
company.  He earned  his  Bachelor  of Science in  Business  Administration  and
Masters of Business  Administration  degrees from Arizona State  University.  He
also  served as an officer in the United  States Air Force for four  years.  Mr.
Evans affiliations include National Multi-
                                       24
<PAGE>
Housing Council; National Association of Real Estate Investment Trusts (NAREIT);
Lambda Alpha, a National Land Economic Fraternity; and Urban Land Institute.

F. Keith  Withycombe has served as a director of the Company since its formation
and served as the President and Chief Operating Officer of the Company since its
formation until January 21, 1997. Prior to that time, Mr.  Withycombe  served as
the President of Evans  Withycombe,  Inc. From 1973 to 1981, Mr.  Withycombe was
Vice President and a Managing  Partner for W.R. Schulz & Associates where he was
responsible  for the  development  and management of a large number of apartment
projects,  in  addition  to  corporate  responsibilities.  Mr.  Withycombe  is a
Certified  Property  Manager.  He is a graduate  of the United  States Air Force
Academy with an Engineering  Sciences degree,  and earned a Master of Industrial
Engineering  degree from Arizona State University.  He also served as an officer
in the United States Air Force for six years.

Joseph F. Azrack became a director of the Company  concurrently with the closing
of the Company's Initial Public Offering in August 1994. Mr. Azrack is President
and Chief Executive Officer of AEW Capital Management, L.P., a Boston based real
estate investment  advisory firm. Mr. Azrack has over 23 years experience in the
real estate investment industry.  He is past Chairman of the Pension Real Estate
Association.  Mr.  Azrack is also a Trustee  of the Urban Land  Institute,  Past
Chairman of the ULI's Task Force on Real Estate Capital  Markets and is a member
of the National Realty Committee.  He is also a member of the Board of Directors
of La Quinta Inns,  and a member of the Taubman Realty Group,  L.P.  partnership
committee. Mr. Azrack is also a past adjunct professor of Real Estate Finance at
Columbia  University's  Graduate  School  of  Business  Administration.  He is a
graduate of Villanova University (B.S.) and Columbia University (M.B.A.).

Peter Bidstrup became a director of the Company concurrently with the closing of
the  Company's  Initial  Public  Offering in August 1994.  Mr.  Bidstrup  formed
Doubletree,  Inc. in 1969 and was  Chairman and Chief  Executive  Officer of the
company and its successor,  Met Hotels,  Inc. until 1991. Mr.  Bidstrup is now a
principal officer and director of Bid-Group, Inc., CDT Investments,  Inc. and GA
Investments, Inc. Manager, COPA Capital, L.L.C. Mr. Bidstrup also is the founder
of Homeward Bound, a non-profit housing  organization.  His memberships  include
Association  for  Corporate  Growth;  Dean's  Council  of 100,  ASU  College  of
Business;  Entrepreneurial Fellow,  University of Arizona; Lambda International;
the Board of  Directors  of the  World  President's  Organization;  the Board of
Directors of the Arizona Community Foundation.  Mr. Bidstrup holds a Bachelor of
Science Degree from the United States Military  Academy and a Master of Business
Administration   Degree   from  the   Harvard   Graduate   School  of   Business
Administration.

John O.  Theobald  II became a director  of the  Company  concurrently  with the
closing of the Company's Initial Public Offering in August 1994. Since 1988, Mr.
Theobald has served as Senior Vice President and General  Counsel for The Pointe
Group,  Ltd.,  a privately  owned real estate  company  operating in Arizona and
Southern California with activities including residential,  office,  industrial,
land development and resort  development and management.  From 1973 to 1988, Mr.
Theobald  was a  partner  in  the  law  firm  of  McLoone,  Theobald  &  Galbut,
specializing  in real estate and  corporate  law. His  memberships  includes the
Boards of Directors of St. Luke's Charitable Health Trust,  Herrington Arthritis
Research Center; and The Arizona Historical Foundation. Mr. Theobald holds an AB
Degree  from  Princeton  University  and a law  degree  from the  University  of
Arizona.

On two occasions (April 1992 and October 1992) when unable to reach a negotiated
settlement with its secured lenders,  two partnerships in which Mr. Evans and/or
Mr.  Withycombe  had an  interest  elected to file a petition  for relief  under
Chapter 11 of the United States Bankruptcy Code. In both cases, the partnerships
were  single-purpose  entities,  each owning one apartment project. In one case,
the partnership was a general partnership in which a corporation wholly owned by
Mr.  Evans  had a  16.7%  non-controlling  interest.  In  the  other  case,  the
partnership was a limited partnership whose corporate general partner was wholly
owned by secured  creditors  being paid off in  accordance  with the  applicable
settlement agreement and the bankruptcy petition being voluntarily  dismissed by
the parties.

Director  Designation  Agreement.  The  Company  has  entered  into  a  Director
Designation  Agreement with each of AEW Partners,  L.P. ("AEW"), CIIF Associates
II Limited Partnership, a Delaware limited partnership ("Copley"), Mr. Evans and
Mr. Withycombe.  Pursuant to the terms of such agreement,  (a) AEW has the right
to designate for  
                                       25
<PAGE>
nomination  one  director  for a period of five years  following  the  Company's
Initial  Public  Offering,  so long  as it  continues  to  hold at  least a 7.5%
interest in the Company  (giving effect to the exchange of all Units (as defined
below under "Security  Ownership of Certain  Beneficial Owners and Management"))
for shares of Common Stock and (b) Mr. Evans and Mr.  Withycombe shall each have
the right to designate  themselves  to serve as directors of the Company so long
as each of them continues to hold a 7.5% interest in the Company  (giving effect
to the exchange of all Units for shares of Common  Stock) or they jointly hold a
12.5%  interest in the Company  (giving  effect to the exchange of all Units for
shares of Common  Stock)  and each of them  continues  to serve as an  executive
officer of the Company.  Pursuant to the Director Designation Agreement, each of
the AEW, Copley,  Mr. Evans and Mr.  Withycombe have agreed to vote their Common
Shares for the persons  nominated  for director  under the Director  Designation
Agreement;  Mr. Azrack is AEW's  initial  designee to the Board of Directors and
Mr. O'Connor is Copley's initial designee to the Board of Directors.


ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation Table

The Company was  organized as a Maryland  corporation  in May 1994 and commenced
operations in connection with the consummation of its Initial Public Offering on
August 17, 1994. Prior to the its Initial Public  Offering,  the Company did not
pay any compensation to its executive  officers.  The following table sets forth
information concerning the compensation awarded to, earned by or paid during the
last three fiscal years to the Company's Chief Executive  Officer and to each of
the four most highly  compensated  executive  officers of the Company whose cash
compensation  exceeded $100,000 for the fiscal year ended December 31, 1996 (the
"Named Executive Officers").
                                       26
<PAGE>
                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                            Long Term
                                                                                 ----------------------------
                                                    Annual Compensation                Compensation Awards
                                           ------------------------------------  ----------------------------
                                                                                  Restricted     Securities
                                                                  Other Annual      Stock       Underlying         All Other
                                   Year    Salary (2)    Bonus    Compensation    Awards (3)    Options/SARs      Compensation
Name and Principal Position         (1)         $          $           $               $              #              (4) $
---------------------------        -----   ----------    -----    -------------  ------------   -------------    --------------

<S>                                 <C>    <C>          <C>       <C>             <C>         <C>                <C>  
Stephen O. Evans.................   1996   $204,000     $     --  $ 14,400        $     --    $ 45,000           $  2,918
   Chairman of the Board and       
   Chief Executive Officer          1995    204,000           --        --              --          --              2,079

                                    1994     71,538       37,500        --              --      150,000             3,179

F. Keith Withycombe (5)..........   1996    199,313           --    12,000              --       45,000             2,871
   President and Chief Operating
   Officer
                                    1995    204,000           --        --              --          --              1,853

                                    1994     45,000       37,500        --              --      150,000             2,738

Richard G. Berry (5).............   1996    181,188           --    12,000          40,006       54,000             1,812
   Executive Vice President
                                    1995    165,000           --        --              --           --             2,310

                                    1994     53,654       28,125        --              --       65,000             2,767

G. Edward O'Clair................   1996    104,500           --     6,000              --       22,500             2,610
   Senior Vice President--
   Construction                     1995     99,493           --        --         423,240           --             1,014

                                    1994     34,219        4,875        --              --       35,000             1,913

Paul R. Fannin...................   1996    116,000       15,000     3,000              --       30,000             1,784
   Senior Vice President--Chief
   Financial Officer, Treasurer     1995    103,600           --     3,058         193,160           --             1,857
   and Secretary                    
                                    1994     32,192        3,750     1,071             --        35,000               322
</TABLE>

-----------------
(1)   The  Company  was  formed  in May 1994 and  therefore  no  information  is
      available with respect to years prior to 1994.
(2)   On an  annualized  basis in 1994,  the  salaries  for the Named  Executive
      Officers  would be:  $200,000  for each of Messrs.  Evans and  Withycombe,
      $150,000  for Mr.  Berry,  $95,667  for Mr.  O'Clair,  and $90,000 for Mr.
      Fannin.
(3)   An aggregate of 82,802 shares of "restricted stock" were issued to certain
      officers of the Company in August 1995 in connection with the continuation
      of an executive  incentive deferred  compensation plan of a predecessor to
      the Company,  including  21,162 shares to Mr.  O'Clair and 9,658 shares to
      Mr. Fannin.  Such shares vest over a three-year  period after issuance and
      upon issuance such shares had voting and dividend rights with one-third of
      the shares vesting in August 1996.  The value of the  restricted  stock at
      the end of the last fiscal year was $454,983 for Mr. O'Clair, and $193,160
      for Mr. Fannin.
(4)   Amounts  shown  in this  column  represent  Company  contributions  to the
      Company's 401(k) Plan.
                                       27
<PAGE>
(5)   Mr.  Withycombe  resigned as President and Chief Operating  Officer of the
      Company effective  January 21, 1997. Mr. Withycombe  remains a director of
      the Company. On January 21, 1997, Richard G. Berry was appointed President
      and Chief Operating Officer of the Company.

                        Option Grants in Fiscal Year 1996
                                Individual Grants

The following table contains  information  concerning the grant of stock options
under  the  Company's  Plan  for the 1996  fiscal  year to the  Named  Executive
Officers.  The table also lists potential  realizable  values of such options on
the basis of assumed annual  compounded stock  appreciation  rates of 5% and 10%
over the life of the options which are set at a maximum of ten years.
<TABLE>
<CAPTION>
                                                                                           Potential Realizable Value at
                              Number of       Percent of Total                                     Assumed Annual
                              Securities          Options       Exercise                         Rates of Share
                              Underlying          Granted        Or Base                       Price Appreciation
                           Options Granted    to Employees in     Price      Expiration        For Option Term (4)
     Name                      (#)(1)          Fiscal Year      ($/Sh)(2)      Date(3)       5%($)(2)     10%($)(2)
-----------------------    ---------------   ------------------ ---------- --------------  ----------------------------
<S>                              <C>               <C>           <C>       <C>               <C>         <C>   
Stephen O. Evans                 45,000            13.0%         $22.25    February 2006     $566,000    $1,434,000
F. Keith Withycombe              45,000            13.0%         $22.25    February 2006      566,000     1,434,000
Richard G. Berry                 54,000            15.6%         $22.25    February 2006      705,000     1,785,000
G. Edward O'Clair                22,500             6.3%         $22.25    February 2006      283,000       717,000
Paul R. Fannin                   35,000             8.7%         $22.25    February 2006      377,000       957,000
</TABLE>

(1)  These options generally will vest in three equal installments on the first,
     second and third  anniversaries of the date of grant in the case of Messrs.
     Evans and Withycombe and in four equal installments for the other officers.
(2)  Based on the price per Common Share at the award date.
(3)  The expiration date of the options is ten years from the date of the award.
(4)  The potential  realizable  value is reported net of the option  price,  but
     before income taxes  associated  with  exercise.  These  amounts  represent
     assumed annual compounded rates of appreciation at 5% and 10% only from the
     date of grant to the expiration date of the option.


           Aggregated Option/SAR Exercises Awarded In Last Fiscal Year
                      and Fiscal Year-End Option/SAR Values

The  following  table  provides  information  related to the  exercise  of stock
options during the year ended  December 31, 1996 by each of the Named  Executive
Officers and the 1996 fiscal year-end value of unexercised  options.  There were
no stock options exercised in 1996.
<TABLE>
<CAPTION>
                                                                                 Number of
                                                                                Securities
                                                                                Underlying               Value of
                                                                                Unexercised            Unexercised
                                                                                  Options              In-the-Money
                                                                               at FY-End (#)        Options at FY-End
                                     Shares Acquired     Value Realized        Exercisable/            Exercisable/
     Name                            on Exercise (#)           ($)             Unexercisable       Unexercisable ($)(1)
-----------------------              ---------------     --------------        -------------       --------------------
<S>                                           <C>              <C>            <C>                    <C>             
Stephen O. Evans                              -                $-             111,250/83,750         $100,000/$50,000
F. Keith Withycombe (2)                       -                 -             111,250/83,750           100,000/50,000
Richard G. Berry                              -                 -              46,000/73,000            32,500/32,500
G. Edward O'Clair                             -                 -              23,125/34,375            17,500/17,500
Paul R. Fannin                                -                 -              25,000/35,000            17,500/17,500
</TABLE>
                                       28
<PAGE>
(1)  Market value of underlying  Common Stock on date of fiscal  year-end  minus
     the exercise price. The closing price on December 31, 1996 was $21.00.

(2)  F. Keith  Withycombe  resigned as  President  and Chief  Operating  Officer
     effective  January 21, 1997 and remains a director of the Company.  Richard
     G. Berry was appointed President and Chief Operating Officer on such date.

The Company does not have any stock appreciation rights

Employment Agreements

On August 17, 1994,  each of Stephen O. Evans and Richard G. Berry  entered into
employment agreements with the Company for a term of three years. The agreements
provide  for  annual  compensation  in the  amounts  set  forth in the  "Summary
Compensation  Table" above and incentive  compensation on the terms set forth in
"Incentive  Compensation Plan" below. Each of the employment agreements provides
for certain severance  payments equal to base compensation for the longer of the
balance  of the  employment  term or 18  months in the  event of  disability  or
termination by the Company without cause or by the employee with "good reason."

The Company generally will have "cause" to terminate  Messrs.  Evans or Berry if
such person (i) engages in acts or omissions  with respect to the Company  which
constitute intentional misconduct or a knowing violation of law, (ii) personally
receives a benefit  of money,  property  or  services  from the  Company or from
another  person dealing with the Company in violation of law, (iii) breaches his
non-competition agreement with the Company, (iv) breaches his duty of loyalty to
the Company, (v) engages in gross negligence in the performance of his duties or
(vi) fails to perform services that have been reasonably requested of him by the
Board of Directors  following  applicable  notice and cure periods and which are
consistent with the terms of his employment  agreement.  Messrs.  Evans or Berry
will each have "good reason" to terminate his employment with the Company in the
event of any  reduction in his  compensation  without his consent,  any material
breach  or  default  by  the  Company  under  his  employment  agreement  or any
substantial diminution in his duties.

As part of their employment agreements,  each of Messrs. Evans and  Berry agreed
to a  noncompetition  covenant with the Company which  generally  prohibits them
(with certain specified exceptions) from engaging in or carrying on, directly or
indirectly, whether as an advisor, principal, agent, partner, officer, director,
employee,  shareholder,  associate  or  consultant  to any person,  partnership,
corporation  or any other business  entity which is engaged in the  development,
construction,  acquisition or management of multifamily  apartment properties in
the North  America  except by or through  the  Company  for the longer of (a) 12
months  following the  termination  of employment  with the Company or (b) three
years after the closing of the Company's  Initial Public  Offering,  without the
prior written  consent of the Board of  Directors;  provided,  however,  if such
person's  employment  is  terminated  by the Company  without  "cause" or by the
employee for "good reason," the agreement not to compete will terminate upon the
termination of employment.

On January 21, 1997,  Mr.  Withycombe  resigned as an officer of the Company and
his duties were assumed by Mr. Berry.  Mr.  Withycombe will continue to serve in
his capacity as a Director of the Company.  Pursuant to an employment  agreement
between the Company and Mr.  Withycombe,  Mr.  Withycombe  is  prohibited  (with
certain  specified  exceptions)  from  engaging in or carrying  on,  directly or
indirectly, whether as an advisor, principal, agent, partner, officer, director,
employee,  shareholder,  associate  or  consultant  to any person,  partnership,
corporation  or any other business  entity which is engaged in the  development,
construction,  acquisition or management of multifamily  apartment properties in
North  America  except by or through  the  Company  for one year  following  the
termination of his employment with the Company.
                                       29
<PAGE>
1994 Stock Incentive Plan

General.  In August  1994 the  Company's  Board of  Directors  adopted,  and the
stockholders of the Company  approved,  the 1994 Stock Incentive Plan (sometimes
referred to herein as the "1994 Plan").  The maximum  number of shares of Common
Stock that may be issued  pursuant to Awards (as defined  below)  under the 1994
Plan is  1,830,000,  subject to  adjustment  as set forth in the 1994  Plan.  No
person shall be eligible to be granted  options and other Awards with respect to
an excess of 250,000  shares of Common Stock during any one calendar  year.  The
purpose of the 1994 Plan is to enable the Company,  the  Operating  Partnership,
the  Management  Company (as defined below) and their  subsidiaries  to attract,
retain  and  motivate  their  employees  and  consultants  by  providing  for or
increasing the  proprietary  interests of such employees and  consultants in the
Company  and  to  enable  the  Company  to  attract,  retain  and  motivate  its
nonemployee  directors  and  further  align  their  interests  with those of the
Company's  stockholders by providing for or increasing the proprietary  interest
of such  directors in the  Company.  Any person,  including  any director of the
Company,  who is an employee of or  consultant  to the  Company,  the  Operating
Partnership,   the  Management   Company  or  any  of  their   subsidiaries  (an
"Employee"), is eligible to be considered for the grant of Awards under the 1994
Plan.  The 1994  Plan  also  provides  for the  automatic  grant of  options  to
directors of the Company who are not employees ("Nonemployee Directors").

The 1994 Plan is required  to be  administered  by a  committee  of the Board of
Directors consisting of two or more directors,  each of whom is a "Disinterested
Person,"  as such term is defined in Rule 16b-3,  as amended  from time to time,
promulgated under the Securities Exchange Act of 1934. Subject to the provisions
of the 1994 Plan,  the committee is authorized  and empowered to administer  the
1994 Plan,  including,  without  limitation,  adopting,  amending and rescinding
rules and regulations  relating to the 1994 Plan;  determining which persons are
Employees  under the 1994 Plan and to which of such  Employees,  if any,  Awards
shall  be  granted  under  the 1994  Plan;  granting  Awards  to  Employees  and
determining  the terms and conditions of Awards granted under the 1994 Plan, and
the  agreements  relating to such Awards;  and  construing the 1994 Plan and the
terms,  conditions  and  restrictions  of any  Awards and  Nonemployee  Director
Options granted under the 1994 Plan.

Awards to Employees.  The  committee is authorized  under the 1994 Plan to enter
into any type of arrangement with an Employee, consistent with the provisions of
the 1994 Plan,  that involves or might involve the issuance of (a) Common Stock,
(b) an  option,  warrant,  convertible  security,  stock  appreciation  right or
similar  right,  with an exercise or conversion  privilege at a price related to
the Common Stock, or (c) any other security or benefit with a value derived from
the value of the Common  Stock (any such  arrangement  is defined  herein as the
"grant" of an "Award").

Awards are not  restricted to any  specified  form or structure and may include,
without limitation,  sales or bonuses of stock, restricted stock, stock options,
reload stock options,  stock purchase  warrants,  other rights to acquire stock,
securities  convertible into or redeemable for stock, stock appreciation rights,
limited  stock  appreciation  rights,   phantom  stock,   dividend  equivalents,
performance units or performance shares. An Award may consist of any one of such
security or benefit,  or of two or more of them in tandem or in the alternative.
A stock option granted to an employee of the Company may be an Incentive  Option
or a Nonqualified Option (as defined below), while a stock option granted to any
other Employee will be a Nonqualified Option. The maximum number of Common Stock
that may be issued pursuant to Incentive  Options granted under the 1994 Plan is
1,000,000.  Common  Stock may be  issued  pursuant  to an Award  for any  lawful
consideration  as determined by the committee,  including,  without  limitation,
services rendered by the recipient of such Award.

Nonemployee  Director  Options.  The 1994 Plan  provides  that each  Nonemployee
Director will, on the day of the annual meeting of  stockholders of the Company,
or any  adjournment  thereof,  at which  directors  of the Company are  elected,
automatically be granted a Nonemployee  Director Option to purchase 2,500 shares
of Common Stock. In addition,  each Nonemployee  Director shall automatically be
granted a Nonemployee  Director  Option to purchase 2,500 shares of Common Stock
upon  appointment to the Board of Directors.  Each  Nonemployee  Director Option
will have an exercise  price equal to the greater of: (i) the fair market  value
of the underlying shares subject to such option on the date of its grant or (ii)
the aggregate par value of such Common Stock on such date. Each
                                       30
<PAGE>
Nonemployee  Director  Option  granted  pursuant  to the 1994 Plan shall  become
exercisable  for the first time to  purchase  100% of the Common  Stock  subject
thereto one year after the date of grant of such Nonemployee Director Option.

Amendment  and  Termination  of 1994  Plan.  The  1994  Plan may be  amended  or
terminated  by the Board of  Directors at any time,  except that the  provisions
relating to Nonemployee Director Options may not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code (the
"Code"),  ERISA,  or  the  rules  thereunder.   Additionally,  no  amendment  or
termination  of the 1994  Plan  shall  deprive  the  recipient  of any  Award or
Nonemployee  Director Option that was previously  granted to the recipient under
the 1994 Plan of his or her rights thereto without the recipient's consent.

Unless sooner terminated by the Board of Directors, the 1994 Plan will terminate
on August 4, 2004. After  termination of the 1994 Plan, no additional  Awards or
Nonemployee  Director Options may be granted  thereunder.  Although Common Stock
may be issued  after  August 4, 2004  pursuant  to the  exercise  of Awards  and
Nonemployee  Director  Options granted prior to such date, no Common Stock shall
be issued under the 1994 Plan after August 4, 2014.

Incentive Compensation Plan

The Company has established an incentive  compensation plan for officers and key
employees  of the  Company.  This plan  provides  for payment of a cash bonus to
participating  officers  and key  employees  if certain  performance  objectives
established  for each  individual are achieved.  Pursuant to such plan,  each of
Messrs.  Evans and Berry shall be entitled to receive a cash bonus of up to 100%
of their respective base compensation, respectively, upon the achievement by the
Company of specified  targets of growth in funds available for  distribution per
share as determined by the  Compensation  Committee.  The amount of the bonus to
other participating  officers and key employees is based on a formula determined
for each employee by the Compensation  Committee or the Chief Executive  Officer
and  President of the Company,  which is based on growth in funds  available for
distribution and other factors.

401(k) Plan

The Company maintains through Evans Withycombe Management, Inc. (the "Management
Company"),  a qualified retirement plan, with a salary deferral feature designed
to qualify under Section 401 of the Internal  Revenue Code (the "401(k)  Plan").
The 401(k) Plan permits  employees of the Management  Company to defer a portion
of their compensation in accordance with the provisions of Section 401(k) of the
Code. The 401(k) Plan currently allows  participants to defer up to 20% of their
eligible  compensation  on a pre-tax basis subject to certain  maximum  amounts.
Matching  contributions  may be made in amounts and at times  determined  by the
Company.  Amounts  contributed  by the Company for a participant  will vest over
five years and will be held in trust until distributed  pursuant to the terms of
the 401(k) Plan.  Employees  are eligible to  participate  in the 401(k) Plan if
they meet  certain  requirements  concerning  minimum age and period of credited
service.  Distributions  from participant  accounts will not be permitted before
age 59  1/2,  except  in the  event  of  death,  disability,  certain  financial
hardships or termination of employment.

For the fiscal  year  ended  December  31,  1996,  the  Company  contributed  an
aggregate of approximately  $13,000 pursuant to the 401(k) Plan on behalf of the
Named Executive  Officers and $113,000 on behalf of all employees as a group. At
December 31, 1996, a total of 272 of the Company's  employees were  participants
in the 401(k) Plan.

Executive Incentive Deferred Compensation Plan

In 1996 the Company's  Initial Public Offering,  Evans  Withycombe,  Inc. had in
place an Executive Incentive Deferred  Compensation Plan (the "Executive Plan").
Pursuant to the Executive Plan,  certain  executives of Evans  Withycombe,  Inc.
(the  "Participants")  were granted  unfunded,  unsecured rights to receive cash
payments based on the  distributions  from certain  partnerships  in which Evans
Withycombe, Inc. owned an interest. The awards would 
                                       31
<PAGE>
have vested over a six-year  period from the date of grant.  In connection  with
the  consummation  of the  Company's  Initial  Public  Offering,  all  rights of
Participants  under the  Executive  Plan  were  canceled,  and the  Participants
received (a) an aggregate  of  approximately  $2.6 million in cash funded by the
Management  Company  prior  to the  offering  and (b) the  right to  receive  an
aggregate  of 98,500  shares  of  restricted  stock  from the  Company  one year
following the offering if they remained as employees of the Company  during such
period,  of which 82,802  shares were issued on or about  August 17,  1995.  One
third  of the  shares  will  vest  on  each  of the  second,  third  and  fourth
anniversaries of the offering based upon the continued employment by the Company
of the Participants.

Director Compensation

The Company currently pays each non-employee  director a fee of $12,000 per year
for services as a director plus $500 for attendance in person at each meeting of
the  Board of  Directors  (including  telephonic  board  meetings),  but not for
committee  meetings.  The  Company  also  reimburses  the  directors  for travel
expenses  incurred in connection  with their duties as directors of the Company.
The Board of Directors has approved a plan to allow the  non-employee  directors
to elect to receive  payment of their  retainer fees in the form of Common Stock
or options to  purchase  Common  Stock  rather than in cash.  See  "Non-Employee
Directors Stock Plan" below. In addition, pursuant to the terms of the Company's
1994 Stock Incentive Plan, each non-employee director will automatically receive
on the date of each annual  meeting an option to purchase 2,500 shares of Common
Stock, at an exercise price equal to the fair market value of such shares on the
date of grant. See "Item 11. Executive Compensation--1994 Stock Incentive Plan."
The Company has been advised that any  compensation  received by Mr. O'Connor is
as a nominee for CIIF  Associates  II Limited  Partnership,  a Delaware  limited
partnership.


                        Non-Employee Directors Stock Plan

The Board of Directors adopted and the Company's stockholders approved the Evans
Withycombe  Residential,  Inc. Non-Employee Directors Stock Plan (the "Directors
Plan").  As discussed  above,  non-employee  directors of the Company  currently
receive  cash  compensation  as an annual  retainer  and for meeting  fees.  The
Directors Plan is intended to more closely align the directors'  compensation to
the  Company's   stock  price,  to  further  the  perspective  of  directors  as
stockholders,  and to promote the long-term growth and financial  success of the
Company by enabling the Company to attract,  retain and motivate such persons by
providing for or increasing their proprietary interest in the Company. Under the
Directors Plan, non-employee directors will have the ability to elect to receive
their  quarterly  directors'  retainer  (including  meeting fees) in the form of
Common Stock or options to purchase  Common Stock in lieu of the cash they would
otherwise be entitled to receive.

Eligibility.  Each  director on the Board of Directors  who on any date when the
Company  pays  directors'  retainer  fees  (each,  a  "Payment  Date") is not an
employee  of the  Company or a  subsidiary  of the  Company is  automatically  a
participant in the Directors Plan.

Administration.  The  timing,  amount and persons  eligible to receive  stock or
options  under the Directors  Plan are  prescribed by the terms of the Directors
Plan and  requires no  discretionary  action by any  administrative  body.  Each
director may elect,  six months before a Payment Date, to receive  retainer fees
payable on such date in the form of stock or options.  Subject to the foregoing,
the Directors Plan is administered by the Compensation Committee of the Board of
Directors  and by such persons to whom it may delegate any  ministerial  duties.
The  Directors  Plan is intended to operate in a manner that  exempts  grants of
stock and options  under the  Directors  Plan from Section 16(b) of the Exchange
Act and that does not affect the status of participants in the Directors Plan as
"disinterested  administrators"  under Exchange Act Rule 16b-3,  for purposes of
their administering other stock-based plans of the Company.

Stock  Subject to the  Directors  Plan.  The  aggregate  number of shares of the
Company's  Common  Stock  that can be issued  under the  Directors  Plan may not
exceed  100,000.  Such number of shares shall be  appropriately  adjusted by the
Compensation  Committee  if the  Company's  Common  Stock is affected  through a
reorganization,   merger,   consolidation,   recapitalization,    restructuring,
reclassification,  dividend  (other  than  quarterly  cash  dividends)  or other
                                       32
<PAGE>
distribution,  stock  split,  spin-off  or  sale  of  substantially  all  of the
Company's assets. Stock may not be issued under the Directors Plan more than ten
years after the date of stockholder  approval of the Directors Plan, except that
Common Stock may be issued  pursuant to the exercise of options granted prior to
such date for a period of five years following such date.

Stock and Options  Awards.  Each  participant  in the Directors Plan may choose,
through  delivery  of an  irrevocable  election  six  months in  advance  to the
Company,  to receive his or her directors retainer payment in the form of shares
(a "Stock Election") or as options to purchase shares (an "Option Election"). If
a participant makes a Stock Election with respect to the retainer fee payable on
a quarterly  Payment Date,  then on such Payment Date,  such  participant in the
Directors  Plan will  receive  of his or her  retainer  in the form of shares of
Common Stock.  The number of shares to be received by a participant  is equal to
the retainer fee amount which the director is entitled to receive divided by the
average  closing  price per share of the Common  Stock  reported for each of the
five business days preceding the Payment Date (the "Market Price").

If a participant  makes an Option  Election with respect to a Payment Date, then
on such Payment Date such participant shall be granted a nonqualified  option to
purchase shares of Common Stock with the following  terms:  (i) the option shall
be immediately exerciseable, (ii) the option shall have a term of ten years, and
(iii) the exercise price of the shares subject to such option shall equal to 75%
of the Market Price.  The number of shares of Common Stock to be subject to such
option is equal to the  retainer  fee amount  which the  director is entitled to
receive divided by a number equal to 25% of the Market Price. That is, each such
option will be granted with an exercise price that is 25% below the Market Price
such that the spread between the exercise price and the Market Price  multiplied
by the number of shares  subject to the option are, on the date of grant,  equal
to the amount of cash otherwise payable to, but forgone by such participant.

The number of shares to be received by any one director is not  determinable  in
advance  because such number is dependent both on the amount of directors'  fees
payable to such director and the trading  price of the  Company's  Common Stock.
Participants  shall have full  beneficial  ownership of shares awarded under the
Directors  Plan,  and shares  received  pursuant to exercise of options  granted
under  the  Directors  Plan,  including  the  right to vote and to  receive  any
dividends  payable with respect to such shares,  subject to any  restrictions on
transferability required under Exchange Act Rule 16b-3.

Amendments and Termination. The Compensation Committee may alter, amend, suspend
or terminate the Directors Plan, with or without  stockholder  approval,  except
that if required  under  Exchange Act Rule 16b-3 the provisions of the Directors
Plan  designating  persons  eligible to  participate  in the Directors  Plan and
specifying  the  amount of  directors  fees and the  amount and timing of grants
under the  Directors  Plan may not be  amended  more than once  every six months
other than to comport with changes in the Internal  Revenue Code,  the Employees
Retirement Income Security Act, or the rules thereunder. The Directors Plan also
provides  that,  to the extent any  amendment  is required by Exchange  Act Rule
16b-3 to be approved by stockholders in order for the Directors Plan to continue
to satisfy Rule 16b-3,  such  amendment to the Directors  Plan shall not be made
without approval of stockholders.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth  information  as of January 15, 1997  regarding
beneficial  ownership  of the Common  Stock and Units of the Company by (i) each
person  known by the  Company  to be a  beneficial  owner of more than 5% of the
Company's  Common  Stock,  (ii) each  director of the  Company,  (iii) the Chief
Executive Officer and each of the four highly compensated  executive officers of
the Company whose cash compensation  exceeded $100,000 for the fiscal year ended
December 31, 1996 and (iv) the Company's  executive  officers and directors as a
group. "Units" are partnership interests in the Operating Partnership. Units are
exchangeable  by the  holder  for cash or, at the  Company's  option,  shares of
Common Stock on a  one-for-one  basis  (subject to  adjustments)  commencing  in
August  1995.  For  purposes  of this  Annual  Report on Form  10-K,  beneficial
ownership  of  securities  is  defined  in  accordance  with  the  rules  of the
Securities  and Exchange  Commission  and  generally  means the power to vote or
exercise  investment  discretion  with  respect  to  securities,  regardless  of
economic interests therein. Except as 
                                       33
<PAGE>
otherwise  indicated,  the Company believes that the beneficial owners of Common
Stock  listed below have sole  investment  and voting power with respect to such
shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
                                      Number of
                                    Common Shares       Percent of All                       Percent of
      Name and Address of            Beneficially       Common Shares        Number of        All Units         Percent of
      Beneficial Owner(1)               Owned            Outstanding           Units         Outstanding     Equity Interest
------------------------------  ---------------------- ------------------  --------------- ---------------- -------------------
<S>                                  <C>                    <C>             <C>                 <C>               <C> 
Stephen O. Evans(2).........           248,252               1.3%           1,808,136           38.7%              8.9%
F. Keith Withycombe(3)......           215,402               1.2%           1,674,886           35.8%              8.2%
Richard G. Berry(4).........            48,120                *               110,000           2.3%                *
G. Edward O'Clair(5)........            49,828                *                 4,724             *                 *
Paul R. Fannin (6)                      41,334                *                  -                -                 *
Joseph F. Azrack(7).........         2,452,900              13.4%               __               __               10.6%
Joseph W. O'Connor(8).......           979,297               5.3%               __               __                4.2%
G. Peter Bidstrup(10).......            25,000                *                 __               __                 *
John O. Theobald II(10).....             6,000                *                 __               __                 *
AEW Partners, L.P...........         2,447,900              13.3%               __               __               10.6%
CIIF Associates II Limited
 Partnership, a Delaware
 limited partnership........           974,297               5.3%               __               __                4.2%
ABKB/LaSalle Group(11)......         1,906,750              10.4%               __               __                8.3%

All Executive Officers and
 Directors as a Group (12
 persons)((7)(8)(9)........          4,112,522              22.0%            3,600,331          77.0%             33.0%

*        Less than 1%.
</TABLE>

(1)      Unless otherwise noted, the address for each of the persons or entities
         listed above is 6991 East  Camelback  Road,  Suite  A-200,  Scottsdale,
         Arizona,  85251.  The  address for AEW and Mr.  Azrack is 225  Franklin
         Street, Boston, Massachusetts 02110; the address for CIIF Associates II
         Limited  Partnership and Mr. O'Connor is 399 Boylston  Street,  Boston,
         Massachusetts  02116;  and  the  address  for  ABKB/LaSalle  Securities
         Limited  Partnership  is 11 South  LaSalle  Street,  Chicago,  Illinois
         60603.
(2)      Includes  111,250 Common Shares subject to options that are exercisable
         within 60 days.  Does not  include  83,750  Common  Shares  subject  to
         options  that are not  exercisable  within  60 days.  Does not  include
         shares of Common Stock issuable upon exchange of 1,808,136  Units.  All
         exchanges  of Units for shares of Common  Stock and  exercise  of stock
         options are subject to the Ownership Limit (as defined in the Company's
         Charter).  Without regard to the Ownership Limit, 1,808,136 Units owned
         by Mr.  Evans  would be  presently  exchangeable  into a like number of
         shares of Common Stock and the amount and  percentage  of shares in the
         table above for Mr. Evans would be 2,056,388 and 8.9%, respectively.
(3)      Includes  111,250 Common Shares subject to options that are exercisable
         within 60 days.  Does not  include  83,750  Common  Shares  subject  to
         options  that are not  exercisable  within  60 days.  Does not  include
         shares of Common Stock issuable upon exchange of 1,674,886  Units.  All
         exchanges  of Units for shares of Common  Stock and  exercise  of stock
         options are subject to the Ownership Limit (as defined in the Company's
         Charter).  Without regard to the Ownership Limit, 1,674,886 Units owned
         by Mr. Withycombe would be presently exchangeable into a like number of
         shares of Common Stock and the amount and  percentage  of shares in the
         table  above  for  Mr.   Withycombe   would  be  1,890,288   and  8.2%,
         respectively.
(4)      Includes  46,000 Common Shares subject to options that are  exercisable
         within 60 days.  Does not  include  73,000  Common  Shares  subject  to
         options  that are not  exercisable  within  60 days.  Does not  include
         shares of Common Stock  issuable  upon exchange of 110,000  Units.  The
         110,000 Units owned by Mr. Berry are presently exchangeable into a like
         number of shares of Common Stock and,  giving effect to such  exchange,
         the amount and  percentage  of shares in the table above for Mr.  Berry
         would be 158,120 and .7%, respectively.
                                       34
<PAGE>
(5)      Includes  23,125 Common Shares subject to options that are  exercisable
         within 60 days.  Does not  include  34,375  Common  Shares  subject  to
         options  that are not  exercisable  within  60 days.  Does not  include
         shares of Common Stock issuable upon exchange of 4,724 Units. The 4,724
         Units  owned by Mr.  O'Clair  are  presently  exchangeable  into a like
         number of shares of Common Stock and, giving effect to such change, the
         amount  and  percentage  of shares in the table  above for Mr.  O'Clair
         would be 49,828 and .2%, respectively.
(6)      Includes  25,000 Common Shares subject to options that are  exercisable
         within 60 days.  Does not  include  35,000  Common  Shares  subject  to
         options that are not  exercisable  within 60 days.  The  percentage  of
         shares in the table above for Mr. Fannin is 41,344 and .2%.
(7)      Includes 2,447,900 Common Shares held by AEW Partners,  L.P. Mr. Azrack
         disclaims  beneficial  ownership  of all of such Common  Shares  except
         3,309  Common  Shares  relating  to his  proportionate  interest in AEW
         Partners,  L.P. Mr.  Azrack is the  President  and  Co-Chairman  of AEW
         Capital  Markets,  L.P..,  the sole general partner of the sole general
         partner of AEW Partners, L.P and 2,500 common shares subject to options
         that are  exerciseable  within 60 days.  Does not include  2,500 Common
         Shares subject to options that are not exercisable within 60 days.
(8)      Includes  974,297  Common  Shares  held by CIIF  Associates  II Limited
         Partnership,  a Delaware limited partnership,  as to which Mr. O'Connor
         disclaims  beneficial  ownership.  Mr.  O'Connor is  Co-Chairman of AEW
         capital Management,  L.P. formerly Copley Advisors, Inc.., the managing
         general  partner of CIIF  Associates II Limited  Partnership  and 2,500
         common shares subject to options that are exerciseable  within 60 days.
         Does not include  2,500 Common  Shares  subject to options that are not
         exercisable within 60 days, which Mr. O'Connor holds as nominee of CIIF
         Associates II Limited Partnership.
(9)      Does not include  482,250 Common Shares subject to options that are not
         exercisable  within 60 days.  Does not include  shares of Common  Stock
         issuable  upon exchange of 3,600,331  Units held by Executive  Officers
         and  directors as a group.  All exchanges of Units for shares of Common
         Stock and exercise of stock options are subject to the Ownership  Limit
         (as defined in the Company's Charter). Without regard for the Ownership
         Limit,  3,600,331  Units  owned  by such  persons  would  be  presently
         exchangeable  into a like  number of shares  of Common  Stock,  and the
         amount and  percentage  of shares in the table  above for such  persons
         would be 7,712,853 and 33.0%, respectively.
(10)     Does not include  2,500 Common  Shares  subject to options that are not
         exercisable within 60 days.
(11)     The  information  set forth is based on a Schedule 13G filed by LaSalle
         Advisors  Limited  Partnership  ("LaSalle  Advisors") and  ABKB/LaSalle
         Securities Limited Partnership ("ABKB/LaSalle") with the SEC 
         on October  10,  1996 that  identifies  such  entities  as a "group" as
         defined in Section  13(d)(3) of the  Exchange  Act.  Such  Schedule 13G
         indicates that LaSalle Advisors Limited  Partnership  beneficially owns
         an aggregate of 1,006,900  shares of Common Stock, of which it has sole
         and  dispositive  power over 502,300  shares,  shared voting power over
         185,700 shares and shared  dispositive  power over 504,600 shares.  The
         Schedule 13G further  indicates  that  ABKB/LaSalle  beneficially  owns
         899,850  shares  of  Common  Stock,  of which it has  sole  voting  and
         dispositive power over 201,600 shares, shared voting power over 566,450
         shares and shared dispositive power over 698,250 shares.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain  entities  affiliated  with  Messrs.  Evans and  Withycombe  (the "Evans
Withycombe  Entities")  own a minority  interest in joint ventures that own nine
multi-family  apartment  communities (the "Berry and Boyle Communities"),  which
were  not   transferred  to  the  Company  in  connection   with  the  Formation
Transactions.  The Evans  Withycombe  Entities  had a right of first  refusal to
acquire  the Berry and Boyle  Communities  upon a sale by a  venture.  The Evans
Withycombe  Entities had agreed to transfer any Berry Boyle Community subject to
the right of first  refusal to the  Company,  if the  Company so elects,  at the
right of first refusal price In the second quarter of 1996, the Company  elected
not to acquire  the Berry & Boyle  communities  and  terminated  its  management
contracts  on the  nine  multi-family  apartment  communities  in  exchange  for
receiving a termination fee of $500,000. In addition, five multifamily apartment
communities in which Evans  Withycombe  owns an interest were not transferred to
the Company.  The Management Company continues to manage these five multi-family
apartment communities for a fee pursuant to existing management agreements.
                                       35
<PAGE>
ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K
<TABLE>
(a)  The following documents are filed as part of this Report:

<S>        <C>                                                                                   <C>
           1.     Report of Independent Auditors                                                 F-1

                  Consolidated Balance Sheets as of December 31, 1996 and 1995.                  F-2

                  Consolidated Statements of Income for the years ended
                  December 31, 1996,1995 and 1994.                                               F-3

                  Consolidated Statements of Stockholders' Equity for the years ended
                  December 31, 1996,1995 and 1994.                                               F-4

                  Consolidated Statements of Cash Flows for the years ended
                  December 31, 1996,1995 and 1994                                                F-5

                  Notes to Consolidated Financial Statements                                     F-6

           2.     Financial Statement Schedule required to be filed by ITEM 8 and Paragraph (d) of
                  this ITEM 14.

                  Schedule III - Real Estate Investments and Accumulated Depreciation as of
                  December 31, 1996.                                                             F-17

                  All  other  schedules  for  which  provision  is  made  in the
                  applicable   accounting   regulation  of  the  Securities  and
                  Exchange   Commission  are  not  required  under  the  related
                  instructions  or are  inapplicable  and  therefore  have  been
                  omitted.

           3.     The  Exhibits are listed in the index of  Exhibits required by
                  Item 601 of Regulation S-K at Item (c)  below and  are  herein
                  incorporated by reference.

(b) A Current Report on Form 8-K was filed on December 26, 1996.
</TABLE>
                                       36
<PAGE>
  Exhibit
  Number                       Description of Document

    ** 3.1      Articles of Amendment and Restatement of the Company.

    ** 3.2      Amended and Restated Bylaws of the Company.

   ** 10.1      Amended and  Restated  Agreement of Limited  Partnership  of the
                Operating Partnership, dated as of August 17, 1994.

   *10.2.1      Articles of Incorporation of Evans Withycombe Management, Inc.

 ** 10.2.2      First Amendment to Articles of Incorporation of Evans Withycombe
                Management, Inc.

   ** 10.3      Amended and Restated Bylaws of Evans Withycombe Management Inc.

   ** 10.4      Certificate of Incorporation of Evans Withycombe Finance, Inc.

   ** 10.5      Bylaws of Evans Withycombe Finance, Inc.

   ** 10.6      Agreement of  Limited  Partnership for Evans  Withycombe Finance
                Partnership, L.P.

   ** 10.7      Director Designation Agreement dated as of August 17, 1994.

   ** 10.8      Registration  Rights Agreement among the Company and the persons
                named therein, dated as of August 17, 1994.

  ** #10.9      1994 Stock Incentive Plan.

    *10.10      Form of  Indemnity  Agreement  between  the  Registrant  and its
                directors and officers.

 ** #10.11      Employment Agreement among the Company, Evans Withycombe
                Management, Inc. and Stephen O. Evans.

** #10.12       Employment Agreement among the Company, Evans Withycombe
                Management, Inc. and F. Keith Withycombe.

** #10.13       Employment Agreement among the Company, Evans Withycombe
                Management, Inc. and Richard G. Berry.

    *10.14      Lease   between   the  Company   and  6991   Camelback   Limited
                Partnership, dated October 5, 1993.

    *10.15      Asset Contribution  Agreement by and among the Company and Evans
                Withycombe  Residential,  L.P., as  purchasers,  and the Sellers
                listed therein, dated as of June 9, 1994.

    *10.16      Property  Contribution  Agreement by and between the Company and
                AEW Partners, L.P., dated as of June 9, 1994.
                                       37
<PAGE>
    *10.17      Property  Interests  Contribution  Agreement  by and between the
                Registrant and CIIF  Associates II Limited  Partnership;  Copley
                Pension  Properties VI, A Real Estate Limited  Partnership;  New
                England Pension Properties V, A Real Estate Limited Partnership;
                and  Copley  Pension  Properties  VII,  A  Real  Estate  Limited
                Partnership, dated as of June 9, 1994.

  ** 10.18      Revolving  Loan Agreement by and between Bank One,  Arizona,  NA
                and Evans Withycombe Residential, L.P., dated December 1, 1995.

  ** 10.19      Property  Management  Agreement by and between Evans  Withycombe
                Residential,  L.P. and Evans Withycombe  Management,  Inc. dated
                August 17, 1994.

  ** 10.20      Property  Management  Agreement by and between Evans  Withycombe
                Finance Partnership,  L.P. and Evans Withycombe Management, Inc.
                dated as of August 17, 1994.

  ** 10.21      Deed of Trust with Assignment of Rents,  Security  Agreement and
                Fixture  Filing made by Evans  Withycombe  Finance  Partnership,
                L.P. to Lawyers  Title of Arizona,  Inc.  dated as of August 17,
                1994.

  ** 10.22      Property Contribution  Agreement by and between Evans Withycombe
                Residential, L.P., Evans Withycombe Residential, Inc. and Acacia
                Creek Limited Partnership dated as of February 1, 1995.

  ** 10.23      Loan Agreement by and between Northwestern Mutual Life Insurance
                and Evans Withycombe Residential, dated December 15, 1995.
 
 *** 10.24      Revolving  Loan Agreement by and between the Banks named herein,
                Bank One Arizona,  N.A., as  administrative  agent,  and Bank of
                America  National Trust and Savings  Association and Wells Fargo
                Bank,  National  Association as co-agents,  and Evans Withycombe
                Residential L.P. dated September 24, 1996.

       *21      List of Subsidiaries of the Company.

      23.1      Consent of Ernst & Young LLP.

*    Previously filed as an exhibit of like number to the Company's Registration
     Statement  on  Form S-11 and  amendments  thereto  (File No. 33-80150)  and
     incorporated herein by reference.

#    Management contract or compensatory plan or arrangement.

**   Previously  filed as an exhibit to the Company's annual report on form 10-K
     for the  fiscal  year ended  December  31,  1995 and 1994 and  incorporated
     herein by reference.

***  Previously filed as an exhibit to the Company's  Registration  Statement on
     Form S-3 and amendments  thereto (File No.  333-17805) and is  incorporated
     herein by reference.
                                       38
<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              EVANS WITHYCOMBE RESIDENTIAL, INC.


Date:    January 31, 1997                          By:  /s/Paul R. Fannin
                                                        -----------------
                                                          Paul R. Fannin,
                                                     Senior Vice President and
                                                        Chief Financial Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
         Signature                                        Title                              Date
         ---------                                        -----                              ----
<S>                                         <C>                                         <C> 
/s/Stephen O. Evans                         Chairman of the Board and Chief             January 31, 1997
----------------------------                     Executive Officer (Principal
         Stephen O. Evans                        Executive Officer)          
                                                 

/s/Richard G. Berry                         President, Chief Operating Officer and      January 31, 1997
----------------------------                     Director
         Richard G. Berry                        

/s/Paul R. Fannin                           Senior Vice President and                   January 31, 1997
----------------------------                     Chief Financial Officer (Principal
         Paul R. Fannin                          Financial and Accounting Officer) 
                                                 

/s/F. Keith Withycombe                      Director                                    January 31, 1997
----------------------------
         F. Keith Withycombe

/s/Joseph F. Azrack                         Director                                    January 31, 1997
----------------------------
         Joseph F. Azrack

/s/G. Peter Bidstrup                        Director                                    January 31, 1997
----------------------------
         G. Peter Bidstrup

/s/Joseph W. O'Connor                       Director                                    January 31, 1997
----------------------------
         Joseph W. O'Connor

/s/John O. Theobald II                      Director                                    January 31, 1997
----------------------------
         John O. Theobald II
</TABLE>
                                       39
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Evans Withycombe Residential, Inc.

We have audited the accompanying consolidated balance sheets of Evans Withycombe
Residential,  Inc. and  subsidiaries  (the  Company) as of December 31, 1996 and
1995 and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period  ended  December  31, 1996.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a).  These financial  statements and the schedule are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements and schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company at  December  31,  1996 and 1995,  and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996, in conformity with generally accepted accounting  principles.
Also, in our opinion the related financial statement  schedule,  when considered
in relation to the basic financial statements taken as a whole, presents fairly,
in all material respects the information set forth therein.


                                               Ernst & Young LLP




Phoenix, Arizona
January 31, 1997
                                      F-1
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                           CONSOLIDATED BALANCE SHEETS
               (Amounts in thousands, except for number of shares)
<TABLE>
<CAPTION>
                                                               December 31, 1996        December 31, 1995
                                                               -----------------        -----------------
<S>                                                             <C>                     <C>            
ASSETS
Real Estate:
  Land..................................................        $       121,915         $        95,908
  Buildings and improvements............................                543,839                 389,846
  Furniture and fixtures................................                 29,567                  23,736
  Construction-in-progress..............................                 66,229                  77,693
                                                                ----------------        -----------------
                                                                        761,550                 587,183

  Less accumulated depreciation.........................                (38,331)                (17,511)
                                                                ----------------        -----------------
                                                                        723,219                 569,672
Cash and cash equivalents...............................                  2,568                   3,634
Restricted cash.........................................                  1,622                     522
Accounts and notes receivable...........................                  3,500                   2,065
Deferred costs, net of accumulated amortization
  of $1,265 and $507 at December 31, 1996
  and 1995, respectively ...............................                  3,838                   2,946
Other assets ...........................................                  1,587                   1,656
                                                                ----------------        -----------------

Total assets ...........................................        $       736,334         $       580,495
                                                                ================        =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Mortgage and notes payable..............................        $       436,172         $       297,456
Accounts payable and other liabilities .................                  7,833                   9,379
Dividends payable ......................................                      -                   6,127
Accrued interest .......................................                  1,417                     605
Accrued property taxes .................................                  2,912                   2,358
Resident security deposits .............................                  1,818                   1,497
Prepaid rent ...........................................                    585                     438
                                                                ----------------        -----------------
Total liabilities ......................................                450,737                 317,860

Minority interest ......................................                 56,592                  64,487

Stockholders' Equity:
  Preferred stock, $.01 par value, 10,000,000 shares
    authorized, issued and outstanding - none ..........                      -                       -
  Common stock, $.01 par value, 100,000,000 shares
    authorized, 18,366,902 and 16,123,279 issued
    and outstanding at December 31, 1996 and
    1995, respectively .................................                    184                     161
  Additional paid-in capital ...........................                253,425                 209,344
  Unamortized employee restricted stock compensation....                   (465)                   (698)
  Distributions in excess of net income ................                (24,139)                (10,659)
                                                                ----------------        -----------------
Total stockholders' equity .............................                229,005                 198,148
                                                                ----------------        -----------------
Total liabilities and stockholders' equity .............        $       736,334         $       580,495
                                                                ================        =================
</TABLE>
See Notes to Consolidated Financial Statements
                                      F-2
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
    (Amounts in thousands, except for number of shares and per share amounts)
<TABLE>
<CAPTION>
                                         Evans Withycombe   Evans Withycombe   Evans Withycombe
                                         Residential, Inc.  Residential, Inc.  Residential, Inc.
                                         -----------------  -----------------      and Group
                                                                                   ---------
                                                        Year Ended December 31,
                                         ----------------------------------------------------
                                               1996              1995             1994
                                               ----              ----             ----
<S>                                       <C>                <C>               <C>      
Revenues:
  Rental................................. $    94,350        $  68,864         $  51,097
  Third party management fees ...........       1,157            1,268             1,668
  Interest and other ....................       6,195            4,478             4,424
                                          -----------        ---------         ---------
    Total revenues ......................     101,702           74,610            57,189

Expenses:
  Repairs and maintenance ...............      11,607            8,293             6,288
  Property operating ....................      12,713            8,699             7,834
  Advertising ...........................       1,864            1,244               966
  Real estate taxes .....................       6,915            4,723             3,204
  Property management ...................       3,225            2,825             2,505
  General and administrative ............       1,698            1,588             1,409
  Interest ..............................      24,225           12,650             7,836
  Depreciation and amortization .........      20,885           13,762            10,333
  Other .................................           -                -             5,233
                                          -----------        ---------         ---------
    Total expenses ......................      83,132           53,784            45,608
                                          -----------        ---------         ---------

Income before minority interest..........      18,570           20,826            11,581
Minority interest .......................      (4,010)          (4,594)           (1,548)
                                          -----------        ---------         ---------

Net income .............................. $    14,560      $    16,232         $  10,033
                                          ===========      ===========         =========




Earnings per share ...................... $       0.84     $      1.01
                                          ============     ===========

Earnings per share, period from August
17 to December 31, 1994..................                                      $    0.38
                                                                               =========





Weighted average shares outstanding .....  17,409,897       16,053,453        15,967,432
                                          ===========     ============        ==========
</TABLE>
See Notes to Consolidated Financial Statements
                                      F-3
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
    (Amounts in thousands, except for number of shares and per share amounts)
<TABLE>
<CAPTION>
                                                                                 Additional   Unamortized
                                                                                   Paid-in      Employee
                                                                                   Capital    Restricted   Distributions
                                                         Number of     Common     (Owners'       Stock     in Excess of
                                                          Shares       Stock       Equity)   Compensation   Net Income      Total
                                                        -----------  ----------  ---------- -------------- -------------  ---------
<S>                                                     <C>         <C>         <C>           <C>           <C>          <C>       
Owners' equity, December 31, 1993 ...................           --  $       --  $  142,886    $       --    $       --   $  142,886
     Capital contributions ..........................           --          --       9,660            --            --        9,660
     Distributions ..................................           --          --     (15,204)           --            --      (15,204)
     Net income, January 1 to August 16, 1994 .......           --          --       4,012            --            --        4,012
                                                        ----------  ----------  ----------    ----------    ----------   ----------
                                                                --          --     141,354            --            --      141,354
     The Offering and formation of
        the Company .................................   16,021,078         160     119,287            --            --      119,447
     Minority interest of unitholders in
       Operating Partnership at date of Offering ....           --          --     (53,343)           --            --      (53,343)
     Net Income, August 17 to December 31, 1994 .....           --          --          --            --         6,021        6,021
     Dividends on common stock ($.55 per share) .....           --          --          --            --        (8,812)      (8,812)
                                                        ----------  ----------  ----------    ----------    ----------   ----------

Stockholders' equity, December 31, 1994 .............   16,021,078         160     207,298            --        (2,791)     204,667
     Net income .....................................           --          --          --            --        16,232       16,232
     Dividends on common stock ($1.50 per share) ....           --          --          --            --       (24,100)     (24,100)
     Conversion of units to common stock ............       19,399        --           390            --            --          390
     Issuance of restricted common stock for
       executive deferred compensation ..............       82,802           1       1,656        (1,657)           --           --
     Amortization of deferred compensation ..........           --          --          --           959            --          959
                                                        ----------  ----------  ----------    ----------    ----------   ----------

Stockholders' equity, December 31, 1995 .............   16,123,279         161     209,344          (698)      (10,659)     198,148

    Net income ......................................           --          --          --            --        14,560       14,560
    Dividends on common stock ($1.58 per share)......           --          --          --            --       (28,040)     (28,040)
    Proceeds of second offering, net of
      underwriting discount and offering costs of
      $3,237 ........................................    2,088,889          21      40,870            --            --       40,891
    Conversion of units to common stock .............      132,793           2       2,581            --            --        2,583
    Exercise of stock options........................       19,500          --         390            --            --          390
    Issuance of restricted stock.....................       10,895          --         240          (240)           --          --
    Forfeiture of restricted stock...................       (8,454)         --          --            --            --          --
    Amortization of deferred compensation ...........           --          --          --           473            --          473
                                                        ----------  ----------  ----------    ----------    ----------   ----------

Stockholders' equity, December 31, 1996 .............   18,366,902  $      184  $  253,425    $     (465)   $  (24,139)  $  229,005
                                                        ==========  ==========  ==========    ==========    ==========   ==========
</TABLE>
See Notes to Consolidated Financial Statements
                                      F-4
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                  Evans            Evans              Evans         
                                                                Withycombe       Withycombe         Withycombe      
                                                            Residential, Inc. Residential, Inc.  Residential, Inc.  
                                                            ----------------- -----------------      and Group      
                                                                                                     ---------      
                                                                             Year Ended December 31,                
                                                              ----------------------------------------------------  
                                                                   1996              1995              1994         
                                                                   ----              ----              ----         
<S>                                                             <C>              <C>               <C>              
Cash flows from operating activities                                                                                
Net income ..................................................   $  14,560        $  16,232         $  10,033        
Adjustments to reconcile net income to net cash                                                                     
  provided by operating  activities:                                                                                
    Depreciation and amortization ...........................      21,578           14,420            10,703        
    Amortization of executive deferred comp .................         390              693               267        
    Minority interest .......................................       4,010            4,594             1,548        
    Write-off of development and acquisition costs ..........         227                -                 -        
    Write-off of deferred loan costs ........................           -              172                 -        
Decrease (increase) in assets                                                                             
    Restricted cash .........................................      (1,100)             561              (129)       
    Accounts and notes receivable ...........................      (1,435)            (758)           (1,111)       
    Other assets ............................................          69           (1,104)            3,136        
(Decrease) increase in liabilities                                                                        
    Accounts payable and other liabilities ..................      (1,546)             153             4,444        
    Due to related parties and owners .......................           -                -            (6,482)       
    Accrued interest ........................................         812              505              (818)       
    Accrued property taxes ..................................         554              825                62        
    Resident security deposits ..............................         321              500                54        
    Prepaid rent ............................................         147             (262)              (98)       
                                                                ---------        ---------         ---------        
Net cash provided by operating activities ...................      38,587           36,531            21,609        
                                                                                                                    
Cash flows from investing activities                                                                                
Purchase of real estate assets ..............................    (127,811)        (116,716)         (207,978)       
Payment for organization and loan costs .....................      (1,650)          (1,345)           (3,673)       
                                                                ---------        ---------         ---------        
Net cash (used) in investing activities .....................    (129,461)        (118,061)         (211,651)       
                                                                                                                    
Cash flows from financing activities                                                                                
Proceeds from Public Offering, net of expenses ..............      40,891                -           181,262        
Proceeds from exercise of options............................         390                -                 -        
Proceeds from mortgage notes and                                                                          
  credit facility ...........................................     269,778          315,653           122,522        
Principal payments on mortgage notes ........................    (177,762)        (202,477)         (101,280)       
Dividends paid ..............................................     (34,167)         (23,901)           (2,884)       
Minority interest distributions .............................      (9,322)          (6,550)           (2,265)       
Distributions to owners .....................................           -                -           (17,012)       
Capital contributions .......................................           -                -             9,660        
                                                                ---------        ---------         ---------        
Net cash provided by financing activities ...................      89,808           82,725           190,003        
                                                                                                                    
Net increase (decrease) in cash and cash                                                                            
  equivalents ...............................................      (1,066)           1,195               (39)       
Cash and cash equivalents, beginning of year ................       3,634            2,439             2,478        
                                                                ---------        ---------         ---------        
Cash and cash equivalents, end of year ......................   $   2,568        $   3,634         $   2,439        
                                                                =========        =========         =========        
                                                                                                                    
Supplemental information                                                                                            
Cash paid during the year for interest ......................   $  22,648        $  11,487         $   8,284        
                                                                =========        =========         =========        
                                                                                                                    
Supplemental disclosure of non-cash activity                                                                        
Assumption of debt related to the acquisition of                                                                    
  apartment communities .....................................   $  46,700        $  56,493         $       -        
                                                                =========        =========         =========        
                                                                                                                    
Acquisition of apartment communities through                                                                        
  issuance of units in the Operating Partnership ............   $       -        $  14,207         $       -        
                                                                =========        =========         =========        
Issuance of stock under restricted stock incentive plan .....   $      83        $     959         $       -        
                                                                =========        =========         =========        
Conversion of units to common stock .........................   $   2,583        $     390         $       -        
                                                                =========        =========         =========        
</TABLE>
See Notes to Consolidated Financial Statements              
                                      F-5
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996
   (Amounts in thousands, except for number of shares or units and per share
                                    amounts)


1.   Organization and Formation of the Company

Evans  Withycombe  Residential,  Inc.  (the  "Company")  is one  of the  largest
developers  and  managers  of upscale  apartment  communities  in Arizona and is
expanding its operation into selected  sub-markets in Southern  California.  The
Company  owns  and  manages  49  stabilized  multifamily  apartment  communities
containing   13,905  units,  of  which  44  stabilized   multifamily   apartment
communities  are located in Phoenix and Tucson,  Arizona,  containing a total of
12,005 units and five stabilized  multifamily  apartment communities are located
in the Riverside/San  Bernardino,  California market containing a total of 1,900
units. The Company considers an apartment  community  stabilized when it reaches
93 percent physical occupancy.  The Company is also in the process of developing
or expanding five multifamily  apartment  communities  comprising 1,078 units in
its  Arizona  markets.  The  Company  is  fully  integrated  with  expertise  in
development, acquisitions, construction and management of apartment communities.
The Company had approximately 580 employees at December 31, 1996.

The Company was incorporated on May 24, 1994 to develop, acquire, own and manage
upscale  multifamily  apartment  communities.  On August 17,  1994,  the Company
completed  an  initial  public   offering  and  engaged  in  various   formation
transactions  designed to transfer ownership of the communities and other assets
of  the  predecessor  company  to  Evans  Withycombe  Residential,  L.  P.  (the
"Operating  Partnership") or Evans  Withycombe  Finance  Partnership,  L.P. (the
"Financing Partnership"). The Company is the sole general partner of and owned a
79.7  percent,  77.02  percent  and  79.50  percent  interest  in the  Operating
Partnership at December 31, 1996, 1995 and 1994, respectively.  The Company also
holds a  noncontrolling  interest  in Evans  Withycombe  Management,  Inc.  (the
"Management Company").

In the second quarter of 1996, the Company  completed the Second  Offering.  The
net  proceeds  from the  Second  Offering  were used to repay a  portion  of the
Revolving Credit Facility.

The Company elected to be taxed as a real estate  investment  trust ("REIT") for
Federal income tax purposes. A corporate REIT is a legal entity which holds real
estate  interests  and,  through  payments  of  dividends  to  stockholders,  is
permitted  to  reduce  or avoid  the  payment  of  federal  income  taxes at the
corporate level.

2.   Basis of Presentation

The  accompanying   consolidated   financial   statements  of  Evans  Withycombe
Residential,  Inc.  include  the  consolidated  accounts  of  the  Company,  the
Operating Partnership, the Financing Partnership and the Management Company from
the date of the Offering, August 17, 1994. The accompanying financial statements
of Evans Withycombe  Residential Group (the  "Predecessor")  prior to August 17,
1994,  include  the  accounts  of  various   partnerships   sponsored  by  Evans
Withycombe.  The Predecessor  was a combination of affiliated  entities that had
ownership in multifamily communities in the Phoenix and Tucson, Arizona area; it
was not a separate  legal entity.  The  Predecessor  accounts are presented on a
combined basis because all of the communities  were managed by Evans  Withycombe
which  had a  significant  ownership  interest  in each of the  communities  and
because these communities were the subject of business combination in connection
with the formation of the Company.

All significant  intercompany  accounts and transactions have been eliminated in
consolidation.
                                      F-6
<PAGE>
Reclassification

Certain amounts in the 1995 balance sheet and statement of stockholders'  equity
have been reclassified to conform to the 1996 presentation.

3.   Summary of Significant Accounting Policies

Real Estate Assets and Depreciation

The Company  records its real estate  assets in  accordance  with  Statement  of
Financial  Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived  Assets and Long-Lived Assets to be Disposed of", which was issued
by the  Financial  Accounting  Standards  Board  in March  1995 and the  Company
adopted in 1996.  SFAS No. 121  requires  that  long-lived  assets  such as real
estate assets, be reviewed whenever events or changes in circumstances  indicate
that  the book  value of the  asset  may not be  recoverable.  If the sum of the
estimated future net cash flows (undiscounted and without interest charges) from
an  asset to be held and used is less  than  the  book  value of the  asset,  an
impairment loss must be recognized in the amount of the difference  between book
value and fair  value as opposed to the  difference  between  book value and net
realizable value under the previous  accounting  standard.  For long-term assets
like apartment communities,  the determination of whether there is an impairment
loss is dependent  primarily on the Company's  estimates on occupancy,  rent and
expense  increases,  which  involves  numerous  assumptions  and judgments as to
future events over a period of many years. At December 31, 1996 the Company does
not hold any assets that meet the impairment criteria of SFAS No. 121.

Costs related  directly to the  acquisition  and  improvement of real estate are
capitalized.  Interest costs incurred during  construction of a new property are
capitalized  until completion of construction on a  building-by-building  basis.
Interest capitalized was $2,714, $5,048 and $2,724, for the years ended December
31, 1996, 1995 and 1994, respectively.

Ordinary  repairs,  maintenance  and costs incurred in connection  with resident
turnover such as unit cleaning,  painting,  and carpet  cleaning are expensed as
incurred;  major  replacements  and  betterments are capitalized and depreciated
over their estimated  useful lives.  Depreciation is computed on a straight-line
basis over the expected useful lives of depreciable property,  which ranges from
10 to 40 years  for  buildings  and  improvements  and five to eight  years  for
furnishings and equipment.

The    Company    reports    developments    and    lease-up    properties    as
construction-in-progress  until construction on the apartment community has been
completed and the apartment community has reached stabilized occupancy.

The Company also reports land  relating to  construction-in-progress  as land on
its balance sheet. Land associated with construction-in-progress was $16,542 and
$16,414 at December 31, 1996 and 1995, respectively.

Revenue Recognition

Rental  income  attributable  to  residential  leases is recorded  when due from
residents.  Leases are for periods of up to one year,  with rental  payments due
monthly.

Cash and Cash Equivalents

Cash and cash equivalents include all cash and cash equivalent  investments with
original  maturities  of three months or less,  primarily  consisting  of demand
deposits in banks.
                                      F-7
<PAGE>
Restricted Cash

Restricted cash includes  restricted  deposits for sinking fund accounts related
to tax exempt bonds, property taxes and escrow accounts.

Deferred Costs

Costs incurred in obtaining  long-term  financing are deferred.  These costs are
amortized on the  effective  interest  method over the terms of the related debt
agreements.

Income Taxes

The  Company  has made an  election  to be taxed as a REIT and  accordingly,  no
federal  or  state  income  taxes  have  been   provided  in  the   accompanying
consolidated financial statements.

Use of Estimates

The  preparation of the  consolidated  financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in the consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

Earnings Per Share

Earnings per share has been  computed by dividing net income for the years ended
December 31, 1996 and 1995 and the period ended December 31, 1994, respectively,
by the weighted average number of shares  outstanding.  Historical  earnings per
share data for the periods  ended  prior to the  Offering on August 17, 1994 are
not relevant since the financial  information prior to such date is comprised of
combined operations of partnerships and corporations.

4.   Other

Prior to the Initial Public  Offering,  Evans  Withycombe,  Inc. had in place an
Executive Incentive Deferred Compensation Plan (the "Executive Plan").  Pursuant
to the  Executive  Plan,  certain  executives  of Evans  Withycombe,  Inc.  (the
"Participants") were granted unfunded, unsecured rights to receive cash payments
based on the distributions  from certain  partnerships in which Evans Withycombe
owned an interest.  The awards would have vested over a six-year period from the
date of grant.  In connection  with the Initial Public  Offering,  all rights of
Participants  under the  Executive  Plan  were  canceled,  and the  participants
received (a) an aggregate  of  approximately  $2,600 in cash which was funded by
Evans Withycombe, Inc. prior to the Initial Public Offering and (b) the right to
receive an aggregate of 98,500 shares of  restricted  stock from the Company one
year  following  the Offering if they remain as employees of the Company  during
such period. One third of the shares will vest on each of the second,  third and
fourth anniversaries of the Offering based on an offering price per share of $20
(See Stock Incentive Plan footnote).  The $2,600 cash payment,  which represents
an estimate of the  executives'  vested share of the gain, was expensed by Evans
Withycombe,  Inc.  during the third quarter of 1994 prior to the Initial  Public
Offering.

In  connection  with the repayment of existing  indebtedness  at the time of the
offering,  prepayment penalties and lender participation  (additional  interest)
totaling $2,600 were paid.
                                      F-8
<PAGE>
5.        Mortgage and Notes Payable

The  Company's  mortgage  notes and notes  payable  consists of the following at
December 31:
<TABLE>
<CAPTION>
                                                                                       1996         1995
                                                                                       ----         ----

<S>                                                                                 <C>          <C>     
Mortgage note payable at fixed interest rate of 7.2 percent, monthly principal      $      -     $  5,457
and interest payments through August 18, 1996.  The unpaid principal balance was
repaid on August 18, 1996.

Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal         5,380        5,463
and interest payments.  The unpaid principal balance was repaid on January 9,
1997.

Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal         4,340        4,406
and interest payments. The unpaid principal balance was repaid on January 9, 1997.

Mortgage note payable at fixed interest rate of 8.0 percent,  monthly principal        8,951        9,063
and interest payments. The unpaid principal balance was repaid on January 9, 1997.

Mortgage note payable at fixed interest rate of 8.28 percent, monthly principal        6,225        6,339
and interest payments.  The unpaid principal balance was repaid on January 31,
1997.

Mortgage note payable at fixed interest rate of 9.95 percent, monthly principal       12,065       12,184
and interest payments through September 15, 1997, remaining balance due September
15, 1997.

Mortgage note payable at fixed interest rate of 9.3 percent, monthly principal         3,182        3,212
and interest payments through September 15, 1997, remaining balance due September
15, 1997

$50 million securitized debt at a fixed interest rate of 7.17 percent, monthly        49,509       50,000
principal and interest payments through January 1, 2006, remaining balance due
January 1, 2006.  Secured by first mortgage liens on 5 communities.

Securitized debt at a fixed stated interest rate of 7.98 percent, with an            130,520      130,439
effective interest rate of 8.05 percent, monthly interest only payments through
August 1, 2001. Secured by first mortgage liens on 22 communities.  The face
amount of $131 million is  due August 1, 2001.  The balance is net of unamortized
discount of $480 and $561 at December 31, 1996 and 1995, respectively.

$13 million short term note payable at a fixed interest rate of 6.0 percent.               -       13,000
Interest only payments with the unpaid principal balance due January 5, 1996.
The unpaid principal balance was repaid on January 5, 1996.

$17.3 million tax exempt bonds with a floating interest rate based on the tax         17,300       17,300
exempt note rate set by the remarketing agent, or at the option of the Company
can convert to a fixed rate as determined by the remarketing agent.  Secured by a
$17.5 million direct pay letter of credit agreement, interest payments only
matures December 1, 2007 (Effective interest rate of 5.16 percent at December 31,
1996).

$22.6 million tax exempt bonds with a floating interest rate based on the tax          22,650            -
exempt note rate set by the remarketing agent, interest payments only.  Secured
by a $22.8  million  direct  pay  letter of credit,  matures  February  1, 2016.
(Effective interest rate of 5.65 percent at December 31, 1996).
</TABLE>
                                      F-9
<PAGE>
<TABLE>
<CAPTION>
                                                                                      1996         1995

<C>                                                                                <C>         <C>        
$24.05 million tax exempt bonds with a floating interest rate based on the tax     $  24,050   $         -
exempt note rate set by the remarketing agent.  Interest payments only.  Secured
by a $24.4 million direct pay letter of credit agreement, matures August 1,
2005.  (Effective interest rate of 6.14 percent at December 31, 1996).

$225 million unsecured Revolving Credit Facility with floating interest rate         152,000        40,593
based on LIBOR plus 1.50 percent or at the option of the Company at prime,
interest payments only.  Matures September 24, 1999 (Effective interest rate of
7.2 percent at December 31, 1996).
                                                                                   ----------  -----------
                                                                                   $ 436,172   $   297,456
                                                                                   =========   ===========
</TABLE>

Each  of  the  mortgage  loans  is  secured  by a  first  mortgage  on  separate
communities.

Principal maturities as of December 31, 1996 are as follows:

                1997                                            $    40,625
                1998                                                    563
                1999                                                152,605
                2000                                                    650
                2001                                                131,218
                Thereafter                                          110,511
                                                                -------------
                                                                $   436,172
                                                                =============


The $225 million Revolving Credit Facility provides funding for working capital,
construction activities and acquisitions.

The  Company  has three  direct pay  letters of credit of  $17,500,  $22,800 and
$24,400  which  serve as a credit  enhancement  for the tax  exempt  bonds.  The
letters of credit are secured by a first mortgage on four apartment communities.

On January 9, 1997, the Company  extinguished  the debt on three  mortgages with
unpaid  principal  balances of  approximately  $18,700  with  proceeds  from the
Revolving  Credit  Facility.  As a result,  the Company incurred a loss from the
early  extinguishment of debt of approximately  $1,200.  The Company prepaid the
$6,225 mortgage note on January 31, 1997 with proceeds from the Revolving Credit
Facility which resulted in an additional loss from the early  extinguishment  of
debt of  approximately  $300.  The loss from  early  extinguishment  of debt was
recorded by the Company in the first quarter 1997.

6.   Distributions

On December 31, 1996, the Company paid a distribution of $.40 per share ($7,311)
to  shareholders  and $.40 per unit  ($1,906)  to  unitholders  of  record as of
December 24, 1996.  Approximately 36 percent and 30 percent of the dividends and
distributions  paid  during 1996 and 1995  represented  return of capital to the
shareholders and unitholders.

7.    Management and Development Fees

The Company performs management services for certain  unaffiliated  communities.
Management  fees  received from managed  communities  were $1,157,  $1,268,  and
$1,668 for the years  ended  December  31,  1996,  1995 and 1994,  respectively.
Included  in 1996  third  party  management  fees is a non  recurring  $500
                                      F-10
<PAGE>
fee  received  in  exchange  for  terminating  the  management  contract on nine
apartment communities  containing 1,298 apartment units in the second quarter of
1996.

Prior  to the  Offering,  in  conjunction  with  development  of  projects,  the
communities  paid  development fees to affiliates of $4,554 for the period ended
August 16, 1994.

8.    Retirement Plan

The Company has a defined  contribution  wealth accumulation plan and trust (the
"Plan") covering all employees who have elected to participate in the Plan. Each
participant may make pretax  contributions to the Plan up to the maximum allowed
by the IRS.  The  Company  makes a  matching  contribution  of 25 percent of the
participant's  contribution  up to 1 percent of a  participant's  salary,  which
totaled $113, $53, and $91 for 1996, 1995, and 1994, respectively.


9.    Commitments and Contingencies

The  Company  leases  office  space in  buildings  and certain  equipment  under
noncancelable  operating leases. Future minimum payments under these leases with
initial terms of one year or more consist of the following at December 31, 1996:

               1997                                                 $ 358
               1998                                                   364
               1999                                                   224
               2000                                                     4
                                                                   ------

                                                                    $ 950
                                                                   ======




Rent  expense for the years ended  December  31,  1996,  1995 and 1994 was $360,
$300, and $288, respectively.
                                      F-11
<PAGE>
10.  Stock Incentive Plan

Stock Option Plan

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related  interpretations
in accounting for its employee stock options  because,  as discussed  below, the
alternative  fair value  accounting  provided for under FASB  Statement No. 123,
"Accounting  for  Stock-Based  Compensation,"  requires use of option  valuation
models that were not developed for use in valuing employee stock options.  Under
APB 25,  because the exercise  price of the  Company's  employee  stock  options
equals  the  market  price of the  underlying  stock on the  date of  grant,  no
compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
Statement  123, and has been  determined as if the Company had accounted for its
employee stock options under the fair value method of that  Statement.  The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following  weighted-average  assumptions  for 1995
and 1996,  respectively:  risk-free  interest  rates of 6.5% and 6.5%;  dividend
yields of 7.5% and 7.4%;  volatility factors of the expected market price of the
Company's common stock of 0.18 and 0.18; and a weighted-average expected life of
the  option of 5 years.  Because  Statement  123 is  applicable  only to options
granted  subsequent to December 31, 1994, its pro forma effect will not be fully
reflected until 1997.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma  information  follows  (amounts in thousands except for earnings per share
information):

                                                           1996          1995
                                                         -------       -------
       Pro forma net income                              $14,557       $16,232
       Pro forma primary earnings per share                $0.84         $1.01

Exercise  prices for options  outstanding  as of  December  31, 1996 ranged from
$18.25 to  $22.25.  The  weighted-average  remaining  contractual  life of those
options is 7.6 years.
                                      F-12
<PAGE>
Initially  1,830,000  shares of the  Company's  common  stock were  reserved for
issuance  under the plan.  Information  with  respect to stock  options  granted
during 1996, 1995 and 1994 is as follows:

                                                                    Weighted
                                                                     Average
                                                                 Exercise Price
                                                        Shares     Per Share
                                                        ------     ---------

Options granted on August 17, 1994                      685,200      $20.00
         Exercised                                            -        -
         Granted                                         16,000       19.65
         Forfeited                                       (4,840)      20.00
                                                      ----------    --------
Options outstanding at December 31, 1994                696,360       19.99
         Exercised                                            -        -
         Granted                                         21,000       19.74
         Forfeited                                      (18,185)      20.00
                                                      ----------    --------
Options outstanding at December 31, 1995                699,175       19.98
         Exercised                                      (19,500)      20.00
         Granted                                        345,000       21.96
         Forfeited                                     (115,825)      20.00
                                                      ----------    --------
Options outstanding at December 31, 1996                908,850      $20.63
                                                      ==========    ========
Options exercisable:
         December 31, 1994                                    -        -
         December 31, 1995                              175,300      $20.00
         December 31, 1996                              357,700      $19.98

Options to purchase 901,650, 1,130,825 and 1,133,640 shares of common stock were
available  for  grant  under  the plan at  December  31,  1996,  1995 and  1994,
respectively.


Executive Stock Incentive Plan

Prior to the Offering,  the Company's predecessor Evans Withycombe,  Inc. had in
place an Executive Incentive Deferred  Compensation Plan (the "Executive Plan").
Pursuant to the Executive Plan,  certain  executives of Evans  Withycombe,  Inc.
(the  "Participants")  were  granted the right to receive an aggregate of 98,500
shares of restricted  stock from the Company one year  following the Offering if
they remain employees of the Company during such period. One-third of the shares
vest on each of the second, third and fourth anniversaries of the Offering based
on an offering  price per share of $20. The expense is being  amortized  ratably
over the  periods in which the  shares  vest and an expense of $390 and $698 and
$267 for the years ended  December 31,  1996,  1995 and 1994,  respectively,  is
included in general and administrative expense.  Information with respect to the
executive restricted stock incentive plan is as follows:

                                                                      Shares
                                                                    --------- 
            Restricted stock at December 31, 1994                      98,500
            Forfeited                                                 (15,698)
                                                                    ----------  
            Restricted stock at December 31, 1995                      82,802
            Forfeited                                                  (8,454)
                                                                    ---------- 
            Restricted stock at December 31, 1996                      74,348
                                                                    ==========

            Number of shares vested                                    27,600
                                      F-13
<PAGE>
Restricted Stock Program

In 1996,  the  Company  awarded  10,895  shares of  restricted  stock to certain
employees of the Company under its 1994 Stock  Incentive  Plan.  The  restricted
stock vests ratably over periods ranging from one to four years from the date of
the award and are based on the price of the stock at the award date which ranges
from $20.75 to $22.25.  The related  expense will be amortized  ratably over the
periods in which the shares  vest and an expense of $83 is  included  in general
and administrative expense for the year ended December 31, 1996.

11.  Minority Interest

Minority  interest  at  December  31,  1996,  1995 and  1994,  respectively,  is
comprised of the following:
<TABLE>
<CAPTION>
                                                                         Number
                                                                        of Units          Dollars
                                                                     ------------    -------------
<S>                                                                    <C>           <C>         
          Minority interest of unit holders in
            operating partnership at date of offering                  4,119,452     $     53,343
          Allocation of net income                                             -            1,548
          Distributions ($.55 per unit)                                        -           (2,265)
                                                                    ------------    -------------
          Balance at December 31, 1994                                 4,119,452           52,626
 
          Issuance of units to acquire apartment communities             710,550           14,207
          Conversion of units to common stock                            (19,399)            (390)
          Allocation of net income                                             -            4,594
          Distributions ($1.50 per unit)                                       -           (6,550)
                                                                     ------------    -------------
          Balance at December 31, 1995                                 4,810,603           64,487

          Conversion of units to common stock                           (132,793)          (2,583)
          Allocation of net income                                             -            4,010
          Distributions ($1.58 per unit)                                       -           (9,322)
                                                                     ------------    -------------
          Balance at December 31, 1996                                 4,677,810     $     56,592
                                                                     ============    =============

</TABLE>

The Units can be redeemed for cash or shares of common stock of the Company on a
one-for-one basis at the Company's  option.  Minority interest of unitholders in
the Operating  Partnership is calculated based on the weighted average of shares
of common stock and Units outstanding during the period.


12.  Fair Value of Financial Instruments

The following  disclosures of estimated fair value were determined by management
using available  market  information and  appropriate  valuation  methodologies.
Judgment is necessary to interpret market data and develop estimated fair value.
Accordingly,  the estimates  presented herein are not necessarily  indicative of
the  amounts  the  Company  could  realize  on   disposition  of  the  financial
instruments.   The  use  of  different  market   assumptions  and/or  estimation
methodologies may have a material effect on the estimated fair value amounts.

Cash equivalents,  accounts receivable,  accounts payable and other accruals are
carried at amounts that reasonably  approximate their fair values as of December
31, 1996 and 1995. The Company's  debt has an estimated  aggregate fair value of
approximately  $437,800 at December 31, 1996  compared to the carrying  value of
$436,172.  At December 31, 1995,  the Company's debt had an estimated fair value
of  approximately  $298,800  compared to the carrying  value of  $297,456.  Fair
values were estimated  using  discounted  cash flow analyses,  based on interest
rates currently available to the Company for issuance of debt with similar terms
and remaining maturities.
                                      F-14
<PAGE>
13.  1994 Results of Operations

         The 1994 results of operations of the Company and its  Predecessor  are
as follows:
<TABLE>
<CAPTION>
                                                    Evans Withycombe      Evans Withycombe
                                                    Residential, Inc.     Residential Group
                                                    -----------------     -----------------

                                                       August 17 to          January 1 to
                                                    December 31, 1994      August 16, 1994
                                                    -----------------      ---------------
<S>                                                  <C>                   <C>          
     Revenues:
       Rental .................................      $       20,185        $      30,912
       Third party management fees ............                 560                1,108
       Interest and other .....................               1,258                3,166
                                                     ----------------      --------------
     Total revenues ...........................              22,003               35,186
     Expenses:
       Repairs and maintenance ................               2,642                3,646
       Property operating .....................               2,392                5,442
       Advertising ............................                 345                  621
       Real estate taxes ......................               1,251                1,953
       Property management ....................               1,104                1,401
       General and administrative .............                 644                  765
       Interest ...............................               2,302                5,534
       Depreciation and amortization ..........               3,754                6,579
       Other ..................................                   -                5,233
                                                     ----------------      --------------
     Total expenses ...........................              14,434               31,174
                                                     ----------------      --------------
     Income before
       minority interest ......................               7,569                4,012
     Minority interest ........................              (1,548)                   -
                                                     ----------------      --------------
     Net income ...............................      $        6,021        $       4,012
                                                     ================      ==============
</TABLE>
                                      F-15
<PAGE>
14. Selected Quarterly Financial Information  (Unaudited,  in thousands,  except
    per share amounts)
<TABLE>
<CAPTION>
                                                                  Quarter
                                        First            Second            Third            Fourth
                                        -----            ------            -----            ------
<S>                                    <C>              <C>               <C>              <C>    
1996

Revenue .....................          $24,179          $24,106           $25,956          $27,461
Net operating income ........           16,858           16,308            16,742           18,695
Income before
  minority interest .........            5,283            4,682             3,927            4,678
Minority interest ...........           (1,212)          (1,027)             (812)            (959)

Net income ..................            4,071            3,655             3,115            3,719
Earnings per share ..........             $.25             $.22              $.17             $.20

1995

Revenue .....................          $16,300          $17,530           $19,088          $21,692
Net operating income ........           11,444           12,015            12,312           15,880
Income before
  minority interest .........            5,606            4,868             4,586            5,766
Minority interest ...........           (1,173)          (1,095)           (1,030)          (1,296)

Net income...................            4,433            3,773             3,556            4,470
Earnings per share...........             $.28             $.23              $.22             $.28
</TABLE>

The Company defines net operating income as earnings before property management,
general and administrative expense, interest and depreciation.
                                      F-16
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
       SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                    Costs Capitalized Subsequent  Gross Amounts at Which      
                                               Initial Cost         to Acquisition/Construction   Carried at Close of Period  
                             -------------------------------------------------------------------------------------------------------
                                                       Buildings and             Buildings and             Buildings and
Description                  Encumbrances    Land      Improvements    Land      Improvements     Land     Improvements      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>           <C>          <C>          <C>          <C>          <C>            <C>     
Same Store                                                                                     
   Phoenix                                                                                     
Bayside at the Islands                                                                         
    Gilbert,  AZ               $ 6,589     $ 1,877       $ 6,623      $ 1,429      $ 3,491      $ 3,306      $10,114        $13,420 
Country Brook                                                                                                                       
    Chandler, AZ                 7,792         937         3,886           25        6,578          962       10,464         11,426 
Deer Creek Village                                                                                                                  
    Phoenix, AZ                  5,116         919         5,454          506        3,465        1,425        8,919         10,344 
Greenwood Village                                                                                                                   
    Tempe, AZ                    6,553       1,770         7,119          349        2,322        2,119        9,441         11,560 
Heritage Point                                                                                                                     
    Mesa, AZ                        --         666         5,125           --          397          666        5,522          6,188 
La Mariposa                                                                                                                         
    Mesa, AZ                     4,750       1,440         3,962          608        2,620        2,048        6,582          8,630 
La Valencia                                                                                                                         
    Mesa, AZ                     7,792       2,485         6,569        1,068        4,283        3,553       10,852         14,405 
Little Cottonwoods                                                                                                                  
    Tempe, AZ                    9,424       2,834         6,655          216        7,161        3,050       13,816         16,866 
Los Arboles                                                                                                                         
    Chandler, AZ                    --       1,160         7,836           --          237        1,160        8,073          9,233 
Miramonte                                                                                                                           
    Scottsdale, AZ               4,340       1,133         3,711           --          123        1,133        3,834          4,967 
Morningside                                                                                                                         
    Scottsdale, AZ               4,542         533         6,316          137        2,115          670        8,431          9,101 
Park Meadow                                                                                                                         
    Gilbert,  AZ                 2,936         607         2,828          225        1,275          832        4,103          4,935 
Preserve at Squaw Peak                                                                                                              
    Phoenix, AZ                  3,172         377         4,252          141        1,939          518        6,191          6,709 
Promontory Pointe                                                                                                                   
    Phoenix, AZ                  7,610       2,038         6,987         (379)       7,861        1,659        4,943          6,602 
                                                                                    (9,905) *                                       
Scottsdale Courtyards                                                                                                               
    Scottsdale, AZ              10,442       2,946         8,385           33        3,087        2,979       11,472         14,451 
Scottsdale Meadows                                                                                                                  
    Scottsdale, AZ               5,381       1,512         4,203           --          113        1,512        4,316          5,828 
Shadow Brook                                                                                                                        
    Phoenix, AZ                  7,922       2,440         9,320          625        3,388        3,065       12,708         15,773 
Shores at Andersen Springs                                                                                                          
    Chandler, AZ                 8,196       2,095         9,682          649        3,949        2,744       13,631         16,375 
</TABLE>
<TABLE>
<CAPTION>
                                         Accumulated      Year        Year          Depreciable
Description                             Depreciation   Developed     Acquired      Lives in Years 
--------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>             <C>           <C>       
Same Store                                                                    
   Phoenix                                                                    
Bayside at the Islands                                                        
    Gilbert,  AZ                          $  815       1988-1989                     5 to 40 years  
Country Brook                                                                                       
    Chandler, AZ                             954                       1991          5 to 40 years  
Deer Creek Village                                                                                  
    Phoenix, AZ                              912                       1991          5 to 40 years  
Greenwood Village                                                                                   
    Tempe, AZ                                961                       1993          5 to 40 years  
Heritage Point                                                                                      
    Mesa, AZ                                 424                       1994          5 to 40 years  
La Mariposa                                                                                         
    Mesa, AZ                                 528                       1990          5 to 40 years  
La Valencia                                                                                         
    Mesa, AZ                                 829                       1990          5 to 40 years  
Little Cottonwoods                                                                                  
    Tempe, AZ                                939                       1989          5 to 40 years  
Los Arboles                                                                                         
    Chandler, AZ                             895                       1993          5 to 40 years  
Miramonte                                                                                           
    Scottsdale, AZ                           481                       1993          5 to 40 years  
Morningside                                                                                         
    Scottsdale, AZ                           731                       1992          5 to 40 years  
Park Meadow                                                                                         
    Gilbert,  AZ                             450                       1992          5 to 40 years  
Preserve at Squaw Peak                                                                              
    Phoenix, AZ                              500                       1991          5 to 40 years  
Promontory Pointe                                                                                   
    Phoenix, AZ                              392                       1988          5 to 40 years  
                                                                                                    
Scottsdale Courtyards                                                                               
    Scottsdale, AZ                         1,035       1993                          5 to 40 years  
Scottsdale Meadows                                                                                  
    Scottsdale, AZ                           539                       1993          5 to 40 years  
Shadow Brook                                                                                        
    Phoenix, AZ                            1,157                       1993          5 to 40 years  
Shores at Andersen Springs                                                                          
    Chandler, AZ                           1,078       1993                          5 to 40 years  

* Write-down of real estate assets
</TABLE>
                                      F-17
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
       SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                          Costs Capitalized Subsequent  Gross Amounts at Which
                                          Initial Cost    to Acquisition/Construction   Carried at Close of Period
                                      ----------------------------------------------------------------------------
                                                 Buildings and         Buildings and            Buildings and         
Description                 Encumbrances  Land   Improvements   Land   Improvements    Land     Improvements      Total 
-----------------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>       <C>         <C>        <C>         <C>         <C>          <C>     
Same Store (continued)                                                                                                 
Silver Creek                                                                                                           
    Phoenix, AZ               $ 3,211      $484     $3,157       $228     $2,429       $ 712       $5,586       $6,298 
Sun Creek                                                                                                              
    Glendale, AZ                3,811       715      3,950        182      1,648         897        5,598        6,495 
The Meadows                                                                                                            
    Mesa, AZ                        -       650      4,797          -      2,795         650        6,231        6,881 
                                                                          (1,361) *                                     
The Palms                                                                                                              
    Phoenix, AZ                 4,895     2,152      4,455      1,133      2,764       3,285        7,219       10,504 
The Pines                                                                                                              
    Mesa, AZ                    3,707       577      3,725        351      2,559         928        6,284        7,212 
Towne Square                                                                                                           
    Chandler, AZ                    -     1,042      8,413        277      3,614       1,319       12,027       13,346 
Villa Encanto                                                                                                          
    Phoenix, AZ                 8,951     2,884      8,558          -        844       2,884        9,402       12,286 
Village at Lakewood                                                                                                    
    Phoenix, AZ                 8,317     1,652      5,776      1,514      5,897       3,166       11,673       14,839 

   Tucson                                                                                                              
Harrison Park                                                                                                          
    Tucson, AZ                  3,315       516      3,511          -        743         516        4,254        4,770 
La Reserve                                                                                                             
    Oro, Valley                 6,409     2,309      6,356        956      3,656       3,265       10,012       13,277 
Orange Grove Village                                                                                                   
    Tucson, AZ                  3,786       814      3,233        906      2,575       1,720        5,808        7,528 
Suntree Village                                                                                                        
    Oro, Valley                 8,550     1,246      8,862        326      3,713       1,572       12,575       14,147 
The Arboretum                                                                                                          
    Tucson, AZ                 16,684     1,014      8,323      1,526      3,349       2,540       11,672       14,212 
Village at Tanque Verde                                                                                                
    Tucson, AZ                  6,436       690      1,280        745      4,895       1,435        6,175        7,610 
                            ------------------------------------------------------------------------------------------
Subtotal Same Store           180,629    44,514    183,309     13,776     84,619      58,290      267,928      326,218 
                                                                                                                       
Communities Stabilized                                                                                                 
Less Than Two Years                                                                                                    
   Phoenix                                                                                                             
Gateway Villas                                                                                                         
    Phoenix, AZ                     -     1,431     11,238          -        (50)      1,431       11,188       12,619 
</TABLE>
<TABLE>
<CAPTION>
                                Accumulated      Year          Year         Depreciable     
Description                     Depreciation   Developed     Acquired      Lives in Years   
------------------------------------------------------------------------------------------  
<S>                               <C>         <C>               <C>          <C>         
Same Store (continued)                                                                      
Silver Creek                                                                                
    Phoenix, AZ                     $546                        1991         5 to 40 years  
Sun Creek                                                                                   
    Glendale, AZ                     624                        1993         5 to 40 years  
The Meadows                                                                                 
    Mesa, AZ                         532                        1987         5 to 40 years  
                                                                                            
The Palms                                                                                   
    Phoenix, AZ                      512           1990                      5 to 40 years  
The Pines                                                                                   
    Mesa, AZ                         679                        1992         5 to 40 years  
Towne Square                                                                                
    Chandler, AZ                   1,607                        1992         5 to 40 years  
Villa Encanto                                                                               
    Phoenix, AZ                      983                        1991         5 to 40 years  
Village at Lakewood                                                                         
    Phoenix, AZ                      915                        1991         5 to 40 years  

   Tucson                                                                                   
Harrison Park                                                                               
    Tucson, AZ                       393                        1991         5 to 40 years  
La Reserve                                                                                  
    Oro, Valley                      732           1988                      5 to 40 years  
Orange Grove Village                                                                        
    Tucson, AZ                       605                        1991         5 to 40 years  
Suntree Village                                                                             
    Oro, Valley                    1,348                        1992         5 to 40 years  
The Arboretum                                                                               
    Tucson, AZ                     1,584                        1992         5 to 40 years  
Village at Tanque Verde                                                                     
    Tucson, AZ                       589                        1990         5 to 40 years  
-----------------------------------------
Subtotal Same Store               25,269                                   
                                                               
Communities Stabilized Less Than 
Two Years                                                            
   Phoenix                                                                     
Gateway Villas                                                                 
    Phoenix, AZ                       561     1994-1995                      5 to 40 years      
                              
* Write-down of real estate assets
</TABLE>
                                      F-18
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
       SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                             Costs Capitalized Subsequent    Gross Amounts at Which
                                          Initial Cost       to Acquisition/Construction      Carried at Close of Period
                                      --------------------------------------------------------------------------------------
                                                Buildings and          Buildings and          Buildings and         
Description                Encumbrances  Land   Improvements    Land   Improvements   Land    Improvements   Total  
--------------------------------------------------------------------------------------------------------------------
<S>                          <C>         <C>       <C>            <C>        <C>      <C>         <C>      <C>      
Communities Stabilized
Less Than Two Years
(continued)
Mountain Park Ranch
    Phoenix, AZ                $9,704    $1,662    $12,540        $ -        $28      $1,662      $12,568  $14,230  
Sonoran
    Phoenix, AZ                     -     2,362     20,802          -         17       2,362       20,819   23,181  
The Enclave
    Tempe, AZ                   8,367     1,500     10,527          -         26       1,500       10,553   12,053  
The Heritage
    Phoenix, AZ                     -     1,211     12,370          -       (13)       1,211       12,357   13,568  
Towne Square Expansion
Phase II
    Chandler, AZ                    -         -      6,061          -          -           -        6,061    6,061  

   Tucson
Arboretum Expansion Phase II
    Tucson, AZ                      -       914      8,383          -          -         914        8,383    9,297  
                              --------------------------------------------------------------------------------------
Subtotal Communities
Stabilized
Less than Two Years            18,071     9,080     81,921          -          8       9,080       81,929   91,009  

Developments and Lease-Up
Properties
   Phoenix
Country Brook Expansion
Phase III
    Chandler, AZ                    -       543      6,779          -          -         543        6,779    7,322  
The Hawthorne
    Phoenix, AZ                     -     2,695     14,087          -          -       2,695       14,087   16,782  
Ingleside
    Phoenix, AZ                     -     1,204      6,242          -          -       1,204        6,242    7,446  
The Isle at Arrowhead
Ranch
    Glendale, AZ                    -     1,652      9,806          -          -       1,652        9,806   11,458  
Ladera
    Phoenix, AZ                     -     2,979     14,884          -          -       2,979       14,884   17,863  
Mirador
    Phoenix, AZ                     -     2,597     20,885          -          -       2,597       20,885   23,482  
Park Meadow Expansion
Phase II
    Gilbert, AZ                     -         4      3,998          -          -           4        3,998    4,002  
Promontory Pointe
Expansion Phase II
    Phoenix, AZ                     -       665      8,141          -          -         665        8,141    8,806  
Towne Square Expansion
Phase III
    Chandler, AZ                    -       605      6,092          -          -         605        6,092    6,697  
</TABLE>
<TABLE>
<CAPTION>
                                     Accumulated          Year        Year         Depreciable   
Description                          Depreciation      Developed    Acquired      Lives in Years 
-------------------------------------------------------------------------------------------------
<S>                                 <C>               <C>           <C>            <C>         
Communities Stabilized                                                                           
Less Than Two Years                                                                              
(continued)                                                                                      
Mountain Park Ranch                                                                              
    Phoenix, AZ                           $1,032      1994-1995                    5 to 40 years    
Sonoran                                                                                          
    Phoenix, AZ                            1,142      1994-1995                    5 to 40 years    
The Enclave                                                                                      
    Tempe, AZ                                860      1994-1995                    5 to 40 years    
The Heritage                                                                                     
    Phoenix, AZ                              769      1994-1995                    5 to 40 years    
Towne Square Expansion                                                                           
Phase II                                                                                         
    Chandler, AZ                               -      1994-1995                    5 to 40 years    
                                                                                                 
   Tucson                                                                                        
Arboretum Expansion Phase II                                                                     
    Tucson, AZ                                 -      1994-1995                    5 to 40 years    
                                    -------------                                                
Subtotal Communities                                                                             
Stabilized                                                                                
Less than Two Years                        4,364                                    
                                                                                    
Developments and Lease-Up                                                           
Properties                                                                          
   Phoenix                                                                          
Country Brook Expansion                                                             
Phase III                                                                           
    Chandler, AZ                             136         1995                      5 to 40 years 
The Hawthorne                                                                                    
    Phoenix, AZ                              122         1995                      5 to 40 years 
Ingleside                                                                                        
    Phoenix, AZ                              386         1995                      5 to 40 years 
The Isle at Arrowhead                                                                            
Ranch                                                                                            
    Glendale, AZ                               3         1996                      5 to 40 years 
Ladera                                                                                           
    Phoenix, AZ                              727       1994-1995                   5 to 40 years 
Mirador                                                                                          
    Phoenix, AZ                              921       1994-1995                   5 to 40 years 
Park Meadow Expansion                                                                            
Phase II                                                                                         
    Gilbert, AZ                              100         1995                      5 to 40 years 
Promontory Pointe                                                                                
Expansion Phase II                                                                               
    Phoenix, AZ                               68         1995                      5 to 40 years 
Towne Square Expansion                                                                           
Phase III                                                                                        
    Chandler, AZ                             177         1995                      5 to 40 years 
</TABLE>
                                      F-19
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
       SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                    Costs Capitalized Subsequent  Gross Amounts at Which      
                                               Initial Cost         to Acquisition/Construction   Carried at Close of Period  
                             -------------------------------------------------------------------------------------------------------
                                                       Buildings and             Buildings and             Buildings and
Description                  Encumbrances    Land      Improvements    Land      Improvements     Land     Improvements      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>           <C>          <C>          <C>          <C>          <C>            <C>     
Developments and Lease-Up
Properties (continued)
The Retreat (1)
    Phoenix, AZ                   $ -      $3,477        $ 2,578      $ -          $   -        $3,477       $ 2,578         $6,055
Scottsdale & Mountain                                                                                                              
View  (1)                                                                                                                          
    Scottsdale, AZ                  -       3,456            508        -              -         3,456           508          3,964
Vista Grove (1)                                                                                                                    
    Mesa, AZ                        -       1,343          1,897        -              -         1,343         1,897          3,240
The Gates Project  (2)                                                                                                             
    Various Locations               -           -            551        -              -             -           551            551
Laguna at Arrowhead  (1)                                                                                                           
    Glendale, AZ                    -         879            592        -              -           879           592          1,471
                                                                                                                                   
   Tucson                                                                                                                          
Bear Canyon                                                                                                                        
    Tucson, AZ                      -       1,645         12,926        -              -         1,645        12,926         14,571
Harrison Park Expansion                                                                                                            
Phase II                                                                                                                           
    Tucson, AZ                      -         749          8,912        -              -           749         8,912          9,661
The Legends                                                                                                                        
    Tucson, AZ                      -       2,728         17,893        -              -         2,728        17,893         20,621
Orange Grove Expansion                                                                                                             
Phase II                                                                                                                           
    Tucson, AZ                      -          93          7,213        -              -            93         7,213          7,306
                           ---------------------------------------------------------------------------------------------------------
Subtotal Developments and                                                                                                          
Lease-Up Properties                 -      27,314        143,984        -              -        27,314       143,984        171,298
                                                                                                                                   
Acquisitions                                                                                                                       
   Phoenix                                                                                                                         
Acacia Creek                                                                                                                       
    Scottsdale, AZ             15,247       6,122         24,382        -            599         6,122        24,981         31,103
Rancho Murietta                                                                                                                    
    Tempe, AZ                   6,225       1,766         10,208        -            993         1,766        11,201         12,967
Superstition Vista                                                                                                                 
    Mesa, AZ                        -       1,641         12,272        -          1,512         1,641        13,784         15,425
</TABLE>
<TABLE>
<CAPTION>
                                 Accumulated          Year           Year          Depreciable   
Description                      Depreciation      Developed       Acquired       Lives in Years 
-------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>              <C>            <C>         
Developments and Lease-Up                                                                           
Properties (continued)                                                                              
The Retreat (1)                                                                                     
    Phoenix, AZ                       $ -             1997                         5 to 40 years    
Scottsdale & Mountain                                                                        
View  (1)                                                                                    
    Scottsdale, AZ                      -             1997                         5 to 40 years    
Vista Grove (1)                                                                              
    Mesa, AZ                            -             1997                         5 to 40 years    
The Gates Project  (2)                                                                       
    Various Locations                   -             Various                      5 to 40 years    
Laguna at Arrowhead  (1)                                                                     
    Glendale, AZ                        -             1997                         5 to 40 years    
                                                                                             
   Tucson                                                                                    
Bear Canyon                                                                                  
    Tucson, AZ                        237             1995                         5 to 40 years    
Harrison Park Expansion                                                                      
Phase II                                                                                     
    Tucson, AZ                        235             1995                         5 to 40 years    
The Legends                                                                                  
    Tucson, AZ                      1,235          1994-1995                       5 to 40 years    
Orange Grove Expansion                                                                       
Phase II                                                                                     
    Tucson, AZ                        297             1995                         5 to 40 years    
                                    -------------------------------------------------------------
Subtotal Developments and                                                                    
Lease-Up Properties                 4,644                                                    
                                                                                             
Acquisitions                                                                                 
   Phoenix                                                                                   
Acacia Creek                                                                                 
    Scottsdale, AZ                  1,486                           1995           5 to 40 years    
Rancho Murietta                                                                              
    Tempe, AZ                         698                           1995           5 to 40 years    
Superstition Vista                                                                           
    Mesa, AZ                          480                           1995           5 to 40 years    
</TABLE>
                                      F-20
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
       SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                    Costs Capitalized Subsequent  Gross Amounts at Which      
                                               Initial Cost         to Acquisition/Construction   Carried at Close of Period  
                             -------------------------------------------------------------------------------------------------------
                                                       Buildings and             Buildings and             Buildings and
Description                  Encumbrances    Land      Improvements    Land      Improvements     Land     Improvements      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>           <C>          <C>          <C>          <C>          <C>            <C>     
Acquisitions (continued)                                                                                                           
   California                                                                                                                      
Canyon Crest Views                                                                                                                 
    Riverside, CA                   $ -      $1,745       $12,163         $ -          $ -        $1,745      $12,163        $13,908
The Ashton                                                                                                                          
    Corona Hills, CA             17,300       2,594        18,679           -        2,185         2,594       20,864         23,458
Portofino                                                                                                                           
    Chino Hills, CA                   -       3,572         9,031           -            -         3,572        9,031         12,603
Parkview Terrace Club                                                                                                               
    Redlands, CA                 22,650       4,969        28,301           -            -         4,969       28,301         33,270
Redlands Lawn and Tennis Club                                                                                                       
    Redlands, CA                 24,050       4,822        24,045           -            -         4,822       24,045         28,867
                           ---------------------------------------------------------------------------------------------------------
Subtotal Acquisitions            85,472      27,231       139,081           -        5,289        27,231      144,370        171,601
                                                                                                                                    
Corporate Office                                                                                                                    
    Scottsdale, AZ                    -           -           325           -        1,099             -        1,424          1,424
                                                                                                                                    
                           ---------------------------------------------------------------------------------------------------------
Total                          $284,172    $108,139      $548,620     $13,776      $91,015      $121,915     $639,635       $761,550
                           =========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                 Accumulated          Year           Year          Depreciable   
Description                      Depreciation      Developed       Acquired       Lives in Years 
-------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>              <C>            <C>         
Acquisitions (continued)                                                                                    
   California                                                                                               
Canyon Crest Views                                                                                          
    Riverside, CA                      $141                         1996           5 to 40 years   
The Ashton                                                                            
    Corona Hills, CA                    510                         1995           5 to 40 years   
Portofino                                                                             
    Chino Hills, CA                      91                         1996           5 to 40 years   
Parkview Terrace Club                                                                 
    Redlands, CA                        286                         1996           5 to 40 years   
Redlands Lawn and Tennis Club                                                         
    Redlands, CA                         50                         1996           5 to 40 years   
                                    --------                                          
Subtotal Acquisitions                 3,742                                           
                                                                                      
Corporate Office                                                                      
    Scottsdale, AZ                      312                         1994           5 to 8 years    
                                                                                      
                                    --------                                          
Total                               $38,331                                           
                                    ========                                      
</TABLE>

(1)  Projects are currently in the early  planning  stage and  preliminary  site
     work.

(2)  The Gates  Project  represents  the  costs  associated  with the  Company's
     investment  in  constructing  security  gate  systems at all its  apartment
     communities.
                                      F-21
<PAGE>
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION

A summary of activity for real estate  investments and accumulated  depreciation
is as follows:
<TABLE>
<CAPTION>

                                                                      Years Ended December 31,
                                                               1996             1995              1994
                                                         ----------------  ---------------  ----------------
                                                                       (Amounts in thousands)
<S>                                                      <C>               <C>              <C>         
Balance at beginning of period                           $    587,183      $    399,987     $    292,513
   Acquisitions                                                88,648            77,895            5,849
   Improvements, including construction costs                  85,719           109,301           66,604
   Elimination of accumulated depreciation
     at date of acquisition                                         -                 -          (38,360) (1)
   Fair value adjustment                                            -                 -           73,381
                                                         ----------------  ---------------  ----------------
   Balance at close of period                            $    761,550      $    587,183     $    399,987
                                                         ================  ===============  ================

Accumulated depreciation
   Balance at beginning of period                        $     17,511      $      3,749     $     32,065
     Depreciation                                              20,885            13,762           10,333
     Accumulated depreciation on disposals                        (65)                -             (289)
     Elimination of accumulated depreciation
       at date of acquisition                                       -                 -          (38,360)
                                                         ----------------  ---------------  ----------------
   Balance at close of period                            $     38,331      $     17,511     $      3,749
                                                         ================  ===============  ================
</TABLE>
(1)  Amount  represents  decrease in basis due to  acquiring  real estate at net
     book value at the time of the Offering.
                                      F-22