UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549


                                    FORM 10-Q



                Quarterly Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


For Quarter ended September 30, 1996              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                (I.R.S. employer identification no.)
of incorporation or organization)


         6991 East Camelback Road, Suite A200, Scottsdale, Arizona 85251
                    (Address of principal executive offices)

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



         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  
                               -----                    -----






 As of October 25, 1996 there were 18,270,064 shares of the registrant's common
                      stock, $0.01 par value outstanding.

                                  Page 1 of 24
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                       ----------------------------------


                                      INDEX
                                      -----
<TABLE>
<CAPTION>
Part I     FINANCIAL INFORMATION                                                         Page
------     ---------------------                                                         ----
<S>                                                                                      <C>
           Item 1   Financial Statements

           Consolidated Balance Sheets as of September 30, 1996 and
           December 31, 1995 (Unaudited) ...............................................   3

           Consolidated Statements of Income for the three and nine months
           ended September 30, 1996 and 1995 (Unaudited) ...............................   4

           Consolidated Statement of Stockholders' Equity as of September 30, 1996
           (Unaudited) .................................................................   5

           Consolidated Statements of Cash Flows for the nine months
           ended September 30, 1996 and 1995 (Unaudited) ...............................   6

           Notes to Consolidated Financial Statements ..................................   7

           Item 2   Management's Discussion
                    and Analysis of Financial
                    Condition and Results of
                    Operations .........................................................  13

Part II    OTHER INFORMATION
-------    -----------------

           Item 6   Exhibits and Reports on Form 8-K....................................  23


Signatures .............................................................................  24
</TABLE>
                                  Page 2 of 24
<PAGE>
                          PART I FINANCIAL INFORMATION
                         Item 1. - Financial Statements
                         ------------------------------

                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                           CONSOLIDATED BALANCE SHEETS
               (Amounts in thousands, except for number of shares)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       September 30, 1996          December 31, 1995
                                                                       ------------------          -----------------
<S>                                                                  <C>                        <C>
ASSETS
Real Estate:
  Land..........................................................       $        113,600            $        95,908
  Buildings and improvements....................................                512,613                    389,846
  Furniture and fixtures........................................                 29,089                     23,736
  Construction-in-progress......................................                 57,855                     77,693
                                                                     ------------------------   ------------------------
                                                                                713,157                    587,183

  Less accumulated depreciation.................................                (32,510)                   (17,511)
                                                                     ------------------------   ------------------------
                                                                                680,647                    569,672
Cash and cash equivalents.......................................                  1,392                      3,634
Restricted cash.................................................                    893                        522
Accounts and notes receivable...................................                  3,268                      2,065
Deferred costs, net of accumulated amortization
  of $1,002 and $507 at September 30, 1996
  and December 31, 1995, respectively ..........................                  4,209                      2,946
Other assets ...................................................                  1,816                      1,656
                                                                     ------------------------   ------------------------

Total assets ...................................................       $        692,225            $       580,495
                                                                     ========================   ========================

LIABILITIES AND STOCKHOLDERS' EQUITY

Mortgage and notes payable......................................       $        376,386            $       297,456
Accounts payable and other liabilities .........................                  8,954                      9,379
Dividends payable ..............................................                  7,308                      6,127
Accrued interest ...............................................                    746                        605
Accrued property taxes .........................................                  4,559                      2,358
Resident security deposits .....................................                  1,655                      1,497
Prepaid rent ...................................................                    779                        438
                                                                     ------------------------   ------------------------
Total liabilities ..............................................                400,387                    317,860

Minority interest ..............................................                 61,141                     64,487

Stockholders' Equity:
  Preferred stock, $.01 par value, 10,000,000 shares
    authorized - none  issued and outstanding...................                      -                          -
  Common stock, $.01 par value, 100,000,000 shares
    authorized 18,270,064 and 16,123,279 issued and
    outstanding at September 30, 1996 and
    December 31, 1995, respectively ............................                    183                        161
  Additional paid-in capital ...................................                251,063                    208,646
  Accumulated deficit ..........................................                (20,549)                   (10,659)
                                                                     ------------------------   ------------------------

Total stockholders' equity .....................................                230,697                    198,148
                                                                     ------------------------   ------------------------

Total liabilities and stockholders' equity .....................       $        692,225            $       580,495
                                                                     ========================   ========================
</TABLE>
                             See accompanying notes
                                  Page 3 of 24
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
      (Amounts in thousands, except per share amounts and number of shares)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                              Three Months Ended                    Nine Months Ended
                                              ------------------                    -----------------
                                   September 30, 1996  September 30, 1995  September 30, 1996 September 30, 1995
                                   ------------------  ------------------  ------------------ ------------------
<S>                                    <C>                <C>                <C>                <C>
Revenues:
  Rental ........................      $     24,351       $     17,619       $     68,565       $     48,656
  Third party management fees ...               103                280              1,054                977
  Interest and other ............             1,502              1,178              4,622              3,298
                                       ------------       ------------       ------------       ------------
    Total revenues ..............            25,956             19,077             74,241             52,931

Expenses:
  Repairs and maintenance .......             3,516              2,436              8,791              6,402
  Property operating ............             3,499              2,632              9,047              6,455
  Advertising ...................               517                440              1,549                945
  Real estate taxes .............             1,682              1,257              4,946              3,358
  Property management ...........               721                550              2,429              2,109
  General and administrative ....               406                309              1,366              1,186
  Interest ......................             6,251              3,322             17,144              7,868
  Depreciation and amortization .             5,437              3,545             15,077              9,548
                                       ------------       ------------       ------------       ------------
    Total expenses ..............            22,029             14,491             60,349             37,871
                                       ------------       ------------       ------------       ------------
Income before minority interest .             3,927              4,586             13,892             15,060
Minority interest ...............              (812)            (1,030)            (3,051)            (3,298)
                                       ------------       ------------       ------------       ------------

Net income ......................      $      3,115       $      3,556       $     10,841       $     11,762
                                       ============       ============       ============       ============

Earnings per share ..............      $       0.17       $       0.22       $       0.63       $       0.73
                                       ============       ============       ============       ============




Weighted average shares
outstanding .....................        18,271,915         16,060,679         17,118,499         16,034,423
                                       ============       ============       ============       ============
</TABLE>
                             See accompanying notes
                                  Page 4 of 24
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
               (Amounts in thousands, except for number of shares)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                  Additional         Accumu-
                                                 Number of         Common           Paid-in           lated
                                                  Shares            Stock           Capital          Deficit             Total
                                              -------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>              <C>               <C>
Stockholders' equity, December 31, 1995 ..      16,123,279       $       161      $   208,646      $   (10,659)      $   198,148
    Net income ...........................            --                --               --             10,841            10,841
    Dividends on common stock ($1.18 per
    share) ...............................            --                --               --            (20,731)          (20,731)
    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 ..          44,355                 1              887             --                 888
    Exercise of stock options ............          11,750              --                234             --                 234
    Issuance of restricted stock, net of
      unamortized deferred compensation of
      $131 ...............................           9,120              --                 66             --                  66
    Forfeiture of restricted stock .......          (7,329)             --               --               --                --
    Amortization of deferred compensation             --                --                360             --                 360
                                                ----------       -----------      -----------      -----------       -----------

Stockholders' equity, September 30, 1996..      18,270,064       $       183      $   251,063      $   (20,549)      $   230,697
                                                ==========       ===========      ===========      ===========       ===========
</TABLE>
                             See accompanying notes
                                  Page 5 of 24
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                         Nine Months ended September 30,
                                                         ------------------------------
                                                              1996             1995
                                                            ---------       ---------
<S>                                                         <C>             <C>
Cash flows from operating activities
Net income ...........................................      $  10,841       $  11,762
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization ......................         15,572           9,468
  Amortization of deferred compensation
      expense  (noncash) .............................            360             534
  Minority interest ..................................          3,051           3,298
  Write-off of real estate assets ....................            107              89
Increase in assets
  Restricted cash ....................................           (371)         (1,200)
  Accounts and notes receivable ......................         (1,203)           (280)
  Other assets .......................................           (160)           (518)
(Decrease) increase in liabilities
  Accounts payable and other liabilities .............           (425)          1,540
  Accrued interest ...................................            141             382
  Accrued property taxes .............................          2,201           1,795
  Resident security deposits .........................            158             225
  Prepaid rent .......................................            341            (294)
                                                            ---------       ---------
Net cash provided by operating activities ............         30,613          26,801

Cash flows from investing activities
Purchase of real estate assets .......................       (103,443)        (90,221)
                                                            ---------       ---------
Net cash used in investing activities ................       (103,443)        (90,221)

Cash flows from financing activities
Proceeds from second offering ........................         40,891            --
Proceeds from exercise of stock options ..............            234            --
Proceeds from mortgage notes and credit facility .....        235,028         114,002
Principal payments on mortgage notes and
  credit facility ....................................       (178,748)        (26,931)
Payment for loan costs ...............................         (1,758)           (625)
Dividends paid .......................................        (19,550)        (17,784)
Minority interest distributions ......................         (5,509)         (4,783)
                                                            ---------       ---------
Net cash provided by financing activities ............         70,588          63,879
                                                            ---------       ---------

Net decrease in cash and cash equivalents ............         (2,242)            459
Cash and cash equivalents, beginning of period .......          3,634           2,439
                                                            ---------       ---------
Cash and cash equivalents, end of period .............      $   1,392       $   2,898
                                                            =========       =========

Supplemental information
Cash paid during the period for interest .............      $  16,500       $   7,121
                                                            =========       =========
Supplemental disclosure of noncash activity
Assumption of debt related to the acquisition of
  apartment communities ..............................      $  22,650       $  26,193
                                                            =========       =========
Acquisition of apartment communities through
  issuance of units in the Operating Partnership .....           --            10,736
                                                            =========       =========
Conversion of units to common stock ..................      $     888       $    --
                                                            =========       =========
Issuance of stock under executive stock incentive plan      $      66       $     800
                                                            =========       =========
</TABLE>
                             See accompanying notes
                                  Page 6 of 24
<PAGE>
                       EVANS WITHYCOMBE RESIDENTIAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Amounts in thousands, except per share amounts)
                                   (Unaudited)

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  48  stabilized  multifamily  apartment  communities
containing   13,289  units,  of  which  44  stabilized   multifamily   apartment
communities  are located in Phoenix and Tucson,  Arizona,  containing a total of
11,885 units and four stabilized  multifamily  apartment communities are located
in the Riverside/San  Bernardino,  California market containing a total of 1,404
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 six multifamily apartment communities comprising 1,198 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 575 employees at September 30, 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
79.3 percent and 77.6 percent interest in the Operating Partnership at September
30, 1996 and 1995 respectively. 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.

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.

In fourth quarter 1995, the Company  adopted  Emerging  Issues Task Force (EITF)
Issue Number 95-6 Accounting by a Real Estate Investment Trust for an Investment
in a Service Corporation, which requires the Company to report the operations of
its Management  Company on a consolidated  basis.  Prior to the issuance of EITF
95-6, the Company reported the Management  Company on a cost basis. The adoption
of EITF  95-6 has no  impact  on net  income,  but  does  increase  third  party
management  fees,  interest and other  revenue,  property  management  expenses,
depreciation  expense and reduce advertising  expense through the elimination of
intercompany  marketing  fees paid to the  Management  Company.  The Company has
restated  the  statements  of income  and cash  flows for the three and the nine
months ended September 30, 1995 for the retroactive application of the change.

The accompanying  unaudited consolidated financial statements have been prepared
by the Company's  management in accordance  with generally  accepted  accounting
principles for interim  financial  information  and the rules and regulations of
the Securities and Exchange Commission (SEC).  Accordingly,  they do not include
all of the information and footnotes required by generally  accepted  accounting
principles  for complete  financial  statements.  All  significant  intercompany
accounts and transactions have been eliminated in consolidation.  In the opinion
of management,  all adjustments (consisting only of normally recurring accruals)
considered necessary for a fair 
                                  Page 7 of 24
<PAGE>
presentation  have been  included.  The results of operations for the nine month
period ended  September 30, 1996 are not  necessarily  indicative of the results
that may be expected for the year ended December 31, 1996.

These consolidated  financial  statements should be read in conjunction with the
Company's  December  31, 1995  audited  consolidated  financial  statements  and
accompanying notes included in the Evans Withycombe Residential, Inc. Form 10-K.

Reclassification

Certain  amounts in the  statements  of income and cash flows for 1995 have been
reclassified to conform to the 1996 presentation.

3.   Summary of Significant Accounting Policies

Real Estate Assets and Depreciation

Real estate assets are stated at the lower of  depreciated  cost.  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 $2,072 and $4,200,  for the nine months ended September 30, 1996
and 1995, 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 $13,607 and
$21,297 at September 30, 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.

Restricted Cash

Restricted  cash  includes  restricted  deposits for  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.
                                  Page 8 of 24
<PAGE>
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 three and
the nine months ended September 30, 1996 and 1995, respectively, by the weighted
average number of shares outstanding during the period.

New Financial Accounting Standards Board Statements

In March 1995, the Financial  Accounting Standards Board (FASB) issued Statement
No. 121 (SFAS No. 121)  Accounting for the  Impairment of Long-Lived  Assets and
for Long-Lived Assets to be Disposed Of which requires the Company to review for
possible  impairment  assets to be held for use and  assets  held for  disposal,
whenever events or changes in circumstances indicate the carrying amount may not
be recoverable, and in such event, to record an impairment loss. The Company has
adopted SFAS No. 121 in 1996. The Company does not hold any assets that meet the
impairment criteria of SFAS No. 121.

In  October  1995,   FASB  issued  SFAS  No.  123  Accounting  for   Stock-Based
Compensation  which  establishes  a fair-value  based method of  accounting  for
employee  stock-based  compensation  plans,  and encourages but does not require
companies  to adopt that  method.  The  Company has chosen to continue to report
stock-based  compensation in accordance with Accounting Principles Board Opinion
No. 25  Accounting  for Stock Issued to  Employees,  but will,  beginning in the
fourth  quarter of 1996 provide pro forma  disclosure of the effects of applying
the fair value method to all applicable awards granted.

4.   Dividends Payable

On October 10, 1996,  the Company paid a dividend of $7,308 ($0.40 per share) to
stockholders  and  distributions  of $1,907 ($0.40 per unit) to  unitholders  of
record as of September 30, 1996.

5.   Mortgage and Notes Payable

The Company's mortgage notes and notes payable consist of the following:

<TABLE>
<CAPTION>
                                                                                     September 30,    December 31,
                                                                                          1996            1995
                                                                                     ------------     -----------
<S>                                                                                  <C>              <C>
Mortgage note payable at fixed interest rate of 7.2 percent,  monthly  principal
and interest payments through August 18, 1996, with unpaid principal balance due
on August 18, 1996 (repaid on August 19, 1996).                                       $        -      $    5,457

Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal and
interest payments through July 1, 1998, remaining balance due on July 1, 1998.             5,396           5,463

Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal and
interest payments through July 1, 1998, remaining balance due on July 1, 1998.             4,352           4,406

Mortgage note payable at fixed interest rate of 8.0 percent,  monthly principal
and interest payments through February 1, 2001, remaining balance due on February     
1, 2001.                                                                                   8,980           9,063
</TABLE>
                                  Page 9 of 24
<PAGE>
5.        Mortgage and Notes Payable (continued)
<TABLE>
<CAPTION>
                                                                                     September 30,    December 31,
                                                                                         1996            1995
                                                                                     ------------     -----------
<S>                                                                                  <C>              <C>
Mortgage note payable at fixed interest rate of 8.28 percent, monthly principal
and interest payments through June 1, 1998, remaining balance due on June 1, 1998.    $    6,247      $    6,339

Mortgage note payable at fixed interest rate of 9.95 percent, monthly principal
and interest payments through September 15, 1997, remaining balance due on                                      
September 15, 1997.                                                                       12,095          12,184

Mortgage note payable at fixed interest rate of 9.3 percent, monthly principal and
interest payments through September 15, 1997, remaining balance due on September                                  
15, 1997.                                                                                  3,190           3,212

$50 million  securitized debt at a fixed interest rate of 7.17 percent,  monthly
principal and interest payments through January 1, 2006, remaining balance due
January 1, 2006.  Secured by first mortgage liens on 5 communities.                       49,676          50,000

Securitized  debt at a fixed  stated  interest  rate  of 7.98  percent,  with an
effective interest rate of 8.05 percent,  monthly interest only payments through
August 1, 2001,  balance of $131  million  due August 1, 2001,  secured by first
mortgage liens on 22 communities,  net of unamortized  discount of $500 and $560
at September 30, 1996 and December 31, 1995, respectively.                               130,500         130,439

$13 million short term note payable at a fixed interest rate of 6 percent.
Interest only payments with the unpaid principal balance due on January 5, 1996
(repaid on January 5, 1996).                                                                   -          13,000

$17.3  million tax exempt bonds with a floating  interest  rate based on the tax
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
$17.8 million direct pay letter of credit,  annual principal  payments beginning
December 1, 1996 through December 1, 2006 ranging from $250,000 to $550,000 with
the remaining unpaid principal balance due December 1, 2007 (effective interest                                 
rate of 5.38 percent at September 30, 1996).                                              17,300          17,300

$22.6 million tax exempt bonds with a floating interest rate based on the tax
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 4.91 percent at September 30, 1996).                                     22,650               -

$225 million  unsecured  Revolving  Credit Facility with floating  interest rate
based on LIBOR  plus 1.75  percent  or at the  option of the  Company  at prime,
interest payments only. Matures September 25, 1999.  (Effective interest rate of
7.29 percent at September 30, 1996).                                                     116,000          40,593
                                                                                      ----------        --------
                                                                                      $  376,386        $297,456
                                                                                      ==========        ========
</TABLE>
Each of the mortgage  notes  payable is secured by a first  mortgage on separate
communities.

Principal maturities as of September 30, 1996 are as follows:

                          1996               $       311
                          1997                    16,776
                          1998                    16,930
                          1999                   117,347
                          2000                     1,428
                          2001                   140,777
                          Thereafter              82,817
                                             ===========
                                             $   376,386
                                             ===========
                                 Page 10 of 24
<PAGE>
6.   Stock Incentive Plans

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
will vest on each of the second,  third and fourth anniversaries of the Offering
based on an  offering  price per share of $20.  The  expense  will be  amortized
ratably over the periods in which the shares vest and an expense of $48 and $360
for the three and the nine months ended September 30, 1996 and $173 and $693 for
the three and the nine months  ended  September  30, 1995 is included in general
and administrative expense. Information with respect to the executive restricted
stock incentive plan for 1996 is as follows:

                                                                       Shares
                                                                       ------
            Restricted stock at December 31, 1995                      82,802
            Forfeited                                                  (7,329)
                                                                       ------
            Restricted stock at September 30, 1996                     75,473
                                                                       ======

            Number of shares vested                                    27,600

Stock Option Plan

The Company  established a stock incentive plan to enable  directors,  executive
officers and other key employees of the Company to  participate in the ownership
of the Company.  Initially  1,830,000  shares of the Company's common stock were
reserved for issuance under the plan.  Options to purchase 887,750 and 1,130,825
shares of common stock were  available for grant under the plan at September 30,
1996 and  December  31, 1995,  respectively.  Information  with respect to stock
options granted during 1996 is as follows:

                                                                Weighted Average
                                                                 Exercise Price
                                                  Shares           Per Share
                                                  -------       ----------------
Options outstanding at December 31, 1995          699,175           $19.98
Exercised                                         (11,750)           19.91
Granted                                           340,000            21.96
Forfeited                                         (85,175)           20.13
                                                  -------           ------
Options outstanding at September 30, 1996         942,250           $20.45
                                                  =======           ======
Options exercisable:
December 31, 1995                                 175,300           $20.00
September 30, 1996                                312,950           $20.01

Restricted Stock Program

In 1996,  the  Company  awarded  9,120  shares of  restricted  stock to  certain
employees of the Company under its 1994 Stock  Incentive  Plan.  The  restricted
stock vests  ratably  over a four year period 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 expense  will be  amortized  ratably  over the periods in which the
shares  vest  and an  expense  of  $34  and  $66  is  included  in  general  and
administrative expense for the three and nine months ended September 30, 1996.
                                 Page 11 of 24
<PAGE>
7.   Minority Interest

Minority interest, at September 30, 1996 is comprised of the following:

                                                 Number of Units      Dollars
                                                 ---------------   -----------
Balance at December 31, 1995                        4,810,603      $    64,487
Conversion of units to common stock                   (44,355)            (888)
Allocation of net income                                    -            3,051
Distributions paid                                          -           (5,509)
                                                    ---------      -----------

Balance at September 30, 1996                       4,766,248      $    61,141
                                                    =========      ===========


The Units  can be  redeemed  for  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 number of
shares of common stock and Units outstanding during the period.
                                  Page 12 of 24
<PAGE>
Item 2                 MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview

The  following  discussion,   which  is  based  on  the  consolidated  financial
statements of Evans Withycombe Residential,  Inc., should be read in conjunction
with the consolidated  financial  statements appearing elsewhere in this report.
The consolidated  financial statements of the Company consist of the communities
owned and under development and the Management Company.

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.

Results of Operations - Consolidated Financial Statements

The results of  operations  for the three and nine months  ended  September  30,
1996, as compared to the three and nine months ended  September  30, 1995,  were
significantly affected by acquisitions, developments and expansions.

Comparison  of  Results  of  Operations  for the  Three  and Nine  Months  Ended
September 30, 1996 to the Three and Nine Months Ended September 30, 1995
<TABLE>
<CAPTION>
                             Three Months Ended               Nine Months Ended
                               September 30,                     September 30,           
                           --------------------  Percentage  --------------------   Percentage
                             1996        1995      Change      1996        1995       Change
                           --------    --------  ----------  --------    --------   ----------
                               (in thousands)                   (in thousands)
<S>                        <C>         <C>          <C>      <C>         <C>           <C>  
Rental income              $ 24,351    $ 17,619      38.2%   $ 68,565    $ 48,656      40.9%
Third party management
    fees                        103         280     (63.2)      1,054         977       7.9
Interest and other            1,502       1,178      27.5       4,622       3,298      40.1
                           --------    --------     -----    --------    --------      ----  
     Total revenues          25,956      19,077      36.1      74,241      52,931      40.3

Property operating and
  maintenance (1)             7,532       5,508      36.7      19,387      13,802      40.5
Real estate taxes             1,682       1,257      33.8       4,946       3,358      47.3
Property management             721         550      31.1       2,429       2,109      15.2
General and
    administrative              406         309      31.4       1,366       1,186      15.2
Interest                      6,251       3,322      88.2      17,144       7,868     117.9
Depreciation and
    amortization              5,437       3,545      53.4      15,077       9,548      57.9
                           --------    --------     -----    --------    --------      ----  
Total expenses               22,029      14,491      52.0      60,349      37,871      59.4
                           --------    --------     -----    --------    --------      ----  
Income before minority
    interest               $  3,927    $  4,586     (14.4)%  $ 13,892    $ 15,060      (7.8)%
                           ========    ========     =====    ========    ========      ====  
Weighted average monthly
    rental revenue per     
    unit                   $    720    $    676              $    713    $    663      
                           ========    ========              ========    ========
Weighted average number
    of units                 13,325      10,093                12,519       9,415      
                           ========    ========              ========    ========
Economic occupancy (2)         89.7%       90.5%                 90.2%       91.1%     
                           ========    ========              ========    ========
</TABLE>
                                  Page 13 of 24
<PAGE>
(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 $6,732 and $19,909 or 38.2 percent and 40.9 percent
for the three and nine  months  ended  September  30,  1996 as  compared  to the
similar  periods in 1995,  respectively 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  $324 and  $1,324  for the three and nine
months  ended  September  30, 1996  compared to the three and nine months  ended
September  30,  1995 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.

Property operating and maintenance  expense increased due to the increase in the
weighted  average number of apartments for the three and nine month period ended
September 30, 1996 as compared to the same periods in 1995,  respectively.  Real
estate taxes increased primarily due to the increase in the number of properties
for the three and nine month period ended September 30, 1996, respectively.

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 $607 and $2,072 of interest for the three and
nine months  ended  September  1996  compared to $1,400 and $4,200 for a similar
periods in 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 three and nine months ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
                             Three Months Ended               Nine Months Ended
                               September 30,                     September 30,           
                           --------------------  Percentage  --------------------   Percentage
                             1996        1995      Change      1996        1995       Change
                           --------    --------  ----------  --------    --------   ----------
                               (in thousands)                   (in thousands)
<S>                        <C>          <C>        <C>       <C>          <C>          <C>
Rental income              $13,678      $13,741     (.5)%    $41,434      $41,128        .7%
Other income                   804          672    19.6        2,445        2,045      19.6
                           -------      -------    ----      -------      -------      ----  
                            14,482       14,413      .5       43,879       43,173       1.6
Property operating and
    maintenance (1)          4,460        4,234     5.3       12,287       11,485       7.0
Real estate taxes              935          997    (6.2)       2,947        2,861       3.0
                           -------      -------    ----      -------      -------      ----  
                             5,395        5,231     3.1       15,234       14,346       6.2
                           -------      -------    ----      -------      -------      ----  
Property net operating
    income                 $ 9,087      $ 9,182    (1.0%)    $28,645      $28,827       (.6%)
                           =======      =======    ====      =======      =======      ====  
Weighted average
    monthly rental
    revenue per unit       $   651      $   642              $   653      $   633
                           =======      =======              =======      =======       
Economic occupancy            89.5%        90.5%                90.1%        91.0%     
                           =======      =======              =======      =======         
</TABLE>


Rental  income for the three and the nine months  ended  September  30, 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 three and nine months ended September
30,  1996 as compared to the
                                 Page 14 of 24
<PAGE>
three and nine months ended  September 30, 1995.  Other income for the three and
nine months  ended  September  30, 1996  increased as a result of gains from the
sale of telephone servicing rights at various communities.

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
three and the nine month  periods  ended  September  30, 1996 as compared to the
three and the nine month periods ended  September 30, 1995 are the result of the
increase in the weighted average number of apartments.
<TABLE>
<CAPTION>
                                                    Three Months Ended                 Nine Months Ended
                                                       September 30,                      September 30,
                                                 ------------------------            ------------------------
                                                  1996              1995              1996              1995
                                                 ------            ------            ------            ------
                                                      (in thousands)                      (in thousands)
<S>                                              <C>               <C>               <C>               <C>   
Rental income                                    $3,121            $2,185            $9,447            $4,081
Other income                                        158               118               516               270
                                                 ------            ------            ------            ------
                                                  3,279             2,303             9,963             4,351

Property operating and maintenance                  796               641             2,062             1,257
Real estate taxes                                   270               150               736               262
                                                 ------            ------            ------            ------
                                                  1,066               791             2,798             1,519
                                                 ------            ------            ------            ------
Property net operating income                    $2,213            $1,512            $7,165            $2,832
                                                 ======            ======            ======            ======
Weighted average number of apartments
   apartments                                     1,521             1,065             1,521               816
                                                 ======            ======            ======            ======
</TABLE>

Development and Lease Up Properties

Development  and  lease  up  properties  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 three
and the nine month periods ended September 30, 1996 as compared to the three and
nine month  periods  ended  September  30, 1995 are the result of there being an
increase in the weighted average number of apartments.

<TABLE>
<CAPTION>
                                                    Three Months Ended                  Nine Months Ended
                                                       September 30,                       September 30,
                                                 ------------------------            ------------------------
                                                  1996              1995              1996              1995
                                                 ------            ------            ------            ------
                                                      (in thousands)                      (in thousands)
<S>                                              <C>               <C>               <C>               <C>   
Rental income                                    $3,178            $  264            $7,462            $  297
Other income                                        259                30               545                35
                                                 ------            ------            ------            ------
                                                  3,437               294             8,007               332

Property operating and maintenance                1,005               231             2,158               301
Real estate taxes                                   163                10               557                15
                                                 ------            ------            ------            ------
                                                  1,168               241             2,715               316
                                                 ------            ------            ------            ------
Property net operating income                    $2,269            $   53            $5,292            $   16
                                                 ======            ======            ======            ======
Weighted average number of 
    apartments in lease-up                        1,604               179             1,243               143
                                                 ======            ======            ======            ======
</TABLE>
                                 Page 15 of 24
<PAGE>
Acquisitions

Acquisitions consist of seven properties containing 2,520 apartment units, which
have  been  acquired  by the  Company  since  January  1,  1995,  including  the
acquisition of Canyon Crest Views, a 178 unit apartment  community acquired June
27, 1996, and Portofino and Parkview  Terrace Club apartments  comprising of 734
units located in Riverside/San Bernardino,  California market that were acquired
on July 31, 1996.  Increases in the three and nine month periods ended September
30, 1996, as compared to the three and nine months ended September 30, 1995, are
the result of the increase in the weighted average number of apartments.
<TABLE>
<CAPTION>
                                                     Three Months Ended                    Nine Months Ended
                                                        September 30,                        September 30,
                                                 --------------------------            -------------------------- 
                                                  1996               1995               1996                1995
                                                 -------            -------            -------            -------
                                                       (in thousands)                        (in thousands)
<S>                                              <C>                <C>                <C>                <C>    
Rental income                                    $ 4,374            $ 1,428            $10,222            $ 3,150
Other income                                         174                 59                485                127
                                                 -------            -------            -------            -------
                                                   4,548              1,487             10,707              3,277

Property operating and maintenance                 1,271                402              2,880                759
Real estate taxes                                    314                100                706                220
                                                 -------            -------            -------            -------
                                                   1,585                502              3,586                979
                                                 -------            -------            -------            -------
Property net operating income                    $ 2,963            $   985            $ 7,121            $ 2,298
                                                 =======            =======            =======            =======
Weighted average number of
   apartments                                      2,275                800              1,830                800
                                                 =======            =======            =======            =======
</TABLE>

Liquidity and Capital Resources

Liquidity

The  Company's net cash provided by operating  activities  increased  from $26.8
million for the nine months ended  September  30, 1995 to $30.6  million for the
nine  months  ended  September  30, 1996  principally  due to  increased  rental
operations  from  additional  properties  acquired and  developed  subsequent to
September 30, 1995. Net cash used in investing  activities  increased from $90.2
million for the nine months ended  September 30, 1995 to $103.4  million for the
nine months ended September 30, 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 $63.9 million for the nine months ended September 30, 1995 to $70.6 million
for the nine months ended  September  30, 1996 due to the proceeds from the sale
of 2,088,889  shares of common stock which were  partially  offset by the use of
those proceeds to paydown the Revolving Credit Facility.

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  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  properties,  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
debt securities or additional equity securities of the Company,  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 
                                 Page 16 of 24
<PAGE>
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 September 30, 1996, the Company's total debt was approximately $376.4 million
and the Company's debt to total market capitalization  (Market Equity plus Debt)
was approximately 42.8 percent.

Conventional Mortgage Loans

Conventional  mortgage  loans were  comprised of 6 fixed rate loans at September
30,  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  2001.  The  conventional  mortgage  loans  aggregated  $40.3 million at
September 30, 1996 with interest rates ranging from 8.0 percent to 9.95 percent.

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 $49.7 million at September 30, 1996.  The loan is  convertible  to unsecured
upon the Company achieving an investment grade rating of BBB or better.

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 of the 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

On December 12, 1995, the Company assumed $17.3 million of tax free bonds with a
floating  interest rate based on the tax exempt note rate set by the remarketing
agent (or at the  option of the  Company at a fixed  rate as  determined  by the
remarketing  agent).  The bonds are secured by a $17.8 million direct pay letter
of credit which is secured by first deeds of trust on two apartment communities.
The debt matures  December 1, 2007. The bonds had an effective  interest rate of
5.02 percent at September 30, 1996.
                                 Page 17 of 24
<PAGE>
On July 31, 1996,  the Company  assumed  $22.6  million of tax free bonds with a
floating  interest rate based on the tax exempt note rate set by the remarketing
agent.  The bonds are  secured  by a $22.8  million  direct pay letter of credit
which is secured by a first deed of trust on an  apartment  community,  the debt
matures on February 1, 2016.  The bonds had an effective  interest  rate of 4.91
percent at September 30, 1996.

Revolving Credit Facility

On September 25, 1996, the Company expanded its existing $125 million  unsecured
Revolving Credit Facility  (Credit  Facility) to $225 million with a Bank Group.
The Credit  Facility  bears  interest at a floating rate of LIBOR plus 175 basis
points (or, at the option of the  Company,  at the prime rate  announced  by the
Banks). The 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 September 30, 1996, there was $116
million  outstanding on the Credit Facility,  with an effective interest rate of
7.29 percent. The 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 September 30, 1996
(amounts in thousands, unaudited).

                                          Outstanding        Weighted Average
                                            Balance            Interest Rate
                                       ----------------      ---------------- 
Fixed Rate Debt:
   Mortgage Debt....................
     Conventional...................   $         89,936              7.87%
     Mortgage Loan Certificates.....            130,500              8.05
                                       ----------------      ----------------
         Total Fixed Rate Debt......            220,436              7.98

Variable Rate Debt:
   Tax Exempt Bonds.................             39,950              5.10
   Revolving Credit Facility........            116,000              7.29
                                       ----------------      ----------------
         Total Variable Rate Debt...            155,950              6.73
                                       ----------------      ----------------
         Total Debt.................   $        376,386              7.46%
                                       ================      ================

The Company  had 3,499 units of  unencumbered  stabilized  properties  and 1,198
units of unencumbered development properties in lease-up at September 30, 1996.

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, which will 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  registered  and  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.  The  Company  and  the  institutional  stockholders  granted  the
underwriters an over-allotment  option to purchase 675,000  additional shares of
common stock. 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.  Net proceeds to the Company from the Second Offering was  approximately
$40,900,000.  The Company used the proceeds from the sale of common stock to pay
down its Revolving Credit Facility.
                                 Page 18 of 24
<PAGE>
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  considers Funds From Operations  ("FFO") an appropriate  measure of
performance  of an equity REIT because it is  predicated  on cash flow  analyses
which the Company and analysts  believe is more  reflective of the value of real
estate  companies  such as the  Company  rather  than a  measure  predicated  on
generally accepted accounting principles ("GAAP"), which gives effect to noncash
items, such as depreciation and amortization.

In May 1995, the National  Association of Real Estate Investment Trusts (NAREIT)
issued a white paper,  which defines FFO,  beginning in 1996, to exclude certain
items, such as amortization of deferred loan costs and depreciation on corporate
fixed assets from FFO. The Company has implemented the new method of calculating
FFO. FFO should not be considered an alternative to net income (as determined in
accordance with GAAP) as a measure of the Company's operating  performance or to
cash flows from operating  activities (as determined in accordance with GAAP) as
a  measure  of the  Company's  liquidity  nor is it  necessarily  indicative  of
sufficient cash flow to fund all 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 data included
elsewhere in this report.

The  following   table   presents  the  Company's  FFO  under  both  methods  of
calculation.

<TABLE>
<CAPTION>
                                          Current Method       Previous Method      Current Method         Previous Method
                                        Three Months Ended    Three Months Ended   Nine Months Ended      Nine Months Ended
                                           September 30,         September 30,       September 30,          September 30,
                                       -------------------   -------------------   ------------------    ------------------
                                         1996       1995       1996       1995       1996       1995       1996       1995
                                       -------    -------    -------    -------    -------    -------    -------    -------
<S>                                    <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>    
Income before minority interest ...... $ 3,927    $ 4,586    $ 3,927    $ 4,586    $13,892    $15,060    $13,892    $15,060
Depreciation and amortization ........   5,390      3,511      5,437      3,545     14,951      9,468     15,077      9,548
Amortization of deferred loan costs ..    --         --          175        129       --         --          495        365
Executive deferred compensation       
expense (noncash) ....................      48        178         48        178        360        534        360        534
                                       -------    -------    -------    -------    -------    -------    -------    -------
Funds from operations                  $ 9,365    $ 8,275    $ 9,587    $ 8,438    $29,203    $25,062    $29,824    $25,507
                                       =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>

Number of common shares and units

The Company had 23,038,163 and 21,897,381  weighted average number of shares and
units for the three and nine months ended  September 30, 1996 and 20,710,296 and
20,522,855 for the three and nine months ended September 30, 1995, respectively.
                                 Page 19 of 24
<PAGE>
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
-------
Country Brook III Expansion     Chandler      120     1,089      $   8        4:95           3:96           1:97
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
                                            -----                -----
                                              772                   50
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                                  1,198                $  75
                                            =====                =====
</TABLE>

The Company owns, or has rights to acquire,  sites intended for the  development
of four additional multifamily apartment communities,  which, if completed,  are
expected to contain  approximately  1,114 apartments.  There can be no assurance
that,  in  connection  with the sites  that it has the  rights to  acquire,  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.  While all apartment communities  previously developed by the
Company  have  been  developed  on  schedule  and  within  budget,   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.
                                 Page 20 of 24
<PAGE>
Acquisition Activity

On July 31, 1996, the Company acquired Portofino, a 176 unit apartment community
located in Chino Hills,  California for a total purchase price of  approximately
$13.1 million cash and Parkview  Terrace Club  Apartments,  a 558 unit apartment
community  located  in  Redlands,  California  for  $9.6  million  cash  and the
assumption of $22.6 million in tax exempt bonds.

The  Company  has  acquired  1,404  apartments  and has  entered  into  purchase
contracts for an additional 834 apartments in Southern  California.  The Company
is  actively  pursuing  and in  preliminary  negotiations  regarding  additional
properties  in  Riverside/San  Bernardino  and  San  Diego,  California,  but no
assurance  can be given  that it will  continue  to  pursue  or  consummate  any
acquisitions as a result of these negotiations.
                                 Page 21 of 24
<PAGE>
Apartment Communities

The following  sets forth certain  information  regarding the current  apartment
communities at September 30, 1996. All of the  communities are owned 100 percent
in fee by the Company.
<TABLE>
<CAPTION>
                                                                                                           Year
                                                                                                        Developed
                                                                           Number of      Developed/        or
                      Apartment Communities                   City        Apartments       Acquired      Acquired
                      ---------------------                   ----        ----------       --------      --------
<S>                                                        <C>             <C>            <C>            <C>
Same Store
Arizona
-------
    Phoenix:
Bayside at the Islands                                       Gilbert             272       Developed        1988
Country Brook                                                Chandler            276        Acq/Dev       1991/1993
Deer Creek Village                                           Phoenix             308        Acquired        1991
Greenwood Village                                             Tempe              270        Acquired        1993
Heritage Point                                                 Mesa              148        Acquired        1994
La Mariposa                                                    Mesa              222        Acquired        1990
La Valencia                                                    Mesa              361        Acquired        1990
Little Cottonwoods                                            Tempe              379      Acq/Acq/Dev    1989/89/90
Los Arboles                                                  Chandler            232       Developed        1985
Miramonte                                                   Scottsdale           151       Developed        1983
Morningside                                                 Scottsdale           160        Acquired        1992
Park Meadow                                                  Gilbert             156        Acquired        1992
Preserve at Squaw Peak                                       Phoenix             108        Acquired        1991
Promontory Pointe                                            Phoenix             304        Acquired        1988
Scottsdale Courtyards                                       Scottsdale           274       Developed        1993
Scottsdale Meadows                                          Scottsdale           168       Developed        1984
Shadow Brook                                                 Phoenix             224        Acquired        1993
Shores at Andersen Springs                                   Chandler            299       Developed      1989/1993
Silver Creek                                                 Phoenix             174        Acquired        1991
Sun Creek                                                    Glendale            175        Acquired        1993
The Meadows                                                    Mesa              306        Acquired        1987
The Palms                                                    Phoenix             132       Developed        1990
The Pines                                                      Mesa              194        Acquired        1992
Towne Square                                                 Chandler            348        Acq/Dev       1992/1995
Villa Encanto                                                Phoenix             382       Developed        1983
Village at Lakewood                                          Phoenix             240       Developed        1988
                                                                               -----
                                                                               6,263
   Tucson:
Harrison Park                                                 Tucson             172        Acquired        1991
La Reserve                                                  Oro Valley           240       Developed        1988
Orange Grove Village                                          Tucson             256        Acquired        1991
Suntree Village                                             Oro Valley           424        Acquired        1992
The Arboretum                                                 Tucson             352        Acq/Dev       1992/1995
Village at Tanque Verde                                       Tucson             217        Acq/Dev       1990/1994
                                                                               -----
                                                                               1,661
                                                                               -----
     Total Same Store                                                          7,924
                                                                               =====
Communities Stabilized Less than Two Years
Arizona
-------
    Phoenix:
Gateway Villas                                               Phoenix             180       Developed        1995
Mountain Park Ranch                                          Phoenix             240       Developed        1995
Sonoran                                                      Phoenix             429       Developed        1995
The Enclave                                                   Tempe              204       Developed        1995
The Heritage                                                 Phoenix             204       Developed        1995
Towne Square Expansion Phase II                              Chandler            120       Developed        1995
                                                                               -----
                                                                               1,377
   Tucson:
Arboretum Expansion Phase II                                  Tucson             144       Developed        1995
                                                                               -----
     Total Communities Stabilized Less than Two Years                          1,521
                                                                               =====
</TABLE>
                                 Page 22 of 24
<PAGE>
<TABLE>
<CAPTION>
                                                                                                  Year
                                                                                               Developed
                                                                  Number of      Developed/        or
             Apartment Communities                   City        Apartments       Acquired      Acquired
             ---------------------                   ----        ----------       --------      --------
<S>                                             <C>                 <C>        <C>             <C>
Developments and Lease-Up Properties
Arizona
-------
   Phoenix:
Country Brook Expansion Phase III (2)              Chandler            120       Developed       1995/96
The Hawthorne (2)                                  Phoenix             276       Developed       1995/96
Ingleside (1)                                      Phoenix             120       Developed       1995/96
The Isle at Arrowhead Ranch                        Glendale            256       Developed        1996
Ladera (1)                                         Phoenix             248       Developed       1995/96
Mirador (4)                                        Phoenix             316       Developed       1995/96
Park Meadow Expansion Phase II (4)                 Gilbert              68       Developed       1995/96
Promontory Pointe Expansion Phase II (2)           Phoenix             120       Developed       1995/96
Towne Square Expansion Phase III (3)               Chandler            116       Developed       1995/96
                                                                    ------
                                                                     1,640
  Tucson:
Bear Canyon (2)                                     Tucson             238       Developed       1995/96
Harrison Park Expansion Phase II (2)                Tucson             188       Developed       1995/96
The Legends (1)                                     Tucson             312       Developed       1995/96
Orange Grove Expansion Phase II (4)                 Tucson             144       Developed       1995/96
                                                                    ------
                                                                       882
                                                                    ------
    Total Developments and Lease-Up Properties                       2,522
                                                                    ======

Acquisitions
  Arizona
  -------
   Phoenix:
Acacia Creek                                      Scottsdale           508        Acquired        1995
Rancho Murietta                                     Tempe              292        Acquired        1995
Superstition Vista                                   Mesa              316        Acquired        1995
                                                                    ------
                                                                     1,116
  California
  ----------
Canyon Crest Views                                Riverside            178        Acquired        1996
The Ashton                                       Corona Hills          492        Acquired        1995
Portofino                                        Chino Hills           176        Acquired        1996
Parkview Terrace Club                              Redlands            558        Acquired        1996
                                                                    ------
                                                                     1,404
                                                                    ------
     Total Acquisitions                                              2,520
                                                                    ======
Total                                                               14,487
                                                                    ======
</TABLE>

(1) Community reached stabilized occupancy in the first quarter 1996
(2) Community is in lease-up
(3) Community reached stabilized occupancy in the second quarter 1996
(4) Community reached stabilized occupancy in the third quarter 1996


PART II     OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K.

(b) No current reports on Form 8-K were filed during the quarter ended September
30, 1996.
                                 Page 23 of 24
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  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.



October 28, 1996                             /s/ Stephen O. Evans
-------------------------                    ---------------------------------
 (Date)                                      Stephen O. Evans,
                                             Chairman of the Board and
                                             Chief Executive Officer




October 28, 1996                             /s/ Paul R. Fannin
-------------------------                    ---------------------------------
 (Date)                                      Paul R. Fannin,
                                             Senior Vice President and
                                             Chief Financial Officer