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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
| Filed by the Registrant ý | |
| Filed by a Party other than the Registrant o | |
| Check the appropriate box: |
| o Preliminary Proxy Statement | |
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ý Definitive Proxy Statement | |
| o Definitive Additional Materials | |
| o Soliciting Material Pursuant to §240.14a-12 |
Equity LifeStyle Properties, Inc.
(Name
of Registrant as Specified In Its Charter)
N/A
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
| ý No fee required. | |
| o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) Title of each class of securities to which transaction applies: |
| 2) Aggregate number of securities to which transaction applies: |
| 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) Proposed maximum aggregate value of transaction: |
| 5) Total fee paid: |
| o Fee paid previously with preliminary materials. |
| o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) Amount Previously Paid: |
| 2) Form, Schedule or Registration Statement No.: |
| 3) Filing Party: |
| 4) Date Filed: |
| SEC 1913 (02-02) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
Table of Contents
EQUITY
LIFESTYLE PROPERTIES, INC.
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held On May 3,
2006
You are cordially invited to attend the 2006 Annual Meeting of
Stockholders (the “Annual Meeting”) of Equity
LifeStyle Properties, Inc., a Maryland corporation (the
“Company”). The Annual Meeting will be held on
Wednesday, May 3, 2006, at 10:00 a.m. Central
Time at Twenty North Wacker Drive, Sixth Floor, Chicago,
Illinois. At the Annual Meeting, stockholders of record at the
close of business on March 10, 2006 will be asked to:
(1) elect each member of the Company’s Board of
Directors to a one-year term;
(2) ratify the selection of Ernst & Young LLP as
the Company’s independent accountants for 2006; and
(3) consider any other business properly brought before the
Annual Meeting.
The attached Proxy Statement contains details of the proposals
to be voted on at the Annual Meeting. We encourage you to read
the Proxy Statement carefully.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE
PRESENT AT THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED
ENVELOPE.
Thank you for your continued support of Equity LifeStyle
Properties.
By Order of the Board of Directors
Ellen Kelleher
Executive Vice President, General Counsel
and Secretary
March 24, 2006
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EQUITY
LIFESTYLE PROPERTIES, INC.
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
PROXY
STATEMENT
INTRODUCTION
This Proxy Statement contains information related to the 2006
Annual Meeting of Stockholders (the “Annual Meeting”)
of Equity LifeStyle Properties, Inc., a Maryland corporation
(the “Company”), which will be held on Wednesday,
May 3, 2006, at 10:00 a.m. Central Time at Twenty
North Wacker Drive, Sixth Floor, Chicago, Illinois.
ABOUT THE
ANNUAL MEETING
What is
the Purpose of the Annual Meeting?
At the Annual Meeting, stockholders will vote on the following
proposals (the “Proposals”):
Proposal 1 — the election of all
directors to a one-year term; and
Proposal 2 — ratification of the
selection of Ernst & Young LLP, an independent
registered public accounting firm (“Ernst &
Young”) as our independent accountants for the fiscal year
ending December 31, 2006. We have sent these proxy
materials to you because our Board of Directors (the
“Board”) is requesting that you allow your shares of
common stock of the Company (“Common Stock”) to be
represented at the Annual Meeting by the proxies named in the
enclosed proxy card. This Proxy Statement contains information
that we are required to provide you under the rules of the
Securities and Exchange Commission (“SEC”) and that is
designed to assist you in voting your shares of Common Stock. On
March 31, 2006, we began mailing these proxy materials to
all stockholders of record at the close of business on
March 10, 2006 (the “Record Date”).
Who Is
Entitled to Vote?
You will be entitled to vote your shares of Common Stock on the
Proposals if you held your shares of Common Stock as of the
close of business on the Record Date. As of the Record Date, a
total of 23,571,352 shares of Common Stock were outstanding
and entitled to vote. Each share of Common Stock entitles its
holder to cast one vote for each matter to be voted upon.
What Is
Required to Hold the Annual Meeting?
The presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of the shares of Common Stock
outstanding and entitled to vote on the Record Date will
constitute a quorum permitting business to be conducted at the
Annual Meeting. If you have returned valid proxy instructions or
you attend the Annual Meeting and vote in person, your shares of
Common Stock will be counted for purposes of determining whether
there is a quorum, even if you abstain from voting on any or all
matters introduced at the Annual Meeting.
How Do I
Vote?
Your vote is important. Stockholders can vote in person
at the Annual Meeting or can vote by completing, signing and
dating the enclosed proxy card and mailing it in the
postage-paid envelope provided.
If you vote by proxy, the individuals named as representatives
on the proxy card will vote your shares of Common Stock in the
manner you indicate. You may specify whether your shares of
Common Stock should be voted for all, some or none of the
nominees for director and whether your shares of Common Stock
should be
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voted for or against Proposal 2. If your shares of Common
Stock are held by a broker, bank or other nominee (i.e., in
“street name”), you will receive instructions from
your nominee which you must follow in order to have your shares
of Common Stock voted. Such stockholders who wish to vote in
person at the Annual Meeting will need to obtain a proxy form
from the broker, bank or other nominee that holds their shares
of Common Stock of record.
Can I
Change or Revoke My Proxy?
Yes, you may change your proxy at any time before the Annual
Meeting by timely delivery of a properly executed, later-dated
proxy or by voting in person at the Annual Meeting. You may
revoke your proxy by filing a written notice with our Secretary
at our address at any time before the Annual Meeting. The powers
of the proxy holders will be suspended if you attend the Annual
Meeting in person and so request that they be suspended.
However, attendance (without further action) at the Annual
Meeting will not by itself revoke a previously granted proxy.
What Are
the Board’s Recommendations?
If no instructions are indicated on your valid proxy, the
representatives holding your proxy will vote in accordance with
the recommendations of the Board. The Board recommends a vote:
| • | FOR the election of each of the nominees for director; and | |
| • | FOR the ratification of the selection of Ernst & Young as the Company’s independent accountants. |
With respect to any other matter that properly comes before the
Annual Meeting or any adjournment or postponement thereof, the
representatives holding proxies will vote as recommended by the
Board, or if no recommendation is given, in their own discretion.
How Can I
Manage the Number of Annual Reports I Receive?
Our 2005 Annual Report and financial statements have been mailed
to stockholders with this Proxy Statement. If you share an
address with any of our other stockholders, your household might
receive only one copy of these documents. To request individual
copies for each stockholder in your household, please contact
Equity LifeStyle Properties, Inc., Attn: Investor Relations, at
Two North Riverside Plaza, Suite 800, Chicago, Illinois
60606 (toll-free number:
1-800-247-5279).
To ask that only one set of the documents be mailed to your
household, please contact your bank, broker or other nominee or,
if you are a stockholder of record, please call our transfer
agent, LaSalle Bank, N.A., toll-free at
1-800-246-5761.
What Vote
is Needed to Approve Each Proposal?
The affirmative vote of the holders of record of a plurality of
all of the votes cast at the Annual Meeting at which a quorum is
present is necessary for the election of the nominees for
director. The affirmative vote of the holders of record of a
majority of all the votes cast at the Annual Meeting at which a
quorum is present is required for the ratification of the
selection of Ernst & Young as our independent
accountants and the approval of any other matters properly
presented at the Annual Meeting for stockholder approval.
Abstentions do not constitute a vote “for” or
“against” any matter being voted on at the Annual
Meeting and will not be counted as “votes cast,”
although they will count toward the presence of a quorum. Broker
“non-votes,” or proxies from brokers or nominees
indicating that such broker or nominee has not received
instructions from the beneficial owner or other entity entitled
to vote such shares of Common Stock on a particular matter with
respect to which such broker or nominee does not have
discretionary voting power, will be treated in the same manner
as abstentions for purposes of the Annual Meeting.
Who is
Soliciting My Proxy?
This solicitation of proxies is made by and on behalf of our
Board. We will pay the cost of solicitation of the proxies. We
have retained LaSalle Bank, N.A., at a de minimis cost,
to assist in the solicitation of proxies.
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No person is authorized on our behalf to give any information or
to make any representations with respect to the Proposals other
than the information and representations contained in this Proxy
Statement, and, if given or made, such information
and/or
representations must not be relied upon as having been
authorized, and the delivery of this Proxy Statement shall not,
under any circumstances, create any implication that there has
been no change in our affairs since the date hereof.
CORPORATE
GOVERNANCE
The Board regularly evaluates the Company’s corporate
governance policies and benchmarks those policies against the
rules and regulations of governmental authorities, the best
practices of other public companies and suggestions received
from various authorities. The Board has adopted the
Company’s Guidelines on Corporate Governance. The
Company’s Guidelines on Corporate Governance require that a
majority of the directors be independent within the meaning of
New York Stock Exchange (“NYSE”) standards. The
Company’s Common Stock is listed on the NYSE under the
symbol “ELS”. The Company has also adopted a Business
Ethics and Conduct Policy, which applies to all directors,
officers and employees of the Company.
The Guidelines on Corporate Governance, the Business Ethics and
Conduct Policy and the charters of the Board’s Audit
Committee and Compensation, Nominating and Corporate Governance
Committee are each available on the Company’s website at
http://www.equitylifestyle.com, and a copy of same may be
obtained free of charge by sending a written request to Equity
LifeStyle Properties, Inc., Attn: Investor Relations, Two North
Riverside Plaza, Suite 800, Chicago, Illinois 60606, or by
contacting the Company’s Investor Relations Department at
investor relations@mhchomes.com.
Stockholder
Communications with the Board
The Company’s Lead Director is Sheli Z. Rosenberg who, as
an independent director, acts in the lead capacity to coordinate
the other independent directors, consults with the
Company’s Chief Executive Officer on Board agendas, chairs
the executive sessions of the non-management directors and
performs other such functions as the Board may direct. Any
stockholder or other interested party who has a concern or
inquiry regarding the conduct of the Company may communicate
directly with the Board or the non-management directors by
contacting the Lead Director, who will receive all such
communications on behalf of the Board or the non-management
directors (as applicable). Communications may be confidential or
anonymous, and may be submitted in writing to the Lead Director,
c/o Secretary,
Equity LifeStyle Properties, Inc., Two North Riverside Plaza,
Suite 800, Chicago, Illinois 60606. All written
communications will be received and processed by the Secretary
of the Company, and all substantive communications will be
referred to the Lead Director. All such communications will be
reviewed and, if necessary, investigated
and/or
addressed by the Lead Director and the status of such
communications will be reported to the Board or the
non-management directors (as applicable) on a quarterly basis.
The Lead Director may direct special treatment, including the
retention of outside advisors or counsel, for any such concern
or inquiry.
Although each director is strongly encouraged to attend each
Annual Meeting of Stockholders, the Board has no formal policy
with respect to such attendance. A majority of the eight
directors in office as of the date of the 2005 Annual Meeting of
Stockholders were in attendance at such meeting.
Non-Management
Directors’ Executive Sessions
Executive sessions of the Company’s non-management
directors are scheduled in connection with regularly scheduled
meetings of the Board and may be held without management present
at such other times as requested by the non-management
directors. The presiding director at these executive sessions is
the Lead Director.
Committees
of the Board; Meetings
Meetings: During the year ended
December 31, 2005, the Board held five meetings and took
ten actions by unanimous written consent. Each of the directors
attended 75% or more of the total number of the meetings of the
Board and the committees on which he or she served.
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Executive Committee: The Executive Committee
of the Board is comprised of Howard Walker (Chair), Samuel Zell
and Donald S. Chisholm. The Executive Committee has the
authority, within certain parameters set by the Board, to
authorize the acquisition, disposition and financing of
investments for the Company (including the issuance of
additional limited partnership interests of MHC Operating
Limited Partnership) and to authorize contracts and agreements,
including those related to the borrowing of money by the
Company, and generally exercise all other powers of the Board
except as prohibited by law. During the year ended
December 31, 2005, the Executive Committee held no meetings
and took 13 actions by unanimous written consent.
Compensation, Nominating and Corporate Governance
Committee: The Compensation, Nominating and
Corporate Governance Committee of the Board (the
“Compensation Committee”) is comprised of
Mrs. Rosenberg (Chair), Mr. Chisholm and Gary L.
Waterman. The Board has determined that each of the Compensation
Committee members is an “independent” director within
the meaning set forth in the NYSE listing standards. The
Compensation Committee determines compensation for the
Company’s executive officers and exercises all powers of
the Board in connection with compensation matters, including
incentive compensation and benefit plans. The Compensation
Committee also has the authority to grant stock options, stock
appreciation rights and restricted stock awards in accordance
with the Company’s 1992 Stock Option and Stock Award Plan,
as amended and restated (the “Plan”), to the
management of the Company and its subsidiaries, other employees
and consultants. In addition, the Compensation Committee
identifies and recommends qualified individuals to become Board
members, develops and recommends the Guidelines on Corporate
Governance applicable to the Company, recommends to the Board
director nominees for each committee of the Board and directs
the Board in an annual review of its performance. During the
year ended December 31, 2005, the Compensation Committee
held six meetings and took three actions by unanimous written
consent.
Audit Committee: The Audit Committee of the
Board is comprised of Philip C. Calian (Chair), Thomas E.
Dobrowski and Mrs. Rosenberg. The Board has determined that
each of the Audit Committee members is an
“independent” director within the meaning set forth in
the NYSE listing standards and
Rule 10A-3
under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). The Board has also determined that
Mr. Calian is an “audit committee financial
expert” as such term is defined by the SEC in
Item 401(h) of
Regulation S-K.
The Audit Committee is governed by the Audit Committee Charter
which was filed as an attachment to the Company’s proxy
statement filed with the SEC on April 11, 2005. The Audit
Committee is responsible for, among other things, engaging our
independent accountants, reviewing with the Company’s
independent accountants the plans for and results of the audit
engagement, approving professional services provided by the
Company’s independent accountants, reviewing the
independence of the Company’s independent accountants,
considering the range of audit and non-audit fees and reviewing
the adequacy of the Company’s internal accounting controls.
The Audit Committee has also established procedures for the
processing of complaints received from employees regarding
internal control, accounting and auditing matters. During the
year ended December 31, 2005, the Audit Committee held nine
meetings and took no actions by unanimous written consent.
Board
Member Nominations
Board member nominations are governed by the Compensation,
Nominating and Corporate Governance Committee Charter. The
Compensation Committee will consider nominees recommended by
stockholders. If you wish to recommend a person whom you
consider qualified to serve on the Board, you must give written
notice to the Secretary of the Company in accordance with the
requirements described in “Stockholder Proposals.”
This notice must contain: (i) as to each nominee, all
information that would be required to be disclosed in a proxy
statement with respect to the election of directors pursuant to
the Exchange Act, (ii) the name and address of the
stockholder giving the notice, (iii) the number of shares
of Common Stock owned beneficially and of record by such
stockholder, and (iv) the written consent of each nominee
to serve as a director if so elected. The Compensation Committee
will consider and evaluate persons recommended by stockholders
in the same manner as potential nominees identified by the Board
and/or the
Compensation Committee.
The Compensation Committee identifies nominees for director from
various sources. In assessing potential director nominees, the
Compensation Committee considers the character, background and
professional
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experience of candidates. All nominees should possess good
judgment and an inquiring and independent mind. Familiarity with
the issues affecting the Company is among the relevant criteria.
All director nominees must possess a reputation for the highest
personal and professional ethics, integrity and values. The
Compensation Committee will also carefully consider any
potential conflicts of interest. Nominees must also be willing
and able to devote sufficient time and effort to carrying out
the duties and responsibilities of a director effectively, and
should be committed to serving on the Board for an extended
period of time.
Biographical
Information
Set forth below are biographies of each of the Company’s
executive officers. Biographies of the director nominees are set
forth below in Proposal 1.
Executive
Officers
Thomas P. Heneghan, 42, is President and Chief Executive
Officer of the Company. See biographical information in
Proposal 1 below.
Roger A. Maynard, 48, has been Executive Vice President
and Chief Operating Officer of the Company since December 2005.
Mr. Maynard is also a member of the Company’s
Management Committee, which was created in 1995 and is comprised
of the Company’s executive officers (the “Management
Committee”). Mr. Maynard was Chief Operating Officer
of the Company from January 2004 to December 2005.
Mr. Maynard was Senior Vice President for national
operations of the Company from January 2003 to December 2003.
Mr. Maynard was Senior Regional Vice President for the
Company’s Eastern division from September 2001 to December
2002, and Senior Regional Vice President for the Company’s
Southeastern region from January 2000 to September 2001.
Mr. Maynard was Regional Vice President for the
Company’s Southeastern region from June 1998 to December
1999, and Regional Vice President for the Company’s
Northeastern region from October 1997 to June 1998.
Ellen Kelleher, 45, has been Executive Vice President and
General Counsel of the Company since March 1997, and has been
Secretary of the Company since May 2000. Ms. Kelleher is
also a member of the Management Committee. Ms. Kelleher was
Senior Vice President, General Counsel and Assistant Secretary
of the Company from March 1994 to March 1997. Ms. Kelleher
is a director of Financial Management Advisors, a private money
management company.
Michael B. Berman, 48, has been Executive Vice President
and Chief Financial Officer of the Company since December 2005.
Mr. Berman is also a member of the Management Committee.
Mr. Berman was Vice President, Chief Financial Officer and
Treasurer of the Company from September 2003 to December 2005.
In 2003, Mr. Berman was an associate professor at New York
University Real Estate Institute. Mr. Berman was a managing
director in the Investment Banking department at Merrill
Lynch & Co. from 1995 to 2002.
Marguerite Nader, 37, has been Vice President of New
Business Development of the Company since January 2001.
Ms. Nader is also a member of the Management Committee.
Ms. Nader was Vice President of Asset Management of the
Company from January 1998 to January 2001. Ms. Nader has
been employed with the Company since 1993.
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
Independence
of Directors
Pursuant to the Company’s Guidelines on Corporate
Governance, which require that a majority of our directors be
independent within the meaning of NYSE corporate governance
standards and do not include any additional categorical
standards other than those required by the NYSE, the Board
undertook a review of the independence of directors nominated
for re-election at the upcoming Annual Meeting. During this
review, the Board considered transactions and relationships, if
any, during the prior year between each director or any
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member of his or her immediate family and the Company, including
those reported under “Certain Relationships and Related
Transactions” below. As provided in the Guidelines, the
purpose of this review was to determine whether any such
relationships or transactions were inconsistent with a
determination that the director is independent.
As a result of this review, the Board affirmatively determined
that all the directors nominated for election at the Annual
Meeting are independent of the Company and its management with
the exception of our current Chief Executive Officer,
Mr. Heneghan and our former Chief Executive Officer, Mr.
Walker. The Board determined that each independent director has
no material relationship with the Company other than being a
director
and/or a
stockholder of the Company. The Board specifically considered
Mr. Zell’s relationship to EGI (defined below) as
described under “Certain Relationships and Related
Transactions” below and determined that this relationship
does not breach NYSE bright line tests and did not hinder his
independence.
General
Information about the Nominees
The Board currently consists of eight members. The
Company’s Charter currently provides for the annual
election of all directors. All the nominees are presently
directors, and each nominee has consented to be named in this
Proxy Statement and to serve if elected.
Biographical
Information
Set forth below are biographies of each of the director nominees.
Samuel Zell, 64, has been Chairman of the Board of the
Company since March 1995, and was Chief Executive Officer of the
Company from March 1995 to August 1996. Mr. Zell was
Co-Chairman of the Board of the Company from its formation until
March 1995. Mr. Zell was a director of Mobile Home
Communities, Inc., the former manager of the Company’s
manufactured home communities, from 1983 until its dissolution
in 1993. Mr. Zell has served as Chairman of Equity Group
Investments, L.L.C. (“EGI”), a private investment
company, since 1999 and is its president. Mr. Zell has been
a trustee and chairman of the board of trustees of Equity Office
Properties Trust (“Equity Office”), an equity real
estate investment trust (“REIT”) primarily focused on
office buildings, since October 1996, and was its chief
executive officer from April 2002 to April 2003, and its
president from April 2002 to November 2002. For more than the
past five years, Mr. Zell has served as chairman of the
board of Anixter International, Inc., a global distributor of
structured cabling systems; as chairman of the board of Equity
Residential, an equity REIT that owns and operates multi-family
residential properties; and as chairman of the board of Capital
Trust, Inc., (“Capital Trust”) a specialized finance
company. Mr. Zell has been chairman of the board of Covanta
Holding Corporation (previously known as Danielson Holding
Corporation) since September 2005, was previously a director
from 1999 until 2004, and served as its president, chairman and
chief executive officer from July 2002 to October 2004.
Mr. Zell was the chairman of the board of Rewards Network,
Inc. (previously known as iDine Rewards Network, Inc.), an
administrator of loyalty-based consumer reward programs, from
2002 until 2005.
Howard Walker, 66, has been Vice-Chairman of the Board of
the Company since May 2003 and Chair of the Board’s
Executive Committee since January 2004. Mr. Walker has been
a director of the Company since November 1997. Mr. Walker
was Chief Executive Officer of the Company from December 1997 to
December 2003. Mr. Walker was President of the Company from
September 1997 to May 2000, and President of Realty Systems,
Inc., an affiliate of the Company, from March 1995 to April
2000. Mr. Walker was a Vice President of the Company from
January 1995 to March 1995. Mr. Walker is a director of
Infohealth, Inc., a privately held company that provides
information system services to the health care industry.
Thomas P. Heneghan, 42, has been President and Chief
Executive Officer of the Company since January 2004.
Mr. Heneghan has been a director of the Company since March
2004. Mr. Heneghan is a member of the Company’s
Management Committee. Mr. Heneghan was President and Chief
Operating Officer of the Company from May 2000 to December 2003.
Mr. Heneghan was Executive Vice President, Chief Financial
Officer and Treasurer of the Company from April 1997 to May
2000, and Vice President, Chief Financial Officer and Treasurer
of the Company from February 1995 to March 1997.
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Donald S. Chisholm, 71, has been a director of the
Company since March 1993. Mr. Chisholm is president of
Vernon Development Co., the developer of a
650-acre
golf course community, and of Ann Arbor Associates Inc., a real
estate development and management company, both for more than
five years.
Thomas E. Dobrowski, 62, has been a director of the
Company since March 1993. Mr. Dobrowski was the managing
director of real estate and alternative investments of General
Motors Investment Management Corporation from December 1994 to
September 2005. Mr. Dobrowski is a director of Capital
Trust. Mr. Dobrowski is also a trustee of Equity Office.
Philip C. Calian, 43, has been a director of the Company
since October 2005. Mr. Calian has been founder and
managing partner of Kingsbury Partners LLC since January 2003,
and a principal of Waveland Investments LLC since July 2004.
Kingsbury Partners LLC is a private equity and consulting firm
focused on providing capital and ownership skills to middle
market distressed businesses, and Waveland Investments LLC is a
Chicago-based private equity firm with committed equity capital.
Prior to founding Kingsbury Partners LLC, Mr. Calian was chief
executive officer of American Classic Voyages Co., a travel and
leisure company, from 1995 until 2002. Mr. Calian is a
director of JetAway Today, Inc., a private internet travel
company; Hudson Lock, LLC, a private lock manufacturer; and
Cottingham & Butler, Inc., a private insurance broker.
Sheli Z. Rosenberg, 64, has been a director of the
Company since August 1996, and has been the Lead Director of the
Company since 2002. Mrs. Rosenberg was vice chairman of EGI
from January 2000 through December 2003. Mrs. Rosenberg was
president of Equity Group Investments, Inc. (“EGI,
Inc.”), an investment company, from November 1994 to
December 1999, and was chief executive officer of EGI, Inc. from
November 1994 to December 1998. Mrs. Rosenberg was a principal
of the law firm of Rosenberg & Liebentritt from 1980 to
September 1997. Mrs. Rosenberg is a director of
CVS Corporation, an owner and operator of drug stores;
Cendant Corporation, a travel related, real estate and direct
marketing services company; and Ventas, Inc., an owner of real
estate in the health care field. Mrs. Rosenberg is a
trustee of Equity Office and Equity Residential.
Gary L. Waterman, 64, has been a director of the Company
since March 1993. Since 1989, Mr. Waterman has been
president of Waterman Limited, a real estate services and
investment company that he founded. Mr. Waterman is a
director and member of the compensation committee of Java
Trading Company, a wholesale coffee roasting company.
Vote
Required
A plurality of the votes cast in person or by proxy at the
Annual Meeting is required for the election of directors.
Although we know of no reason why any nominee would not be able
to serve, if any nominee should become unavailable for election,
the persons named as proxies will vote your shares of Common
Stock to approve the election of any substitute nominee proposed
by the Board.
Board
Recommendation
The Board unanimously recommends that you vote
“FOR” each of the eight nominees for director for a
one-year term.
PROPOSAL NO. 2
RATIFICATION
OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board recommends that the stockholders ratify the selection
of Ernst & Young as the Company’s independent
accountants for the fiscal year ending December 31, 2006.
Although stockholder action on this matter is not required, the
Board believes it is good corporate practice to seek stockholder
ratification of its selection. The Audit Committee has
pre-approved Ernst & Young’s review of our 2006
quarterly financial statements and SEC filings and intends to
engage Ernst & Young to audit our 2006 annual financial
statements. If the selection of Ernst & Young is not
ratified, the Audit Committee anticipates that it will
nevertheless engage Ernst & Young as independent
accountants for the 2006 calendar year, but will consider
whether it should select other auditors for the 2007 calendar
year.
7
Table of Contents
Ernst & Young has advised us that neither it nor any
member thereof has any financial interest, direct or indirect,
in our Company or any of our subsidiaries in any capacity. There
have been no disagreements between the Company and its
independent accountants relating to accounting procedures,
financial statement disclosures or related items.
Representatives of Ernst & Young are expected to be
available at the Annual Meeting. These representatives will have
an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Audit and
Non-Audit Fees
Audit Fees. The aggregate fees billed (or
expected to be billed) for fiscal years 2005 and 2004 for
professional services rendered by the independent accountants
for the audit of the Company’s financial statements, for
the audit of internal controls relating to Section 404 of
the Sarbanes-Oxley Act and for the reviews by the independent
accountants of the financial statements included in the
Company’s
Forms 10-Q
were $529,000 and $620,500, respectively.
Audit-Related Fees. The aggregate fees billed
(or expected to be billed) for fiscal years 2005 and 2004 for
assurance and related services by the independent accountants
that are reasonably related to the performance of the audit or
review of the Company’s financial statements that are not
reported as “Audit Fees” above were $37,450 and
$152,000, respectively. These fees consist primarily of fees for
services provided to assist the Company with attest services
related to audits of subsidiaries and benefit plans.
Tax Fees. The aggregate fees billed (or
expected to be billed) for fiscal years 2005 and 2004 for
professional services rendered by the independent accountants
for tax compliance, tax advice and tax planning were $29,500 for
each year. These fees consist primarily of fees for services
provided to assist the Company with tax return preparation and
review and corporate tax compliance services.
All Other Fees. There were no other fees
billed to the Company by the independent accountants in fiscal
years 2005 and 2004.
Auditor Independence. The Audit Committee has
determined that the independent accountants’ provision of
the non-audit services described above is compatible with
maintaining the independent accountants’ independence.
Policy on Pre-Approval. The Company and the
Audit Committee are committed to ensuring the independence of
the Company’s independent accountants, both in fact and in
appearance. In this regard, the Audit Committee has established
a pre-approval policy in accordance with the applicable rules of
the SEC and the NYSE. The Audit Committee must pre-approve all
audit services and permissable non-audit services provided by
the Company’s independent accountants, except for any de
minimis non-audit services. The Audit Committee may delegate
to one or more of its members who is an independent director the
authority to grant pre-approvals. All services provided by
Ernst & Young in 2005 were pre-approved by the Audit
Committee.
Vote
Required
The affirmative vote of holders of a majority of the votes cast
is necessary to ratify the selection of Ernst & Young.
Board
Recommendation
The Board unanimously recommends that you vote
“FOR” the ratification of the selection of
Ernst & Young as the Company’s independent
accountants for 2006.
8
Table of Contents
EXECUTIVE
COMPENSATION
This table reflects, for each of the last three years, the
compensation paid to or earned by the Company’s Chief
Executive Officer and those persons who were, at
December 31, 2005, the next four most highly compensated
executive officers of the Company.
SUMMARY
COMPENSATION TABLE
| Long-Term Compensation Awards | ||||||||||||||||||||||||
|
Restricted |
Securities |
|||||||||||||||||||||||
| Annual Compensation |
Common |
Underlying |
All Other |
|||||||||||||||||||||
|
Name and Principal Position |
Bonus |
Stock Awards |
Options |
Compensation |
||||||||||||||||||||
|
(as of December 31,
2005)
|
Year | Salary ($) | ($)(1) | ($) (2)(3) | Granted (#) | ($)(4) | ||||||||||||||||||
|
Thomas P. Heneghan
|
2005 | 350,000 | 565,000 | 0 | 0 | 8,400 | ||||||||||||||||||
|
President, Chief Executive
|
2004 | 275,400 | 471,875 | 1,472,000 | 0 | 12,300 | ||||||||||||||||||
|
Officer, Director and
|
2003 | 270,000 | 0 | 0 | 0 | 8,000 | ||||||||||||||||||
|
Member of Management Committee(5)
|
||||||||||||||||||||||||
|
Ellen Kelleher
|
2005 | 285,000 | 271,000 | 0 | 0 | 8,400 | ||||||||||||||||||
|
Executive Vice President,
|
2004 | 257,040 | 361,000 | 920,000 | 0 | 12,300 | ||||||||||||||||||
|
General Counsel, Secretary and
|
2003 | 252,000 | 150,000 | 0 | 0 | 8,000 | ||||||||||||||||||
|
Member of Management Committee
|
||||||||||||||||||||||||
|
Roger A. Maynard
|
2005 | 285,000 | 271,000 | 0 | 0 | 8,400 | ||||||||||||||||||
|
Executive Vice President,
|
2004 | 257,040 | 361,000 | 1,104,000 | 0 | 12,300 | ||||||||||||||||||
|
Chief Operating Officer and
|
2003 | 175,000 | 150,000 | 0 | 0 | 8,000 | ||||||||||||||||||
|
Member of Management Committee(6)
|
||||||||||||||||||||||||
|
Michael B. Berman
|
2005 | 285,000 | 271,000 | 0 | 0 | 8,400 | ||||||||||||||||||
|
Executive Vice President,
|
2004 | 257,040 | 361,000 | 920,000 | 0 | 12,300 | ||||||||||||||||||
|
Chief Financial Officer and
|
2003 | 61,062 | 50,000 | 0 | 0 | 0 | ||||||||||||||||||
|
Member of Management Committee(7)
|
||||||||||||||||||||||||
|
Marguerite Nader
|
2005 | 155,488 | 205,000 | 0 | 0 | 6,220 | ||||||||||||||||||
|
Vice President of New Business
|
2004 | 135,000 | 56,500 | 276,000 | 0 | 11,796 | ||||||||||||||||||
|
Development and Member of
|
2003 | 132,355 | 40,000 | 0 | 0 | 6,894 | ||||||||||||||||||
|
Management Committee
|
||||||||||||||||||||||||
| (1) | Under the Plan, an officer who receives a bonus receives 50% of the bonus in cash and 50% of the bonus in the form of a stock award. Under the Plan, the officer may request, subject to approval by the Compensation Committee, to receive more or less than 50% of the bonus in the form of a stock award. To the extent that an officer receives up to 50% of the bonus as a stock award, the stock award is calculated using the fair market value of a share of Common Stock as of the date the bonus is paid. If more than 50% of the bonus is to be paid as a stock award, the additional stock award is calculated using the most recent purchase price for a share of Common Stock under the Company’s Non-Qualified Employee Stock Purchase Plan (“ESPP”) or the price that would be used under the ESPP for the offering period then in progress if the period ended the day the bonus was paid, which is less than the fair market value of a share of Common Stock on the day the bonus is paid. |
9
Table of Contents
| (2) | The total number and value of shares of Common Stock (“Restricted Common Stock”) awarded pursuant to restricted stock grants (“Restricted Common Stock Awards”) in various years, and held by each named executive officer as of December 31, 2005, were as follows: |
|
Number |
||||||||
| of Shares | Value ($) | |||||||
|
Thomas P. Heneghan
|
27,334 | 1,216,363 | ||||||
|
Ellen Kelleher
|
18,334 | 815,863 | ||||||
|
Roger A. Maynard
|
14,000 | 623,000 | ||||||
|
Michael B. Berman
|
8,334 | 370,863 | ||||||
|
Marguerite Nader
|
6,500 | 289,250 | ||||||
| All holders of Restricted Common Stock receive any dividends paid on such shares. | ||
| (3) | The number of shares of Restricted Common Stock granted to each named executive officer effective January 5, 2004 pursuant to the 2004 Program, as described below under “Compensation Committee Report on Executive Compensation”, was as follows (each of these awards is subject to a vesting schedule, with one-third of the award vesting on December 10, 2004; one-third vesting on December 10, 2005; and the remainder vesting on December 10, 2006): |
|
Thomas P. Heneghan
|
40,000 | |||
|
Ellen Kelleher
|
25,000 | |||
|
Roger A. Maynard
|
30,000 | |||
|
Michael B. Berman
|
25,000 | |||
|
Marguerite Nader
|
7,500 |
| (4) | Includes employer matching contributions and profit sharing contributions pursuant to the Equity LifeStyle Properties, Inc. Retirement Savings Plan. | |
| (5) | Mr. Heneghan became President and Chief Executive Officer as of January 1, 2004, and became a director in March 2004. | |
| (6) | Mr. Maynard became Chief Operating Officer as of January 1, 2004, and became Executive Vice President and Chief Operating Officer in December 2005. | |
| (7) | Mr. Berman became Vice President, Chief Financial Officer and Treasurer as of September 30, 2003, and became Executive Vice President and Chief Financial Officer in December 2005. |
OPTION
GRANTS IN LAST FISCAL YEAR
There were no option grants in fiscal year 2005 to any of the
executive officers named in the Summary Compensation Table,
except that Mr. Heneghan received a grant of options to
purchase 10,000 shares of Common Stock for his service as a
director during 2005.
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR — END OPTION VALUES
AND FISCAL YEAR — END OPTION VALUES
|
Number of |
Value of Unexercised |
|||||||||||||||
|
Unexercised Options |
In-the-Money
Options |
|||||||||||||||
|
Shares |
at FY-End (#) |
at FY-End ($) |
||||||||||||||
|
Acquired on |
Value |
Exercisable/ |
Exercisable/ |
|||||||||||||
|
Name
|
Exercise (#) | Realized ($) | Unexercisable | Unexercisable | ||||||||||||
|
Thomas P. Heneghan
|
0 | 0 | 9,999/10,001 | 110,289/90,911 | ||||||||||||
|
Ellen Kelleher
|
0 | 0 | 0/0 | 0/0 | ||||||||||||
|
Roger A. Maynard
|
0 | 0 | 0/0 | 0/0 | ||||||||||||
|
Michael B. Berman
|
0 | 0 | 0/0 | 0/0 | ||||||||||||
|
Marguerite Nader
|
0 | 0 | 0/0 | 0/0 | ||||||||||||
10
Table of Contents
STOCK
OPTION AND STOCK AWARD PLAN INFORMATION
The Plan was adopted in December 1992, and amended and restated
from time to time, most recently effective March 23, 2001.
The Plan and certain amendments thereto were approved by the
Company’s stockholders. A maximum of 6,000,000 shares
of Common Stock are available for grant under the Plan, and no
more than 250,000 shares of Common Stock may be subject to
grants to any one individual in any calendar year. As of
December 31, 2005, 1,775,975 shares of Common Stock
remained available for grant; of these, 839,025 shares of
Common Stock remained available for Restricted Common Stock
Awards.
DIRECTOR
COMPENSATION
The Company paid each of its non-employee directors a quarterly
fee of $7,500 for the quarters ended March 31, 2005 and
June 30, 2005 and $11,250 for the quarters ended
September 30, 2005 and December 31, 2005,
respectively. In addition, directors who serve on the Executive
Committee, Audit Committee or Compensation Committee receive an
additional $1,000 per annum for each committee on which
they serve. Committee chairs receive an additional $500 per
annum for their service. Directors who are employees of the
Company are not paid any directors’ fees. The Company
reimburses the directors for travel expenses incurred in
connection with their activities on behalf of the Company. On
the date of the first Board meeting after each Annual Meeting of
Stockholders, each director then in office will receive at the
director’s election either an annual grant of options to
purchase 10,000 shares of Common Stock at the then-current
market price or an annual grant of 2,000 shares of
Restricted Common Stock. One-third of the options to purchase
Common Stock and the shares of Restricted Common Stock covered
by these awards vest on the date six months after the grant
date, one-third vest on the first anniversary of the grant date
and one-third vest on the second anniversary of the grant date.
In February 2006, Mr. Zell was awarded options to purchase
100,000 shares of Common Stock, for services rendered as
Chairman of the Board during 2005; Mrs. Rosenberg was awarded
options to purchase 25,000 shares of Common Stock, which
she elected to receive as 5,000 shares of Restricted Common
Stock, for services rendered as Lead Director and Chair of the
Compensation Committee during 2005; Mr. Walker was awarded
options to purchase 15,000 shares of Common Stock, which he
elected to receive as 3,000 shares of Restricted Common
Stock, for services rendered as Chair of the Executive Committee
during 2005; and Mr. Calian was awarded options to purchase
15,000 shares of Common Stock, which he elected to receive
as 3,000 shares of Restricted Common Stock, for services
rendered as Audit Committee Financial Expert and Audit Committee
Chair during 2005. One-third of the options to purchase Common
Stock and the shares of Restricted Common Stock covered by these
awards vests on each of December 31, 2006,
December 31, 2007 and December 31, 2008.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members for 2005 were
Mr. Chisholm, Mr. Waterman and Mrs. Rosenberg. No
member of the Compensation Committee is a past or present
officer or employee of the Company. For a description of certain
transactions with Board members or their affiliates, see
“Certain Relationships and Related Transactions.”
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee determines the compensation of the
Company’s officers, including those named in the Summary
Compensation Table, and guides the Company’s overall
philosophy towards compensation of its employees. The
Compensation Committee believes that the compensation of the
Company’s Chief Executive Officer and all of the
Company’s officers should be both competitive and based on
individual and Company performance.
The Company’s executive salary structure is reviewed
annually by the Compensation Committee using the SNL Executive
Compensation Review for REITs (“SNL Survey”) for
guidance. In addition, the entire Company’s salary
structure is reviewed annually. Where salary information is
unavailable for a particular position, other positions having
similar responsibilities either within the Company or in
companies of
11
Table of Contents
comparable size are used. Salary increases are based upon
overall Company performance and upon each officer’s
(including the Chief Executive Officer’s) performance and
contribution to the Company’s performance.
The Company’s compensation policy takes into account a
review of local and national peer group salary surveys focusing
primarily on the SNL Survey. The SNL Survey contains detailed
compensation and performance data on publicly traded REITs. The
Compensation Committee believes the SNL Survey provides
comparable salary data for the Company. The Compensation
Committee believes that the Company’s compensation levels
compare favorably to those of the Company’s peer groups
described in the surveys and targets median to high total
compensation levels for the Company’s officers. This is not
the same peer group that is used in the Performance Graph
disclosed separately in this Proxy Statement. In addition,
during 2006 the Compensation Committee engaged the services of
an outside consulting firm, Towers Perrin, to review and advise
the Compensation Committee on executive compensation matters.
The Compensation Committee believes that attracting and
retaining highly qualified executives is accomplished by
providing competitive base salaries and meaningful incentives,
both short-term and long-term, intended to reward performance
and retain experienced management. During the fiscal year ended
December 31, 2005, there were three major components of
executive compensation: base salary, bonus and long-term
incentives in the form of Restricted Common Stock Awards. The
Compensation Committee has deliberately kept base salaries at
levels which may compare less favorably with comparable
positions in other companies. This allows the Compensation
Committee to reward officers’ performance through bonuses
and long-term incentives such as Restricted Common Stock Awards.
Further short-term and mid-term incentives for officers are
accomplished through the Company’s bonus plan. The bonus
plan involves the Company and the officer jointly setting goals
for such officer at the beginning of each year.
Benchmarks for determining bonus amounts during 2005 included
meeting occupancy targets in the manufactured home community
portfolio, achieving certain levels of new home sales volumes,
sales profitability, and resort operation revenues, and
achieving proforma costs and timeliness on expansion and
development projects. Each performance measure carried equal
weight.
In 2005, the Company’s core business continued to deliver
solid operating performance. The Company successfully integrated
and operated the 135 properties that we acquired or invested in
during 2004. During the integration process, the existing
business continued to operate in line with expectations. Because
of the success of the integration of the properties, the
Compensation Committee awarded an additional special award bonus
(“Special Award”) of $250,000 for the Chief Executive
Officer and $100,000 for each of the Chief Financial Officer,
Chief Operating Officer, General Counsel and Vice President of
New Business Development.
To provide long-term incentives for officers and to retain
qualified officers, the Company has created performance and
tenure-based Restricted Common Stock Award programs. The vesting
of Restricted Common Stock Awards is subject to acceleration in
the case of death, disability and involuntary termination not
for cause or change of control of the Company. The Compensation
Committee recognizes that the interests of stockholders are best
served by giving key employees the opportunity to participate in
the appreciation of the Company’s Common Stock.
In December 2001, the Compensation Committee created the 2004
Long Term Restricted Stock Plan (the “2004 Program”),
which provided for shares of Restricted Common Stock to be
granted on January 5, 2004 to individuals who were employed
by the Company on November 15, 2001 and on January 5,
2004 and who hold the respective titles of Chief Executive
Officer, Chief Operating Officer, General Counsel and Chief
Financial Officer, as well as certain other titles, on such
grant date. Shares granted on January 5, 2004 are subject
to a further three year vesting schedule, with one-third vesting
December 10, 2004, one-third vesting December 10, 2005
and one-third vesting December 10, 2006, with vesting based
on an individual’s tenure in such titled positions. In
connection with the hiring of Mr. Berman, Chief Financial
Officer of the Company, in September 2003, the Compensation
Committee waived the requirement that Mr. Berman hold such
title on the grant date in order to be eligible to receive a
grant of Restricted Common Stock under the 2004 Program; as a
result, Mr. Berman received such a grant on January 5,
2004. On January 5, 2004 under the 2004 Program,
Mr. Heneghan was granted 40,000 shares;
Mr. Berman was granted 25,000 shares; Mr. Maynard
was granted
12
Table of Contents
30,000 shares; Ms. Kelleher was granted
25,000 shares; and Ms. Nader was granted
7,500 shares. No Restricted Common Stock was granted to
employees or officers of the Company in 2005.
During 2005, Mr. Heneghan, who served as the Chief
Executive Officer of the Company, received a base annual salary
of $350,000 and a cash bonus of $315,000, representing 60% of
the bonus for which he was eligible, excluding the Special Award
discussed above. In establishing Mr. Heneghan’s base
annual salary for 2006, the Compensation Committee considered
Mr. Heneghan’s individual performance and the
performance of the Company in 2005. The Compensation Committee
also recognized that under Mr. Heneghan’s leadership
of the Company, the Company successfully integrated and operated
the 2004 acquisitions while maintaining performance of the
existing business. In establishing Mr. Heneghan’s 2005
bonus, the Compensation Committee reviewed Mr. Heneghan’s
performance against established goals set by the Compensation
Committee for both the Company and Mr. Heneghan
individually. In 2005, Mr. Heneghan was eligible to receive a
bonus of up to 150% of his base annual salary; however,
Mr. Heneghan and the other members of senior management
received only the portion of the bonus related to new home sales
volumes, sales profitability, and resort operation revenues, but
did not receive the portion of the bonus related to occupancy
and development activities. Mr. Heneghan requested, and the
Compensation Committee approved, that the portion of the 2005
potential bonus relating to occupancy and development activities
be carried over into bonus targets for 2006 due to unforeseen
factors impacting these targets, such as hurricanes and
alternative use analyses on previously approved development
plans. The Compensation Committee further determined that
Mr. Heneghan’s base salary and bonus were appropriate
in relation to market data and the base salaries of other Chief
Executive Officers within the Company’s industry and within
publicly traded companies of similar size.
No options were granted to employees of the Company during 2005,
except for Mr. Heneghan’s grant as a director.
The Compensation Committee believes that the compensation
program properly rewards the Company’s officers for
achieving improvements in the Company’s performance and
serving the interests of its stockholders.
The Company may or may not structure compensation arrangements
to satisfy the requirements for performance-based compensation
under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Code”).
Respectfully submitted,
Sheli Z. Rosenberg, Chair
Donald S. Chisholm
Gary L. Waterman
March 24, 2006
AUDIT
COMMITTEE REPORT
The Audit Committee of the Board consists of the three directors
of the Company listed below, each of whom meets the independence
and financial literacy requirements of the NYSE and
Rule 10A-3
of the Exchange Act. In addition, the Board has determined that
Mr. Calian qualifies as an “audit committee financial
expert” as defined by the SEC rules. No member of the Audit
Committee is a current or former officer or employee of the
Company, and no member serves on more than two other public
company audit committees.
The Audit Committee oversees the Company’s financial
reporting process on behalf of the Board. The Company’s
management has the primary responsibility for the financial
statements, for maintaining effective internal control over
financial reporting, and for assessing the effectiveness of
internal control over financial reporting. The Audit Committee
is governed by a written charter approved by the Board. In
accordance with this charter, the Audit Committee oversees the
accounting, auditing and financial reporting practices of the
Company. The Audit Committee is responsible for the appointment,
retention, compensation, and oversight of the work of the
independent accountants. The Audit Committee pre-approves the
services of the independent
13
Table of Contents
accountants in accordance with the applicable rules of the SEC
and the NYSE. The Audit Committee has also established
procedures for the processing of complaints received from
employees regarding internal control, accounting, and auditing
matters. The Audit Committee held nine meetings during 2005.
In fulfilling its oversight responsibilities, the Audit
Committee reviewed and discussed the audited financial
statements in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2005 (the
“Form 10-K”)
with the Company’s management, including a discussion of
the quality, not just the acceptability, of the accounting
principles; the reasonableness of significant judgments; and the
clarity of disclosures in the financial statements. The Audit
Committee also reviewed and discussed management’s report
on its assessment of the effectiveness of the Company’s
internal control over financial reporting and the independent
accountants’ report on management’s assessment and the
effectiveness of the Company’s internal control over
financial reporting with management, the internal auditors and
the independent accountants.
The Audit Committee reviewed with the Company’s independent
accountants, who are responsible for expressing an opinion on
the conformity of those audited financial statements with
generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company’s
accounting principles and such other matters as are required to
be discussed with the Audit Committee by Statement on Auditing
Standards No. 61 (as amended), other standards of the
Public Company Accounting Oversight Board, rules of the SEC, and
other applicable regulations. In addition, the Audit Committee
has discussed with the independent accounting firm the
firm’s independence from the Company’s management and
the Company, including the matters in the letter from the firm
required by Independence Standards Board Standard No. 1,
and considered the compatibility of non-audit services provided
to the Company by the independent accountants with the
independent accountants’ independence.
The Audit Committee discussed with the Company’s
independent accountants the overall scope and plans for their
audit. The Audit Committee met with the independent accountants,
with and without management present, to discuss the results of
their examinations; their evaluation of the Company’s
internal controls, including internal control over financial
reporting; and the overall quality of the Company’s
financial reporting.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board, and the Board has
approved, that the audited financial statements and
management’s assessment of the effectiveness of the
Company’s internal control over financial reporting be
included in the
Form 10-K
for filing with the SEC. The Audit Committee and the Board also
have recommended, subject to stockholder ratification, the
selection of the Company’s independent accountants.
Respectfully submitted,
Philip C. Calian, Chair
Thomas E. Dobrowski
Sheli Z. Rosenberg
March 24, 2006
14
Table of Contents
PERFORMANCE
GRAPH
The following performance graph compares total
stockholders’ return on the Common Stock since
December 31, 2000 with the Standard and Poors
(“S&P”) 500 Stock Index and the index of equity
REITs prepared by the National Association of Real Estate
Investment Trusts (“NAREIT”). The Common Stock price
performance graph assumes that an investment of $100 was made on
December 31, 2000 in the Common Stock and in each of the
two indexes, and further assumes the reinvestment of all
dividends. Equity REITs are defined as those REITs which derive
more than 75% of their income from equity investments in real
estate assets. The NAREIT equity index includes all tax
qualified REITs listed on the NYSE, the American Stock Exchange
or the NASDAQ Stock Market. Common Stock price performance
presented for the period from December 31, 2000 through
December 31, 2005 is not necessarily indicative of future
results.
Comparison
of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2005
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||||||||||||||||
|
Company
|
Return | % | 14.38 | .65 | 32.67 | 17.73 | 24.78 | ||||||||||||||||||||||||||||
| Cumulative $ | $ | 100.00 | $ | 114.38 | $ | 115.12 | $ | 152.72 | $ | 179.81 | $ | 224.37 | |||||||||||||||||||||||
|
S&P 500
|
Return | % | -11.88 | -22.11 | 28.68 | 10.87 | 3.00 | ||||||||||||||||||||||||||||
| Cumulative $ | $ | 100.00 | $ | 88.12 | $ | 68.64 | $ | 88.32 | $ | 97.92 | $ | 100.86 | |||||||||||||||||||||||
|
NAREIT Equity
|
Return | % | 12.67 | 3.81 | 37.06 | 31.57 | 12.12 | ||||||||||||||||||||||||||||
| Cumulative $ | $ | 100.00 | $ | 112.67 | $ | 116.97 | $ | 160.32 | $ | 210.94 | $ | 236.51 | |||||||||||||||||||||||
15
Table of Contents
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
This table sets forth information with respect to persons who
are known to own more than 5% of the 23,571,352 outstanding
shares of Common Stock as of March 10, 2006.
|
Amount and |
||||||||
|
Nature of |
||||||||
|
Beneficial |
Percentage |
|||||||
|
Name and Business Address of
Beneficial Owner
|
Ownership(1) | of Class | ||||||
|
Samuel Zell and entities
affiliated with Samuel Zell and
Ann Lurie and entities affiliated with Ann Lurie(2) |
3,788,678 | 16.1 | % | |||||
|
Two North Riverside Plaza
|
||||||||
|
Chicago, Illinois 60606
|
||||||||
|
FMR Corp.(3)
|
3,236,259 | 13.7 | % | |||||
|
82 Devonshire Street
|
||||||||
|
Boston, Massachusetts 02109
|
||||||||
|
Deutsche Bank AG(4)
|
2,791,143 | 11.8 | % | |||||
|
Taunusanlage 12, D-60325
|
||||||||
|
Frankfurt am Main
|
||||||||
|
Federal Republic of Germany
|
||||||||
|
Morgan Stanley(5)
|
2,350,378 | 10.0 | % | |||||
|
1585 Broadway
|
||||||||
|
New York, New York 10036
|
||||||||
|
General Motors Employees Global
Group Pension Trust(6)
|
2,271,198 | 9.6 | % | |||||
|
c/o General Motors Investment
|
||||||||
|
Management Corporation
|
||||||||
|
767 Fifth Avenue
|
||||||||
|
New York, New York 10153
|
||||||||
| (1) | MHC Operating Limited Partnership (the “Operating Partnership”) is the entity through which the Company conducts substantially all of its operations. The limited partners of the Operating Partnership own units of limited partnership interest (“OP Units”) which are convertible into an equivalent number of shares of Common Stock. In accordance with SEC regulations governing the determination of beneficial ownership of securities, the percentage of Common Stock beneficially owned by a person assumes that all OP Units held by the person are exchanged for Common Stock, that none of the OP Units held by other persons are so exchanged, that all options exercisable within 60 days of the Record Date to acquire Common Stock held by the person are exercised and that no options to acquire Common Stock held by other persons are exercised. |
16
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| (2) | Includes Common Stock, OP Units which are exchangeable for Common Stock, and options to purchase Common Stock which are currently exercisable or exercisable within 60 days of the Record Date owned as follows: |
|
Common |
||||||||||||
| Stock | OP Units | Options | ||||||||||
|
Samuel Zell
|
217,091 | — | 586,666 | |||||||||
|
Samuel Zell Revocable Trust
|
10,551 | — | — | |||||||||
|
Helen Zell Revocable Trust
|
2,000 | — | — | |||||||||
|
Samstock/SZRT, L.L.C.
|
294,133 | 13,641 | — | |||||||||
|
Samstock/ZGPI, L.L.C.
|
6,003 | — | — | |||||||||
|
Samstock, L.L.C.
|
446,000 | 601,665 | — | |||||||||
|
Samstock/ZFT, L.L.C.
|
8,887 | 187,278 | — | |||||||||
|
Samstock/Alpha, L.L.C.
|
8,887 | — | — | |||||||||
|
EGI Holdings, Inc.
|
— | 579,873 | — | |||||||||
|
Donald S. Chisholm Trust
|
7,000 | — | — | |||||||||
|
Anda Partnership
|
— | 233,694 | — | |||||||||
|
LFT Partnership
|
— | 5,436 | — | |||||||||
|
EGIL Investments, Inc.
|
— | 579,873 | — | |||||||||
|
TOTALS:
|
1,000,552 | 2,201,460 | 586,666 | |||||||||
Mr. Zell does not have a pecuniary interest in the
2,000 shares of Common Stock shown above held by the Helen
Zell Revocable Trust, the trustee of which is Helen Zell,
Mr. Zell’s spouse. Mr. Zell also does not have a
pecuniary interest in the 7,000 shares of Common Stock
shown above held by the Donald S. Chisholm Trust, the trustee of
which is Mr. Zell.
The number in the table includes 469,777 shares of Common
Stock and 2,187,819 OP Units in which Mr. Zell has a
pecuniary interest, but with respect to which he does not have
voting or dispositive power. 469,777 shares of Common Stock
and 1,368,816 OP Units are indirectly owned by trusts
established for the benefit of Mr. Zell and his family, the
trustee of which is Chai Trust Company, L.L.C. (“Chai
Trust”). Mr. Zell is not an officer or director of
Chai Trust and does not have voting or dispositive power with
respect to such Common Stock or OP Units. Additionally,
819,003 OP Units are held by EGIL Investments, Inc.
(“EGIL”), Anda Partnership and LFT Partnership. Under
a shareholders’ agreement dated December 31, 1999,
trusts established for the benefit of the family of Ann and
Robert Lurie have the power to vote and to dispose of the
OP Units beneficially owned by EGIL. In addition, Ann Lurie
and Mark Slezak each share the power to vote or to direct the
vote and share the power to dispose or to direct the disposition
of OP Units held by Anda Partnership and LFT Partnership,
and Mr. Zell does not have a pecuniary interest in the
OP Units held thereby. Mr. Zell disclaims beneficial
ownership of such 469,777 shares of Common Stock and
2,187,819 OP Units, except to the extent of his pecuniary
interest therein.
| (3) | Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2005, Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp. (“FMR”) and an investment advisor registered under Section 203 of the Investment Advisors Act of 1940 (“Investment Act”), is the beneficial owner of 3,014,671 shares of Common Stock as a result of acting as investment advisor to various investment companies under the Investment Act. The ownership of one investment company, Real Estate Investment Portfolio (“REIP”), amounted to 1,553,900 shares of Common Stock. REIP has its principal office at 82 Devonshire Street, Boston, Massachusetts 02109. Fidelity Management Trust Company, a wholly-owned subsidiary of FMR, is the beneficial owner of 221,588 shares of Common Stock as a result of serving as investment manager of certain institutional accounts. Edward C. Johnson 3d, Abigail P. Johnson and other members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR. | |
| (4) | Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2005, Deutsche Bank AG is the beneficial owner of 2,791,143 shares of Common Stock on behalf of the Private Clients and Asset |
17
Table of Contents
| Management business group of Deutsche Bank AG and its subsidiaries and affiliates. Of these shares, RREEF America, L.L.C. is the reported beneficial owner of 2,731,043 shares; Deutsche Investment Management Americas is the reported beneficial owner of 34,700 shares; Deutsche Asset Management, Inc. is the reported beneficial holder of 16,200 shares; and Deutsche Bank Trust Corp Americas is the reported beneficial holder of 9,200 shares. | ||
| (5) | Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2005, Morgan Stanley and its wholly-owned subsidiary, Morgan Stanley Investment Management Inc. (“MSIM”), are the beneficial owners of 2,350,378 shares of Common Stock, including shares owned through accounts managed by them on a discretionary basis. MSIM has sole voting and dispositive power over 1,547,218 shares of Common Stock. Morgan Stanley has sole voting and dispositive power over 1,736,443 shares of Common Stock and shared voting and dispositive power over 607 shares of Common Stock. | |
| (6) | The shares of Common Stock reported herein are held of record by State Street Bank & Trust Company, acting as trustee (the “Trustee”) for the General Motors Employes Global Group Pension Trust (the “GM Trust Fund”), a trust formed under and for the benefit of certain employee benefit plans of General Motors Corporation (“GM”) and its subsidiaries and a former GM affiliate and its subsidiaries. These shares may be deemed to be owned beneficially by General Motors Investment Management Corporation (“GMIMC”), a wholly owned subsidiary of GM. GMIMC’s principal business is providing investment advice and investment management services with respect to the assets of certain employee benefit plans of GM and its subsidiaries and former affiliates. The Trustee may vote and dispose of the shares held by the GM Trust Fund only pursuant to the direction of GMIMC personnel, and accordingly beneficial ownership of the shares by the Trustee is disclaimed. |
18
Table of Contents
SECURITY
OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 10, 2006,
certain information with respect to the Common Stock that may be
deemed to be beneficially owned by each director of the Company,
by the executive officers named in the Summary Compensation
Table and by all such directors and executive officers as a
group. The address for each of the directors and executive
officers is
c/o Equity
LifeStyle Properties, Inc., Two North Riverside Plaza,
Suite 800, Chicago, Illinois 60606. Unless otherwise
indicated, each person has sole investment and voting power, or
shares such power with his or her spouse, with respect to the
shares set forth in the following table.
|
Shares of |
Shares Upon |
|||||||||||||||
|
Common |
Exercise of |
Percentage |
||||||||||||||
|
Name of Beneficial
Holder
|
Stock(1) | Options(2) | Total | of Class(3) | ||||||||||||
|
Michael B. Berman
|
42,354 | — | 42,354 | * | ||||||||||||
|
Philip C. Calian
|
5,000 | — | 5,000 | * | ||||||||||||
|
Donald S. Chisholm(4)
|
96,068 | 10,000 | 106,068 | * | ||||||||||||
|
Thomas E. Dobrowski(5)
|
— | 73,333 | 73,333 | * | ||||||||||||
|
Thomas P. Heneghan
|
183,436 | 13,333 | 196,769 | * | ||||||||||||
|
Ellen Kelleher
|
191,762 | — | 191,762 | * | ||||||||||||
|
Roger A. Maynard
|
29,880 | — | 29,880 | * | ||||||||||||
|
Marguerite Nader
|
11,549 | — | 11,549 | * | ||||||||||||
|
Sheli Z. Rosenberg(6)
|
192,697 | 35,000 | 227,697 | 1.0 | % | |||||||||||
|
Howard Walker
|
118,981 | — | 118,981 | * | ||||||||||||
|
Gary L. Waterman
|
76,244 | 20,000 | 96,244 | * | ||||||||||||
|
Samuel Zell(4)
|
3,202,012 | 586,666 | 3,788,678 | 16.1 | % | |||||||||||
|
All directors and executive
officers as a group (12 persons) including the above-named
persons
|
4,149,983 | 738,332 | 4,888,315 | 20.7 | % | |||||||||||
| * | Less than 1% | |
| (1) | The shares of Common Stock beneficially owned includes OP Units that can be exchanged for an equivalent number of shares of Common Stock. | |
| (2) | The amounts shown in this column reflect shares of Common Stock subject to options which are currently exercisable or exercisable within 60 days of the Record Date. | |
| (3) | In accordance with SEC regulations governing the determination of beneficial ownership of securities, the percentage of Common Stock beneficially owned by a person assumes that all OP Units held by the person are exchanged for Common Stock, that none of the OP Units held by other persons are so exchanged, that all options exercisable within 60 days of the Record Date to acquire Common Stock held by the person are exercised and that no options to acquire Common Stock held by other persons are exercised. | |
| (4) | Mr. Zell does not have a pecuniary interest in 2,000 shares of Common Stock reported above held by the Helen Zell Revocable Trust, the trustee of which is Helen Zell, Mr. Zell’s spouse. Mr. Zell also does not have a pecuniary interest in 7,000 shares of Common Stock reported above held by the Donald S. Chisholm Trust, the trustee of which is Mr. Zell. | |
| The number in the table includes 469,777 shares of Common Stock and 2,187,819 OP Units in which Mr. Zell has a pecuniary interest but with respect to which he does not have voting or dispositive power. 469,777 shares of Common Stock and 1,368,816 OP Units are indirectly owned by trusts established for the benefit of Mr. Zell and his family, the trustee of which is Chai Trust. Mr. Zell is not an officer or director of Chai Trust and does not have voting or dispositive power with respect to such Common Stock or OP Units. Additionally, 819,003 OP Units are held by EGIL, Anda Partnership and LFT Partnership. Under a shareholders’ agreement dated December 31, 1999, trusts established for the benefit of the family of Ann and Robert Lurie have the power to vote and to dispose of the OP Units beneficially owned by EGIL. In addition, Ann Lurie and Mark Slezak each share the power to vote or to direct the vote and share the power |
19
Table of Contents
| to dispose or to direct the disposition of OP Units held by Anda Partnership and LFT Partnership, and Mr. Zell does not have a pecuniary interest in the OP Units held thereby. Mr. Zell disclaims beneficial ownership of such 469,777 shares of Common Stock and 2,187,819 OP Units, except to the extent of his pecuniary interest therein. | ||
| (5) | The number in the table includes 71,604 shares of Common Stock which are held by Mr. Dobrowski as nominee for certain pension trusts. | |
| (6) | Includes 11,530 OP Units beneficially owned by Mrs. Rosenberg which are exchangeable into 11,530 shares of Common Stock. Also includes 75,196 shares of Common Stock beneficially owned by Mrs. Rosenberg’s spouse, as to which Mrs. Rosenberg disclaims beneficial ownership. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Company occupies office space in a building owned by an
affiliate of EGI, an entity controlled by Mr. Zell, at Two
North Riverside Plaza, Chicago, Illinois 60606. Amounts incurred
for rental of this office space totaled approximately $465,000
for the year ended December 31, 2005. No amounts were due
to this affiliate as of December 31, 2005.
The independent members of the Board, excluding Mr. Zell,
have reviewed and approved the rates charged by the EGI
affiliate in connection with the lease of the Company’s
office space.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act
(“Section 16(a)”) requires the Company’s
executive officers and directors, and persons who own more than
10% of the Common Stock, to file reports of ownership and
changes of ownership with the SEC and the NYSE. Executive
officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on the Company’s review of the copies of those
forms received by the Company, or written representations from
executive officers and directors that no Forms 5 were
required to be filed for the fiscal year ended December 31,
2005, all appropriate Section 16(a) forms were filed in a
timely manner, except as described below:
Mr. Walker disposed of 120.3 shares of Common Stock on
March 11, 2005; a Form 4 inadvertently was not filed
when due by March 13, 2005, but was filed on June 10,
2005. Mr. Berman acquired 260 shares of Common Stock
on May 26, 2005, and 260 shares of Common Stock on
May 27, 2005; a Form 4 inadvertently was not filed
when due by May 28, 2005 and May 29, 2005,
respectively, but was filed on June 3, 2005.
Mr. Calian became a director of the Company on
October 17, 2005; a Form 3 inadvertently was not filed
when due by October 27, 2005, but was filed on
November 3, 2005.
STOCKHOLDER
PROPOSALS FOR THE 2007 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2007
Annual Meeting must be received by the Secretary of the Company
no later than December 8, 2006, in order to be considered
for inclusion in the Company’s proxy statement and on the
proxy card that will be solicited by the Board in connection
with the 2007 Annual Meeting.
In addition, if a stockholder desires to bring business before
an Annual Meeting of Stockholders which is not the subject of a
proposal for inclusion in the Company’s proxy materials,
the stockholder must follow the advance notice procedures
outlined in the Company’s Bylaws. The Company’s Bylaws
provide that in order for a stockholder to nominate a candidate
for election as a director at an Annual Meeting or propose
business for consideration at such Annual Meeting, notice must
generally be given to the Secretary of the Company no more than
90 days nor less than 60 days prior to the first
anniversary of the preceding year’s Annual Meeting. The
2006 Annual Meeting is scheduled for May 3, 2006.
Therefore, if a stockholder desires to present a proposal for
the 2007 Annual Meeting without seeking to include the proposal
in the Company’s proxy materials, the Company
20
Table of Contents
must receive notice of the proposal no earlier than
February 2, 2007 and no later than March 4, 2007.
Copies of the Bylaws may be obtained from the Secretary of the
Company by written request.
2005
ANNUAL REPORT
Stockholders are concurrently being furnished with a copy of the
Company’s 2005 Annual Report (“Annual Report”)
and the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2005 (the
“Form 10-K”)
as filed with the Securities Exchange Commission. Additional
copies of the Annual Report,
Form 10-K
and of this Proxy Statement may be obtained from the
Company’s website at
http://www.equitylifestyle.com
or by contacting Equity LifeStyle Properties, Inc, Attn:
Investor Relations, at Two North Riverside Plaza,
Suite 800, Chicago, Illinois 60606, (toll-free number:
1-800-247-5279).
Copies will be furnished promptly at no additional expense.
OTHER
MATTERS
The Board knows of no other matters to be presented for
stockholder action at the Annual Meeting. If any other matters
are properly presented at the Annual Meeting for action, it is
intended that the persons named in the accompanying proxy and
acting thereunder will vote in accordance with their best
judgment on such matters.
By Order of the Board of Directors
Ellen Kelleher
Executive Vice President, General Counsel and Secretary
March 24, 2006
Chicago, Illinois
21
Table of Contents
EQUITY LIFESTYLE PROPERTIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Equity LifeStyle Properties, Inc., a Maryland corporation (the
“Company”), hereby appoints SAMUEL ZELL and THOMAS P. HENEGHAN, or either of them, with full power
of substitution in each of them, to attend the Annual Meeting of Stockholders of the Company to be
held on Wednesday, May 3, 2006, at 10:00 a.m. Central time (the “Meeting”), and any adjournment or
postponement thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at the Meeting and otherwise to represent the undersigned at the Meeting with all
powers possessed by the undersigned if personally present at the Meeting. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and of the accompanying Proxy
Statement and revokes any proxy heretofore given with respect to the Meeting. The votes entitled to
be cast by the undersigned will be cast as instructed on the reverse side. If this proxy is
executed but no instruction is given, the votes entitled to be cast by the undersigned will be cast
“for” each of the nominees for director and “for” the ratification of the selection of Ernst &
Young LLP as the Company’s independent accountants for 2006, as described in the Proxy Statement,
and in the discretion of the proxy holder on any other matter that may properly come before the
Meeting or any adjournment or postponement thereof.
COMMENTS/ADDRESS CHANGE:
(Continued and to be signed on other side)
o FOLD AND DETACH HERE o
Table of Contents
EQUITY LIFESTYLE PROPERTIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ý
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ý
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
| 1. ELECTION OF DIRECTORS | For All |
Withhold All |
For All Except |
|||||
| o | o | o | ||||||
| Nominees: | ||||||||
| Donald S. Chisholm | ||||||||
| Thomas E. Dobrowski | ||||||||
| Thomas P. Heneghan | ||||||||
| Philip C. Calian | ||||||||
| Sheli Z. Rosenberg | ||||||||
| Howard Walker | ||||||||
| Gary L. Waterman | ||||||||
| Samuel Zell | ||||||||
| Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee, write that nominee’s name in the space provided below: | ||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
| 2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS | For | Against | Abstain | |||||
| Proposal to ratify the selection of Ernst & Young LLP as the Company’s independent accountants for 2006. | o | o | o | |||||
| And on any other matter which may properly come before the Meeting or any adjournment or postponement thereof in the discretion of the proxy holder. | ||||||||
| I PLAN TO ATTEND THE MEETING | o | |||||||
| Date | ||||||||
Signature |
||||||||
Signature |
||||||||
| NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR OFFICER, PLEASE GIVE FULL TITLE UNDER SIGNATURE. IF THE SIGNER IS A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER, GIVING FULL TITLE AS SUCH. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON. | ||||||||
o FOLD AND DETACH HERE o
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
IN THE ENCLOSED ENVELOPE.