10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

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

For the transition period from          to          .

Commission file number 1-16755

Archstone-Smith Trust

(Exact name of Registrant as Specified in Its Charter)

MARYLAND	84-1592064
(State or other jurisdiction of	(IRS employer
incorporation or organization)	identification no.)

9200 E. Panorama Circle, Suite 400
Englewood, Colorado 80112
(Address of principal executive office)
(303) 708-5959
(Registrant’s telephone number, including area code)

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

	Name of each exchange on
Title of each class	which registered
Common Shares of Beneficial Interest, par value	New York Stock Exchange
$0.01 per share

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

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the securities Act.  Yes   þ     No  o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   o     No  þ

     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   þ     No  o

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer  þ     Accelerated filer  o     Non-accelerated filer  o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   o     No  þ

     Based on the closing price of the registrant’s Common Shares on June 30, 2006, the aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $10,929,317,760.

     At February 20, 2007 there were approximately 220,379,832 of the registrant’s Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2007 annual meeting of its shareholders are incorporated by reference in Part III of this report.

Table of Contents

Item	Description	Page
	PART I
	Glossary		3
1.	Business		7
	The Company		7
	2006 Accomplishments		8
	Investment Strategy		9
	Customer-focused Operations		10
	Conservative Balance Sheet Management		12
	Management		13
	Biographies of Senior Officers of Archstone-Smith Trust		13
	Employees		14
	Insurance		14
	Competition		14
	Available Information and Code of Ethics		15
1A.	Risk Factors		15
1B.	Unresolved Staff Comments		19
2.	Properties		19
	United States Geographic Distribution, excluding Ameriton		19
	Real Estate Portfolio		20
3.	Legal Proceedings		22
4.	Submission of Matters to a Vote of Security Holders		22
	PART II
5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		23
6.	Selected Financial Data		25
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
	Results of Operations		27
	Liquidity and Capital Resources		36
	Litigation and Contingencies		37
	Critical Accounting Policies		38
	Off Balance Sheet Arrangements		40
	Contractual Commitments		40
	New Accounting Pronouncements		40
7A.	Quantitative and Qualitative Disclosures About Market Risk		41
8.	Financial Statements and Supplementary Data		43
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		43
9A.	Controls and Procedures		44
	Management’s Report on Internal Control Over Financial Reporting		44
9B.	Other Information		44
	PART III
10.	Directors, Executive Officers and Corporate Governance		45
11.	Executive Compensation		45
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		45
13.	Certain Relationships and Related Transactions and Director Independence		45
14.	Principal Accounting Fees and Services		45
	PART IV
15.	Exhibits, Financial Statement Schedules		46
Indenture
First Supplemental Indenture
Second Supplemental Indenture
Third Supplemental Indenture
Computation of Ratio of Earnings to Fixed Charges
Computation of Ratio of Earnings to Combined Fixed Charges
Consent of Independent Registered Public Accounting Firm
Subsidiaries
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

GLOSSARY

     The following abbreviations, acronyms or defined terms used in this document are defined below:

Abbreviation, Acronym or Defined Term	Definition/Description
A-1 Common Unitholders	Holders of A-1 Common Units.
A-1 Common Units	Operating Trust class A-1 common units, par value $0.01 per unit, together with any class B-1 Common Units, which are redeemable for cash or, at the option of Archstone-Smith, Common Shares. A-1 Common Units are the common units of the Operating Trust not held by Archstone-Smith and represent a minority interest of approximately 11.8% in the Operating Trust at December 31, 2006.
A-2 Common Units	Operating Trust class A-2 common units of beneficial interest, par value $0.01 per unit. Archstone-Smith is the sole holder of A-2 Common Units, which represent approximately an 88.2% interest in the Operating Trust at December 31, 2006.
ADA	Americans with Disabilities Act, as amended.
Ameriton	AMERITON Properties Incorporated, which is a taxable REIT subsidiary that engages in the opportunistic acquisition, development and eventual disposition of real estate with a shorter-term investment horizon.
Annual Report	This Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2006.
Archstone-Smith	Archstone-Smith Trust. Unless indicated otherwise, financial information and references throughout this document are labeled, “Archstone-Smith” for periods before and after the Smith Merger.
B Common Units	Operating Trust class B common units of beneficial interest, par value $0.01 per unit, which are issued to persons who contribute property to the Operating Trust. B Common Units convert automatically to A-1 Common Units immediately following the distribution of income for the quarter in which the property was contributed.
Board	Archstone-Smith’s Board of Trustees.
CES	Consolidated Engineering Services, Inc. was a taxable REIT subsidiary of Archstone-Smith in the business of delivering mission critical facilities management services for corporate, government and institutional customers. CES was sold to a third party in December 2002 for $178 million.
Common Share(s)	Archstone-Smith common shares of beneficial interest, par value $0.01 per share.
Common Shareholders	Holders of the Common Shares
Common Units	The A-1 Common Units and the A-2 Common Units.
Convertible Debt	$575 million exchangeable senior unsecured notes that are exchangeable into Common Shares.
Convertible Preferred Shares	Collectively, the Series A, H, J, K and L Preferred Shares.
Declaration of Trust	Archstone-Smith’s Amended and Restated Declaration of Trust, as filed with the State of Maryland on May 31, 2006, as amended and supplemented.
DEU	Dividend Equivalent Unit; an amount credited to the account of holders of certain options and RSU’s under our long-term incentive plan.
DeWAG	DeWAG Deutsche WohnAnlage GmbH.
DRIP	Dividend Reinvestment and Share Purchase Plan.
EPS	Earnings Per Share determined in accordance with GAAP.
FASB	Financial Accounting Standards Board.
FHA	Fair Housing Act, as amended.
GAAP	Generally accepted accounting principles in the United States.
High-Rise	Those communities with five or more above-ground floors.
Independent Trustees	Members of the Board meeting the NYSE definition of “Independent Director.”

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Abbreviation, Acronym or Defined Term	Definition/Description
In Planning	Represents parcels of land owned or Under Control, which are in the development planning process, upon which construction of apartments is expected to commence subsequent to the completion of the entitlement and building permit processes.
International	Refers to our operational and investment activities in Europe. Our investments to date have been limited to Germany.
IRR	On a sold community, IRR refers to the unleveraged internal rate of return calculated by Archstone-Smith, considering the initial purchase price and all capital invested in the community, the timing and amounts of net operating income during the period owned and the net sales proceeds from the sale. The IRR calculations include property management overhead and internal disposition costs but not depreciation or allocations for corporate general and administrative expenses, interest expenses, income tax expenses (if any) or other indirect operating expenses. Therefore, an IRR calculation is not a substitute for net income as a measure of our performance. Management believes that IRRs are an important indicator of the value created during the ownership period. Historical IRRs are not necessarily indicative of IRRs that will be produced in the future. Our methodology for calculating IRRs may not be consistent with the methodology used by other companies.
Lease-Up	The phase during which newly constructed apartment units are being leased for the first time, but prior to the community becoming Stabilized.
LIBOR	London Interbank Offered Rate.
Long-Term Unsecured Debt	Collectively, Archstone-Smith’s long-term unsecured senior notes payable and unsecured tax-exempt bonds.
NAREIT	National Association of Real Estate Investment Trusts.
Net Operating Income or NOI	Represents rental revenues less rental expenses and real estate taxes. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. NOI is a non-GAAP financial measure. See a reconciliation of NOI to Earnings from Operations in this Annual Report in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Property-level operating results.”
NYSE	New York Stock Exchange.
Oakwood or Oakwood Worldwide	The terms used in reference to a group of partnerships coordinated by a common sponsor who contributed a group of apartment communities to the Operating Trust in 2005.
Oakwood Master Leases	Refers to thirteen communities acquired from Oakwood and one community we previously owned and operated that were leased in their entirety to an affiliate of Oakwood Worldwide under master lease agreements with seven year terms, subject to Oakwood’s right to terminate individual leases under certain circumstances after the one year anniversary of the acquisition.
Operating Trust	Archstone-Smith Operating Trust, the entity through which we conduct all property ownership and business operations.
Preferred Shares or Perpetual Preferred Shares	The Series I Preferred Shares.
REIT	Real estate investment trust. This term is also used to refer to consolidated subsidiaries of Archstone-Smith, but excluding taxable and International subsidiaries unless the context indicates otherwise.
Restricted Share Unit or RSU	A unit representing an interest in one Common Share, subject to certain vesting provisions, granted to an associate through our long-term incentive plan.

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Abbreviation, Acronym or Defined Term	Definition/Description
Same-Store	Term used to refer to a group of operating communities in the United States that had attained Stabilization and were fully operating during the entire time two periods are being compared. Excludes communities which were not eligible for inclusion due to (i) recent acquisition or development, (ii) major redevelopment, or (iii) a significant number of non-operational units (fires, floods, etc.). Also excludes Ameriton properties, due to their short-term holding periods, and International properties.
Series A Preferred Shares	Archstone-Smith Series A Cumulative Preferred Shares of Beneficial Interest, par value $0.01 per share, which were redeemed in full in November 2003.
Series C Preferred Shares	Archstone-Smith Series C Cumulative Perpetual Preferred Shares of Beneficial Interest, par value $0.01 per share, which were redeemed in full in August 2002.
Series D Preferred Shares	Archstone-Smith Series D Cumulative Perpetual Preferred Shares of Beneficial Interest, par value $0.01 per share, which were redeemed in full in August 2004.
Series E Perpetual Preferred Units	8.375% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in February 2005.
Series F Perpetual Preferred Units	8.125% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in September 2004.
Series G Perpetual Preferred Units	8.625% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in March 2005.
Series H Preferred Shares	Archstone-Smith Series H Cumulative Convertible Perpetual Preferred Shares of Beneficial Interest, par value $0.01 per share, which were converted into Common Shares in full in May 2003.
Series I Preferred Shares	Archstone-Smith Series I Cumulative Perpetual Preferred Shares of Beneficial Interest, par value $100,000 per share, redeemable in February 2028.
Series J Preferred Shares	Archstone-Smith Series J Cumulative Convertible Perpetual Preferred Shares of Beneficial Interest, par value $0.01 per share, which were converted into Common Shares in full in July 2002.
Series K Preferred Shares	Archstone-Smith Series K Cumulative Convertible Perpetual Preferred Shares of Beneficial Interest, par value $0.01 per share, which were converted into Common Shares in September 2004.
Series L Preferred Shares	Archstone-Smith Series L Cumulative Convertible Perpetual Preferred Shares of Beneficial Interest, par value $0.01 per share, which were converted into Common Shares in December 2004.
Series M Preferred Unit	Operating Trust Series M Preferred Unit of Beneficial Interest, par value $0.01 per unit.
Series N-1 Preferred Units	Operating Trust Series N-1 Convertible Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit.
Series N-2 Preferred Units	Operating Trust Series N-2 Convertible Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit.
SMC	Smith Management Construction, Inc. was a taxable REIT subsidiary of Archstone-Smith in the business of providing construction management and building maintenance services. SMC was sold to members of its senior management in February 2003.
Smith Merger	The series of transactions in October 2001 whereby Archstone-Smith merged with Smith Residential, and Archstone Communities Trust (now, the Operating Trust) merged with Smith Partnership.
Smith Partnership	Charles E. Smith Residential Realty L.P.
Smith Residential	Charles E. Smith Residential Realty, Inc.
SFAS	Statement of Financial Accounting Standards.
Stabilized or Stabilization	The classification assigned to an apartment community that has achieved 93% occupancy, and for which development, new management and new marketing programs (or development and marketing in the case of a newly developed community) have been completed.
Total Expected Investment	For development communities, represents the total expected investment at completion; for operating communities, represents the total expected investment plus planned capital expenditures.
Trustees	Members of the Board of Trustees of Archstone-Smith.

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Abbreviation, Acronym or Defined Term	Definition/Description
Under Control	A term used to identify land parcels which the Operating Trust does not own, yet has an exclusive right through contingent contract or letter of intent during a contractually agreed upon time period to acquire the land, subject to satisfaction of contingencies during the due diligence and entitlement processes.
Unitholders	The holders of the A-1 Common Units and the A-2 Common Units.
UPREIT	Umbrella Partnership Real Estate Investment Trust.

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Forward-Looking Statements

     Certain statements in this Annual Report that are not historical facts are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, beliefs, assumptions, estimates and projections about the industry and markets in which we operate. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. Information concerning expected investment balances, expected funding sources, planned investments, forecasted dates and revenue and expense growth assumptions are examples of forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

     Our operating results depend primarily on income from apartment communities, which is substantially influenced by supply and demand for apartment units, operating expense levels, property level operations and the pace and price at which we develop, acquire or dispose of apartment communities. Capital and credit market conditions, which affect our cost of capital, also influence operating results. See “Risk Factors” in Item 1 of this Annual Report for a complete discussion of the various risk factors that could affect our future performance.

PART I

Item 1.

Business

     Archstone-Smith, an S&P 500 company, is a leader in apartment investment and operations. The company owns and operates a portfolio of High-Rise and garden apartment communities concentrated in many of the most desirable neighborhoods in the Washington, D.C. metropolitan area, Southern California, the New York City metropolitan area, the San Francisco Bay Area, Boston and Seattle. The company strives to continually upgrade the quality of its portfolio through the selective sale of assets, using proceeds to fund investments with higher anticipated growth prospects. Through our two customer-facing brands, Archstone and Charles E. Smith, we strive to provide great apartments and great service, all backed by our unconditional Seal of Service™.

     As of December 31, 2006, we owned or had an ownership position in 348 communities, representing 88,011 units, including units under construction. At year-end, our operating portfolio was concentrated in protected locations in the following core markets, based on NOI for the three months ended December 31, 2006, excluding amounts owned by Ameriton, International investments and joint ventures:

Washington, D.C. metropolitan area	34.6	%
Southern California	25.8
New York City metropolitan area	12.5
San Francisco Bay Area, California	11.5
Boston, Massachusetts	5.0
Seattle, Washington	4.2
Southeast Florida	2.2
Chicago, Illinois	2.0
Total	97.8	%

The Company

     Archstone-Smith is engaged primarily in the acquisition, development, redevelopment, operation and long-term ownership of apartment communities in the United States. We have elected REIT status and are structured as an UPREIT, with all property ownership and business operations conducted through the Operating Trust. We are the sole trustee and owned 88.2% of the Operating Trust at December 31, 2006. Archstone-Smith Common Shares trade on the New York Stock Exchange (NYSE: ASN). Our principal focus is to maximize shareholder value by:

• Acquiring, developing, redeveloping and operating apartments in our core markets, which are characterized by: protected locations with limited land for new housing construction, expensive single-family home prices, and a strong, diversified economic base with significant employment growth potential;

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• Generating long-term sustainable growth in operating cash flow;

• Increasing our Common Share dividend, as we have done for the last 16 consecutive years;

• Recruiting, training and retaining people who we believe are the best and brightest in the apartment business;

• Building the dominant operating platform in the apartment industry, to produce an operating franchise that we believe is more efficient, more profitable and difficult to replicate. We invest in technology to improve our operations and customer service delivery, strengthen our brand position and solidify our reputation for operational leadership; and

• Managing our invested capital through the selective sale of apartment communities with slower growth prospects and redeploying the proceeds to fund investments with higher anticipated growth prospects and value creation, in many of the most desirable neighborhoods in our core markets.

2006 Accomplishments

• Archstone-Smith produced Same-Store revenue growth of 6.5% and NOI growth of 7.5% for the full year of 2006.

• Archstone-Smith’s reported Same-Store NOI outperformed our peer average by 1,002 basis points for the period from January 1, 2001 through December 31, 2006. ⁽¹⁾

• We dramatically increased our presence in New York City through the acquisition of five high-rise apartment communities, totaling $845.1 million and 1,382 units, and are now the largest public owner of apartments in Manhattan. At year-end 2006, our committed Total Expected Investment in the New York City metropolitan area, including joint venture developments, totaled $2.0 billion.

• We made significant incremental investments in the San Francisco Bay Area, which now represents almost 12% of our portfolio, acquiring five communities, totaling $655.9 million and 1,978 units.

• We achieved our 12-year-long goal of repositioning of our portfolio from undesirable, commodity markets, into many of the most desirable neighborhoods in our core markets. As of December 31, 2006, our portfolio was 97.8% in our core markets.

• In May 2006, we completed our second acquisition in Europe with the purchase of a 657-unit portfolio concentrated in Berlin, Germany, for $50.5 million. In July 2006, we completed the acquisition of DeWAG, a German company that specializes in the acquisition, long-term ownership and re-sale or “privatization” of attractive residential properties in the major metropolitan areas of Southern and Western Germany. At acquisition, the real estate portfolio consisted of approximately 6,400 units valued at $646.3 million.

• In July 2006, we completed a successful $575 million convertible debt offering. This offering was used to repay outstanding balances under our revolving credit facility and certain other indebtedness, to make additional investments and for general corporate purposes.

• On July 12, 2006, Fitch Ratings upgraded our credit rating to A- from BBB+.

• We increased our 2007 annualized Common Share dividend level 4.0% to $1.81, or $0.4525 per quarter. This marks our 16^th consecutive annual Common Share dividend increase and a total increase of 183% since 1991. Our first quarter 2007 Common Share dividend was paid in February 2007, representing our 126^th consecutive quarterly payment.

• Forbes magazine ranked Archstone-Smith at 954 on the Forbes 2000 List for 2006, the magazine’s comprehensive ranking of the world’s largest corporations.

• Archstone-Smith was named Property Management Company of the Year by the National Association of Home Builders.

(1) NOI performance is defined as cumulative same-store NOI growth for the period presented, relative to the average Same-Store NOI growth for our peer companies, which are Avalon Bay Communities; BRE Properties, Inc.; Camden Property Trust; Equity Residential; Essex Property Trust, Inc.; Post Properties, Inc.; and United Dominion Realty. Each company’s cumulative same-store NOI growth is calculated from 2001 through 2006. Results for 2001 through 2006 are per Green Street Advisors Apartment REITS: 4Q01 Review, 4Q03 Review, February ’06 Update and February ‘07 Update, except for Archstone-Smith figures, which are actual reported results.

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Investment Strategy

Capital recycling program

     We believe that one of our most important objectives is to improve the quality of our portfolio with every transaction we complete. In 2006, we completed the disposition of $1.5 billion of non-core assets, excluding Ameriton and International dispositions, representing 11,534 units, generating net GAAP gains of $546.3 million and an average unleveraged IRR of 20.1%. In addition, during 2006 we acquired $1.7 billion of assets, excluding Ameriton and International acquisitions, representing 4,209 units, and started development of $349.5 million of assets, representing 1,069 units, in markets that include, Southern California and the San Francisco Bay Area.

Focus on core markets

     We focus our investment activities in our core markets, which are characterized by: (i) protected locations with high barriers to entry; (ii) expensive single-family home prices; and (iii) a strong, diversified economic base with significant employment growth potential.

     Barriers to entry exist in areas where there is a very limited amount of land zoned and available for housing development, and where local municipalities are reluctant to zone additional land for new housing. We believe that the difficulty of developing new apartments in protected locations and the high cost of single family housing limits competition for our product. Limits on competition, together with the diverse economic base typical of our core markets, maximize our ability to keep our occupancy relatively constant while increasing rents and producing sustainable long-term cash flow growth.

     Our investment professionals generally live in our core markets, allowing them to research and evaluate potential investments at the “street corner level of detail.” This locally based investment acumen guides our decisions in making investments, allowing us to continually upgrade the quality of our portfolio. As a result, our portfolio is concentrated in many of the most desirable neighborhoods in the Washington, D.C. metropolitan area, Southern California, the New York City metropolitan area, the San Francisco Bay Area, Boston and Seattle.

     In late 2005 we indicated that Archstone-Smith would attempt to dispose of virtually all of our remaining non-core assets in 2006 and we have achieved this goal.

Developments

     We place considerable emphasis on the value created through our development of new apartment properties. At December 31, 2006, we had $3.8 billion in Total Expected Investment of assets in our development pipeline, including communities under construction and In Planning in the REIT, Ameriton and joint ventures. We completed $602.9 million of new REIT development properties during the year, representing 2,023 units, in markets that include the Washington, D.C. metropolitan area, Southern California, New York City metropolitan area and Boston.

     We believe that our locally based development infrastructure creates a significant competitive advantage for identifying and completing very attractive investment opportunities in our core markets. As such, we expect our development capability to continue to be a key contributor to growth and to create significant value as properties are completed and Stabilized, producing attractive returns during the next several years. Additionally, we generally utilize guaranteed maximum price contracts, which caps our cost of construction at a guaranteed price through qualified third-party contractors to reduce our exposure to construction cost risk.

Ameriton

     Ameriton, our wholly owned subsidiary, continues to be a highly profitable franchise for our company. Utilizing our development, acquisition and operating expertise, Ameriton identifies under-managed operating communities, as well as development and redevelopment opportunities with a short-term target ownership horizon of one to two years that have the potential to produce significant profits on re-sale. Ameriton sold twelve investments in 2006 (including two joint venture transactions), contributing $64.6 million or $0.25 per share to Archstone-Smith’s 2006 earnings. These transactions, excluding the two joint ventures, produced an IRR of 16.7%.

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     As of December 31, 2006, Ameriton had 22 communities representing 7,220 units under construction or In Planning, including joint ventures. While nearly 54.5% of Ameriton’s development pipeline is located in our core markets, they are in locations that we deem to be non-core for ownership by the REIT.

     A meaningful component of Ameriton’s profitable development program is attributable to its creation of a successful business as a joint venture financier of new, high-quality apartment communities that are built by other capable developers with whom we have fostered relationships over the past several years. Since 2003, Ameriton has completed nine of these transactions, realizing pre-tax gains of $46.7 million, or $0.20 per share, at an average leveraged IRR of 30.1%.

     Leveraging our relationships with third-party apartment developers, we also created a related business that offers a compelling platform for long-term value creation: mezzanine debt financing. Our Ameriton investment team sources these transactions on behalf of the REIT, as the interest income is qualifying REIT income and therefore not subject to tax. Of the $197.7 million in mezzanine loan commitments we have made through December 31, 2006, $103.4 million were originated in 2006. During the year, we had 4 loans representing $37.3 million repaid or sold. We are encouraged by the opportunities to selectively invest capital at very attractive returns in this incremental area of our business.

International

     We expanded our international presence with the May 2006 acquisition of a 657-unit portfolio concentrated in Berlin, Germany, and the July 2006 acquisition of DeWAG, a German company, including its residential real estate portfolio and management team. DeWAG specializes in the acquisition, long-term ownership and re-sale or “privatization” of attractive residential properties in the major metropolitan areas of Southern and Western Germany. Collectively, the DeWAG senior management team has more than 60 years of German residential real estate expertise and extensive local market knowledge along with strong, long-term relationships with major real estate owners. As of December 31, 2006, our International apartment portfolio consists of 8,334 units generally located in attractive micro- and macro-locations in well-developed areas with access to parks, schools, shopping, employment and recreation.

     The German residential real estate market is experiencing an important shift in the way that residential property is owned and operated, which creates opportunities for investors with a long-term perspective to take advantage of the positive changes expected in this market. A limited supply of new residential property, coupled with increased demand driven by an increasing number of households, sets the stage for positive developments in rental rates and occupancy. In addition, portfolio rents at existing properties that were under corporate or municipal ownership are often below market levels, as these residential owners are generally focused on providing affordable housing for their constituents, and are not driven by purely economic considerations.

Customer-focused Operations

     We believe that our long-term cash flow growth is enhanced by our strong operating capability, including the benefit of the Archstone and Charles E. Smith brands, robust and scalable technology, and our continued investment in our associates.

Powerful brands

     An essential component of our strategy is to consistently offer a higher level of service at our apartment communities. Through our Seal of Service ^TM , we offer our residents convenience and flexibility all backed by written guarantees. We believe we were the first public apartment REIT with an established track record of offering customers flexible lease terms from two to 12 months as standard practice – and the first apartment company in the nation to offer fully transactional online leasing through Online Lease, our proprietary automated system.

     Our expansion in the New York City metropolitan area underscores the embedded value of our customer-focused operating and branding strategy. We believe we were the first apartment owner and manager in Manhattan to provide all of the following services: (i) leasing offices that are open seven days a week; (ii) showing apartments without an appointment or a broker; (iii) processing applications in 48 hours, compared to one week process time at most competitors; (iv) offering unconditional service guarantees through our Seal of Service™; and (v) providing a technology platform that makes it easy for people to do business with us through online rent payment, online service requests and our Online Lease. Customers have enthusiastically accepted this approach, allowing us to achieve an 8.9% increase in new move-in rents in our Same-Store operating communities in Manhattan in the fourth quarter of 2006 as compared to the same period in 2005.

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Investing in technology

     Web-based property management system. We invest in technology to improve our core operations and make it easier for our customers to do business with us. In 2005, we completed the roll-out of MRI, a web-based property management system that provides the platform for virtually all of our customer-facing technology products. In addition, MRI’s automated work order solution allows us to manage and execute service requests more efficiently, in line with our 1-day service guarantee, through which we promise to respond to service requests within 24 hours. Equally important, MRI gives us the ability to accurately track resident histories to better understand and serve our customers.

     Revenue management. In 2000, we pioneered the use of a sophisticated revenue management product, Lease Rent Options (LRO). LRO brings a tremendous amount of discipline to the pricing process, enabling us to more precisely forecast demand to optimize pricing and occupancy across our portfolio, thereby increasing revenues. In 2006, we continued to refine and improve LRO to better manage pricing, occupancy and lease expirations to make us less vulnerable to seasonal shifts in customer traffic.

     We believe that pricing in the apartment industry is too reliant on on-site individuals who often use “gut instinct” to make what are ultimately arbitrary pricing decisions. To bring discipline and sophistication to pricing in the apartment industry, we began to actively market LRO to other apartment owners, licensing it to five large apartment companies; several other apartment owners are currently pilot testing the software. In 2006, Archstone-Smith entered into an agreement with The Rainmaker Group, an Atlanta-based software company, to market, distribute, develop, implement and support the LRO product.

     Resident websites. MRI provides a seamless online presence with our customers via resident-only websites, which we rolled out nationally in 2005, allowing customers 24/7 access to us to pay rent online, submit and track service requests, participate in periodic feedback surveys, review and update account information and more. In 2006, we collected online rent payments representing revenue of $304.6 million and 25.8% of total rent collected, which was 141% greater than the online rent payments collected in 2005. Online rent payments continued to accelerate throughout the year, with online rent payments in December 2006 totaling 32.0% of all rent collected.

     Online Lease. We believe that we were the first national apartment company where customers could complete leases completely online through Online Lease, our proprietary automated system. Using Online Lease, customers can log on to any computer to search for a specific apartment, view real-time pricing and availability, select rentable amenities such as garages or additional storage, complete their credit application and finalize their lease.

     Fully launched in 2005, Online Lease has been well-accepted by our customers, representing more than 17.0% of all leases transacted in 2006. Of those apartments that were leased online for the full year of 2006, 28.0% were leased sight-unseen by customers and 39.0% were leased by customers who only visited an Archstone-Smith community once. We believe Online Lease provides us with a meaningful competitive edge to better serve customers and improve our operating margins.

     Internet marketing and lead management. Approximately 44% of all of our leases for the year ended December 31, 2006, were sourced through the Internet, with the vast majority of our customers beginning their apartment search online through third-party search vehicles such as Google and Yahoo! or Internet Listing Services (ILS) that include Apartments.com and Move.com as well as our branded websites, ArchstoneApartments.com and SmithApartments.com. Because the acquisition cost for customers sourced through the Internet is dramatically lower than traditional marketing channels, such as print advertising, we continue to focus our marketing efforts on improving our online presence and lead management system.

Investing in our associates

     A critical component to ensuring the integrity of our brand offering is attracting, training and retaining the best professionals in our industry — and giving them the support and tools to provide an exceptional customer experience.

     Associate engagement. In 2005, we contracted with Kenexa, a leading associate engagement consultancy, to measure our associates’ engagement and identify key drivers of engagement. It is our belief that associates who are fully engaged in their roles tend to contribute at a much higher level to the company and stay with us longer. Our initial results were extremely encouraging, with 75% of our associates taking part in the survey. Our results place us in the top quartile of responses among the companies with whom Kenexa works, including many of the “best in class” corporations in the United States.

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     Incentive-Based Compensation. We made significant progress during the year on our Incentive-Based Compensation (IBC) program, through which leasing associates take on a more traditional sales role, earning the majority of their compensation through leases “sold.” Previously, approximately 20% of our leasing associates’ income was based on leasing activity; with the IBC program, approximately 65% of a leasing associate’s income is generated through leases they put in place. We believe that providing this performance-based income potential allows us to attract higher-caliber sales associates who are more vested in delivering a superior experience to our customers. Full roll out of the IBC program was completed in 2006.

     Developing our leaders. In 2006, another 112 community and service managers attended Leading Teams at Archstone-Smith, a three-day program for our on-site management teams. This three-day program focuses on 31 leadership practices consistent with our company culture and values that we believe drive our success. To date, a total of 736 managers have participated in Leading Teams and The Practice of Leadership, our feedback-based training program for corporate and operations managers during which direct reports and peers evaluate managers to identify strengths and opportunities for improvement to enhance their effectiveness as team leaders.

Conservative Balance Sheet Management

     One of our primary financial objectives is to structure our balance sheet to enhance our financial flexibility in order to have access to capital when others in the industry do not. Archstone-Smith has a significant equity base, with equity market capitalization of $14.6 billion, including the value of the A-1 Common Units, as of December 31, 2006. Our investment-grade debt ratings from Standard & Poor’s (BBB+), Moody’s Investors Service (Baal) and Fitch, Inc. (A-) are indicative of our solid financial position.

     In July 2006 we closed on the funding of $575 million aggregate principal amount of exchangeable senior unsecured notes – including a 15.0% underwriters over-allotment option – due 2036, with a coupon of 4.0%. The notes are exchangeable into Archstone-Smith Common Shares at an exchange ratio, subject to adjustment, of 15.7206 shares per $1,000 principal amount of notes. The company received approximately $563 million net proceeds from this offering and used the net proceeds to repay outstanding balances under its revolving credit facility and certain other indebtedness, to make additional investments and for general corporate purposes.

     Our unencumbered asset base was $7.6 billion as of the end of the year. As of February 20, 2007, we had approximately $1.1 billion of liquidity, including cash on hand, restricted cash in escrows and capacity on unsecured credit facilities. We believe this financial flexibility allows us to act more quickly on new investment opportunities as they arise.

     We have structured our long-term debt maturities in a manner designed to avoid unmanageable repayment obligations in any year. We have only $491.1 million of long-term debt maturing in 2007, representing 2.3% of our total market capitalization. The following summarizes our long-term debt maturity profile for 2007 through 2011, and thereafter, as of December 31, 2006 (dollar amounts in millions):

			% of Total Market
Year	Total		Capitalization (1)
2007	$	491.1		2.3	%
2008		546.8		2.6	%
2009		481.5		2.3	%
2010		404.5		1.9	%
2011		843.6		4.0	%
Thereafter and debt discount		3,364.4		16.0	%
Total	$	6,131.9		29.1	%

(1) Total market capitalization as of December 31, 2006, represents the market capitalization based on the closing share price on the last trading day of the period for common shares, Units and the liquidation value for Preferred Shares as well as the book value of total debt.

     Consistent dividend growth. We raised our anticipated 2007 distribution level 4.0% to $1.81 per share, marking our 16th consecutive annual Common Share dividend increase and a total increase of 183% since 1991.

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Management

     We have several senior executives who possess the leadership, operational, investment and financial skills and experience to oversee the overall operation of our company. We believe several of our senior officers could serve as the principal executive officer and continue our strong performance. Our management team emphasizes active training and organizational development initiatives for associates at all levels of our company in order to build long-term management depth and facilitate succession planning.

Officers of Archstone-Smith

     Certain senior officers, including all executive officers, of Archstone-Smith are:

Name	Title
R. Scot Sellers*	Chairman and Chief Executive Officer
J. Lindsay Freeman*	Chief Operating Officer
Charles E. Mueller, Jr*	Chief Financial Officer
Caroline Brower*	General Counsel and Secretary
Alfred G. Neely*	Chief Development Officer and President – Charles E. Smith Residential Division
Mark A. Schumacher*	Chief Accounting Officer
Daniel E. Amedro	Chief Information Officer
Jack R. Callison	Executive Vice President-East Operations
Dana K. Hamilton	Managing Director – Europe
Gerald R. Morgan	Senior Vice President-National Operations

* Executive Officers

Biographies of Senior Officers

     R. Scot Sellers — 50 — Chairman and Chief Executive Officer, Archstone-Smith, from June 1997 to July 1998 and since December 1998, with overall responsibility for Archstone-Smith’s strategic direction, investments and operations; Co-Chairman and Chief Investment Officer, Archstone-Smith, from July 1998 to December 1998; other executive management positions within Archstone-Smith and its predecessors and affiliates since 1993; Member, Executive Committee of the Board of Governors and, during 2006, Chairman, National Association of Real Estate Investment Trusts; Member, Executive Committee of the Board of Directors of the National Multi Housing Council; Director, Christian International Scholarship Foundation; Director of CEO Forum; and Director, Alliance for Choice in Education.

     J. Lindsay Freeman — 61 — Chief Operating Officer, Archstone-Smith, since September 2002, with responsibility for managing all investment and operating activities for Archstone-Smith; President-East Division, Archstone-Smith, from October 2001 to September 2002, with responsibility for all investments and operations of the East Division; other executive management positions with Archstone-Smith and its predecessors and affiliates since May 1994. Mr. Freeman will retire on December 31, 2007.

     Charles E. Mueller, Jr. — 43 — Chief Financial Officer, Archstone-Smith, since December 1998, with responsibility for the planning and execution of the Company’s financial strategy, balance sheet management and corporate operations and oversight of the company’s accounting/financial reporting, corporate finance, investor relations, corporate and property tax, due diligence, risk management, human resources, national marketing and ancillary services functions; various other management positions with Archstone-Smith and its predecessors and affiliates since April 1994; Member, Executive Committee of the Board of Directors of the National Multi Housing Council Executive Committee; Member, Real Estate Roundtable President’s Council; Director, Colorado UpLIFT; Director, Denver K-Life. Mr. Mueller will assume the position of Chief Operating Officer, Archstone-Smith, on or before January 1, 2008.

     Caroline Brower — 58 — General Counsel and Secretary, Archstone-Smith, since September 1999, with responsibility for legal and corporate governance; from September 1998 to September 1999, President of Ameriton Properties Incorporated; prior thereto, Ms. Brower was a partner of Mayer, Brown & Platt (now Mayer, Brown, Rowe & Maw, LLP) where she practiced transaction and real estate law.

     Alfred G. Neely — 61 — President, Charles E. Smith Residential Division, Archstone-Smith, since February 2005; Chief Development Officer, Archstone-Smith, since April 2003, with responsibility for the oversight and direction of all Archstone-Smith residential development projects; Executive Vice President, Archstone-Smith, and, prior to November 2001, Charles E. Smith Residential Realty, Inc. (a predecessor of Archstone-Smith) from April 1989 to April 2003 with responsibility for oversight and direction of High-Rise and garden residential development projects.

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     Mark A. Schumacher — 48 — Chief Accounting Officer, Archstone-Smith, since December 2004 and Senior Vice President and Controller, Archstone-Smith, from January 2002 to December 2004, with principal responsibility for accounting and financial reporting; prior thereto, Vice President and Corporate Controller of Qwest Communications International (“Qwest”) from December 2000 to December 2001, where he had principal responsibility for accounting and financial reporting; from 1984 through 2000, held various managerial and senior executive level positions in the accounting and financial reporting departments of US West. On March 15, 2005, the Securities and Exchange Commission entered an administrative order and settled civil proceedings against Mr. Schumacher relating to his work at Qwest. The Securities and Exchange Commission alleged, among other things, that Mr. Schumacher was a cause of Qwest failing to properly record and report certain transactions in accordance with generally accepted accounting principles in violation of the Securities Exchange Act of 1934 (the “Exchange Act”). Pursuant to the terms of the consent decree, Mr. Schumacher settled all claims against him, agreed to cease and desist from violating various provisions of Section 13 of the Exchange Act and related rules there under, agreed not to engage in the future in any activity in violation of such provisions and paid a fine of $40,000.

     Daniel E. Amedro — 50 — Chief Information Officer, Archstone-Smith, since May 1998, with primary responsibility for the company’s information technology functions and initiatives; prior thereto he held senior information officer positions at American Medical Response, the largest private ambulance operation in the United States, and Hyatt Hotels and Resorts, where he was responsible for all strategic information systems including Spirit, Hyatt’s worldwide reservation system, which supported over 50,000 users and was recognized as the leading reservations system in the hospitality industry.

     Jack R. Callison — 36 — Executive Vice President — East Operations, Archstone-Smith, since February 2006, with responsibility for the oversight of the company’s East Region community operations, which is comprised of more than 35,000 apartment units in the greater Washington D.C. metropolitan area, New York City, Boston, Southeast Florida and Atlanta, and represents over 55% of the company’s Net Operating Income; Executive Vice President — National Operations, Archstone-Smith from July 2005 to January 2006, where he was responsible for many of the company’s operating and technology-related initiatives in addition to overseeing human resources, national marketing, and ancillary services. Since joining the company in 1997, Mr. Callison has held numerous management positions in the company’s capital markets, investor relations, real estate due diligence and accounting departments. Mr. Callison is also a certified public accountant. Mr. Callison will assume the position of President — U.S. Operations, Archstone-Smith, at a time to be determined during 2007.

     Dana K. Hamilton — 38 — Managing Director – Europe, Archstone-Smith, since February 2005, with responsibility for research and development of European investment and operational opportunities; Executive Vice President – National Operations, Archstone-Smith, from May 2001 to February 2005, with responsibility for corporate services, including human resources, training and development, marketing and corporate communications, and new business development; various other management positions with Archstone-Smith and its predecessors and affiliates since August 1994.

     Gerald R. Morgan — 43 — Senior Vice President — National Operations, Archstone-Smith, since March 2006, with responsibility for national operations and corporate services departments including human resources, marketing and ancillary services; from January 2000 to November 2005, Mr. Morgan was a partner serving as the chief operating officer and chief financial officer of Francisco Partners, a $2.5 billion private equity fund, where he was responsible for finance, accounting, investor relations, human resources and portfolio company reporting; prior thereto, Mr. Morgan held various financial positions with Security Capital Group Incorporated, most recently as a senior vice president serving as the chief financial officer of two London-based real estate investment funds. Mr. Morgan will assume the position of chief financial officer, Archstone-Smith, on or before January 1, 2008.

Employees

     We currently employ approximately 2,666 individuals, of whom approximately 1,958 are focused on the site-level operation of our garden communities and High-Rise properties. Of the site-level associates, approximately 123 are subject to collective bargaining agreements with four unions in Illinois and New York. The balance are professionals who manage corporate and regional operations, including our investment program, property operations, financial activities and other support functions. We consider our relationship with our employees to be very good.

Insurance

     We carry comprehensive general liability coverage on our owned communities, with limits of liability customary within the industry to insure against liability claims and related defense costs. Similarly, we are insured against the risk of direct physical damage in amounts necessary to reimburse the company on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period. Our property policies for all United States operating and development communities and certain International communities include coverage for the perils of flood and earthquake shock with limits and deductibles customary in the industry. We also obtain title insurance policies when acquiring new properties, which insure fee title to our real properties. We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities. The terms of our property and general liability policies may exclude certain mold-related claims or other types of claims based on the specific circumstances and allegations. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. In addition, for our United States communities we self-insure certain portions of our insurance program through a wholly-owned captive insurance company, and therefore use our own funds to satisfy those limits, when applicable.

Competition

     There are numerous commercial developers, real estate companies and other owners of real estate that we compete with in seeking land for development, apartment communities for acquisition and disposition and residents for apartment communities. All of our apartment communities are located in developed areas that include other apartment communities. The number of competitive apartment communities in a particular area could have a material adverse effect on our ability to lease units and on the rents charged. In addition, single-family homes and other residential properties provide housing alternatives to residents and potential residents of our apartment communities.

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Available Information and Code of Ethics

     Our website is http://www.archstonesmith.com. We make available free of charge, on or through our website, our annual, quarterly and current reports, as well as any amendments to these reports, as soon as reasonably practicable after electronically filing these reports with the Securities and Exchange Commission. We have adopted a Code of Ethics and Business Conduct applicable to our Board and officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller. A copy of our Code of Ethics and Business Conduct is available through our website. Any amendments to or waivers of our Code of Ethics and Business Conduct that apply to the principal executive officer, principal financial officer and principal accounting officer or controller and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website. Any reference to our website in this Annual Report does not incorporate by reference the information contained in the website and such information should not be considered a part of this Annual Report. Charters of the Nominating and Corporate Governance Committee, Management Development and Executive Compensation Committee and Audit Committee, as well as the Code of Business Conduct and Ethics and our Corporate Governance Guidelines are available at no charge upon written request to Investor Relations, 9200 East Panorama Circle, Suite 400, Englewood, Colorado 80112.

Item 1A. Risk Factors

     The following factors could affect our future financial performance:

     We have restrictions on the sale of certain properties.

     A taxable sale of any of the properties acquired in the Smith Merger prior to January 1, 2022, could result in increased costs to us in light of the tax-related obligations made to the former Smith Partnership Unitholders. Under the shareholders’ agreement between Archstone-Smith, the Operating Trust, Robert H. Smith and Robert P. Kogod, we are restricted from transferring specified high-rise properties located in the Crystal City area of Arlington, Virginia until October 31, 2016, without the consent of Messrs. Smith and Kogod, which could result in increased costs to us and our inability to sell these properties at an opportune time. However, we are permitted to transfer these properties in connection with a non-taxable sale or a sale of all of the properties in a single transaction or pursuant to a bona fide mortgage of any or all of such properties in order to secure a loan or other financing.

     We have similar restrictions with respect to the properties acquired from Oakwood Worldwide in 2005. The restrictions last until the earlier of (a) such time as 99% of the contributing partners have sold, redeemed or otherwise disposed of their A-1 Common Units in a taxable event and (b) the later to occur of (x) 10 years from the closing of the contribution of such properties and (y) the last to die of Howard Ruby and Ed Broida. Mr. Broida died in 2006.

     We depend on our key personnel.

     Our success depends on our ability to attract and retain the services of executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the loss of several of our key personnel could have an adverse effect on us.

     Debt financing could adversely affect our performance.

     We are subject to risks associated with debt financing and preferred equity. These risks include the risks that we will not have sufficient cash flow from operations to meet required payments of principal and interest or to pay distributions on our securities at expected rates, that we will be unable to refinance current or future indebtedness, that the terms of any refinancing will not be as favorable as the terms of existing indebtedness, and that we will be unable to make necessary investments in new business initiatives due to lack of available funds. Increases in interest rates could increase interest expense, which would adversely affect net earnings and cash available for payment of obligations. If we are unable to make required payments on indebtedness that is secured by a mortgage on our property, the asset may be transferred to the lender with a consequent loss of income and value to us.

     Additionally, our debt agreements contain customary covenants which, among other things, restrict our ability to incur additional indebtedness and, in certain instances, restrict our ability to engage in material asset sales, mergers, consolidations and acquisitions. These debt agreements also require us to maintain various financial ratios. Failure to comply with these covenants could result in a requirement to repay the indebtedness prior to its maturity, which could have an adverse effect on our cash flow and ability to make distributions to shareholders.

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     Some of our debt instruments bear interest at variable rates. Increases in interest rates would increase our interest expense under these instruments and would increase the cost of refinancing these instruments and issuing new debt. As a result, higher interest rates would adversely affect cash flow and our ability to service our indebtedness and to make distributions to our shareholders.

     We had $6.5 billion in total debt outstanding as of December 31, 2006, of which $2.8 billion was secured by real estate assets and $1.5 billion was subject to variable interest rates, including $84.7 million outstanding on our short-term credit facilities.

     We may not have access to equity capital.

     A prolonged period in which we cannot effectively access the public equity markets may result in heavier reliance on alternative financing sources to undertake new investment activities. These alternative sources of financing may be more costly than raising funds in the public equity markets.

     We could be subject to acts of terrorism.

     Periodically, we receive alerts from government agencies that apartment communities could be the target of both domestic and foreign terrorism. Although we currently have insurance coverage for losses incurred in connection with terrorist-related activities, losses could exceed our coverage limits and have a material adverse affect on our operating results.

     We are subject to risks inherent in ownership of real estate.

     Real estate, cash flows and values are affected by a number of factors, including changes in the general economic climate, local, regional or national conditions (such as an oversupply of communities or a reduction in rental demand in a specific area), the quality and philosophy of management, competition from other available properties and the ability to provide adequate property maintenance and insurance and to control operating costs. Real estate cash flows and values are also affected by such factors as government regulations, including zoning, usage and tax laws, caps on rent and rent increases, interest rate levels, the availability of financing, property tax rates, utility expenses, potential liability under environmental and other laws and changes in environmental and other laws. Although we seek to minimize these risks through our market research and property management capabilities, they cannot be totally eliminated.

     We are subject to risks inherent in real estate development.

     We have developed or commenced development on a substantial number of apartment communities and expect to develop additional apartment communities in the future. Real estate development involves risks in addition to those involved in the ownership and operation of established communities, including the risks that financing, if needed, may not be available on favorable terms, construction may not be completed on schedule, contractors may default, estimates of the costs of developing apartment communities may prove to be inaccurate, the costs and availability of materials may be adversely affected by global supply and demand, and communities may not be leased or rented on profitable terms or in the time frame anticipated. Timely construction may be affected by local weather conditions, local moratoria on construction, local or national strikes and local or national shortages in materials, building supplies or energy and fuel for equipment. These risks may cause the development project to fail to perform as expected.

     Real estate investments are relatively illiquid and we may not be able to recover our investments.

     Equity real estate investments are relatively illiquid, which may tend to limit our ability to react promptly to changes in economic or other market conditions. Our ability to dispose of assets in the future will depend on prevailing economic and market conditions. Furthermore, our mezzanine loans to real estate investors may not be recoverable if those investors are unable to monetize the underlying asset at underwritten amounts.

     Compliance with laws and regulatory requirements may be costly.

     We must comply with certain accessibility, environmental, building, and health and safety laws and regulations related to the ownership, operation, development and acquisition of apartments. Under those laws and regulations, we may be liable for, among other things, the costs of bringing our properties into compliance with the statutory and regulatory requirements. Non-compliance with certain of these laws and regulations may impose liability without regard to fault, and could give rise to actions brought against us by governmental entities and/or third parties who claim to be or have been damaged as a consequence of an apartment not being in compliance with the subject laws and regulations. As part of our due diligence

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procedures in connection with the acquisition of a property, whether it is an apartment community or land to be developed, we conduct an investigation of the property’s compliance with known laws and regulatory requirements with which we must comply once we acquire a property, which investigation includes performing a Phase I environmental assessment of the property and a Phase II assessment if recommended in the Phase I report. We hire architects and general contractors to design and build our development projects, and we rely on them to design and build in accordance with all legal requirements. We cannot, however, give any assurance that our investigations and these assessments have revealed all potential non-compliance issues or related liabilities, or that our development properties have been designed and built in accordance with all applicable legal requirements.

     Costs associated with moisture infiltration and resulting mold remediation may be costly.

     As a general matter, concern about indoor exposure to mold continues as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to moisture infiltration and resulting mold. We have implemented guidelines and procedures to address moisture infiltration and resulting mold issues if and when they arise. We believe that these measures will minimize the potential for any adverse effect on our residents. The terms of our property and general liability policies after June 30, 2002, may exclude certain mold-related claims. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. We can make no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future material impact on our financial results.

     Changes in laws may result in increased cost.

     We may not be able to pass on increased costs resulting from increases in real estate taxes, income taxes or other governmental requirements, such as the enactment of regulations relating to internal air quality, directly to our residents. Substantial increases in rents, as a result of those increased costs, may affect the ability of a resident to pay rent, causing increased vacancy.

     Archstone-Smith’s failure to qualify as a REIT would have adverse consequences.

     We believe that we have qualified for taxation as a REIT under the Internal Revenue Code and we plan to continue to meet the requirements for taxation as a REIT. We cannot, however, guarantee that we will continue to qualify in the future as a REIT. We cannot give any assurance that new legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements relating to Archstone-Smith’s qualification. If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates. Also, unless the Internal Revenue Service granted us relief, we would remain disqualified as a REIT for four years following the year in which we failed to qualify. In the event that we failed to qualify as a REIT, we would be required to pay significant income taxes and would have less money available for operations and distributions to shareholders. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In order to maintain our qualification as a REIT under the Internal Revenue Code, our Declaration of Trust limits the ownership of our shares by any person or group of related persons to 9.8%, unless special approval is granted by our Board.

     The Operating Trust intends to qualify as a partnership, but we cannot guarantee that the Operating Trust will qualify.

     The Operating Trust intends to qualify as a partnership for federal income tax purposes. However, the Operating Trust will be treated as an association taxable as a corporation for federal income tax purposes if it is deemed to be a publicly traded partnership, unless at least 90% of its income is qualifying income as defined in the tax code. Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. We believe that the Operating Trust will meet this qualifying income test, but cannot guarantee that it will. If the Operating Trust were to be taxed as a corporation, it will incur substantial tax liabilities, Archstone-Smith would fail to qualify as a REIT for tax purposes and Archstone-Smith’s and the Operating Trust’s ability to raise additional capital would be impaired.

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     We are subject to losses that may not be covered by insurance.

     There are certain types of losses (such as from war) that may be uninsurable or not economically insurable. Additionally, many of our communities in California are located in the general vicinity of active earthquake fault lines, and our Southeast Florida assets are in coastal locations and subject to hurricanes. Although we maintain insurance to cover most reasonably likely risks, including earthquakes and hurricanes, if an uninsured loss or a loss in excess of insured limits occurs, we could lose both our invested capital in, and anticipated profits from, one or more communities. We may also be required to continue to repay mortgage indebtedness or other obligations related to such communities. The terms of our property and general liability policies after June 30, 2002, may exclude certain mold-related claims. We can make no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future material impact on our financial results. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. Any such loss could materially adversely affect our business, financial condition and results of operations.

     We have a concentration of investments in certain markets.

     As shown in the United States Geographic Distribution table below in “Item 2. Properties,” our most significant investment concentrations are in the Washington, D.C. metropolitan area, Southern California, the New York City metropolitan area and the San Francisco Bay Area. Southern California is the geographic area comprising the Los Angeles County, San Diego, Orange County, Ventura County and the Inland Empire markets. We are, therefore, subject to increased exposure (positive or negative) from economic and other competitive factors specific to markets within these geographic areas.

     Our business is subject to extensive competition.

     There are numerous commercial developers, real estate companies and other owners of real estate that we compete with in seeking land for development, apartment communities for acquisition and disposition and residents for apartment communities. All of our apartment communities are located in developed areas that include other apartment communities. The number of competitive apartment communities in a particular area could have a material adverse effect on our ability to lease units and on the rents charged. In addition, single-family homes and other residential properties provide housing alternatives to residents and potential residents of our apartment communities.

     Ownership of properties located outside of the United States subjects us to foreign currency risks which may adversely impact our ability to make distributions.

     We currently own properties located outside of the United States, which subjects us to risk from fluctuations in exchange rates between foreign currencies and the U.S. dollar. We expect that our principal foreign currency exposure will be to the Euro. Changes in the relation of these currencies to U.S. dollars may affect the fair values and earnings streams of our international holdings, and therefore our revenues and operating margins on our non-dollar denominated foreign holdings. These fluctuations in foreign currency exchange rates may materially adversely impact our financial condition, results of operations, cash flow, cash available for distribution, including cash available to pay distributions to our Common Shareholders, per share trading price of our Common Shares, ability to satisfy our debt obligations and ability to qualify as a REIT.

     We intend to attempt to mitigate the risk of currency fluctuation by financing our properties in the local currency denominations, although we cannot assure you that we will be able to do so or that this will be effective. We have engaged, and may continue to engage, in direct hedging activities to mitigate the risks of exchange rate fluctuations. If we do engage in foreign currency exchange rate hedging activities, any income recognized with respect to these hedges (as well as any foreign currency gain recognized with respect to changes in exchange rates) may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT.

     Acquisition and ownership of foreign properties involve risks greater than those faced by us in the United States

     Foreign real estate investments generally involve certain risks not generally associated with investments in the United States. Our international acquisitions and operations are subject to a number of risks, including acquisition risk resulting from less knowledge of local real estate markets, economies, and business practices and customs; our limited knowledge of and relationships with sellers in these markets; higher due diligence, transaction and structuring costs than those we may face in the United States; additional accounting and control expenses; complexity and costs associated with managing international operations; difficulty in hiring qualified management, leasing personnel and service providers in a timely fashion; multiple, conflicting and changing legal, regulatory, tax and treaty environments, including land use, zoning and environmental laws, as well as the enactment of laws prohibiting or restricting the foreign ownership of property; exposure to increased taxation, confiscation or

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expropriation; currency transfer restrictions and limitations on our ability to distribute cash earned in foreign jurisdictions to the United States; difficulty in enforcing agreements in non-United States jurisdictions, including those entered into in connection with our acquisitions; and change in the availability, cost and terms of property financing resulting from varying national economic policies or changes in interest rates.

     Our inability to overcome these risks could adversely affect our foreign operations and could harm our business and results of operations.

Item 1B. Unresolved Staff Comments

     Not Applicable.

Item 2. Properties

United States Geographic Distribution, excluding Ameriton

     At December 31, 2006, the geographic distribution for our eight core markets based on NOI for the three months ended December 31, 2006 was as follows:

Washington, D.C. metropolitan area	34.6	%
Southern California	25.8
New York City metropolitan area	12.5
San Francisco Bay Area, California	11.5
Boston, Massachusetts	5.0
Seattle, Washington	4.2
Southeast Florida	2.2
Chicago, Illinois	2.0
Total	97.8	%

     The following table summarizes the geographic distribution for 2006, 2005 and 2004, based on NOI:

	Total Portfolio(1)
	2006			2005			2004
Core Markets
Washington, D.C. metropolitan area		34.6	%		36.6	%		39.4	%
Southern California		25.8			24.9			18.9
New York City metropolitan area		12.5			6.8			4.9
San Francisco Bay Area, California		11.5			8.2			8.2
Boston, Massachusetts		5.0			4.7			4.7
Seattle, Washington		4.2			3.9			3.1
Southeast Florida		2.2			4.0			4.7
Chicago, Illinois		2.0			4.3			6.1
Total Core Markets		97.8	%		93.4	%		90.0	%
Non-Core Markets (2)
Houston, Texas		—			1.3	%		1.5	%
Denver, Colorado		—			1.1			1.9
Atlanta, Georgia		—			—			2.3
Raleigh, North Carolina		—			—			1.1
Other		2.2			4.2			3.2
Total Non-Core Markets		2.2	%		6.6	%		10.0	%
Total All Markets		100	%		100	%		100	%

(1)	Based on NOI for the fourth quarter of each calendar year, excluding NOI from communities disposed of during the period. See Item 7 under the caption “Property-level operating results” for a discussion on why we believe NOI is a meaningful measure and a reconciliation of NOI to Earnings from Operations.
(2)	Markets that represent 1.0% or less of NOI in any year are included in Other for that year.

19

Real Estate Portfolio

     We are a leading multifamily company focused primarily on the operation, development, redevelopment, acquisition, management and long-term ownership of apartment communities in protected markets throughout the United States. The following information summarizes our wholly owned real estate portfolio as of December 31, 2006 (dollar amounts in thousands). Additional information on our real estate portfolio is contained in “Schedule III, Real Estate and Accumulated Depreciation” and in our audited financial statements contained in this Annual Report:

20

					Archstone-
	Number of		Number of		Smith		Percentage
	Communities		Units		Investment		Leased(1)
OPERATING APARTMENT COMMUNITIES:
Garden Communities:
Boston, Massachusetts(2)		9		2,044	$	474,586		86.9	%
Dallas, Texas		1		514		48,177		96.1	%
Denver, Colorado		1		156		10,549		92.9	%
El Paso, Texas		1		379		14,198		92.9	%
Houston, Texas		1		616		36,937		97.7	%
Inland Empire, California		3		1,298		84,475		96.3	%
Los Angeles County, California		20		7,483		1,454,616		92.1	%
New York City metropolitan area		1		396		89,118		97.5	%
Orange County, California		8		2,063		267,381		96.3	%
Orlando, Florida		1		312		22,100		95.2	%
Phoenix, Arizona		2		742		28,760		94.1	%
San Diego, California		8		2,803		358,793		96.7	%
San Francisco Bay Area, California		20		7,419		1,351,578		93.9	%
Seattle, Washington		9		3,408		308,999		95.1	%
Southeast Florida		5		1,924		232,675		95.4	%
Stamford, Connecticut		1		160		36,568		95.6	%
Ventura County, California		4		1,018		159,212		96.1	%
Washington, D.C. metropolitan area		17		8,152		1,111,173		94.2	%
Garden Community Subtotal/Average		112		40,887	$	6,089,895		94.2	%
High-Rise Properties:
Boston, Massachusetts(2)		5		1,207	$	376,289		72.6	%
Chicago, Illinois		2		1,113		234,813		95.2	%
Los Angeles County, California(3)		3		1,073		238,151		91.0	%
Minneapolis, Minnesota		1		250		27,107		95.6	%
New York City metropolitan area		10		2,929		1,566,026		96.9	%
Philadelphia, Pennsylvania		1		80		19,035		N/A
San Diego, California		1		387		44,358		93.5	%
San Francisco Bay Area, California		2		853		268,575		95.4	%
Seattle, Washington		2		338		62,422		N/A
Washington, D.C. metropolitan area		35		11,722		2,252,196		95.4	%
High-Rise Subtotal/Average		62		19,952	$	5,088,972		94.0	%
FHA/ADA Settlement Capital Accrual		—		—	$	29,185		N/A
Operating Apartment Communities Subtotal/Average		174		60,839	$	11,208,052		94.1	%
APARTMENT COMMUNITIES UNDER CONSTRUCTION:
Garden Communities:
Los Angeles County, California		2		655		172,783		N/A
Orange County, California		1		884		60,161		N/A
San Francisco Bay Area, California		1		185		61,695		N/A
Garden Community Subtotal/Average		4		1,724	$	294,639
High-Rise Properties:
Boston, Massachusetts		1		426	$	112,242		N/A
Apartment Communities Under Construction Subtotal/Average		5		2,150	$	406,881		N/A
APARTMENT COMMUNITIES IN PLANNING:(4)
Garden Communities:
Boston, Massachusetts		1		420		—
Washington, D.C. metropolitan area		1		357		—
High-Rise Communities:
Boston, Massachusetts		1		341	$	16,774
Washington, D.C. metropolitan area		2		723		58,764
Total Apartment Communities In Planning (4) Subtotal/Average		5		1,841	$	75,538
Total REIT Communities		184		64,830	$	11,690,471
AMERITON PORTFOLIO:
Operating Apartment Communities		5		1,474	$	174,983
Apartment Communities Under Construction and In Planning (4)		20		6,670		308,448
Other Real Estate Assets		—		—		102,093
Subtotal/Average		25		8,144		585,524
INTERNATIONAL PORTFOLIO:
German Operating Apartment Communities		119		8,334		851,593
OTHER REAL ESTATE ASSETS(5)		—		—	$	60,052
Total Real Estate Owned at December 31, 2006		328		81,308	$	13,187,640

See notes on following page.

21

(1)	Represents the percentage leased as of December 31, 2006. For communities in Lease-Up, the percentage leased is based on leased units divided by total number of units in the community (completed and under construction) as of December 31, 2006. The “N/A” for the Seattle and Philadelphia markets in the High-Rise operating community section indicates that the markets are entirely comprised of Oakwood Master Lease communities. Oakwood Master Leased communities have been excluded from the Percentage Leased calculation for other markets that have both Oakwood Master Leased communities and communities with traditional resident leases. A “N/A” indicates markets with communities under construction where Lease-Up has not yet commenced.
(2)	Lower average occupancy is due to the inclusion of certain recently completed development communities which are in Lease-Up and therefore not yet Stabilized.
(3)	Includes a 623-unit community which recently completed redevelopment and whose occupancy was 85.9% as of December 31, 2006.
(4)	As of December 31, 2006, we had two investments representing $7.1 million or 777 units and one investment representing $0.5 million or 176 units classified as In Planning and Under Control for Archstone-Smith and Ameriton, respectively. Our actual investment in these communities is reflected in the “Other assets” caption of our Balance Sheet.
(5)	Includes land that is not In Planning and other real estate assets.

Item 3. Legal Proceedings

     During the second quarter of 2005, we entered into a full and final settlement in the United States District Court for the District of Maryland with three national disability organizations and agreed to make capital improvements in a number of our communities in order to make them fully compliant with the FHA and ADA. The litigation, settled by this agreement, alleged lack of full compliance with certain design and construction requirements under the two federal statutes at 71 of the company’s wholly owned or joint venture communities, of which we still own or have an interest in 45. As part of the settlement, the three disability organizations all recognized that Archstone-Smith had no intention to build any of its communities in a manner inconsistent with the FHA or ADA.

     The amount of the capital expenditures required to remediate the communities named in the settlement was estimated at $47.2 million and was accrued as an addition to real estate during the fourth quarter of 2005. The settlement agreement approved by the court allows us to remediate each of the designated communities over a three year period, and also provides that we are not restricted from selling any of our communities during the remediation period. We agreed to pay damages totaling $1.4 million, which included legal fees and costs incurred by the plaintiffs. We had $29.2 million of the original accrual remaining on December 31, 2006.

     We are subject to various claims filed in 2002 and 2003 in connection with moisture infiltration and resulting mold issues at certain High-Rise properties we once owned in Southeast Florida. These claims generally allege that water infiltration and resulting mold contamination resulted in the claimants having personal injuries and/or property damage. Although certain of these claims continue to be in various stages of litigation, with respect to the majority of these claims, we have either settled the claims and/or we have been dismissed from the lawsuits that had been filed. With respect to the lawsuits that have not been resolved, we continue to defend these claims in the normal course of litigation.

     We are a party to various other claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

     None

22

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     Our Common Shares are listed on the NYSE under the symbol “ASN.” The following table sets forth the high and low sales prices of our Common Shares, as reported on the NYSE Composite Tape, and cash distributions per Common Share for the periods indicated.

					Cash
	High		Low		Distributions
2005:
First Quarter	$	38.28	$	32.76	$	0.4325
Second Quarter		39.25		33.63		0.4325
Third Quarter		43.03		38.25		0.4325
Fourth Quarter		43.10		36.31		0.4325
2006:
First Quarter	$	50.11	$	41.79	$	0.4350
Second Quarter		51.38		44.81		0.4350
Third Quarter		55.31		49.66		0.4350
Fourth Quarter		61.00		53.81		0.4350
2007:
First Quarter (through February 20, 2007)	$	64.77	$	56.55	$	0.4525

     As of February 20, 2007, we had approximately 220,379,832 Common Shares outstanding, approximately 2,640 record holders of Common Shares and approximately 26,148 beneficial holders of Common Shares.

     To qualify as a REIT, we are required to make annual shareholder distributions of 90% of our taxable income. The payment of distributions is also subject to the discretion of the Board and is dependent upon our strategy, financial condition and operating results. Our long-term objective is to increase annual distributions per Common Share while maximizing the amount of internally generated cash flow from operations to fund future investment opportunities.

     We announce the following year’s projected annual distribution level after the Board’s annual budget review and approval. In December 2006 the Board announced a 4.0% increase in the annual distribution level from $1.74 to $1.81 per Common Share and, in January 2007, declared the first quarter 2007 distribution of $0.4525 per Common Share payable on February 28, 2007, to shareholders of record on February 13, 2007. This dividend marks our 126th consecutive quarter of dividends declared and paid. All future Common Share distributions are subject to approval by our Board.

     We are restricted from declaring or paying any distribution with respect to our Common Shares unless cumulative distributions on all Preferred Shares have been paid and sufficient funds have been set aside for Preferred Share distributions that have been declared and not paid. All of our declared distributions have been paid on schedule.

     For federal income tax purposes, distributions may consist of ordinary income, capital gains, non-taxable return of capital or a combination thereof. Distributions that exceed our current and accumulated earnings and profits constitute a return of capital rather than ordinary income and reduce the shareholder’s basis in the Common Shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the shareholder’s basis in the Common Shares, it will generally be treated as a gain from the sale or exchange of that shareholder’s Common Shares. We notify our shareholders annually of the taxability of distributions paid during the preceding year. The following table summarizes the taxability of cash distributions paid on the Common Shares in 2006 and 2005:

	2006		2005
Per Common Share:
Ordinary income	$	1.31	$	1.12
Capital gains		0.43		0.61
Total	$	1.74	$	1.73

23

     For federal income tax purposes, the following summaries reflect the taxability of dividends paid on our Preferred Shares:

	2006		2005
Per Series I Preferred Share(1):
Ordinary income	$	5,778	$	4,959
Capital gains		1,882		2,701
Total	$	7,660	$	7,660

(1) The Series I Preferred Shares have a par value of $100,000 per share.

     Our tax return for the year ended December 31, 2006 has not been filed, and the taxability information for 2006 is based upon the best available data we have. Our tax returns for prior years have not been examined by the Internal Revenue Service and, therefore, the taxability of the dividends may be subject to change.

     In 2006, 2005 and 2004 we issued 1,772,673, 11,289,070 and 374,921 A-1 Common Units of the Operating Trust as partial consideration for real estate, respectively. All units were issued in transactions exempt from registration under Section 4(2) of the Securities Act of 1933 and the rules thereunder.

     The following table summarizes repurchases of our Common Shares (amounts in thousands):

					Total Number of		Maximum Approximate
			Average Price Paid		Shares Purchased as		Dollar Value That May
	Number of Shares		per Share		Part of Publicly		Yet Be Purchased
Period	Purchased		(1)		Announced Plan		Under the Plan
1/1/05 - 2/28/05		—	$	—		—	$	188,633
3/1/05 - 3/31/05		1,210		34.27		1,210		147,083
4/1/05 - 4/30/05		437		34.40		437		132,137	(2)
5/1/05 - 12/31/05		—		—		—		132,137
Total		1,647	$	34.31		1,647
1/1/06 - 12/31/06		—	$	—		—	$	132,137
Total		—		—		—

(1)	Price includes amounts paid for commissions.
(2)	On April 22, 2005, the Board increased the total authorized for share repurchases to $255 million.

24

     Set forth below is a line graph comparing the yearly percentage change in the cumulative total shareholder return on Common Shares against the cumulative total return of the Standard & Poor’s Composite-500 Stock Index, the NAREIT Equity REIT Index and the NAREIT Apartment REIT Index for the five-year period commencing December 31, 2001 and ended December 31, 2006.⁽¹⁾ The Common Share price performance shown on the graph is not necessarily indicative of future price performance.

	12/31/2001		12/31/2002		12/31/2003		12/31/2004		12/31/2005		12/31/2006
Archstone-Smith		100		96		122		182		208		299
S & P 500		100		78		100		111		117		135
NAREIT Equity REIT Index		100		104		142		187		210		284
NAREIT Apartment REIT Index		100		94		118		159		182		254

(1) Assumes that the value of the investment in Common Shares and each index was $100.00 on December 31, 2001 and that all dividends were reinvested.

Item 6. Selected Financial Data

     The following table provides selected financial data relating to our historical financial condition and results of operations as of and for each of the years ending December 31, 2002 to 2006. This data is qualified in its entirety by, and should be read in conjunction with, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes that have been included or incorporated by reference in this Annual Report. Prior year’s amounts have been restated for amounts classified within discontinued operations. (in thousands, except per share data):

	Years ended December 31,
	2006		2005		2004		2003		2002
Operations Summary(1):
Total revenues(2)	$	1,133,586	$	833,633	$	661,478	$	594,374	$	567,842
Property operating expenses (rental expenses and real estate taxes)		343,342		252,382		210,747		180,658		181,794
Net Operating Income(3)		712,834		525,221		431,523		394,382		376,586
Depreciation on real estate investments		261,438		187,771		150,470		119,776		109,074
Interest expense		245,895		164,035		125,108		107,791		107,978
General and administrative expense		68,188		58,604		55,479		49,838		45,710
Earnings from operations		201,008		121,609		106,111		100,658		106,188
Gains on dispositions of depreciated real estate, net(4)		—		—		—		—		35,950
Income from unconsolidated entities		36,316		22,432		17,902		5,745		53,602
Net earnings from discontinued operations(5)		518,313		464,488		410,632		341,913		145,691
Preferred Share dividends		3,829		3,831		10,892		20,997		32,185
Net earnings attributable to Common Shares(3):

25

	Years ended December 31,
	2006		2005		2004		2003		2002
— Basic		723,605		612,341		531,450		412,660		282,630
— Diluted		735,452		612,693		535,714		426,192		282,830
Common Share dividends		377,513		353,623		539,116		245,460		306,189
Per Share Data:
Net earnings attributable to Common Shares:
— Basic	$	3.35	$	3.01	$	2.71	$	2.20	$	1.59
— Diluted		3.33		3.00		2.69		2.18		1.58
Common Share cash dividends paid(6)		1.74		1.73		2.72		1.71		1.70
Cash dividends paid per share:
Series A Preferred Share(7)		—		—		—		2.11		2.29
Series C Preferred Share(8)		—		—		—		—		1.38
Series D Preferred Share(9)		—		—		1.31		2.19		2.19
Series H, J, K and L Preferred Shares(10)		—		—		—		3.38		3.36
Series I Preferred Share(10)(11)		7,660.00		7,660.00		7,660.00		7,660.00		7,660.00
Weighted average Common Shares outstanding:
— Basic		216,159		203,526		196,098		187,170		177,757
— Diluted		221,153		204,492		199,233		195,640		178,780

(1)	Net earnings from discontinued operations have been reclassified to reflect communities classified as discontinued operations as of December 31, 2006 for all years presented.
(2)	Annual revenues and other income, inclusive of discontinued operations, for 2006, 2005, 2004, 2003 and 2002 were $1.3 billion, $1.1 billion, $1.0 billion, $1.0 billion and $1.0 billion, respectively.
(3)	Defined as rental revenues less rental expenses and real estate taxes. We believe that net earnings attributable to Common Shares and NOI are the most relevant measures of our operating performance and allow investors to evaluate our business against our industry peers and against all publicly traded companies as a whole. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. See Item 7 of this Annual Report under Results of Operations for a reconciliation of NOI to Earnings from Operations, and to obtain the required information to recalculate NOI from continuing operations.
(4)	Gains on the disposition of real estate investments classified as held for sale after January 1, 2002 are included in discontinued operations.
(5)	Represents property-specific components of net earnings and gains/losses on the disposition of real estate classified as held for sale subsequent to January 1, 2002.
(6)	Includes a $1.00 per share special dividend issued to our Common Shareholders and Unitholders in December 2004.
(7)	The Series A Preferred Shares were called for redemption during October 2003; of the 2.9 million Preferred Shares outstanding, 2.8 million were converted to Common Shares and the remaining were redeemed.
(8)	All of the outstanding Series C Preferred Shares were redeemed at liquidation value plus accrued dividends in August 2002.
(9)	All of the outstanding Series D Preferred Shares were redeemed at liquidation value plus accrued dividends in August 2004.
(10)	The Series L Preferred Shares were converted into Common Shares during December 2004 and the dividend paid during 2004 prior to conversion was $3.40 per share. In September 2004, the Series K Preferred Shares were converted into Common Shares and the dividend paid during 2004 prior to conversion was $2.55 per share. The Series H Preferred Shares were converted into Common Shares during May 2003 and the dividend paid during 2003 prior to conversion was $1.27 per share. In July 2002, Series J Preferred Shares were converted into Common Shares. During the fourth quarter 2001, we paid approximately $5.8 million of dividends on the Series H, I, J, K and L Preferred Shares that were declared by Smith Residential prior to the Smith Merger.
(11)	Series I Preferred Shares have a par value of $100,000 per share.

26

	Years Ended December 31,
	2006		2005		2004		2003		2002
Financial Position:
Real estate owned, at cost	$	12,858,507	$	11,031,917	$	8,972,860	$	8,891,418	$	9,229,398
Real estate held for sale(1)		329,133		327,347		249,178		107,762		68,337
Investments in and advances to unconsolidated entities		235,323		132,728		111,481		86,367		116,594
Total assets		13,259,127		11,462,095		9,061,280		8,916,591		9,091,647
Unsecured credit facilities		84,723		394,578		19,000		103,790		365,578
Long-Term Unsecured Debt		3,355,699		2,540,036		2,094,358		1,866,861		1,771,724
Mortgages Payable		2,776,234		2,393,652		2,031,505		1,960,827		2,330,533
Total liabilities		6,956,789		5,693,305		4,469,994		4,179,488		4,699,920
Perpetual Preferred Shares		50,000		50,000		50,000		148,940		294,041
Total shareholders’ equity		5,563,189		4,981,517		4,093,178		4,144,687		3,843,818
Number of Common Shares outstanding		220,147		212,414		199,577		194,762		180,706

	Years Ended December 31,
	2006			2005			2004			2003			2002
Other Data:
Net cash flows provided by (used in):
Operating activities	$	537,428		$	414,019		$	399,897		$	343,696		$	385,107
Investing activities		(506,264	)		(964,621	)		528,253			428,166			(137,401	)
Financing activities		3,853			360,985			(730,125	)		(779,478	)		(241,887	)

(1) Previous years have been restated to include assets that were classified as held for sale as of December 31, 2006.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Executive Summary

     During the three years covered by this Annual Report, we have continued to focus on two of our most important goals: (i) managing our invested capital through the selective sale of apartment communities in non-core locations and redeploying the proceeds to fund investments with higher anticipated growth prospects in outstanding locations in our core markets; and (ii) building the dominant operating platform in the apartment industry.

     As it relates to the goal of managing our invested capital, in 2006 we completed a twelve year effort to reposition virtually all our portfolio from less desirable commodity markets into some of the very best apartment markets in the country. The following graphs help illustrate the dramatic shift which has occurred over that period.

27

United States Geographic Distribution - 1995 vs. 2006⁽¹⁾

(1) Allocation is based on the relative NOI in core versus non-core markets for the three months ended December 31, 1994 for the 1995 geographic distribution and the three months ended December 31, 2006 for the 2006 geographic distribution. Core markets are defined as the Washington D.C. metropolitan area; Southern California; the New York City metropolitan area; the San Francisco Bay Area in California; Boston, Massachusetts; Seattle, Washington; Southeast Florida and Chicago, Illinois. Non-core is defined as all other markets in the United States.

     Although the full measure of success related to this strategy will be more fully reflected in future results, the increase in our diluted earnings per share, which includes gains from dispositions, have been encouraging.

Diluted Earnings Per Share

28

Other major factors that influenced our operating results over the last three years include the following:

• Our Same-Store NOI has increased 11.0% in 2006 as compared to 2004. We believe the improvement in our Same-Store performance has resulted from a number of factors including strengthening market fundamentals as well as benefits from the significant investments we have made in people and operating systems.

• The significant disposition volume resulting from the portfolio repositioning strategy mentioned above, resulted in REIT GAAP gains, net of disposition costs, of $546.3 million, $446.7 million and $372.2 million in 2006, 2005 and 2004, respectively. These gains have been a major driver of our earnings per share growth.

• Utilizing the REIT’s development, acquisition and operating expertise, Ameriton has identified under-managed operating communities, as well as development and redevelopment opportunities with a short-term ownership horizon of one to two years that have produced GAAP gains, net of dispositions costs, of $51.2 million, $75.2 million and $65.1 million in 2006, 2005 and 2004, respectively. The timing and amount of Ameriton’s contributions to our earnings will fluctuate from year to year and depend primarily on its ability to identify profitable investment opportunities, timing of completion of investments in its development pipeline and real estate market values.

• During 2006, we recognized a net loss of $13.1 million ($6.4 million excluding depreciation) as a result of building our International platform and our expansion efforts in Germany.

• We recognized $77.4 million, $56.0 million and $19.2 million in other income during 2006, 2005 and 2004, respectively, related primarily to non-recurring insurance-related reimbursement, gains from land sales (including Ameriton land sales) and interest income.

• We recognized $275.8 million, $217.6 million and $208.8 million in interest expense, including discontinued operations, during 2006, 2005 and 2004, respectively. The year over year increases were due primarily to financing related to the growth in our real estate portfolio and higher average interest rates.

• We recognized $37.5 million, $72.2 million and $29.3 million in other expense, including discontinued operations, during 2006, 2005 and 2004, respectively, related primarily to Ameriton income taxes, debt extinguishment costs and loss contingencies. Most of the costs in other expense are event-driven and will not necessarily reoccur each year.

• We recognized $2.3 million and $28.8 million in other non-operating income during 2006 and 2005, respectively, related primarily to gains from the sale of our Rent.com investment.

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Reconciliation of Quantitative Summary to Consolidated Statements of Earnings

     The following schedule is provided to reconcile our consolidated statements of earnings to the information presented in the “Quantitative Summary” provided in the next section:

	2006									2005									2004
	Continuing			Discontinued						Continuing			Discontinued						Continuing			Discontinued
	Operations			Operations			Total			Operations			Operations			Total			Operations			Operations			Total
Rental revenue	$	1,056,176		$	139,457		$	1,195,633		$	777,603		$	239,806		$	1,017,409		$	642,270		$	325,784		$	968,054
Other income		77,410			—			77,410			56,030			—			56,030			19,208			—			19,208
Property operating expenses (rental expenses and real estate taxes)		(343,342	)		(61,022	)		(404,364	)		(252,382	)		(105,587	)		(357,969	)		(210,747	)		(143,341	)		(354,088	)
Depreciation on real estate investments		(261,438	)		(26,858	)		(288,296	)		(187,771	)		(51,017	)		(238,788	)		(150,470	)		(69,519	)		(219,989	)
Interest expense		(245,895	)		(29,931	)		(275,826	)		(164,035	)		(53,533	)		(217,568	)		(125,108	)		(83,644	)		(208,752	)
General and administrative expenses		(68,188	)		—			(68,188	)		(58,604	)		—			(58,604	)		(55,479	)		—			(55,479	)
Other expense		(13,715	)		(23,805	)		(37,520	)		(49,232	)		(22,947	)		(72,179	)		(13,563	)		(15,739	)		(29,302	)
Minority interest		(30,541	)		(77,100	)		(107,641	)		(21,164	)		(64,168	)		(85,332	)		(20,465	)		(49,356	)		(69,821	)
Income from unconsolidated entities		36,316			—			36,316			22,432			—			22,432			17,902			—			17,902
Other non-operating income		2,338			—			2,338			28,807			—			28,807			28,162			—			28,162
Gains, net of disposition costs		—			597,572			597,572			—			521,934			521,934			—			446,447			446,447
Net earnings	$	209,121		$	518,313		$	727,434		$	151,684		$	464,488		$	616,172		$	131,710		$	410,632		$	542,342

Quantitative Summary

     This summary is provided for reference purposes and is intended to support and be read in conjunction with the narrative discussion of our results of operations. This quantitative summary includes all operating activities, including those classified as discontinued operations for GAAP reporting purposes. This information is presented to correspond with the manner in which we analyze the business. We generally reinvest disposition proceeds into new developments and operating communities and therefore believe it is most useful to analyze continuing and discontinued operations on a combined basis. The impact of communities classified as “discontinued operations” for GAAP reporting purposes is discussed separately in a later section under the caption “Discontinued Operations Analysis.”

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										2006 vs. 2005			2005 vs. 2004
										Increase /			Increase /
	2006			2005			2004			(Decrease)			(Decrease)
Rental revenues:
Same-Store (1)	$	637,079		$	600,358		$	579,358		$	36,721		$	21,000
Non Same-Store		491,668			375,712			348,668			115,956			27,044
Ameriton		20,869			33,986			36,752			(13,117	)		(2,766	)
International		34,920			—			—			34,920			—
Non-multifamily		11,097			7,353			3,276			3,744			4,077
Total revenues		1,195,633			1,017,409			968,054			178,224			49,355
Property operating expenses (rental expenses and real estate taxes):
Same-Store (1)		201,158			193,906			186,512			7,252			7,394
Non Same-Store		173,108			145,033			148,224			28,075			(3,191	)
Ameriton		10,619			17,038			18,884			(6,419	)		(1,846	)
International		16,225			—			—			16,225			—
Non-multifamily		3,254			1,992			468			1,262			1,524
Total operating expenses		404,364			357,969			354,088			46,395			3,881
Net Operating Income (rental revenues less property operating expenses)		791,269			659,440			613,966			131,829			45,474
Margin (NOI/rental revenues):		66.2	%		64.8	%		63.4	%		1.4	%		1.4	%
Average occupancy during period: (2)		93.9	%		94.6	%		94.8	%		(0.7	%)		(0.2	%)
Other income		77,410			56,030			19,208			21,380			36,822
Depreciation of real estate investments		288,296			238,788			219,989			49,508			18,799
Interest expense		327,634			256,679			232,324			70,955			24,355
Capitalized interest		51,808			39,111			23,572			12,697			15,539
Net interest expense		275,826			217,568			208,752			58,258			8,816
General and administrative expenses		68,188			58,604			55,479			9,584			3,125
Other expense		37,520			72,179			29,302			(34,659	)		42,877
Earnings from continuing and discontinued operations		198,849			128,331			119,652			70,518			8,679
Minority interest		107,641			85,332			69,821			22,309			15,511
Equity in earnings from unconsolidated entities		36,316			22,432			17,902			13,884			4,530
Other non-operating income
Gains on disposition of real estate investments, net of disposition costs:		2,338			28,807			28,162			(26,469	)		645
Taxable subsidiaries		51,245			75,248			74,230			(24,003	)		1,018
REIT		546,327			446,686			372,217			99,641			74,469
Net earnings	$	727,434		$	616,172		$	542,342		$	111,262		$	73,830

(1)	Reflects revenues and operating expenses for Same-Store communities that were owned on December 31, 2006 and fully operating during all three years in the comparison period.
(2)	Does not include occupancy associated with properties owned by Ameriton, operated under the Oakwood Master Leases or International.

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Property-level operating results — 2006 compared to 2005

     We utilize NOI as the primary measure to evaluate the performance of our operating communities and for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. In analyzing the performance of our operating portfolio, we evaluate Same-Store communities separately from Non Same-Store communities and other properties.

Same-Store Analysis

     The following table reflects revenue, expense and NOI growth for Same-Store communities that were owned on December 31, 2006 and fully operating during both years.

	Same-Store			Same-Store
	Revenue			Expense			Same-Store
	Growth			Growth			NOI Growth
Garden		6.6	%		6.2	%		6.7	%
High-Rise		6.5	%		1.9	%		8.8	%
Total		6.5	%		4.4	%		7.5	%

     Same-Store revenues were up in all core markets for both the garden and the High-Rise portfolios, resulting primarily from higher rental income per unit. During 2006, we experienced substantial upward pressure on new move-in rental rates as a result of a number of factors, including: (i) employment growth; (ii) lack of new apartment supply due to limited land to build competing assets; (iii) significant increases in the values of single family homes in our protected markets; and (iv) higher interest rates, all of which have translated into significant increases in our revenue growth. In addition to strong rent increases and actively managing our lease expirations we are also continuing to make enhancements to many components of the operating platform, such as LRO, MRI, Online Lease, resident portal and internet marketing. We believe that all of these improvements have resulted in meaningful efficiencies for us. The primary drivers of our year-over-year operating expenses were higher insurance costs, real estate taxes and personnel costs. During 2006, we began passing more utility costs through to residents in our High-Rise communities which helped lower our operating expenses. These revenue and expense increases resulted in overall portfolio Same-Store NOI growth of 7.5%, which was driven principally by strong NOI growth in the Washington D.C. metropolitan area, Southern California and the New York City metropolitan area — which represent more than 72% of the company’s portfolio — with year-to-date Same-Store NOI increases of 7.4%, 8.5% and 12.6%, respectively.

Non Same-Store and Other Analysis

     The $87.9 million NOI increase in the non Same-Store portfolio is primarily attributable to (i) $86.6 million related to acquisitions; (ii) $15.6 million related to newly developed apartment communities, including Lease-Ups; (iii) $33.3 million related to the Oakwood Master Leases; and offset by (iv) $52.9 million related to community dispositions.

Ameriton

     The $6.7 million NOI decrease from Ameriton apartment communities is primarily attributable to a $10.3 million decline related to community dispositions, including the sale of new developments, partially offset by $3.5 million increase from community acquisitions.

International

     The increase in NOI of $18.7 million is primarily attributable to the DeWAG acquisition that occurred in July 2006. As of December 31, 2006, the International portfolio consisted of 8,334 residential units.

Non Multi-family

     The $2.5 million NOI increase is primarily attributable to commercial/retail income associated with an asset purchased by Ameriton in July, 2005.

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Property-level operating results — 2005 compared to 2004

Same-Store Analysis

     The following table reflects revenue, expense and NOI growth for Same-Store communities that were owned on December 31, 2005 and fully operating during both years.

	Same-Store			Same-Store
	Revenue			Expense			Same-Store
	Growth			Growth			NOI Growth
Garden		3.6	%		3.5	%		3.6	%
High-Rise		3.9	%		4.8	%		3.4	%
Total		3.7	%		4.1	%		3.6	%

     Same-Store revenues were up in all core markets for both the garden and the High-Rise portfolios, resulting primarily from higher rental income per unit and a slight improvement in the percentage of units occupied. We experienced revenue growth throughout 2005 as our markets strengthened and pricing power returned as new move-in rents, a leading indicator, continued to rise. In addition to improving operating fundamentals across our markets, we believe LRO has also enabled us to better manage lease expirations and produce higher revenues in the slow seasonal months. The Washington D.C. metropolitan area and Southern California, our two largest markets, reported revenue growth of 3.9% and 4.3%, respectively. The drivers of our year-over-year operating expenses were higher real estate taxes and personnel costs, as well as extraordinary snow removal and utility expenses in the first quarter of 2005. These increases were realized to a greater degree in High-Rise. These revenue and expense increases resulted in overall portfolio Same-Store NOI growth of 3.6%, which was the major driver of the 1.4% margin increase recorded for the overall portfolio.

Non Same-Store and Other Analysis

     The $30.2 million NOI increase in the non Same-Store portfolio is primarily attributable to (i) $51.5 million related to acquisitions; (ii) $16.0 million related to newly developed apartment communities, including lease-ups; (iii) $20.0 million related to the Oakwood Master Leases; and offset by (iv) $61.2 million related to community dispositions.

Ameriton

     The $0.9 million NOI decrease from Ameriton apartment communities is primarily attributable to a $6.7 million decline related to community dispositions, including the sale of new developments, partially offset by $5.9 million increase from community acquisitions.

Non Multi-family

     The $2.6 million NOI increase is primarily attributable to commercial/retail income associated with an asset purchased by Ameriton in 2005.

Other Income

     The increase in other income during 2006 as compared to 2005 resulted primarily from (i) a $19.0 million increase in interest income on mortgage loans to third parties and other interest bearing instruments; (ii) a $19.6 million increase in gains on land sales, primarily in Ameriton. These increases were offset by a $21.9 million decrease in 2006 related to insurance recoveries.

     The increase in other income during 2005 as compared to 2004 resulted primarily from (i) a $25.7 million increase from insurance recoveries related to moisture infiltration and mold litigation settlement costs associated with a previously owned community in Southeast Florida; (ii) a $9.3 million increase in interest income on mortgage loans to third parties and other interest bearing instruments; (iii) a $4.7 million increase in hurricane-related insurance reimbursements; and (iv) a $2.8 million insurance reimbursement for costs incurred in connection with our FHA and ADA settlement. These increases and other smaller insurance-related reimbursements recorded in 2005 were partially offset by a $4.7 million benefit related to the sale of CES and higher land gains in 2004.

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Depreciation Expense

     The depreciation increases in each year are primarily related to the increase in the size of the real estate portfolio. A few of the major drivers are (i) amortization of the value associated with in-place leases over the lease term on new acquisitions; (ii) disposition of assets with a lower depreciable basis at significant gains, and reinvestment of the proceeds into assets with a higher depreciable basis; partially offset by (iii) cessation of depreciation on assets sold or classified as held for sale.

Interest Expense

     The increase in gross interest expense during 2006 as compared to 2005 is due to higher average debt levels associated with the increased size of the real estate portfolio combined with higher average interest rates on our unsecured credit facilities and other debt instruments. The International transactions were the most significant drivers of the portfolio increase in 2006. Capitalized interest also increased significantly as a result of the increase in the size and number of communities under construction and, to a lesser extent, higher average interest rates in 2006.

     The increase in gross interest expense during 2005 as compared to 2004 is due to higher average debt levels associated with the increased size of the real estate portfolio combined with higher average interest rates on our unsecured credit facilities and other debt instruments. The Oakwood transaction was the most significant driver of the portfolio increase in 2005. Capitalized interest also increased significantly as a result of the increase in the size and number of communities under construction and, to a lesser extent, higher average interest rates in 2005.

General and Administrative Expenses

     The increase in the general and administrative expenses during 2006 as compared to 2005 is principally due to higher personnel-related costs related to our recent International expansion.

     The increase in general and administrative expenses during 2005 as compared to 2004 is due to higher employee compensation-related costs, increased recruiting and relocation expenses and higher travel costs. These costs were partially offset by a smaller charge in 2005 as compared to 2004 pertaining to executive Common Share grants related to the achievement of total shareholder return performance targets.

Other Expenses

     The decrease in other expenses during 2006 as compared to 2005 is primarily attributable to (i) $14.3 million decrease in early debt extinguishment costs; (ii) an $8.5 million decrease in legal expenses; (iii) a $1.5 million decrease in taxes in our taxable REIT subsidiaries; (iv) a $7.8 million decrease in hurricane related charges; (v) a $2.8 million writeoff of a loan to a prior affiliate in 2005; and (vi) a $1.5 million impairment related to a non-core asset in 2005 offset by a $4.3 million impairment charge on that asset in 2006.

     The increase in other expenses during 2005 as compared to 2004 is primarily attributable to (i) $21.1 million increase in early debt extinguishment costs; (ii) $11.9 million in legal expenses and litigation settlement costs related to the settlement of the FHA and ADA lawsuit and other legal matters; (iii) a $4.3 million increase in hurricane related charges; (iv) a $2.8 million writeoff of a loan to a prior affiliate; and (v) a $1.5 million impairment related to a non-core asset.

Minority Interest

     Minority interest increased in each successive period as a result of higher earnings and changes in the relative number of Common Units in each period, which averaged 12.9%, 12.1% and 10.9% of net earnings for 2006, 2005 and 2004, respectively.

Equity in Income from Unconsolidated Entities

     The increase in income from unconsolidated entities during 2006 as compared to 2005 is due primarily to more income from community dispositions and related venture liquidations.

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     The increase in income from unconsolidated entities during 2005 as compared to 2004 is due primarily to an increase in disposition-related gains, including $6.6 million from Ameriton joint ventures and recognition of a $1.7 million incentive payment earned in connection with the final liquidation of a joint venture partnership in 2005. These increases were partially offset by recognition of $3.2 million of contingent proceeds from the expiration during the second quarter of 2004 of certain indemnifications related to the sale of CES.

Other Non-Operating Income

     Other non-operating income during 2006 consists primarily of a $1.7 million of gain from the sale of our Rent.com investment which was recorded upon the resolution of certain contingencies..

     Other non-operating income during 2005 consists primarily of $25.9 million of gains from the sale of our Rent.com investment and $2.1 million from the sale of other equity securities while 2004 other non-operating income consists of $24.9 million in gains on the sale of equity securities and a $3.3 million gain from the sale of our property management business.

Gains on real estate dispositions

     See “Discontinued Operations Analysis” below for discussion of gains.

Discontinued Operations Analysis

     Included in the overall results discussed above are the following amounts associated with properties which have been sold or were classified as held for sale as of December 31, 2006 (dollars in thousands).

	Years Ended December 31,
	2006			2005			2004
Rental revenue	$	139,457		$	239,806		$	325,784
Rental expenses		(44,043	)		(74,715	)		(104,023	)
Real estate taxes		(16,979	)		(30,872	)		(39,318	)
Depreciation on real estate investments		(26,858	)		(51,017	)		(69,519	)
Interest expense (1)		(29,931	)		(53,533	)		(83,644	)
Income taxes from taxable REIT subsidiaries		(9,972	)		(15,600	)		(13,975	)
Provision for possible loss on real estate investment		(4,328	)		(1,500	)		—
Debt extinguishment costs related to dispositions		(9,505	)		(5,847	)		(1,764	)
Allocation of minority interest		(77,100	)		(64,168	)		(49,356	)
Gains on disposition of real estate investments, net of disposition costs:
Taxable subsidiaries		51,245			75,248			62,629
REIT		546,327			446,686			383,818
Total discontinued operations	$	518,313		$	464,488		$	410,632
Number of communities sold during period		42			35			30
Number of communities classified as held for sale		9			9			6

(1) The portion of interest expense included in discontinued operations that is allocated to properties based on the company’s leverage ratio was $20.9 million, $40.3 million and $62.2 million for 2006, 2005 and 2004, respectively.

     As a result of the execution of our strategy of managing our invested capital through the selective sale of apartment communities in non-core locations and redeploying the proceeds to fund investments with higher anticipated growth prospects in our core markets, we had significant disposition activity in all three years. The resulting gains, net of disposition costs, were the biggest driver of overall earnings from discontinued operations. The REIT gains progressively increased in each successive year as communities with higher values were sold and the market for apartment communities improved. Our taxable REIT subsidiary gains are from Ameriton community dispositions, which contributed significantly to our earnings in each year. The year-to-year changes in revenues and operating expenses associated with discontinued operations is primarily attributable to the market and number of communities sold during the period or held for sale at the end of the period. Changes in direct

35

operating expenses and allocated interest expense generally relate to the overall revenue levels for each period. Income taxes fluctuate in relation to the taxable gains associated with communities sold by our taxable REIT subsidiaries, which increased in each successive year. The portion of earnings from discontinued operations allocated to minority interest increased each year due primarily to the higher income resulting from higher gains.

Preferred Share Dividend Analysis

     Preferred Share distributions were consistent between 2006 and 2005 and decreased by $7.1 million in 2005 as compared to 2004 This decrease was primarily due to the redemption of our Series D Preferred Shares in August 2004, the conversion of Series K Preferred Shares into Common Shares in September 2004 and the early conversion of Series L Preferred Shares into Common Shares in December 2004. These savings were partially offset by the recognition of $1.7 million of issuance costs related to the Series D Preferred Shares in 2004. The decrease in Preferred Share distributions due to conversions was offset by an increase in Common Share dividends.

Liquidity and Capital Resources

     We are committed to maintaining a strong balance sheet and preserving our financial flexibility, which we believe enhances our ability to capitalize on attractive investment opportunities as they become available. As a result of the significant cash flow generated by our operations, current cash positions, the available capacity under our unsecured credit facilities, gains from the disposition of real estate and our demonstrated ability to access the capital markets, we believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash flow needs during 2007. Please refer to the Consolidated Statements of Cash Flows for detailed information of our sources and uses of cash for the years ended December 31, 2006, 2005 and 2004.

Scheduled Debt Maturities and Interest Payment Requirements

     We have structured our long-term debt maturities in a manner designed to avoid unmanageable repayment obligations in any year, which would negatively impact our financial flexibility. We have scheduled debt maturities of $491.1 million during 2007, $546.8 million in 2008 and $481.5 million in 2009. See Note 8 in our audited financial statements in this Annual Report for additional information on outstanding debt balances and scheduled debt maturities.

     On February 20, 2007, we had $69.9 million borrowed on our unsecured credit facilities, $8.9 million outstanding under letters of credit and available borrowing capacity on our unsecured credit facilities of $625.4 million.

     Our unsecured credit facilities, Long-Term Unsecured Debt and mortgages payable had effective weighted average interest rates of 5.9%, 5.6% and 5.4%, respectively, as of December 31, 2006. All of these rates give effect to debt issuance costs, fair value hedges, the amortization of fair market value purchase adjustments and other fees and expenses, as applicable.

     Our debt instruments generally contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage ratios and maximum leverage ratios. We were in compliance with all financial covenants pertaining to our debt instruments as of and for the year ended December 31, 2006.

Shareholder Dividend/Distribution Requirements

     Based on anticipated distribution levels for 2007 and the number of shares and units outstanding as of December 31, 2006, we anticipate that we will pay the following dividends/distributions in 2007 (in thousands, except per share amounts):

	Per Share		Total
Common Share and Common Unit distributions(1)(2):
Common Shares	$	1.81	$	398,466
A-1 Common Unit distributions		1.81		53,421
M Preferred Unit		476.03		—
N-1 Preferred Units		20.96		6
N-2 Preferred Units		8.98		6
Series I Preferred Share dividends(3)		7,660.00		3,830
Total dividend/distribution requirements			$	455,729

(1)	Future distributions on Common Shares and Common Units are contingent upon approval by our Board of Trustees.
(2)	See Note 11 in our audited financial statements in this Annual Report for more information on minority interests.
(3)	Series I Preferred Shares have a par value of $100,000 per share.

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Planned Investments

     Following is a summary of planned investments as of December 31, 2006, including Ameriton but excluding joint ventures. The amounts labeled “Discretionary” represent future investments that we plan to make, although there is not a contractual commitment to do so. The amounts labeled “Committed” represent the approximate amount that we are contractually committed to fund for communities under construction in accordance with construction contracts with general contractors (dollar amounts in thousands).

	Planned Investments
	Discretionary		Committed
Communities under redevelopment	$	1,812	$	3,082
Communities under construction		—		619,441
Communities In Planning and Owned		1,196,121		—
Communities In Planning and Under Control		406,336		—
Community acquisitions under contract		146,766		—
FHA/ADA Settlement Capital Accrual		—		29,185
Total	$	1,751,035	$	651,708

     In addition to the planned investments noted above, we expect to make additional investments relating to planned expenditures on recently acquired communities as well as recurring expenditures to improve and maintain our established operating communities.

     We anticipate completion of most of the communities that are currently under construction and the planned operating community improvements by the end of 2009. No assurances can be given that communities we do not currently own will be acquired or that planned developments will actually occur. In addition, actual costs incurred could be greater or less than our current estimates.

Funding Sources

     We anticipate financing our planned investment and operating needs primarily with cash flow from operating activities, disposition proceeds from our capital recycling, existing cash balances and borrowings under our unsecured credit facilities, prior to arranging additional long-term financing. We had $625.4 million in available capacity on our unsecured credit facilities, $465.3 million of cash in tax-deferred exchange escrow and $3.0 million of cash on hand at February 20, 2007. In addition, we expect the proceeds from REIT dispositions to approximate our investment in new REIT operating community acquisitions in 2007. We therefore do not believe that discontinued operations will have a significant adverse impact on our liquidity in the foreseeable future. We have filed registration statements to facilitate issuance of debt and equity securities on an as-needed basis subject to our ability to effect offerings on satisfactory terms based on prevailing conditions.

Litigation and Contingencies

     During the second quarter of 2005, we entered into a full and final settlement in the United States District Court for the District of Maryland with three national disability organizations and agreed to make capital improvements in a number of our communities in order to make them fully compliant with the FHA and ADA. The litigation, settled by this agreement, alleged lack of full compliance with certain design and construction requirements under the two federal statutes at 71 of the company’s wholly owned and joint venture communities, of which we still own or have an interest in 45. As part of the settlement, the three disability organizations all recognized that Archstone-Smith had no intention to build any of its communities in a manner inconsistent with the FHA or ADA.

     The amount of the capital expenditures required to remediate the communities named in the settlement was estimated at $47.2 million and was accrued as an addition to real estate during the fourth quarter of 2005. The settlement agreement approved by the court allows us to remediate each of the designated communities over a three year period, and also provides that we are not restricted from selling any of our communities during the remediation period. We agreed to pay damages totaling $1.4 million, which included legal fees and costs incurred by the plaintiffs. We had $29.2 million of the original accrual remaining on December 31, 2006.

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     We are subject to various claims filed in 2002 and 2003 in connection with moisture infiltration and resulting mold issues at certain high-rise properties we once owned in Southeast Florida. These claims generally allege that water infiltration and resulting mold contamination resulted in the claimants having personal injuries and/or property damage. Although certain of these claims continue to be in various stages of litigation, with respect to the majority of these claims, we have either settled the claims and/or we have been dismissed from the lawsuits that had been filed. With respect to the lawsuits that have not been resolved, we continue to defend these claims in the normal course of litigation.

     We are a party to various other claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

Critical Accounting Policies

     We define critical accounting policies as those accounting policies that require our management to exercise their most difficult, subjective and complex judgments. Our management has discussed the development and selection of all of these critical accounting policies with our audit committee, and the audit committee has reviewed the disclosure relating to these policies. Our critical accounting policies relate principally to the following key areas:

Internal Cost Capitalization

     We have an investment organization that is responsible for development and redevelopment of apartment communities. Consistent with GAAP, all direct and certain indirect costs, including interest and real estate taxes, incurred during development and redevelopment activities are capitalized. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period. Included in capitalized costs are management’s estimates of the direct and incremental personnel costs and indirect project costs associated with our development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development accounting, legal fees, and various office costs that clearly relate to projects under development. Because the estimation of capitalizable internal costs requires management’s judgment, we believe internal cost capitalization is a “critical accounting estimate.”

     If future accounting rules limit our ability to capitalize internal costs or if our development activity decreased significantly without a proportionate decrease in internal costs, there could be an increase in our operating expenses. For example, if hypothetically, we were to reduce our development and land acquisition activity by 25% with no corresponding decrease in internal costs, our diluted net earnings per Common Share could decrease by approximately 0.6% or approximately $0.019 based on 2006 amounts.

Valuation of Real Estate

     Long-lived assets to be held and used are carried at cost and evaluated for impairment when events or changes in circumstances indicate such an evaluation is warranted. We also evaluate assets for potential impairment when we deem them to be held for sale. Valuation of real estate is considered a “critical accounting estimate” because the evaluation of impairment and the determination of fair values involve a number of management assumptions relating to future economic events that could materially affect the determination of the ultimate value, and therefore, the carrying amounts of our real estate. Furthermore, decisions regarding when a property should be classified as held for sale under SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” requires significant management judgment. There are many phases to the disposition process ranging from the initial market research to being under contract with non-refundable earnest money to closing. Deciding when management is committed to selling an asset is therefore highly subjective.

     When determining if there is an indication of impairment, we estimate the asset’s NOI over the anticipated holding period on an undiscounted cash flow basis and compare this amount to its carrying value. Estimating the expected NOI and holding period requires significant management judgment. If it is determined that there is an indication of impairment for assets to be held and used, or if an asset is deemed to be held for sale, we then determine the fair value of the asset.

     The apartment industry uses capitalization rates as the primary measure of fair value. Specifically, annual NOI for a community is divided by an estimated capitalization rate to determine the fair value of the community. Determining the appropriate capitalization rate requires significant judgment and is typically based on many factors including the prevailing rate for the market or submarket, as well as the quality and location of the properties. Further, capitalization rates can fluctuate up or down due to a variety of factors in the overall economy or within local markets. If the actual capitalization rate for a community is significantly different from our estimated rate, the impairment evaluation for an individual asset could be

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materially affected. For example, we would value a community with annual NOI of $10 million at $200 million using a 5.0% capitalization rate, whereas that same community would be valued at $166.7 million if the actual capitalization rate were 6.0%. Historically we have had limited and infrequent impairment charges, and the majority of our apartment community sales have produced gains. For example, we have sold approximately $4.0 billion of real estate assets based on cost over the 3 years covered by this Annual Report, which produced approximately $1.6 billion in gains. Over that same period, we have recorded $5.8 million in valuation-related impairments.

Capital Expenditures and Depreciable Lives

     We incur costs relating to redevelopment initiatives, revenue enhancing and expense reducing capital expenditures, and recurring capital expenditures that are capitalized as part of our real estate. These amounts are capitalized and depreciated over estimated useful lives determined by management. We allocate the cost of newly acquired properties between net tangible and identifiable intangible assets. The primary intangible asset associated with an apartment community acquisition is the value of the existing lease agreements. When allocating cost to an acquired property, we first allocate costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the property is vacant. We estimate the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. We depreciate the building and fixtures based on the expected useful life of the asset and amortize the intangible value of the lease agreements over the average remaining life of the existing leases.

     Determining whether expenditures meet the criteria for capitalization, the assignment of depreciable lives and determining the appropriate amounts to allocate between tangible and intangible assets for property acquisitions requires our management to exercise significant judgment and is therefore considered a “significant accounting estimate.”

     Total capital expenditures were 0.9% and 1.5% of weighted average gross real estate as of December 31, 2006 and 2005, respectively. Additionally, depreciation expense related to continuing operations as a percentage of depreciable real estate was 3.0%, 3.1% and 3.3% or $1.05, $1.03 and $0.99 per diluted Share for the years ended December 31, 2006, 2005 and 2004, respectively. If the actual weighted average useful life were determined to be one year shorter or longer than management’s current estimate, our annual depreciation expense would increase or decrease approximately 3.0% or $0.03 per Common Share. See Note 1 in our audited financial statements in this Annual Report for additional detail on depreciable lives.

Pursuit Costs

     We incur costs relating to the potential acquisition of existing operating communities or land for development of new operating communities, which we refer to as pursuit costs. To the extent that these costs are identifiable with a specific property and would be capitalized if the property were already acquired, the costs are accumulated by project and capitalized in the Other Asset section of the balance sheet. If these conditions are not met, the costs are expensed as incurred. Capitalized costs include but are not limited to earnest money, option fees, environmental reports, traffic reports, surveys, photos, blueprints, direct and incremental personnel costs and legal costs. Upon acquisition, the costs are included in the basis of the acquired property. When it becomes probable that a prospective acquisition will not be acquired, the accumulated costs for the property are charged to other expense on the statement of earnings in the period such a determination is made.

     Because of the inherent judgment involved in evaluating whether a prospective property will ultimately be acquired, we believe capitalizable pursuit costs are a “critical accounting estimate.” If it were determined that 25% of accumulated costs relating to prospective acquisitions were deemed improbable as of December 31, 2006, net earnings for the year ended December 31, 2006 would decrease by approximately $0.027 per share, excluding refundable earnest money.

Consolidation vs. Equity Method of Accounting for Ventures

     From time to time, we make co-investments in real estate ventures with third parties and are required to determine whether to consolidate or use the equity method of accounting for the venture. FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (as revised) and Emerging Issues Task Force issued EITF No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” are the two primary sources of accounting guidance in this area. Appropriate application of these relatively complex rules requires substantial management judgment, which we believe, makes the choice of the appropriate accounting method for these ventures a “critical accounting estimate.”

     For example, if we were to consolidate all of our equity-method joint ventures at December 31, 2006, our total assets and total liabilities would increase by approximately $1.5 billion (11.4%) and $1.2 billion (17.1%), respectively.

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Off Balance Sheet Arrangements

     Our real estate investments in entities that do not qualify as variable interest entities, variable interest entities where we are not the primary beneficiary and entities we do not control through majority economic interest are not consolidated and are reported as investments in unconsolidated entities. Our investments in and advances to unconsolidated entities at December 31, 2006, aggregated $235.3 million. Please refer to Note 6, Investments in and Advances to Unconsolidated Entities for additional information.

     As part of the Smith Merger and the Oakwood transaction, we are required to indemnify certain Unitholders for any personal income tax expense resulting from the sale of properties identified in tax protection agreements. We do not believe that we will be required to perform under the terms of the indemnification agreements due to our ability and intent to hold and use these properties through the term of the indemnification period or our ability to dispose of assets through tax-deferred exchanges. The estimated difference in the book and tax carrying value of properties that are at least partially subject to tax protection agreements was approximately $4.3 billion at December 31, 2006.

Contractual Commitments

     The following table summarizes information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our audited financial statements in this Annual Report regarding contractual commitments (amounts in millions).

			2008		2010		2012
	2007		and 2009		and 2011		thru 2096		Total
Scheduled long-term debt maturities	$	491.1	$	1,028.3	$	1,248.1	$	3,364.4	$	6,131.9
Unsecured credit facilities(1)		—		—		84.7		—		84.7
Term loan — International		235.8		—		—		—		235.8
Interest on indebtedness		335.3		590.7		481.7		188.2		1,595.9
Development and redevelopment expenditures		307.9		314.6		—		—		622.5
Performance bonds and guarantees		26.9		11.5		—		1.2		39.6
FHA/ADA Settlement(2)		14.6		14.6		—		—		29.2
Lease commitments and other(3)		86.0		17.7		19.2		217.8		340.7
Total	$	1,497.6	$	1,977.4	$	1,833.7	$	3,771.6	$	9,080.3

(1)	The $600 million unsecured facility matures December 2010, with a one-year extension option available at our discretion.
(2)	Represents the estimated capital spending associated with the FHA and ADA settlement assuming the remainder will be spent evenly over the next two years. Certain communities impacted by the settlement may be sold, which could impact the ultimate timing and amounts spent.
(3)	Includes letters of credit and lease commitments relating principally to ground lease payments as of December 31, 2006.

New Accounting Pronouncements

     In June 2005, the Emerging Issues Task Force issued EITF No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF No. 04-5). This Issue provides a framework for evaluating whether a general partner or group of general partners or managing members controls a limited partnership or limited liability company and therefore should consolidate the entity. The presumption that the general partner or group of general partners or managing members controls a limited liability partnership or limited liability company may be overcome if the limited partners or members have (1) the substantive ability to dissolve the partnership without cause, or (2) substantive participating rights. EITF No. 04-5 became effective on June 30, 2005 for new or modified limited partnerships or limited liability companies and January 1, 2006 for all existing arrangements. The adoption of EITF No. 04-5 did not have a material impact on our financial position, net earnings or cash flows.

     In April 2006, the FASB issued FASB Staff Position (FSP) FIN 46R-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).” This FSP addresses certain implementation issues related to FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities.” Specifically, FSP FIN 46R-6 addresses how a reporting enterprise should determine the variability to be considered in applying FIN 46R. The variability that is considered in applying FIN 46R affects the determination of: (a) whether an entity is a variable interest entity (VIE); (b) which interests are

40

“variable interests” in the entity; and (c) which party, if any, is the primary beneficiary of the VIE. Our assessment of variability affects any calculation of expected losses and expected residual returns, if such a calculation is necessary. The company is required to apply the guidance in this FSP prospectively to all entities (including newly created entities) with which it first becomes involved and to all entities previously required to be analyzed under FIN 46R when a “reconsideration event” has occurred, beginning July 1, 2006. The company will evaluate the impact of this FSP at the time any such “reconsideration event” occurs, and for any new entities with which the company becomes involved in future periods.

     In July 2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.” FIN 48 defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 is not expected to have a material effect on our financial position, net earnings or cash flows.

     In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108) Topic 1N, “Financial Statements — Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” This Bulletin provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The guidance in this Bulletin must be applied to financial reports covering the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not have a material effect on our financial position, net earnings or cash flows.

     Please refer to Note 12 for details regarding the implementation of SFAS No. 123R, “Share-Based Payment.”

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Stock Investments

     From time to time we make public and private investments in equity securities. The publicly traded equity securities are classified as “available for sale securities” and carried at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity. The private investments, for which we lack the ability to exercise significant influence, are accounted for at cost. Declines in the value of public and private investments that our management determines are other than temporary, are recorded as a provision for possible loss on investments. Our evaluation of the carrying value of these investments is primarily based upon a regular review of market valuations (if available), each company’s operating performance and assumptions underlying cash flow forecasts. In addition, our management considers events and circumstances that may signal the impairment of an investment.

Interest Rate Hedging Activities

     We are exposed to the impact of interest rate changes and will occasionally utilize interest rate swaps and interest rate caps as hedges with the objective of lowering our overall borrowing costs. These derivatives are designated as either cash flow or fair value hedges. We do not use these derivatives for trading or other speculative purposes. Further, as a matter of policy, we only enter into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, we have not sustained, nor do we expect to sustain, a material loss from the use of these hedging instruments.

     We formally assess both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. We measure hedge effectiveness by comparing the changes in the fair value or cash flows of the derivative instrument with the changes in the fair value or cash flows of the hedged item. We assess effectiveness of purchased interest rate caps based on overall changes in the fair value of the caps. If a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively.

     To determine the fair values of derivative and other financial instruments, we use a variety of methods and assumptions that are based on market value conditions and risks existing at each balance sheet date. These methods and assumptions include standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost and termination cost. All methods of assessing fair value result in a general approximation of value, and therefore, are not necessarily indicative of the actual amounts that we could realize upon disposition.

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     During the years ended December 31, 2006, 2005 and 2004 we recorded an increase/(decrease) to interest expense of $372,000, $(174,000) and $33,000, for hedge ineffectiveness caused by a difference between the interest rate index on a portion of our outstanding variable rate debt and the underlying index of the associated interest rate swap. We pursue hedging strategies that we expect will result in the lowest overall borrowing costs and least degree of earnings volatility possible.

     The following table summarizes the notional amount, carrying value and estimated fair value of our derivative financial instruments used to hedge interest rates, as of December 31, 2006. The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rate or market risks (dollar amounts in thousands).

	Notional		Maturity		Carrying and
	Amount		Date Range		Estimated Fair Value
Cash flow hedges:
Interest rate caps	$	486,354		2007-2013	$	809
Interest rate swaps		367,054		2007-2014		7,080
Total cash flow hedges	$	853,408		2007-2014	$	7,889
Fair value hedges:
Interest rate swaps	$	75,055		2008	$	1,185
Total rate of return swaps		36,346		2007		(1,447	)
Total fair value hedges	$	111,401		2007-2008	$	(262	)
Total hedges	$	964,809		2007-2014	$	7,627

Foreign Currency Hedging Activities

     We are exposed to foreign-exchange related variability and earnings volatility on our foreign investments. During 2006 and 2005, we entered into foreign currency forward contracts with an aggregated notional amount of €201.5 million and designated the contracts as cash flow hedges. The fair value of these forward contracts at December 31, 2006 was ($1.2) million.

Energy Contract Hedging Activities

     We are exposed to price risk associated with the volatility of natural gas, fuel oil and electricity rates. During 2005 and 2006, we entered into contracts with several of our suppliers to fix our payments on set quantities of natural gas, fuel oil and electricity. If the contract meets the criteria of a derivative, we designate these contracts as cash flow hedges of the overall changes in floating-rate payments made on our energy purchases. As of December 31, 2006, we had energy-related derivatives with aggregate notional amounts of $5.3 million and an estimated fair value and carrying amount of ($1.1) million. These contracts mature on or before December 31, 2007.

Equity Securities Hedging Activities

     We are exposed to price risk associated with changes in the fair value of certain equity securities. During 2006, we entered into forward sale agreements with an aggregate notional amount, which represents the fair value of the underlying marketable securities, of approximately $6.6 million and an aggregate fair value of the forward sale agreements of approximately ($0.3) million, to protect against a reduction in the fair value of these securities. We designated this forward sale as a fair value hedge.

Interest Rate Sensitive Liabilities

     The table below provides information about our liabilities that are sensitive to changes in interest rates as of December 31, 2006. As the table incorporates only those exposures that existed as of December 31, 2006, it does not consider those exposures or positions that could arise after that date.

     Moreover, because there were no firm commitments to actually sell these instruments at fair value as of December 31, 2006, the information presented herein is an estimate and has limited predictive value. As a result, our ultimate realized gain or loss, if any, will depend on the exposures that arise during future periods, hedging strategies, prevailing interest rates and other market factors existing at the time. The debt classification and interest rates shown below give effect to fair value hedges and other fees or expenses, where applicable (in thousands):

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																						Estimated
																			Total			Fair
	2007			2008			2009			2010			2011			Thereafter			Balance			Value(1)
Interest rate sensitive liabilities:
Unsecured credit facilities:	$	—		$	—		$	—		$	84,723		$	—		$	—		$	84,723		$	84,723
Average nominal interest rate(2)		—			—			—			5.5	%		—			—			5.5	%		—
Term loan — International:	$	235,771		$	—		$	—		$	—		$	—		$	—		$	235,771		$	235,771
Average nominal interest rate(2)		4.1	%		—			—			—			—			—			4.1	%		—
Long-Term Unsecured Debt:
Fixed rate	$	386,250		$	312,822		$	81,250		$	263,750		$	625,000		$	1,610,332		$	3,279,404		$	3,360,607
Average nominal interest rate(2)		5.4	%		4.0	%		7.6	%		6.0	%		4.5	%		5.7	%		5.4	%		—
Variable rate(3)	$	—		$	21,468		$	—		$	—		$	—		$	54,827		$	76,295		$	76,295
Average nominal interest rate(2)		—			3.9	%		—			—			—			4.0	%		4.0	%		—
Mortgages payable:
Fixed rate debt	$	77,690		$	196,637		$	392,102		$	131,931		$	174,143		$	820,480		$	1,792,983		$	1,818,091
Average nominal interest rate(2)		5.8	%		5.7	%		6.0	%		6.0	%		6.1	%		6.0	%		6.0	%		—
Variable rate debt	$	27,235		$	15,859		$	8,132		$	8,813		$	44,446		$	878,766		$	983,251		$	983,251
Average nominal interest rate(2)		5.1	%		2.4	%		5.1	%		5.1	%		4.6	%		4.9	%		4.8	%		—

(1)	The estimated fair value for each of the liabilities listed was calculated by discounting the actual principal payment stream at prevailing interest rates (obtained from third party financial institutions) currently available on debt instruments with similar terms and features.
(2)	Reflects the weighted average nominal interest rate on the liabilities outstanding during each period, giving effect to principal payments and final maturities during each period, if any. The nominal rates for variable rate mortgages payable have been held constant during each period presented based on the actual variable rates as of December 31, 2006. The weighted average effective interest rate on the unsecured credit facilities, Long-Term Unsecured Debt and mortgages payable was 5.9%, 5.6% and 5.4, respectively, as of December 31, 2006.
(3)	Represents unsecured tax-exempt bonds.

Item 8. Financial Statements and Supplementary Data

     Our Balance Sheets as of December 31, 2006 and 2005, and our Statements of Earnings, Shareholders’ Equity and Comprehensive Income (Loss) and Cash Flows for each of the years in the three-year period ended December 31, 2006, Schedule III — Real Estate and Accumulated Depreciation and Schedule IV — Mortgage Loans on Real Estate, together with the reports of KPMG LLP, Independent Registered Public Accounting Firm, are included under Item 15 of this Annual Report and are incorporated herein by reference. Unaudited selected quarterly financial data is presented in Note 14 of our audited financial statements in this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     Not applicable.

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Item 9A. Controls and Procedures

     An evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were, to the best of their knowledge, effective as of December 31, 2006, to ensure that information required to be disclosed in reports that are filed or submitted under the Securities Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to December 31, 2006, there were no significant changes in the company’s disclosure controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Management’s Report on Internal Control Over Financial Reporting

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. We have concluded that, as of December 31, 2006, our internal control over financial reporting was effective based on these criteria. Our independent registered public accounting firm, KPMG LLP, has issued an audit report on our assessment of our internal control over financial reporting, which is included herein.

     Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of their inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Archstone-Smith have been detected.

     We acquired DeWAG during July 2006 and have excluded the DeWAG financial reporting controls from our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006. DeWAG’s total assets were $857.0 million and total revenues were $27.7 million as of and for the year ended December 31, 2006 and are included in our consolidated financial statements.

/s/ R. Scot Sellers

R. Scot Sellers

Chairman of the Board, Chief Executive Officer and Trustee (principal executive officer)

/s/ Charles E. Mueller, Jr.

Charles E. Mueller, Jr.

Chief Financial Officer (principal financial officer)

Item 9B. Other Information

     Not Applicable.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance

     For information regarding certain senior officers, including all of our executive officers, see “Item 1. Business — Officers of Archstone-Smith.” For information on our Code of Ethics, see “Item 1. Business — Available Information and Code of Ethics.” The other information required by this Item 10 is incorporated herein by reference to the description under the captions “Nominees,” “Meetings and Committees of the Board,” and “Section 16(a) Beneficial Ownership Reporting Compliance,” in our definitive proxy statement for our annual meeting of shareholders (“2007 Proxy Statement”).

Item 11. Executive Compensation

     Incorporated herein by reference to the description under the captions “Compensation Discussion and Analysis,” “2006 Executive Compensation,” “Post-Employment Payments,” and “Trustee Compensation” in the 2007 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     Incorporated herein by reference to the description under the captions “Principal Shareholders” in the 2007 Proxy Statement.

Equity Compensation Plan Information

					(c)
	(a)		(b)		Number of securities
	Number of securities		Weighted-average		remaining available for
	to be issued upon		exercise price of		future issuance under
	exercise of		outstanding		equity compensation plans
	outstanding options,		options, warrants		(excluding securities
Plan Category	warrants and rights		and rights		reflected in column (a))
Equity compensation plans approved by security holders		3,151,540	$	30.72		10,316,885
Equity compensation plans not approved by security holders		—		—		—
Total		3,151,540	$	30.72		10,316,885

Item 13. Certain Relationships and Related Transactions, and Director Independence

     Incorporated herein by reference to the description under the caption “Certain Relationships and Transactions” and “Meetings and Committees of the Board” in the 2007 Proxy Statement.

Item 14. Principal Accounting Fees and Services

     Incorporated herein by reference to the description under the caption, “Ratification of Relationship with Independent Registered Public Accountants” in the 2007 Proxy Statement.

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Part IV

Item 15. Exhibits, Financial Statement Schedules

The following documents are filed as part of this report:

(a) Financial Statements and Schedules:

1. Financial Statements

See Index to Financial Statements and Schedules on page 47 of this report, which is incorporated herein by reference.

2. Financial Statement Schedules:

See Schedule III on page 85 of this report, which is incorporated herein by reference.

See Schedule IV on page 87 of this report, which is incorporated herein by reference.

All other schedules have been omitted since the required information is presented in the financial statements and the related notes or is not applicable.

3. Exhibits

See Index to Exhibits on page 89 of this report, which is incorporated herein by reference.

(b) Exhibits:

The Exhibits required by Item 601 of Registration S-K are listed in the Index to Exhibits on page 89 of this Annual Report, which is incorporated herein by reference.

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INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

	Page
Reports of Independent Registered Public Accounting Firm		48-49
Consolidated Balance Sheets as of December 31, 2006 and 2005		50
Consolidated Statements of Earnings for the years ended December 31, 2006, 2005 and 2004		51
Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the years ended December 31, 2006, 2005 and 2004		52
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004		53
Notes to Consolidated Financial Statements		54-83
Report of Independent Registered Public Accounting Firm on Supplementary Information		84
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2006		85-86
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2006		87
Signatures		88
Index to Exhibits		89-90

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Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Archstone-Smith Trust:

     We have audited the accompanying consolidated balance sheets of Archstone-Smith Trust and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of earnings, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of Archstone-Smith Trust’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Archstone-Smith Trust and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Archstone-Smith Trust’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2007, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Denver, Colorado
March 1, 2007

48

Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Archstone-Smith Trust:

     We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that Archstone-Smith Trust maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Archstone-Smith Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Archstone-Smith Trust’s internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

     A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     In our opinion, management’s assessment that Archstone-Smith Trust maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Archstone-Smith Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

     Archstone-Smith Trust acquired DeWAG Deutsche WohnAnlage GmbH (DeWAG) during July 2006, and has excluded from its assessment of the effectiveness of Archstone-Smith Trust's internal control over financial reporting as of December 31, 2006, DeWAG’s internal control over financial reporting associated with total assets of $857.0 million and total revenues of $27.7 million included in the consolidated financial statements of Archstone-Smith Trust as of and for the year ended December 31, 2006. Our audit of internal control over financial reporting of Archstone-Smith Trust also excluded an evaluation of the internal control over financial reporting of DeWAG.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Archstone-Smith Trust and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of earnings, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated March 1, 2007, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Denver, Colorado
March 1, 2007

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ARCHSTONE-SMITH TRUST

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2006		2005
ASSETS
Real estate	$	12,858,507	$	11,031,917
Real estate — held for sale		329,133		327,347
Less accumulated depreciation		957,146		836,693
		12,230,494		10,522,571
Investments in and advances to unconsolidated entities		235,323		132,728
Net real estate investments		12,465,817		10,655,299
Cash and cash equivalents		48,655		13,638
Restricted cash in tax-deferred exchange and bond escrow		319,312		495,274
Other assets		425,343		297,884
Total assets	$	13,259,127	$	11,462,095
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unsecured credit facilities	$	84,723	$	394,578
Term Loan — International		235,771		—
Long-Term Unsecured Debt		3,339,462		2,523,639
Long-Term Unsecured Debt — held for sale		16,237		16,397
Mortgages payable		2,743,081		2,360,181
Mortgages payable — held for sale		33,153		33,471
Accounts payable		71,967		53,366
Accrued interest		67,135		50,991
Accrued expenses and other liabilities		365,260		260,682
Total liabilities		6,956,789		5,693,305
Minority interest		739,149		787,273
Shareholders’ equity:
Perpetual Preferred Shares		50,000		50,000
Common Shares (Par value $0.01; 450,000,000 shares authorized; 220,147,167 and 212,413,939 shares issued and outstanding in 2006 and 2005, respectively)		2,201		2,124
Additional paid-in capital		4,883,164		4,652,901
Accumulated other comprehensive income (loss)		3,520		(1,720	)
Retained Earnings		624,304		278,212
Total shareholders’ equity		5,563,189		4,981,517
Total liabilities and shareholders’ equity	$	13,259,127	$	11,462,095

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE-SMITH TRUST

CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)

	Years Ending December 31,
	2006			2005			2004
Revenues:
Rental revenues	$	1,056,176		$	777,603		$	642,270
Other income		77,410			56,030			19,208
		1,133,586			833,633			661,478
Expenses:
Rental expenses		248,837			182,546			155,350
Real estate taxes		94,505			69,836			55,397
Depreciation on real estate investments		261,438			187,771			150,470
Interest expense		245,895			164,035			125,108
General and administrative expenses		68,188			58,604			55,479
Other expenses		13,715			49,232			13,563
		932,578			712,024			555,367
Earnings from operations		201,008			121,609			106,111
Minority interest		(30,541	)		(21,164	)		(20,465	)
Income from unconsolidated entities		36,316			22,432			17,902
Other non-operating income		2,338			28,807			28,162
Net earnings before discontinued operations		209,121			151,684			131,710
Net earnings from discontinued operations		518,313			464,488			410,632
Net earnings		727,434			616,172			542,342
Preferred Share dividends		(3,829	)		(3,831	)		(10,892	)
Net earnings attributable to Common Shares — Basic		723,605			612,341			531,450
Interest on Convertible Debt		11,139			—			—
Dividends on Convertible Preferred Shares		—			—			3,755
Minority interest		708			352			509
Net earnings attributable to Common Shares — Diluted	$	735,452		$	612,693			535,714
Weighted average Common Shares outstanding:
Basic		216,159			203,526			196,098
Diluted		221,153			204,492			199,233
Net earnings per Common Share — Basic:
Net earnings before discontinued operations	$	0.95		$	0.73		$	0.62
Discontinued operations, net		2.40			2.28			2.09
Net earnings	$	3.35		$	3.01		$	2.71
Net earnings per Common Share — Diluted:
Net earnings before discontinued operations	$	0.95		$	0.73		$	0.61
Discontinued operations, net		2.38			2.27			2.08
Net earnings	$	3.33		$	3.00		$	2.69
Dividends paid per Common Share	$	1.74		$	1.73		$	2.72

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE-SMITH TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2006, 2005 and 2004
(In thousands)

	Convertible			Perpetual
	Preferred			Preferred									Accumulated
	Shares at			Shares at									Other
	Aggregate			Aggregate			Common			Additional			Comprehensive
	Liquidation			Liquidation			Shares at			Paid-in			Income			Retained
	Preference			Preference			Par Value			Capital			(Loss)			Earnings			Total
Balances at December 31, 2003	$	50,000		$	98,940		$	1,948		$	3,952,404		$	14,235		$	27,160		$	4,144,687
Comprehensive income:
Net earnings		—			—			—			—			—			542,342			542,342
Change in fair value of cash flow hedges		—			—			—			—			3,750			—			3,750
Change in fair value/sale of marketable securities		—			—			—			—			(22,410	)		—			(22,410	)
Comprehensive income attributable to Common Shares																				523,682
Preferred Share dividends		—			—			—			—			—			(10,892	)		(10,892	)
Common Share dividends		—			—			—			—			—			(539,116	)		(539,116	)
A-1 Common Units converted into Common Shares		—			—			24			47,925			—			—			47,949
Conversion of Preferred Shares into Common Shares		(50,000	)		—			26			49,974			—			—			—
Common Share repurchases		—			—			(35	)		(95,633	)		—			—			(95,668	)
Preferred Share repurchases		—			(48,940	)		—			1,727			—			—			(47,213	)
Exercise of Options		—			—			31			61,436			—			—			61,467
Issuance of Common Shares in exchange for real estate		—			—			2			4,500			—			—			4,502
Other, net		—			—			—			3,780			—			—			3,780
Balances at December 31, 2004		—			50,000			1,996			4,026,113			(4,425	)		19,494			4,093,178
Comprehensive income:
Net earnings		—			—			—			—			—			616,172			616,172
Change in fair value of cash flow hedges		—			—			—			—			4,211			—			4,211
Change in fair value/sale of marketable securities		—			—			—			—			(1,214	)		—			(1,214	)
Foreign currency exchange translation		—			—			—			—			(292	)		—			(292	)
Comprehensive income attributable to Common Shares																				618,877
Preferred Share dividends		—			—			—			—			—			(3,831	)		(3,831	)
Common Share dividends		—			—			—			—			—			(353,623	)		(353,623	)
A-1 Common Units converted into Common Shares		—			—			4			8,411			—			—			8,415
Common Share repurchases		—			—			(16	)		(56,479	)		—			—			(56,495	)
Exercise of Options		—			—			17			41,549			—			—			41,566
Equity-classified awards under Compensation Plans		—			—			2			14,668			—			—			14,670
Issuance of Common Shares		—			—			121			491,277			—			—			491,398
Other, net (Including Minority Interest Revaluation of $129,051)		—			—			—			127,362			—			—			127,362
Balances at December 31, 2005	$	—		$	50,000		$	2,124		$	4,652,901		$	(1,720	)	$	278,212		$	4,981,517
Comprehensive income:
Net earnings		—			—			—			—			—			727,434			727,434
Change in fair value of hedges		—			—			—			—			1,058			—			1,058
Change in fair value of marketable securities		—			—			—			—			1,638			—			1,638
Foreign currency exchange translation		—			—			—			—			2,544			—			2,544
Comprehensive income attributable to Common Shares																				732,674
Preferred Share dividends		—			—			—			—			—			(3,829	)		(3,829	)
Common Share dividends		—			—			—			—			—			(377,513	)		(377,513	)
A-1 Common Units converted into Common Shares		—			—			60			143,344			—			—			143,404
Issuance of Common Shares under Dividend Reinvestment Plan		—			—			5			27,095			—			—			27,100
Exercise of Options		—			—			12			27,704			—			—			27,716
Equity-classified awards under Compensation Plans		—			—			—			10,681			—			—			10,681
Other, net (Including Minority Interest Revaluation of $26,618)		—			—			—			21,439			—			—			21,439
Balances at December 31, 2006	$	—		$	50,000		$	2,201		$	4,883,164		$	3,520		$	624,304		$	5,563,189

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE-SMITH TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Years Ended December 31,
	2006			2005			2004
Operating activities:
Net earnings	$	727,434		$	616,172		$	542,342
Adjustments to reconcile net earnings to net cash flow provided by operating activities:
Depreciation and amortization		302,495			252,174			232,990
Gains on dispositions of depreciated real estate		(602,915	)		(524,684	)		(451,816	)
Gains on sale of marketable equity securities		(1,673	)		(27,948	)		(28,162	)
Provisions for possible loss on investments		4,328			9,803			—
Minority interest		107,641			85,332			69,821
Equity in earnings from unconsolidated entities		(6,118	)		6,605			6,233
Interest accrued on Mezzanine loans		(9,781	)		(5,224	)		—
Change in other assets		(14,786	)		7,132			526
Change in accounts payable, accrued expenses and other liabilities		49,067			7,663			32,113
Other, net		(18,264	)		(13,006	)		(4,150	)
Net cash flow provided by operating activities		537,428			414,019			399,897
Investing activities:
Real estate investments		(2,216,598	)		(2,016,573	)		(1,423,549	)
Purchase of DeWAG net of cash acquired of $20,364		(252,428	)		—			—
Change in investments in unconsolidated entities, net		(76,366	)		(10,991	)		(21,662	)
Proceeds from dispositions		1,888,341			1,538,839			1,821,641
Change in restricted cash		175,962			(375,179	)		60,825
Change in notes receivable, net		(82,414	)		(98,909	)		(6,077	)
Proceeds from notes receivable		46,081			36,654			—
Other, net		11,158			(38,462	)		97,075
Net cash flow provided by (used in) investing activities		(506,264	)		(964,621	)		528,253
Financing activities:
Proceeds from Long-Term Unsecured Debt		859,385			695,724			297,052
Payments on Long-Term Unsecured Debt		(51,250	)		(251,250	)		(72,950	)
Principal repayment of mortgages payable, including prepayment penalties		(324,700	)		(500,963	)		(159,558	)
Regularly scheduled principal payments on mortgages payable		(12,949	)		(15,067	)		(11,512	)
Proceeds from Term Loan — International		272,792			—			—
Principal repayments on Term Loan — International		(37,021	)		—			—
Proceeds from mortgage notes payable		—			33,807			51,656
Proceeds from (payments on) unsecured credit facilities, net		(309,855	)		375,578			(84,790	)
Proceeds from issuance of Common Shares, net		—			491,398			—
Proceeds from Common Shares issued under DRIP and employee stock options		57,773			41,566			61,467
Repurchase of Common Shares and Preferred Shares		—			(56,495	)		(146,954	)
Repurchase of Series E and F Perpetual Preferred Units		—			(19,522	)		(42,712	)
Cash dividends paid on Common Shares		(377,513	)		(353,623	)		(539,116	)
Cash dividends paid on Preferred Shares		(3,829	)		(3,831	)		(9,165	)
Cash dividends paid to minority interests		(55,079	)		(64,385	)		(69,799	)
Other, net		(13,901	)		(11,952	)		(3,744	)
Net cash flow provided by (used in) financing activities		3,853			360,985			(730,125	)
Net change in cash and cash equivalents		35,017			(189,617	)		198,025
Cash and cash equivalents at beginning of period		13,638			203,255			5,230
Cash and cash equivalents at end of period	$	48,655		$	13,638		$	203,255

These consolidated statements of cash flows combine cash flows from discontinued operations with
cash flows from continuing operations. See Note 18 for supplemental information on non-cash
investing and financing activities.

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE-SMITH TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006, 2005 and 2004
(The glossary included in this Annual Report is hereby incorporated by reference)

(1) Description of Business and Summary of Significant Accounting Policies

Business

     Our business is conducted primarily through Archstone-Smith Operating Trust, our majority owned subsidiary, which we refer to herein as the “Operating Trust”. We are structured as an UPREIT under which all property ownership and business operations are conducted through the Operating Trust. We are the sole trustee and own approximately 88.2% of the Operating Trust’s outstanding A-1 Common Units; the remaining 11.8% of the Common Units are owned by minority interest holders. As used herein, “we,” “our” and the “company” refers to the Operating Trust and Archstone-Smith, collectively, except where the context otherwise requires. Archstone-Smith is an equity REIT organized under the laws of the State of Maryland. We focus on creating value for our shareholders by acquiring, developing, redeveloping and operating apartments primarily in our core markets which are characterized by protected locations with limited land for new housing construction, expensive single-family home prices, and a strong, diversified economic base with significant employment growth potential.

Principles of Consolidation

     The accounts of Archstone-Smith and its controlled subsidiaries are consolidated in the accompanying financial statements. All significant inter-company accounts and transactions have been eliminated. We use the equity method to account for investments that do not qualify as variable interest entities, variable interest entities where we are not the primary beneficiary and entities that we do not control, or where we do not own a majority of the economic interest, but have the ability to exercise significant influence over the operating and financial policies of the investee. We also use the equity method when we function as the managing member and our partner does not have substantive participating rights or we can be replaced by a partner if we are the managing member. For an investee accounted for under the equity method, our share of net earnings or losses of the investee is reflected in income as earned and dividends are credited against the investment as received.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the financial statements and the related notes. Actual results could differ from management’s estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period they are determined to be necessary.

Discontinued Operations

     For properties accounted for under SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” the results of operations for properties sold during the period or classified as held for sale at the end of the current period are required to be classified as discontinued operations in the current and prior periods. The property-specific components of net earnings that are classified as discontinued operations include rental revenue, rental expense, real estate tax, depreciation expense, minority interest and interest expense (actual interest expense for encumbered properties and a pro-rata allocation of interest expense for any unencumbered portion up to our weighted average leverage ratio). The net gain or loss and the related internal disposition costs on the eventual disposal of the held for sale properties are also classified as discontinued operations. Land sales and properties sold by our unconsolidated entities are not included in discontinued operations and related gains or losses are reported as a component of other income and income from unconsolidated entities, respectively.

Cash and Cash Equivalents

     Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all highly liquid instruments with maturities when purchased of three months or less to be cash equivalents.

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ARCHSTONE-SMITH TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Cash in Tax-Deferred Exchange and Bond Escrow

     In most cases, disposition proceeds are set aside and designated to fund future tax-deferred exchanges of qualifying real estate investments. If these proceeds are not redeployed to qualifying real estate investments within 180 days, these funds are redesignated as cash and cash equivalents. We generally decide if we are not going to do an exchange within 45 days and it is therefore rare for cash to remain in escrow for the full 180 days. Additionally, cash proceeds from bond financings held in escrow to fund future development costs and cash held as security deposits are classified as restricted cash.

Marketable Securities and Other Investments

     All publicly traded equity securities are classified as “available for sale” and carried at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity. Private investments, for which we do not have the ability to exercise significant influence, are accounted for at cost. Declines in the value of public and private investments that management determines are other than temporary are recorded as a provision for loss on investments.

Real Estate and Depreciation

     Real estate, other than properties held for sale, is carried at depreciated cost. Long-lived assets designated as being held for sale are reported at the lower of their carrying amount or estimated fair value less cost to sell, and thereafter are no longer depreciated. Costs associated with acquisition efforts are recorded in other assets and the unsuccessful acquisition efforts are expensed at the time the pursuit is abandoned.

     We allocate the cost of newly acquired properties between net tangible and identifiable intangible assets. When allocating cost to an acquired property, we first allocate costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the property is vacant. We estimate the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. We depreciate the building and fixtures based on the expected useful life of the asset and amortize the intangible value of the lease agreements over the average remaining life of the existing leases. This amortization expense is included in depreciation on real estate investments in our consolidated statements of earnings

     In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

     We have an investment organization that is responsible for development and redevelopment of apartment communities. Consistent with GAAP, all direct and certain indirect costs, including interest and real estate taxes, incurred during development and redevelopment activities are capitalized. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period. Included in capitalized costs are management’s estimates of the direct and incremental personnel costs and indirect project costs associated with our development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development accounting, legal fees, and various office costs that clearly relate to projects under development.

     Depreciation is computed over the expected useful lives of depreciable property on a straight-line basis as follows:

Building and related land improvements	15-40 years
Furniture, fixtures, equipment and other	3-10 years
Intangible value of retail and commercial lease agreements	1-20 years
Intangible value of residential lease agreements	6-48 months

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ARCHSTONE-SMITH TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest

     During 2006, 2005 and 2004, the total interest paid in cash on all outstanding debt was $315.5 million, $263.5 million and $229.6 million, respectively.

     We capitalize interest during the construction period as part of the cost of apartment communities under development. Interest capitalized during 2006, 2005 and 2004 aggregated $51.8 million, $39.1 million and $23.6 million, respectively.

Cost of Raising Capital

     Costs incurred in connection with the issuance of equity securities are deducted from shareholders’ equity. Costs incurred in connection with the issuance or renewal of debt is subject to the provisions of EITF 96-19. Accordingly, if the terms of the renewed or modified debt instrument are deemed to be substantially different (i.e., a 10 percent or more difference in the present value of the remaining cash flows), all unamortized loan costs associated with the extinguished debt are charged against earnings during the current period; otherwise, costs are capitalized as other assets and amortized into interest expense over the term of the related loan or the renewal period. The balance of any unamortized loan costs associated with retired debt is expensed upon retirement. We utilize the straight-line method to amortize debt issuance costs as it approximates the effective interest method required under SFAS No. 91. Amortization of loan costs included in interest expense for 2006, 2005 and 2004 was $6.1 million, $4.2 million and $4.4 million, respectively.

Moisture Infiltration and Mold Remediation Costs

     We estimate and accrue costs related to the correction of moisture infiltration and related mold remediation when we anticipate incurring such remediation costs because of the assertion of a legal claim or threatened litigation. When we incur remediation costs at our own discretion, the cost is recognized as incurred. Costs of addressing moisture infiltration and resulting mold remediation issues are only capitalized, subject to recoverability, when it is determined by management that such costs also extend the life, increase the capacity, or improve the safety or efficiency of the property relative to when the community was originally constructed or acquired, if later. All other related costs are expensed.

Intangibles

     Intangible assets consist of lease-related intangibles and certain intangibles associated with the DeWAG acquisition. The market value of above and below market leases are based on our estimate of current market rents as compared to the rent that we are receiving and is recorded in either other assets or other liabilities. These assets are charged and liabilities are credited to rental income over the estimated term of the lease. We also recognize the value of our in-place residential lease agreements and amortize these assets into depreciation on real estate investments over the estimated term of the lease.

     The following is a summary of the domestic intangibles and the corresponding amortization we expect to record (dollar amounts in thousands). See Note 3 for a summary of DeWAG-related intangibles.

			Weighted
	Gross		Average
	Carrying	Accumulated	Useful Life
	Amount	Amortization	(in years)
In-place leases	$64,127	$49,933	2
Above-market leases	936	141	7
Total intangible assets	$65,063	$50,074
Below-market leases	$17,921	$1,794	6
Total intangible liabilities	$17,921	$1,794

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Estimated net amortization for the year ended
2007	$	5,868
2008	$	440
2009	$	(133	)
2010	$	(353	)
2011	$	(313	)

     We will perform an impairment test annually, or more frequently, if events or changes in circumstances indicate impairment of our intangible assets, which are included in other assets.

Insurance Recoveries

     We recognize insurance recovery proceeds as other income if the recovery is related to items that were originally expensed, such as, legal settlements, legal expenses and repairs that did not meet capitalization guidelines. For recoveries of property damages that were eligible for capitalization, we reduce the basis of the property or if the property has subsequently been sold, we recognize the proceeds as an additional gain on sale. We recognize insurance recoveries at such time that we believe the recovery is probable and we have sufficient information to make a reasonable estimate of proceeds, except in cases where we have to pursue recovery via litigation. In this circumstance, we recognize the recovery when we have a signed, legally binding agreement with the insurance carrier.

Derivative Financial Instruments

     We utilize derivative financial instruments to manage our interest rate risk, foreign currency exchange risk, exposure to changes in the fair value of certain investments in equity securities and exposure to volatile energy prices. During 2003, we adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” Under SFAS No. 149, the resulting assets and liabilities associated with derivative financial instruments are carried on our financial statements at estimated fair value at the end of each reporting period. The changes in the fair value of a fair value hedge and the fair value of the items hedged are generally recorded in earnings for each reporting period. The change in the fair value of effective cash flow hedges and foreign currency hedges are carried on our financial statements as a component of accumulated other comprehensive income (loss). If effective, our hedges have little or no impact on our current earnings.

Revenue and Gain Recognition

     We generally lease our apartment units under operating leases with terms of one year or less. Communities subject to the Oakwood Master Leases entered into in 2005 have a seven year term. Rental income related to leases is recognized in the period earned over the lease term in accordance with Statement of Financial Accounting Standards SFAS No.13, “Accounting for Leases.” Rent concessions are recognized as an offset to revenues collected over the term of the underlying lease.

     We use the full accrual method of profit recognition in accordance with SFAS No. 66 to record gains on sales of real estate. Accordingly, we evaluate the related GAAP requirements in determining the profit to be recognized at the date of each sale transaction (i.e., the profit is determinable and the earnings process is complete). We recognize deferred gains when a property is sold to a third party.

Rental Expenses

     Rental expenses shown on the accompanying Statements of Earnings include costs associated with on-site and property management personnel, utilities, repairs and maintenance, property insurance, marketing, landscaping and other on-site and related administrative costs. Utility reimbursements from residents, which are recorded as offsets to utility expenses, aggregated $25.4 million, $19.2 million and $16.3 million for 2006, 2005 and 2004, respectively.

Legal Fees

     We generally recognize legal expenses as incurred; however, if such fees are related to the accrual for an estimated legal settlement, we accrue for the related incurred and anticipated legal fees at the same time we accrue the estimated cost of settlement.

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Foreign Currency Translation

     Assets and liabilities of the company’s foreign operations are translated into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated at average rates in effect during the period. The resulting translation adjustment is reflected as accumulated other comprehensive income (loss), a separate component of shareholders’ equity on the Consolidated Balance Sheets. The functional currency utilized for these subsidiaries is the local foreign currency.

Stock-Based Compensation

     We account for our stock based compensation using SFAS No. 123R, “Share-Based Payment” and expense the grant date fair value of the stock options and other equity based compensation issued to employees.

Income Taxes

     We have made an election to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and we believe we qualify as a REIT and have made all required distributions of our taxable income. See Note 16 for more information on income taxes.

     Income taxes for our taxable REIT subsidiaries are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.

Comprehensive Income

     Comprehensive income, which is defined as net earnings and all other non-owner changes in equity, is displayed in the accompanying consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss). Other comprehensive income (loss) reflects unrealized holding gains and losses on the available-for-sale investments, changes in the fair value of effective cash flow hedges and gains and losses on long-term foreign currency transactions (see Derivative Financial Instruments).

     Our accumulated other comprehensive income (loss) for the years ended December 31, 2006, 2005 and 2005 is as follows (in thousands).

	Net
	Unrealized									Accumulated
	Gains on						Foreign			Other
	Marketable			Cash Flow			Currency			Comprehensive
	Securities			Hedges			Translation			Income/(Loss)
Balance at December 31, 2003	$	23,808		$	(9,573	)	$	—		$	14,235
Change in fair value of hedges		—			3,750			—			3,750
Change in fair value of marketable securities		1,372			—			—			1,372
Reclassification adjustments for realized net gains		(23,782	)		—			—			(23,782	)
Balance at December 31, 2004	$	1,398		$	(5,823	)	$	—		$	(4,425	)
Change in fair value of hedges		—			4,211			—			4,211
Change in fair value of marketable securities		865			—			—			865
Reclassification adjustments for realized net gains		(2,079	)		—			—			(2,079	)
Foreign currency exchange translation		—			—			(292	)		(292	)
Balance at December 31, 2005	$	184		$	(1,612	)	$	(292	)	$	(1,720	)
Change in fair value of hedges		—			1,058			—			1,058
Change in fair value of marketable securities		1,638			—			—			1,638
Foreign currency exchange translation		—			—			2,544			2,544
Balance at December 31, 2006	$	1,822		$	(554	)	$	2,252		$	3,520

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Per Share Data

     Following is a reconciliation of basic EPS to diluted EPS for the periods indicated (in thousands):

	Years Ended December 31,
	2006		2005		2004
Reconciliation of numerator between basic and diluted net earnings per Common Share(1):
Net earnings attributable to Common Shares — Basic	$	723,605	$	612,341	$	531,450
Interest on Convertible Debt		11,139		—		—
Dividends on Convertible Preferred Shares		—		—		3,755
Minority interest		708		352		509
Net earnings attributable to Common Shares — Diluted	$	735,452	$	612,693	$	535,714
Reconciliation of denominator between basic and diluted net earnings per Common Share(1):
Weighted average number of Common Shares outstanding— Basic		216,159		203,526		196,098
Assumed conversion of Convertible Debt into Common Shares		4,210		—		—
Assumed conversion of Preferred Shares into Common Shares		—		—		2,182
Incremental options		784		966		953
Weighted average number of Common Shares outstanding— Diluted		221,153		204,492		199,233

(1) Excludes the impact of potentially dilutive equity securities during periods in which they are anti-dilutive.

Market Concentration Risk

     Approximately 34.6%, 25.8%, 12.5% and 11.5% of our apartment communities are located in the Washington, D.C. metropolitan area, Southern California, New York City metropolitan area and the San Francisco Bay Area of California, based on NOI for the three months ended December 31, 2006, exclusive of Ameriton and International properties. Southern California is the geographic area comprising Los Angeles County, San Diego, Orange County, Ventura County and the Inland Empire. We are, therefore, subject to increased exposure (positive or negative) from economic and other competitive factors specific to markets within these geographic areas.

Preferred Share Redemptions

     When redeeming preferred shares, we recognize share issuance costs as a charge to preferred share dividends in accordance with Financial Accounting Standards Board (“FASB”) — Emerging Issues Task Force (“EITF”) Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock.” In July 2003, the Securities and Exchange Commission (“SEC”) staff issued a clarification of the SEC’s position on the application of FASB-EITF Topic D-42. The SEC staff’s position, as clarified, is that in applying Topic D-42, the carrying value of preferred shares that are redeemed should be reduced by the amount of original issuance costs, regardless of where in shareholders’ equity those costs are reflected.

Reclassifications

     Certain prior year amounts have been reclassified to conform to the current presentation. We have corrected the presentation of the cash flows related to our unconsolidated entities which resulted in a $29.0 million and $24.1 million increase to operating cash flows for the years ended December 31, 2005 and 2004, respectively with a corresponding decrease to investing cash flows.

New Accounting Pronouncements

     In June 2005, the Emerging Issues Task Force issued EITF No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF No. 04-5). This Issue provides a framework for evaluating whether a general partner or group of general partners or managing members controls a limited partnership or limited liability company and therefore should consolidate the entity. The presumption that the general partner or group of general partners or managing members controls a limited liability partnership or limited liability company may be overcome if the limited partners or members have (1) the substantive ability to

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dissolve the partnership without cause, or (2) substantive participating rights. EITF No. 04-5 became effective on June 30, 2005 for new or modified limited partnerships or limited liability companies and January 1, 2006 for all existing arrangements. The adoption of EITF No. 04-5 did not have a material impact on our financial position, net earnings or cash flows.

     In April 2006, the FASB issued FASB Staff Position (FSP) FIN 46R-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).” This FSP addresses certain implementation issues related to FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities.” Specifically, FSP FIN 46R-6 addresses how a reporting enterprise should determine the variability to be considered in applying FIN 46R. The variability that is considered in applying FIN 46R affects the determination of: (a) whether an entity is a variable interest entity (VIE); (b) which interests are “variable interests” in the entity; and (c) which party, if any, is the primary beneficiary of the VIE. Our assessment of variability affects any calculation of expected losses and expected residual returns, if such a calculation is necessary. The company is required to apply the guidance in this FSP prospectively to all entities (including newly created entities) with which it first becomes involved and to all entities previously required to be analyzed under FIN 46R when a “reconsideration event” has occurred, beginning July 1, 2006. The company will evaluate the impact of this FSP at the time any such “reconsideration event” occurs, and for any new entities with which the company becomes involved in future periods.

     In July 2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” FIN 48 defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 is not expected to not have a material effect on our financial position, net earnings or cash flows.

     In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108) Topic 1N, “Financial Statements – Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” This Bulletin provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The guidance in this Bulletin must be applied to financial reports covering the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not have a material effect on our financial position, net earnings or cash flows.

     Please refer to Note 12 for details regarding the implementation of SFAS No. 123R, “Share-Based Payment.”

(2) Real Estate

Investments in Real Estate

     Investments in real estate, at cost, were as follows (dollar amounts in thousands):

	December 31, 2006				December 31, 2005
	Investment		Units (1)		Investment		Units (1)
REIT Apartment Communities:
Operating communities	$	11,208,052		60,839	$	9,966,915		66,487
Communities under construction		406,881		2,150		575,631		2,754
Development communities In Planning(2)		75,538		1,841		24,365		585
Total REIT apartment communities		11,690,471		64,830		10,566,911		69,826
Ameriton(2)		585,524		8,144		692,269		7,489
International		851,593		8,334		44,457		822
Other real estate assets(3)		60,052		—		55,627		—
Total real estate	$	13,187,640		81,308	$	11,359,264		78,137

(1) Unit information is based on management’s estimates and has not been audited by our Independent Registered Public Accounting Firm.

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(2)	Includes development communities In Planning – Owned and In Planning – Under Control. Our investment as of December 31, 2006 and December 31, 2005 for development communities In Planning – Under Control was $7.6 million and $145,000, respectively, and is reflected in the “Other assets” caption of our Consolidated Balance Sheets.
(3)	Includes land that is not In Planning and other real estate assets.

Capital Expenditures

     In conjunction with the underwriting of each acquisition of an operating community, we prepare acquisition budgets that encompass the incremental capital needed to achieve our investment objectives. These expenditures, combined with the initial purchase price and related closing costs, are capitalized and classified as “acquisition-related” capital expenditures, as incurred.

     As part of our operating strategy, we periodically evaluate each community’s physical condition relative to established business objectives and the community’s competitive position in its market. In conducting these evaluations, we consider our return on investment in relation to our long-term cost of capital as well as our research and analysis of competitive market factors. Based on these factors, we make decisions on incremental capital expenditures, which are classified as either “redevelopment” or “recurring.”

     The redevelopment category includes: (i) redevelopment initiatives, which are intended to reposition the community in the marketplace and include items such as significant upgrades to the interiors, exteriors, landscaping and amenities; (ii) revenue-enhancing expenditures, which include investments that are expected to produce incremental community revenues, such as building garages, carports and storage facilities or gating a community; and (iii) expense-reducing expenditures, which include items such as water submetering systems and xeriscaping that reduce future operating costs.

     Recurring capital expenditures consist of significant expenditures for items having a useful life in excess of one year, which are incurred to maintain a community’s long-term physical condition at a level commensurate with our operating standards. Examples of recurring capital expenditures include roof replacements, certain make-ready expenditures, parking lot resurfacing and exterior painting.

     The change in investments in real estate, at cost, consisted of the following (in thousands):

	Years Ended December 31,
	2006			2005
Balance at January 1	$	11,359,264		$	9,221,038
Acquisition-related expenditures		2,530,459			2,671,112
Redevelopment expenditures		57,414			106,264
Recurring capital expenditures		46,354			48,311
Development expenditures, excluding initial acquisition costs		388,502			324,740
Acquisition and improvement of land for development		209,916			81,340
Dispositions		(1,403,858	)		(1,175,834	)
Provision for possible loss on investment		(4,328	)		(1,500	)
Change in estimated hurricane retirements		4,496			—
Other		7,987			(8,303	)
Net apartment community activity		1,836,942			2,046,130
Change in other real estate assets		(8,566	)		92,096
Balance at December 31	$	13,187,640		$	11,359,264

     At December 31, 2006, we had unfunded contractual commitments of $651.7 million related to communities under construction and under redevelopment. The purchase prices of certain recent acquisitions in Germany were allocated to land, buildings and other assets based on preliminary estimates and is subject to change as we obtain more complete information regarding land, building and lease intangibles values.

(3) DeWAG Acquisition

     On July 27, 2006, we closed on the acquisition of 94% of the shares and 94% of an outstanding shareholder loan of DeWAG for approximately $271 million, based on the exchange rate on the transaction date. We have the option to acquire the remaining 6%, owned by the Managing Directors of DeWAG, under certain circumstances. The results of DeWAG’s operations have been included in the consolidated financial statements since July 1, 2006. The purchase was funded by an international term

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loan, which is expected to be repaid or refinanced on or before April 27, 2007. In addition, we assumed approximately $509 million in DeWAG liabilities. DeWAG specializes in the acquisition, ownership, operation and re-sale of quality residential properties in the major metropolitan areas of Southern and Western Germany, as well as West Berlin. As of July 1, 2006, the portfolio consisted of approximately 6,400 residential units. We acquired DeWAG because we are interested in expanding our operations into the German markets which we believe have attractive fundamentals for apartment operations.

     The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed at the date of the acquisition. We recognized goodwill in connection with the DeWAG acquisition. Goodwill represents the excess of the purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets. The goodwill associated with the transaction is primarily attributable to the people and processes which comprise the investing and the operating platform. We will perform an impairment test annually, or more frequently if events or changes in circumstances indicate impairment of our goodwill. Due to the recent closing of the transaction, we are still in the process of seeking information to finalize the valuations for our real estate, intangible assets, and certain liabilities. Therefore, the purchase price allocation is subject to change (dollar amounts in thousands).

Real estate	$	646,285
Other assets		67,722
Intangible assets		30,958
Goodwill		34,490
Total assets	$	779,455
Mortgages payable	$	407,933
Other liabilities		10,759
Deferred tax liability		69,327
Intangible liabilities		20,514
Total liabilities		508,533
Net assets acquired	$	270,922

     Following are preliminary values as of December 31, 2006 related to the intangible assets and liabilities we identified in connection with the DeWAG transaction and the corresponding amortization we expect to record based on the translated balances (dollar amounts in thousands).

						Weighted
	Gross					Average
	Carrying		Accumulated			Useful Life
	Amount		Amortization			(in years)
Non-compete agreements	$	19,672	$	(2,459	)		4
In-place leases		12,765		(1,596	)		4
Total intangible assets	$	32,437	$	(4,055	)
Below-market leases	$	21,496	$	(2,687	)		4
Total intangible liabilities	$	21,496	$	(2,687	)

Estimated net amortization for the year ended
2007	$	2,735
2008	$	2,735
2009	$	2,735
2010	$	1,368

     The changes in the carrying amount of goodwill for the year ended are as follows:

Balance July 1, 2006	$	34,490
Change in foreign currency translation		960
Balance December 31, 2006	$	35,450

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     Our proforma results, assuming the transaction occurred at the beginning of the year, would not have been materially different from the previously reported results.

(4)Oakwood Asset Acquisition

     During 2005 we acquired 35 communities, comprising 12,696 units, for a total purchase price of $1.5 billion from Oakwood Worldwide. We funded the acquisitions with a combination of $362.8 million or 10.1 million A-1 Common Units, $250,000 or 1,000 N-1 and N-2 Preferred Units, $581.2 million of assumed mortgage debt and the remainder through cash. We acquired two additional communities, comprising 533 units, for a total purchase price of $69.3 million from Oakwood during 2006. We funded the acquisitions with a combination of $15.8 million or 0.4 million A-1 Common Units, $28.1 million of assumed mortgage debt and the remainder through cash.

     Fourteen of the communities acquired and one community we previously owned and operated were leased back to an affiliate of Oakwood Worldwide under the Oakwood Master Leases, which have seven-year terms, expiring between July 2012 and March 2013, subject to Oakwood’s right to terminate individual leases under certain circumstances after the one-year anniversary of the acquisition, with one exception for which the right to terminate exists throughout the term. As of December 31, 2006, none of the Oakwood Master Lease Communities have been returned to the Company. The aggregate contractual base rent due under these leases is $63.1 million and is subject to annual adjustments on January 1st of each year equal to the percentage change in the average same-store NOI growth for certain other specified properties. We are responsible for payment of real estate taxes, insurance and certain capital expenditures. We have engaged an affiliate of Oakwood to manage the retail portion of each community, if applicable. The real estate cost and net book value associated with the communities subject to the Oakwood Master Leases aggregated $938.6 million and $912.8 million, respectively, as of December 31, 2006. Approximately 5.8% of our total rental revenue was earned from the Oakwood Master Leases.

(5) Discontinued Operations

     The results of operations for properties sold during the period or designated as held-for-sale at the end of the period are required to be classified as discontinued operations. The property specific components of net earnings that are classified as discontinued operations include rental revenues, rental expenses, real estate taxes, depreciation expense, minority interest, income taxes and interest expense (actual interest expense for encumbered properties and a pro-rata allocation of interest expense for any unencumbered property up to our weighted average leverage ratio), as well as the net gain or loss on the disposition of properties.

     Consistent with our capital recycling program, we had nine operating apartment communities, representing 3,502 units (unaudited), classified as held for sale under the provisions of SFAS No. 144, at December 31, 2006. Accordingly, we have classified the operating earnings from these nine properties within discontinued operations for the years ended December 31, 2006, 2005 and 2004. During the twelve months ended December 31, 2006, 2005 and 2004 we sold 42, 35 and 30 Archstone-Smith and Ameriton operating communities, respectively. The operating results of these communities and the related gain/loss on sale are also included in discontinued operations for 2006, 2005 and 2004.

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The following is a summary of net earnings from discontinued operations (in thousands):

	Years Ended December 31,
	2006			2005			2004
Rental revenue	$	139,457		$	239,806		$	325,784
Rental expenses		(44,043	)		(74,715	)		(104,023	)
Real estate taxes		(16,979	)		(30,872	)		(39,318	)
Depreciation on real estate investments		(26,858	)		(51,017	)		(69,519	)
Interest expense (1)		(29,931	)		(53,533	)		(83,644	)
Income taxes from taxable REIT subsidiaries		(9,972	)		(15,600	)		(13,975	)
Provision for possible loss on real estate investment		(4,328	)		(1,500	)		—
Debt extinguishment costs related to dispositions		(9,505	)		(5,847	)		(1,764	)
Allocation of minority interest		(77,100	)		(64,168	)		(49,356	)
Gain from the disposition of REIT real estate investments, net		548,187			448,358			386,792
Internal Disposition Costs — REIT transactions (2)		(1,860	)		(1,672	)		(2,974	)
Gain from the dispositions of taxable REIT subsidiary real estate investments, net		54,728			76,326			65,024
Internal Disposition Costs – Taxable REIT subsidiary transactions (2)		(3,483	)		(1,078	)		(2,395	)
Total discontinued operations	$	518,313		$	464,488		$	410,632

(1)	The portion of interest expense included in discontinued operations that is allocated to properties based on the company’s leverage ratio was $20.9 million, $40.2 million and $62.2 million for 2006, 2005 and 2004, respectively.
(2)	Represents the direct and incremental compensation and related costs associated with the employees dedicated to our significant disposition activity.

     The real estate, mortgage payable (if applicable) and long-term unsecured debt balances associated with operating communities classified as held for sale as of December 31, 2006 are reflected, for all periods presented, as “Real estate – held for sale”, “Mortgages payable – held for sale” and “Long-Term Unsecured Debt – held for sale” respectively, in the accompanying Consolidated Balance Sheets.

     The disposition proceeds associated with the sales of individual rental units by our International subsidiaries are included in continuing operations as other income as such sales do not meet the requirements under SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” to be reflected as discontinued operations.

(6) Investments in and Advances to Unconsolidated Entities

Real Estate Joint Ventures

     At December 31, 2006, the REIT had investments in eleven real estate joint ventures. Our ownership percentage of economic interests ranges from 20% to 87%. Major decisions are subject to the approval of all members, and we generally handle day-to-day operations. At December 31, 2006, Ameriton had five real estate joint ventures in which the venture partners are the development/managing members. Major investment decisions are generally subject to the approval of all members, and our venture partners handle all day-to-day operational decisions. Ameriton generally contributes a majority of the GAAP equity. Economic interest in the ventures varies depending upon the ultimate return of the venture. The REIT and Ameriton joint ventures do not qualify as variable interest entities as neither partner is deemed to individually receive substantially all the benefits from the joint venture. Accordingly, we utilize the guidance provided by SOP 78-9, “Accounting for Investments in Real Estate Ventures,” when determining the basis of accounting for these ventures. Because we do not control the voting interest of these joint ventures, we account for these entities using the equity method. In the aggregate, these ventures own 14,072 units. At December 31, 2006, the investment balance consists of $199.7 million in REIT joint ventures and $35.6 million in Ameriton joint ventures. At December 31, 2005, the investment balance consists of $102.6 million in

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REIT joint ventures and $30.1 million in Ameriton joint ventures. Archstone-Smith and Ameriton’s combined weighted average percentage of ownership in joint ventures based on total assets at December 31, 2006 was 37.6%.

Summary Financial Information

     Combined summary balance sheet data for our investments in unconsolidated entities presented on a stand-alone basis follows (in thousands):

	2006		2005
Assets:
Real estate	$	1,530,659	$	1,142,921
Other assets		213,569		244,557
Total assets	$	1,744,228	$	1,387,478
Liabilities and owners’ equity:
Inter-company debt payable to Archstone-Smith	$	1,519	$	2,324
Mortgages payable(1)		1,063,451		894,300
Other liabilities		126,048		120,898
Total liabilities		1,191,018		1,017,522
Owners’ equity		553,210		369,956
Total liabilities and owners’ equity	$	1,744,228	$	1,387,478

(1) The Operating Trust guarantees $292.0 million of the outstanding debt balance as of December 31, 2006 and is committed to guarantee another $16.9 million upon funding of additional debt.

     Selected summary results of operations for our unconsolidated investees presented on a stand-alone basis follows (in thousands):

	2006		2005		2004
REIT Joint Ventures
Revenues	$	132,671	$	128,844	$	140,390
Net Earnings(1)		69,341		57,141		29,559
Ameriton Joint Ventures
Revenues	$	340	$	4,080	$	5,950
Net Earnings(2)		17,790		12,507		(713	)
Total
Revenues	$	133,011	$	132,924	$	146,340
Net Earnings	$	87,131	$	69,648	$	28,846

(1)	Includes gains associated with the disposition of REIT Joint Venture assets of $68.4 million, $31.6 million and $32.4 million during 2006, 2005 and 2004, respectively.
(2)	Includes Ameriton’s share of pre-tax gains associated with the disposition of real estate joint venture assets. These gains totaled $19.8 million, $14.2 million and $7.0 million during 2006, 2005 and 2004, respectively.

     Our income from unconsolidated entities differs from the stand-alone net earnings from the investees presented above due to various accounting adjustments made in accordance with GAAP. Examples of these differences include: (i) only recording our proportionate share of realizable net earnings in the unconsolidated investees; (ii) the impact of certain eliminating inter-company transactions; and (iii) timing differences in income recognition due to deferral of gains on contribution of properties to joint ventures. Additionally, we have incurred certain joint venture formation costs at the investor level which we account for as outside basis as these costs are not reflected on the stand-alone financial statements of the joint venture. These amounts are reflected on our consolidated financial statements and are amortized over the life of the underlying ventures.

     Except as disclosed, we generally do not guarantee third party debt incurred by our unconsolidated investees. Investee third-party debt consists principally of mortgage notes payable. Generally, mortgages on real estate assets owned by our unconsolidated investees are secured by the underlying properties. Occasionally, the investees and/or Archstone-Smith are required to guarantee the mortgages along with all other venture partners. As of December 31, 2006, we have not been required to perform under any guarantees provided to our joint ventures.

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     During 2006, we closed a joint venture transaction with the State of Wisconsin Investment Board (“SWIB”). SWIB committed $150 million of capital for 80% of the equity and we committed $37.5 million of capital for the remaining 20%. We have invested $25.1 million and our remaining commitment as of December 31, 2006 is $12.4 million.

(7) Mortgage and Other Notes Receivable

     The change in mortgage and other notes receivable, which are included in other assets, during the years ended December 31, 2006 and 2005 consisted of the following (in thousands):

	Years Ended
	December 31,
	2006			2005
Balance at January 1	$	74,396		$	8,729
Funding of additional notes		85,165			97,096
Accrued interest		9,781			5,224
Repayments and sales of notes		(46,081	)		(36,653	)
Balance at December 31	$	123,261		$	74,396

     We have a commitment to fund an additional $22.7 million under existing agreements. Our rights to the underlying collateral on these notes in the event of default are generally subordinate to the primary mortgage lender. We evaluate the collectibility of our mezzanine and other notes receivable on a quarterly basis. We recognized interest income associated with notes receivable of $17.4 million and $7.2 million for the years ended December 31, 2006 and 2005, respectively. The weighted average interest rate on these notes as of December 31, 2006 was 10.6%, including 12.6% relating to mezzanine notes receivable.

(8) Borrowings

Unsecured Credit Facilities

     Our $600 million unsecured credit facility, which is led by JPMorgan Chase Bank, N.A. bears interest at the greater of the prime rate or the federal funds rate plus 0.50% or, at our option, LIBOR plus 0.40%. The spread over LIBOR can vary from LIBOR plus 0.325% to LIBOR plus 1.00%, based upon the rating of our long-term unsecured senior notes. The facility contains an accordion feature that allows us to increase the size of the commitment to $1.0 billion at any time during the life of the facility, subject to lenders providing additional commitments, and enables us to borrow up to $150 million in foreign currencies. The credit facility is scheduled to mature in June 2010, but may be extended for one year at our option.

     The following table summarizes our revolving credit facility borrowings under our line of credit (in thousands, except for percentages):

	Years Ended
	December 31,
	2006			2005
Total unsecured revolving credit facility	$	600,000		$	600,000
Borrowings outstanding at December 31	$	80,000		$	360,000
Outstanding letters of credit under this facility	$	14,880		$	37,813
Weighted average daily borrowings	$	100,474		$	183,434
Maximum borrowings outstanding during the period	$	360,000		$	580,000
Weighted average daily nominal interest rate		5.0	%		4.0	%
Weighted average daily effective interest rate		6.3	%		4.3	%

     We also have a short-term unsecured borrowing agreement with JPMorgan Chase Bank, N.A. which provides for maximum borrowings of $100 million. The borrowings under the agreement bear interest at an overnight rate agreed to at the time of borrowing and ranged from 4.6% to 5.7% during 2006. There were $4.7 million and $34.6 million of borrowings outstanding under the agreement at December 31, 2006 and 2005, respectively.

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Term Loan – International

     We entered into a $272.8 million secured, short-term borrowing agreement with LaSalle Bank National Association to fund the acquisition of DeWAG. The borrowing under this agreement bears interest at EURIBOR plus 0.40%. The effective interest rate at December 31, 2006 was 4.1%. We expect this loan to be paid off or refinanced before April 27, 2007.

Long-Term Unsecured Debt

     In July 2006 we issued $575 million of exchangeable senior unsecured notes that are due in 2036. The notes have a coupon rate of 4.0% and are exchangeable into Common Shares at an exchange ratio, subject to adjustment, of 15.7206 per $1,000 principal of notes (or an initial exchange price of $63.6108 per Common Share). No separate value is ascribed to the conversion feature. The company received approximately $563 million in net proceeds from this offering. The notes are senior unsecured obligations of the Operating Trust. The company used the net proceeds from the offering to repay outstanding balances under its revolving credit facility and certain secured debt, to make incremental investments and for general corporate purposes. Prior to July 18, 2011, the holders, at their option, may exchange the notes for Common Shares upon the occurrence of specified events. Upon tender of notes for exchange, we may pay cash, Archstone-Smith Common Shares, Units, or a combination of cash and Common Shares, at our option. The holders may require us to repurchase the notes for cash on July 18, 2011 and on July 15 of 2016, 2021, 2026 and 2031 and at any time prior to maturity upon the occurrence of a fundamental change in Archstone-Smith. On or after July 18, 2011, we may elect to redeem all or part of the notes for cash. We may redeem the notes at any time prior to maturity to the extent necessary to preserve our status as a real estate investment trust. When these notes are dilutive to our earnings per share, we add the interest to the numerator and include the shares in the denominator of the weighted average shares outstanding to compute diluted earnings per share.

     In March 2006, the Operating Trust issued $300 million in long-term unsecured ten-year senior notes with a coupon rate of 5.8% and an effective interest rate of 5.9%. The company used the net proceeds from the offering to repay outstanding balances under its revolving credit facility and certain secured debt, to make incremental investments and for general corporate purposes.

     A summary of our Long-Term Unsecured Debt outstanding at December 31, 2006 and 2005 is as follows (dollar amounts in thousands):

							Balance at		Balance at		Average
				Effective			December 31,		December 31,		Remaining Life
Type of Debt	Coupon Rate(1)			Interest Rate(2)			2006		2005		(Years)
Long-term unsecured senior notes		5.4	%		5.6	%	$	3,279,404	$	2,462,964		5.23
Unsecured tax-exempt bonds		4.0	%		4.2	%		76,295		77,072		16.60
Total/average		5.4	%		5.6	%	$	3,355,699	$	2,540,036		5.54

(1)	Represents a fixed rate for the long-term unsecured notes and a variable rate for the unsecured tax-exempt bonds.
(2)	Includes the effect of fair value hedges, loan cost amortization and other ongoing fees and expenses, where applicable.

     The $3.4 billion of Long-Term Unsecured Debt generally has semi-annual interest payments and either amortizing annual principal payments or balloon payments due at maturity. The unsecured tax-exempt bonds require semi-annual interest payments and are due upon maturity with $21.5 million maturing in 2008 and $54.8 million maturing in 2029. The notes are redeemable at our option, in whole or in part, and the unsecured tax-exempt bonds are redeemable at our option upon sale of the related property. The redemption price is generally equal to the sum of the principal amount of the notes being redeemed plus accrued interest through the redemption date plus a standard make-whole premium, if any.

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Mortgages Payable

     Our mortgages payable generally feature either monthly interest and principal payments or monthly interest-only payments with balloon payments due at maturity (see Scheduled Debt Maturities). Early repayment of mortgages is generally subject to prepayment penalties. A summary of mortgages payable outstanding for the years ending December 31, 2006 and 2005 follows (dollar amounts in thousands):

	Outstanding Balance at (1)				Effective Interest
	December 31, 2006		December 31, 2005		Rate (2)
Secured floating rate debt:
Tax-exempt debt	$	935,536	$	839,318		4.9	%
Conventional mortgages		167,020		54,455		4.6	%
Total Floating		1,102,556		893,773		4.9	%
Secured fixed rate debt:
Tax-exempt debt		3,086		—		6.4	%
Conventional mortgages		1,651,650		1,480,170		5.8	%
Other secured debt		18,942		19,709		3.2	%
Total Fixed		1,673,678		1,499,879		5.8	%
Total debt outstanding at end of period	$	2,776,234	$	2,393,652		5.4	%

(1)	Includes the unamortized fair market value adjustment associated with assumption of fixed rate mortgages in connection with real estate acquisitions. The unamortized balance aggregated $43.9 million and $63.5 million at December 31, 2006 and 2005 respectively, and is being amortized into interest expense over the life of the underlying debt.
(2)	Includes the effect of fair value hedges, credit enhancement fees, the amortization of fair market value purchase adjustment, and other related costs, where applicable.

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     The change in mortgages payable during 2006 and 2005 consisted of the following (in thousands):

	2006			2005
Balance at January 1	$	2,393,652		$	2,031,505
Proceeds from mortgage notes payable		—			33,152
Mortgage assumptions related to property acquisitions		728,484			864,155
Proceeds from construction loans		—			655
Regularly scheduled principal amortization		(12,949	)		(15,067	)
Prepayments, final maturities and other		(332,953	)		(520,748	)
Balance at December 31	$	2,776,234		$	2,393,652

Scheduled Debt Maturities

     Approximate principal payments due during each of the next five calendar years and thereafter, are as follows (in thousands):

	Long Term Unsecured Debt				Mortgages Payable
	Regularly				Regularly
	Scheduled		Final		Scheduled		Final
	Principal		Maturities		Principal		Maturities
	Amortization		and Other		Amortization		and Other		Total
2007	$	31,250	$	355,000	$	18,992	$	85,933	$	491,175
2008		31,250		303,040		19,387		193,109		546,786
2009		51,250		30,000		19,138		381,096		481,484
2010		43,750		220,000		17,984		122,760		404,494
2011		50,000		575,000		19,208		199,381		843,589
Thereafter and debt discount(1)		252,500		1,412,659		499,365		1,199,881		3,364,405
Total	$	460,000	$	2,895,699	$	594,074	$	2,182,160	$	6,131,933

(1) The average annual principal payments due from 2012 to 2040 are $116.4 million per year.

Other

     The book value of total assets pledged as collateral for mortgage loans and other obligations at December 31, 2006 and 2005 is $5.6 billion and $4.6 billion, respectively. Our debt instruments generally contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage ratios and maximum leverage ratios. We were in compliance with all financial covenants pertaining to our debt instruments at December 31, 2006. See Note 13 for a summary of derivative financial instruments used in connection with our debt instruments.

(9) Dividends to Shareholders

     To maintain our status as a REIT, we are generally required to distribute at least 90% of our taxable income. The payment of dividends is subject to the discretion of the Board and is dependent upon our strategy, financial condition and operating results. In December 2006, the Board announced a 4.0% increase in the annual distribution level from $1.74 to $1.81 per Common Share and, in January 2007, declared the first quarter 2007 distribution of $0.4525 per Common Share, payable on February 28 to shareholders of record on February 13, 2007.

     The following table summarizes the cash dividends or distributions paid per share on Common Shares and Preferred Shares during 2006, 2005 and 2004:

	2006		2005		2004
Common Shares and A-1 Units(1)	$	1.74	$	1.73	$	2.72
Series D Preferred Shares(2)		¾		¾		1.31
Series I Preferred Shares(3)		7,660.00		7,660.00		7,660.00
Series K Preferred Shares(4)		¾		¾		2.55
Series L Preferred Shares(5)		¾		¾		3.40

See notes on following page.

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(1)	Includes a $1.00 per share special dividend issued to our Common Shareholders in December 2004.
(2)	The Series D Preferred Shares were redeemed in August 2004.
(3)	The Series I Preferred Shares have a par value of $100,000.
(4)	The Series K Preferred Shares were converted into Common Shares in September 2004.
(5)	The Series L Preferred Shares were converted to Common Shares in December 2004.

(10) Shareholders’ Equity

Shares of Beneficial Interest

     Our Declaration of Trust authorizes us to issue 450,000,000 shares with a par value of $0.01 per share. Our Declaration of Trust allows us to issue Common Shares, Preferred Shares and such other shares of beneficial interest as the Board may create and authorize from time to time. The Board may classify or reclassify any unissued shares from time to time by setting or changing the preferences, conversion rights, voting powers, restrictions, limitations as to distributions, qualifications of terms or conditions of redemption.

Preferred Share Redemption and Conversions

     In August 2004, the Series D Preferred Shares were redeemed at liquidation value plus distributions for a total of $47.6 million. The Series K Preferred Shares were converted to Common Shares in September 2004 and the Series L Preferred Shares were converted to Common Shares in December 2004.

Common Share Repurchase and Issuances

     In September 2005, we sold approximately 12.1 million Common Shares in an underwritten public offering under an existing shelf registration statement filed with the Securities and Exchange Commission. The $491.4 million in net proceeds were used to pay down the balance on our unsecured credit facilities.

     In 2006 and 2005, we repurchased 204,877 and 1,646,800 Common Shares for an average price of $58.90 and $34.31 per share, including commissions, respectively.

Preferred Shares

     A summary of our Perpetual Preferred Shares outstanding at December 31, 2006 and 2005, including their significant rights, preferences, and privileges follows (amounts in thousands):

					Annual
	Redemption		Liquidation		Dividend Rate		December 31,
Description	Date(1)		Value		Per Share		2006		2005
Series I Preferred Shares; 500 shares issued and outstanding at December 31, 2006 and 2005, respectively(1)		02/01/28		100,000		7,660	$	50,000	$	50,000

(1) Series I Preferred Shares may be redeemed for cash at our option, in whole or in part, at a redemption price equal to the liquidation price per share, plus accrued and unpaid dividends, if any, on or after the redemption date indicated.

     The holders of our Preferred Shares do not have preemptive rights over the holders of Common Shares, but do have limited voting rights under certain circumstances. The Preferred Shares have no stated maturity, are not subject to any sinking fund requirements and we are not obligated to redeem or retire the shares. Holders of the Preferred Shares are entitled to receive cumulative preferential cash distributions, when and as declared and authorized by the Board, out of funds legally available for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the payment of distributions. All Preferred Share distributions are cumulative from date of original issue and all series of Preferred Shares rank equally as to distributions and liquidation proceeds. All dividends due and payable on Preferred Shares have been accrued and paid as of the end of each fiscal year.

     If six quarterly dividends payable (whether or not consecutive) on any series or class of Preferred Shares that are of equal rank with respect to dividends and any distribution of assets, shall not be paid in full, the number of Independent Trustees shall be increased by two and the holders of all such Preferred Shares voting as a class regardless of series or class, shall be entitled to elect the two additional Independent Trustees. Whenever all dividends in arrears have been paid, the right to elect the two additional Independent Trustees shall cease and the terms of such Independent Trustees shall terminate.

Dividend Reinvestment and Share Purchase Plan

     Our Dividend Reinvestment and Share Purchase Plan was designed and implemented to increase ownership in the company by private investors. Under the plan, holders of Common Shares and A-1 Common Units have the ability to receive cash dividends or automatically reinvest their cash dividends to purchase additional Common Shares. We have the option of issuing new shares or acquiring shares through open market purchases or in negotiated transactions with third parties to satisfy our obligations under the plan. Common Shares acquired under the plan may be entitled to a discount, currently 1%.

Ownership Restrictions and Significant Shareholders

     Our governing documents restrict beneficial ownership of our outstanding shares by a single person, or persons acting as a group, to 9.8% of the Common Shares and 25% of each series of Preferred Shares. For us to qualify as a REIT under the Internal Revenue Code of 1986, as amended, not more than 50% in value of our outstanding capital shares may be owned by five or fewer individuals at any time during the last half of our taxable year. The provision permits five persons to acquire up to a maximum of 9.8% each of the Common Shares, or an aggregate of 49% of the outstanding Common Shares.

     Common Shares owned by a person or group of persons in excess of the 9.8% limit are subject to redemption. The provision does not apply where a majority of the Board, in its sole and absolute discretion, waives such limit after determining that our eligibility to qualify as a REIT for federal income tax purposes will not be jeopardized or the disqualification as a REIT is advantageous to shareholders.

(11) Minority Interest

     Net earnings are allocated to minority interests based on the ownership percentage of the Operating Trust associated with Unitholders relative to Common Shareholders.

     Minority interest consists of the following at December 31, 2006 and 2005 (in thousands):

	2006		2005
A-1 Common Units	$	738,910	$	787,023
N-1 and N-2 Units		239		250
Total	$	739,149	$	787,273

     The changes in the minority interest balance are as follows:

	Balance at December 31,
	2006			2005
Beginning balance	$	787,273		$	498,098
A-1 Common Unit conversions		(143,462	)		(8,415	)
A-1 Common Unit redemptions		(12,065	)		(3,618	)
Unitholders share of net earnings		107,641			85,332
Common Units issued for real estate		81,401			408,042
N-1 and N-2 Units issued for real estate		—			250
Series E, F & G Redemptions		—			(19,522	)
Unitholders distributions		(55,079	)		(43,843	)
A-1 revaluation ($26,618) and other		(26,560	)		(129,051	)
Ending balance	$	739,149		$	787,273

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A-1 Common Units

     As of December 31, 2006 and December 31, 2005, we owned an 88.2% and 86.2% majority interest in the Operating Trust, respectively. The A-1 Common Units are redeemable at the option of the Unitholders. Except as limited by agreement, Archstone-Smith has the option of redeeming the A-1 Common Units with cash or with Common Shares. The A-1 Common Units are entitled to the same distributions as Common Shares. The A-1 Common Unitholder’s aggregate minority interest in the Operating Trust was approximately 11.8% at December 31, 2006 and 13.8% at 2005. During 2006 and 2005, respectively, we converted 5,962,697 and 401,211 A-1 Common Units and issued 1,772,673 and 11,289,070 A-1 Common Units in exchange for real estate. The Common Units issued in 2005 related primarily to the Oakwood transaction described in Note 4.

     We revalue A-1 minority interest each quarter to maintain a proportional relationship between the book value of equity associated with Common Shareholders relative to that of holders of A-1 Common Units since both have equivalent rights and Units are convertible into Common Shares on a one-for-one basis.

Series M Preferred Unit

     In December 2004, the Operating Trust issued one Series M Preferred Unit in exchange for cash. This unit is redeemable at the option of the holder of such unit and/or the Operating Trust under certain circumstances. If the Operating Trust is required to redeem the Series M Preferred Unit, the redemption price will be paid in cash. If the holder of the Series M Preferred Unit requests redemption of the Series M Preferred Unit, the Operating Trust has the option of redeeming the Series M Preferred Unit with cash or with Common Shares. The redemption value under such circumstances is based on the performance of the related real estate asset, as outlined in the contribution agreement. The Series M Preferred Unit is entitled to a dividend equivalent to the same dividend paid on 263 Common Shares. The holder of the Series M Preferred Unit does not have preemptive rights over the holders of Common Shares and does not have any voting right except as required by law. The Series M Preferred Unit has no stated maturity and is not subject to any sinking fund requirements.

Series N-1 and N-2 Preferred Units

     Three-hundred N-1 and 700 N-2 Preferred Units were issued as partial consideration for land acquired in one of the Oakwood acquisitions. If certain entitlements related to the land are obtained, the N-1 and N-2 units have the potential to convert to Common Units at a rate of $70,000 and $30,000, respectively, per entitled apartment unit. As of December 31, 2006, no entitlements have been obtained. The Series N-1 Preferred Units are entitled to a dividend equivalent to the same dividend paid on 11.58 Common Shares. The Series N-2 Preferred Units are entitled to a dividend equivalent to the same dividend paid on 4.96 Common Shares. The holders of the Series N-1 and N-2 Preferred Units do not have preemptive rights over the holders of Common Shares and do not have any voting rights except as required by law. The Series N-1 and N-2 Preferred Units have no stated maturity and are not subject to any sinking fund requirements.

Perpetual Preferred Units

     At various dates, consolidated subsidiaries of Archstone-Smith issued Perpetual Preferred Units to limited partners in exchange for cash. During 2005, all remaining Perpetual Preferred Units were redeemed at liquidation value plus accrued dividends.

(12) Benefit Plans and Implementation of SFAS 123R

     In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” This Statement is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB No. 25, “Accounting for Stock Issued to Employees.” The Statement requires companies to recognize, in the income statement, the grant-date fair value of stock options and other equity based compensation issued to employees. We used the modified prospective method in adopting the Statement, which became effective January 1, 2006.

     Since we early-adopted the fair value recognition provisions of SFAS No. 123 for all awards granted after January 1, 2003, adoption of SFAS No. 123R did not have a material impact on our financial position, net earnings or cash flows. Upon the adoption of SFAS 123R, we recorded a benefit resulting from application of an anticipated forfeiture rate on existing awards of approximately $100,000 which had no effect on our reported earnings per share. With respect to options granted prior to January 1, 2003, no stock-based employee compensation expense was reflected in the financial statements for the years ended

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December 31, 2006. Recording this expense would have lowered net earnings by approximately $100,000. We have made an election to be taxed as a REIT under the Internal Revenue Code of 1986, as amended; therefore, there was no tax impact that was recorded as a result of the adoption of this standard.

     Our long-term incentive plan was approved in 1997, and was modified in connection with the Smith Merger. There have been six types of awards under the plan: (i) options with a DEU feature (only awarded prior to 2000); (ii) options without the DEU feature (generally awarded after 1999); (iii) Restricted Share Unit awards with a DEU feature (awarded prior to 2006); (iv) Restricted Share Unit awards with a cash dividend payment feature (awarded after 2005) (v) employee share purchase program with matching options without the DEU feature, granted only in 1997 and 1998; and (vi) Common Shares issued to certain named executives under our Special Long-Term Incentive Plan.

     No more than 20 million share or option awards in the aggregate may be granted under the plan and no individual may be awarded more than 1.0 million share or option awards in any one-year period. The plan has a 10-year term. As of December 31, 2006, Archstone-Smith had approximately 10.3 million shares available for issuance. Non-qualified options constitute an important component of compensation for officers below the level of senior vice president and for selected employees.

     A summary of the status of Archstone-Smith Trust’s awards under our long term incentive plans as of December 31, 2006 and changes during the years ended on those dates is presented below:

	Option Awards				RSU Awards
			Weighted				Weighted
			Average				Average Grant
	Options		Exercise Price		Units		Price
Balance, December 31, 2005		2,702,026	$	24.94		948,735	$	27.77
Granted		426,977		45.61		310,855		45.85
Exercised/Settled		1,249,089		23.96		296,215		33.23
Forfeited		48,559		35.86		16,760		34.31
Expired		—		—		—		—
Balance, December 31, 2006		1,831,355	$	30.14		946,615	$	31.82

     Options

     During the years ended December 31, 2006, 2005, and 2004 the share options granted to associates had a calculated fair value of $5.52, $4.19 and $1.39 per option, respectively. The historical exercise patterns of the associate groups receiving option awards are similar, and therefore we used only one set of assumptions in calculating fair value for each period. For the year ended December 31, 2006, the calculated fair value was determined using the Black-Scholes-Merton valuation model, using a weighted average risk-free rate interest rate of 4.66%, a weighted average dividend yield of 4.57%, a volatility factor of 18.3% and a weighted average expected life of four years. For the year ended December 31, 2005, the calculated fair value was determined using the Black-Scholes-Merton valuation model, using a weighted average risk-free interest rate of 3.77%, a weighted average dividend yield of 5.63%, a volatility factor of 21.97% and a weighted average expected life of five years. For the year ended December 31, 2004, the calculated fair value was determined using the Black-Scholes-Merton valuation model, using a weighted average risk-free interest rate of 3.48%, a weighted average dividend yield of 6.92%, a volatility factor of 15.33% and a weighted average expected life of five years. The options vest over a three-year period and have a contractual term of 10 years. We used an estimated forfeiture rate of 30% in recording option compensation expense for the year ended December 31, 2006, based primarily on historical experience. The unamortized compensation cost is $1.1 million, which includes all options previously granted but not yet vested. This amount will be recorded as compensation cost ratably through December 31, 2008.

     The total intrinsic value of the share options exercised during the years ended December 31, 2006, 2005 and 2004 were $30.7 million, $22.9 million and $28.1 million, respectively. The intrinsic value is defined as the difference between the realized fair value of the share or the quoted fair value at the end of the period, less the exercise price of the option. We have 1.4 million fully vested options outstanding at December 31, 2006 with a weighted average exercise price of $26.55. The weighted-average contractual life of the fully vested options is 6.3 years, and they have an intrinsic value of $44.7 million. In addition, we have 296,000 options outstanding that we expect to vest with a weighted average exercise price of $41.83. The weighted-average contractual life of the unvested options is 9.4 years, and they have an intrinsic value of $3.7 million.

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     Restricted Share Units

     Also during the year ended December 31, 2006, we issued RSUs to senior officers and trustees of the company with a weighted average grant date fair value of $45.85 per share. The units vest over a three-year period and the related unamortized compensation cost is $9.8 million, which includes all units previously granted but not yet vested. This amount will be recorded as compensation cost ratably through December 31, 2008.

     We have 694,000 fully vested RSUs outstanding at December 31, 2006 with a weighted average grant date fair value of $28.18. The weighted-average contractual life for the fully vested shares is 6.2 years and the intrinsic value is $40.4 million. In addition, we have 252,600 RSUs outstanding that we expect to vest with a weighted average grant date fair value of $41.77. The weighted-average contractual life for the unvested shares is 9.3 years and the intrinsic value is $14.7 million. The total intrinsic value of the RSUs settled during the years ended December 31, 2006, 2005 and 2004 were $15.8 million, $8.5 million and $5.8 million, respectively.

     Special Long Term Incentive Plan

     Effective January 1, 2006, a special long-term incentive program related to the achievement of total shareholder return performance targets was established for certain of our executive officers. We would issue approximately 300,000 performance units if all performance targets are ultimately met as of December 31, 2008. The calculated grant date fair value of approximately $4.8 million is being charged to compensation expense ratably over the three-year term of the plan. The calculated fair value was determined by an independent third party using a Monte Carlo simulation approach which yielded an estimated payout percentage of 41%. The related unamortized compensation cost at December 31, 2006 is $3.2 million.

     Summary

     The compensation cost associated with all awards for the year ended December 31, 2006 was approximately $11.3 million, of which approximately $8.5 million was charged to operating expenses, and approximately $2.8 million related to dedicated investment personnel and was capitalized to development and other qualifying investment activities. The compensation cost associated with all awards for the year ended December 31, 2005 was approximately $8.5 million, of which approximately $6.5 million was charged to operating expenses, and approximately $2.0 million related to dedicated investment personnel and was capitalized to development and other qualifying investment activities. The compensation cost associated with all awards for the year ended December 31, 2004 was approximately $5.5 million, of which approximately $4.0 million was charged to operating expenses, and approximately $1.5 million related to dedicated investment personnel and was capitalized to development and other qualifying investment activities.

Dividend Equivalent Units

     Under the modified long-term incentive plan, participants who were awarded options prior to 2000 and RSUs prior to 2006 were credited with DEUs equal to the amount of dividends paid on Common Shares with respect to such awards. The DEUs vest under substantially the same terms as the underlying share options or RSUs.

     DEUs earned on options are calculated by taking the average number of options held at each record date and multiplying by the difference between the average annual dividend yield on Common Shares and the average dividend yield for the Standard & Poor’s 500 Stock Index. DEUs earned on RSUs are calculated by taking the average number of RSUs held at each record date and multiplying by the average annual dividend yield on Common Shares. DEUs earned on existing DEUs are calculated by taking the number of DEUs at December 31 and multiplying by the average annual dividend yield on Common Shares.

     Certain of the options and all RSUs included in the table above have a DEU feature. The aggregate number of vested DEUs outstanding as of December 31, 2006 was 354,500. During the year ended December 31, 2006, we recorded $486,800 as a charge to operating expense related to unvested DEUs and $1,680,000 of common share dividends related to vested DEUs.

401(k) Plan and Nonqualified Deferred Compensation Plan

     In December 1997, the Archstone-Smith Board established a 401(k) plan and a nonqualified savings plan, which both became effective on January 1, 1998. The 401(k) plan provides for matching employer contributions of fifty cents for every dollar contributed by the employee, up to 6% of the employee’s annual contribution. Contributions by employees to the 401(k) plan were subject to federal limitations of $15,000 during 2006. The matching employer contributions are made in Common

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Shares, which vest based on years of service at 20% per year. We also have a nonqualified deferred compensation plan which permits deferrals of compensation by eligible employees and non-employee trustees. No employer contributions are currently being made to that plan. Amounts deferred under the deferred compensation plan are invested among a variety of investments as directed by the participants, and are generally deferred until termination of employment or service as a trustee.

Deferral of Fees by Non-Employee Trustees

     Through December 31, 2005 and pursuant to the terms of the nonqualified deferred compensation plan, each non-employee member of our Board has had the opportunity to defer receipt of all or a portion of the service fees they otherwise would have been paid in cash. If a participant elected to have their fees deferred, the fees accrued in the form of phantom shares equal to the number of Common Shares that could have been purchased on the date the fee was credited. Dividends are calculated on the phantom shares and additional phantom shares are credited. Distribution of phantom shares may be deferred to a later date. Upon settlement, phantom shares convert into Common Shares on a one-to-one basis.

     Beginning in 2006 each non-employee member of our Board has the ability to defer new service fees into the Archstone-Smith Deferred Compensation Plan, rather than into phantom shares. The Trustee can elect to have his or her fees deferred and invested in one or more of the investment funds that are otherwise available under the deferred compensation plan. Upon settlement such investments are paid out in cash. The phantom shares already on account will continue to accrue additional phantom shares in lieu of dividends.

(13) Financial Instruments and Hedging Activities

Fair Value of Financial Instruments

     At December 31, 2006 and 2005, the fair values of cash and cash equivalents, restricted cash held in a tax-deferred exchange escrow accounts, receivables and accounts payable approximated their carrying values because of the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures were determined based on available market information and valuation methodologies believed to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, therefore, are not necessarily indicative of the actual amounts that we could realize upon disposition. The following table summarizes these financial instruments (in thousands):

	Balance at December 31, 2006						Balance at December 31, 2005
	Carrying			Estimated			Carrying			Estimated
	Amounts			Fair Value			Amounts			Fair Value
Marketable equity securities	$	6,600		$	6,600		$	4,648		$	4,648
Borrowings:
Unsecured credit facilities	$	84,723		$	84,723		$	394,578		$	394,578
Term Loan – International		235,771			235,771			—			—
Long-Term Unsecured Debt		3,355,699			3,436,902			2,540,036			2,623,056
Mortgages payable		2,776,234			2,801,342			2,393,652			2,393,389
Interest rate contracts:
Interest rate swaps	$	6,818		$	6,818		$	3,618		$	3,618
Interest rate caps		809			809			339			339
Forward contracts:
Forward sale agreement	$	(313	)	$	(313	)		—			—
Foreign currency forward		(1,172	)		(1,172	)		(15	)		(15	)
Energy contracts:
Electricity contracts	$	(8	)	$	(8	)	$	(26	)	$	(26	)
Natural gas contracts		(1,047	)		(1,047	)		—			—
Fuel oil contracts		—			—			(6	)		(6	)

     All publicly traded equity securities are classified as “available for sale securities” and carried at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity. Private investments, for which we do not have the ability to exercise significant influence, are accounted for at cost. Declines in the value of public and private investments that management determines are other than temporary, are recorded as a provision for possible loss on investments. Our evaluation of the carrying value of these investments is primarily based upon a regular review of market valuations (if available), each

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company’s operating performance and assumptions underlying cash flow forecasts. In addition, management considers events and circumstances that may signal the impairment of an investment.

Interest Rate Hedging Activities

     We are exposed to the impact of interest rate changes and will occasionally utilize interest rate swaps and interest rate caps as hedges with the objective of lowering our overall borrowing costs. These derivatives are designated as either cash flow or fair value hedges. In connection with the DeWAG transaction, we assumed interest rate swaps with an aggregate notional amount of €227.0 million. The DeWAG swaps, which have an aggregate fair value of approximately $5.9 million and notional amount of $295.2 million at December 31, 2006, were put in place by DeWAG to fix the interest cost associated with certain variable rate mortgages. These derivatives were not designated as hedges for US GAAP purposes and changes in fair value are recorded as adjustments to interest expense. We have interest rate caps that are not designated as a hedge that have immaterial fair value as of December 31, 2006. These caps were required by the loan agreement. We do not use these derivatives for trading or other speculative purposes. Further, as a matter of policy, we only enter into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, we have not, nor do we expect to sustain a material loss from the use of these hedging instruments.

     We formally assess all hedges, both at inception of the hedge and on an ongoing basis, as to whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. We measure hedge effectiveness by comparing the changes in the fair value or cash flows of the derivative instrument with the changes in the fair value or cash flows of the hedged item. If a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively.

     To determine the fair values of derivative and other financial instruments, we use a variety of methods and assumptions that are based on market value conditions and risks existing at each balance sheet date. These methods and assumptions include standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost and termination cost. All methods of assessing fair value result in a general approximation of value, and therefore, are not necessarily indicative of the actual amounts that we could realize upon disposition.

     During the years ended December 31, 2006, 2005 and 2004 we recorded an increase/(decrease) to interest expense of $372,000, $(174,000) and $33,000, for hedge ineffectiveness caused by a difference between the interest rate index on a portion of our outstanding variable rate debt and the underlying index of the associated interest rate swap. We pursue hedging strategies that we expect will result in the lowest overall borrowing costs and least degree of earnings volatility.

     The following table summarizes the notional amount, carrying value and estimated fair value of our derivative financial instruments used to hedge interest rates, as of December 31, 2006 (dollar amounts in thousands). The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rate or market risks.

					Carrying and
	Notional		Maturity		Estimated
	Amount		Date Range		Fair Value
Cash flow hedges:
Interest rate caps	$	486,354		2007-2013	$	809
Interest rate swaps		367,054		2007-2014		7,080
Total cash flow hedges	$	853,408		2007-2014	$	7,889
Fair value hedges:
Interest rate swaps	$	75,055		2008	$	1,185
Total rate of return swaps		36,346		2007		(1,447	)
Total fair value hedges	$	111,401		2007-2008	$	(262	)
Total hedges	$	964,809		2007-2014	$	7,627

Foreign Currency Hedging Activities

     We are exposed to foreign-exchange related variability and earnings volatility on our foreign investments. As such, during 2006 and 2005 we entered into foreign currency forward contracts with an aggregated notional amount of €201.5 million as a

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hedge against our exposure to variability in exchange rates on investment in foreign subsidiaries and designated the contract as a net investment hedge. The fair value of these forward contracts at December 31, 2006 was ($1.2) million.

Energy Contract Hedging Activities

     We are exposed to price risk associated with the volatility of natural gas, fuel oil and electricity rates. During 2005 and 2006, we entered into contracts with several of our suppliers to fix our payments on set quantities of natural gas, fuel oil and electricity. If the contract meets the criteria of a derivative, we designate these contracts as cash flow hedges of the overall changes in floating-rate payments made on our energy purchases. As of December 31, 2006, we had energy-related derivatives with aggregate notional amounts of $5.3 million and an estimated fair value and carrying amount of ($1.1) million. These contracts mature on or before December 31, 2007.

Equity Securities Hedging Activities

     We are exposed to price risk associated with changes in the fair value of certain equity securities. During 2006, we entered into forward sale agreements with an aggregate notional amount equal to the fair value of the underlying marketable securities of approximately $6.6 million, to protect against a reduction in the fair value of these securities. The contract had an aggregate estimated fair value of approximately ($0.3) million at December 31, 2006. We designated this forward sale as a fair value hedge.

(14) Selected Quarterly Financial Data (Unaudited)

     Selected quarterly financial data (in thousands, except per share amounts) for 2006 and 2005 is summarized below. The sum of the quarterly earnings per Common Share amounts may not equal the annual earnings per Common Share amounts due primarily to changes in the number of Common Shares outstanding from quarter to quarter.

	Three Months Ended
	3-31(1)		6-30(1)		9-30(1)		12-31(1)
2006:
Total revenues	$	252,412	$	265,145	$	305,313	$	310,716
Earnings from operations		41,219		47,159		58,584		54,046
Income from unconsolidated entities		18,878		10,518		2,088		4,832
Other non-operating income		176		243		1,718		201
Less minority interest:
Convertible operating partnership units(2)		7,598		6,944		7,337		6,977
Plus net earnings from discontinued operations		71,780		115,873		76,129		254,531
Less Preferred Share dividends		958		957		957		957
Net earnings attributable to Common Shares — Basic	$	123,497	$	165,892	$	130,225	$	305,676
Net earnings per Common Share(2):
Basic	$	0.58	$	0.77	$	0.60	$	1.39
Diluted	$	0.58	$	0.77	$	0.60	$	1.36
2005:
Total revenues	$	177,902	$	184,889	$	231,778	$	239,064
Earnings from operations		2,122		25,998		53,342		40,147
Income from unconsolidated entities		11,117		5,794		1,839		3,682
Other non-operating income		24,005		4,778		72		(48	)
Less minority interest:
Perpetual preferred units (2)		741		—		—		—
Convertible operating partnership units(2)		4,757		4,515		11,200		5,898
Plus net earnings from discontinued operations		33,611		23,647		119,670		287,560
Less Preferred Share dividends		957		958		958		958
Net earnings attributable to Common Shares — Basic(2)	$	64,400	$	54,744	$	162,765	$	324,485
Net earnings per Common Share(2):
Basic	$	0.32	$	0.28	$	0.80	$	1.53
Diluted	$	0.32	$	0.27	$	0.80	$	1.52

(1) Net earnings from discontinued operations have been reclassified for all periods presented.

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(2) Due to the quarterly pro-rata calculation of minority interest and rounding, the sum of the quarterly per share and/or dollar amounts does not equal the year-to-date totals.

(15) Segment Data

     We define our garden communities and High-Rise properties each as individual operating segments. We have determined that each of our garden communities and each of our High-Rise properties have similar economic characteristics and also meet the other GAAP criteria, which permit the garden communities and high-rise properties to be aggregated into two reportable segments. Additionally, we have defined the activity from Ameriton as an individual operating segment as its primary focus is the opportunistic acquisition, development and eventual disposition of real estate with a short term investment horizon. NOI is defined as rental revenues less rental expenses and real estate taxes. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing year-to-year property performance.

     Following are reconciliations, which exclude the amounts classified as discontinued operations, of each reportable segment’s (i) revenues to consolidated revenues; (ii) NOI to consolidated earnings from operations; and (iii) assets to consolidated assets, for the periods indicated (in thousands):

	Years Ended December 31,
	2006		2005		2004
Reportable apartment communities segment rental revenues:
Same-Store:
Garden communities	$	363,677	$	343,476	$	331,746
High-Rise properties		254,549		239,549		231,000
Non Same-Store:
Garden communities		210,830		93,320		39,512
High-rise properties		174,147		88,447		33,534
Ameriton(1)		6,956		5,458		3,202
Other non-reportable operating segment revenues		46,017		7,353		3,276
Total segment and consolidated rental revenues	$	1,056,176	$	777,603	$	642,270

	Years Ended December 31,
	2006			2005			2004
Reportable apartment communities segment NOI:
Same-Store:
Garden communities	$	251,293		$	236,606		$	228,084
High-Rise properties		172,547			158,660			154,002
Non Same-Store:
Garden communities		142,153			63,178			22,739
High-Rise properties		117,146			59,425			22,623
Ameriton(1)		3,158			1,990			1,266
Other non-reportable operating segment NOI		26,537			5,362			2,809
Total segment and consolidated NOI		712,834			525,221			431,523
Reconciling items:
Other income		77,410			56,030			19,208
Depreciation on real estate investments		(261,438	)		(187,771	)		(150,470	)
Interest expense		(245,895	)		(164,035	)		(125,108	)
General and administrative expenses		(68,188	)		(58,604	)		(55,479	)
Other expenses		(13,715	)		(49,232	)		(13,563	)
Consolidated earnings from operations	$	201,008		$	121,609		$	106,111

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(1) While rental revenue and NOI are the primary measures we use to evaluate the performance of our assets, management also utilizes gains from the disposition of real estate when evaluating the performance of Ameriton as its primary focus is the opportunistic acquisition, development and eventual disposition of real estate with a short term investment horizon. During 2006, 2005 and 2004, pre-tax gains, net of internal disposition costs, from the disposition of Ameriton depreciated real estate were $51.2 million, $75.2 million and $65.1 million, respectively. These gains are classified within discontinued operations. Ameriton assets are excluded from our Same-Store population as they are acquired or developed to achieve short-term opportunistic gains, and therefore, the average holding period is typically much shorter than the holding period of assets operated by the REIT.

	Year Ended December 31,
	2006		2005
Reportable operating communities segment assets:
Same-Store:
Garden communities	$	2,594,681	$	2,632,382
High-Rise properties		2,508,155		2,539,302
Non Same-Store:
Garden communities		2,950,252		2,829,915
High-Rise properties		2,388,235		1,457,841
Ameriton		434,282		557,684
FHA/ADA settlement capital accrual		29,185		47,198
International		843,003		—
Other non-reportable operating segment assets		153,568		130,902
Total segment assets		11,901,361		10,195,224
Real estate held for sale, net		329,133		327,347
Total segment assets		12,230,494		10,522,571
Reconciling items:
Investment in and advances to unconsolidated entities		235,323		132,728
Cash and cash equivalents		48,655		13,638
Restricted cash in tax-deferred exchange escrow		319,312		495,274
Other assets		425,343		297,884
Consolidated total assets	$	13,259,127	$	11,462,095

     Total capital expenditures for garden communities excluding communities sold or held for sale, were $60.6 million and $38.1 million for the years ended December 31, 2006 and 2005, respectively. Total capital expenditures for High-Rise properties excluding communities sold or held for sale were $64.7 million and $66.1 million for the years ended December 31, 2006 and 2005, respectively. Total capital expenditures for Ameriton properties excluding communities sold or held for sale, were $1.1 million and $0.5 million for the years ended December 31, 2006 and 2005, respectively.

(16) Income Taxes

     Substantially all of our income is derived through the Operating Trust. The Operating Trust has elected to be treated as a partnership for federal income tax purposes. Accordingly, the Operating Trust’s income is not subject to federal income taxes. We have elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, we must meet a number of ownership, organizational and operational requirements, including a requirement that we currently distribute at least 90% of our taxable income. As a REIT, we are generally not subject to corporate level federal income taxes on net income we distribute to our shareholders. Accordingly, no provision for REIT income taxes is included in the accompanying Consolidated Statements of Earnings. If we fail to qualify as a REIT in any taxable year, then we will be subject to federal income taxes at regular corporate rates. Even as a REIT, we may be subject to certain state, local and REIT-specific federal taxes on our income and property. In addition, we have certain taxable subsidiaries such as Ameriton and certain International subsidiaries for which we do record a provision for income taxes.

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     The following table reconciles net earnings to domestic taxable income subject to dividend distribution requirement for the years ended December 31 (in thousands):

	For the Year Ended December 31,
	2006			2005			2004
	(estimated)
GAAP net earnings	$	727,435		$	616,172		$	542,342
Book to tax differences:
Forward contracts		—			—			(20,067	)
Depreciation and amortization(1)		43,778			11,678			4,630
Gain or loss from capital transactions(2)		(389,805	)		(258,406	)		(37,173	)
Reserves		(13,053	)		(3,046	)		9,359
Other, net		(10,690	)		(17,281	)		(21,369	)
Taxable income		357,665			349,117			477,722
Less: capital gains recognized(2)		(93,150	)		(136,120	)		(299,178	)
Taxable income subject to dividend distribution requirement	$	264,515		$	212,997		$	178,544

(1)	We use accelerated depreciable lives for tax purposes. This results in higher depreciation expense on newly acquired assets for tax purposes relative to GAAP. This is offset by the Smith Merger in 2001 and the Oakwood transaction in 2005 as GAAP depreciation expense for the related assets is based on fair value and tax depreciation is based on a lower historical tax basis.
(2)	Taxable gains are smaller than book gains due primarily to tax-deferred exchanges.

     The following table provides a reconciliation between cash dividends paid and dividends paid deduction (in thousands):

	For the Year Ended December 31,
	2006		2005		2004
	(estimated)
Taxable component of dividends paid	$	379,087	$	353,572	$	545,586
Plus: dividends designated from following year		—		—		—
Less: dividends designated to prior year		—		—		(16,048	)
Dividends paid deduction(1)	$	379,087	$	353,572	$	529,538

(1) Includes a special dividend of $221 million paid in December 2004, and reflects distribution of all ordinary income and capital gains.

     The following table summarizes the taxability of our dividends for the past three years:

	For the Year Ended December 31,
	2006			2005			2004
Ordinary income		75	%		65	%		46	%
Capital gains(1)		25	%		35	%		54	%
		100	%		100	%		100	%

(1) Includes 11.4%, 34.3% and 22.8% of unrecaptured Section 1250 gains in 2006, 2005, and 2004, respectively.

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     As a taxable REIT subsidiary, Ameriton is subject to state and federal income taxes. Income tax expense consists of the following for the years ended December 31, 2006, 2005, and 2004 which is included in either other expense or discontinued operations (in thousands):

	For the Year Ended December 31,
	2006		2005			2004
Income tax expense (benefit)
Current	$	14,825	$	21,854		$	20,119
Deferred		3,208		(2,255	)		(1,314	)
Total expense	$	18,033	$	19,599		$	18,805

     Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax income as a result of the following for the years ended December 31, 2006, 2005, and 2004 (in thousands):

	For the Year Ended December 31,
	2006			2005		2004
Computed expected tax expense	$	19,018		$	19,039	$	17,801
Increase (decrease) in income taxes resulting from state taxes and other		(985	)		560		1,004
Income tax expense	$	18,033		$	19,599	$	18,805

     Deferred income taxes reflect the estimated net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts for income tax purposes. Ameriton’s deferred tax assets and liabilities at December 31, 2006 and 2005 are presented below (in thousands).

	Years Ended December 31,
	2006			2005
Deferred tax assets:
Deferred compensation	$	712		$	3,775
Reserves		560			421
Real estate, principally due to depreciation		1,211			1,310
Other		75			928
Deferred tax assets		2,558			6,434
Deferred tax liabilities:
Real estate, principally due to depreciation		—			—
Income from unconsolidated entities		2,603			3,271
Deferred tax liabilities		2,603			3,271
Net deferred tax asset (liability)	$	(45	)	$	3,163

International Income Taxes

     During the year ended December 31, 2006, we recorded a $5.6 million tax benefit and a corresponding deferred tax asset related to the net loss on our International operations. In addition, we have a $69.0 million deferred tax liability as of December 31, 2006 related primarily to built-in gains on the DeWAG real estate portfolio.

(17) Commitments and Contingencies

Commitments

     At December 31, 2006 we had eight non-cancelable ground leases for certain apartment communities and buildings that expire between 2042 and 2077. Each ground lease generally provides for a fixed annual rental payment plus additional rental payments based on the properties’ operating results. Additionally, we lease certain office space under non-cancelable operating leases with fixed annual rental payments.

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     The future minimum lease payments payable under non-cancelable leases are as follows at December 31, 2006 (in thousands):

2007	$	3,767
2008		3,816
2009		3,868
2010		3,886
2011		3,926
Thereafter (2012-2077)	$	215,623
Total	$	234,886

     See Note 2 for real estate-related commitments.

Guarantees and Indemnifications

     Investee third-party debt consists principally of mortgage notes payable. Generally, mortgages on real estate assets owned by our unconsolidated investees are secured by the underlying properties. We generally do not guarantee third party debt incurred by our unconsolidated investees; however, the investees and/or Archstone-Smith are occasionally required to guarantee the mortgages along with all other venture partners. We guarantee $292.0 million of the outstanding debt balance related to an unconsolidated development joint venture and are committed to guarantee another $16.9 million upon funding of additional debt. As of December 31, 2006 we have not been required to perform under any guarantees provided to our joint ventures.

     As part of the Smith Merger and the Oakwood transaction, we are required to indemnify certain Unitholders for any personal income tax expense resulting from the sale of properties identified in tax protection agreements. We do not believe that we will be required to perform under the terms of the indemnification agreements due to our ability and intent to hold and use these properties through the term of the indemnification period or our ability to dispose of assets through tax-deferred exchanges. The estimated difference in the book and tax carrying value of properties that are at least partially subject to tax protection agreements was approximately $4.3 billion at December 31, 2006.

Litigation and Contingencies

     During the second quarter of 2005, we entered into a full and final settlement in the United States District Court for the District of Maryland with three national disability organizations and agreed to make capital improvements in a number of our communities in order to make them fully compliant with the FHA and ADA. The litigation, settled by this agreement, alleged lack of full compliance with certain design and construction requirements under the two federal statutes at 71 of the company’s wholly-owned and joint venture communities, of which we still own or have an interest in 45. As part of the settlement, the three disability organizations all recognized that Archstone-Smith had no intention to build any of its communities in a manner inconsistent with the FHA or ADA.

     The amount of the capital expenditures required to remediate the communities named in the settlement was estimated at $47.2 million and was accrued as an addition to real estate during the fourth quarter of 2005. The settlement agreement approved by the court allows us to remediate each of the designated communities over a three year period, and also provides that we are not restricted from selling any of our communities during the remediation period. We agreed to pay damages totaling $1.4 million, which included legal fees and costs incurred by the plaintiffs. We had $29.2 million of the original accrual remaining on December 31, 2006.

     We are subject to various claims filed in 2002 and 2003 in connection with moisture infiltration and resulting mold issues at certain high-rise properties we once owned in Southeast Florida. These claims generally allege that water infiltration and resulting mold contamination resulted in the claimants having personal injuries and/or property damage. Although certain of these claims continue to be in various stages of litigation, with respect to the majority of these claims, we have either settled the claims and/or we have been dismissed from the lawsuits that had been filed. With respect to the lawsuits that have not been resolved, we continue to defend these claims in the normal course of litigation.

     We are a party to various other claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

82

ARCHSTONE-SMITH TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(18) Supplemental Cash Flow Information

     Significant non-cash investing and financing activities for the years ended December 31, 2006, 2005 and 2004 consisted of the following:

• Issued $81.4 million, $408.0 million and $10.8 million of A-1 Common Units as partial consideration for properties acquired during 2006, 2005 and 2004, respectively;

• Issued $250,000 of Series N-1 and N-2 Preferred Units ($125,000 each) as partial consideration for real estate during 2005;

• Converted $143.4 million, $8.4 million and $47.9 million A-1 Common Units to Common Shares during 2006, 2005 and 2004, respectively;

• Assumed mortgage debt of $728.5 million, $864.2 million and $113.6 million during 2006, 2005 and 2004, respectively, in connection with the acquisition of apartment communities;

• Recorded a $47.2 million accrual for anticipated capital spending to bring properties named in the FHA and ADA settlement into compliance in 2005;

• See Notes 3 and 4 for further discussion regarding the non-cash financing components of the DeWAG and Oakwood acquisitions.

(19) Related Party Transactions

     Archstone-Smith has the following business relationships with business entities or family members of Board of Trustee members Robert H. Smith and Robert P. Kogod:

     On April 8, 2002, the Operating Trust entered into an Office Space Easement and Cost Sharing Arrangement with CESM, Inc. and others. CESM, Inc. is controlled by two of our trustees, Mr. Smith and Mr. Kogod. During 2006, CESM, Inc. paid to us a total of $99,355 for office services provided by us to CESM, Inc. and $32,783 for certain employee expenses. For that same period, we paid to CESM, Inc. $234,480 for a portion of the rent due for the executive suites that CESM, Inc. leases and which are utilized by Mr. Smith and Mr. Kogod while working for us, and $56,825 for certain employee expenses to support Mr. Smith and Mr. Kogod.

     Mr. Smith owns a residence within a condominium in Crystal City. Archstone-Smith staffed the property with doormen, maintenance, and administrative staff. We were reimbursed by the condominium association for payroll and benefits costs for these employees and we received a monthly management fee of $1,800 for other Archstone-Smith management oversight. We do not have an ownership interest in this property. We discontinued management of this asset as of February 28, 2006. Prior to the termination date, we billed $32,054 for expenses incurred and management fees for this property during 2006.

     Mr. Smith and Mr. Kogod have a 0.33% and 4.36% ownership interest, respectively, in two apartment communities in Washington D.C. We received a management fee of 4.5% of revenues to manage the property and perform all accounting functions. We do not have an ownership interest in this property. We discontinued management of this asset as of May 31, 2006. Prior to the termination date, we billed $1,143,463 for expenses incurred and management fees for these properties during 2006.

83

Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Archstone-Smith Trust:

     Under date of March 1, 2007, we reported on the consolidated balance sheets of Archstone-Smith Trust and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of earnings, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules, Schedule III – Real Estate and Accumulated Depreciation (Schedule III) and Schedule IV – Mortgage Loans on Real Estate (Schedule IV). Schedule III and Schedule IV are the responsibility of Archstone-Smith Trust’s management. Our responsibility is to express an opinion on Schedule III and Schedule IV based on our audits.

     In our opinion, Schedule III and Schedule IV, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

\s\ KPMG LLP

Denver, Colorado
March 1, 2007

84

ARCHSTONE-SMITH TRUST

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
(Dollar amounts in thousands)

					Initial Cost to						Gross Amount at Which
					Archstone-Smith Trust				Costs		Carried at Year End
									Capitalized
			Encum-				Buildings &		Subsequent to				Buildings &				Accumulated			Construction		Year
	Units		brances		Land		Improvements		Acquisition		Land		Improvements		Totals		Depreciation			Year(1)		Acquired
Apartment Communities:
Garden Communities:
Atlanta, Georgia		1,006		—		24,440		—		59,772		24,780		59,432		84,212		(15	)	Under Construction			2001
Austin, Texas		444		—		4		1,158		33,091		4,830		29,423		34,253		(4,712	)		2001		2001
Boston, Massachusetts		2,044		129,612		66,944		327,909		79,733		75,204		399,382		474,586		(42,224	)		1898-2006		1999-2006
Dallas, Texas		514		33,280		8,912		38,550		715		8,927		39,250		48,177		(1,585	)		1998		2005
Denver, Colorado		156		—		1,030		4,596		4,923		1,523		9,026		10,549		(3,157	)		1981		1992
El Paso, Texas		379		11,685		1,307		11,802		1,089		1,337		12,861		14,198		(503	)		1974		2005
Greater NYC metropolitan area		396		78,000		23,211		4,058		61,849		23,182		65,936		89,118		(3,914	)		2006		2006
Houston, Texas		1,036		—		18,965		24,307		12,300		19,181		36,391		55,572		(9,764	)		1996		1998
Inland Empire, California		1,298		—		10,436		59,147		14,892		12,180		72,295		84,475		(21,149	)		1985-1990		1995-1997
Los Angeles, California		8,138		254,461		504,186		785,620		337,594		507,439		1,119,961		1,627,400		(76,734	)		1969-2006		1998-2006
Orange County, California		2,947		—		79,497		121,417		126,627		89,548		237,993		327,541		(40,393	)		1986-2002		1996-2005
Orlando, Florida		312		—		3,110		17,620		1,370		3,748		18,352		22,100		(6,298	)		1988		1998
Phoenix, Arizona		1,403		23,770		26,363		45,809		19,347		26,529		64,990		91,519		(949	)		1978-1999		2005-2006
San Diego, California		2,968		33,376		84,916		108,480		185,750		91,277		287,869		379,146		(50,957	)		1973-2005		1996-2006
Bay Area, California		7,604		249,521		413,676		724,210		275,421		420,165		993,142		1,413,307		(115,542	)		1909-2004		1995-2006
Seattle, Washington		3,408		25,709		67,521		144,561		96,917		74,510		234,489		308,999		(56,169	)		1976-2003		1997-2005
Southeast Florida		2,282		—		69,856		197,603		8,269		74,678		201,050		275,728		(20,219	)		1990-2003		1998-2005
Stamford, Connecticut		160		—		5,775		1,225		29,568		6,320		30,248		36,568		(3,595	)		2002		2002
Ventura County, California		1,018		—		40,210		72,232		46,770		40,780		118,432		159,212		(13,759	)		1985-2005		1997-2005
Washington, D.C. metropolitan area		9,048		258,925		289,655		660,646		236,150		300,484		885,967		1,186,451		(113,308	)		1967-2003		1999-2006
Garden Communities Total		46,561		1,098,339		1,740,014		3,350,950		1,632,147		1,806,622		4,916,489		6,723,111		(584,946	)
High-Rise Properties:
Boston, Massachusetts		1,633		27,505		67,518		172,030		248,983		78,088		410,443		488,531		(23,298	)		1901-2006		2001-2006
Chicago, Illinois		1,113		36,682		39,837		188,925		6,051		40,111		194,702		234,813		(23,791	)		1988-1999		2001-2005
Dallas, Texas		181		—		2,323		—		1,410		2,323		1,410		3,733		—		Under Construction			2004
Los Angeles, California		1,073		—		34,402		139,613		64,136		34,697		203,454		238,151		(16,424	)		1934-2004		2003-2004
Minneapolis, Minnesota		250		17,803		5,002		21,768		337		5,008		22,099		27,107		(915	)		1983		2005
NYC metropolitan area		3,028		462,066		584,270		793,256		218,187		649,519		946,194		1,595,713		(45,067	)		1870-2003		2002-2006
Philadelphia, Pennsylvania		80		—		2,229		16,741		65		2,231		16,804		19,035		(357	)		1945		2006
San Diego, California		387		—		5,963		33,789		4,606		6,054		38,304		44,358		(10,162	)		1992		1999
Bay Area, California		853		—		87,664		176,474		4,437		87,905		180,670		268,575		(4,106	)		1966-1986		2005-2006
Seattle, Washington		338		34,360		16,279		46,041		102		16,288		46,134		62,422		(1,822	)		1992-1998		2005
Washington, D.C. metropolitan area		11,722		587,896		582,947		1,420,478		248,771		597,753		1,654,443		2,252,196		(229,124	)		1929-2005		2001-2006
High-Rise Properties Total		20,658		1,166,312		1,428,434		3,009,115		797,085		1,519,977		3,714,657		5,234,634		(355,066	)
Germany(2)		8,334		499,550		161,465		627,144		62,984		174,403		677,190		851,593		(8,590	)		1903-2006		2005-2006
FHA/ADA Settlement Capital accrual																29,185
Total Apartment Communities — Operating and Under Construction		75,553		2,764,201		3,329,913		6,987,209		2,492,216		3,501,002		9,308,336		12,838,523		(948,602	)
Other:
Development communities In Planning and Owned		4,802		8,362												216,479
Hotel, retail and other assets				3,671												132,638		(8,544	)
Total real estate assets		80,355		2,776,234												13,187,640		(957,146	)

(1)	Represents the date that the building structure was originally completed. For phased developments, it represents the date the earliest phase was constructed.
(2)	Our German portfolio is concentrated primarily in the Federal States of North-Rhine Westphalia, Hesse, Baden-Wurttemburg and Berlin.

85

SCHEDULE III

     The following is a reconciliation of the carrying amount and related accumulated depreciation of Archstone-Smith’s investment in real estate, at cost (in thousands):

	Years Ended December 31,
Carrying Amounts	2006			2005			2004
Balance at January 1	$	11,359,264		$	9,221,038		$	8,999,180
Apartment communities:
Acquisition-related expenditures		2,530,459			2,671,112			1,080,639
Redevelopment expenditures		57,414			106,264			40,999
Recurring capital expenditures		46,354			48,311			50,147
Development expenditures, excluding land acquisitions		388,502			324,740			333,782
Acquisition and improvement of land for development		209,916			81,340			175,470
Dispositions		(1,403,858	)		(1,175,834	)		(1,460,046	)
Provision for possible loss on investment		(4,328	)		(1,500	)		¾
Change in estimated hurricane retirements		4,496			¾			¾
Other		7,987			(8,303	)		¾
Net apartment community activity	$	1,836,942		$	2,046,130		$	220,991
Other:
Change in other real estate assets		(8,566	)		92,096			867
Balance at December 31	$	13,187,640		$	11,359,264		$	9,221,038

	Years Ended December 31,
Accumulated Depreciation	2006			2005			2004
Balance at January 1	$	836,693		$	763,542		$	648,982
Depreciation for the year(1)		266,589			220,770			203,639
Accumulated depreciation on real estate dispositions		(146,136	)		(147,619	)		(89,079	)
Balance at December 31	$	957,146		$	836,693		$	763,542

(1) Depreciation is net of $21.7 million and $18.0 million for intangible assets related to the value of leases in place for real estate acquired in 2006 and 2005, respectively.

86

SCHEDULE IV

ARCHSTONE-SMITH TRUST

MORTGAGE LOANS ON REAL ESTATE

December 31, 2006
(Dollar amounts in thousands)

														Principal
														amount of
														loans
														subject to
												Carrying		delinquent
				Final Maturity		Periodic		Prior		Face amount		amount of		principal or
Description	Interest Rate			Date		payment term		liens		of mortgages		mortgages		interest
Mortgage and Other Notes Receivable:
Washington, D.C.		18	%		7/17/07		(1)		(3)	$	9,235	$	6,955		—
Massachusetts		18	%		1/01/08		(1)		(3)		7,687		6,483		—
New York	LIBOR + 5%				9/30/10		(1)		(3)		25,654		25,654		—
Massachusetts	LIBOR + 7%				2/07/11		(1)		(3)		9,268		8,216		—
Washington, D.C.		14	%		6/03/09		(1)		(3)		7,524		4,685		—
New York	LIBOR + 7%				6/22/09		(1)		(3)		42,070		26,708		—
Maryland		7	%		3/24/07		(1)				44,560		44,560		—
										$	145,998	$	123,261		—

	2006			2005
Balance at January 1	$	74,396		$	8,729
New Mortgage Loans		85,165			97,096
Other(2)		9,781			5,224
Collections of Principal		(46,081	)		(36,653	)
Balance at December 31	$	123,261		$	74,396

(1)	Outstanding principal plus accrued and unpaid interest is generally due on the maturity date unless specified as payable monthly in the loan agreement. Partial prepayment is required to the extent the borrower receives proceeds from the sale of constructed units in accordance with contracted terms.
(2)	A portion of the accrued interest amount is added to the principal amount on a monthly basis on the majority of the loans.
(3)	Our rights to the underlying collateral in the event of default are subordinate to a primary mortgage lender.

87

ARCHSTONE-SMITH TRUST

SIGNATURES

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

ARCHSTONE-SMITH TRUST
By:	/s/ R. Scot Sellers
	R. Scot Sellers
	Chairman of the Board and
	Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

Signature	Title	Date
/s/ R. Scot Sellers R. Scot Sellers	Chairman of the Board, Chief Executive Officer and Trustee (principal executive officer)	March 1, 2007
/s/ Charles E. Mueller, Jr. Charles E. Mueller, Jr.	Chief Financial Officer (principal financial officer)	March 1, 2007
/s/ Mark A. Schumacher Mark A. Schumacher	Chief Accounting Officer (principal accounting officer)	March 1, 2007
/s/ James A. Cardwell James A. Cardwell	Trustee	March 1, 2007
/s/ Stephen R. Demeritt Stephen R. Demeritt	Trustee	March 1, 2007
/s/ Ernest A. Gerardi, Jr. Ernest A. Gerardi, Jr.	Trustee	March 1, 2007
/s/ Ruth Ann M. Gillis Ruth Ann M. Gillis	Trustee	March 1, 2007
/s/ Ned S. Holmes Ned S. Holmes	Trustee	March 1, 2007
/s/ Robert P. Kogod Robert P. Kogod	Trustee	March 1, 2007
/s/ James H. Polk III James H. Polk III	Trustee	March 1, 2007
/s/ John M. Richman John M. Richman	Trustee	March 1, 2007
/s/ John C. Schweitzer John C. Schweitzer	Trustee	March 1, 2007
/s/ Robert H. Smith Robert H. Smith	Trustee	March 1, 2007

88

INDEX TO EXHIBITS

     Certain of the following documents are filed herewith. Certain other of the following documents have been previously filed with the Securities and Exchange Commission and, pursuant to Rule 12b-32, are incorporated herein by reference:

Number	Description
3.1	Amended and Restated Declaration of Trust of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 3.1 to Archstone-Smith Trust’s Current Report of Form 8-K filed with the SEC on June 2, 2006)
3.2	Restated Bylaws of Archstone-Smith Trust (incorporated by reference to Exhibit 3.2 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on June 2, 2006)
4.1	Indenture, dated as of February 1, 1994, between Archstone-Smith Operating Trust (formerly Property Trust of America) and Morgan Guaranty Trust Company of New York, as Trustee relating to Archstone-Smith Operating Trust’s (formerly Property Trust of America) unsecured senior debt securities
4.2	First Supplemental Indenture, dated February 2, 1994, among Archstone-Smith Operating Trust (formerly Property Trust of America), Morgan Guaranty Trust Company of New York and State Street Bank and Trust Company, as successor Trustee
4.3	Second Supplemental Indenture, dated August 2, 2004, between Archstone-Smith Operating Trust and U.S. Bank National Association, as successor Trustee
4.4	Third Supplemental Indenture, dated July 14, 2006, between Archstone-Smith Operating Trust and U.S. Bank National Association, as successor Trustee
4.5	Indenture, dated as of August 14, 1997, between Security Capital Atlantic Incorporated and State Street Bank and Trust Company, as Trustee (incorporated by reference to Exhibit 4.8 to Security Capital Atlantic Incorporated’s Registration Statement on Form S-11 (File No. 333-30747))
4.6	Form of Archstone-Smith Trust common share ownership certificate (incorporated by reference to Exhibit 3.3 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
4.7	Form of Archstone-Smith Trust share certificate for Series I Preferred Shares (incorporated by reference to Exhibit 3.8 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
10.1	Amended and Restated Declaration of Trust of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 4.1 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on June 2, 2006)
10.2	Amended and Restated Bylaws of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 4.2 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on June 2, 2006)
10.3	Articles Supplementary for Series M Preferred Unit of Beneficial Interest of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 3.1 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on December 16, 2004)
10.4	Articles Supplementary for Series N-1 Preferred Unit of Beneficial Interest and N-2 Preferred Unit of Beneficial Interest of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 3.1 to the Archstone-Smith Operating Trust’s Current Report on Form 8-K filed with the SEC on August 2, 2005)
10.5	Amended and Restated Archstone-Smith Trust Equity Plan for Outside Trustee and all amendments thereto (incorporated by reference to Exhibits 10.5, 10.6 and 10.7 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on December 12, 2006)
10.6	Archstone-Smith Trust 2001 Long-Term Incentive Plan and all amendments thereto (incorporated by reference to Exhibit 10.1, 10.2, 10.3 and 10.4 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on December 12, 2006)
10.7	Archstone-Smith Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to Archstone-Smith’s Annual Report on Form 10-K for the year ended December 31, 2001)
10.8	Form of Non-Qualified Share Option Agreement for Archstone-Smith Trust 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Archstone-Smith Trust’s Annual Report on Form 10-Q for the Quarter Ended September 30, 2004)
10.9	Form of Restricted Share Unit Agreement for Archstone-Smith Trust 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 of Archstone-Smith Trust’s Annual Report on Form 10-Q for the Quarter Ended September 30, 2004)
10.10	Form of Restricted Share Unit Agreement for Archstone-Smith Trust Equity Plan for Outside Trustees (incorporated by reference to Exhibit 10.3 of Archstone-Smith Trust’s Annual Report on Form 10-Q for the Quarter Ended September 30, 2004)

89

Number	Description
10.11	Form of Indemnification Agreement entered into between Archstone-Smith Trust and each of its officers and Trustees (incorporated by reference to Exhibit 10.6 to Archstone-Smith Trust’s Annual Report on From 10K for the year ended December 31, 2003)
10.12	Form of Change in Control Agreement between Archstone-Smith Trust and certain of its officers (incorporated by reference to Exhibit 10.7 to Archstone-Smith’s Annual Report on Form 10-K for the year ended December 31, 2002)
10.13	Amended and Restated Credit Agreement, dated as of June 21, 2006, by and among Archstone-Smith Operating Trust, as borrower, and Archstone-Smith Trust as parent, and J.P. Morgan Chase Bank, as administrative agent,, J.P. Morgan Europe Limited, as administrative agent for foreign currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and Suntrust Bank and Citicorp North America, Inc. as documentation agents and the various banks signatory thereto (incorporated by reference to Exhibit 10.2 to Archstone-Smith’s Current Report on Form 8-K filed with the SEC on June 27, 2006)
10.14	Guaranty, dated as of June 21, 2006, by Archstone-Smith Trust, as guarantor, for the benefit of J.P. Morgan Chase Bank, as administrative agent, J.P. Morgan Europe Limited, as administrative agent for foreign currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and Suntrust Bank and Citicorp North America, Inc. as documentation agents and the various banks signatory thereto (incorporated by reference to Exhibit 10.1 to Archstone-Smith’s Current Report on Form 8-K filed with the SEC on June 27, 2006)
10.15	Archstone Dividend Reinvestment and Share Purchase Plan (incorporated by reference to the prospectus contained in Archstone-Smith Trust’s Registration Statement on Form S-3 (No. 333-44639-01))
10.16	2006 and 2007 schedule of applicable dates under the Archstone Dividend Reinvestment and Share Purchase Plan (included by reference to Exhibit 99.1 to Archstone-Smith Trust’s current report on form 8-K filed with the SEC on February 14, 2006)
10.17	Shareholders’ Agreement, dated as of October 31, 2001, by and among Archstone-Smith Trust, Archstone-Smith Operating Trust, Robert H. Smith and Robert P. Kogod (incorporated by reference to Exhibit 10.1 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
10.18	Noncompetition Agreement by and among Charles E. Smith Residential Realty, Inc., Charles E. Smith Residential Realty L.P. and Robert P. Kogod and Robert H. Smith (incorporated by reference to Exhibit 10.1 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
10.19	Registration Rights and Lock-up Agreement (incorporated by reference to Exhibit 10.2 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
10.20	License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential Realty, Inc. (incorporated by reference to Exhibit 10.35 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
10.21	License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential Realty L.P. (incorporated by reference to Exhibit 10.36 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
12.1	Computation of Ratio of Earnings to Fixed Charges
12.2	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends
15.1	Consent of Independent Registered Public Accounting Firm
21	Subsidiaries of Archstone-Smith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

90

EX-4.1

Exhibit 4.1

PROPERTY TRUST OF AMERICA

TO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Trustee

Indenture
Dated as of February 1, 1994

Senior Debt Securities

TABLE OF CONTENTS

		Page
	ARTICLE ONE
	DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101.	Definitions		1
	Acquired Debt		2
	Act		2
	Additional Amounts		2
	Affiliate		2
	Annual Service Charge		2
	Authenticating Agent		2
	Authorized Newspaper		2
	Bankruptcy Law		2
	Bearer Security		3
	Board of Trustees		3
	Board Resolution		3
	Business Day		3
	Capital Stock		3
	CEDEL		3
	Commission		3
	Company		3
	Company Request and Company Order		3
	Consolidated Income Available for Debt Service		3
	Conversion Event		4
	Corporate Trust Office		4
	corporation		4
	coupon		4
	Custodian		4
	Debt		4
	Defaulted Interest		4
	Disqualified Stock		4
	Dollar or $		5
	DTC		5
	Earnings from Operations		5
	ECU		5
	Euroclear		5
	European Communities		5
	European Monetary System		5
	Event of Default		5
	Foreign Currency		5
	GAAP		5

		Page
	Government Obligations		5
	Holder		6
	Indenture		6
	Indexed Security		6
	interest		6
	Interest Payment Date		6
	Make-Whole Amount		6
	Maturity		7
	Officers’ Certificate		7
	Opinion of Counsel		7
	Original Issue Discount Security		7
	Outstanding		7
	Paying Agent		8
	Person		8
	Place of Payment		8
	Predecessor Security		8
	Redemption Date		9
	Redemption Price		9
	Registered Security		9
	Regular Record Date		9
	Repayment Date		9
	Repayment Price		9
	Responsible Officer		9
	Securities Act		9
	Security		9
	Security Register and Security Registrar		9
	Significant Subsidiary		9
	Special Record Date		9
	Stated Maturity		9
	Subsidiary		10
	Total Assets		10
	Trust Indenture Act or TIA		10
	Trustee		10
	Undepreciated Real Estate Assets		10
	United States		10
	United States person		10
	Yield to Maturity		10
SECTION 102.	Compliance Certificates and Opinions		11
SECTION 103.	Form of Documents Delivered to Trustee		11
SECTION 104.	Acts of Holders		12
SECTION 105.	Notices, etc., to Trustee and Company		14
SECTION 106.	Notice to Holders; Waiver		14
SECTION 107.	Effect of Headings and Table of Contents		15
SECTION 108.	Successors and Assigns		15

		Page
SECTION 109.	Separability Clause		15
SECTION 110.	Benefits of Indenture		15
SECTION 111.	No Personal Liability		15
SECTION 112.	Governing Law		16
SECTION 113.	Legal Holidays		16
	ARTICLE TWO
	SECURITIES FORMS
SECTION 201.	Forms of Securities		16
SECTION 202.	Form of Trustee’s Certificate of Authentication		17
SECTION 203.	Securities Issuable in Global Form		17
	ARTICLE THREE
	THE SECURITIES
SECTION 301.	Amount Unlimited; Issuable in Series		18
SECTION 302.	Denominations		21
SECTION 303.	Execution, Authentication, Delivery and Dating		22
SECTION 304.	Temporary Securities		24
SECTION 305.	Registration, Registration of Transfer and Exchange		26
SECTION 306.	Mutilated, Destroyed, Lost and Stolen Securities		30
SECTION 307.	Payment of Interest; Interest Rights Preserved		31
SECTION 308.	Persons Deemed Owners		33
SECTION 309.	Cancellation		34
SECTION 310.	Computation of Interest		34
	ARTICLE FOUR
	SATISFACTION AND DISCHARGE
SECTION 401.	Satisfaction and Discharge of Indenture		34
SECTION 402.	Application of Trust Funds		36
	ARTICLE FIVE
	REMEDIES
SECTION 501.	Events of Default		36
SECTION 502.	Acceleration of Maturity; Rescission and Annulment		38
SECTION 503.	Collection of Indebtedness and Suits for Enforcement by Trustee		39
SECTION 504.	Trustee May File Proofs of Claim		40
SECTION 505.	Trustee May Enforce Claims Without Possession of Securities or Coupons		41
SECTION 506.	Application of Money Collected		41
SECTION 507.	Limitation on Suits		41

		Page
SECTION 508.	Unconditional Right of Holders to Receive Principal, Premium
	or Make-Whole Amount, if any, Interest and Additional Amounts		42
SECTION 509.	Restoration of Rights and Remedies		42
SECTION 510.	Rights and Remedies Cumulative		42
SECTION 511.	Delay or Omission Not Waiver		43
SECTION 512.	Control by Holders of Securities		43
SECTION 513.	Waiver of Past Defaults		43
SECTION 514.	Waiver of Usury, Stay or Extension Laws		44
SECTION 515.	Undertaking for Costs		44
	ARTICLE SIX
	THE TRUSTEE
SECTION 601.	Notice of Defaults		44
SECTION 602.	Certain Rights of Trustee		45
SECTION 603.	Not Responsible for Recitals or Issuance of Securities		46
SECTION 604.	May Hold Securities		46
SECTION 605.	Money Held in Trust		46
SECTION 606.	Compensation and Reimbursement		46
SECTION 607.	Corporate Trustee Required; Eligibility; Conflicting Interests		47
SECTION 608.	Resignation and Removal; Appointment of Successor		47
SECTION 609.	Acceptance of Appointment by Successor		49
SECTION 610.	Merger, Conversion, Consolidation or Succession to Business		50
SECTION 611.	Appointment of Authenticating Agent		50
	ARTICLE SEVEN
	HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701.	Disclosure of Names and Addresses of Holders		52
SECTION 702.	Reports by Trustee		52
SECTION 703.	Reports by Company		52
SECTION 704.	Company to Furnish Trustee Names and Addresses of Holders		53
	ARTICLE EIGHT
	CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 801.	Consolidations and Mergers of Company and Sales, Leases and
	Conveyances Permitted Subject to Certain Conditions		53
SECTION 802.	Rights and Duties of Successor Corporation		54
SECTION 803.	Officers’ Certificate and Opinion of Counsel		54
	ARTICLE NINE
	SUPPLEMENTAL INDENTURES
SECTION 901.	Supplemental Indentures Without Consent of Holders		54

		Page
SECTION 902.	Supplemental Indentures with Consent of Holders		56
SECTION 903.	Execution of Supplemental Indentures		57
SECTION 904.	Effect of Supplemental Indentures		57
SECTION 905.	Conformity with Trust Indenture Act		58
SECTION 906.	Reference in Securities to Supplemental Indentures		58
SECTION 907.	Notice of Supplemental Indentures		58
	ARTICLE TEN
	COVENANTS
SECTION 1001.	Payment of Principal, Premium or Make-Whole Amount, if any,
	Interest and Additional Amounts		58
SECTION 1002.	Maintenance of Office or Agency		58
SECTION 1003.	Money for Securities Payments to Be Held in Trust		60
SECTION 1004.	Limitations on Incurrence of Debt		61
SECTION 1005.	Existence		63
SECTION 1006.	Maintenance of Properties		63
SECTION 1007.	Insurance		63
SECTION 1008.	Payment of Taxes and Other Claims		63
SECTION 1009.	Provision of Financial Information		63
SECTION 1010.	Statement as to Compliance		64
SECTION 1011.	Additional Amounts		64
SECTION 1012.	Waiver of Certain Covenants		65
	ARTICLE ELEVEN
	REDEMPTION OF SECURITIES
SECTION 1101.	Applicability of Article		65
SECTION 1102.	Election to Redeem; Notice to Trustee		66
SECTION 1103.	Selection by Trustee of Securities to Be Redeemed		66
SECTION 1104.	Notice of Redemption		66
SECTION 1105.	Deposit of Redemption Price		68
SECTION 1106.	Securities Payable on Redemption Date		68
SECTION 1107.	Securities Redeemed in Part		69
	ARTICLE TWELVE
	SINKING FUNDS
SECTION 1201.	Applicability of Article		69
SECTION 1202.	Satisfaction of Sinking Fund Payments with Securities		69
SECTION 1203.	Redemption of Securities for Sinking Fund		70
	ARTICLE THIRTEEN
	REPAYMENT AT THE OPTION OF HOLDERS

		Page
SECTION 1301.	Applicability of Article		70
SECTION 1302.	Repayment of Securities		70
SECTION 1303.	Exercise of Option		70
SECTION 1304.	When Securities Presented for Repayment Become Due and Payable		71
SECTION 1305.	Securities Repaid in Part		72
	ARTICLE FOURTEEN
	DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401.	Applicability of Article; Company’s Option to Effect Defeasance
	or Covenant Defeasance		72
SECTION 1402.	Defeasance and Discharge		73
SECTION 1403.	Covenant Defeasance		73
SECTION 1404.	Conditions to Defeasance or Covenant Defeasance		74
SECTION 1405.	Deposited Money and Government Obligations to Be Held in Trust;
	Other Miscellaneous Provisions		76
	ARTICLE FIFTEEN
	MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501.	Purposes for Which Meetings May Be Called		77
SECTION 1502.	Call, Notice and Place of Meetings		77
SECTION 1503.	Persons Entitled to Vote at Meetings		77
SECTION 1504.	Quorum; Action		78
SECTION 1505.	Determination of Voting Rights; Conduct and Adjournment of
	Meetings		79
SECTION 1506.	Counting Votes and Recording Action of Meetings		80
SECTION 1507.	Evidence of Action Taken by Holders		80
SECTION 1508.	Proof of Execution of Instruments		80

TESTIMONIUM
SIGNATURES AND SEALS
ACKNOWLEDGMENTS
EXHIBIT A — FORMS OF CERTIFICATION

PROPERTY TRUST OF AMERICA

Reconciliation and tie between Trust Indenture Act of 1939, as amended (the “1939 Act”), and Indenture, dated as of February 1, 1994

Trust Indenture
Act Section		Indenture Section
§ 310	(a) (1)		607(a)
	(a)(2)		607(a)
	(b)		607(b), 608
§ 312	(c)		701
§ 314	(a)		703
	(a)(4)		1011
	(c)(1)		102
	(c)(2)		102
	(e)		102
§ 315	(b)		601
§ 316	(a) (last sentence)		101 (“Outstanding”)
	(a)(1)(A)		502, 512
	(a)(1)(B)		513
	(b)		508
§ 317	(a)(1)		503
	(a)(2)		504
§ 318	(a)		112
	(c)		112

NOTE:	This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
	Attention should also be directed to Section 318(c) of the 1939 Act, which provides that the provisions of Sections 310 to and including 317 of the 1939 Act are a part of and govern every qualified indenture, whether or not physically contained therein.

     INDENTURE, dated as of February 1, 1994, between PROPERTY TRUST OF AMERICA, a Maryland real estate investment trust (hereinafter called the “Company”), having its principal office at 1790 Commerce Park Drive, El Paso, Texas 79912 and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a banking corporation organized under the laws of the State of New York, as Trustee hereunder (hereinafter called the “Trustee”), having its Corporate Trust Office at 60 Wall Street, New York, New York 10260.

RECITALS OF THE COMPANY

     The Company deems it necessary to issue from time to time for its lawful purposes senior debt securities (hereinafter called the “Securities”) evidencing its unsecured and unsubordinated indebtedness, and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to aggregate principal amount, to bear interest at the rates or formulas, to mature at such times and to have such other provisions as shall be fixed therefor as hereinafter provided.

     All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

     SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or the context otherwise requires:

     (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

     (2) all other terms used herein which are defined in the TIA, either directly or by reference therein, have the meanings assigned to them therein, and the terms “cash transaction” and “self-liquidating paper,” as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the TIA;

     (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and

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     (4) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

     Certain terms, used principally in Article Three, Article Five, Article Six and Article Ten, are defined in those Articles. In addition, the following terms shall have the indicated respective meanings:

     “Acquired Debt” means Debt of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Debt incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition. Acquired Debt shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Subsidiary.

     “Act” has the meaning specified in Section 104.

     “Additional Amounts” means any additional amounts which are required by a Security, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders and which are owing to such Holders.

     “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Annual Service Charge” as of any date means the maximum amount which is payable in any period for interest on, and original issue discount of, Debt of the Company and its Subsidiaries and the amount of dividends which are payable in respect of any Disqualified Stock.

     “Authenticating Agent” means any authenticating agent appointed by the Trustee pursuant to Section 611.

     “Authorized Newspaper” means a newspaper, printed in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place. Whenever successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different Authorized Newspapers in the same city meeting the foregoing requirements and in each case on any Business Day.

     “Bankruptcy Law” has the meaning specified in Section 501.

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     “Bearer Security” means a Security which is payable to bearer.

     “Board of Trustees” means the board of trustees of the Company, the executive committee or any other committee of that board duly authorized to act for it in respect hereof.

     “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Trustees, and to be in full force and effect on the date of such certification, and delivered to the Trustee.

     “Business Day,” when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 301, any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in that Place of Payment or particular location are authorized or required by law, regulation or executive order to close.

     “Capital Stock” means, with respect to any Person, any capital stock (including preferred stock), shares, interests, participations or other ownership interests (however designated) of such Person and any rights (other than debt securities convertible or exchangeable for corporate stock), warrants or options to purchase any thereof.

     “CEDEL” means Centrale de Livraison de Valeurs Mobilières, S.A., or its successor.

     “Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date.

     “Company” means the Person named as the “Company” in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor corporation.

     “Company Request” and “Company Order” mean, respectively, a written request or order signed in the name of the Company by its Chairman of the Board of Trustees, the President or a Vice President, and by its Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee.

     “Consolidated Income Available for Debt Service” for any period means Earnings from Operations of the Company and its Subsidiaries plus amounts which have been deducted, and minus amounts which have been added, for the following (without duplication): (a) interest on Debt of the Company and its Subsidiaries, (b) provision for taxes of the Company and its Subsidiaries based on income, (c) amortization of debt discount, (d) provisions for gains and losses on properties and property depreciation and amortization, (e) the effect of any noncash charge resulting from a change in accounting principles in determining Earnings from Operations for such period and (f) amortization of deferred charges.

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     “Conversion Event” means the cessation of use of (i) a Foreign Currency (other than the ECU or other currency unit) both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit (or composite currency) other than the ECU for the purposes for which it was established.

     “Corporate Trust Office” means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at 60 Wall Street, New York, New York 10260.

     “corporation” includes corporations, associations, companies and business trusts.

     “coupon” means any interest coupon appertaining to a Bearer Security.

     “Custodian” has the meaning set forth in Section 501.

     “Debt” of the Company or any Subsidiary means any indebtedness of the Company or any Subsidiary, whether or not contingent, in respect of (i) borrowed money or evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any security interest existing on property owned by the Company or any Subsidiary, (iii) the reimbursement obligations, contingent or otherwise, in connection with any letters of credit actually issued or amounts representing the balance deferred and unpaid of the purchase price of any property or services, except any such balance that constitutes an accrued expense or trade payable, or all conditional sale obligations or obligations under any title retention agreement, (iv) the principal amount of all obligations of the Company or any Subsidiary with respect to redemption, repayment or other repurchase of any Disqualified Stock or (v) any lease of property by the Company or any Subsidiary as lessee which is reflected on the Company’s Consolidated Balance Sheet as a capitalized lease in accordance with GAAP to the extent, in the case of items of indebtedness under (i) through (iii) above, that any such items (other than letters of credit) would appear as a liability on the Company’s Consolidated Balance Sheet in accordance with GAAP, and also includes, to the extent not otherwise included, any obligation by the Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise (other than for purposes of collection in the ordinary course of business), Debt of another Person (other than the Company or any Subsidiary).

     “Defaulted Interest” has the meaning specified in Section 307.

     “Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which by the terms of such Capital Stock (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable), upon the happening of any event or otherwise (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (ii) is convertible into or exchangeable or exercisable for Debt or Disqualified Stock

4

or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Stated Maturity of the series of Debt Securities.

     “Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.

     “DTC” means The Depository Trust Company.

     “Earnings from Operations” for any period means net earnings excluding gains and losses on sales of investments, net as reflected in the financial statements of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.

     “ECU” means the European Currency Unit as defined and revised from time to time by the Council of the European Communities.

     “Euroclear” means Morgan Guaranty Trust Company of New York, Brussels Office, or its successor as operator of the Euroclear System.

     “European Communities” means the European Economic Community, the European Coal and Steel Community and the European Atomic Energy Community.

     “European Monetary System” means the European Monetary System established by the Resolution of December 5, 1978 of the Council of the European Communities.

     “Event of Default” has the meaning specified in Article Five.

     “Foreign Currency” means any currency, currency unit or composite currency, including, without limitation, the ECU issued by the government of one or more countries other than the United States of America or by any recognized confederation or association of such governments.

     “GAAP” means generally accepted accounting principles as used in the United States applied on a consistent basis as in effect from time to time; provided, that solely for purposes of calculating the financial covenants contained herein, “GAAP” shall mean generally accepted accounting principles as used in the United States on the date hereof, applied on a consistent basis.

     “Government Obligations” means securities which are (i) direct obligations of the United States of America or the government which issued the Foreign Currency in which the Securities of a particular series are payable, for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the Foreign Currency in which the Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which,

5

in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt.

     “Holder” means, in the case of a Registered Security, the Person in whose name a Security is registered in the Security Register and, in the case of a Bearer Security, the bearer thereof and, when used with respect to any coupon, shall mean the bearer thereof.

     “Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument, “Indenture” shall mean, with respect to any one or more series of Securities for which such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of the or those particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party.

     “Indexed Security” means a Security the terms of which provide that the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance.

     “interest” when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, shall mean interest payable after Maturity, and, when used with respect to a Security which provides for the payment of Additional Amounts pursuant to Section 1011, includes such Additional Amounts.

     “Interest Payment Date” means, when used with respect to any Security, the Stated Maturity of an installment of interest on such Security.

     “Make-Whole Amount” means the amount, if any, in addition to principal which is required by a Security, under the terms and conditions specified therein or as otherwise specified as contemplated by Section 301, to be paid by the Company to the Holder thereof in connection with any optional redemption or accelerated payment of such Security.

6

     “Maturity” means, when used with respect to any Security, the date on which the principal of such Security or an installment of principal become due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment, repurchase or otherwise.

     “Officers’ Certificate” means a certificate signed by the Chairman of the Board of Trustees, the President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary of an Assistant Secretary, of the Company, and delivered to the Trustee.

     “Opinion of Counsel” means a written opinion of counsel, who may be an employee of or counsel for the Company or other counsel satisfactory to the Trustee.

     “Original Issue Discount Security” means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.

     “Outstanding,” when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

          (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

          (ii) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the holders of such Securities and any coupons appertaining thereto; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or other provision therefor satisfactory to the Trustee has been made;

          (iii) Securities, except solely to the extent provided in Sections 401, 1402 or 1403, as applicable, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Articles Four or Fourteen; and

          (iv) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by TIA Section 313, (i) the principal amount of

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an Original Issue Discount Security that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 502, (ii) the principal amount of any Security denominated in a Foreign Currency that may be counted in making such determination or calculation and that shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined pursuant to Section 301 as of the date such Security is originally issued by the Company, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent as of such date of original issuance of the amount determined as provided in clause (i) above) of such Security, (iii) the principal amount of any Indexed Security that may be counted in making such determination or calculation and that shall be deemed outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to Section 301, and (iv) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.

     “Paying Agent” means any Person authorized by the Company to pay the principal of (and premium or Make-Whole Amount, if any) or interest on any Securities or coupons on behalf of the Company, or if no such Person is authorized, the Company.

     “Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

     “Place of Payment” means, when used with respect to the Securities of or within any series, the place or places where the principal of (and premium or Make-Whole Amount, if any) and interest on such Securities are payable as specified as contemplated by Sections 301 and 1002.

     “Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains.

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     “Redemption Date” means, when used with respect to any Security to be redeemed, in whole or in part, the date fixed for such redemption by or pursuant to this Indenture.

     “Redemption Price” means, when used with respect to any Security to be redeemed, the price at which it is to be redeemed pursuant to this Indenture.

     “Registered Security” means any Security which is registered in the Security Register.

     “Regular Record Date” for the installment of interest payable on any Interest Payment Date on the Registered Securities of or within any series means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day.

     “Repayment Date” means, when used with respect to any Security to be repaid or repurchased at the option of the Holder, the date fixed for such repayment or repurchase by or pursuant to this Indenture.

     “Repayment Price” means, when used with respect to any Security to be repaid or repurchased at the option of the Holder, the price at which it is to be repaid or repurchased by or pursuant to this Indenture.

     “Responsible Officer” means, when used with respect to the Trustee, any officer of the Trustee assigned by the Trustee to administer its corporate trust matters.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder by the Commission.

     “Security” has the meaning stated in the first recital of this Indenture and, more particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that, if at any time there is more than one Person acting as Trustee under this Indenture, “Securities” with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of or within any series as to which such Person is not Trustee.

     “Security Register” and “Security Registrar” have the respective meanings specified in Section 305.

     “Significant Subsidiary” means any Subsidiary which is a “significant subsidiary” (within the meaning of Regulation S-X, promulgated under the Securities Act) of the Company.

     “Special Record Date” for the payment of any Defaulted Interest on the Registered Securities of or within any series means a date fixed by the Trustee pursuant to Section 307.

     “Stated Maturity” means, when used with respect to any Security or any installment of principal thereof or interest thereon, the date specified in such Security or a coupon representing

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such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable.

     “Subsidiary” means, with respect to any Person, any corporation or other entity of which a majority of (a) the voting power of the voting equity securities or (b) the outstanding equity interests of which are owned, directly or indirectly, by such Person. For the purposes of this definition, “voting equity securities” means equity securities having voting power for the election of directors, whether at all times or only so long as no senior class of security has such voting power by reason of any contingency.

     “Total Assets” as of any date means the sum of (i) the Company’s Undepreciated Real Estate Assets and (ii) all other assets of the Company determined in accordance with GAAP (but excluding accounts receivable and intangibles).

     “Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended and as in force at the date as of which this Indenture was executed, except as provided in Section 905.

     “Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of or within any series shall mean only the Trustee with respect to the Securities of that series.

     “Undepreciated Real Estate Assets” as of any date means the cost (original cost plus capital improvements) of real estate assets of the Company and its Subsidiaries on such date, before depreciation and amortization determined on a consolidated basis in accordance with GAAP.

     “United States” means, unless otherwise specified with respect to any Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.

     “United States person” means, unless otherwise specified with respect to any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

     “Yield to Maturity” means the yield to maturity, computed at the time of issuance of a Security (or, if applicable, at the most recent redetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles.

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     SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture (including covenants, compliance with which constitute conditions precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

     Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (excluding certificates delivered pursuant to Section 1010) shall include:

     (1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto;

     (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

     (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and

     (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

     SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

     Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a certificate or representations by counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion, certificate or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information as to such factual matters is

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in the possession of the Company, unless such counsel knows that the certificate or opinion or representations as to such matters are erroneous.

     Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

     SECTION 104. Acts of Holders.

     (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. If Securities of a series are issuable as Bearer Securities, any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of Securities of such series may, alternatively, be embodied in and evidenced by the record of Holders of Securities of such series voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities of such series duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instrument and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company and any agent of the Trustee or the Company, if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1506.

     (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgements of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient.

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     (c) The ownership of Registered Securities shall be proved by the Security Register.

     (d) The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed, as depositary, by any trust company, bank, banker or other depositary, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (1) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, or (2) such Bearer Security is produced to the Trustee by some other Person, or (3) such Bearer Security is surrendered in exchange for a Registered Security, or (4) such Bearer Security is no longer Outstanding. The ownership of Bearer Securities may also be proved in any other manner which the Trustee deems sufficient.

     (e) If the Company shall solicit from the Holders of Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, in or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date.

     (f) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating

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Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

     SECTION 105. Notices, etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

     (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or

     (2) The Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company.

     SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.

     If by reason of the suspension of or irregularities in regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder.

     Except as otherwise expressly provided herein or otherwise specified with respect to any Securities pursuant to Section 301, where this Indenture provides for notice to Holders of Bearer Securities of any event, such notices shall be sufficiently given if published in an Authorized Newspaper in The City of New York and in such other city or cities as may be specified in such Securities, and if the Securities of such series are listed on any stock exchange outside the United States, in any place at which such Securities are listed on a securities exchange to the extent that such securities exchange so requires, on a Business Day, such publication to be not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication.

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     If by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause it shall be impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as shall be given with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. Neither the failure to give notice by publication to any particular Holder of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any notice to Holders of Registered Securities given as provided herein.

     Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.

     Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

     SECTION 107. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

     SECTION 108. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

     SECTION 109. Separability Clause. In case any provision in this Indenture or in any Security or coupon shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

     SECTION 110. Benefits of Indenture. Nothing in this Indenture or in the Securities or coupons appertaining thereto, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture.

     SECTION 111. No Personal Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, in any Security or coupon appertaining thereto, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such or, against any past, present or future shareholder, officer or trustee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and

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released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities.

     SECTION 112. Governing Law. This Indenture and the Securities and coupons shall be governed by and construed in accordance with the law of the State of New York. This Indenture is subject to the provisions of the TIA that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.

     SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security or coupon other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu hereof), payment of interest or any Additional Amounts or principal (and premium or Make-Whole Amount, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity, provided that no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be.

ARTICLE TWO

SECURITIES FORMS

     SECTION 201. Forms of Securities. The Registered Securities, if any, of each series and the Bearer Securities, if any, and related coupons of each series, shall be in substantially the forms as shall be established in or pursuant to one or more indentures supplemental hereto or Board Resolutions, shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage.

     Unless otherwise specified as contemplated by Section 301, Bearer Securities shall have interest coupons attached.

     The definitive Securities and coupons shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities or coupons, as evidenced by their execution of such Securities or coupons.

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     SECTION 202. Form of Trustee’s Certificate of Authentication. Subject to Section 611, the Trustee’s certificate of authentication shall be in substantially the following form:

     This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Trustee
By
	Authorized Officer

     SECTION 203. Securities Issuable in Global Form. If Securities of or within a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and the provisions of Section 302, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon instructions given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel.

     The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303.

     Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of and any premium or Make-Whole Amount and interest on any Security in permanent global form shall be made to the Person or Persons specified therein.

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     Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security (i) in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form, or (ii) in the case of a permanent global Security in bearer form, Euroclear or CEDEL.

ARTICLE THREE

THE SECURITIES

     SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.

     The Securities may be issued in one or more series. There shall be established in or pursuant to one or more Board Resolutions, or indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (1), (2) and (15) below), if so provided, may be determined from time to time by the Company with respect to unissued Securities of or within the series when issued from time to time):

     (1) the title of the Securities of or within the series (which shall distinguish the Securities of such series from all other series of Securities);

     (2) any limit upon the aggregate principal amount of the Securities of or within the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of or within the series pursuant to Section 304, 305, 306, 906, 1107 or 1305);

     (3) the date or dates, or the method by which such date or dates will be determined, on which the principal of the Securities of or within the series shall be payable and the amount of principal payable thereon;

     (4) the rate or rates at which the Securities of or within the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest will be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, and the basis upon which interest shall be calculated if other than that of a 360-day year comprised of twelve 30-day months;

     (5) the place or places, if any, other than or in addition to the Borough of Manhattan, The City of New York, where the principal of (and premium or Make-Whole

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Amount, if any), interest, if any, on, and Additional Amounts, if any, payable in respect of, Securities of or within the series shall be payable, any Registered Securities of or within the series may be surrendered for registration of transfer or exchange and notices or demands to or upon the Company in respect of the Securities of or within the series and this Indenture may be served;

     (6) the period or periods within which, the price or prices (including the premium or Make-Whole Amount, if any), at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have the option;

     (7) the obligation, if any, of the Company to redeem, repay or purchase Securities of or within the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which or the date or dates on which, the price or prices at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;

     (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Registered Securities of or within the series shall be issuable and, if other than the denomination of $5,000, the denomination or denominations in which any Bearer Securities of or within the series shall be issuable;

     (9) if other than the Trustee, the identity of each Security Registrar and/or Paying Agent;

     (10) if other than the principal amount thereof, the portion of the principal amount of Securities of or within the series that shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502, or the method by which such portion shall be determined;

     (11) if other than Dollars, the Foreign Currency or Currencies in which payment of the principal of (and premium or Make-Whole Amount, if any) or interest or Additional Amounts, if any, on the Securities of or within the series shall be payable or in which the Securities of or within the series shall be denominated;

     (12) whether the amount of payments of principal of (and premium or Make-Whole Amount, if any) or interest, if any, on the Securities of or within the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined;

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     (13) whether the principal of (and premium or Make-Whole Amount, if any) or interest or Additional Amounts, if any, on the Securities of or within the series are to be payable, at the election of the Company or a Holder thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such Securities are denominated or stated to be payable, the period or periods within which (including the Election Date), and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are to be so payable;

     (14) provisions, if any, granting special rights to the Holders of Securities of or within the series upon the occurrence of such events as may be specified;

     (15) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to Securities of or within the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein;

     (16) whether Securities of or within the series are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms upon which Bearer Securities of or within the series may be exchanged for Registered Securities of or within the series and vice versa (if permitted by applicable laws and regulations), whether any Securities of or within the series are to be issuable initially in temporary global form and whether any Securities of or within the series are to be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and, if Registered Securities of or within the series are to be issuable as a global Security, the identity of the depositary for such series;

     (17) the date as of which any Bearer Securities of or within the series and any temporary global Security representing Outstanding Securities of or within the series shall be dated if other than the date of original issuance of the first Security of the series to be issued;

     (18) the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender

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of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304;

     (19) the applicability, if any, of Sections 1402 and/or 1403 to the Securities of or within the series and any provisions in modifications of, in addition to or in lieu of any of the provisions of Article Fourteen;

     (20) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions;

     (21) if the Securities of or within the series are to be issued upon the exercise of debt warrants, the time, manner and place for such Securities to be authenticated and delivered;

     (22) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1011 on the Securities of or within the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option); and

     (23) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture).

     All Securities of any one series and the coupons appertaining to any Bearer Securities of such series, if any, shall be substantially identical except, in the case of Registered or Bearer Securities issued in global form, as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series.

     If any of the terms of the Securities of any series are established by action taken pursuant to one or more Board Resolutions or supplemental indentures, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order for authentication and delivery of such Securities.

     SECTION 302. Denominations. The Securities of each series shall be issuable in such denominations as shall be specified as contemplated by Section 301. With respect to Securities of any series denominated in Dollars, in the absence of any such provisions with respect to the Securities of any series, the Registered Securities of such series, other than Registered Securities

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issued in global form (which may be of any denomination), shall be issuable in denominations of $1,000 and any integral multiple thereof and the Bearer Securities of such series, other than Bearer Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $5,000.

     SECTION 303. Execution, Authentication, Delivery and Dating. The Securities and any coupons appertaining thereto shall be executed on behalf of the Company by its Chairman of the Board, one of its Managing Directors or one of its Vice Presidents, under its corporate seal reproduced thereon, and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities and coupons may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities.

     Securities or coupons appertaining thereto bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities or coupons.

     At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupon appertaining thereto, executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities; provided, however, that, in connection with its original issuance, no Bearer Security shall be mailed or otherwise delivered to any location in the United States; and provided further that, unless otherwise specified with respect to any series of Securities pursuant to Section 301, a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to received such Bearer Security shall have furnished a certificate to Euroclear or CEDEL, as the case may be, in the form set forth in Exhibit A-1 to this Indenture or such other certificate as may be specified with respect to any series of Securities pursuant to Section 301, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture.

     Except as permitted by Section 306, the Trustee shall not authenticate and deliver any Bearer Security unless all appurtenant coupons for interest then matured have been detached and cancelled. If all of the Securities of any series are not to be issued at one time and if the Board Resolution or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as interest rate or formula, maturity date, date of issuance and date from which interest shall accrue.

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     In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to TIA Section 315(a) through 315(d)) shall be fully protected in relying upon:

     (i) an Opinion of Counsel complying with Section 102 and stating that:

     (a) the form or forms of such Securities and any coupons have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture;

     (b) the terms of such Securities and any coupons have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture; and

     (c) such Securities, together with any coupons appertaining thereto, when completed pursuant to such procedures as may be specified therein, and executed and delivered by the Company to the Trustee for authentication in accordance with this Indenture, authenticated and delivered by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting the enforcement of creditors’ rights generally and to general equitable principles and to such other matters as may be specified therein; and

     (ii) an Officers’ Certificate complying with Section 102 and stating that all conditions precedent provided for in this Indenture relating to the issuance of such Securities have been, or will have been upon compliance with such procedures as may be specified therein, complied with and that, to the best of the knowledge of the signers of such certificate, no Event of Default with respect to such Securities shall have occurred and be continuing.

The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee’s own rights, duties, obligations or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.

     Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all the Securities of any series are not to be issued at one time, it shall not be necessary to deliver a Company Order, an Opinion of Counsel or an Officers’ Certificate otherwise required pursuant to the preceding paragraph at the time of issuance of each Security of such series, but such order, opinion and certificate, with appropriate modifications to cover such future issuances, shall be delivered at or before the time of issuance of the first Security of such series.

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     Each Registered Security shall be dated the date of its authentication and each Bearer Security shall be dated as of the date specified as contemplated by Section 301.

     No Security or coupon appertaining thereto shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security or the Security to which such coupon appertains a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued or sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

     SECTION 304. Temporary Securities.

     (a) Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form with one or more coupons or without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form.

     Except in the case of temporary Securities in global form (which shall be exchanged in accordance with Section 304(b) or as otherwise provided in or pursuant to a Board Resolution), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any non-matured coupons appertaining thereto), the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations; provided, however, that no definitive Bearer Security shall be delivered in

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exchange for a temporary Registered Security; and provided further that a definitive Bearer Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series.

     (b) Unless otherwise provided as contemplated in Section 301, this Section 304(b) shall govern the exchange of temporary Securities issued in global form other than through the facilities of DTC. If any such temporary Security is issued in global form, then such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a depositary or common depositary (the “Common Depositary”), for the benefit of Euroclear and CEDEL.

     Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the “Exchange Date”), the Company shall deliver to the Trustee definitive Securities, in an aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depositary to the Trustee, as the Company’s agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge, and the Trustee shall authenticate and deliver, in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of or within the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that, unless otherwise specified in such temporary global Security, upon such presentation by the Common Depositary, such temporary global Security is accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by CEDEL as to the portion of such temporary global Security held for its account then to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or in such other form as may be established pursuant to Section 301; and provided further that definitive Bearer Securities shall be delivered in exchange for a portion of a temporary global Security only in compliance with the requirements of Section 303.

     Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or CEDEL, as the case may be, to request such exchange on his behalf and delivers to Euroclear or CEDEL, as the

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case may be, a certificate in the form set forth in Exhibit A-1 to this Indenture (or in such other form as may be established pursuant to Section 301), dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like unless such Person takes delivery of such definitive Securities in person at the offices of Euroclear or CEDEL. Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States.

     Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL on such Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee of a certificate or certificates in the form set forth in Exhibit A-2 to this Indenture (or in such other forms as may be established pursuant to Section 301), for credit without further interest on or after such Interest Payment Date to the respective accounts of Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or CEDEL, as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such other forms as may be established pursuant to Section 301). Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section 304(b) and of the third paragraph of Section 303 of this Indenture and the interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners. Except as otherwise provided in this paragraph, no payments of principal or interest owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security shall have been exchanged for an interest in a definitive Security. Any interest so received by Euroclear and CEDEL and not paid as herein provided shall be returned to the Trustee prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company.

     SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency of

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the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes referred to collectively as the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee, at its Corporate Trust Office, is hereby initially appointed “Security Registrar” for the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided. In the event that the Trustee shall cease to be Security Registrar, it shall have the right to examine the Security Register at all reasonable times.

     Subject to the provisions of this Section 305, upon surrender for registration of transfer of any Registered Security of any series at any office or agency of the Company in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount, being a number not contemporaneously outstanding, and containing identical terms and provisions.

     Subject to the provisions of this Section 305, at the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such office or agency. Whenever any such Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive. Unless otherwise specified with respect to any series of Securities as contemplated by Section 301, Bearer Securities may not be issued in exchange for Registered Securities.

     If (but only if) permitted as contemplated by Section 301, at the option of the Holder, Bearer Securities of any series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default thereto appertaining. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, any such permitted exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to any Paying Agent any such missing coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of payment; provided, however, that, except as otherwise provided in

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Section 1002, interest represented by coupons shall be payable only upon presentation and surrender of those coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in a permitted exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the Opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the holder making the exchange is entitled to receive.

     Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global Security shall be exchangeable only as provided in this paragraph. If the depositary for any permanent global Security is DTC, then, unless the terms of such global Security expressly permit such global Security to be exchanged in whole or in part for definitive Securities, a global Security may be transferred, in whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor to DTC for such global Security selected and approved by the Company or to a nominee of such successor to DTC. If at any time DTC notifies the Company that it is unwilling or unable to continue as depositary for the applicable global Security or Securities or if at any time DTC ceases to be a clearing agency registered under the Securities Exchange of 1934 if so required by applicable law or regulation, the Company shall appoint a successor depositary with respect to such global Security or Securities. If (x) a successor depositary for such global Security or Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such unwillingness, inability or ineligibility, (y) an Event of Default has occurred and is continuing and the beneficial owners representing a majority in principal amount of the applicable series of Securities represented by such global Security or Securities advise DTC to cease acting as depositary for such global Security or Securities or (z) the Company, in its sole discretion, determines at any time that all Outstanding Securities (but not less than all) Securities of any series issued or issuable in the form of one or more global Securities shall no longer be represented by such global Security or Securities (provided, however, the Company may not make such determination during the 40-day restricted period provided by Regulation S under the Securities Act or during any other similar period during which the Securities must be held in global form as may be required by the Securities Act), then the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities of like series, rank, tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such global Security or Securities. If any beneficial owner of an interest in a permanent global Security is otherwise entitled to exchange such interest for Securities of such series and of like tenor and

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principal amount of another authorized form and denomination, as specified as contemplated by Section 301 and provided that any applicable notice provided in the permanent global Security shall have been given, then without unnecessary delay but in any event not later than the earliest date on which such interest may be so exchanged, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owner’s interest in such permanent global Security. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered for exchange by DTC or such other depositary as shall be specified in the Company Order with respect thereto to the Trustee, as the Company’s agent for such purpose; provided, however, that no such exchanges may occur during a period beginning at the opening of business 15 days before any selection of Securities to be redeemed and ending on the relevant Redemption Date if the Security for which exchange is requested may be among those selected for redemption; and provided further that no Bearer Security delivered in exchange for a portion of a permanent global Security shall be mailed or otherwise delivered to any location in the United States. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture.

     All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.

     Every Registered Security presented or surrendered for registration of transfer or for exchange or redemption shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

     No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer.

     The Company or the Trustee, as applicable, shall not be required (i) to issue, register the transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the

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Securities to be redeemed under Section 1103 and ending at the close of business on (A) if such Securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such Securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such Securities are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor; provided that such Registered Security shall be simultaneously surrendered for redemption, or (iv) to issue, register the transfer of or exchange any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid.

     SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security or a Security with a mutilated coupon appertaining to it is surrendered to the Trustee or the Company, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them or any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security.

     If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon, and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains.

     Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains, pay such Security or coupon; provided, however, that payment of principal of (and premium or Make-Whole Amount, if any), any interest on and any Additional Amounts with respect to, Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at an office or agency located

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outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto.

     Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

     Every new Security of any series with its coupons, if any, issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series and their coupons, if any, duly issued hereunder.

     The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons.

     SECTION 307. Payment of Interest; Interest Rights Preserved. Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, interest on any Registered Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest on any Registered Security may at the Company’s option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee located inside the United States.

     Unless otherwise provided as contemplated by Section 301 with respect to the Securities of any series, payment of interest may be made, in the case of a Bearer Security, by transfer to an account maintained by the payee with a bank located outside the United States.

     Unless otherwise provided as contemplated by Section 301, every permanent global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be, with respect to that portion of such permanent global Security held for its account by Cede & Co. or the Common Depositary, as the case may be, for the purpose of permitting such party to credit the interest received by it in respect of such permanent global Security to the accounts of the beneficial owners thereof.

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     In case a Bearer Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any Regular Record Date and before the opening of business (at such office or agency) on the next succeeding Interest Payment Date, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date and interest will not be payable on such Interest Payment Date in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.

     Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, any interest on any Registered Security of any series that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

     (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at his address as it appears in the Security Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in an Authorized Newspaper in each place of payment, but such publications shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having

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been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). In case a Bearer Security of any series is surrendered at the office or agency in a Place of Payment for such series in exchange for a Registered Security of such series after the close of business at such office or agency on any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.

     (2) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

     SECTION 308. Persons Deemed Owners. Prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium or Make-Whole Amount, if any), and (subject to Sections 305 and 307) interest on, such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

     Title to any Bearer Security and any coupons appertaining thereto shall pass by delivery. the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of any Bearer Security and the Holder of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

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     None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

     Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such global Security or impair, as between such depositary and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depositary (or its nominee) as Holder of such global Security.

     SECTION 309. Cancellation. All Securities and coupons surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and coupons and Securities and coupons surrendered directly to the Trustee for any such purpose shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. Cancelled Securities and coupons held by the Trustee shall be destroyed by the Trustee and the Trustee shall deliver a certificate of such destruction to the Company, unless by a Company Order the Company directs their return to it.

     SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 with respect to Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

ARTICLE FOUR

SATISFACTION AND DISCHARGE

     SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series herein expressly provided for and any right to receive Additional Amounts, as provided in Section 1011), and the Trustee, upon receipt of a Company Order, and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when

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     (1) either

     (A) all Securities of such series theretofore authenticated and delivered and all coupons, if any, appertaining thereto (other than (i) coupons appertaining to Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities and coupons of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date, whose surrender has been waived as provided in Section 1106, and (iv) Securities and coupons of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company for discharge from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or

     (B) all Securities of such series and, in the case of (i) and (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation

     (i) have become due and payable, or

     (ii) will become due and payable at their Stated Maturity within one year, or

     (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable, sufficient to pay and discharge the entire indebtedness on such Securities and such coupons not theretofore delivered to the Trustee for cancellation, for principal (and premium or Make-Whole Amount, if any) and interest, and any Additional Amounts with respect thereto, to the date of such deposit (in the case of Securities which have become due and payable) or the Stated Maturity or Redemption Date, as the case may be;

     (2) The Company has paid or caused to be paid all other sums payable hereunder by the Company; and

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     (3) The Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under Section 606, the obligations of the Company to any Authenticating Agent under Section 611 and, if money shall have been deposited with and held by the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive.

     SECTION 402. Application of Trust Funds. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium or Make-Whole Amount, if any), and any interest and Additional Amounts for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law.

ARTICLE FIVE

REMEDIES

     SECTION 501. Events of Default. Subject to any modifications, additions or deletions relating to any series of Securities as contemplated pursuant to Section 301, “Event of Default,” wherever used herein with respect to any particular series of Securities, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

     (1) default in the payment of any interest upon or any Additional Amounts payable in respect of any Security of or within that series or of any coupon appertaining thereto, when such interest, Additional Amounts or coupon becomes due and payable, and continuance of such default for a period of 30 days; or

     (2) default in the payment of the principal of (or premium or Make-Whole Amount, if any, on) any Security of that series when due and payable at its Maturity; or

     (3) default in the deposit of any sinking fund payment, when and as due by the terms of any Security of that series; or

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     (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture with respect to any Security of that series (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

     (5) a default under any bond, debenture, note or other evidence of indebtedness of the Company, or under any mortgage, indenture or other instrument of the Company (including a default with respect to Securities of any series other than that series) under which there may be issued or by which there may be secured any indebtedness of the Company (or by any Subsidiary, the repayment of which the Company has guaranteed or for which the Company is directly responsible or liable as obligor or guarantor), whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay an aggregate principal amount exceeding $10,000,000 of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto and shall have resulted in such indebtedness in an aggregate principal amount exceeding $10,000,000 becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities of that series a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to the rescinded or annulled and stating that such notice is a “Notice of Default” hereunder; or

     (6) the entry by a court of competent jurisdiction of one or more judgments, orders or decrees against the Company or any of its Subsidiaries in an aggregate amount (excluding amounts covered by insurance) in excess of $10,000,000 and such judgments, orders or decrees remain undischarged, unstayed and unsatisfied in an aggregate amount (excluding amounts covered by insurance) in excess of $10,000,000 for a period of 30 consecutive days; or

     (7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

     (A) commences a voluntary case,

     (B) consents to the entry of an order for relief against it in an involuntary case,

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     (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or

     (D) makes a general assignment for the benefit of its creditors; or

     (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

     (A) is for relief against the Company or any Significant Subsidiary in an involuntary case,

     (B) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of either of its property, or

     (C) orders the liquidation of the Company or any Significant Subsidiary,

     and the order or decree remains unstayed and in effect for 90 days; or

     (9) any other Event of Default provided with respect to Securities of that series.

As used in this Section 501, the term “Bankruptcy Law” means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors and the term “Custodian” means any receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law.

     SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be specified in the terms thereof) of, and the Make-Whole Amount, if any, on, all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal or specified portion thereof shall become immediately due and payable.

     At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:

     (1) The Company has paid or deposited with the Trustee a sum sufficient to pay in the currency, currency unit or composite currency in which the Securities of such

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series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series):

     (A) all overdue installments of interest on and any Additional Amounts payable in respect of all Outstanding Securities of that series and any related coupons;

     (B) the principal of (and premium or Make-Whole Amount, if any, on) any Outstanding Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities;

     (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest and any Additional Amounts at the rate or rates borne by or provided for in such Securities; and

     (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

     (2) all Events of Default with respect to Securities of that series, other than the nonpayment of the principal of (or premium or Make-Whole Amount, if any) or interest on Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.

No such rescission shall affect any subsequent default or impair any right consequence thereon.

     SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if:

     (1) default is made in the payment of any installment of interest or Additional Amounts, if any, on any Security of any series and any related coupon when such interest or Additional Amount becomes due and payable and such default continues for a period of 30 days, or

     (2) default is made in the payment of the principal of (or premium or Make-Whole Amount, if any, on) any Security of any series at its Maturity,

then the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities of such series and coupons, the whole amount then due and payable on such Securities and coupons for principal (and premium or Make-Whole Amount, if any) and interest and Additional Amount, with interest upon any overdue principal (and premium or Make-Whole Amount, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest or Additional Amounts, if any, at the rate or rates borne by or provided for in such Securities, and, in addition thereto, such further amount

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as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

     If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities of such series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities of such series, wherever situated.

     If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any related coupons by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

     SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium or Make-Whole Amount, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise:

     (i) to file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities of such series, of principal (and premium or Make-Whole Amount, if any) and interest and Additional Amounts, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and

     (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of Securities of such series and coupons to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any

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predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 606.

     Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security or coupon any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security or coupon in any such proceeding.

     SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons. All rights of action and claims under this Indenture or any of the Securities or coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered.

     SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium or Make-Whole Amount, if any) or interest and any Additional Amounts, upon presentation of the Securities or coupons, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

     FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 606;

     SECOND: To the payment of the amounts then due and unpaid upon the Securities and coupons for principal (and premium or Make-Whole Amount, if any) and interest and any Additional Amounts payable, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities and coupons for principal (and premium or Make-Whole Amount, if any), interest and Additional Amounts, respectively; and

     THIRD: To the payment of the remainder, if any, to the Company.

     SECTION 507. Limitation on Suits. No Holder of any Security of any series or any related coupon shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

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     (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;

     (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

     (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

     (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

     (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.

     SECTION 508. Unconditional Right of Holders to Receive Principal, Premium or Make-Whole Amount, if any, Interest and Additional Amounts. Notwithstanding any other provision in this Indenture, the Holder of any Security or coupon shall have the right which is absolute and unconditional to receive payment of the principal of (and premium or Make-Whole Amount, if any) and (subject to Sections 305 and 307) interest on, and any Additional Amounts in respect of, such Security or payment of such coupon on the respective due dates expressed in such Security or coupon (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

     SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders of Securities and coupons shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

     SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred upon or

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reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

     SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security or coupon to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Securities or coupons, as the case may be.

     SECTION 512. Control by Holders of Securities. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities of such series, provided that

     (1) such direction shall not be in conflict with any rule of law or with this Indenture,

     (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

     (3) the Trustee need not take any action which might involve it in personal liability or be unduly prejudicial to the Holders of Securities of such series not joining therein (but the Trustee shall have no obligation as to the determination of such undue prejudice).

     SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any related coupons waive any past default hereunder with respect to such series and its consequences, except a default

     (1) in the payment of the principal of (or premium or Make-Whole Amount, if any) or interest on or Additional Amounts payable in respect of any Security of such series or any related coupons, or

     (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.

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     Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

     SECTION 514. Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, nor or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

     SECTION 515. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of any undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium or Make-Whole Amount, if any) or interest on or Additional Amounts payable with respect to any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date).

ARTICLE SIX

THE TRUSTEE

     SECTION 601. Notice of Defaults. Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium or Make-Whole Amount, if any) or interest on or any Additional Amounts with respect to any Security of such series, or in the payment of any sinking fund installment with respect to the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities and coupons of such series; and provided further that in the case of any default or breach of the character specified in Section 501(4) with respect to the Securities and

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coupons of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to the Securities of such series.

     SECTION 602. Certain Rights of Trustee. Subject to the provisions of TIA Section 315(a) through 315(d):

     (1) the Trustee shall perform only such duties as are expressly undertaken by it to perform under this Indenture;

     (2) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

     (3) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 303 which shall be sufficiently evidenced as provided therein) and any resolution of the Board of Trustees may be sufficiently evidenced by a Board Resolution;

     (4) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers’ Certificate;

     (5) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

     (6) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series or any related coupons pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

     (7) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or

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investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;

     (8) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and

     (9) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

     The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

     SECTION 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee’s certificate of authentication, and in any coupons shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or coupons, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof.

     SECTION 604. May Hold Securities. The Trustee, any Paying Agent, Security Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent.

     SECTION 605. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on, or investment of, any money received by it hereunder except as otherwise agreed with and for the sole benefit of the Company.

     SECTION 606. Compensation and Reimbursement. The Company agrees:

     (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

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     (2) except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith; and

     (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense, arising out of or in connection with the acceptance or administration of the trust or trusts or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder except to the extent any such loss, liability or expense may be attributable to its own negligence or bad faith.

     As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium or Make-Whole Amount, if any) or interest on particular Securities or any coupons.

     The provisions of this Section shall survive the termination of this Indenture.

     SECTION 607. Corporate Trustee Required; Eligibility; Conflicting Interests. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

     SECTION 608. Resignation and Removal; Appointment of Successor.

     (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609.

     (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

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     (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and to the Company.

     (d) If at any time:

     (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or

     (2) the Trustee shall cease to be eligible under Section 607(a) and shall fail to resign after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or

     (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

     (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent

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jurisdiction for the appointment of a successor Trustee with respect to Securities of such series.

     (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.

     SECTION 609. Acceptance of Appointment by Successor.

     (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in Section 606.

     (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto, pursuant to Article Nine hereof, wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent

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provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.

     (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.

     (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

     SECTION 610. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities or coupons shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities or coupons so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities or coupons. In case any Securities or coupons shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities or coupons, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee.

     SECTION 611. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption or repayment thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an

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Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, except as may otherwise be provided pursuant to Section 301, shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

     Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent.

     An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and to the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of or within the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

     The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section.

     If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee’s

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certificate of authentication, an alternate certificate of authentication substantially in the following form:

     This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Trustee
By:		,
	as Authenticating Agent
By:
	Authorized Officer

ARTICLE SEVEN

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

     SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities or coupons, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).

     SECTION 702. Reports by Trustee. Within 60 days after February 1 of each year commencing with the first February 1 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a brief report dated as of such February 1 if required by TIA Section 313(a).

     SECTION 703. Reports by Company. The Company will:

     (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it will file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the

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Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;

     (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

     (3) transmit by mail to the Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in TIA Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.

     SECTION 704. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee:

     (a) semi-annually, not later than 15 days after the Regular Record Date for interest for each series of Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Registered Securities of such series as of such Regular Record Date, or if there is no Regular Record Date for interest for such series of Securities, semi-annually, upon such dates as are set forth in the Board Resolution or indenture supplemental hereto authorizing such series, and

     (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished,

provided, however, that, so long as the Trustee is the Security Registrar, no such list shall be required to be furnished.

ARTICLE EIGHT

CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE

     SECTION 801. Consolidations and Mergers of Company and Sales, Leases and Conveyances Permitted Subject to Certain Conditions. The Company may consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into any other Person, provided that in any such case, (1) either the Company shall be the continuing entity, or the successor (if other than the Company) entity shall be a Person organized and existing under the laws of the United States or a State thereof and such successor entity shall expressly assume the due and punctual payment of the principal of (and premium or Make-Whole Amount, if any) and any interest (including all Additional Amounts, if any, payable pursuant to Section 1011) on

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all of the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company by supplemental indenture, complying with Article Nine hereof, satisfactory to the Trustee, executed and delivered to the Trustee by such Person and (ii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result thereof as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or the lapse of time, or both, would become an Event of Default, shall have occurred and be continuing.

     SECTION 802. Rights and Duties of Successor Corporation. In case of any such consolidation, merger, sale, lease or conveyance and upon any such assumption by the successor entity, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the predecessor entity, except in the event of a lease, shall be relieved of any further obligation under this Indenture and the Securities. Such successor entity thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor entity, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor entity thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof.

     In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate.

     SECTION 803. Officers’ Certificate and Opinion of Counsel. Any consolidation, merger, sale, lease or conveyance permitted under Section 801 is also subject to the condition that the Trustee receive an Officers’ Certificate and an Opinion of Counsel to the effect that any such consolidation, merger, sale, lease or conveyance, and the assumption by any successor entity, complies with the provisions of this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.

ARTICLE NINE

SUPPLEMENTAL INDENTURES

     SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders of Securities or coupons, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or

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more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

     (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities contained; or

     (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or

     (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); provided, however, that in respect of any such additional Events of Default such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of that or those series of Securities to which such additional Events of Default apply to waive such default; or

     (4) to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of or any premium, Make-Whole Amount or interest on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form, provided that any such action shall not adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or

     (5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or

     (6) to secure the Securities; or

     (7) to establish the form or terms of Securities of any series and any related coupons as permitted by Sections 201 and 301; or

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     (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or

     (9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture or to make any other changes, provided that in each case, such provisions shall not adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or

     (10) to close this Indenture with respect to the authentication and delivery of additional series of Securities or to qualify, or maintain qualification of, this Indenture under the TIA; or

     (11) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Sections 401, 1402 and 1403; provided in each case that any such action shall not adversely affect the interests of the Holders of Securities of such series and any related coupons or any other series of Securities in any material respect.

     SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of all Outstanding Securities affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities and any related coupons under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby:

     (1) change the Stated Maturity of the principal of (or premium or Make-Whole Amount, if any, on) or any installment of principal of or interest on, any Security; or reduce the principal amount thereof or the rate or amount of interest thereon or any Additional Amounts payable in respect thereof, or any premium or Make-Whole Amount payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 1011 (except as contemplated by Section 801(1) and permitted by Section 901(1)), or reduce the amount of the principal of an Original Issue Discount Security or Make-Whole Amount, if any, that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504; or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of

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Payment where, or the currency or currencies, currency unit or units or composite currency or currencies in which, the principal of any Security or any premium or Make-Whole Amount or any Additional Amounts payable in respect thereof or the interest thereon is payable; or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or the Repayment Date, as the case may be); or

     (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver with respect to such series (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 1504 for quorum or voting; or

     (3) modify any of the provisions of this Section, Section 513 or Section 1012, except to increase the required percentage to effect such action or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.

          It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

          A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.

     SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

     SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby.

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     SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.

     SECTION 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.

     SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture.

ARTICLE TEN

COVENANTS

     SECTION 1001. Payment of Principal, Premium or Make-Whole Amount, if any, Interest and Additional Amounts. The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of (and premium or Make-Whole Amount, if any) and interest on and any Additional Amounts payable in respect of the Securities of that series in accordance with the terms of such series of Securities, any coupons appertaining thereto and this Indenture. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest due on and any Additional Amounts payable in respect of Bearer Securities on or before Maturity, other than Additional Amounts, if any, payable as provided in Section 1011 in respect of principal of (or premium or Make-Whole Amount, if any, on) such a Security, shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. Unless otherwise specified with respect to Securities of any series pursuant to Section 301, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security.

     SECTION 1002. Maintenance of Office or Agency. If Securities of a series are issuable only as Registered Securities, the Company shall maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. If Securities of a series are issuable as

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Bearer Securities, the Company will maintain: (A) in the Borough of Manhattan, The City of New York, an office or agency where any Registered Securities of that series may be presented or surrendered for payment, where any Registered Securities of that series may be surrendered for exchange, where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served and where Bearer Securities of that series and related coupons may be presented or surrendered for payment in the circumstances described in the following paragraph (and not otherwise); (B) subject to any laws or regulations applicable thereto, in a Place of Payment for that series which is located outside the United States, an office or agency where Securities of that series and related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Securities of that series pursuant to Section 1011); provided, however, that if the Securities of that series are listed on the Luxembourg Stock Exchange, The International Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent for the Securities of that series in Luxembourg, London or any other required city located outside the United States, as the case may be, so long as the Securities of that series are listed on such exchange; and (C) subject to any laws or regulations applicable thereto, in a Place of Payment for that series located outside the United States an office or agency where any Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of that series and the related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Bearer Securities of that series pursuant to Section 1011) at the offices specified in the Security, in London, England, and the Company hereby appoints the same as its agent to receive such respective presentations, surrenders, notices and demands, and the Company hereby appoints Trustee its agent to receive all such presentations, surrenders, notices and demands.

     Unless otherwise specified with respect to any Securities pursuant to Section 301, no payment of principal, premium, Make-Whole Amount or interest on or Additional Amounts in respect of Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States; provided, however, that, if the Securities of a series are payable in Dollars, payment of principal of and any premium and interest on any Bearer Security (including any Additional Amounts or Make-Whole Amount payable on Securities of such series pursuant to Section 1011) shall be made at the office of the Company’s Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in Dollars of the full amount of such principal, premium, interest, Additional Amounts or Make-Whole Amount, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture, is illegal or effectively precluded by exchange controls or other similar restrictions.

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     The Company may from time to time designate one or more other offices or agencies where the Securities of one or more series and related coupons, if any, may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 301 with respect to a series of Securities, the Company hereby designates as a Place of Payment for each series of Securities the office or agency of the Company in the Borough of Manhattan, The City of New York, and initially appoints the Trustee at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands.

     Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of the Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, at least one exchange rate agent.

     SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of any Securities and any related coupons, it will, on or before each due date of the principal of (and premium or Make-Whole Amount, if any), or interest on or Additional Amounts in respect of, any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (and premium or Make-Whole Amount, if any) or interest or Additional Amounts so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act.

     Whenever the Company shall have one or more Paying Agents for any series of Securities and any related coupons, it will, on or before each due date of the principal of (and premiums or Make-Whole Amount, if any), or interest on or Additional Amounts in respect of, any Securities of that series, deposit with a Payment Agent a sum (in the currency or currencies, currency unit or units or composite currency or currencies described in the preceding paragraph) sufficient to pay the principal (and premium or Make-Whole Amount, if any) or interest or Additional Amounts, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium, Make-Whole Amount or interest or Additional Amounts and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.

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     The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will

     (1) hold all sums held by it for the payment of principal of (and premium or Make-Whole Amount, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

     (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any such payment of principal (and premium or Make-Whole Amount, if any) or interest; and

     (3) at any time during the continuance of any such default upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

     The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.

     Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium or Make-Whole Amount, if any) or interest on, or any Additional Amounts in respect of, any Security of any series and remaining unclaimed for two years after such principal (and premiums or Make-Whole Amount, if any), interest or Additional Amounts has become due and payable shall be paid to the Company upon Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment of such principal of (and premium or Make-Whole Amount, if any) or interest on, or any Additional Amounts in respect of, any Security, without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

     SECTION 1004. Limitations on Incurrence of Debt.

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     (a) The Company will not, and will not permit any Subsidiary to, incur any Debt if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of the Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP is greater than 60% of the sum of (without duplication) (i) the Company’s Total Assets as of the end of the calendar quarter covered in the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed with the Commission (or, if such filing is not permitted under the Securities Exchange Act of 1934, with the Trustee) prior to the incurrence of such additional Debt and (ii) the purchase price of any real estate assets or mortgages receivable acquired, and the amount of any securities offering proceeds received (to the extent such proceeds were not used to acquire real estate assets or mortgages receivable or used to reduce Debt), by the Company or any Subsidiary since the end of such calendar quarter, including those proceeds obtained in connection with the incurrence of such additional Debt;

     (b) In addition to the limitations set forth in subsection (a) of this Section 1004, the Company will not, and will not permit any Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for Debt Service to the Annual Service Charge for the four consecutive fiscal quarters most recently ended prior the date on which such additional Debt is to be incurred shall have been less than 1.5, on a pro forma basis after giving effect thereto and to the application of the proceeds therefrom, and calculated on the assumption that (i) such Debt and any other Debt incurred by the Company and its Subsidiaries since the first day of such four-quarter period and the application of the proceeds therefrom, including to refinance other Debt, had occurred at the beginning of such period; (ii) the repayment or retirement of any other Debt by the Company and its Subsidiaries since the first day of such four-quarter period had been incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period); (iii) in the case of Acquired Debt or Debt incurred in connection with any acquisition since the first day of such four-quarter period, the related acquisition had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation; and (iv) in the case of any acquisition or disposition by the Company or its Subsidiaries of any asset or group of assets since the first day of such four-quarter period, whether by merger, stock purchase or sale, or asset purchase or sale, such acquisition or disposition or any related repayment of Debt had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition or disposition being included in such pro forma calculation.

     (c) In addition to the limitation set forth in subsections (a) and (b) of this Section 1004, the Company will not, and will not permit any Subsidiary to, incur any Debt secured by any mortgage, lien, charge, pledge, encumbrance or security interest of any kind upon any of the property of the Company or any Subsidiary, whether owned at

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the date hereof or hereafter acquired, if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of the Company and its Subsidiaries on a consolidated basis which is secured by any mortgage, lien, charge, pledge, encumbrance or security interest on property of the Company or any Subsidiary is greater than 40% of the Company’s Total Assets.

     (d) For purposes of this Section 1004 Debt shall be deemed to be “incurred” by the Company or a Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or otherwise become liable in respect thereof.

     SECTION 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the existence, rights (charter and statutory) and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any right or franchise if the Board of Trustees shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders of Securities of any series.

     SECTION 1006. Maintenance of Properties. The Company will cause all of its properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any Subsidiary from selling or otherwise disposing for value its properties in the ordinary course of its business.

     SECTION 1007. Insurance. The Company will, and will cause each of its Subsidiaries to, keep all of its insurable properties insured against loss or damage at least equal to their then full insurable value with financially sound and reputable insurance companies.

     SECTION 1008. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.

     SECTION 1009. Provision of Financial Information. Whether or not the Company is subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company will, to the

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extent permitted under the Securities Exchange Act of 1934, file with the Commission the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to such Section 13 or 15(d) (the “Financial Statements”) if the Company were so subject, such documents to be filed with the Commission on or prior to the respective dates (the “Required Filing Dates”) by which the Company would have been required so to file such documents if the Company were so subject.

     The Company will also in any event (x) within 15 days of each Required Filing Date (i) transmit by mail to all Holders, as their names and addresses appear in the Security Register, without cost to such Holders, copies of the annual reports and quarterly reports which the Company would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 if the Company were subject to such Sections, and (ii) file with the Trustee copies of annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 if the Company were subject to such Sections and (y) if filing such documents by the Company with the Commission is not permitted under the Securities Exchange Act of 1934, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective Holder.

     SECTION 1010. Statement as to Compliance. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company’s compliance with all conditions and covenants under this Indenture and, in the event of any noncompliance, specifying such noncompliance and the nature and status thereof. For purposes of this Section 1010, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.

     SECTION 1011. Additional Amounts. If any Securities of a series provide for the payment of Additional Amounts, the Company will pay to the Holder or any Security of such series or any coupon appertaining thereto Additional Amounts as may be specified as contemplated by Section 301. Whenever in this Indenture there is mentioned, in any context except in the case of Section 502(1), the payment of the principal or of any premium, Make-Whole Amount or interest on, or in respect of, any Security of any series or payment of any related coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established pursuant to Section 301 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made.

     Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not

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bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or Make-Whole Amount or interest if there has been any change with respect to the matters set forth in the below-mentioned Officers’ Certificate, the Company will furnish the Trustee and the Company’s principal Paying Agent or Paying Agents, if other than the Trustee, with an Officers’ Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of that series shall be made to Holders of Securities of that series or any related coupons who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of or within the series. If any such withholding shall be required, then such Officers’ Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of that series or related coupons and the Company will pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal or interest with respect to any Securities of a series or related coupons until it shall have received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of a series or related coupons without withholding or deductions until otherwise advised. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold the harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them or in reliance on any Officers’ Certificate furnished pursuant to this Section or in reliance on the Company’s not furnishing such an Officers’ Certificate.

     SECTION 1012. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1009, inclusive, and with any other term, provision or condition with respect to the Securities of any series specified in accordance with Section 301 (except any such term, provision or condition which could not be amended without the consent of all Holders of Securities of such series pursuant to Section 902), if before or after the time for such compliance the Holders of at least a majority in principal amount of all outstanding Securities of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.

ARTICLE ELEVEN

REDEMPTION OF SECURITIES

     SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as

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otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article.

     SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board of Resolution. In case of any redemption at the election of the Company of less than all of the Securities of any series, the Company shall, at least 45 days prior to the giving of the notice of redemption in Section 1104 (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers’ Certificate evidencing compliance with such restriction.

     SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series issued on the same day with the same terms are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series.

     The Trustee shall promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

     For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.

     SECTION 1104. Notice of Redemption. Notice of redemption shall be given in the manner provided in Section 106, not less than 30 days nor more than 60 days prior to the Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 301, to each Holder of Securities to be redeemed, but failure to give such notice in the manner herein provided to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof.

     Any notice that is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice.

     All notices of redemption shall state:

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     (1) the Redemption Date;

     (2) the Redemption Price, accrued interest to the Redemption Date payable as provided in Section 1106, if any, and Additional Amounts, if any;

     (3) if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amount) of the particular Security or Securities to be redeemed;

     (4) in case any Security is to be redeemed in part only, the notice relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without a charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed;

     (5) that on the Redemption Date the Redemption Price and accrued interest to the Redemption Date payable as provided in Section 1106, if any, will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to accrue on and after said date;

     (6) the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any;

     (7) that the redemption is for a sinking fund, if such is the case;

     (8) that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons maturing subsequent to the date fixed for redemption or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee for such series and any Paying Agent is furnished;

     (9) if Bearer Securities of any series are to be redeemed and any Registered Securities of such series are not to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities not subject to the redemption on this Redemption Date pursuant to Section 305 or otherwise, the last date, as determined by the Company, on which such exchanges may be made; and

     (10) the CUSIP number of such Security, if any, provided that neither the Company or the Trustee shall have any responsibility for any such CUSIP number.

     Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company’s request, by the Trustee in the name and at the expense of the Company.

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     SECTION 1105. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article Twelve, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date.

     SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with said notice, together with all coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of coupons for such interest; and provided further that, installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.

     If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons.

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     If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium or Make-Whole Amount, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security.

     SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities of the same series, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.

ARTICLE TWELVE

SINKING FUNDS

     SECTION 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series.

     The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a “mandatory sinking fund payment,” and any payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an “option sinking fund payment.” If provided for by the terms of any Securities of any series, the cash amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.

     SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The Company may, in satisfaction of all or any part of any mandatory sinking fund with respect to the Securities of a series, (1) deliver Outstanding Securities of such series (other than any previously called for redemption) together in the case of any Bearer Securities of such series with all unmatured coupons appertaining thereto and (2) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities, or which have otherwise been acquired by the Company; provided that such Securities so delivered or applied as a credit have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly.

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     SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking payment date for Securities of any series, the Company will deliver to the Trustee an Officers’ Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and will also deliver to the Trustee any Securities to be so delivered and credited. If such Officers’ Certificate shall specify an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon be obligated to pay the amount therein specified. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107.

ARTICLE THIRTEEN

REPAYMENT AT THE OPTION OF HOLDERS

     SECTION 1301. Applicability of Article. Repayment of Securities of any series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities, if any, and (except as otherwise specified by the terms of such series established pursuant to Section 301) in accordance with this Article.

     SECTION 1302. Repayment of Securities. Securities of any series subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereof, together with interest, if any, thereof accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that on or before the Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as it own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of, and (except if the Repayment Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date.

     SECTION 1303. Exercise of Option. Securities of any series subject to repayment at the option of the Holders thereof will contain an “Option to Elect Repayment” form on the reverse of

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such Securities. In order for any Security to be repaid at the option of the Holder, the Trustee must receive at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the Holders of such Securities) not earlier than 60 days nor later than 30 days prior to the Repayment Date (1) the Security so providing for such repayment together with the “Option to Elect Repayment” form on the reverse thereof duly completed by the Holder (or by the Holder’s attorney duly authorized in writing) or (2) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange, or the National Association of Securities Dealers, Inc. (“NASD”), or a commercial bank or trust company in the United States setting forth the name of the Holder of the Security, the principal amount of the Security, the principal amount of the Security to be repaid, the CUSIP number, if any, or a description of the tenor and terms of the Security, a statement that the option to elect repayment is being exercised thereby and a guarantee that the Security to be repaid, together with the duly completed form entitled “Option to Elect Repayment” on the reverse of the Security, will be received by the Trustee not later than the fifth Business Day after the date of such telegram, telex, facsimile transmission or letter; provided, however, that such telegram, telex, facsimile transmission or letter shall only be effective if such Security and form duly completed are received by the Trustee by such fifth Business Day. If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder for the portion of the principal amount of such Security surrendered that is not to be repaid, must be specified. The principal amount of any Security providing for prepayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of or within the series of which such Security to be repaid is a part. Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company.

     SECTION 1304. When Securities Presented for Repayment Become Due and Payable. If Securities of any series providing for repayment at the option of the Holders thereof shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be repaid, except to the extent provided below, shall be void. Upon surrender of any such Security for repayment in accordance with such provisions, together with all coupons, if any, appertaining thereto maturing after the Repayment Date, the principal amount of such security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that coupons whose Stated Maturity is on or prior to the Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified pursuant to

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Section 301, only upon presentation and surrender of such coupons; and provided further that, in the case of Registered Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable (but without interest thereon, unless the Company shall default in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.

     If any Bearer Security surrendered for repayment shall not be accompanied by all appurtenant coupons maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 1302 an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons.

     If the principal amount of any Security surrendered for repayment shall not be so repaid upon surrender thereof, such principal amount (together with interest, if any, thereon accrued to such Repayment Date) shall, until paid, bear interest from the Repayment Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security.

     SECTION 1305. Securities Repaid in Part. Upon surrender of any Registered Security which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid.

ARTICLE FOURTEEN

DEFEASANCE AND COVENANT DEFEASANCE

     SECTION 1401. Applicability of Article; Company’s Option to Effect Defeasance or Covenant Defeasance. If, pursuant to Section 301, provision is made for either or both of (a) defeasance of the Securities of or within a series under Section 1402 or (b) covenant defeasance of the Securities of or within a series under Section 1403 to be applicable to the Securities of any series, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article (with such modifications thereto as may be specified pursuant to Section 301 with respect to any Securities), shall be applicable to such Securities and any

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coupons appertaining thereto, and the Company may at its option by Board Resolution, at any time, with respect to such Securities and any coupons appertaining thereto, elect to defease such Outstanding Securities and any coupons appertaining thereto pursuant to Section 1402 (if applicable) or Section 1403 (if applicable) upon compliance with the conditions set forth below in this Article.

     SECTION 1402. Defeasance and Discharge. Upon the Company’s exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities and any coupons appertaining thereto on the date the conditions set forth in Section 1404 are satisfied (hereinafter, “defeasance”). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities and any coupons appertaining thereto, which shall thereafter be deemed to be “Outstanding” only for the purposes of Section 1405 and the other Sections of this Indenture referred to in clauses (A) and (B) below, and to have satisfied all of its other obligations under such Securities and any coupons appertaining thereto and this Indenture insofar as such Securities and any coupons appertaining thereto are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Outstanding Securities and any coupons appertaining thereto to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium or Make-Whole Amount, if any) and interest, if any, on such Securities and any coupons appertaining thereto when such payments are due, (B) the Company’s obligations with respect to such Securities under Sections 305, 306, 1002 and 1003 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by Section 1011, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 1403 with respect to such Securities and any coupons appertaining thereto.

     SECTION 1403. Covenant Defeasance. Upon the Company’s exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 1004 to 1009, inclusive, and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to such Outstanding Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, “covenant defeasance”), and such Securities and any coupons appertaining thereto shall thereafter be deemed to be not “Outstanding” for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with Sections 1004 to 1009, inclusive, or such other covenant, but shall continue to be deemed “Outstanding” for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other

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covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(4) or 501(8) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby.

     SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of Section 1402 or Section 1403 to any Outstanding Securities of or within a series and any coupons appertaining thereto:

     (a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto, (1) an amount in such currency, currencies or currency unit in which such Securities and any coupons appertaining thereto are then specified as payable at Stated Maturity, or (2) Government Obligations applicable to such Securities and coupons appertaining thereto (determined on the basis of the currency, currencies or currency unit in which such Securities and coupons appertaining thereto are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of (and premium or Make-Whole Amount, if any) and interest, if any, on such Securities and any coupons appertaining thereto, money in an amount, or (3) a combination thereof in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of (and premium or Make-Whole Amount, if any) and interest, if any, on such Outstanding Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities and any coupons appertaining thereto on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities and any coupons appertaining thereto; provided, that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such Government Obligations to said payments with respect to such Securities. Before such a deposit, the Company may give to the Trustee, in accordance with Section 1102 hereof, a notice of its election to redeem all or any portion of such Outstanding Securities at a future date in accordance with the terms of the Securities of such series and Article Eleven hereof, which notice shall be irrevocable. Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing.

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     (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound (and shall not cause the Trustee to have a conflicting interest pursuant to Section 310(b) of the TIA with respect to any Security of the Company).

     (c) No Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to such Securities and any coupons appertaining thereto shall have occurred and be continuing on the date of such deposit or, insofar as Sections 501(6) and 501(7) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).

     (d) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred.

     (e) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.

     (f) The Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with and an Opinion of Counsel to the effect that either (i) as a result of a deposit pursuant to subsection (a) above and the related exercise of the Company’s option under Section 1402 or Section 1403 (as the case may be), registration is not required under the Investment Company Act of 1940, as amended, by the Company, with respect to the trust funds representing such deposit or by the Trustee for such trust funds or (ii) all necessary registrations under said Act have been effected.

     (g) After the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

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     (h) Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301.

     SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the “Trustee”) pursuant to Section 1404 in respect of any Outstanding Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of all sums due and to become due thereon in respect of principal (and premium or Make-Whole Amount, if any) and interest and Additional Amounts, if any, but such money need not be segregated from other funds except to the extent required by law.

     Unless otherwise specified with respect to any Security pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has been made, (a) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 301 or the terms of such Security to receive payment in a currency or currency unit other than that in which the deposit pursuant to Section 1404(a) has been made in respect of such Security, or (b) a Conversion Event occurs in respect of the currency or currency unit in which the deposit pursuant to Section 1404(a) has been made, the indebtedness represented by such Security and any coupons appertaining thereto shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium or Make-Whole Amount, if any), and interest, if any, on such Security as the same becomes due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the currency or currency unit in which such Security becomes payable as a result of such election or Conversion Event based on the applicable market exchange rate for such currency or currency unit in effect on the second Business Day prior to each payment date, except, with respect to a Conversion Event, for such currency or currency unit in effect (as nearly as feasible) at the time of the Conversion Event.

     The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such Outstanding Securities and any coupons appertaining thereto.

     Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government

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Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article.

ARTICLE FIFTEEN

MEETINGS OF HOLDERS OF SECURITIES

     SECTION 1501. Purposes for Which Meetings May Be Called. A meeting of Holders of Securities of any series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series.

     SECTION 1502. Call, Notice and Place of Meetings.

     (a) The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 1501, to be held at such time and at such place in the Borough of Manhattan, The City of New York, or in London as the Trustee shall determine. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

     (b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series shall have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1501, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, or in London for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section.

     SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such

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meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

     SECTION 1504. Quorum; Action. The Persons entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes after the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1502(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum.

     Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of that series; provided, however, that, except as limited by the proviso to Section 902, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series.

     Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related coupons, whether or not present or represented at the meeting.

     Notwithstanding the foregoing provisions of this Section 1504, if any action is to be taken at a meeting of Holders of Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series;

78 

     (i) there shall be no minimum quorum requirement for such meeting; and

     (ii) the principal amount of the Outstanding Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture.

     SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings.

     (a) Notwithstanding any provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the Person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof.

     (b) The Trustee shall, by an instrument in writing appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 1502(b), in which case the Company or the Holders of Securities of or within the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting.

     (c) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.

     (d) Any meeting of Holders of Securities of any series duly called pursuant to Section 1502 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of

79 

such series represented at the meeting, and the meeting may be held as so adjourned without further notice.

     SECTION 1506. Counting Votes and Recording Action of Meetings. The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and series numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any Series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1502 and, if applicable, Section 1504. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

     SECTION 1507. Evidence of Action Taken by Holders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Holders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Article Six) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article.

     SECTION 1508. Proof of Execution of Instruments. Subject to Article Six, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee.

* * * * *

     This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture.

80 

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

PROPERTY TRUST OF AMERICA
By:
	C. Ronald Blakenship
	Chairman and Principal Executive Officer

[SEAL]

Attest:

Paul E. Szurek
Secretary

MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:
	Ward Spooner
	Vice President

[SEAL]

Attest:

Cheryl Petti
Assistant Secretary

STATE OF NEW MEXICO	)
	) ss:
COUNTY OF SANTA FE	)

     On the 1st day of February, 1994, before me personally came C. Ronald Blankenship, to me known, who, being by me duly sworn, did depose and say that he resides at 720 Camino Cabra, Santa Fe, New Mexico 87501, that he is Chairman and Principal Executive Officer of PROPERTY TRUST OF AMERICA, one of the entities described in and which executed the foregoing instrument; that he knows the seal of said entity; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Trustees of said entity, and that he signed his name thereto by like authority.

[Notarial Seal]

Notary Public 

Commission Expires 

STATE OF NEW YORK	)
	) ss:
COUNTY OF NEW YORK	)

     On the 1st day of February, 1994, before me personally came Ward Spooner, to me known, who, being by me duly sworn, did depose and say that he resides at                                                                                                      , that he is a Vice President of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the board of directors of said corporation, and that he signed his name thereto by like authority.

[Notarial Seal]

Notary Public 

Commission Expires 

EXHIBIT A

FORMS OF CERTIFICATION

EXHIBIT A-1

FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE

CERTIFICATE

[Insert title or sufficient description of Securities to be delivered]

     This is to certify that, as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States federal income taxation regardless of its source (“United States person(s)”), (ii) are owned by United States person(s) that are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as “financial institutions”) purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise Property Trust of America or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, such financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)), certifies that it has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

     As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

     We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the above-captioned Securities held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

     This certificate excepts and does not relate to [U.S.$]                                          of such interest in the above-captioned Securities in respect of which we are not able to certify and as to which we understand an exchange for an interest in a Permanent Global Security or an exchange for and delivery of definitive Securities (or, if relevant, collection of any interest) cannot be made until we do so certify.

     We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.

Dated:                                         , 19      
[To be dated no earlier than the 15th day prior
to the earlier of (i) the Exchange Date or
(ii) the relevant Interest Payment Date occurring
prior to the Exchange Date, as applicable]

[Name of Person Making 

Certification] 

(Authorized Signator) 

Name:  

Title:  

EXHIBIT A-2

FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO
OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE

CERTIFICATE

[Insert title or sufficient description of Securities to be delivered]

     This is to certify that, based solely on written certifications that we have received in writing, by tested telex or by electronic transmission from each of the persons appearing in our records as persons entitled to a portion of the principal amount set forth below (our “Member Organizations”) substantially in the form attached hereto, as of the date hereof, [U.S.$]                                          principal amount of the above-captioned Securities (i) is owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source (“United States person(s)”), (ii) is owned by United States persons(s) that are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as “financial institutions”) purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such financial institution has agreed, on its own behalf or through its agent, that we may advise Property Trust of America or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and that such financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

     As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

     We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion of the temporary global Security representing the above-captioned Securities excepted in the above-referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations

with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied upon as of the date hereof.

     We understand that this certification is required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.

Dated:                                         , 19      
[To be dated no earlier than the earlier of
the Exchange Date or the relevant Interest
Payment Date occurring prior to the Exchange
Date, as applicable]

[Morgan Guaranty Trust 

   Company of New York,
   Brussels Office,] as
Operator of the
   Euroclear System
   [Cedel S.A.] 

By:  

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EX-4.2

Exhibit 4.2

     FIRST SUPPLEMENTAL INDENTURE, dated as of February 2, 1994, by and among PROPERTY TRUST OF AMERICA, a real estate investment trust organized under the laws of the State of Maryland having its principal office at 1790 Commerce Park Drive, El Paso, Texas 79912 (hereinafter sometimes called the “Company”), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a banking corporation organized under the laws of the State of New York having its principal corporate trust office at 60 Wall Street, New York, New York 10260, as Trustee under the Indenture (as hereinafter defined) (the “Resigning Trustee”), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking corporation having its principal corporate trust office at 225 Franklin Street, Boston, Massachusetts 02110, as successor Trustee under the Indenture (the “Successor Trustee”).

RECITALS OF THE COMPANY

     The Company and the Resigning Trustee have heretofore entered into an Indenture dated as of February 1, 1994 (hereinafter called the “Indenture”) between the Company and the Resigning Trustee, providing for the issuance by the Company from time to time of its senior debt securities evidencing its unsecured and unsubordinated indebtedness (the “Securities”).

     No Securities have been issued under the Indenture.

     The Company desires to appoint the Successor Trustee to succeed the Resigning Trustee as Trustee under the Indenture.

     In accordance with Sections 901(8) and 901(9) of the Indenture, this First Supplemental Indenture to the Indenture evidences and provides for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Securities and makes other changes to the Indenture which do not adversely affect the interests of the Holders (as defined in the Indenture) of Securities of any series.

     All things necessary to make the Indenture, as hereby modified, a valid agreement of the Company, in accordance with its terms, have been done.

     NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and of the covenants contained in the Indenture, the Company, the Resigning Trustee and the Successor Trustee covenant and agree, for the equal and proportionate benefit of all Holders of Securities, as follows:

ARTICLE ONE

THE RESIGNING TRUSTEE

     1.01. Pursuant to Section 608 of the Indenture, with respect to all Securities, at the request of the Company, the Resigning Trustee hereby resigns as Trustee under the Indenture, and hereby gives written notice thereof to the Company. The Company hereby accepts the foregoing sentence as such written notice.

     1.02. The Resigning Trustee hereby transfers to the Successor Trustee all the rights, powers, trusts and duties of the Resigning Trustee under the Indenture. The Resigning Trustee shall execute and deliver such further instruments and shall do such other things as the Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in the Successor Trustee all the rights, powers, trusts and duties hereby transferred to the Successor Trustee. The Company, the Resigning Trustee and the Successor Trustee agree that the Resigning Trustee has never held any property or money under the Indenture.

ARTICLE TWO

THE COMPANY

     2.01. The Secretary of the Company, by attesting to the execution of this First Supplemental Indenture, hereby certifies that annexed hereto as Exhibit A is a copy of the Board Resolution duly adopted by the Board of Trustees and by the Pricing Committee of the Board of Trustees of the Company, and in full force and effect on the date hereof authorizing certain officers of the Company (one of whom executed this First Supplemental Indenture on behalf of the Company) to, among other things: (a) appoint the Successor Trustee as Trustee under the Indenture; and (b) execute and deliver such agreements and other instruments (including this First Supplemental Indenture) as may be necessary or desirable to effectuate the succession of the Successor Trustee as Trustee under the Indenture.

     2.02. The Company hereby appoints the Successor Trustee as successor Trustee under the Indenture with respect to all Securities and confirms to the Successor Trustee all the rights, powers, trusts and duties of the Resigning Trustee.

ARTICLE THREE

THE SUCCESSOR TRUSTEE

     3.01. The Successor Trustee hereby represents and warrants to the Resigning Trustee and to the Company that the Successor Trustee is qualified and eligible under the provisions of Section 607 of the Indenture and of the Trust Indenture Act of 1939, as amended, to become Trustee under the Indenture with respect to all Securities.

     3.02. The Successor Trustee hereby accepts its appointment as successor Trustee under the Indenture with respect to all Securities and is hereby vested with all the rights, powers, trusts and duties of the Resigning Trustee under the Indenture. The Resigning Trustee and the Company agree with the Successor Trustee that the foregoing sentence is an instrument acknowledging such acceptance effective under Section 609(a) of the Indenture upon execution, acknowledgment and delivery hereof by the Successor Trustee.

ARTICLE FOUR

AMENDMENT OF THE INDENTURE

     4.01. Section 101 of the Indenture is hereby amended by deleting the definition therein of “Corporate Trust Office” and inserting in lieu thereof the following:

     “‘Corporate Trust Office’ means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at 225 Franklin Street, Boston, Massachusetts 02110.”

     4.02. Section 202 of the Indenture is hereby amended by deleting the form of Certificate of Authentication of the Trustee set forth therein and inserting in lieu thereof the following:

     “This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

STATE STREET BANK AND TRUST COMPANY, as Trustee
By
	Authorized Officer”

     4.03. Section 611 of the Indenture is hereby amended by deleting the alternate form of Certificate of Authentication which appears as part of the sixth paragraph thereof and inserting in lieu thereof the following:

     “This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

STATE STREET BANK AND TRUST COMPANY, as Trustee
By		,
	As Authenticating Agent
By
	Authorized Officer”

ARTICLE FIVE

MISCELLANEOUS PROVISIONS

     5.01. All capitalized terms which are used herein and not otherwise defined herein are defined in the Indenture and are used herein with the same meanings as in the Indenture.

     5.02. This First Supplemental Indenture and the resignation, appointment and acceptance effected hereby shall be effective as of the opening of business on the date first above written upon the execution and delivery hereof by each of the parties hereto.

     5.03. Notwithstanding the resignation of the Resigning Trustee, the Company shall remain obligated under Section 606 of the Indenture to compensate, reimburse and indemnify the Resigning Trustee in connection with its trusteeship under the Indenture.

     5.04. Unless otherwise specified with respect to any Securities pursuant to Section 301 with respect to a series of Securities, the Company hereby designates as a Place of Payment for each series of Securities the office or agency of the Company in the city of Boston, Massachusetts and appoints the Successor Trustee as Trustee under the Indenture at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands.

     5.05. Except as expressly amended hereby, the Indenture shall continue in full force and effect in accordance with the provisions thereof and the Indenture is in all respects hereby ratified and confirmed. This First Supplemental Indenture and all its provisions shall be deemed a part of the Indenture in the manner and to the extent herein and therein provided.

     5.06. This First Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

     5.07. This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

     5.08. Neither the Resigning Trustee nor the Successor Trustee shall have any responsibility for the Recitals of the Company hereto, which Recitals are made by the Company alone, or for the validity or sufficiency of this First Supplement Indenture.

          IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

PROPERTY TRUST OF AMERICA
By:
	C. Ronald Blankenship
	Chairman and Principal Executive Officer

[SEAL]

Attest:

By:
	Paul E. Szurek
	Secretary

STATE STREET BANK AND TRUST COMPANY
By:
	Philip M. Crimmins
	Vice President

[SEAL]

Attest:

By:  

MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:
	Ward Spooner
	Vice President

[SEAL]

Attest:

By:
	Cheryl Petti
	Assistant Secretary

ACKNOWLEDGMENT

STATE OF NEW MEXICO    )

                                                          )    SS.

COUNTY OF SANTA FE       )

          On the 2nd day of February, 1994, before me personally appeared C. Ronald Blankenship, known to me or proved to me on the basis of satisfactory evidence to be the Chairman and Principal Executive Officer of Property Trust of America, the real estate investment trust that executed the foregoing instrument, who, being duly sworn, acknowledged that he resides at 720 Camino Cabra, Santa Fe, New Mexico 87501; that he knows the seal of said real estate investment trust; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Trustees of said real estate investment trust; and that he signed his name thereto by like authority.

                                        
Notary Public

My commission expires:           

CORPORATE ACKNOWLEDGMENT

STATE OF MASSACHUSETTS   )

                                                                )    SS.

COUNTY OF SUFFOLK      )

     On the 2nd day of February, 1994, before me personally appeared Philip M. Crimmins, known to me or proved to me on the basis of satisfactory evidence to be a Vice President of State Street Bank and Trust Company, the corporation that executed the foregoing instrument, who, being duly sworn, acknowledged that he resides at                                                                                                                          ; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority.

                                        
Notary Public

My commission expires:           

CORPORATE ACKNOWLEDGMENT

STATE OF NEW YORK         )

                                                            )    SS.

COUNTY OF NEW YORK     )

          On the 2nd day of February, 1994, before me personally appeared Ward Spooner, known to me or proved to me on the basis of satisfactory evidence to be a Vice President of Morgan Guaranty Trust Company of New York, the corporation that executed the foregoing instrument, who, being duly sworn, acknowledged that he resides at                                                                                                                          ; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority.

                                        
Notary Public

My commission expires:           

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EX-4.3

Exhibit 4.3

SECOND SUPPLEMENTAL INDENTURE

     SECOND SUPPLEMENTAL INDENTURE, dated as of August 2, 2004 (this “Supplemental Indenture”), by and between ARCHSTONE-SMITH OPERATING TRUST (formerly known as Property Trust of America and as Archstone Communities Trust), a real estate investment trust organized under the laws of the State of Maryland having its principal office at 9200 E. Panorama Circle, Suite 400, Englewood, Colorado 80112 (hereinafter sometimes called the “Company”), and U.S. BANK NATIONAL ASSOCIATION (as successor in interest to State Street Bank and Trust Company), having a corporate trust office at Corporate Trust Services, 100 Wall Street, Suite 1600, New York, New York 10005, as successor Trustee under the Base Indenture (defined below) (the “Trustee”).

RECITALS OF THE COMPANY

     The Company and the Trustee have heretofore entered into an Indenture dated as of February 1, 1994, as amended by a First Supplemental Indenture dated as of February 2, 1994 (as so supplemented hereinafter called the “Base Indenture”) between the Company and the Trustee, providing for the issuance by the Company from time to time of its senior debt securities evidencing its unsecured and unsubordinated indebtedness (the “Securities”).

     Section 301 of the Base Indenture provides for various matters with respect to any series of Securities issued under the Base Indenture to be established in an indenture supplemental to the Base Indenture.

     Section 901(7) of the Base Indenture provides for the Company and the Trustee to enter into an indenture supplemental to the Base Indenture to establish the form of or terms of Securities of any series as provided by Sections 201 and 301 of the Base Indenture.

     The Board of Trustees of Archstone-Smith Trust, the sole trustee of the Company, has duly adopted resolutions authorizing the Company to execute and deliver this Supplemental Indenture and authorized the issuance of the Notes.

     All things necessary to make the Indenture, as hereby modified, a valid agreement of the Company, in accordance with its terms, have been done.

     NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and of the covenants contained herein and in the Indenture, and the purchase of Securities provided for herein by the Holders thereof, the Company and the Trustee covenant and agree, for the equal and proportionate benefit of all Holders of Notes, as follows:

ARTICLE ONE
RELATION TO BASE INDENTURE; DEFINITIONS

     Section 1.1. Relation to Base Indenture. This Supplemental Indenture constitutes an integral part of the Base Indenture.

     Section 1.2. Definitions. For all purposes of this Supplemental Indenture, except as otherwise expressly provided for or unless the context otherwise requires:

(1)	Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Base Indenture;
(2)	The definition of the term “Total Assets” provided for herein applies solely to this Supplemental Indenture and the covenants set forth in Section 2.4 hereof.; and
(3)	All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture.

     “Capitalization Rate” means: (i) 7.5%.

     “Capitalized Property Value” means, as of any date, the aggregate sum of all Property EBITDA for each such property for the prior four quarters and capitalized at the applicable Capitalization Rate, provided, however, that if the value of a particular property calculated pursuant to this clause is less than the undepreciated book value of such property determined in accordance with GAAP, such undepreciated book value shall be used in lieu thereof with respect to such property. “Property EBITDA” is defined as, for any period of time, without duplication net earnings (loss), excluding net derivative gains (losses) and gains (losses) on dispositions of real estate, before deductions for the Company and its Subsidiaries (including amounts reported in discontinued operations) for (i) interest expense; (ii) provision for taxes based on income; (iii) depreciation, amortization and all other non-cash items, as determined in good faith by the Company, deducted in arriving at net income (loss); (iv) extraordinary items; (v) non-recurring items, as determined in good faith by the Company (including prepayment penalties); and (vi) minority interest. In each case for such period, amounts will be as reasonably determined by the Company in accordance with GAAP, except to the extent GAAP is not applicable with respect to the determination of all non-cash and non-recurring items. For purposes of this definition, Property EBITDA will not include corporate level general and administrative expenses and other corporate expenses such as land holding costs and pursuit cost write-offs as determined in good faith by the Company.

     “Consolidated EBITDA” means, for any period of time, without duplication net earnings (loss), excluding net derivative gains (losses) and gains (losses) on dispositions of REIT real estate investments as reflected in the reports filed by Archstone-Smith Trust under the Exchange Act, before deductions for the Company and its Subsidiaries (including amounts reported in discontinued operations) for (i) interest expense; (ii) provision for taxes based on income; (iii) depreciation, amortization and all other non-cash items, as determined in good faith by the Company, deducted in arriving at net income (loss); (iv) extraordinary items; (v) non-recurring items, as determined in good faith by the Company (including prepayment penalties); and (vi) minority interest. In each case for such period, amounts will be as reasonably determined by the Company in accordance with GAAP, except to the extent GAAP is not applicable with respect to the determination of all non-cash and non-recurring items. Consolidated EBITDA will be adjusted, without duplication, to give pro forma effect: (x) in the case of any assets having been placed-in-service or removed from service since the beginning of the period and on or prior to the date of determination, to include or exclude, as the case may be, any Consolidated EBITDA

2

earned or eliminated as a result of the placement of such assets in service or removal of such assets from service as if the placement of such assets in service or removal of such assets from service occurred at the beginning of the period; and (y) in the case of any acquisition or disposition of any asset or group of assets since the beginning of the period and on or prior to the date of determination, including, without limitation, by merger, or share or asset purchase or sale, to include or exclude, as the case may be, any Consolidated EBITDA earned or eliminated as a result of the acquisition or disposition of those assets as if the acquisition or disposition occurred at the beginning of the period.

     “Make-Whole Amount” means, in connection with any optional redemption or accelerated payment of any Note, the excess, if any, of (i) the aggregate present value as of the date of such redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of such dollar if such redemption or accelerated payment had not been made, determined by discounting, on a semiannual basis, such principal and interest at the Reinvestment Rate (determined on the third Business Day preceding the date such notice of redemption is given or declaration of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or accelerated payment had not been made, over (ii) the aggregate principal amount of the Securities being redeemed or paid.

     “Reinvestment Rate” means .25% (one-quarter of one percent) plus the arithmetic mean of the yields under the respective headings “This Week” and “Last Week” published in the Statistical Release under the caption “Treasury Constant Maturities” for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For the purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used.

     “Stabilized Property” means (i) with respect to an acquisition of an income producing property, a property becomes stabilized when the Company or its Subsidiaries have owned the property for at least four (4) full quarters and (ii) with respect to new construction or development property, a property becomes stabilized four (4) full quarters after the earlier of (a) eighteen (18) months after substantial completion of construction or development, and (b) the quarter in which the occupancy level of the property is at least ninety-three percent (93%).

     “Statistical Release” means the statistical release designated “H.15(519)” or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under the Indenture, then such other reasonably comparable index which shall be designated by the Company.

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     “Total Assets” means the sum of: (1) for Stabilized Properties, Capitalized Property Value; and (2) for all other assets of the Company and its Subsidiaries, undepreciated book value as determined in accordance with GAAP.

ARTICLE TWO
THE NOTES

     Section 2.1. Title of Securities. There shall be a series of Securities designated the “5.625 % Senior Notes due 2014” (the “Notes”).

     Section 2.2. Limitation on Aggregate Principal Amount. The aggregate principal amount of the Notes initially shall be limited to $300,000,000. The Company may, subject to Section 2.4 of this Supplemental Indenture and applicable law, issue additional Notes under this Supplemental Indenture without the consent of the Holders of outstanding Notes. The initially issued Notes and any additional Notes subsequently issued shall be treated as a single class for all purposes of this Supplemental Indenture and the Base Indenture and such additional Notes shall be substantially identical to initially issued Notes. Nothing contained in this Section 2.2 or elsewhere in this Supplemental Indenture, or in the Notes, is intended to or shall limit execution by the Company or authentication or delivery by the Trustee of Notes under the circumstances contemplated by Sections 303, 304, 305, 306, 906, 1107 and 1305 of the Base Indenture.

     Section 2.3. Interest and Interest Rates; Maturity Date of Notes.

     (a) The Notes shall bear interest at 5.625% per annum from August 2, 2004 or from the immediately preceding Interest Payment Date (as defined below) to which interest has been paid, payable semi-annually in arrears on February 15 and August 15 of each year, commencing February 15, 2005 (each, an “Interest Payment Date”), to the persons (the “Holders”) in whose name the applicable Notes are registered in the Security Register at the close of business 15 calendar days prior to such Interest Payment Date (i.e., February 1 and August 1, respectively) (regardless of whether such day is a Business Day, as defined below), as the case may be (each, a “Regular Record Date”). Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. Interest, if any, not punctually paid or duly provided for on any Interest Payment Date with respect to a Note (“Defaulted Interest”) shall forthwith cease to be payable to the Holder on the applicable Regular Record Date and may either be paid to the person in whose name such Note is registered at the close of business on a special record date (the “Special Record Date”) for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to the Holder of such Note not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, as more particularly described in the Base Indenture.

     (b) If any Interest Payment Date or Maturity falls on a day that is not a Business Day, the required payment shall be made on the next Business Day as if it were made on the date such payment was due and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date or Maturity, as the case may be.

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     (c) The Notes shall mature on August 15, 2014.

     Section 2.4. Limitations on Incurrence of Debt. In addition to the covenants set forth in Article TEN of the Base Indenture, there are established pursuant to Section 901(2) of the Base Indenture the following covenants for the benefit of the Holders of the Notes and to which the Notes shall be subject; provided, however, that the covenants set forth in Section 1004 of the Base Indenture shall apply to the Notes only for so long as any Securities issued pursuant to the Base Indenture prior to the date hereof remain outstanding:

     (a) The Company will not, and will not permit any Subsidiary to, incur any Debt if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, Debt would exceed 65% of Total Assets at the reporting date.

     (b) In addition to the limitations set forth in Section 2.4(a) of this Supplemental Indenture, the Company will not, and will not permit any Subsidiary to, incur any Debt if the ratio of Consolidated EBITDA to the Annual Service Charge for the four consecutive fiscal quarters most recently ended prior the date on which such additional Debt is to be incurred shall have been less than 1.5, on a pro forma basis after giving effect thereto and to the application of the proceeds therefrom, and calculated on the assumption that (i) such Debt and any other Debt incurred by the Company and its Subsidiaries since the first day of such four-quarter period and the application of the proceeds therefrom, including to refinance other Debt, had occurred at the beginning of such period; (ii) the repayment or retirement of any other Debt by the Company and its Subsidiaries since the first day of such four-quarter period had been incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period); (iii) in the case of Acquired Debt or Debt incurred in connection with any acquisition since the first day of such four-quarter period, the related acquisition had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation; and (iv) in the case of any acquisition or disposition by the Company or its Subsidiaries of any asset or group of assets since the first day of such four-quarter period, whether by merger, stock purchase or sale, or asset purchase or sale, such acquisition or disposition or any related repayment of Debt had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition or disposition being included in such pro forma calculation.

     (c) In addition to the limitation set forth in subsections (a) and (b) of this Section 2.4, the Company will not, and will not permit any Subsidiary to, incur any Debt secured by any mortgage, lien, charge, pledge, encumbrance or security interest of any kind upon any of the property of the Company or any Subsidiary, whether owned at the date hereof or hereafter acquired, if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of the Company and its Subsidiaries on a consolidated basis which is secured by any mortgage, lien, charge, pledge, encumbrance or security

5

interest on property of the Company or any Subsidiary is greater than 40% of the Company’s Total Assets.

     (d) For purposes of this Section 2.4 Debt shall be deemed to be “incurred” by the Company or a Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or otherwise become liable in respect thereof.

     Section 2.5. Optional Redemption. The Notes shall be redeemable, at the option of the Company, in whole at any time or in part from time to time, as provided in Article ELEVEN of the Base Indenture, and at a redemption price equal to the sum of (i) the principal amount of the Notes being redeemed plus accrued interest thereon to the redemption date and (ii) the Make-Whole Amount, if any (the “Redemption Price”).

     Section 2.6. Places of Payment. The Places of Payment where the Notes may be presented or surrendered for payment, where the Notes may be surrendered for registration of transfer or exchange and where notices and demands to and upon the Company in respect of the Notes and the Base Indenture may be served shall be the office or agency of the Trustee for such purpose which shall initially be located at c/o U.S. Bank National Association, 60 Livingston Avenue, St. Paul, Minnesota 55107.

     Section 2.7. Method of Payment. Payment of the principal of and interest on the Notes shall be made at the office or agency of the Company maintained for that purpose (which shall initially be an office or agency of the Trustee), in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payments of principal and interest on the Notes (other than payments of principal and interest due at Maturity) may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer to an account maintained by the Person entitled thereto located within the United States.

     Section 2.8. Currency. Principal and interest on the Notes shall be payable in Dollars.

     Section 2.9. Registered Securities; Global Form. The Notes shall be issuable and transferable in fully registered form as Registered Securities, without coupons. The Notes shall initially be issued in the form of one or more permanent global Notes. The depository for the Notes shall be The Depository Trust Company (the “Depositary”). The Notes shall not be issuable in definitive form except as provided in Section 305 of the Base Indenture.

     Section 2.10. Form of Notes. The Notes shall be substantially in the form attached as Exhibit A hereto.

     Section 2.11. Transfer and Exchange. Transfers and exchanges of Notes shall be made in the manner described in Section 305 of the Base Indenture.

     Section 2.12. General Provisions Relating to Transfers and Exchanges.

     (a) The Trustee and the Security Registrar will retain copies of all certificates, opinions and other documents received in connection with the transfer or exchange of a

6

Note (or a beneficial interest therein), in accordance with its standard record retention procedures and the Company will have the right to inspect and make copies thereof at any reasonable time upon written notice to the Trustee or the Security Registrar, as the case may be.

     (b) Each Holder of a Note agrees to indemnify the Company, Security Registrar and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder’s Note in violation of any provision of this Supplemental Indenture or applicable United States federal or state securities law.

     (c) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Supplemental Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among members of, or participants or indirect participants in, the Depositary or beneficial owners of interests in any global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Supplemental Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

     Section 2.13. Registrar and Paying Agent. The Trustee shall initially serve as Security Registrar and Paying Agent for the Notes.

     Section 2.14. Defeasance. The provisions of Article FOURTEEN of the Base Indenture shall be applicable to the Notes. The provisions of Section 1403 of the Base Indenture shall apply to the covenants set forth in Section 2.4 of this Supplemental Indenture and to those covenants specified in Section 1403 of the Base Indenture.

     Section 2.15. Waiver of Certain Covenants. Notwithstanding the provisions of Section 1012 of the Base Indenture, the Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1009, inclusive, of the Base Indenture, with Section 2.4 of this Supplemental Indenture and with any other term, provision or condition with respect to the Notes (except any such term, provision or condition which could not be amended without the consent of all Holders of the Notes), if before or after the time for such compliance the Holders of at least a majority in principal amount of all outstanding Notes, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition. Except to the extent so expressly waived, and until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.

     Section 2.16. No Sinking Fund. The provisions of Article TWELVE of the Base Indenture shall not be applicable to the Notes.

     Section 2.17. No Repayment at Option of Holders. The provisions of Article THIRTEEN of the Base Indenture shall not be applicable to the Notes.

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ARTICLE THREE
MISCELLANEOUS PROVISIONS

     Section 3.1. All capitalized terms which are used herein and not otherwise defined herein are defined in the Indenture and are used herein with the same meanings as in the Indenture.

     Section 3.2. This Supplemental Indenture shall be effective as of the opening of business on the date first above written upon the execution and delivery hereof by each of the parties hereto.

     Section 3.3. Except as expressly modified or amended hereby, the Base Indenture continues in full force and effect and is in all respects confirmed, ratified and preserved.

     Section 3.4. Except as expressly amended hereby, the Indenture shall continue in full force and effect in accordance with the provisions thereof and the Indenture is in all respects hereby ratified and confirmed. This Supplemental Indenture and all its provisions shall be deemed a part of the Indenture in the manner and to the extent herein and therein provided.

     Section 3.5. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

     Section 3.6. This Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

     Section 3.7. The Trustee shall have not any responsibility for the Recitals of the Company hereto, which Recitals are made by the Company alone, or for the validity or sufficiency of this Supplement Indenture.

[Remainder of page intentionally left blank]

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          IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

ARCHSTONE-SMITH OPERATING TRUST
By:
	[Name]
	[Title]

[SEAL] Attest:
By:
	Caroline Brower
	Secretary

U.S. BANK NATIONAL ASSOCIATION, as Trustee as aforesaid
By:
	[Name]
	[Title]

Attest:
 

By:  

EXHIBIT A

FORM OF NOTE

Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the Company (as defined below) or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

REGISTERED	PRINCIPAL AMOUNT
No.: 1	$
CUSIP No.:

ARCHSTONE-SMITH OPERATING TRUST
                    % NOTE DUE 20__

     ARCHSTONE-SMITH OPERATING TRUST, a real estate investment trust organized and existing under the laws of the State of Maryland (hereinafter called the “Company,” which term shall include any successor under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, upon presentation, the principal sum of _________ DOLLARS on ______, 20___ and to pay interest on the outstanding principal amount thereon from ______, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on ______ and ______ in each year, commencing on ______, 2004, at the rate of ___% per annum, until the entire principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest which shall be the ______ or ______ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not more than 15 days and not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the City of Minneapolis, Minnesota, or elsewhere as provided in the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be

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made by (i) check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) transfer to an account of the Person entitled thereto located inside the United States.

     Each Security of this series is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of February 1, 1994, between Archstone-Smith Operating Trust (formerly known as Archstone Communities Trust and prior thereto Security Capital Pacific Trust and Property Trust of America) (the “Company”) and Morgan Guaranty Trust Company of New York, as trustee (“Morgan”), as supplemented by the First Supplemental Indenture dated as of February 2, 1994 (the “Indenture”) between the Company, State Street Bank and Trust Company, as successor trustee, and Morgan, and as further supplemented by the Second Supplemental Indenture dated as of July ______, 2004 between the Company and U.S. Bank National Association, as successor trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture with respect to the series of which this Security is a part) to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the first page hereof, initially limited in aggregate principal amount to $______, subject to the Company’s right to increase the aggregate principal amount of such series from time to time.

     Securities of this series may be redeemed at any time at the option of the Company, in whole or in part, at a redemption price equal to the sum of (i) the principal amount of the Securities being redeemed plus accrued interest thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to such Securities.

     The following definitions apply with respect to any redemption of the Securities of this series at the option of the Company:

     “Make-Whole Amount” means, in connection with any optional redemption or accelerated payment of any Security, the excess, if any, of (i) the aggregate present value as of the date of such redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that would have been payable in respect of such dollar if such redemption or accelerated payment had not been made, determined by discounting, on a semiannual basis, such principal and interest at the Reinvestment Rate (determined on the third Business Day preceding the date such notice of redemption is given or declaration of acceleration is made) from the respective dates on which such principal and interest would have been payable if such redemption or accelerated payment had not been made, over (ii) the aggregate principal amount of the Securities being redeemed or paid.

     “Reinvestment Rate” means .___% (one-quarter of one percent) plus the arithmetic mean of the yields under the respective headings “This Week” and “Last Week” published in the Statistical Release under the caption “Treasury Constant Maturities” for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity, yields for

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the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For the purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used.

     “Statistical Release” means the statistical release designated “H.15(519)” or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under the Indenture, then such other reasonably comparable index which shall be designated by the Company.

     The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default applicable to the Company, in each case, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Security.

     If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of, and the Make-Whole Amount, if any, on, the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

     As provided in and subject to the provisions of the Indenture, unless the principal of all of the Securities of this series at the time Outstanding shall already have become due and payable, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and the Trustee shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any interest on or after the respective due dates expressed herein.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series of Securities then Outstanding affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the

A-3

Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

     No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, Make-Whole Amount, if any, on, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any Place of Payment where the principal of, Make-Whole Amount, if any, on, and interest on this Security are payable duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

     The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same.

     No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

     No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in this Security, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such, or against any past, present or future shareholder, officer or trustee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder thereof and as part of the consideration for the issue of the Securities of this series.

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     All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

     THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

     Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused “CUSIP” numbers to be printed on the Securities of this series as a convenience to the Holders of such Securities. No representation is made as to the correctness or accuracy of such CUSIP numbers as printed on the Securities, and reliance may be placed only on the other identification numbers printed hereon.

[This space intentionally left blank.]

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     Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by the undersigned officer.

Archstone-Smith Operating Trust
By:
	Name:
	Title:

Attest
By:
	Name:
	Title:

Dated: July __, 2004

TRUSTEE’S CERTIFICATE OF AUTHENTICATION:

     This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
	Authorized Officer

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ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto

PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE

(Please Print or Typewrite Name and Address including
Zip Code of Assignee)

the within Security of Archstone-Smith Operating Trust and hereby does irrevocably constitute and appoint

                                                                                                                                                                                       Attorney to transfer said Security on the books of the within named Company with full power of substitution in the premises.

     Dated:                                         

NOTICE: The signature to this assignment must correspond with the name as it appears on the first page of the within Security in every particular, without alteration or enlargement or any change whatever.

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EX-4.4

Exhibit 4.4

ARCHSTONE-SMITH OPERATING TRUST

as Issuer

and

U.S. BANK NATIONAL ASSOCIATION

as Trustee

THIRD SUPPLEMENTAL INDENTURE

Dated as of July 14, 2006

4.00% Exchangeable Senior Notes Due 2036

Table of Contents

		Page
ARTICLE 1 Definitions
Section 1.01	Relation to Base Indenture and Supplemental Indentures		2
Section 1.02	Definitions		2
ARTICLE 2 Issue, Description, Execution, Registration and Exchange of Notes
Section 2.01	Designation and Amount		8
Section 2.02	Form of Notes		8
Section 2.03	Date and Denomination of Notes; Payments of Interest		9
Section 2.04	Reserved		9
Section 2.05	Execution, Authentication and Delivery of Notes		9
Section 2.06	Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary		10
Section 2.07	Additional Notes; Repurchases		11
Section 2.08	No Sinking Fund		11
Section 2.09	Ranking		11
ARTICLE 3 Redemption
Section 3.01	Right to Redeem		12
Section 3.02	Selection of Notes to be Redeemed		12
Section 3.03	Notice of Redemption		12
ARTICLE 4 Particular Covenants of the Company
Section 4.01	Payment of Principal and Interest		13
Section 4.02	No Limitation on Incurrence of Debt		13
ARTICLE 5 Defaults and Remedies
Section 5.01	Events of Default		14
ARTICLE 6 Supplemental Indentures
Section 6.01	Supplemental Indentures Without Consent of Noteholders		14
Section 6.02	Modification and Amendment with Consent of Noteholders		14
Section 6.03	Effect of Supplemental Indentures		15

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		Page
ARTICLE 7 Consolidation, Merger, Sale, Conveyance and Lease
Section 7.01	Company May Consolidate, Etc. on Certain Terms		15
ARTICLE 8 Exchange of Notes
Section 8.01	Exchange		15
Section 8.02	Exchange Procedures		19
Section 8.03	Reserved		23
Section 8.04	Adjustment of Exchange Rate		23
Section 8.05	Sufficient Shares to be Delivered		30
Section 8.06	Effect of Reclassification, Consolidation, Merger or Sale		30
Section 8.07	Certain Covenants		32
Section 8.08	Responsibility of Trustee		32
Section 8.09	Notice to Holders Prior to Certain Actions		32
Section 8.10	Shareholder Rights Plans		33
Section 8.11	Ownership Limit		33
Section 8.12	Net Share Settlement Election		33
Section 8.13	Registration of Common Shares		33
ARTICLE 9 Repurchase of Notes at Option of Holders
Section 9.01	Repurchase of Securities at Option of the Holder on Specified Dates		34
Section 9.02	Repurchase at Option of Holders Upon a Fundamental Change		38
ARTICLE 10 Miscellaneous Provisions
Section 10.01	Ratification of Base Indenture		41
Section 10.02	Provisions Binding on Company’s Successors		41
Section 10.03	Official Acts by Successor Corporation		41
Section 10.04	Addresses for Notices, Etc		41
Section 10.05	Governing Law		42
Section 10.06	Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee		42
Section 10.07	Non-Business Day		42
Section 10.08	No Security Interest Created		42
Section 10.09	Benefits of Indenture		42
Section 10.10	Table of Contents, Headings, Etc		42
Section 10.11	Execution in Counterparts		43
Section 10.12	Trustee		43
Section 10.13	Further Instruments and Acts		43
Section 10.14	Waiver of Jury Trial		43
Section 10.15	Force Majeure		43

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     THIRD SUPPLEMENTAL INDENTURE dated as of July 14, 2006 (the “Third Supplemental Indenture”), by and between ARCHSTONE-SMITH OPERATING TRUST (formerly known Archstone Communities Trust and prior thereto as Security Capital Pacific Trust and Property Trust of America), a real estate investment trust organized under the laws of the State of Maryland having its principal office at 9200 E. Panorama Circle, Suite 400, Englewood, Colorado 80112 (hereinafter sometimes called the “Company”), and U.S. BANK NATIONAL ASSOCIATION (as successor in interest to State Street Bank and Trust Company), a national banking association having a corporate trust office at 100 Wall Street, Suite 1600, New York, New York 10005, as successor trustee under the Base Indenture (as defined below)(the “Trustee”).

WITNESSETH:

     WHEREAS, the Company has heretofore delivered to the Trustee an indenture dated as of February 1, 1994 (the “Base Indenture”) by and between Property Trust of America (as the Company was formerly known) and Morgan Guaranty Trust Company of New York (as predecessor to State Street Bank and Trust Company, which became the successor trustee pursuant to the First Supplemental Indenture, as defined below) providing for the issuance by the Company from time to time of its senior debt securities evidencing its unsecured and unsubordinated indebtedness (the “Securities”); and

     WHEREAS, Section 301 of the Base Indenture provides for various matters with respect to any series of Securities issued under the Base Indenture to be established in an indenture supplemental to the Base Indenture; and

     WHEREAS, Section 901(7) of the Base Indenture provides for the Company and the Trustee to enter into an indenture supplemental to the Base Indenture to establish the form or terms of Securities of any series as provided by Section 201 and Section 301 of the Base Indenture; and

     WHEREAS, the terms of the Base Indenture, other than Section 801, Section 1004, Article 12 and Article 13 thereof, as amended and supplemented by the first supplemental indenture thereto, dated as of February 2, 1994 (the “First Supplemental Indenture”), and except as otherwise provided in this Third Supplemental Indenture, are binding upon the Notes (as defined below) issued pursuant to this Third Supplemental Indenture (together with the Base Indenture and the First Supplemental Indenture, the “Indenture”); and

     WHEREAS, the terms of this Third Supplemental Indenture apply only to the Notes (as defined below), which Notes shall be subject to additional issuances at the discretion of the Company pursuant to Section 2.07; and

     WHEREAS, the second supplemental indenture to the Base Indenture, dated as of August 2, 2004 (the “Second Supplemental Indenture”), does not apply to the Notes (as defined below); and

     WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 4.00% Exchangeable Senior Notes Due 2036 (hereinafter referred to as the

“Notes”), initially in an aggregate principal amount not to exceed $575,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company and the board of trustees of Archstone-Smith Trust, a Maryland real estate investment trust (“Archstone-Smith Trust”), on behalf of Archstone-Smith Trust, including in Archstone-Smith Trust’s capacity as the sole trustee of the Company, have each duly authorized the execution and delivery of this Third Supplemental Indenture; and

     WHEREAS, the Notes (including the certificate of authentication to be borne by the Notes), a form of Put Right Repurchase Notice, a form of Fundamental Change Repurchase Notice, a form of Exchange Notice and a form of assignment and transfer are to be substantially in the forms hereinafter provided for; and

     WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized Authenticating Agent, as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid agreement according to its terms, have been done and performed, and the execution of this Third Supplemental Indenture and the issue hereunder of the Notes have in all respects been duly authorized.

     NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

     That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided below), as follows:

ARTICLE 1
Definitions

     Section 1.01 Relation to Base Indenture and Supplemental Indentures.

     (a) This Third Supplemental Indenture shall constitute an Integral part of the Base Indenture.

     (b) Section 801, Section 1004, Article 12 and Article 13 of the Base Indenture shall not apply to the Notes, and the Second Supplemental Indenture shall not apply to the Notes;

     Section 1.02 Definitions. For all purposes of this Third Supplemental Indenture, except as otherwise expressly provided for or unless the context otherwise requires:

     (a) Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Base Indenture;

     (b) Terms defined both herein and in the Base Indenture shall have the meanings assigned to them herein;

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     (c) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Third Supplemental Indenture; and

     (d) All other terms used in this Third Supplemental Indenture, which are defined in the Trust Indenture Act or which are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this Third Supplemental Indenture. The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this Third Supplemental Indenture as a whole and not to any particular Article, Section or other Subdivision. The terms defined in this Article include the plural as well as the singular.

     “Additional Settlement Consideration” shall have the meaning specified in Section 8.02(k).

     “Additional Shares” shall have the meaning specified in Section 8.01(g).

     “Archstone-Smith Trust” shall have the meaning specified in the Recitals.

     “Base Indenture” shall have the meaning specified in the Recitals.

     “Board of Trustees” means the board of trustees of Archstone-Smith Trust, acting on behalf of Archstone-Smith Trust as the sole trustee of the Company.

     “Close of Business” means 5:00 p.m. (New York City time).

     “Common Shares” means, subject to Section 8.06, the common shares of beneficial interest of Archstone-Smith Trust, par value $0.01 per share, at the date of this Third Supplemental Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of Archstone-Smith Trust and that are not subject to redemption by Archstone-Smith Trust; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

     “Common Units” means the Class A-1 common units of beneficial interest, par value $0.01 per unit, of the Company.

     “Company” shall have the meaning specified in the Preamble, and subject to the provisions of Article 7, shall include its successors and assigns.

     “Company Put Right Notice” shall have the meaning specified in Section 9.01(c).

     “Company Put Right Notice Date” shall have the meaning specified in Section 9.01(c).

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     “Daily Exchange Value” means, for each of the 20 consecutive Trading Days during the Observation Period, one-twentieth (1/20) of the product of (a) the applicable Exchange Rate and (b) the Daily VWAP of the Common Shares (or the Reference Property, if applicable) on such day.

     “Daily Settlement Amount,” for each of the 20 Trading Days during the Observation Period, shall consist of:

     (i) cash in an amount equal to the Specified Percentage, multiplied by the Daily Exchange Value relating to such day or equal to the Specified Amount (or, if the Company makes the Net Share Settlement Election, cash in an amount equal to not less than the lower of $50 and the Daily Exchange Value relating to such day); and

     (ii) a number of Common Shares equal to (x) the difference between such Daily Exchange Value and the Specified Amount (to the extent that the Specified Amount is greater than zero), divided by (y) the Daily VWAP of the Common Shares for such day.

     “Daily VWAP” for each Common Share means, for each of the 20 consecutive Trading Days during the Observation Period, the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page [ASN<equity> AQR] in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Trading Day (or if such volume-weighted average price is unavailable, the market value of one Common Share on such Trading Day as the Board of Trustees determines in good faith using a volume-weighted method).

     “Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the person specified in the Base Indenture as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, “Depositary” shall mean or include such successor.

     “Distributed Property” shall have the meaning specified in Section 8.04(c).

     “Dividend Threshold Amount” shall have the meaning specified in Section 8.04(d).

     “Effective Date” shall have the meaning specified in Section 8.01(g)(ii).

     “Event of Default” means, with respect to the Notes, any event specified in Section 5.01, continued for the period of time, if any, and after the giving of notice, if any, therein designated.

     “Ex-Dividend Date” means, (a) with respect to Section 8.01(e), the first date upon which a sale of a Common Share does not automatically transfer the right to receive the relevant dividend from the seller of the Common Shares to its buyer, and (b) in all other cases, with respect to any issuance or distribution on the Common Shares or any other equity security, the first date on which the Common Shares or such other equity security trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance or distribution.

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     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Exchange Agent” shall mean the Trustee or any successor office or agency where the Notes may be surrendered for exchange.

     “Exchange Date” shall have the meaning specified in Section 8.02(c).

     “Exchange Obligation” shall have the meaning specified in Section 8.01(a).

     “Exchange Price” means as of any date $1,000 divided by the Exchange Rate as of such date.

     “Exchange Rate” shall have the meaning specified in Section 8.01(a).

     “Exchange Trigger Price” shall have the meaning specified in Section 8.01(c).

     “First Supplemental Indenture” shall have the meaning specified in the Recitals.

     “Fundamental Change” shall be deemed to occur upon the consummation of any transaction or event (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise) in connection with which more than 50% of the Common Shares are exchanged for, converted into, acquired for or constitutes solely the right to receive, consideration which is not at least 90% common equity (or American Depositary Shares representing shares of common equity) that is: (a) listed on, or immediately after the consummation of such transaction or event, will be listed on, a United States national securities exchange, or (b) approved, or immediately after such transaction or event will be approved, for quotation on the Nasdaq Global Market or any similar United States system of automated dissemination of quotations of securities prices.

     “Fundamental Change Company Notice” shall have the meaning specified in Section 9.02(b).

     “Fundamental Change Repurchase Date” shall have the meaning specified in Section 9.02(a).

     “Fundamental Change Repurchase Notice” shall have the meaning specified in Section 9.02(a)(i).

     “Fundamental Change Repurchase Price” shall have the meaning specified in Section 9.02(a).

     “Global Note” shall have the meaning specified in Section 2.06(b).

     “Indenture” shall have the meaning specified in the Recitals.

     “Interest Payment Date” means January 15 and July 15 of each year, beginning on January 15, 2007.

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     “Last Reported Sale Price” means, with respect to the Common Shares or any other security for which a Last Reported Sale Price must be determined, on any date, the closing sale price per share of the Common Shares or unit of such other security (or, if no closing sale price is reported, the average of the last bid and last ask prices or, if more than one in either case, the average of the average last bid and the average last ask prices) on such date as reported in composite transactions for the principal U.S. securities exchange on which the Common Shares or such other security is traded or, if the Common Shares or such other security are not listed on a U.S. national or regional securities exchange, as reported by the Nasdaq Global Market. If the Common Shares or such other security are not listed for trading on a United States national or regional securities exchange and not reported by the Nasdaq Global Market on the relevant date, the Last Reported Sale Price shall be the last quoted bid price per Common Share or such other security in the over-the-counter market on the relevant date, as reported by the National Quotation Bureau or similar organization. If the Common Shares or such other security is not so quoted, the Last Reported Sale Price shall be the average of the mid-point of the last bid and ask prices for the Common Shares or such other security on the relevant date from each of at least three nationally recognized independent investment banking firms selected from time to time by the Board of Trustees for that purpose. The Last Reported Sale Price shall be determined without reference to extended or after hours trading.

     “Market Disruption Event” means the occurrence or existence for more than a one-half hour period in the aggregate on any scheduled Trading Day for the Common Shares of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the applicable stock exchange or otherwise) in the Common Shares or in any options, contracts or future contracts relating to the Common Shares, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such day.

     “Maturity Date” means July 15, 2036, unless the Notes are earlier repurchased, exchanged or redeemed.

     “Measurement Period” shall have the meaning specified in Section 8.01(b).

     “Merger Event” shall have the meaning specified in Section 8.06.

     “Net Share Settlement Election” shall have the meaning specified in Section 8.12.

     “Noteholder” or “Holder,” as applied to any Note, or other similar terms, means any person in whose name at the time a particular Note is registered on the Security Register.

     “Notice of Exchange” shall have the meaning specified in Section 8.02(c).

     “Observation Period” means the 20 consecutive Trading Day period beginning on and including the second Trading Day after the related Exchange Date in respect of such Note.

     “Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 306 of the Base Indenture in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost, destroyed or stolen Note that it replaces.

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     “Put Right Repurchase Date” shall have the meaning assigned to it in Section 9.01(b).

     “Put Right Repurchase Notice” shall have the meaning assigned to it in Section 9.01(b)(i).

     “Put Right Repurchase Price” shall have the meaning assigned to it in Section 9.01(b).

     “Record Date,” with respect to the payment of interest on any Interest Payment Date, shall have the meaning specified in Section 2.03, and with respect to Section 8.04, shall have the meaning specified in Section 8.04(f).

     “Redemption Price” shall have the meaning specified in Section 3.01(c).

     “Reference Property” shall have the meaning specified in Section 8.06(b).

     “Second Supplemental Indenture” shall have the meaning specified in the Recitals.

     “Securities” shall have the meaning specified in the Recitals.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Specified Amount” and “Specified Percentage” mean the aggregate principal amount of Notes, or percentage thereof, respectively, for which the Company elects to pay cash pursuant to Section 8.01 and Section 8.12 herein; provided that the Company may provide that the Specified Amount or Specified Percentage for any Trading Day will not be in excess of the Daily Exchange Value.

     “Spin-Off” shall have the meaning specified in Section 8.04(c).

     “Share Price” means the price paid per Common Share in connection with a Fundamental Change pursuant to which Additional Shares shall be added to the Exchange Rate as set forth in Section 8.01(e)(ii), which shall be equal to (i) if Holders of Common Shares receive only cash in such Fundamental Change, the cash amount paid per Common Share and (ii) in all other cases, the average of the Last Reported Sale Prices of the Common Shares over the five consecutive Trading Day period ending on the Trading Day preceding the Effective Date of the Fundamental Change.

     “Third-Party Financial Institution” shall have the meaning specified in Section 8.01(b).

     “Third Supplemental Indenture” shall have the meaning specified in the Preamble.

     “Trading Day” means a day during which (i) trading in Common Shares generally occurs, (ii) there is no Market Disruption Event and (iii) a Last Reported Sale Price for Common Shares (other than a Last Reported Sale Price referred to in the next to last sentence of such definition) is available for such day; provided that if the Common Shares is not admitted for trading or quotation on or by any exchange, bureau or other organization referred to in the

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definition of Last Reported Sale Price (excluding the next to last sentence of that definition), Trading Date shall mean any Business Day.

     “Trading Price” with respect to the Notes, on any date of determination, means the average of the secondary market bid quotations obtained by the Trustee for $2.0 million principal amount of Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers selected by the Company; provided that if three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, that one bid shall be used. If the Trustee cannot reasonably obtain at least one bid for $2.0 million principal amount of Notes from a nationally recognized securities dealer, then the Trading Price per $1,000 principal amount of Notes will be deemed to be less than 98% of the product of the Last Reported Sale Price of the Common Shares and the Exchange Rate.

     “Trigger Event” shall have the meaning specified in Section 8.04(c).

     “Trustee” shall have the meaning specified in the Preamble until a successor trustee shall have become such pursuant to the applicable provisions of the Indenture. The Trustee shall initially serve as the Security Registrar and Paying Agent for the Notes.

     “Trust Indenture Act” refers to the Trust Indenture Act of 1939, as amended, and the rules and regulations promulgated thereunder.

ARTICLE 2
Issue, Description, Execution, Registration and Exchange of Notes

     Section 2.01 Designation and Amount. The Notes shall be designated as the “4.00% Exchangeable Senior Notes Due 2036.” The aggregate principal amount of Notes that may be authenticated and delivered under this Third Supplemental Indenture is initially limited to $575,000,000, subject to Section 2.07 and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant Section 2.06, Section 8.02 and Section 9.02 hereof and Sections 303,304, 305, 306, 906 and 1107 of the Base Indenture.

     Section 2.02 Form of Notes. The Notes and the Trustee’s certificate of authentication to be borne by such Notes shall be substantially in the form set forth in Exhibit A.

     Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes are subject.

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     The Global Note shall represent such principal amount of the Outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate principal amount of Outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of Outstanding Notes represented thereby may from time to time be increased or reduced to reflect repurchases, exchanges, transfers or exchanges permitted hereby. Any endorsement of the Global Note to reflect the amount of any increase or decrease in the amount of Outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of principal and accrued and unpaid interest on the Global Note shall be made to the Holder of such Note on the date of payment, unless a Record Date or other means of determining Holders eligible to receive payment is provided for herein.

     The terms and provisions contained in the form of Note attached as Exhibit A hereto are incorporated herein and shall constitute, and are hereby expressly made, a part of this Third Supplemental Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Third Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby.

     Section 2.03 Date and Denomination of Notes; Payments of Interest. The Notes shall be issuable in registered form without coupons in denominations of $1,000 principal amount and integral multiples thereof. Each Note shall be dated the date of its authentication and shall bear interest from the date specified on the face of the form of Note attached as Exhibit A hereto. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months.

     The Person in whose name any Note (or its Predecessor Note) is registered on the Security Register at the Close of Business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date. Interest shall be payable at the office of the Company maintained by the Company for such purposes, which shall initially be an office or agency of the Trustee. The Company shall pay interest (i) on any Notes in certificated form by check mailed to the address of the Person entitled thereto as it appears in the Security Register (or upon written application by such Person to the Security Registrar not later than the relevant record date, by wire transfer in immediately available funds to such Person’s account within the United States, if such Person is entitled to interest on an aggregate principal amount in excess of $1,000,000) or (ii) on any Global Note by wire transfer of immediately available funds to the account of the Depositary or its nominee. The term “Record Date” with respect to any Interest Payment Date shall mean the January 1 or July 1 preceding the applicable January 15 or July 15 Interest Payment Date, respectively.

     Section 2.04 Reserved.Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman or Vice-Chairman of the Board of Trustees, Chief Executive Officer, President, any of its Executive or Senior Vice Presidents, Managing Director, or any of its Vice Presidents (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”).

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     At any time and from time to time after the execution and delivery of this Third Supplemental Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes, without any further action by the Company hereunder.

     Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note attached as Exhibit A hereto, manually executed by the Trustee (or an Authenticating Agent appointed by the Trustee as provided by Section 611 of the Base Indenture), shall be entitled to the benefits of this Third Supplemental Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee (or such an Authenticating Agent) upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Third Supplemental Indenture.

     In case any officer of the Company who shall have signed any of the Notes shall cease to be such officer before the Notes so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Notes nevertheless may be authenticated and delivered or disposed of as though the person who signed such Notes had not ceased to be such officer of the Company; and any Note may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Note, shall be the proper officers of the Company, although at the date of the execution of this Third Supplemental Indenture any such person was not such an officer.

     Section 2.06 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary.

     (a) The Company shall provide for the registration of transfers or exchange of the Notes in the Security Register. Upon surrender for registration of transfer of any Note to the Security Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.06, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Third Supplemental Indenture (if any).

     Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive, bearing registration numbers not contemporaneously outstanding.

     All Notes presented or surrendered for registration of transfer or for exchange, repurchase or exchange shall (if so required by the Company, the Trustee, the Security Registrar or any co-registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and duly executed, by the Noteholder thereof or his attorney-in-fact duly authorized in writing.

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     No service charge shall be charged to the Noteholder for any exchange or registration of transfer of Notes, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith.

     None of the Company, the Trustee, the Security Registrar or any co-registrar shall be required to exchange or register a transfer of (a) any Notes surrendered for exchange or, if a portion of any Note is surrendered for exchange, such portion thereof surrendered for exchange or (b) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn), in accordance with Article 9 hereof.

     All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Third Supplemental Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

     (b) So long as the Notes are eligible for book-entry settlement with the Depositary, unless otherwise required by law, all Notes shall be represented by one or more Notes in global form (each, a “Global Note”) registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in a Global Note, which does not involve the issuance of a definitive Note, shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depositary therefor.

     Section 2.07 Additional Notes; Repurchases. The Company may, without the consent of the Noteholders and notwithstanding Section 2.01, reopen the Notes and issue additional Notes hereunder with the same terms and with the same CUSIP number as the Notes initially issued hereunder in an unlimited aggregate principal amount, which will form the same series with the Notes initially issued hereunder, provided that no such additional Notes may be issued unless fungible with the Notes initially issued hereunder for U.S. federal income tax purposes. The Company may also from time to time repurchase the Notes in open market purchases or negotiated transactions without prior notice to Noteholders.

     Section 2.08 No Sinking Fund. The provisions of Article Twelve of the Base Indenture shall not be applicable to the Notes. No sinking fund is provided for the Notes.

     Section 2.09 Ranking. The Notes constitute a senior unsecured general obligation of the Company, ranking equally with other existing and future senior unsecured and unsubordinated indebtedness of the Company and ranking senior in right of payment to any future indebtedness of the Company that is expressly made subordinate to the Notes by the terms of such indebtedness.

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ARTICLE 3
Redemption

     Section 3.01 Right to Redeem.

     (a) Notwithstanding any provision of the Base Indenture, as modified by this Third Supplemental Indenture, to the contrary, the Company may redeem the Notes at any time, in whole but not in part, in order to preserve the status of Archstone-Smith Trust as a real estate investment trust under the Code.

     (b) The Company, at its option, may redeem the Notes from time to time in whole or in part on or after July 18, 2011 if the Company has made at least 10 semi-annual interest payments (including the interest payments on January 15, 2007, and July 15, 2011) in the full amount required by this Indenture; provided that the Company may not provide notice of a redemption of Notes at the Company’s option that specifies that the Company will settle exchanges of Notes prior to such redemption in cash, Common Shares or a combination thereof unless, at the time of such notice, the Company has available to it sufficient registered Common Shares to satisfy its Exchange Obligation in respect of the Notes to be redeemed.

     (c) Any redemption of Notes shall be at a redemption price equal to 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest, if any, to the Redemption Date (the “Redemption Price”); provided, however, that the Company may deduct from such Redemption Price any amount required to be deducted and withheld under applicable law.

     Section 3.02 Selection of Notes to be Redeemed.

     (a) The provisions of Section 1103 of the Base Indenture shall govern the selection of Notes to be redeemed by the Trustee; provided, however, that if less than all of the Notes are to be redeemed, the Trustee shall make the selection from the Notes of that series Outstanding and not previously called for redemption, by lot, or in its discretion, on a pro rata basis.

     (b) If any Note selected for partial redemption is exchanged in part before termination of the exchange right with respect to the portion of the Note so selected, the exchanged portion of such Note shall be deemed to be part of the portion selected for redemption. Notes which have been exchanged subsequent to the Trustee commencing selection of Notes to be redeemed but prior to redemption of such Notes shall be treated by the Trustee as Outstanding for the purpose of such selection.

     Section 3.03 Notice of Redemption. The provisions of Section 1104 of the Base Indenture shall govern notices of redemption of the Notes; provided, however, that in addition to the information specified in Section 1104 of the Base Indenture, notices of redemption of the Notes shall also state:

     (a) the then-current Exchange Price;

     (b) the name and address of the Exchange Agent; and

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     (c) that Holders who wish to exchange Notes must surrender such Notes for exchange no later than the Close of Business on the second Business Day immediately preceding the Redemption Date and must satisfy the other requirements set forth herein.

ARTICLE 4
Particular Covenants of the Company

     Section 4.01 Payment of Principal and Interest. (a) Section 307 and Section 1001 of the Base Indenture shall apply to the Notes; provided, however, that, with respect to any Noteholder with an aggregate principal amount in excess of $1,000,000, at the application of such Holder in writing to the Security Registrar not later than the relevant Record Date, accrued and unpaid interest on such Holder’s Notes shall be paid by wire transfer in immediately available funds to such Holder’s account in the United States supplied by such Holder from time to time to the Trustee and Paying Agent (if different from Trustee); provided further that payment of accrued and unpaid interest made to the Depositary shall be paid by wire transfer in immediately available funds in accordance with such wire transfer instructions and other procedures provided by the Depositary from time to time.

     (b) Except as otherwise provided in this Section 4.01(b), a Holder of any Notes at the Close of Business on a Record Date shall be entitled to receive interest on such Notes on the corresponding Interest Payment Date. A Holder of any Notes as of a Record Date that are exchanged after the Close of Business on such Record Date and prior to the opening of business on the corresponding Interest Payment Date shall be entitled to receive interest on the principal amount of such Notes, notwithstanding the exchange of such Notes prior to such Interest Payment Date. However, a Holder that surrenders any Notes for exchange between the Close of Business on a Record Date and the opening of business on the corresponding Interest Payment Date shall be required to pay the Company an amount equal to the interest payable by the Company with respect to such Notes on such Interest Payment Date at the time such Holder surrenders such Securities for exchange, provided, however, that this sentence shall not apply to a Holder that converts Securities:

     (i) in respect of which the Company has given notice of redemption pursuant to Section 3.03 on a Redemption Date that is after the relevant Record Date and on or prior to the relevant Interest Payment Date; or

     (ii) to the extent of any overdue interest, if any overdue interest exists at the time of exchange with respect to such Notes.

     Accordingly, a Holder that converts Notes under any of the circumstances described in clauses (i) or (ii) above will not be required to pay to the Company an amount equal to the interest payable by the Company with respect to such Notes on the relevant Interest Payment Date.

     Section 4.02 No Limitation on Incurrence of Debt.. The provisions of Section 1004 of the Base Indenture shall not be applicable to the Notes.

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ARTICLE 5
Defaults and Remedies

     Section 5.01 Events of Default. The provisions of Sections 501(3), (5) and (6) of the Base Indenture shall not be applicable to the Notes. As contemplated under Section 501(9) of the Base Indenture, the following events, in addition to the events described in Sections 501(1), (2),(4), (7) and (8) of the Base Indenture, shall be Events of Default with respect to the Notes:

     (a) failure by the Company to comply with its obligation to exchange the Notes into cash, Common Shares or a combination of cash and Common Shares, as applicable, upon exercise of a Holder’s exchange right, and such failure continues for a period of 10 days;

     (b) failure by the Company to issue a Fundamental Change Company Notice in accordance with Section 9.02(b) when due, and such failure continues for a period of two days;

     (c) default by the Company in the payment of an aggregate principal amount exceeding $50,000,000 on any evidence of indebtedness of the Company or any mortgage, indenture or other instrument of the Company under which the indebtedness is issued or by which the indebtedness is secured, such default having occurred after the expiration of any applicable grace period and having resulted in the acceleration of the maturity of the indebtedness, but only if the indebtedness is not discharged or the acceleration is not rescinded or annulled; and

     (d) the entry by a court of competent jurisdiction of one or more judgments, orders or decrees against the Company or any of its Subsidiaries in an aggregate amount, excluding amounts fully covered by insurance, in excess of $50,000,000 and such judgments, orders or decrees remain undischarged, unstayed and unsatisfied in an aggregate amount, excluding amounts fully covered by insurance, in excess of $50,000,000 for a period of 30 consecutive days.

ARTICLE 6
Supplemental Indentures

     Section 6.01 Supplemental Indentures Without Consent of Noteholders. The provisions of Section 901 of the Base Indenture shall be applicable to the Notes.

     Section 6.02 Modification and Amendment with Consent of Noteholders. The provisions of Section 902 of the Base Indenture shall be applicable to the Notes. With the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Resolution of the Board of Trustees, and the Trustee may enter into an indenture or indentures supplemental to this Indenture, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture, or of modifying in any manner the rights of the Holders of Notes and any related coupons under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Note affected thereby, modify this Indenture in any manner specified in Section 902 of the Base Indenture or, in addition thereto, either of the following:

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     (a) make any change that adversely affects the exchange rights of any Notes; or

     (b) reduce the Fundamental Change Repurchase Price, Redemption Price or Put Right Repurchase Price of any Note or amend or modify in any manner adverse to the Holders of the Notes the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise.

     Section 6.03 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered under this Indenture and of any coupon appertaining thereto shall be bound thereby.

ARTICLE 7
Consolidation, Merger, Sale, Conveyance and Lease

     Section 7.01 Company May Consolidate, Etc. on Certain Terms. Section 801 of the Base Indenture shall not be applicable to the Notes and in its place and stead the following provision shall be applicable:

     The Company may consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into any other entity, provided that in any such case, (1) either the Company, Archstone-Smith Trust or another Person controlled by Archstone-Smith Trust shall be the continuing entity, or the successor entity, if other than the Company, formed by or resulting from the transaction shall be an entity organized and existing under the laws of the United States, any State thereof or the District of Columbia and such successor entity shall expressly assume the due and punctual payment of the principal of (and premium or Make-Whole Amount, if any) and interest (including any Additional Amounts, if any) on the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture, to be performed by the Company, in a manner satisfactory to the Trustee, executed and delivered to the Trustee by such entity; immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any of its Subsidiaries as a result thereof as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or the lapse of time, or both, would become an Event of Default, shall have occurred and be continuing; and (3) an Officers’ Certificate and Opinion of Counsel covering such conditions shall have been delivered to the Trustee. Upon such consolidation, merger or transfer, the successor entity shall succeed to and may exercise every right and power of the Company under this Indenture.

ARTICLE 8
Exchange of Notes

     Section 8.01 Exchange.

     (a) Subject to the conditions described in clauses (b) through (f) below and to Section 8.11, and upon compliance with the provisions of this Article 8, a Holder of Notes shall have the right, at such Holder’s option, to exchange all or any portion (if the portion to be exchanged is

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$1,000 principal amount or an integral multiple thereof) of such Notes at any time prior to the Close of Business on the scheduled Trading Day immediately preceding July 18, 2011 at a rate (the “Exchange Rate”) of 15.7206 Common Shares (subject to adjustment by the Company as provided in Section 8.04) per $1,000 principal amount Note (the “Exchange Obligation”) under the circumstances and during the periods set forth below. On and after July 18, 2011, regardless of the conditions described in clause (b) through (f) below, upon compliance with the provisions of this Article 8 and subject to Section 8.11 and 8.12, a Noteholder shall have the right, at such Holder’s option, to exchange all or any portion (if the portion to be exchanged is $1,000 principal amount or an integral multiple thereof) of such Note at any time prior to the Close of Business on the scheduled Trading Day immediately preceding the Maturity Date.

     (b) A Holder of Notes shall have the right, at such Holder’s option, to exchange its Notes prior to July 18, 2011, during the five Business Day period immediately after any ten consecutive Trading Day period (the “Measurement Period”) in which the Trading Price per $1,000 principal amount of Notes for each day of such Measurement Period was less than 98% of the product of the Last Reported Sale Price of the Common Shares on such date and the Exchange Rate on such date, all as determined by the Trustee (except the Trading Price). The Trustee shall have no obligation to determine the Trading Price of the Notes. The Company shall request that a third-party nationally recognized financial institution authorized to do business in the United States of America other than the Trustee (the “Third-Party Financial Institution”), determine the Trading Price of the Notes and provide such determination to both the Company and the Trustee in writing; provided that the Company shall have no obligation to make such request unless a Noteholder or group of Noteholders representing at least $1,000,000 aggregate principal amount of Notes provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of the Notes would be less than 98% of the product of the Last Reported Sale Price at such time and the then-applicable Exchange Rate, at which time the Company shall instruct the Third-Party Financial Institution to determine the Trading Price of the Notes beginning on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000 principal amount of the Notes is greater than or equal to 98% of the product of the Last Reported Sale Price on such date and the then-applicable Exchange Rate. If the Trading Price condition set forth above has been met, the Company shall so notify the Noteholders. If at any time after the Trading Price condition set forth above has been met, the Trading Price per $1,000 principal amount of Notes is greater than 98% of the product of the Last Reported Sale Price on such date and the then-applicable Exchange Rate, the Company shall so notify the Noteholders.

     (c) A Holder of Notes shall have the right, at such Holder’s option, to exchange Notes during any calendar quarter after the quarter ended September 30, 2006, and only during such calendar quarter, if the Last Reported Sale Price for the Common Shares for at least 20 Trading Days during the period of 30 consecutive Trading Days ending on the last Trading Day of the previous calendar quarter exceeds 130% of the Exchange Price (the “Exchange Trigger Price”) on such last Trading Day, which Exchange Price shall be subject to adjustment in accordance with this Article 8. The Company shall employ a Third-Party Financial Institution to determine at the beginning of each calendar quarter whether the Notes are exchangeable as a result of the price of Common Shares, and such Third-Party Financial Institution shall notify the Company and Trustee of its determination.

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     (d) In the event that the Company has delivered a notice of redemption in accordance with Section 1104 of the Base Indenture and Section 3.03 of this Third Supplemental Indenture to the Holders of Notes, a Holder of Notes may exchange Notes at any time prior to the Close of Business on the second Business Day immediately preceding the corresponding Redemption Date; provided, however, that a Holder who has delivered a Fundamental Change Repurchase Notice with respect to a Note may not exchange such Note until the Holder has withdrawn the Fundamental Change Repurchase Notice in accordance with the terms of the Note and this Third Supplemental Indenture.

     (e) (i) In the event that the Company or Archstone-Smith Trust elects to:

     (A) distribute to all or substantially all Holders of Common Shares rights entitling them to purchase, for a period expiring within 60 days after the Record Date for such distribution, Common Shares at a price less than the Last Reported Sale Price of the Common Shares for the Trading Day immediately preceding the declaration date of such distribution; or

     (B) distribute to all or substantially all Holders of Common Shares, assets or debt securities of the Company or Archstone-Smith Trust or rights to purchase the Company’s or Archstone-Smith Trust’s securities, which distribution has a per share value (as determined by the Board of Trustees) exceeding 15% of the Last Reported Sale Price of the Common Shares on the day immediately preceding the date of declaration of such distribution,

then, in either case, Holders may surrender the Notes for exchange at any time on and after the date that the Company provides notice to Holders referred to in the next sentence until the earlier of the Close of Business on the Business Day immediately preceding the Ex-Dividend Date for such distribution or the date the Company announces that such distribution will not take place. The Company shall notify Holders of any distribution referred to in either clause (A) or clause (B) above and of the resulting exchange right no later than the tenth Business Day prior to the Ex-Dividend Date for such distribution.

     (ii) If the Company is a party to any transaction or event that constitutes a Fundamental Change, a Holder may surrender Notes for exchange at any time from and after the 30th scheduled Trading Day prior to the anticipated Effective Date of such transaction or event until the related Fundamental Change Repurchase Date and, upon such surrender, the Holder shall be entitled to the increase in the Exchange Rate, if any, specified in Section 8.01(g). The Company shall give notice to all record Noteholders and the Trustee no later than 30 scheduled Trading Days prior to the anticipated Effective Date of such transaction and issue a press release of the Fundamental Change no later than 45 scheduled Trading Days prior to the anticipated effective date of the Fundamental Change.

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     (iii) If Archstone-Smith Trust is a party to a consolidation, merger, binding share exchange or sale or conveyance of all or substantially all of its properties and assets, in each case pursuant to which the Common Shares would be converted into cash, securities and/or other property, then the Holders shall have the right to exchange Notes at any time beginning fifteen calendar days prior to the date announced by the Company as the anticipated effective date of the transaction and until and including the date that is fifteen calendar days after the date that is the effective date of such transaction; provided such transaction does not otherwise constitute a Fundamental Change to which the provisions of Section 8.01(e)(ii) shall apply. The Company will notify Holders of Notes at least 20 calendar days prior to the anticipated effective date of such transaction. If the Board of Trustees determines the anticipated effective date of the transaction, such determination shall be conclusive and binding on the Holders.

     (f) The Notes shall be exchangeable at any time beginning on the first Business Day after any 30 consecutive Trading Day period during which Common Shares are not listed on either a U.S. national securities exchange or the Nasdaq Global Market.

(g) (i) If a Noteholder elects to exchange Notes in connection with a Fundamental Change that occurs prior to July 18, 2011, the Exchange Rate applicable to each $1,000 principal amount of Notes so exchanged shall be increased by an additional number of Common Shares (the “Additional Shares”) as described below. Settlement of Notes tendered for exchange to which Additional Shares shall be added to the Exchange Rate as provided in this subsection shall be settled pursuant to Section 8.02 below, as applicable. For purposes of this Section 8.01(g), an exchange shall be deemed to be “in connection with” a Fundamental Change to the extent that the related exchange notice is delivered during the time period beginning on the 30th Trading Day prior to the anticipated Effective Date of such Fundamental Change and ending on the related Fundamental Change Repurchase Date, inclusive (regardless of whether the provisions of clauses (b), (c), (d), (e) or (f) of this Section 8.01 shall apply to such exchange). Such exchange notice shall indicate that the Holder of Notes has elected to exchange Notes in connection with a Fundamental Change; provided, however, that the failure to so indicate shall not in any way affect the Exchange Obligation or the right of such Holder to receive Additional Shares in connection with such exchange.

     (ii) The number of Additional Shares by which the Exchange Rate will be increased shall be determined by reference to the table attached as Schedule A hereto, based on the date on which the Fundamental Change occurs or becomes effective (the “Effective Date”), and the Share Price; provided, that if the Share Price is between two Share Price amounts in the table or the Effective Date is between two Effective Dates in the table, the number of Additional Shares shall be determined by a straight-line interpolation between the number of Additional Shares set forth for the next higher and next lower Share Price amounts and the two nearest Effective Dates, as applicable, based on a 365-day year; provided further that if (1) the Share Price is greater than $85.00 per Common Share (subject to adjustment in the same manner as set forth in Section 8.04), no Additional Shares will be added to the Exchange Rate, and (2) the Share Price is

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less than $52.14 per share (subject to adjustment in the same manner as set forth in Section 8.04), no Additional Shares will be added to the Exchange Rate. Notwithstanding the foregoing, in no event will the total number of Common Shares issuable upon exchange exceed 19.1791 per $1,000 principal amount of Notes (subject to adjustment in the same manner as set forth in Section 8.04).

     (iii) The Share Prices set forth in the first row of the table in Schedule A hereto shall be adjusted as of any date on which the Exchange Rate of the Notes is adjusted. The adjusted Share Prices shall equal the Share Prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Exchange Rate in effect immediately prior to the adjustment giving rise to the Share Price adjustment and the denominator of which is the Exchange Rate as so adjusted. The number of Additional Shares within the table shall be adjusted in the same manner as the Exchange Rate as set forth in Section 8.04 (other than by operation of an adjustment to the Exchange Rate by adding Additional Shares).

     Section 8.02 Exchange Procedures.

     (a) Subject to Section 8.02(b) and Section 8.12, the Company will satisfy the Exchange Obligation with respect to each $1,000 principal amount of Notes validly tendered for exchange in cash, fully paid Common Shares or a combination thereof, as applicable, by delivering, on the third Trading Day immediately following the last day of the related Observation Period, cash, Common Shares or a combination thereof, as applicable, equal to the sum of the Daily Settlement Amounts for each of the 20 Trading Days during the related Observation Period; provided that (i) the Company will deliver cash in lieu of fractional Common Shares as set forth pursuant to clause (k) below; (ii) if the Company elects to settle an exchange of notes only in Common Shares, such settlement will occur as soon as practicable after the Company notifies the Holders of the Notes that it has chosen such method of settlement, but in any event within three Business Days of the relevant Exchange Date; and (iii) the Company will inform exchanging Holders by notice to the Trustee no later than two Trading Days beginning on and including the Exchange Date if the Company elects to pay cash upon exchange of the Notes and will specify in such notice the amount or percentage of Notes for which cash will be paid; provided that the Company may provide that the Specified Amount or Specified Percentage for any Trading Day will not be in excess of the Daily Exchange Value. The Daily Settlement Amounts shall be determined by the Company promptly following the last day of the Observation Period.

     (b) Notwithstanding Section 8.02(a), the Company shall satisfy the Exchange Obligation with respect to each $1,000 principal amount of Notes tendered for exchange to which Additional Shares shall be added to the Exchange Rate as set forth in Section 8.01(g) pursuant to this clause (b).

     (i) If the last day of the applicable Observation Period related to Notes surrendered for exchange is prior to the third Trading Day preceding the Effective Date of the Fundamental Change, the Company will satisfy the related Exchange Obligation with respect to each $1,000 principal amount of Notes tendered for

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exchange as described in Section 8.02(b)(ii) by delivering the amount of cash, Common Shares or a combination thereof, as applicable (based on the Exchange Rate, but without regard to the number of Additional Shares to be added to the Exchange Rate pursuant to Section 8.01(g)) on the third Trading Day immediately following the last day of the applicable Observation Period. As soon as practicable following the Effective Date of the Fundamental Change, the Company will deliver the increase in such amount of cash and Reference Property deliverable in lieu of Common Shares, if any, as if the Exchange Rate had been increased by such number of Additional Shares during the related Observation Period (and based upon the related Daily VWAP prices during such Observation Period). If such increased amount of cash and shares, if any, results in an increase to the amount of cash to be paid to Holders, the Company will pay such increase in cash, and if such increased amount results in an increase to the number of Common Shares, the Company will deliver such increase by delivering Reference Property based on such increased number of shares.

     (ii) If the last day of the applicable Observation Period related to Notes surrendered for exchange is on or following the third scheduled Trading Day preceding the Effective Date of such Fundamental Change, the Company will satisfy the Exchange Obligation with respect to each $1,000 principal amount of Notes tendered for exchange as described in Section 8.01(e)(i) (based on the Exchange Rate as increased by the Additional Shares pursuant to Section 8.01(g) above) on the later to occur of (x) the Effective Date of the Fundamental Change and (y) the third Trading Day immediately following the last day of the applicable Observation Period.

     (c) Before any holder of a Note shall be entitled to exchange the same as set forth above, such holder shall (1) in the case of a Global Note, comply with the procedures of the Depositary in effect at that time and, if required, pay funds equal to interest payable on the next Interest Payment Date to which such holder is not entitled as set forth in Section 8.02(i) and, if required, pay all taxes or duties, if any, and (2) in the case of a Note issued in certificated form, (a) complete and manually sign and deliver an irrevocable written notice to the Exchange Agent in the form on the reverse of such certificated Note (or a facsimile thereof) (a “Notice of Exchange”) at the office of the Exchange Agent and shall state in writing therein the principal amount of Notes to be exchanged and the name or names (with addresses) in which such holder wishes the certificate or certificates for any Common Shares, if any, to be delivered upon settlement of the Exchange Obligation to be registered, (b) surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents), at the office of the Exchange Agent, (c) if required, pay funds equal to interest payable on the next Interest Payment Date to which such holder is not entitled as set forth in Section 8.02(i), and (d) if required, pay all taxes or duties, if any. A Note shall be deemed to have been exchanged immediately prior to the Close of Business on the date (the “Exchange Date”) that the Holder has complied with the requirements set forth in this Section 8.02(c).

     No Notice of Exchange with respect to any Notes may be tendered by a holder thereof if such holder has also tendered a Put Right Repurchase Notice or a Fundamental Change Repurchase Notice and not validly withdrawn such Put Right Repurchase Notice or Fundamental

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Change Repurchase Notice in accordance with the applicable provisions of Section 9.01 or 9.02, as the case may be.

     If more than one Note shall be surrendered for exchange at one time by the same holder, the Exchange Obligation with respect to such Notes, if any, that shall be payable upon exchange shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted thereby) so surrendered.

     (d) Delivery of the amounts owing in satisfaction of the Exchange Obligation shall be made by the Company in no event later than the date specified in Section 8.02(a), except to the extent specified in Section 8.02(b). The Company shall make such delivery by paying the cash amount owed to the Exchange Agent or to the Holder of the Note surrendered for exchange, or such Holder’s nominee or nominees, and by issuing, or causing to be issued, and delivering to the Exchange Agent or to such Holder, or such Holder’s nominee or nominees, certificates or a book-entry transfer through the Depositary for the number of full Common Shares to which such Holder shall be entitled as part of such Exchange Obligation (together with any cash in lieu of fractional shares).

     (e) In case any Note shall be surrendered to the Trustee for partial exchange (along with, if the Company or the Trustee so requires, due endorsements from such Holder, or written instruments of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his attorney-in-fact), the Company shall execute and the Trustee shall authenticate and deliver to or upon the written order of the Holder of the Note so surrendered, without charge to such Holder, a new Note or Notes containing identical terms and conditions to the Outstanding Notes in authorized denominations in an aggregate principal amount equal to the unexchanged portion of the surrendered Note.

     (f) If a Holder submits a Note for exchange, the Company shall pay all documentary, stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of Common Shares, if any, upon the exchange. However, the Holder shall pay any such tax that is due because the Holder requests any Common Shares to be issued in a name other than the Holder’s name. The Exchange Agent may refuse to deliver the certificates representing the Common Shares being issued in a name other than the Holder’s name until the Trustee receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. The Exchange Agent may refuse to deliver the certificates representing the Common Shares being issued in a name other than the holder’s name until the Trustee receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations.

     (g) Except as provided in Section 8.04, no adjustment shall be made for dividends on any shares issued upon the exchange of any Note as provided in this Article.

     (h) Upon the exchange of an interest in a Global Note, the Trustee, or the Custodian at the direction of the Trustee, shall make a notation on such Global Note as to the reduction in

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the principal amount represented thereby. The Company shall notify the Trustee in writing of any exchange of Notes effected through any Exchange Agent other than the Trustee.

     (i) Upon exchange, a Noteholder will not receive any separate cash payment for accrued and unpaid interest, except as set forth below. The Company’s settlement of its Exchange Obligation as described above shall be deemed to satisfy its obligation to pay the principal amount of the Note and accrued and unpaid interest to, but not including, the Exchange Date. As a result, accrued and unpaid interest to, but not including, the Exchange Date shall be deemed to be paid in full rather than cancelled, extinguished or forfeited. Notwithstanding the preceding sentence, if Notes are exchanged after the Close of Business on a Record Date, Holders of such Notes as of the Close of Business on the Record Date will receive the interest payable on such Notes on the corresponding Interest Payment Date notwithstanding the exchange. Notes surrendered for exchange during the period from the Close of Business on any regular Record Date to the opening of business on the corresponding Interest Payment Date must be accompanied by payment of an amount equal to the interest payable on the Notes so exchanged; provided, however, that no such payment need be made (1) if the Company has called the Notes for redemption or (2) to the extent of any overdue interest existing at the time of exchange with respect to such Note. Except as described above, no payment or adjustment will be made for accrued interest on exchanged Notes.

     (j) The Person in whose name the certificate for any Common Shares issued upon exchange is registered shall be treated as a Holder of such Common Shares of record on and after the Exchange Date; provided, however, that no surrender of Notes on any date when the share transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the Common Shares upon such exchange as the record Holder or Holders of such Common Shares on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such Common Shares as the record Holder or Holders thereof for all purposes at the Close of Business on the next succeeding day on which such share transfer books are open; such exchange shall be at the Exchange Rate in effect on the date that such Notes shall have been surrendered for exchange, as if the share transfer books of the Company had not been closed. Upon exchange of Notes, such Person shall no longer be a Noteholder.

     (k) Notwithstanding any other provision of the Notes, no Holder of Notes shall be entitled to exchange such Notes for Common Shares if and to the extent that the Company has not received such Common Shares from Archstone-Smith Trust. If the Company is unable to deliver shares to any Holder of Notes as described above, the Company will at the Company’s option either pay cash to such Holder in lieu of the Common Shares otherwise deliverable, or issue to such Holder a number of the Company’s Common Units equal to the shortfall in the number of Common Shares otherwise deliverable, with such Common Units having all the rights and privileges provided in the Company’s declaration of trust as in effect on the date of issuance of such Common Units including the right by, and at Archstone-Smith Trust’ election, to have such units redeemed for cash in an amount equal to the fair market value of an equal number of Common Shares or for an equal number of Common Shares.

     If the Company elects to deliver (x) Common Shares pursuant to clause (ii)(B) of the definition of “Daily Settlement Amount” and such Common Shares constitute “Restricted

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Securities” as defined in Rule 144 under the Securities Act or (y) the Company’s Common Units in lieu of Common Shares pursuant to the immediately preceding paragraph, the Company shall issue to the Holder an additional 0.03 Common Shares or 0.03 shares of the Company’s Common Units, as applicable, for each Common Share that would otherwise have been due upon exchange (the “Additional Settlement Consideration”). Any Additional Settlement Consideration shall be delivered at the time of the delivery of the Common Shares that would otherwise have been due upon exchange.

     (l) No fractional Common Shares shall be issued upon exchange of any Note or Notes. If more than one Note shall be surrendered for exchange at one time by the same Holder, the number of full shares that shall be issued upon exchange thereof shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any fractional Common Share that would otherwise be issued upon exchange of any Note or Notes (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Last Reported Sale Price of the Common Shares on the last day of the applicable Observation Period.

     Section 8.03 Reserved.

     Section 8.04 Adjustment of Exchange Rate. The Exchange Rate shall be adjusted from time to time by the Company as follows:

     (a) In case Archstone-Smith Trust shall issue Common Shares as a dividend or distribution to Holders of the outstanding Common Shares, or shall effect a subdivision into a greater number of Common Shares or combination into a lower number of Common Shares, the Exchange Rate shall be adjusted based on the following formula:

ER’ = ER0    x	OS’
	OS0

where

ER0	=	the Exchange Rate in effect immediately prior to such event;
ER’	=	the Exchange Rate in effect immediately after such event;
OS0	=	the number of Common Shares outstanding immediately prior to such event; and
OS’	=	the number of Common Shares outstanding immediately after such event.

Such adjustment shall become effective immediately after 9:00 a.m., New York City time, on the Business Day following the Record Date fixed for such determination. If any dividend or distribution of the type described in this Section 8.04(a) is declared but not so paid or made, or the outstanding Common Shares are not subdivided or combined, as the case may be, the Exchange Rate shall be immediately readjusted, effective as of the date the Board of Trustees determines not to pay such dividend or distribution, or subdivide or combine the outstanding

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Common Shares, as the case may be, to the Exchange Rate that would then be in effect if such dividend, distribution, subdivision or combination had not been declared.

     (b) In case Archstone-Smith Trust shall issue to all or substantially all Holders of its outstanding Common Shares rights, warrants or convertible securities entitling them (for a period expiring within sixty (60) calendar days after the issuance thereof) to subscribe for or purchase Common Shares at a price per share less than the Last Reported Sale Price of the Common Shares on the Business Day immediately preceding the date of announcement of such issuance, the Exchange Rate shall be adjusted based on the following formula:

 ER’ = ER₀   x OS₀ + X   OS₀ + Y

where

ER0	=	the Exchange Rate in effect immediately prior to such event;
ER’	=	the Exchange Rate in effect immediately after such event;
OS0	=	the number of Common Shares outstanding immediately prior to such event;
X	=	the total number of Common Shares issuable pursuant to such rights, warrants or convertible securities; and
Y	=	the number of Common Shares equal to the aggregate price payable to exercise such rights, warrants or convertible securities divided by the average of the Last Reported Sale Prices of Common Shares over the ten consecutive Trading Day period ending on the Business Day immediately preceding the Record Date (or, if later, the Ex-Dividend Date) for the issuance of such rights, warrants or convertible securities.

Such adjustment shall be successively made whenever any such rights, warrants or convertible securities are issued and shall become effective immediately after 9:00 a.m., New York City time, on the Business Day following the date fixed for such determination. If such rights, warrants or convertible securities are not so exercised prior to their expiration, the Exchange Rate shall again be adjusted to be the Exchange Rate that would then be in effect if such Record Date for such distribution had not been fixed.

     In determining whether any rights, warrants or convertible securities entitle the Holders to subscribe for or purchase Common Shares at less than such Last Reported Sale Price, and in determining the aggregate offering price of such Common Shares, there shall be taken into account any consideration received by Archstone-Smith Trust for such rights, warrants or convertible securities and any amount payable on exercise or exchange thereof, the value of such consideration, if other than cash, to be determined by the Board of Trustees.

     (c) In case Archstone-Smith Trust shall, by dividend or otherwise, distribute to all or substantially all Holders of its Common Shares any class of beneficial interest of Archstone-Smith Trust (other than Common Shares as covered by Section 8.04(a)), evidences of its indebtedness or other assets or property of Archstone-Smith Trust (including securities, but

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excluding dividends, distributions, rights and warrants covered by Section 8.04(a), Section 8.04(b) or Section 8.04(d) and distributions described below in this paragraph (c) with respect to Spin-Offs) (any of such shares of beneficial interest, indebtedness, or other asset or property hereinafter in this Section 8.04(c) called the “Distributed Property”), then, in each such case the Exchange Rate shall be adjusted based on the following formula:

 ER’ = ER₀   x SP₀   SP₀ — FMV

where

ER0	=	the Exchange Rate in effect immediately prior to such distribution;
ER’	=	the Exchange Rate in effect immediately after such distribution;
SP0	=	the average of the Last Reported Sale Prices of the Common Shares over the ten consecutive Trading Day period ending on the Business Day immediately preceding the Record Date for such distribution (or, if earlier, the Ex-Dividend Date); and
FMV	=	the fair market value (as determined by the Board of Trustees) of the shares of beneficial interest, evidences of indebtedness, assets or property distributed with respect to each outstanding Common Share on the Record Date for such distribution (or, if earlier, the Ex-Dividend Date).

Such adjustment shall become effective immediately prior to 9:00 a.m., New York City time, on the Business Day following the date fixed for the determination of shareholders entitled to receive such distribution; provided that if the then fair market value (as so determined) of the portion of the Distributed Property so distributed applicable to one Common Share is equal to or greater than SP0 as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall have the right to receive, for each $1,000 principal amount of Notes upon exchange, the amount of Distributed Property such Holder would have received had such Holder owned a number of Common Shares equal to the Exchange Rate on the Record Date. If such dividend or distribution is not so paid or made, the Exchange Rate shall again be adjusted to be the Exchange Rate that would then be in effect if such dividend or distribution had not been declared. If the Board of Trustees determines the fair market value of any distribution for purposes of this Section 8.04(c) by reference to the actual or when issued trading market for any securities, it must in doing so consider the prices in such market over the same period used in determining SP0 above.

     With respect to an adjustment pursuant to this Section 8.04(c) where there has been a payment of a dividend or other distribution on the Common Shares of or other beneficial interests in Archstone-Smith Trust, or on any class or series of stock of or similar beneficial interest in or relating to a Subsidiary or other business unit thereof (a “Spin-Off”), the Exchange Rate in effect immediately before 5:00 p.m., New York City time, on the Record Date fixed for determination of shareholders entitled to receive the distribution will be increased based on the following formula:

 ER’ = ER₀   x FMV₀ + MP₀   MP₀

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where

ER0	=	the Exchange Rate in effect immediately prior to such distribution;
ER’	=	the Exchange Rate in effect immediately after such distribution;
FMV0	=	the average of the Last Reported Sale Prices of the beneficial interests distributed to Holders of Common Shares applicable to one Common Share over the first ten consecutive Trading Day period after the effective date of the Spin-Off; and
MP0	=	the average of the Last Reported Sale Prices of Common Shares over the first ten consecutive Trading Day period after the effective date of the Spin-Off.

Such adjustment shall occur on the tenth Trading Day from, and including, the effective date of the Spin-Off; provided that in respect of any exchange within the ten Trading Days following any Spin-Off, references within this paragraph (c) to ten days shall be deemed replaced with such lower number of Trading Days as have elapsed between such Spin-Off and the Exchange Date in determining the applicable Exchange Rate.

     Rights or warrants distributed by Archstone-Smith Trust to all Holders of Common Shares, entitling the Holders thereof to subscribe for or purchase shares of Archstone-Smith Trust’s beneficial interests, including Common Shares (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such Common Shares; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Shares, shall be deemed not to have been distributed for purposes of this Section 8.04 (and no adjustment to the Exchange Rate under this Section 8.04 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Exchange Rate shall be made under this Section 8.04(c). If any such right or warrant, including any such existing rights or warrants distributed prior to the date of this Third Supplemental Indenture, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the Holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Exchange Rate under this Section 8.04 was made, (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any Holders thereof, the Exchange Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a Holder or Holders of Common Shares with respect to such rights or warrants (assuming such Holder had retained such rights or warrants), made to

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all Holders of Common Shares as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants that shall have expired or been terminated without exercise by any Holders thereof, the Exchange Rate shall be readjusted as if such rights and warrants had not been issued.

     For purposes of this Section 8.04(c), Section 8.04(a) and Section 8.04(b), any dividend or distribution to which this Section 8.04(c) is applicable that also includes Common Shares to which Section 8.04(a) applies or rights or warrants to subscribe for or purchase Common Shares to which Section 8.04(b) applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets or shares of beneficial interests other than such Common Shares or rights or warrants to which Section 8.04(c) applies (and any Exchange Rate adjustment required by this Section 8.04(c) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such Common Shares or such rights or warrants (and any further Exchange Rate adjustment required by Section 8.04(a) and Section 8.04(b) with respect to such dividend or distribution shall then be made), except (A) the Record Date of such dividend or distribution shall be substituted as “the Record Date” and “the date fixed for such determination” within the meaning of Section 8.04(a) and Section 8.04(b) and (B) any Common Shares included in such dividend or distribution shall not be deemed “outstanding immediately prior to such event” within the meaning of Section 8.04(a).

     (d) In case Archstone-Smith Trust shall pay a dividend or make a distribution consisting exclusively of cash to all or substantially all Holders of its Common Shares to the extent that the aggregate of all such cash dividends or distributions paid in any quarter exceeds the Dividend Threshold Amount for such quarter, the Exchange Rate shall be adjusted based on the following formula:

 ER’ = ER₀    x  SP₀ — T   SP₀ — C

where

ER0	=	the Exchange Rate in effect immediately prior to the Record Date for such distribution;
ER’	=	the Exchange Rate in effect immediately after the Record Date for such distribution;
SP0	=	the average of the Last Reported Sale Prices of the Common Shares over the period of ten consecutive Trading Days ending the Business Day immediately preceding the Record Date (as defined in clause (f) of this Section) for such distribution (or, if earlier, the Ex-Dividend date relating to such distribution); and
T	=	the dividend threshold amount (“Dividend Threshold Amount”), which amount shall initially be $0.435 per quarter and which shall be appropriately adjusted from time to time for any share dividends on, or subdivisions or combinations of, Common Shares; provided, that if an Exchange Rate adjustment is required to be made as a result of a distribution that is not a quarterly dividend either in whole or in part, the

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		Dividend Threshold Amount shall be deemed to be zero; and
C	=	the amount in cash per share that Archstone-Smith Trust distributes to Holders of Common Shares.

Such adjustment shall become effective immediately after 5:00 p.m., New York City time, on the Record Date for such dividend or distribution; provided that if the portion of the cash so distributed applicable to one Common Share is equal to or greater than SP0 above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall have the right to receive upon exchange of a Note (or any portion thereof) the amount of cash such Holder would have received had such Holder owned a number of shares equal to the Exchange Rate on the Record Date. If such dividend or distribution is not so paid or made, the Exchange Rate shall again be adjusted to be the Exchange Rate that would then be in effect if such dividend or distribution had not been declared.

     For the avoidance of doubt, for purposes of this Section 8.04(d), in the event of any reclassification of the Common Shares, as a result of which the Notes become exchangeable into more than one class of Common Shares, if an adjustment to the Exchange Rate is required pursuant to this Section 8.04(d), references in this Section to one Common Share or Last Reported Sale Price of one Common Share shall be deemed to refer to a unit or to the price of a unit consisting of the number of shares of each class of Common Shares into which the Notes are then exchangeable equal to the number of shares of such class issued in respect of one Common Share in such reclassification. The above provisions of this paragraph shall similarly apply to successive reclassifications.

     (e) In case Archstone-Smith Trust or any of its Subsidiaries makes a payment in respect of a tender offer or exchange offer for all or any portion of the Common Shares, to the extent that the cash and value of any other consideration included in the payment per Common Share exceeds the Last Reported Sale Price of the Common Shares on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (as it may be amended), the Exchange Rate shall be increased based on the following formula:

ER’ = ER₀     x AC + (SP’ x OS’)   SP’ x OS ₀

where

ER0	=	the Exchange Rate in effect on the date such tender or exchange offer expires;
ER’	=	the Exchange Rate in effect on the day next succeeding the date such tender or exchange offer expires;
AC	=	the aggregate value of all cash and any other consideration (as determined by the Board of Trustees) paid or payable for shares purchased in such tender or exchange offer;
OS0	=	the number of Common Shares outstanding immediately prior to the date

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		such tender or exchange offer expires;
OS’	=	the number of Common Shares outstanding immediately after the date such tender or exchange offer expires; and
SP’	=	the average of the Last Reported Sale Prices of Common Shares over the ten consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires,

such adjustment to become effective immediately prior to the opening of business on the day following the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer. If the Company is obligated to purchase shares pursuant to any such tender or exchange offer, but the Company is permanently prevented by applicable law from effecting all or any such purchases or all or any portion of such purchases are rescinded, the Exchange Rate shall again be adjusted to be the Exchange Rate that would then be in effect if such tender or exchange offer had not been made or had only been made in respect of the purchases that had been effected. No adjustment to the Exchange Rate will be made if the application of the foregoing formula would result in a decrease in the Exchange Rate.

     (f) For purposes of this Section 8.04 the term “Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the Holders of Common Shares have the right to receive any cash, securities or other property or in which the Common Shares (or other applicable security) is exchanged for or exchanged into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Trustees or by statute, contract or otherwise).

     (g) In addition to those required by clauses (a), (b), (c), (d), and (e) of this Section 8.04, and to the extent permitted by applicable law and subject to the applicable rules of the New York Stock Exchange, the Company from time to time may increase the Exchange Rate by any amount for a period of at least 20 days if the Board of Trustees determines that such increase would be in the Company’s best interest. In addition, the Company may also (but is not required to) increase the Exchange Rate to avoid or diminish any income tax to Holders of Common Shares or rights to purchase Common Shares in connection with any dividend or distribution of shares (or rights to acquire shares) or similar event. Whenever the Exchange Rate is increased pursuant to the preceding sentence, the Company shall mail to the Holder of each Note at his last address appearing on the Security Register provided for in Section 2.06 a notice of the increase at least five days prior to the date the increased Exchange Rate takes effect, and such notice shall state the increased Exchange Rate and the period during which it will be in effect.

     (h) All calculations and other determinations under this Article 8 shall be made by the Company and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a share, as the case may be. No adjustment shall be made for Archstone-Smith Trust’s issuance of Common Shares or any securities convertible into or exchangeable for Common Shares, or the right to purchase Common Shares or such convertible or exchangeable securities, other than as provided in this Section 8.04. No adjustment shall be made to the Exchange Rate unless such adjustment would require a change of at least 1% in the Exchange Rate then in effect at such time. The Company shall carry forward any adjustments that are less than 1% of the Exchange

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Rate and make such carried forward adjustments, regardless of whether the aggregate adjustment is less than 1% within one year of the first such adjustment carried forward, upon a Fundamental Change, upon any call of the Notes for redemption or upon maturity.

     (i) Whenever the Exchange Rate is adjusted as herein provided, the Company shall promptly file with the Trustee and any Exchange Agent other than the Trustee an Officers’ Certificate setting forth the Exchange Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. The Trustee and Exchange Agent may conclusively rely on the accuracy of the Exchange Rate adjustment provided by the Company. Unless and until a Responsible Officer of the Trustee shall have received such Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Exchange Rate and may assume without inquiry that the last Exchange Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Exchange Rate setting forth the adjusted Exchange Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Exchange Rate to the Holder of each Note at his last address appearing on the Security Register provided for in Section 2.06 of this Third Supplemental Indenture, within thirty (30) days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

     (j) For purposes of this Section 8.04, the number of Common Shares at any time outstanding shall not include shares held in the treasury of Archstone-Smith Trust but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of Common Shares.

     Section 8.05 Sufficient Shares to be Delivered. To the extent the Company elects to deliver Common Shares, and subject to Section 8.02(k) and Section 8.12, the Company shall provide, free from preemptive rights, sufficient Common Shares to provide for exchange of the Notes from time to time as such Notes are presented for exchange.

     Section 8.06 Effect of Reclassification, Consolidation, Merger or Sale. If any of the following events occur, namely (i) any reclassification or change of the outstanding Common Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a split, subdivision or combination), (ii) any consolidation, merger or combination of Archstone-Smith Trust with another Person, or (iii) any sale or conveyance of all or substantially all of the property and assets of Archstone-Smith Trust to any other Person, in either case as a result of which Holders of Common Shares shall be entitled to receive cash, securities or other property or assets with respect to or in exchange for such Common Shares (any such event a “Merger Event”), then:

     (a) the Company shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) providing for the exchange and settlement of the Notes as set forth in this Third Supplemental Indenture. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article and the Trustee may conclusively rely on the determination by the Company of the equivalency of such adjustments.

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If, in the case of any Merger Event, the Reference Property includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such reclassification, change, consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Notes as the Board of Trustees shall reasonably consider necessary by reason of the foregoing, including to the extent required by the Board of Trustees and practicable the provisions providing for the repurchase rights set forth in Article 9 herein.

In the event the Company shall execute a supplemental indenture pursuant to this Section 8.06, the Company shall file with the Trustee an Officers’ Certificate briefly stating the kind or amount of cash, securities or property or asset that will constitute the Reference Property after any such Merger Event, any adjustment to be made with respect thereto, and the Trustee shall promptly mail notice thereof to all Noteholders.

     (b) Notwithstanding the provisions of Section 8.02(a) and Section 8.02(b), and subject to the provisions of Section 8.01, at the effective time of such Merger Event, the right to exchange each $1,000 principal amount of Notes will be changed to a right to exchange such Note by reference to the kind and amount of cash, securities or other property or assets that a Holder of a number of Common Shares equal to the Exchange Rate immediately prior to such transaction would have owned or been entitled to receive (the “Reference Property”) such that from and after the effective time of such transaction, a Noteholder will be entitled thereafter to exchange its Notes into cash (up to the aggregate principal amount thereof) and the same type (and in the same proportion) of Reference Property, based on the Daily Settlement Amounts of Reference Property in an amount equal to the applicable Exchange Rate, as described under Section 8.02(a) or Section 8.02(b), as applicable. For purposes of determining the constitution of Reference Property, the type and amount of consideration that a Holder of Common Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or conveyance of assets or other transactions that cause the Common Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of shareholder election) will be deemed to be the weighted average of the types and amounts of consideration received by the Holders of Common Shares that affirmatively make such an election. The Company shall not become a party to any such transaction unless its terms are consistent with the preceding. None of the foregoing provisions shall affect the right of a Holder of Notes to exchange its Notes in accordance with the provisions of this Article 8 prior to the effective time of such Merger Event.

     (c) The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Noteholder, at his address appearing on the Security Register provided for in Section 2.06, within thirty (30) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

     (d) The above provisions of this Section shall similarly apply to successive Merger Events.

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     Section 8.07 Certain Covenants. The Company covenants that all Common Shares delivered upon exchange of Notes will be fully paid and non-assessable by Archstone-Smith Trust and free from all taxes, liens and changes with respect to the issue thereof.

     Section 8.08 Responsibility of Trustee. The Trustee and any other Exchange Agent shall not at any time be under any duty or responsibility to any Noteholder to determine the Exchange Rate or whether any facts exist which may require any adjustment of the Exchange Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Exchange Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Shares, or of any securities or property, which may at any time be issued or delivered upon the exchange of any Note; and the Trustee and any other Exchange Agent make no representations with respect thereto. Neither the Trustee nor any Exchange Agent shall be responsible for any failure of the Company to transfer or deliver any Common Shares or certificates therefor or other securities or property or cash upon the surrender of any Note for the purpose of exchange or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article.

     Without limiting the generality of the foregoing, neither the Trustee nor any Exchange Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 8.06 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Noteholders upon the exchange of their Notes after any event referred to in such Section 8.06 or to any adjustment to be made with respect thereto, but, subject to the provisions of Article 6 of the Base Indenture, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers’ Certificate with respect thereto.

     Section 8.09 Notice to Holders Prior to Certain Actions.

     In case:

     (a) Archstone-Smith Trust shall declare a dividend (or any other distribution) on its Common Shares that would require an adjustment in the Exchange Rate pursuant to Section 8.04; or

     (b) Archstone-Smith Trust shall authorize the granting to all of the Holders of its Common Shares of rights or warrants to subscribe for or purchase any share of any class or any other rights or warrants;

     (c) of any reclassification of the Common Shares (other than a subdivision or combination of outstanding Common Shares, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which Archstone-Smith Trust is a party and for which approval of any shareholders of Archstone-Smith Trust is required, or of the sale or transfer of all or substantially all of the assets of Archstone-Smith Trust; or

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     (d) of the voluntary or involuntary dissolution, liquidation or winding-up of Archstone-Smith Trust,

the Company shall cause to be filed with the Trustee and to be mailed to each Noteholder at his address appearing on the Security Register as promptly as possible but in any event at least ten (10) days prior to the applicable date specified in clause (x) or (y) below, as the case may be, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date as of which the Holders of Common Shares of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that Holders of Common Shares of record shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.

     Section 8.10 Shareholder Rights Plans. Upon exchange of the Notes, the Noteholders shall receive, in addition to any Common Shares issuable upon such exchange, the associated rights issued under any shareholder rights plan that Archstone-Smith Trust adopts. If, and only if, the Noteholders receive rights under such shareholder rights plans as described in the preceding sentence upon exchange of their Notes, then no other adjustment pursuant to this Article 8 shall be made in connection with such shareholder rights plans.

     Section 8.11 Ownership Limit. Notwithstanding any other provision of this Third Supplemental Indenture or the Notes, no Holder of Notes shall be entitled to exchange such Notes for Common Shares to the extent that receipt of such shares would cause such Holder (together with such Holder’s affiliates) to exceed the applicable ownership limit contained in the declaration of trust of Archstone-Smith Trust as then in effect.

     Section 8.12 Net Share Settlement Election. Notwithstanding anything to the contrary in this Article 8, at any time on or prior to the twenty-sixth Business Day immediately preceding the Maturity Date, the Company may irrevocably elect (“Net Share Settlement Election”) to satisfy the its Exchange Obligation with respect to the Notes to be exchanged after the date of such election with a combination of cash in an amount equal to not less than the lower of (x) the aggregate Daily Exchange Value and (y) the aggregate principal amount of the Notes to be exchanged, and Common Shares in excess thereof, as described in Section 8.01 and Section 8.02 herein. Such election would be in the sole discretion of the Company without the consent of the Holders of Notes. If the Company makes such election, it shall notify the Trustee and the Holders of Notes at their addresses shown in the Security Register.

     Section 8.13 Registration of Common Shares. If the Company elects to deliver Common Shares upon exchange of the Notes, the Company shall deliver such Common Shares pursuant to a registration statement that has been declared or otherwise become automatically effective upon filing under the Securities Act; provided that if the Company cannot deliver to exchanging Noteholders Common Shares registered pursuant to an effective registration statement, the Company has the right to deliver to those exchanging Noteholders Common

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Shares that have not been registered under the Securities Act or Common Units in accordance with Section 8.02(k) in satisfaction of all or a portion of the Company’s obligations under the Notes, at the election of the Company.

ARTICLE 9
Repurchase of Notes at Option of Holders

     Section 9.01 Repurchase of Securities at Option of the Holder on Specified Dates.

     (a) The provisions of Article Thirteen of the Base Indenture shall not be applicable to the Notes.

     (b) At the option of the Holder thereof, Notes shall be repurchased by the Company in accordance with the provisions of the Notes on July 18, 2011, July 15, 2016, July 15, 2021, July 15, 2026, and July 15, 2031 (each, a “Put Right Repurchase Date”) at a repurchase price per Note equal to 100% of the aggregate principal amount of the Notes being repurchased, together with any accrued and unpaid interest up to, but not including, such Put Right Repurchase Date (the “Put Right Repurchase Price”).

     Repurchases of Notes by the Company pursuant to this Section 9.01 shall be made, at the option of the Holder thereof, upon:

     (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by the Holder of a written notice of purchase (a “Put Right Repurchase Notice”) in the form set forth on the reverse of the Note at any time from the opening of business on the date that is 25 Business Days prior to the applicable Put Right Repurchase Date until the Close of Business on the fifth Business Day prior to such Put Right Repurchase Date stating:

     (A) if certificated, the certificate numbers of the Notes to be delivered for repurchase;

     (B) the portion of the principal amount of the Notes to be repurchased, which must be $1,000 or an integral multiple thereof; and

     (C) that the Notes are to be repurchased as of the applicable Put Right Repurchase Date pursuant to the terms and conditions specified in the Notes and in this Third Supplemental Indenture; and

     (ii) delivery of such Note to the Paying Agent prior to, on or after the Put Right Repurchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Put Right Repurchase Price therefor, which shall be so paid pursuant to this Section 9.01 only if the Note so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Put Right Repurchase Notice, as determined by the Company.

34

     The Company shall repurchase from the Holder thereof, pursuant to this Section 9.01, a portion of a Note if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Third Supplemental Indenture that apply to the repurchase of all of a Note also apply to the repurchase of such portion of such Note.

     Any repurchase by the Company contemplated pursuant to the provisions of this Section 9.01 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Put Right Repurchase Date and the time of delivery of the Note.

     The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company of the receipt by it of any Put Right Repurchase Notice or written notice of withdrawal thereof in accordance with the provisions of Section 9.01(e).

     Any Note that is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Note without service charge, a new Note or Notes, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Note so surrendered.

     (c) In connection with any purchase of Notes pursuant to this Section 9.01, the Company shall give written notice of the Put Right Repurchase Date to the Holders (the “Company Put Right Notice”).

     The Company Put Right Notice shall be sent by first-class mail to the Trustee and to each Holder (and to each beneficial owner as required by applicable law) that has delivered a Put Right Repurchase Notice within 10 Business Days of receipt of such Put Right Repurchase Notice, or, if a shorter period, at least two Business Days prior to any Put Right Repurchase Date (the “Company Put Right Notice Date”). Each Company Put Right Notice shall include a form of Put Right Repurchase Notice to be completed by a Noteholder and shall state:

     (i) the Put Right Repurchase Price and the Exchange Price;

     (ii) the name and address of the Paying Agent and the Exchange Agent;

     (iii) that Notes as to which a Put Right Repurchase Notice has been given may be exchanged in accordance with Article 8 only if the applicable Put Right Repurchase Notice has been withdrawn in accordance with the terms of this Third Supplemental Indenture;

     (iv) that Notes must be surrendered to the Paying Agent to collect payment;

     (v) that the Put Right Repurchase Price for any Note as to which a Put Right Repurchase Notice has been given and not withdrawn will be paid promptly

35

following the later of the Put Right Repurchase Date and the time of surrender of such Note as described in subclause (iv) above;

     (vi) the procedures the Holder must follow to exercise rights under this Section and a brief description of those rights;

     (vii) briefly, the exchange rights of the Notes;

     (viii) the procedures for withdrawing a Put Right Repurchase Notice (including pursuant to the terms of Section 9.01(e);

     (ix) that, unless the Company defaults in making payment on Notes for which a Put Right Repurchase Notice has been submitted, interest on the Notes in respect of which a Put Right Repurchase Notice has been delivered and not withdrawn will cease to accrue on the Put Right Repurchase Date; and

     (x) the CUSIP number of the Notes.

     If any of the Notes are to be redeemed in the form of a Global Note, the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to redemptions.

     At the Company’s request, the Trustee shall give such Company Put Right Notice in the Company’s name and at the Company’s expense; provided, however, that, in all cases, the text of such Company Put Right Notice shall be prepared by the Company.

     (d) Upon receipt by the Trustee (or other Paying Agent appointed by the Company) of the Put Right Repurchase Notice specified in Section 9.01(b)(i), the Holder of the Note in respect of which such Put Right Repurchase Notice was given shall (unless such Put Right Repurchase Notice is withdrawn as specified in Section 9.01(e)) thereafter be entitled to receive solely the Put Right Repurchase Price with respect to such Note. Such Put Right Repurchase Price shall be paid to such Holder, subject to receipt of funds by the Paying Agent, promptly following the later of (x) the Put Right Repurchase Date with respect to such Note (provided the conditions in Section 9.01(b) have been satisfied) and (y) the time of delivery of such Note to the Paying Agent by the Holder thereof in the manner required by Section 9.01(b)(i). Notes in respect of which a Put Right Repurchase Notice has been given by the Holder thereof may not be exchanged pursuant to Article 8 on or after the date of the delivery of such Put Right Repurchase Notice, unless such Put Right Repurchase Notice has first been validly withdrawn as specified in Section 9.01(e).

     (e) A Put Right Repurchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Put Right Repurchase Notice at any time prior to 10:00 A.M. New York City time on the fourth business on the Business Day prior to the Put Right Repurchase Date specifying:

     (i) if certificated Notes have been issued, the certificate numbers of the withdrawn Notes;

36

     (ii) the principal amount of the Notes with respect to which such notice of withdrawal is being submitted; and

     (iii) the principal amount, if any, of such Notes that remains subject to the original Put Right Repurchase Notice, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000;

provided, however, that if the Notes are not in certificated form, the notice must comply with appropriate procedures of the Depositary.

     A written notice of withdrawal of a Put Right Repurchase Notice shall be in the form set forth in the preceding paragraph.

     Upon receipt of a written notice of withdrawal, the Paying Agent shall promptly return to the Holders thereof any Notes in respect of which a Put Right Repurchase Notice has been withdrawn in accordance with the provisions of Section 9.01(f).

     (f) There shall be no repurchase of any Notes pursuant to this Section 9.01 if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Notes, of the required Put Right Repurchase Notice) and is continuing an Event of Default with respect to Notes of such series (other than a default in the payment of the Put Right Repurchase Price with respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof any Notes held by it during the continuance of an Event of Default with respect to Notes of such series (other than a default in the payment of the Put Right Repurchase Price with respect to such Notes), in which case, upon such return, the Put Right Repurchase Notice with respect thereto shall be deemed to have been withdrawn.

     (g) Prior to 11:00 a.m. (local time in The City of New York) on the Put Right Repurchase Date, the Company shall deposit with the Trustee (or other Paying Agent appointed by the Company or if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust in accordance with the terms of the Base Indenture as modified by this Third Supplemental Indenture) an amount (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Put Right Repurchase Price of all the Notes or portions thereof which are to be purchased as of the Put Right Repurchase Date. The manner in which the deposit required by this Section 9.01(g) is made by the Company shall be at the option of the Company; provided that such deposit shall be made in a manner such that the Trustee or a Paying Agent shall have immediately available funds on the Put Right Repurchase Date.

     If the Trustee (or other Paying Agent appointed by the Company) holds, in accordance with the terms hereof, money sufficient to pay the Put Right Repurchase Price of any Note, then, on the Put Right Repurchase Date, such Note will cease to be Outstanding and the rights of the Holder in respect thereof shall terminate (other than the right to receive the Put Right Repurchase Price as aforesaid).

     To the extent that the aggregate amount of cash deposited by the Company pursuant to this Section 9.01(g) exceeds the aggregate Put Right Repurchase Price of the Notes or portions thereof that the Company is obligated to purchase, then promptly after the Put Right Repurchase

37

Date the Trustee or a Paying Agent, as the case may be, shall return any such excess cash to the Company.

     Section 9.02 Repurchase at Option of Holders Upon a Fundamental Change.

     (a) If a Fundamental Change occurs at any time, then each Noteholder shall have the right, at such Holder’s option, to require the Company to repurchase all of such Holder’s Notes or any portion thereof that is a multiple of $1,000 principal amount, for cash on the date (the “Fundamental Change Repurchase Date”) specified by the Company that is not less than twenty (20) Business Days and not more than thirty-five (35) Business Days after the date of the Fundamental Change Company Notice (as defined below) at a repurchase price equal to 100% of the principal amount thereof, together with accrued and unpaid interest thereon to, but excluding, the Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”).

     Repurchases of Notes under this Section 9.02 shall be made, at the option of the Holder thereof, upon:

     (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by a Holder of a duly completed notice (the “Fundamental Change Repurchase Notice”) in the form set forth on the reverse of the Note prior to the Close of Business on the Fundamental Change Repurchase Date; and

     (ii) delivery or book-entry transfer of the Notes to the Trustee (or other Paying Agent appointed by the Company) at any time after delivery of the Fundamental Change Repurchase Notice (together with all necessary endorsements) at the Corporate Trust Office of the Trustee (or other Paying Agent appointed by the Company), such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor; provided that such Fundamental Change Repurchase Price shall be so paid pursuant to this Section 9.02 only if the Note so delivered to the Trustee (or other Paying Agent appointed by the Company) shall conform in all respects to the description thereof in the related Fundamental Change Repurchase Notice.

     The Fundamental Change Repurchase Notice shall state:

     (A) if certificated, the certificate numbers of Notes to be delivered for repurchase;

     (B) the portion of the principal amount of Notes to be repurchased, which must be $1,000 or an integral multiple thereof; and

     (C) that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and this Indenture.

     Any repurchase by the Company contemplated pursuant to the provisions of this Section 9.02 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Fundamental Change Repurchase Date and the time of the book-entry transfer or delivery of the Note.

38

     The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written notice of withdrawal thereof in accordance with the provisions of Section 9.02(c).

     Any Note that is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Note without service charge, a new Note or Notes, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Note so surrendered.

     (b) On or before the twentieth day after the occurrence of any Fundamental Change, the Company shall provide to all Holders of record of the Notes and the Trustee and Paying Agent a notice (the “Fundamental Change Company Notice”) of the occurrence of such Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. Such mailing shall be by first class mail. Simultaneously with providing such Fundamental Change Company Notice, the Company shall publish a notice containing the information included therein once in a newspaper of general circulation in The City of New York or publish such information on the Company’s website or through such other public medium as the Company may use at such time.

     Each Fundamental Change Company Notice shall specify:

     (i) the events causing the Fundamental Change;

     (ii) the date of the Fundamental Change;

     (iii) that the Holder must exercise the repurchase right on or prior to the Close of Business on the Fundamental Change Repurchase Date;

     (iv) the Fundamental Change Repurchase Price;

     (v) the Fundamental Change Repurchase Date;

     (vi) the name and address of the Paying Agent and the Exchange Agent;

     (vii) the applicable Exchange Rate and any adjustments to the applicable Exchange Rate;

     (viii) that the Notes with respect to which a Fundamental Change Repurchase Notice has been delivered by a Holder may be exchanged only if the Holder withdraws the Fundamental Change Repurchase Notice in accordance with the terms of this Indenture; and

     (ix) the procedures that Holders must follow to require the Company to repurchase their Notes.

39

     No failure of the Company to give the foregoing notices and no defect therein shall limit the Noteholders’ repurchase rights or affect the validity of the proceedings for the repurchase of the Notes pursuant to this Section 9.02.

     (c) A Fundamental Change Repurchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the Paying Agent in accordance with the Fundamental Change Company Notice at any time prior to the Close of Business on the Business Day prior to the Fundamental Change Repurchase Date, specifying:

     (i) the principal amount of the Notes with respect to which such notice of withdrawal is being submitted;

     (ii) if certificated Notes have been issued, the certificate numbers of the withdrawn Notes; and

     (iii) the principal amount, if any, of such Notes that remains subject to the original Fundamental Change Repurchase Notice, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000;

provided, however, that if the Notes are not in certificated form, the notice must comply with appropriate procedures of the Depositary.

     (d) On or prior to 11:00 a.m. (local time in The City of New York) on the second Business Day following the Fundamental Change Repurchase Date, the Company will deposit with the Trustee (or other Paying Agent appointed by the Company or if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust in accordance with this Indenture) an amount of money sufficient to repurchase on the Fundamental Change Repurchase Date all of the Notes to be repurchased on such date at the Fundamental Change Repurchase Price. Subject to receipt of funds and/or Notes by the Trustee (or other Paying Agent appointed by the Company), payment for Notes surrendered for repurchase (and not withdrawn) prior to the Close of Business on the Fundamental Change Repurchase Date will be made promptly after the later of (x) the Fundamental Change Repurchase Date with respect to such Note (provided the Holder has satisfied the conditions to the payment of the Fundamental Change Repurchase Price in Section 9.02), and (y) the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the Holder thereof in the manner required by Section 9.02 by mailing checks for the amount payable to the Holders of such Notes entitled thereto as they shall appear in the Security Register, provided, however, that payments to the Depositary shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. The Trustee shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Fundamental Change Repurchase Price.

     (e) If the Trustee (or other Paying Agent appointed by the Company) holds money or securities sufficient to repurchase on the Fundamental Change Repurchase Date all the Notes or portions thereof that are to be purchased as of the second Business Day following the Fundamental Change Repurchase Date, then on and after the Fundamental Change Repurchase Date (i) such Notes will cease to be Outstanding, (ii) interest will cease to accrue on such Notes,

40

and (iii) all other rights of the Holders of such Notes will terminate, whether or not book-entry transfer of the Notes has been made or the Notes have been delivered to the Trustee or Paying Agent, other than the right to receive the Fundamental Change Repurchase Price upon delivery of the Notes.

ARTICLE 10
Miscellaneous Provisions

     Section 10.01 Ratification of Base Indenture. Except as expressly modified or amended hereby, the Base Indenture, as modified by the First Supplemental Indenture and the Second Supplemental Indenture (which is not applicable to the Notes), continues in full force and effect and is in all respects confirmed, ratified and preserved.

     Section 10.02 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in this Third Supplemental Indenture shall bind its successors and assigns whether so expressed or not.

     Section 10.03 Official Acts by Successor Corporation. Any act or proceeding by any provision of this Third Supplemental Indenture authorized or required to be done or performed by any board, committee, trustee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, trustee or officer of any corporation, trust or other entity that shall at the time be the lawful sole successor of the Company.

     Section 10.04 Addresses for Notices, Etc. Any notice or demand which by any provision of this Third Supplemental Indenture is required or permitted to be given or served by the Trustee or by the Noteholders on the Company shall be deemed to have been sufficiently given or made, for all purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee) to Archstone-Smith Operating Trust, 9200 E. Panorama, Suite 400, Englewood, Colorado 80112, Attention: General Counsel. Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to U.S. Bank National Association, Attention: Corporate Trust Administration, 100 Wall Street, Suite 1600, New York, New York 10005.

     The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.

     Any notice or communication mailed to a Noteholder shall be mailed to him by first class mail, postage prepaid, at his address as it appears on the Security Register and shall be sufficiently given to him if so mailed within the time prescribed.

     Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

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     Section 10.05 Governing Law. THIS THIRD SUPPLEMENTAL INDENTURE AND EACH NOTE ISSUED PURSUANT HERETO SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED THEREIN.

     Section 10.06 Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

     Each certificate or opinion provided for by or on behalf of the Company in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (i) a statement that the person making such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (iii) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

     Section 10.07 Non-Business Day. Section 113 of the Base Indenture shall also apply to any Fundamental Change Purchase Date, Put Right Repurchase Date or Exchange Date in respect of the Notes.

     Section 10.08 No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.

     Section 10.09 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any person, other than the parties hereto, any Paying Agent, any Authenticating Agent, any Security Registrar and their successors hereunder, the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

     Section 10.10 Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of this Third Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

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     Section 10.11 Execution in Counterparts. This Third Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

     Section 10.12 Trustee. The Trustee makes no representations as to the validity or sufficiency of this Third Supplemental Indenture. The statements and recitals herein are deemed to be those of the Company and not of the Trustee.

     Section 10.13 Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

     Section 10.14 Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.

     Section 10.15 Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

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     IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed as of the date first written above.

ARCHSTONE-SMITH OPERATING TRUST
By:
	Name:	Charles E. Mueller, Jr.
	Title:	Chief Financial Officer and Executive Vice President

[SEAL]

Attest:

By:
	Name:	Caroline Bower
	Title:	Secretary

U.S. BANK NATIONAL ASSOCIATION,      as Trustee, as aforesaid
By:
	Authorized Person

Attest:

By:
	Name:
	Title:

SCHEDULE A

	Share Price
Effective Date	$52.14		$55.00		$60.00		$65.00		$70.00		$75.00		$85.00
July 14, 2006		3.4585		2.8269		1.9550		1.3141		0.8468		0.5126		0.1188
July 18, 2007		3.4529		2.7997		1.9038		1.2543		0.7892		0.4620		0.0920
July 18, 2008		3.4290		2.7442		1.8167		1.1573		0.6983		0.3860		0.0532
July 18, 2009		3.3796		2.6484		1.6716		1.0009		0.5559		0.2721		0.0100
July 18, 2010		3.3164		2.4923		1.4113		0.7159		0.3093		0.0944		0.0000
July 18, 2011		3.4585		2.4612		0.9461		0.0000		0.0000		0.0000		0.0000

EXHIBIT A

EX-12.1

EXHIBIT 12.1

ARCHSTONE-SMITH TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(Dollar amounts in thousands)

	Years Ended December 31,
	2006(1)		2005(1)		2004(1)		2003(1)		2002(1)
Earnings from operations	$	201,008	$	121,609	$	106,111	$	100,658	$	106,188
Add:
Interest expense		245,895		164,035		125,108		107,791		107,978
Earnings as adjusted	$	446,903	$	285,644	$	231,219	$	208,449	$	214,166
Fixed Charges:
Interest expense	$	245,895	$	164,035	$	125,108	$	107,791	$	107,978
Capitalized interest		51,808		39,111		23,572		26,854		32,377
Total fixed charges	$	297,703	$	203,146	$	148,680	$	134,645	$	140,355
Ratio of earnings to fixed charges		1.5		1.4		1.6		1.5		1.5

(1) Net earnings from discontinued operations have been reclassified for all periods presented to conform with the list of communities in discontinued operations as of December 31, 2006.

EX-12.2

EXHIBIT 12.2

ARCHSTONE-SMITH TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS

(Dollar amounts in thousands)

	Years Ended December 31,
	2006(1)		2005(1)		2004(1)		2003(1)		2002(1)
Earnings from operations	$	201,008	$	121,609	$	106,111	$	100,658	$	106,188
Add:
Interest expense		245,895		164,035		125,108		107,791		107,978
Earnings as adjusted	$	446,903	$	285,644	$	231,219	$	208,449	$	214,166
Combined fixed charges and Preferred Share dividends:
Interest expense	$	245,895	$	164,035	$	125,108	$	107,791	$	107,978
Capitalized interest		51,808		39,111		23,572		26,854		32,377
Total fixed charges		297,703		203,146		148,680		134,645		140,355
Preferred Share dividends		3,829		3,831		10,892		20,997		32,185
Combined fixed charges and Preferred Share dividends	$	301,532	$	206,977	$	159,572	$	155,642	$	172,540
Ratio of earnings to combined fixed charges and Preferred Share dividends		1.5		1.4		1.4		1.3		1.2

(1) Net earnings from discontinued operations have been reclassified for all periods presented to conform with the list of communities in discontinued operations as of December 31, 2006.

EX-15.1

EXHIBIT 15.1

Consent of Independent Registered Public Accounting Firm

The Board of Trustees
Archstone-Smith Trust:

     We consent to the incorporation by reference in the registration statement Nos. 333-114632 (Form S-3), 333-114358 (Form S-3), 333-133286 (Form S-3), 333-114770 (Form S-8), 333-72550 (Form S-8), 333-72506 (Form S-8), 333-60817-99 (Form S-8), 333-60815-99 (Form S-8), 333-31033-99 (Form S-8), 333-31031-99 (Form S-8), 333-43723-99 (Form S-8) and 333-124162 (Form S-3) of Archstone-Smith Trust of our reports dated March 1, 2007, with respect to the consolidated balance sheets of Archstone-Smith Trust and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of earnings, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006, and all related financial statement schedules, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Archstone-Smith Trust.

     Our report dated March 1, 2007, on management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2006, contains an explanatory paragraph that states Archstone-Smith Trust acquired DeWAG Deutsche WohnAnlage GmbH (DeWAG) during July 2006, and has excluded from its assessment of the effectiveness of Archstone-Smith Trust’s internal control over financial reporting as of December 31, 2006, DeWAG’s internal control over financial reporting associated with total assets of $857.0 million and total revenues of $27.7 million included in the consolidated financial statements of Archstone-Smith Trust as of and for the year ended December 31, 2006. Our audit of internal control over financial reporting of Archstone-Smith Trust also excluded an evaluation of the internal control over financial reporting of DeWAG.

/s/ KPMG LLP

Denver, Colorado
March 1, 2007

EX-21

Exhibit 21

Company Name	Jurisdiction
7158 Willoughby, LLC	Delaware
AICP LLC	Delaware
Alban Towers, LLC	District of Columbia
Archstone Europe Trading B.V.	Netherlands
AMERITON Properties Incorporated	Maryland
API Cameron Park LLC	Delaware
API Dadeland LLC	Delaware
API Emeryville Parkside	Delaware
API Emeryville Watertower LLC	Delaware
API Fox Plaza LLC	Delaware
API Hibiscus LLC	Delaware
API Laurel Crossing LLC	Delaware
API Manhattan Incorporated	Delaware
API Mission North LLC	Delaware
API Roosevelt Center Incorporated	Delaware
API Town Center South I LLC	Delaware
API Town Center South II LLC	Delaware
API Town Center South III LLC	Delaware
Archstone Builders Incorporated	Delaware
Archstone BV	Netherlands
Archstone Deutsche RE Holding GmbH	Germany
Archstone Deutsche RE Trading GmbH	Germany
Archstone Foundation	Colorado
Archstone Management Services Incorporated	Delaware
Archstone Property Management (California) Incorporated	Delaware
Archstone Property Management LLC	Delaware
Archstone Vinnin Square LLC	Delaware
Archstone-Smith Communities LLC	Delaware
Archstone-Smith Operating Trust	Maryland
Archstone-Smith Unitholder Services LLC	Delaware
ASN 50th Street LLC	Delaware
ASN Arbor Vista L.P.	Delaware
ASN Aston LLC	Delaware
ASN Bay Landing 1031 LLC	Delaware

Company Name	Jurisdiction
ASN Bay Landing LLC	Delaware
ASN Bay Meadows I LLC	Delaware
ASN Bay Meadows II LLC	Delaware
ASN Bell Lakes LLC	Delaware
ASN Bellevue LLC	Delaware
ASN Bowie LLC	Delaware
ASN Brooklyn Heights LLC	Delaware
ASN Calabasas I LLC	Delaware
ASN Calabasas II LLC	Delaware
ASN Chicago LLC	Delaware
ASN City Place LLC	Delaware
ASN Clinton Green Member LLC	Delaware
ASN Dulles LLC	Delaware
ASN Dupont Circle LLC	Delaware
ASN Estancia LLC	Delaware
ASN Europe Trading Incorporated	Delaware
ASN Europe Trading U.S. Incorporated	Delaware
ASN Fairfax Corner LLC	Delaware
ASN Foundry LLC	Delaware
ASN Fox Plaza LLC	Delaware
ASN Fremont LLC	Delaware
ASN Gaithersburg LLC	Delaware
ASN Hoboken I LLC	Delaware
ASN Hoboken II LLC	Delaware
ASN Holdings LLC	Delaware
ASN Kendall Square LLC	Delaware
ASN Key West LLC	Delaware
ASN LaJolla LLC	Delaware
ASN Lake Mendota Investments LLC	Delaware
ASN Lakeshore East LLC	Delaware
ASN Las Flores LLC	Delaware
ASN Long Beach LLC	Delaware
ASN Los Feliz LLC	Delaware
ASN Maple Leaf (Office) LLC	Delaware
ASN Maple Leaf Member LLC	Delaware
ASN Marina Del Rey LLC	Delaware

Company Name	Jurisdiction
ASN Marina LLC	Delaware
ASN Meadow Wood LLC	Delaware
ASN Mission Center LLC	Delaware
ASN Mission Gorge LLC	Delaware
ASN Mountain View LLC	Delaware
ASN Multifamily Limited Partnership	Delaware
ASN Murray Hill LLC	Delaware
ASN Northgate LLC	Delaware
ASN Park Essex LC	Delaware
ASN Pasadena LLC	Delaware
ASN Placentia Place LLC	Delaware
ASN Portofino LLC	Delaware
ASN Presidio View LLC	Delaware
ASN Quarry Hills 1031 LLC	Delaware
ASN Quarry Hills LLC	Delaware
ASN Reading LLC	Delaware
ASN Redmond LLC	Delaware
ASN Redmond Park LLC	Delaware
ASN RH Member LLC	Delaware
ASN Richardson Highlands LLC	Delaware
ASN Rockville LLC	Delaware
ASN Rolling Hills Manager LLC	Delaware
ASN Roosevelt Center LLC	Delaware
ASN San Diego LLC	Delaware
ASN San Jose LLC	Delaware
ASN Santa Monica LLC	Delaware
ASN Seattle LLC	Delaware
ASN Sonoma LLC	Delaware
ASN StoneRidge LLC	Delaware
ASN StoneRidge Manager LLC	Delaware
ASN Studio City LLC	Delaware
ASN Summit LLC	Delaware
ASN Sunset LLC	Delaware
ASN Symphony Place LLC	Delaware
ASN Tanforan Crossing I LLC	Delaware
ASN Tanforan Crossing II LLC	Delaware

Company Name	Jurisdiction
ASN Technologies, Inc.	Delaware
ASN Texas GP LLC	Delaware
ASN Thousand Oaks Plaza LLC	Delaware
ASN Ventura LLC	Delaware
ASN Virginia Holdings LLC	Delaware
ASN Walnut Creek LLC	Delaware
ASN Warner Center LLC	Delaware
ASN Washington Boulevard LLC	Delaware
ASN Watertown LLC	Delaware
ASN West End LLC	Delaware
ASN Westmont LLC	Delaware
ASN Wisconsin Place (Residential) LLC	Delaware
ASN Wisconsin Place (Retail ) LLC	Delaware
ASN Woodland Hills East LLC	Delaware
ASN Worthington Place LLC	Delaware
ASN-Massachusetts Holdings (1) LLC	Delaware
ASN-Massachusetts Holdings (2) LLC	Delaware
ASN-Massachusetts Holdings (3) LLC	Delaware
ASN-Massachusetts Holdings (4) LLC	Delaware
ASN-Massachusetts Holdings (5) LLC	Delaware
ASN-Washington Holdings (1) LLC	Delaware
Brandywine Apartments of Maryland, LLC	Maryland
Capital Mezz LLC	Delaware
Casco Dunwoody LLC	Delaware
Casco GP LLC	Delaware
Casco Properties LP	Delaware
Casco Property Trust LLC	Delaware
Casco Thornbury Bay LLC	Delaware
Chateau Marina LLC	Delaware
Courthouse Hill LLC	Delaware
Detroit Village LLC	Delaware
Elk Sierra LLC	Delaware
Fiji Villas, LLC	Delaware
First Herndon Associates Limited Partnership	Delaware
Golden State Mezz LLC	Delaware
Katahdin GP LLC	Delaware

Company Name	Jurisdiction
Katahdin Properties LP	Delaware
Katahdin Property Trust LLC	Delaware
La Brea Gateway LLC	Delaware
Lake Mendota Investments LLC	Delaware
LMI Cheshire Bridge LLC	Delaware
LMI Pembroke Landings LLC	Delaware
LMI Preston Park LLC	Delaware
LMI Riverbend LLC	Delaware
LMI Rosemont LLC	Delaware
LMI Windward Park LLC	Delaware
Metropolitan Acquisition Finance LP	Delaware
Monadnock Harbour Cove LLC	Delaware
Monadnock Property Trust, LLC	Delaware
Monadnock Texas LP	Texas
Monterey Ranch Residential & Commercial Community Property Owners Association Inc.	Texas
Museum Gardens LLC	Delaware
Northblock Lofts, LLC	Delaware
Oakwood Las Colinas L.P.	Delaware
OEC Holdings, LLC	Delaware
The Lakes Holdings, LLC	Delaware
Panorama Insurance Ltd.	Bermuda
Prospector Diversified Assets LLC	Delaware
PTR — California Holdings (1) LLC	Delaware
PTR — California Holdings (3) LLC	Delaware
PTR — Colorado (1) LLC	Colorado
R&B Realty Group II, LLC	Delaware
RPG Orange, LLC	Delaware
SCA-North Carolina (1) LLC	Delaware
SCA-North Carolina (2) LLC	Delaware
Smith Five, Inc.	Delaware
Smith Four, Inc.	Delaware
Smith One, Inc.	Delaware
Smith Property Holdings 2000 Commonwealth L.L.C.	Delaware
Smith Property Holdings 4411 Connecticut Avenue LLC	Delaware
Smith Property Holdings Alban Towers L.L.C.	Delaware

Company Name	Jurisdiction
Smith Property Holdings Alban Towers Two L.L.C.	Delaware
Smith Property Holdings Ballston Place L.L.C.	Delaware
Smith Property Holdings Buchanan House LLC	Delaware
Smith Property Holdings Columbia Road L.P.	Delaware
Smith Property Holdings Consulate LLC	Delaware
Smith Property Holdings Cronin’s Landing L.P.	Massachusetts
Smith Property Holdings Crystal Houses LLC	Delaware
Smith Property Holdings Crystal Plaza LLC	Delaware
Smith Property Holdings Crystal Towers L.P.	Delaware
Smith Property Holdings Five (D.C.) L.P.	Delaware
Smith Property Holdings Five L.P.	Delaware
Smith Property Holdings Four L.P.	Delaware
Smith Property Holdings Kenmore L.P.	Delaware
Smith Property Holdings Lincoln Towers LLC	Delaware
Smith Property Holdings One (D.C.) L.P.	Delaware
Smith Property Holdings One L.P.	Delaware
Smith Property Holdings Parc Vista LLC	Delaware
Smith Property Holdings Reston Landing LLC	Delaware
Smith Property Holdings Sagamore Towers LLC	Delaware
Smith Property Holdings Seven L.P.	Virginia
Smith Property Holdings Six (D.C.) L.P.	Delaware
Smith Property Holdings Six L.P.	Delaware
Smith Property Holdings Springfield LLC	Delaware
Smith Property Holdings Superior Place LLC	Delaware
Smith Property Holdings Three (D.C.) L.P.	Delaware
Smith Property Holdings Three L.P.	Delaware
Smith Property Holdings Two (D.C.) L.P.	Delaware
Smith Property Holdings Two L.P.	Delaware
Smith Property Holdings Van Ness L.P.	Delaware
Smith Property Holdings Water Park Towers LLC	Delaware
Smith Property Holdings Wilson LLC	Delaware
Smith Realty Company	Maryland
Smith Seven, Inc.	Delaware
Smith Six, Inc.	Delaware
Smith Three, Inc.	Delaware
Smith Two, Inc.	Delaware

Company Name	Jurisdiction
SPH Springfield Station L.L.C.	Delaware
Square 673 Apartments LLC	Delaware
Texas GP Properties LLC	Delaware
TRG-Pembroke Road, LLC	Florida
Warner Pointe, LLC	Delaware
Westminster Estates, LLC	Texas
Wisconsin Place Residential LLC	Delaware

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, R. Scot Sellers, certify that:

1.	I have reviewed this annual report on Form 10-K of Archstone-Smith Trust (the “registrant”).
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the years covered by annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the years presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-f(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of trustees (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

By:	/s/ R. Scot Sellers
	R. Scot Sellers
	Chairman and Chief Executive Officer

March 1, 2007

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Charles E. Mueller, Jr., certify that:

1.	I have reviewed this annual report on Form 10-K of Archstone-Smith Trust (the “registrant”).
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the years covered by annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the years presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-f(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of trustees (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

By:	/s/ Charles E. Mueller, Jr.
	Charles E. Mueller, Jr.
	Chief Financial Officer (Principal Financial Officer)

March 1, 2007

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     The undersigned, being the Chief Executive Officer of Archstone-Smith Trust, a Maryland real estate investment trust (the “Issuer”), hereby certifies that the Annual Report on Form 10-K (the “Annual Report”) of the Issuer for the year ended December 31, 2006, which accompanies this certification, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. §78m(a)) and that the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

By:	/s/ R. Scot Sellers
	R. Scot Sellers
	Chairman and Chief Executive Officer

March 1, 2007

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     The undersigned, being the Chief Financial Officer of Archstone-Smith Trust, a Maryland real estate investment trust (the “Issuer”), hereby certifies, that the Annual Report on Form 10-K (the “Annual Report”) of the Issuer for the year ended December 31, 2006, which accompanies this certification, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. §78m(a)) and that the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

By:	/s/ Charles E. Mueller, Jr.
	Charles E. Mueller, Jr.
	Chief Financial Officer

March 1, 2007