Edgar Filing: MANUFACTURED HOME COMMUNITIES INC

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

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[ ] Preliminary proxy statement
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Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12

Name of Registrant as Specified in its Charter:

Manufactured Home Communities, Inc.

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N/A

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800
CHICAGO, ILLINOIS 60606

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 2003

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You are cordially invited to attend the 2003 Annual Meeting of Stockholders
(the "Meeting") of MANUFACTURED HOME COMMUNITIES, INC., a Maryland corporation
(the "Company"), to be held at One North Franklin Street, Third Floor, Chicago,
Illinois, on Tuesday, May 13, 2003, at 10:00 a.m. Central time. At the Meeting,
we will consider and take action on the following matters:

(1) Election of three directors to the Company's Board of Directors
(the "Board");

(2) To approve an amendment to the Company's charter (the "Charter
Amendment") to eliminate the current classification of the Board; and

(3) Any other business as may properly come before the Meeting or any
adjournment or postponement thereof.

The Board recommends that you vote "for" each of the nominees for the Board
and "for" the approval of the Charter Amendment.

Only stockholders of record at the close of business on March 14, 2003 will
be entitled to vote at the Meeting or any adjournment or postponement thereof.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING IN PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AS SOON
AS POSSIBLE IN THE ENCLOSED ENVELOPE.

By Order of the Board of Directors

/s/ Ellen Kelleher

Ellen Kelleher
Executive Vice President, General
Counsel
and Secretary

April 8, 2003

MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800
CHICAGO, ILLINOIS 60606

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PROXY STATEMENT

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INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), of proxies to be voted at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, May 13, 2003 (the
"Meeting"), and any adjournment or postponement thereof. The Company will pay
the cost of soliciting these proxies. The Company has retained the services of
MacKenzie Partners, Inc. to solicit proxies and distribute materials to
brokerage firms, banks, custodians and other institutional owners. The Company
will pay MacKenzie Partners, Inc. a fee of approximately $7,500 for these
services, plus expenses. In addition, the Company will reimburse brokerage firms
and other persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. The Company may
conduct further solicitation personally, by telephone or by facsimile through
its employees, officers and directors, none of whom will receive additional
compensation for assisting with the solicitation. Brokers and other nominees who
held of record stock of the Company on March 14, 2003 (the "Record Date"), the
record date for determining stockholders entitled to notice of and to vote at
the Meeting, will be asked to contact the beneficial owners of the shares which
they hold.

This Proxy Statement and accompanying proxy are being mailed to
stockholders commencing on or about April 11, 2003. The proxy, if properly
executed and returned, will be voted according to your instructions, but it may
be revoked at any time before it is exercised by giving notice of revocation in
writing to the Secretary of the Company, by voting in person at the Meeting or
by submitting a subsequently dated proxy to the Secretary of the Company at or
prior to the Meeting. The mere presence at the Meeting of a stockholder who has
granted a proxy shall not itself revoke the proxy. Shares held in street name
may be voted in person only if the stockholder obtains a signed proxy from the
record holder giving the stockholder the right to vote.

2002 ANNUAL REPORT

Stockholders are concurrently being furnished a copy of the Company's 2002
Annual Report (the "Annual Report") and of the Company's Annual Report on Form
10-K for the year ended December 31, 2002 (the "Form 10-K") as filed with the
Securities and Exchange Commission (the "SEC"). Additional copies of the Annual
Report and of the Form 10-K may be obtained by contacting Ellen Kelleher,
Executive Vice President, General Counsel and Secretary of the Company, at Two
North Riverside Plaza, Suite 800, Chicago, Illinois 60606, 312-279-1400; copies
will be furnished promptly at no additional expense.

VOTING

Only stockholders of record at the close of business on the Record Date
will be entitled to vote at the Meeting. On the Record Date, 22,258,447 shares
of the Company's common stock, par value $.01 per share ("Common Stock"), were
outstanding. Each share of Common Stock outstanding on the Record Date entitles
the holder thereof to one vote upon each matter to be voted upon at the Meeting.

The presence in person or by proxy of stockholders entitled to cast a majority
of all the votes entitled to be cast at the Meeting shall constitute a quorum.
Shares represented by proxies that reflect abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. The affirmative vote of a plurality of all votes cast
at the Meeting, if a quorum is present, is sufficient to elect each nominated
director to the Board. The approval of the proposal to amend the Company's
charter (the "Charter Amendment") to eliminate the current classification of the
Board (see Proposal No. 2 below) requires the affirmative vote of the holders of
two-thirds of all the votes entitled to be cast on the proposal. An abstention
as to any particular matter when passage requires the vote of a majority of the
votes entitled to be cast at the Meeting, however, does not constitute a vote
"for" or "against" and will be disregarded in calculating the votes cast as to
such matter. "Broker non-votes" (i.e., where a broker or nominee submits a proxy
specifically indicating the lack of discretionary authority to vote on a matter)
will be treated in the same manner as abstentions. Abstentions and broker
non-votes have the effect of votes against matters, such as the Charter
Amendment, requiring the affirmative vote of the holders of two-thirds of all
the votes entitled to be cast on such matters.

If there is not a quorum at the Meeting, the stockholders entitled to vote
at the Meeting, whether present in person or represented by proxy, shall only
have the power to adjourn the Meeting until such time as there is a quorum. The
Meeting may be reconvened without notice to the stockholders, other than an
announcement at the prior adjournment of the Meeting, within 120 days after the
Record Date, and a quorum must be present at such reconvened Meeting.

If a proxy in the form enclosed is duly executed, dated and returned, and
it has not been revoked in accordance with the instructions set forth therein,
the shares of Common Stock represented thereby will be voted by Samuel Zell and
Howard Walker, the Board's proxy agents for the Meeting, in accordance with the
specifications made thereon by the stockholder. If no such specifications are
made, such proxy will be voted (i) for the election of the three nominees for
director to the Board, (ii) for the approval of the Charter Amendment and (iii)
at the discretion of Mr. Zell and Mr. Walker with respect to such other business
as may properly come before the Meeting or any adjournment or postponement
thereof.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Board currently consists of ten members. However, two directors, Dr.
Masotti and Mr. Torres, have resigned effective May 12, 2003, and a third
director position currently held by Mr. Podjasek, whose term expires at the
Meeting, will not be filled. In accordance with the Company's Bylaws, the Board
has determined to reduce its size from ten members to seven members effective
immediately after the Meeting. The Company's charter (the "Charter") currently
provides that the Company's directors shall be divided into three classes as
nearly equal in number as possible, with each class having a term of three
years. The Board has nominated Donald S. Chisholm, Thomas E. Dobrowski and
Howard Walker for election to serve as directors of the Company until the 2006
Annual Meeting of Stockholders and until their successors are duly elected and
qualified. If the Charter Amendment is approved, the classified Board will be
eliminated, the current term of each director in office as of the Meeting and
each director elected at the Meeting will end at the 2004 Annual Meeting of
Stockholders (the "2004 Meeting"), and all directors will, starting with the
2004 Meeting, be elected for one-year terms at each Annual Meeting of
Stockholders. Biographical information for each of the nominees is set forth
under the caption "Management."

Each nominee has consented to be named in this Proxy Statement and to serve
if elected. All nominees are currently directors. In the event that any nominee
should become unable to serve as a director (which is not anticipated), the
persons designated as representatives will cast votes for the remaining nominees
and for such other person or persons as the Board may recommend.

THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD SUCH VOTE OR TO THE CONTRARY ARE GIVEN.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
executive officers and directors of the Company as of the Record Date. If the
Charter Amendment is approved, the terms of each director in office as of the
Meeting and each director elected at the Meeting will end at the 2004 Meeting.

NAME AGE POSITION
---- --- --------

Samuel Zell.......................... 61 Chairman of the Board (term expires in 2005)
Howard Walker........................ 63 Chief Executive Officer, Vice Chairman of the Board and
Director (term expires in 2003)
Thomas P. Heneghan................... 39 President and Chief Operating Officer
Ellen Kelleher....................... 42 Executive Vice President, General Counsel and Secretary
John M. Zoeller...................... 42 Executive Vice President, Chief Financial Officer and
Treasurer
Donald S. Chisholm................... 68 Director (term expires in 2003)
Thomas E. Dobrowski.................. 59 Director (term expires in 2003)
David A. Helfand..................... 38 Director (term expires in 2005)
Louis H. Masotti, Ph.D............... 68 Director (term expires in 2004)
John F. Podjasek, Jr................. 61 Director (term expires in 2003)
Sheli Z. Rosenberg................... 61 Director (term expires in 2004)
Michael A. Torres.................... 42 Director (term expires in 2005)
Gary L. Waterman..................... 61 Director (term expires in 2004)

The following is a biographical summary of the experience of the executive
officers and directors of the Company. For information concerning membership as
of the date of this Proxy Statement on committees of the Board, see "Committees
of the Board; Meetings" below.

Samuel Zell has been Chairman of the Board of the Company since March 1995
and was Chief Executive Officer of the Company from March 1995 to August 1996.
Mr. Zell was Co-Chairman of the Board of the Company from its formation until
March 1995. Mr. Zell was a director of Mobile Home Communities, Inc. ("MH
Inc."), the former manager of the Company's manufactured home communities, from
1983 until its dissolution in 1993. Mr. Zell has been chairman of Equity Group
Investments, L.L.C. ("EGI"), an investment company, since 1999, and, until
December 1998, was chairman of the board of Equity Group Investments, Inc.
("EGI, Inc."), an investment company, for more than five years. Mr. Zell is
chairman of the board of Anixter International Inc. ("Anixter"), a distributor
of electrical and cable products; Capital Trust, Inc. ("Capital Trust"), a
specialized finance company; Angelo and Maxie's, Inc., formerly known as Chart
House Enterprises, Inc., an owner and operator of restaurants; and Danielson
Holding Corporation, a holding company for insurance and marine transportation
businesses. Since July 2002, Mr. Zell has been chief executive officer of
Danielson Holding Corporation. Mr. Zell is chairman of the board of trustees of
Equity Office Properties Trust ("Equity Office"), an equity real estate
investment trust ("REIT") primarily focused on office buildings; and chairman of
Equity Residential Properties Trust ("Equity Residential"), an equity REIT
primarily focused on multifamily residential properties. Mr. Zell has been a
director of Idine Rewards Network, Inc. ("Idine"), an administrator of loyalty
based consumer reward programs, since July 2002, and has been its chairman since
September 2002.

Howard Walker has been a director of the Company since November 1997, and
has been Chief Executive Officer of the Company since December 1997. Mr. Walker
also has been Vice Chairman of the Board of the Company since May 2002. Mr.
Walker was President of the Company from September 1997 to May 2000, and
President of Realty Systems, Inc., an affiliate of the Company, from March 1995
to April 2000. Mr. Walker is also a member of the Company's management committee
(the "Management Committee"), which was created in 1995 and is comprised of the
Company's senior executive officers. Mr. Walker was a Vice President of the
Company from January 1995 to March 1995.

Thomas P. Heneghan has been President and Chief Operating Officer of the
Company since May 2000. Mr. Heneghan is also a member of the Management
Committee. Mr. Heneghan was Executive Vice President, Chief Financial Officer
and Treasurer of the Company from April 1997 to May 2000, and Vice President,
Chief Financial Officer and Treasurer of the Company from February 1995 to March
1997.

Ellen Kelleher has been Executive Vice President and General Counsel of the
Company since March 1997, and has been Secretary of the Company since May 2000.
Ms. Kelleher is also a member of the Management Committee. Ms. Kelleher was
Senior Vice President, General Counsel and Assistant Secretary of the Company
from March 1994 to March 1997.

John M. Zoeller has been Executive Vice President, Chief Financial Officer
and Treasurer of the Company since May 2002. Mr. Zoeller was Vice President,
Chief Financial Officer and Treasurer of the Company from May 2000 to May 2002.
Mr. Zoeller is also a member of the Management Committee. From January 1999 to
May 2000, Mr. Zoeller was a vice president of EGI. From January 1997 to December
1998, Mr. Zoeller was a vice president of EGI, Inc.

Donald S. Chisholm has been a director of the Company since March 1993. Mr.
Chisholm is president of Vernon Development Co., the developer of a 650-acre
golf course community, and of Ann Arbor Associates Inc., a real estate
development and management company, both for more than five years.

Thomas E. Dobrowski has been a director of the Company since March 1993.
Mr. Dobrowski has been the managing director of real estate and alternative
investments of General Motors Investment Management Corporation since December
1994. Mr. Dobrowski is a director of Capital Trust. Mr. Dobrowski is also a
trustee of Equity Office.

David A. Helfand has been a director of the Company since May 1995. Mr.
Helfand has been with Equity Office since July 1998, and serves as its chief
investment officer. Mr. Helfand was a managing director of Equity International
Properties, a division of EGI, Inc., from December 1997 to July 1998. Mr.
Helfand was President of the Company from January 1995 to September 1997, and
was Chief Executive Officer of the Company from August 1996 to December 1997.
Mr. Helfand was Chief Financial Officer of the Company from December 1992 to
February 1995, and Senior Vice President of the Company from March 1994 to
January 1995.

Louis H. Masotti, Ph.D., has been a director of the Company since March
1993. Dr. Masotti has been president of Louis H. Masotti, Ltd., a management,
real estate and urban development consultancy, for more than five years. Dr.
Masotti was professor of management and urban development and director of the
program in real estate management for the Graduate School of Management of the
University of California at Irvine from 1992 to 1998. Dr. Masotti is a professor
emeritus of Northwestern University's Kellogg Graduate School of Management. Dr.
Masotti has resigned as a director of the Company effective May 12, 2003, and
his director position will not be filled.

John F. Podjasek, Jr., has been a director of the Company since May 1994.
Mr. Podjasek has been the Managing Director of the private equity group at
WestLB Asset Management (USA) LLC since September 2000. Mr. Podjasek was the
Managing Director and co-head of the Private Markets Group of Forstmann -- Leff
International, Inc. from July 1997 to September 2000. Mr. Podjasek was retired
from November 1995 to July 1997. Previously, Mr. Podjasek was employed by
Allstate Insurance Company

from 1966 to November 1995, most recently serving as vice president of venture
capital and real estate. Mr. Podjasek will not stand for reelection at the
Meeting, and his director position will not be filled.

Sheli Z. Rosenberg has been a director of the Company since August 1996.
During 2002, Mrs. Rosenberg was appointed the Lead Director of the Company.
Since January 2000, Mrs. Rosenberg has been vice chairman of EGI. Mrs. Rosenberg
was president of EGI, Inc. from November 1994 to December 1999, and was chief
executive officer of EGI, Inc. from November 1994 to December 1998. Mrs.
Rosenberg was a principal of the law firm of Rosenberg & Liebentritt from 1980
to September 1997. Mrs. Rosenberg is a director of CVS Corporation, an owner and
operator of drug stores; Capital Trust; Cendant Corporation, a travel related,
real estate related and direct marketing consumer and business services company;
Idine; and Ventas, Inc., an owner of real estate in the health care field. Mrs.
Rosenberg is a trustee of Equity Office and Equity Residential.

Michael A. Torres has been a director of the Company since March 1993. Mr.
Torres is the Chief Executive Officer and a principal of Lend Lease Rosen Real
Estate Securities LLC ("Lend Lease Rosen"), an investment management firm. Mr.
Torres joined Lend Lease Rosen in February 1995. Mr. Torres is a trustee of Lend
Lease Funds, a family of mutual funds. Mr. Torres serves on the Board of
Directors of the Robert Togo Foundation. Mr. Torres has resigned as a director
of the Company effective May 12, 2003, and his director position will not be
filled.

Gary L. Waterman has been a director of the Company since March 1993. Since
1989, Mr. Waterman has been president of Waterman Limited, a real estate
services and investment company that he founded. Mr. Waterman is a director and
member of the Compensation Committee of Java Trading Company, a wholesale coffee
roasting company.

COMMITTEES OF THE BOARD; MEETINGS

Meetings: During the year ended December 31, 2002, the Board held four
meetings and took eight actions by unanimous written consent. Each of the
directors attended 75% or more of the total number of the meetings of the Board
and of its committees on which he or she served.

Executive Committee: The Executive Committee of the Board is composed of
Messrs. Zell, Walker and Chisholm. The Executive Committee has the authority,
within certain parameters set by the Board, to acquire, dispose of and finance
investments for the Company (including the issuance of additional limited
partnership interests of MHC Operating Limited Partnership ("OP Units")) and to
execute contracts and agreements, including those related to the borrowing of
money by the Company, and generally exercise all other powers of the Board
except as prohibited by law. During the year ended December 31, 2002, the
Executive Committee held no meetings and took three actions by unanimous written
consent.

Compensation Committee: The Compensation Committee of the Board is
composed of Messrs. Chisholm, Masotti and Waterman and Mrs. Rosenberg. The
Compensation Committee determines compensation for the Company's executive
officers and exercises all powers of the Board in connection with compensation
matters, including incentive compensation and benefit plans. The Compensation
Committee also has the authority to grant stock options, stock appreciation
rights and restricted stock awards in accordance with the Company's 1992 Stock
Option and Stock Award Plan, as amended and restated (the "Plan"), to the
management of the Company and its subsidiaries, other employees and consultants.
During the year ended December 31, 2002, the Compensation Committee held two
meetings and took no actions by unanimous written consent.

Audit Committee: The Audit Committee of the Board is composed of Messrs.
Dobrowski and Torres and Mrs. Rosenberg. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the Company's independent public accountants the plans for and
results of the audit engagement, approves professional services provided by the
Company's independent public accountants, reviews the independence of the
Company's independent public accountants, considers the range of audit and
non-audit fees and reviews the adequacy of the

Company's internal accounting controls. Each of the Audit Committee members is
an "independent" director within the meaning of "independent" set forth in The
New York Stock Exchange ("NYSE") listing standards. During the year ended
December 31, 2002, the Audit Committee held five meetings and took one action by
unanimous written consent.

EXECUTIVE COMPENSATION

The following table shows information with respect to the annual
compensation for services rendered to the Company for the fiscal years ended
December 31, 2002, December 31, 2001 and December 31, 2000 by the Company's
Chief Executive Officer and those persons who were, at December 31, 2002, the
next three most highly compensated executive officers of the Company.

SUMMARY COMPENSATION TABLE

LONG-TERM COMPENSATION
AWARDS
ANNUAL -------------------------
COMPENSATION RESTRICTED SECURITIES
------------------- COMMON UNDERLYING ALL OTHER
BONUS STOCK AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2)(3) GRANTED(#) ($)(4)
--------------------------- ---- --------- ------- ------------ ---------- ------------

Howard Walker................... 2002 500,000 223,897 697,888 0 10,000
Chief Executive Officer, 2001 273,000 103,000 53,980 0 8,500
Vice Chairman, Director 2000 262,650 175,000 604,750 0 10,200
and Member of Management
Committee(5)(6)
Thomas P. Heneghan.............. 2002 270,000 175,000 560,700 0 10,000
President, Chief Operating 2001 261,500 113,600 0 0 8,500
Officer and Member of 2000 251,320 298,964 493,000 0 10,200
Management Committee(6)
Ellen Kelleher.................. 2002 252,000 195,910 490,613 0 10,000
Executive Vice President, 2001 244,500 103,000 0 0 8,500
General Counsel, Secretary 2000 234,840 275,000 431,375 0 10,174
and Member of Management
Committee(6)
John M. Zoeller................. 2002 252,000 194,946 490,613 0 10,000
Executive Vice President, 2001 244,500 113,600 695,325 0 8,500
Chief Financial Officer, 2000 147,227 198,964 431,375 0 8,819
Treasurer and Member of
Management Committee(6)(7)

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(1) Actual payment of 2001 bonuses was made in 2002. Bonuses for 2000 and 2002
were paid in the year during which they were earned.

(2) The total number and value of shares of Common Stock ("Restricted Common
Stock") awarded pursuant to restricted stock grants ("Restricted Common
Stock Awards") in various years, pursuant to the plans and programs
described below under "Compensation Committee Report on Executive
Compensation", and held by each named executive officer as of December 31,
2002 were as follows:

NUMBER OF SHARES VALUE($)
---------------- ---------

Howard Walker........................................ 33,189 983,390
Thomas P. Heneghan................................... 27,500 814,825
Ellen Kelleher....................................... 21,813 646,319
John M. Zoeller...................................... 36,813 1,090,769

All holders of Restricted Common Stock receive any dividends paid on such
shares.

(3) The number of shares of Restricted Common Stock granted to each named
executive officer effective January 4, 2002 pursuant to the 1997 Program, as
described below under "Compensation Committee Report on Executive
Compensation", was as follows (said award is subject to a vesting schedule,
with 50% of the award vesting immediately; 25% vesting one year from the
date of the award; and the remainder vesting two years from the date of the
award):

Howard Walker............................................... 20,250
Thomas P. Heneghan.......................................... 18,000
Ellen Kelleher.............................................. 15,750
John M. Zoeller............................................. 15,750

Note: The cumulative totals set forth in footnote 2 above include the
portion of this award that had not vested as of December 31, 2002.

No Restricted Common Stock was granted to executive officers in 2001,
except as described in footnotes (5) and (7) below with respect to Messrs.
Walker and Zoeller, respectively.

The number of shares of Restricted Common Stock granted to each named
executive officer in 2000 was as follows:

The Restricted Common Stock Award granted to each named executive officer
in 2000 was made in two separate grants, one on November 14, 2000 and the
second on December 29, 2000. 50% of such Restricted Common Stock Award
vested on December 29, 2000; 25% vested on December 29, 2001; and the
remainder vested on December 29, 2002.

(4) Includes employer matching contributions and profit sharing contributions
pursuant to The MHC Advantage Retirement Savings Plan.

(5) As a member of the Board, Mr. Walker received an award of 2,000 shares of
Restricted Common Stock on May 9, 2000, on May 8, 2001, and on May 8, 2002.
Each of these awards is subject to a vesting schedule, with one-third of the
award vesting six months from the date of the award; one-third vesting one
year from the date of the award; and the remainder vesting two years from
the date of the award.

(6) Under the Company's MBO bonus plan, an officer who receives a
management-by-objective ("MBO") bonus receives 50% of the MBO bonus in cash
and 50% of the MBO bonus in the form of a stock award. The officer may
request, subject to approval by the Compensation Committee, to receive any
portion of the MBO bonus in the form of a stock award. To the extent that an
officer receives up to 50% of the MBO bonus as a stock award, the stock
award is calculated using the fair market value of a share of Common Stock
as of the date the MBO bonus is paid or (for 2002) as of the date the MBO
bonus is declared. If more than 50% of the MBO bonus is to be paid as a
stock award, the additional stock award is calculated using the most recent
purchase price for a share of Common Stock under the Company's Non-Qualified
Employee Stock Purchase Plan ("ESPP") or the price that would be used under
the ESPP for the offering period then in progress if the period ended the
day the MBO bonus was paid, which is less than the fair market value of a
share of Common Stock on the day the MBO bonus is paid. Bonus amounts
reflected for certain of the named executive officers for each of the years
indicated include the discount on shares of Common Stock with respect to
elections they made to receive more than 50% of the MBO bonus as a stock
award, as follows: (a) for 2000, Messrs. Heneghan and Zoeller; (b) for 2001,
Messrs. Heneghan and Zoeller; and (c) for 2002, Messrs. Walker and Zoeller
and Ms. Kelleher.

(7) Mr. Zoeller became an executive officer of the Company in May 2000 (the
salary figure shown for Mr. Zoeller for 2000 is a pro rated amount).
Effective January 1, 2001, Mr. Zoeller was awarded

25,000 shares of Restricted Common Stock pursuant to the "1998 Program"
described below under "Compensation Committee Report on Executive
Compensation."

OPTION GRANTS IN LAST FISCAL YEAR

There were no option grants in fiscal year 2002 to any of the executive
officers named in the Summary Compensation Table.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------------- --------------------

Howard Walker................... 25,000 347,530 0/0 0/0
Thomas P. Heneghan.............. 0 0 12,000/0 107,310/0
Ellen Kelleher.................. 21,000 266,474 0/0 0/0
John M. Zoeller................. 0 0 4,000/0 30,958/0

---------------

(1) Calculated by determining the difference between (a) $29.63, the per share
value of the Company's Common Stock on December 31, 2002, the last trading
day of the year, and (b) the exercise price of in-the-money options.

DIRECTOR COMPENSATION

The Company paid each of its non-employee directors an annual fee of
$30,000 in 2002. In addition, directors who serve on the Audit Committee,
Executive Committee or Compensation Committee receive an additional $1,000 per
annum for each committee on which they serve. Committee chairs receive an
additional $500 per annum. Directors who are employees of the Company are not
paid any directors' fees. The Company reimburses the directors for travel
expenses incurred in connection with their activities on behalf of the Company.
On the date of the first Board meeting after each Annual Meeting of
Stockholders, each director then in office will receive at the director's
election either an annual grant of options to purchase 10,000 shares of Common
Stock at the then-current market price or an annual grant of 2,000 shares of
Restricted Common Stock. In March 2003, Mr. Zell was awarded options to purchase
100,000 shares of Common Stock, which he elected to receive as 20,000 shares of
Restricted Common Stock, for services rendered as Chairman of the Board during
2002, and Mrs. Rosenberg was awarded options to purchase 25,000 shares of Common
Stock, which she elected to receive as 5,000 shares of Restricted Common Stock,
for services rendered as Lead Director during 2002. One-third of the shares of
Restricted Common Stock covered by these grants vests on each of December 31,
2003, December 31, 2004 and December 31, 2005.

COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION

The Compensation Committee members for 2002 were Messrs. Chisholm, Masotti
and Waterman and Mrs. Rosenberg. No Compensation Committee interlocking
relationships existed in 2002. For a description of certain transactions with
Board members or their affiliates, see "Certain Relationships and Related
Transactions."

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

The Compensation Committee determines the compensation of the Company's
executive officers, including those named in the Summary Compensation Table, and
guides the Company's overall philosophy towards compensation of its employees.
The Compensation Committee believes that the compensation of the Company's Chief
Executive Officer and all of the Company's executive officers should be both
competitive and based on individual and Company performance.

The Company's compensation policy takes into account a review of local and
national peer group salary surveys focusing primarily on the SNL Executive
Compensation Review 2002 for REITs ("SNL Survey"). The SNL Survey contains
detailed compensation and performance data on publicly traded REITs. The
Compensation Committee believes the SNL Survey provides comparable salary data
for the Company. The Compensation Committee believes that the Company's
compensation levels compare favorably to the Company's peer groups described in
the surveys and targets median to high compensation levels for the Company's
executive officers. This is not the same peer group that is used in the
Performance Graph on page 13.

During the fiscal year ended December 31, 2002, there were three major
components of executive compensation: base salary, bonuses and Restricted Common
Stock Awards.

The Compensation Committee believes that attracting and retaining highly
qualified executives is accomplished by providing competitive base salaries and
meaningful incentives, both short-term and long-term, intended to reward
performance and retain experienced management. Benchmarks for determining base
salary and bonus levels include targeted funds from operations ("FFO") levels,
strength of the balance sheet and creation of stockholder value. Each
performance measure carries equal weight.

The Company's executive salary structure is reviewed annually by the
Compensation Committee using the SNL Survey for guidance. In addition, the
entire Company's salary structure is reviewed annually. Where salary information
is unavailable for a particular position, other positions having similar
responsibilities either within the Company or in companies of comparable size
are used. Salary increases are based upon overall Company performance and upon
each executive officer's (including the Chief Executive Officer's) performance
and contribution to the Company's performance. Also, the Compensation Committee
has deliberately kept base salaries at levels which may compare less favorably
with comparable positions in other companies. This allows the Compensation
Committee to reward executive officers' performance through bonuses and
long-term incentives such as Restricted Common Stock Awards.

Further short-term and mid-term incentives for executive officers are
accomplished through the Company's MBO bonus plan. The MBO bonus plan involves
the Company and the executive officer jointly setting goals for such executive
officer at the beginning of each year.

In 2002, the Company and the REIT industry encountered a challenging
economic environment. Despite the poor economy, the Company's core business
continued to deliver solid operating income growth. The Company successfully
redeployed approximately $90 million of capital from all age communities in
average growth markets to age qualified communities in Florida and Arizona that
are more in line with the Company's long term strategic plan. The Company has
maintained its balance sheet at an appropriate debt to equity level and has
continued its efforts to obtain market rent levels that achieve an equitable
balance between the expectations of residents and those of stockholders. In
light of the foregoing, the Compensation Committee determined that the MBO
bonuses should be paid to the executive officers of the Company. In determining
the total MBO bonus for each executive officer, the Compensation Committee also
considered the amount of other awards and benefits which were included in the
total compensation of such executive officer.

MBO bonuses, if paid, are paid to the executive officers of the Company 50%
in cash and 50% in a stock award calculated using the fair market value of a
share of Common Stock on the date the bonus is
9

paid. The officer may request, subject to the Compensation Committee's approval,
to receive more or less of the bonus in the form of a stock award. To the extent
that the officer receives more than 50% of the MBO bonus as a stock award, the
stock award is calculated using the most recent purchase price for a share of
Common Stock under the ESPP or the price that would be used under the ESPP for
the offering period then in progress if the period ended the day the MBO bonus
was paid.

To provide long-term incentives for executive officers and as a means to
retain qualified executive officers, the Company has created performance and
tenure-based Restricted Common Stock Award programs.

In 1997, the Company implemented a five-year incentive program tied to
increases in stockholder value (the "1997 Program"). Shares were awarded under
the 1997 Program only if annual performance benchmarks (based upon increases in
share price plus distributions to stockholders) were achieved. Shares awarded
were then subject to a vesting schedule (50% immediately and 25%, respectively,
on the next two anniversaries of the award). Executive officers received awards
under the 1997 Program in 1997 and 2000. In addition, effective January 4, 2002,
executive officers received awards under the 1997 Program as follows: Mr. Walker
was awarded 20,250 shares; Mr. Heneghan was awarded 18,000 shares; and Ms.
Kelleher and Mr. Zoeller were each awarded 15,750 shares.

In 1998, the Company implemented an incentive program tied to achieving
targeted levels of FFO per share through 2003 (the "1998 Program"). On November
24, 1998, Restricted Common Stock Awards were granted to executive officers and
other members of senior management under the 1998 Program. In 1999 and 2001,
awards were made under the 1998 Program to certain additional members of senior
management (excluding executive officers who had received awards in 1998). Any
Restricted Common Stock awarded under the 1998 Program will vest over a
five-year period, with lapsing of restrictions tied to achieving targeted levels
of FFO per share. Vesting with respect to 80% of the Restricted Common Stock
awarded under the 1998 Program had occurred as of December 31, 2002.

In December 2001, the Compensation Committee created the 2004 Long Term
Restricted Stock Plan (the "2004 Program"), which provides for shares of
Restricted Common Stock to be granted on January 5, 2004 to individuals who are
employed by the Company on November 15, 2001 and on January 5, 2004 and who hold
the respective titles of Chief Executive Officer, Chief Operating Officer,
General Counsel and Chief Financial Officer, as well as certain other titles on
such grant date. Any shares granted on January 5, 2004 would be subject to a
further three year vesting schedule, with one-third vesting December 10, 2004,
one-third vesting December 10, 2005 and one-third vesting December 10, 2006,
with vesting based solely on an individual's tenure in such titled positions.
These shares have not been issued and there can be no assurance that any person
listed in the Summary Compensation Table would be eligible for a grant of shares
under the 2004 Program. Mr. Walker will not be eligible for the 2004 Program. In
lieu of the 2004 Program for Mr. Walker and in order to provide for an orderly
transition of senior management, Mr. Walker received an employment contract
ending May 17, 2004 providing for an annual base salary of $500,000 and annual
bonus range not to exceed $250,000.

To encourage Mr. Walker to remain employed by the Company, the Company has
entered into a deferred compensation agreement with Mr. Walker. The agreement,
entered into in December 2000, provides Mr. Walker with a salary benefit
commencing May 17, 2004. Pursuant to the agreement, commencing on such date Mr.
Walker will receive an annual deferred compensation payment in the amount of
$200,000 for a ten year period. The Company has purchased an annuity for
approximately $1,200,000 to fund its future obligations under the agreement. The
annuity is held by a trust for the benefit of Mr. Walker and is subject to the
claims of creditors of the Company.

In 2002, the Compensation Committee did not implement any new programs, and
the only shares awarded to management in 2002 were awarded under the 1997
Program as described above as a result of attainment of the performance
benchmarks contained in the 1997 Program.

The vesting of Restricted Common Stock Awards is subject to acceleration in
the case of death, disability and involuntary termination not for cause or
change of control of the Company. The Compensation Committee recognizes that the
interests of stockholders are best served by giving key employees the
opportunity to participate in the appreciation of the Company's Common Stock.

No options were granted to employees or officers of the Company during
2002.

The Compensation Committee believes that the compensation program properly
rewards the Company's officers for achieving improvements in the Company's
performance and serving the interests of its stockholders.

The Company may or may not structure compensation arrangements to satisfy
the requirements for performance-based compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").

Respectfully submitted,

Donald S. Chisholm, Chairman
Louis H. Masotti, Ph.D.
Sheli Z. Rosenberg
Gary L. Waterman

AUDIT COMMITTEE REPORT

The Audit Committee oversees the Company's financial reporting process on
behalf of the Board. Management has the primary responsibility for the financial
reporting process, including the system of internal controls, and for the
preparation of consolidated financial statements in accordance with generally
accepted accounting principles. The Audit Committee is governed by a written
charter approved by the Board. In accordance with this charter, the Audit
Committee oversees the accounting, auditing and financial reporting practices of
the Company. In fulfilling its oversight responsibilities, the Audit Committee
reviewed the audited financial statements in the Form 10-K with management,
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.

The Audit Committee reviewed with the Company's independent accountants,
who are responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. In
addition, the Audit Committee has discussed with the independent accountants the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards) and the accountants' independence from the Company and
management, including the matters in the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and considered the compatibility of non-audit services provided to
the Company by the independent accountants with the accountants' independence.

The Audit Committee discussed with the Company's independent accountants
the overall scope and plans for their audit. The Audit Committee met with the
independent accountants, with and without management present, to discuss the
results of their examinations, their evaluation of the Company's internal
controls and the overall quality of the Company's financial reporting.

In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Form 10-K for filing with the SEC.

Respectfully submitted,

Michael A. Torres, Chairman
Thomas E. Dobrowski
Sheli Z. Rosenberg

AUDIT FEES

The aggregate fees billed (or expected to be billed) for professional
services rendered by the independent accountants for the audit of the Company's
financial statements for fiscal year 2002 and the reviews by the independent
accountants of the financial statements included in the Company's Forms 10-Q for
fiscal year 2002 were $175,000.

ALL OTHER FEES

There were no fees billed for professional services rendered by the
independent accountants for any financial systems design and implementation in
fiscal year 2002. The aggregate fees billed (or expected to be billed) for
services rendered by the independent accountants to the Company and not
otherwise described under "Audit Fees" for fiscal year 2002 were $84,000.
Included in these fees are approximately $40,000 of fees for attest services
related to audits of subsidiaries and benefit plans, $10,000 of fees for
corporate tax compliance, and $34,000 of fees for other non-audit services
performed for the Company.

The Audit Committee has determined that the independent accountants'
provision of the non-audit services described above is compatible with
maintaining the independent accountants' independence.

PERFORMANCE GRAPH

The following performance graph compares total stockholders' return on the
Common Stock since December 31, 1997 with the Standard and Poors ("S&P") 500
Stock Index and the index of equity REITs prepared by the National Association
of Real Estate Investment Trusts ("NAREIT"). The Common Stock price performance
graph assumes that an investment of $100 was made on December 31, 1997 in the
Common Stock and in each of the two indexes and further assumes the reinvestment
of all dividends. Equity REITs are defined as those REITs which derive more than
75% of their income from equity investments in real estate assets. The NAREIT
equity index includes all tax qualified REITs listed on the NYSE, the American
Stock Exchange or the NASDAQ Stock Market. Common Stock price performance
presented for the period from December 31, 1997 through December 31, 2002 is not
necessarily indicative of future results.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100
DECEMBER 31, 2002

(PERFORMANCE GRAPH)

--------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------

Company Return % -1.69 3.31 27.37 14.36 0.65
Cumulative $ $100.00 $120.49 $124.48 $158.55 $181.32 $148.90
S&P 500 Return % 28.58 21.05 -9.10 -11.88 -22.10
Cumulative $ $100.00 $171.47 $207.56 $188.66 $166.24 $ 97.11
NAREIT Equity Return % -17.50 -4.62 26.37 13.89 3.81
Cumulative $ $100.00 $ 99.21 $ 94.63 $119.58 $136.19 $117.57

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of the Record Date (except as
noted), with respect to each person who is known by the Company's management to
be the beneficial owner of more than 5% of the outstanding shares of Common
Stock.

AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND BUSINESS ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
--------------------------------------------- ------------ --------

Samuel Zell and entities controlled by Samuel Zell and
Ann Lurie and entities controlled by Ann Lurie(2)......... 3,495,032 15.7%
Two North Riverside Plaza
Chicago, Illinois 60606
General Motors Employes Global Group Pension Trust(3)....... 2,271,198 10.2%
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Morgan Stanley(4)........................................... 1,822,498 8.2%
1585 Broadway
New York, New York 10036
FMR Corp (5)................................................ 1,245,655 5.6%
82 Devonshire Street
Boston, Massachusetts 02109

---------------

(1) MHC Operating Limited Partnership (the "Operating Partnership") is the
entity through which the Company conducts substantially all of its
operations. The limited partners of the Operating Partnership own units of
limited partnership interest ("OP Units") which are convertible into an
equivalent number of shares of Common Stock. In accordance with SEC
regulations governing the determination of beneficial ownership of
securities, the percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of the Record Date to acquire Common
Stock held by the person are exercised and that no options to acquire Common
Stock held by other persons are exercised.

(2) Includes Common Stock, OP Units which are exchangeable for Common Stock, and
options to purchase Common Stock which are currently exercisable or
exercisable within 60 days of the Record Date owned as follows:

COMMON
STOCK OP UNITS OPTIONS
------- --------- -------

Samuel Zell....................................... 45,446 -- 566,665
Samuel Zell Revocable Trust....................... 10,551 -- --
Samstock/SZRT, L.L.C. ............................ 294,133 13,641 --
Samstock/ZGPI, L.L.C. ............................ 6,003 -- --
Samstock, L.L.C. ................................. 346,000 601,665 --
Samstock/ZFT, L.L.C. ............................. 8,887 187,278 --
Samstock/Alpha, L.L.C. ........................... 8,887 -- --
EGI Holdings, Inc. ............................... -- 579,873 --
Donald S. Chisholm Trust.......................... 7,000 -- --
Anda Partnership.................................. -- 233,694 --
LFT Partnership................................... -- 5,436 --
EGIL Investments, Inc............................. -- 579,873 --
TOTALS:........................................... 726,907 2,201,460 566,665
======= ========= =======

Mr. Zell disclaims beneficial ownership of 7,000 shares of Common Stock and
819,003 OP Units because the economic benefits with respect to such shares
of Common Stock and OP Units are attributable to other persons. EGIL
Investments, Inc. ("EGIL") has beneficial ownership of 579,873 OP Units.
Under a stockholders' agreement dated December 31, 1999 among certain Zell
family trusts and certain Lurie family trusts, (a) the Zell trusts have the
power to vote and to dispose of the OP Units beneficially owned by EGI
Holdings, Inc. ("EGI Holdings") and (b) the Lurie trusts have the power to
vote and to dispose of the OP Units beneficially owned by EGIL. Chai Trust
Company L.L.C., shares the power to vote or to direct the vote and shares
the power to dispose or to direct the disposition of 2,318,466 shares of
Common Stock the ownership of which is disclosed with respect to
Samstock/ZGPI, L.L.C., Samstock, L.L.C., Samstock/ZFT, L.L.C.,
Samstock/Alpha, L.L.C., EGI Holdings and EGIL. In addition, Ann Lurie and
Mark Slezak each share the power to vote or to direct the vote and share
the power to dispose or to direct the disposition of 1,393,440 shares of
Common Stock the ownership of which is disclosed with respect to EGI
Holdings, EGIL and Anda Partnership, and Ann Lurie shares the power to vote
or to direct the vote and shares the power to dispose or to direct the
disposition of 5,436 shares of Common Stock the ownership of which is
disclosed with respect to LFT Partnership.

(3) The shares of Common Stock reported herein are held of record by State
Street Bank & Trust Company, acting as trustee (the "Trustee") for the
General Motors Employes Global Group Pension Trust (the "GM Trust Fund"), a
trust formed under and for the benefit of certain employee benefit plans of
General Motors Corporation ("GM") and its subsidiaries and a former GM
affiliate and its subsidiaries. These shares may be deemed to be owned
beneficially by General Motors Investment Management Corporation ("GMIMCo"),
a wholly owned subsidiary of GM. GMIMCo's principal business is providing
investment advice and investment management services with respect to the
assets of certain employee benefit plans of GM and its subsidiaries and
former affiliates. The Trustee may vote and dispose of the shares held by
the GM Trust Fund only pursuant to the direction of GMIMCo personnel, and
accordingly beneficial ownership of the shares by the Trustee is disclaimed.

(4) Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2002,
Morgan Stanley and its wholly-owned subsidiary, Morgan Stanley Dean Witter
Investment Management Inc. ("Morgan Stanley, Inc."), are the beneficial
owners of 1,822,489 and 1,609,594 shares of Common Stock,

respectively, through accounts managed by them on a discretionary basis.
Morgan Stanley has shared voting power over 1,529,295 shares of Common Stock
and shared dispositive power over 1,822,498 shares of Common Stock. Morgan
Stanley, Inc. has shared voting power over 1,316,400 shares of Common Stock
and shared dispositive power over 1,609,594 shares of Common Stock.

(5) Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2002,
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. ("FMR") and an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940 ("Investment Act"), is the beneficial owner
of 1,178,100 shares of Common Stock as a result of acting as investment
advisor to various investment companies under the Investment Act. Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR, is the
beneficial owner of 76,500 shares of Common Stock as a result of serving as
investment manager of institutional accounts. Geode Capital Management, LLC,
an investment advisor registered under Section 203 of the Investment Act
owned by certain shareholders and employees of FMR, beneficially owns 55
shares of Common Stock.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of the Record Date, certain information
with respect to the Common Stock that may be deemed to be beneficially owned by
each director of the Company, by the four executive officers named in the
Summary Compensation Table and by all such executive officers and directors as a
group. The address for each of the executive officers and directors is c/o
Manufactured Home Communities, Inc., Two North Riverside Plaza, Suite 800,
Chicago, Illinois 60606. Unless otherwise indicated, each person has sole
investment and voting power, or shares such power with his or her spouse, with
respect to the shares set forth in the following table.

SHARES OF SHARES UPON
COMMON EXERCISE OF PERCENTAGE
NAME OF BENEFICIAL HOLDER STOCK(1) OPTIONS(2) TOTAL OF CLASS(3)
------------------------- ---------- ----------- --------- -----------

Donald S. Chisholm(4).................. 64,339 30,000 94,339 *
Thomas E. Dobrowski(5)................. -- 46,666 46,666 *
David A. Helfand....................... 127,834 76,000 203,834 *
Thomas P. Heneghan..................... 286,995 12,000 298,995 1.3%
Ellen Kelleher......................... 245,433 -- 245,433 1.1%
Louis H. Masotti....................... 17,020 -- 17,020 *
John F. Podjasek, Jr................... 15,768 70,000 85,768 *
Sheli Z. Rosenberg(6).................. 108,587 143,999 252,586 1.1%
Michael A. Torres...................... 17,712 50,000 67,712 *
Howard Walker.......................... 229,810 229,810 1.0%
Gary L. Waterman....................... 49,654 30,000 79,654 *
Samuel Zell(4)(7)...................... 2,928,367 566,665 3,495,032 15.7%
John M. Zoeller........................ 88,981 4,000 92,981 *
All directors and executive officers as
a group (13 persons) including the
above-named persons.................. 4,180,500 1,029,330 5,209,830 23.4%
========== ========== ========= ====

---------------

* Less than 1%

(1) The shares of Common Stock beneficially owned includes OP Units that can be
exchanged for an equivalent number of shares of Common Stock.

(2) The amounts shown in this column reflect shares of Common Stock subject to
options which are currently exercisable or exercisable within 60 days of the
Record Date.

(3) In accordance with SEC regulations governing the determination of beneficial
ownership of securities, the percentage of Common Stock beneficially owned
by a person assumes that all OP Units held by the person are exchanged for
Common Stock, that none of the OP Units held by other persons are so
exchanged, that all options exercisable within 60 days of the Record Date to
acquire Common Stock held by the person are exercised and that no options to
acquire Common Stock held by other persons are exercised.

(4) Includes 7,000 shares of Common Stock owned by the Donald S. Chisholm Trust
(the "Chisholm Trust"), Samuel Zell, Trustee. Under SEC regulations, Mr.
Zell may be deemed to be the beneficial owner of all the shares which are
beneficially owned by the Chisholm Trust. Mr. Zell disclaims beneficial
ownership of the shares owned by the Chisholm Trust.

(5) The securities of the Company of which Mr. Dobrowski is named as beneficial
holder in the foregoing table are held by Mr. Dobrowski as nominee for
certain pension trusts. Accordingly, he has no personal interest in such
securities.

(6) Includes 11,530 OP Units beneficially owned by Mrs. Rosenberg which are
exchangeable into 11,530 shares of Common Stock. Also includes 15,786 shares
of Common Stock beneficially owned by Mrs. Rosenberg's spouse, as to which
Mrs. Rosenberg disclaims beneficial ownership.

(7) Mr. Zell disclaims beneficial ownership of 7,000 shares of Common Stock and
819,003 OP Units included above because the economic benefits with respect
to such shares of Common Stock and OP Units are attributable to other
persons. See "Security Ownership of Certain Beneficial Owners."

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company occupies office space owned by an affiliate of EGI, an entity
controlled by Mr. Zell, at Two North Riverside Plaza, Chicago, Illinois 60606.
In addition, pursuant to an administrative services agreement, EGI or certain of
its affiliates provide the Company and its subsidiaries with certain
administrative, office facility and other services with respect to certain
aspects of the Company's business, including, but not limited to, administrative
support and other services. Amounts incurred for these services totaled
approximately $1,000 for the year ended December 31, 2002. There were no
significant amounts due to these affiliates at December 31, 2002. Certain
related entities, owned by persons affiliated with Mr. Zell, provided investor
relations services and office space to the Company and its subsidiaries during
2002. Amounts incurred for these services totaled approximately $719,000 for the
year ended December 31, 2002. The amount due to these affiliates at December 31,
2002 was $52,000.

The independent members of the Board have reviewed and approved the rates
charged by EGI and its affiliates in connection with the lease of the Company's
office space. Additionally, the budget for services rendered to the Company and
its subsidiaries by EGI and its affiliates is submitted to, reviewed and
approved by the Audit Committee.

On January 1, 2002, the Company purchased all of the common stock of Realty
Systems, Inc. ("RSI"). The Company previously owned the non-voting preferred
stock of RSI and had notes receivable from RSI which were recorded as an
investment in an affiliate. The Company purchased the common stock of RSI from
EGI, which is controlled by Mr. Zell, for approximately $675,000.

The executive officers listed below are indebted to the Company as a result
of purchasing Common Stock from the Company. The loans accrue interest, payable
quarterly in arrears, at the applicable Federal rate, as defined in the Code, in
effect at the time the loans were made. The loans are recourse to the respective
individuals; are collateralized by a pledge of the shares of Common Stock
purchased; and are due and payable upon the first to occur of the employee
leaving the Company or

January 2, 2006. All dividends paid on pledged shares in excess of the then
marginal tax rate are used to pay interest and principal on the loans:

LARGEST AGGREGATE BALANCE AS OF
NAME AMOUNT OWED IN 2002 DECEMBER 31, 2002 INTEREST RATE
---- ------------------- ----------------- -------------

Howard Walker....................... $901,420 0 5.91%
Thomas P. Heneghan.................. $829,217 $803,692 5.91%
Ellen Kelleher...................... $745,427 $672,749 5.91%

PROPOSAL NO. 2

TO APPROVE AN AMENDMENT TO THE COMPANY'S CHARTER
TO ELIMINATE THE CURRENT CLASSIFICATION OF THE BOARD

The Board has determined that the Charter should be amended to eliminate
the current classification of the Board and to provide for the annual election
of all directors, has declared such amendment to be advisable and has
unanimously resolved to recommend such amendment to the stockholders. If the
proposed amendment is approved, the classified Board will be eliminated, the
current term of office of each director in office as of the Meeting and each
director elected at the Meeting will end at the 2004 Meeting and all directors
will thereafter be elected for one-year terms at each Annual Meeting of
Stockholders.

Pursuant to the Charter as currently in effect, the Board is divided into
three classes with staggered three-year terms, and one class of directors is
elected at each Annual Meeting of Stockholders. The proposed Charter Amendment
would eliminate the three classes with their staggered three-year terms, as
described below, and provide for the annual election of all directors.

Proponents of classified boards of directors believe that a classified
board helps the board of directors maintain a greater continuity of experience
because the majority of directors at any given time will have experience with
the business affairs and operations of the corporation. This continuity may
assist the corporation in long-term strategic planning. Additionally, proponents
argue that a classified board reduces the possibility of a sudden change in
control of the board of directors.

The Board believes that it is in the best interests of the Company and its
stockholders to eliminate the classified Board, thereby permitting the Company's
stockholders to elect all members of the Board annually. The Board believes that
this will promote greater accountability of each director to all stockholders
and will allow the Company's stockholders an opportunity annually to register
their views on the collective performance of the Board and the performance of
each director individually. In addition, the Board believes that, in general,
boards that are not classified are perceived by the investment community more
positively than classified boards. The proposal to eliminate the classification
of the Board is neither the result of any effort to unseat incumbent directors
nor the result of any effort by any person to take control of the Board.

Section 1 of Article VI of the current Charter provides that the directors
shall be divided into three classes, as nearly equal in number as possible, with
a term of three years each, and with the term of office of one class expiring
each year. If the proposed Charter Amendment is approved, Section 1 of Article
VI of the Charter would be deleted and replaced with the following:

SECTION 1. NUMBER AND TERM. The number of directors constituting the
entire Board of Directors shall be established in the manner provided in
the Bylaws of the Corporation; provided, however, that (a) if there is
stock outstanding and so long as there are three or more stockholders, the
number of directors shall never be less than three and (b) if there is
stock outstanding and so long as there are less than three stockholders,
the number of directors may be less than three but not less than the number
of stockholders. The directors of the Corporation shall be elected by the
stockholders entitled to vote thereon at each annual meeting of
stockholders and shall hold office until the next annual meeting of
stockholders and until their

successors are elected and qualify. The term of the directors in office on
May 14, 2003 shall expire at the annual meeting of stockholders next
occurring after May 14, 2003 or upon the election and qualification of
their successors.

If the proposed Charter Amendment is approved by the stockholders of the
Company, the Charter Amendment will become effective upon the filing of the
articles of amendment relating thereto with the Maryland State Department of
Assessments and Taxation, which will occur as soon as reasonably practicable
following such approval. The approval of the Charter Amendment requires the
affirmative vote of the holders of two-thirds of all the votes entitled to be
cast on the matter.

THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL TWO. PROXIES SOLICITED BY THE
BOARD WILL BE VOTED "FOR" THIS PROPOSAL UNLESS INSTRUCTIONS TO WITHHOLD SUCH
VOTE OR TO THE CONTRARY ARE GIVEN.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires the Company's officers and directors, and persons who own more than 10%
of its Common Stock, to file reports of ownership and changes of ownership with
the SEC and the NYSE. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

Based solely on the Company's review of the copies of those forms received
by the Company, or written representations from officers and directors that no
Forms 5 were required to be filed for the fiscal year ended December 31, 2002,
all appropriate Section 16(a) forms were filed in a timely manner, except as
described below.

Form 4s filed for Mrs. Rosenberg on June 3, 2002 and July 6, 2002 reported
that Mrs. Rosenberg directly purchased Common Stock through the exercise of
certain options. However, Mrs. Rosenberg transferred such options to her spouse
and her spouse exercised the options to purchase the respective shares of Common
Stock reflected therein. Consequently, 15,000 shares of Common Stock reported as
directly owned by Mrs. Rosenberg were in fact indirectly owned by her.
Thereafter, Mrs. Rosenberg's spouse reinvested dividends received through the
Company's dividend reinvestment plan in October 2002. As a result of these
purchases by Mrs. Rosenberg's spouse, the Form 4 filed for Mrs. Rosenberg on
November 1, 2002 inadvertently failed to report 240 shares of Common Stock
acquired by Mrs. Rosenberg's spouse in this manner. Upon such information
becoming known, amended Form 4s were filed for Mrs. Rosenberg on March 28, 2003.

INDEPENDENT ACCOUNTANTS

Ernst & Young LLP served as the Company's independent accountants for the
fiscal year ended December 31, 2002. There have been no disagreements between
the Company and its independent accountants relating to accounting procedures,
financial statement disclosures or related items. Representatives of Ernst &
Young LLP are expected to be available at the Meeting and will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.

STOCKHOLDER PROPOSALS

Under regulations adopted by the SEC, stockholder proposals intended to be
presented at the 2004 Meeting must be received by the Secretary of the Company
no later than December 2, 2003, in order to be considered for inclusion in the
Company's proxy statement and on the proxy card that will be solicited by the
Board in connection with the 2004 Meeting.

In addition, if a stockholder desires to bring business before an Annual
Meeting of Stockholders which is not the subject of a proposal for inclusion in
the Company's proxy materials, the stockholder must follow the advance notice
procedures outlined in the Company's Bylaws. The Company's Bylaws provide that
in order for a stockholder to nominate a candidate for election as a director at
a meeting or propose business for consideration at such meeting, notice must
generally be given to the Secretary of the Company no more than 90 days nor less
than 60 days prior to the first anniversary of the preceding year's meeting. The
Meeting is scheduled for May 13, 2003. Therefore, if a stockholder desires to
present a proposal for the 2004 Meeting without seeking to include the proposal
in the Company's proxy materials, the Company must receive notice of the
proposal no earlier than February 8, 2004 and no later than March 9, 2004. The
fact that the Company may not insist upon compliance with these requirements
should not be construed as a waiver by the Company of its right to do so at any
time in the future. The Company reserves the right to reject, rule out of order
or take other appropriate action with respect to any proposal that does not
comply with these and other applicable requirements.

OTHER MATTERS

The Board is not aware of any business which will be presented at the
Meeting other than those matters set forth in the accompanying Notice of Annual
Meeting of Stockholders. If any other matters are properly presented at the
Meeting for action, it is intended that the persons named in the accompanying
proxy and acting thereunder will vote in accordance with their best judgment on
such matters.

By Order of the Board of Directors

/s/ Ellen Kelleher
Ellen Kelleher
Executive Vice President, General
Counsel
and Secretary

April 8, 2003

Chicago, Illinois

MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), hereby appoints SAMUEL ZELL and HOWARD
WALKER, or either of them, with full power of substitution in each of them, to
attend the Annual Meeting of Stockholders of the Company to be held on Tuesday,
May 13, 2003, at 10:00 a.m. Central time, and any adjournment or postponement
thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the undersigned at
the meeting with all powers possessed by the undersigned if personally present
at the meeting. The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as
instructed on the reverse side. If this proxy is executed but no instruction is
given, the votes entitled to be cast by the undersigned will be cast "for" each
of the nominees for director and "for" the amendment to the Company's charter to
eliminate the current classification of the Board of Directors, as described in
the Proxy Statement, and in the discretion of the proxy holder on any other
matter that may properly come before the meeting or any adjournment or
postponement thereof.

COMMENTS/ADDRESS CHANGE:

---------------------------------------

--------------------------------------- (Continued and to be signed on
other side)

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o FOLD AND DETACH HERE o

6564--MANUFACTURED HOME COMMUNITIES, INC.

MANUFACTURED HOME COMMUNITIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.

1. ELECTION OF DIRECTORS For Withhold For All
Nominees: Howard Walker, All All Except
Donald S. Chisholm, and [ ] [ ] [ ]
Thomas E. Dobrowski

Instruction: TO WITHHOLD AUTHORITY to vote for any
individual nominee, write that nominee's name in the
space provided below:

---------------------------------------------------------

2. CHARTER AMENDMENT For Against Abstain
[ ] [ ] [ ]
To approve an amendment to the Company's
charter to eliminate the current classification of the
Board of Directors.

And on any other matter which may properly come before the meeting or any
adjournment or postponement thereof in the discretion of the proxy holder.

I PLAN TO ATTEND THE MEETING [ ]

Date
-----------------------------

Signature
------------------------------------------------

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NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN OR OFFICER, PLEASE GIVE
FULL TITLE UNDER SIGNATURE.

--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o

YOUR VOTE IS IMPORTANT.

PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.

6564--MANUFACTURED HOME COMMUNITIES, INC.