<PAGE>   1

   

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                   FORM 10-K/A
    


[x]           JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES AND EXCHANGE  ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended         December 31, 1995

                                       OR

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from    _____ to _____

<TABLE>
                    <S>                                                         <C>
                           Commission File Number:  1-6828                             Commission File Number:  1-7959

                                  STARWOOD LODGING                                             STARWOOD LODGING 
                                        TRUST                                                     CORPORATION
                    (Exact name of registrant as specified in its               (Exact name of registrant as specified in its
                                       charter)                                                   charter)                   
                                                                                                                             
                                       Maryland                                                   Maryland                   
                             (State or other jurisdiction                               (State or other jurisdiction         
                          of incorporation or organization)                          of incorporation or organization)       
                                                                                                                             
                                     52-0901263                                                  52-1193298                  
                         (I.R.S. employer identification no.)                       (I.R.S. employer identification no.)     
                                                                                                                             
                          11835 W. Olympic Blvd., Suite 695                           11835 W. Olympic Blvd., Suite 675      
                            Los Angeles, California  90064                             Los Angeles, California  90064        
                           (Address of principal executive                             (Address of principal executive       
                             offices, including zip code)                               offices, including zip code)         
                                                                                                                             
                                    (310) 575-3900                                             (310) 575-3900                
                           (Registrant's telephone number,                             (Registrant's telephone number,       
                                including area code)                                        including area code)             
</TABLE>
<PAGE>   2
          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
                   <S>                                                                    <C>
                                                                                            Name of each exchange
                                 Title of each class                                         on which registered
                                 -------------------                                         -------------------

                   Shares of Beneficial Interest, $0.01 par value,
                      of Starwood Lodging Trust ("Trust Shares")
                                     paired with                                          New York Stock Exchange
                      Shares of Common Stock, $0.01 par value,
                    of Starwood Lodging Corporation ("Corporation
                                       Shares")


                        1986 Warrants to purchase Trust Shares
                                     paired with                                           American Stock Exchange
                    1986 Warrants to purchase Corporation Shares
</TABLE>




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

    Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.     Yes  X      No    .
                                                       ---        ---

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of each 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 [  ].

    As of February 23, 1996, the aggregate market value of the Registrants'
voting stock held by non-affiliates(1) was $462,822,000.

    As of February 23, 1996, the Registrants had outstanding 13,822,617 Trust
Shares and 13,822,617 Corporation Shares.





 __________________________________

      1 For purposes of this Joint Annual Report only, includes
 all voting shares other than those held by the Registrants'
 Trustees or Directors and executive officers.
<PAGE>   3
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
         Item
        Number
       in Form
         10-K                                            PART I                                        Page
         ----                                                                                          ----
         <S>           <C>                                                                              <C>
          1.           Business  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1

          2.           Properties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           8

          3.           Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .          25

          4.           Submission of Matters to a Vote of Security Holders . . . . . . . . . .          26

                                                        PART II

          5.           Market for Registrants' Common Equity and Related  
                       Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . .          28

          6.           Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . .          30

          7.           Management's Discussion and Analysis of Financial Condition 
                        and Results of Operations. . . . . . . . . . . . . . . . . . . . . . .          31

          8.           Financial Statements and Supplementary Data . . . . . . . . . . . . . .          39

          9.           Changes in and Disagreements with Accountants on 
                       Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . .          39

                                                        PART III

         10.           Trustees, Directors and Executive Officers of the Registrants . . . . .          39

         11.           Executive Compensation  . . . . . . . . . . . . . . . . . . . . . . . .          43

         12.           Security Ownership of Certain Beneficial Owners and Management  . . . .
                                                                                                        48
         13.           Certain Relationships and Related Transactions  . . . . . . . . . . . .          50

                                                        PART IV

         14.           Exhibits, Financial Statements, Financial Statement Schedules
                       and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . .          54
</TABLE>





                                       1
<PAGE>   4
                                     PART I

ITEM 1.  BUSINESS.

                 Starwood Lodging Trust, formerly Hotel Investors Trust (the
"Trust"), was organized in 1969 as a Maryland real estate investment trust, and
has invested in fee, ground leasehold and mortgage loan interests in hotel
properties located throughout the United States.

                 In order for the Trust to qualify for favorable tax status as
a real estate investment trust ("REIT") under the Internal Revenue Code of 1986
(the "Code"), the Trust leases its properties to third party operators.  In
1980, Starwood Lodging Corporation, formerly Hotel Investors Corporation (the
"Corporation" and, together with the Trust, "Starwood Lodging"), was organized
as a Maryland corporation and has leased hotel properties from the Trust since
that date.

                 Unless the context otherwise requires, all references herein
to "Starwood Lodging" refer to the Trust and the Corporation, and all
references to the "Trust" and to the "Corporation" include the Trust and the
Corporation, respectively, and those entities respectively owned or controlled
by the Trust or the Corporation, including the Realty Partnership (defined
below) and the Operating Partnership (defined below).

                 Since 1980, the shares of beneficial interest of the Trust
("Trust Shares") and the shares of common stock of the Corporation
("Corporation Shares") have been "paired" on a one-for-one basis and may only
be held or transferred in units consisting of one Trust Share and one
Corporation Share ("Paired Shares").  The Code has prohibited the "pairing" of
shares between a REIT and a management company since 1983.  This rule does not
apply to the Trust because its Paired Share structure has existed since 1980.

                 At December 31, 1995, Starwood Lodging owned equity interests
in 36 hotel properties, including two hotel/casinos, and owned mortgage
interests in another 13 hotel properties.  At such date, of the 36 hotels in
which Starwood Lodging owned an equity interest (including the two
hotel/casinos), four hotels were being managed by third-party operators and
three hotels were leased to a third-party operator.  For information as to such
interests and properties, see Item 2 of this Joint Annual Report.

                              ACQUISITION STRATEGY

                 Starwood Lodging intends to continue to expand and diversify
its hotel portfolio through the acquisition of primarily midscale and upscale
hotels in major metropolitan areas.  Starwood Lodging believes that hotels
primarily in these segments can be purchased at prices below replacement cost
and offer better potential for cash flow growth than hotels in other market
segments.  Starwood Lodging generally seeks investments in hotels where
management believes that such hotels' profits can be increased by the
introduction of more professional and efficient management techniques or the
injection of





                                       1
<PAGE>   5
capital for maintenance and renovations.  Properties are targeted throughout
the United States, but Starwood Lodging generally focuses on markets located
near other properties owned and operated by Starwood Lodging, markets with
significant barriers to entry or markets with stable demand generators such as
universities, government agencies or large companies.

                 Consistent with this strategy, Starwood Lodging acquired
equity and mortgage interests in the following hotels during 1995:

<TABLE>
<CAPTION>
                                                                                       Approximate
                                                                           Date of       Purchase
                           Hotel                      Location            Purchase     Price (000s)       Rooms
                           -----                      --------            --------     ------------       -----
                    <S>                            <C>                    <C>            <C>               <C>  
                    Omni                           Chapel Hill, NC         4/6/95        $  10,500         168  
                    Sheraton Colony Square         Atlanta, GA             7/18/95          34,000         462  
                    Embassy Suites                 Tempe, AZ               7/27/95          19,300         224  
                    Doral Inn                      New York, NY            9/20/95          43,000         652  
                    Grand Hotel (1)                Washington, DC          9/28/95          19,500         263  
                    Terrace Garden                 Atlanta, GA            10/31/95          27,900         364  
                    Lenox Inn                      Atlanta, GA            10/31/95           9,000         180  
                    Holiday Inn                    Beltsville, MD         11/30/95          11,500         206  
                                                                                          --------       -----  
                                                                                          $174,700       2,519
                                                                                          ========       =====
</TABLE>

(1)      Represents a mortgage interest.  The equity interest was purchased on
         January 4, 1996 for approximately $13.5 million.  This hotel is now
         known as the Westin Washington.

                 In addition, during the first month of 1996, Starwood Lodging
completed the acquisition of the Grand Hotel in Washington D.C. for an
additional $13.5 million and for approximately $41.6 million, acquired a 58.2%
interest in a joint venture that acquired the 960-room Boston Park Plaza and
related real estate assets in Boston, Massachusetts.

                 Starwood Lodging is evaluating numerous other hotel
properties for acquisition, and as of the date of this Joint Annual Report has
entered into agreements to purchase and has made offers on eight properties in
the aggregate amount of approximately $170 million, all but one of which are
subject to the satisfaction of a number of conditions prior to closing.
Starwood Lodging has fully performed under such other agreement to purchase;
however, the closing remains subject to certain limited conditions on the part
of the other parties.  Starwood Lodging intends to finance the acquisition of
these or other hotel properties through cash flow from operations, through
borrowings under credit facilities and, when market conditions warrant,
through the issuance of debt or equity securities.

                 The Trust and the Corporation intend that the Operating
Partnership lease and operate hotels owned or acquired by the Realty
Partnership thereby retaining for shareholders the economic benefits otherwise
retained by third party operators.  During 1995, the





                                       2
<PAGE>   6
Operating Partnership assumed management of 13 hotels and in January of 1996
assumed management of the Grand Hotel in Washington, D.C. (now a Westin hotel)
and the Boston Park Plaza.  In addition, in early 1996, the Operating
Partnership expects to terminate two of the third-party management agreements
currently in place for three hotels which are currently majority owned by the
Realty Partnership and operated on behalf of the Operating Partnership by
third-party management companies.  Upon such termination, the Operating
Partnership intends to assume the management of these hotels.

                               THE REORGANIZATION

                 On January 31, 1995 (the "Closing Date"), the Trust and the
Corporation consummated a reorganization (the "Reorganization") with Starwood
Capital Group, L.P. ("Starwood Capital") and certain affiliates of Starwood
Capital (the "Starwood Partners") effective January 1, 1995.

                 The Reorganization involved a number of related transactions
that occurred simultaneously on the Closing Date.  Such transactions included
(i) the contribution by the Trust to SLT Realty Limited Partnership (the
"Realty Partnership"), a newly formed Delaware limited partnership, of
substantially all of the properties and assets of the Trust, subject to
substantially all of the liabilities of the Trust (including the senior debt
(the "Senior Debt") of the Trust), in exchange for an approximate 28.3%
interest as a general partner in the Realty Partnership, (ii) the contribution
by the Starwood Partners to the Realty Partnership of approximately $12.6
million in cash and certain hotel properties and first mortgage notes, in
exchange for limited partnership units representing the remaining approximate
71.7% interest in the Realty Partnership, (iii) the contribution by the
Corporation and its subsidiaries to SLC Operating Limited Partnership (the
"Operating Partnership" and together with the Realty Partnership, the
"Partnerships"), a newly formed Delaware limited partnership, of substantially
all of their properties and operating assets (except for their gaming assets,
which are to be contributed upon approval by Nevada gaming authorities),
subject to substantially all of their liabilities, in exchange for an
approximate 28.3% interest as a general partner in the Operating Partnership,
and (iv) the contribution by the Starwood Partners to the Operating Partnership
of approximately $1.4 million in cash and fixtures, furnishings and equipment
of the hotel properties, in exchange for limited partnership units representing
the remaining approximate 71.7% interest in the Operating Partnership.  On
March 24, 1995, a Starwood Partner exchanged $12 million of Senior Debt for
additional limited partnership units of the Realty Partnership and the
Operating Partnership resulting in the Starwood Partners owning approximately
74.6% of each of the Partnerships.

                 The following equity interests and mortgage notes were
contributed to the Realty Partnership by the Starwood Partners in the
Reorganization:

 Equity Interests contributed as part of the Reorganization:





                                       3
<PAGE>   7
<TABLE>
<CAPTION>
                      Hotel                      Location                Rooms
                      -----                      --------                -----
               <S>                        <C>                             <C>
               Doubletree Hotel           Rancho Bernardo, California     209
               Capitol Hill Suites        Washington, D.C.                152
               Harvey Wichita             Wichita, Kansas                 259
               French Quarter Suites      Lexington, Kentucky             155
</TABLE>

Mortgage notes contributed as part of the Reorganization:

<TABLE>
<CAPTION>
                 Hotel                          Outstanding Principal
               Securing                               Balance on
                 Note                              January 1, 1995
               --------                         ---------------------
 <S>                                                 <C>
 Harvey Hotel Addison (1)  . . . . . .               $10,403,000
 Harvey Hotel Bristol (1)  . . . . . .                16,645,000
 Harvey Hotel DFW (1)  . . . . . . . .                25,892,000
 Atlantic City Quality Inn (2) . . . .                11,411,000
 Secaucus, New Jersey Ramada (2) . . .                12,458,000
                                                     -----------
                                                     $76,809,000
------------------                                   ===========
</TABLE>

(1)    Represent first mortgage notes bearing interest at 8% payable quarterly
       in arrears.  The mortgage notes have a 15-year amortization period and a
       balloon payment at maturity.  The mortgage notes mature on December 31,
       2002 and are cross-collateralized.

(2)    The mortgage notes bear interest at various rates and are payable
       monthly in arrears, except that for the months of November 1994 through
       April 1995, debt service for the Atlantic City Quality Inn was to accrue
       and be paid from excess cash flow.  Commencing May 1, 1995 fixed
       payments of debt service were required to be resumed.  The mortgages
       mature between 1996 and 2010.

As part of the Reorganization, the Realty Partnership assumed certain mortgage
notes payable, all of which were refinanced during 1995 with the proceeds of
the Prior Credit Agreement (defined below) or the Facilities (defined below).
The terms of the assumed mortgage notes are summarized as follows:

       A $39,013,000 note issued in connection with the acquisition of the
       Harvey mortgage notes receivable under the terms of a Loan Agreement
       with a third party dated October 15, 1993.  The note was nonrecourse,
       was to mature on January 31, 2003 and bore interest on a monthly basis
       at variable rates based on the London Interbank Offer Rate ("LIBOR")
       plus 3%.

       A $2,122,000 construction loan funded in 1994 and used to renovate the
       Harvey Wichita Hotel.  The note bore interest at 7.5%.  Principal and
       interest was payable monthly and the note was to mature in the year
       2000.

In addition, as part of the Reorganization, the Realty Partnership assumed
other mortgage notes payable in the aggregate principal amount of $17,750,000,
which notes were refinanced with the proceeds of the Loan (defined below)
pursuant to the Prior Credit Agreement.

                                  THE OFFERING





                                       4
<PAGE>   8
               On July 6, 1995, Starwood Lodging completed a public offering
(the "Offering") of 11,787,500 Paired Shares at a price of $23.00 per Paired
Share.  Net proceeds of the Offering of approximately $245.7 million in
aggregate were contributed by the Trust and the Corporation to the Realty
Partnership and the Operating Partnership, respectively, thereby increasing the
general partnership interest of the Trust and the Corporation to approximately
69.9% of the Realty Partnership and the Operating Partnership, respectively,
with the Starwood Partners' limited partnership interests representing the
remaining approximate 30.1% interest in each of the Partnerships.  Proceeds
from the Offering were used to repay amounts outstanding under the Prior Credit
Agreement.  Shortly prior to the Offering, the Trust and the Corporation
effected a one-for-six reverse stock split of the Paired Shares in which each
six Paired Shares held on the record date for the reverse split were converted
into one Paired Share.

                                   STRUCTURE

               As of the date of this Joint Annual Report, the structure of
Starwood Lodging is as follows:



                              Holders of Paired Shares


            Starwood Lodging                       Starwood Lodging
                 Trust            Shares are          Corporation
           Owns 69.9% of SLT  ------------------   Owns 69.9% of SLC
             Realty Limited         Paired         Operating Limited
               Partnership                            Partnership

               SLT Realty                             SLT Operating
          Limited Partnership                      Limited Partnership

                               Starwood Partners
                        Own 30.1% of each of SLT Realty
                     Limited Partnership and SLC Operating
                             Limited Partnership

               The limited partnership units of the Realty Partnership and the
Operating Partnership held by the Starwood Partners are (subject to the
ownership limit provisions of the Trust and the Corporation) exchangeable by
the Starwood Partners, for, at the option of the Trust and the Corporation,
either cash, Paired Shares of Starwood Lodging representing up to approximately
30.1% of the Paired Shares after such exchange, or a combination of





                                       5
<PAGE>   9
cash and such Paired Shares.  The ownership limit provisions of Starwood
Lodging are designed to preserve the status of the Trust as a REIT for tax
purposes by providing that in general no shareholder may own, directly or
indirectly, more than 8% of the outstanding Paired Shares.

               Since the Reorganization, the Trust has conducted substantially
all of its business and operations through the Realty Partnership.  As of
December 31, 1995, the Realty Partnership held fee interests, ground leaseholds
and mortgage loan interests in 49 hotel properties containing over 10,500 rooms
located in 21 states throughout the United States and the District of Columbia.
The Trust controls the Realty Partnership as the sole general partner of the
Realty Partnership.

               Since the Reorganization, the Corporation (together with its
wholly-owned subsidiaries) has conducted substantially all of its business and
operations (other than its gaming operations) through the Operating
Partnership.  As of December 31, 1995, the Operating Partnership leased from
the Realty Partnership all but four of the 35 hotel properties owned in fee or
held pursuant to long-term leases by the Realty Partnership.  In addition, the
Operating Partnership owns a 51% general partnership interest in a joint
venture that owns the Milwaukee Marriott hotel.

                                GAMING APPROVALS

               Upon receipt of Nevada gaming regulatory approvals, the
Corporation will control the Operating Partnership as its managing general
partner.  Prior to the receipt of such approvals, the Operating Partnership is
being managed by a management committee, the members of which are identical to
the members of the Board of Directors of the Corporation that will hold office
upon receipt of Nevada gaming regulatory approvals (see Item 10 of this Joint
Annual Report) and the gaming operations (which consist of two hotel/casinos
located in Las Vegas, Nevada) are being operated through Hotel Investors
Corporation of Nevada ("HICN") a wholly-owned subsidiary of the Corporation.
Upon receipt of such approvals (or such time as such approvals are no longer
required), HICN will become a wholly-owned subsidiary of the Operating
Partnership.  Nevada gaming regulatory approvals are expected to be received by
the end of 1997.

                               CREDIT FACILITIES

               On July 25, 1995, the Realty Partnership and the Trust, entered
into a Mortgage Loan Funding Facility Agreement (together with subsequent
amendments the "Repo Facility") with Lehman Commercial Paper Inc. ("Lehman
Commercial Paper").  Pursuant to the Repo Facility, Lehman Commercial Paper has
agreed to advance up to $71 million to the Realty Partnership for a period of
18 months ending January 25, 1997.  Advances under the Repo Facility bear
interest at a rate based on one month LIBOR plus 150 basis points for the
period ending July 25, 1996 and one month LIBOR plus 175 basis points
thereafter and are secured by certain mortgage notes receivable and other
collateral of the Realty Partnership.





                                       6
<PAGE>   10
               On October 25, 1995, the Realty Partnership and the Trust
entered into a line of credit agreement (together with subsequent amendments,
the "Acquisition Facility") with Lehman Brothers Holdings, Inc ("Lehman
Holdings") pursuant to which Lehman Holdings agreed to make advances to the
Realty Partnership of up to $135 million for a period expiring on October 1,
1998.  The Acquisition Facility superseded and replaced the Prior Credit
Agreement.

               Advances under the Acquisition Facility bear interest at a rate
based upon one, two or three-month LIBOR plus 162.5 basis points and are
secured by liens on 29 of the hotel equity interests of the Realty Partnership
and may be secured by other properties, all on a cross-collateralized basis.  A
$60 million portion of the Acquisition Facility is being syndicated.  Up to $58
million of the obligations under the Acquisition Facility has been guaranteed
by the Operating Partnership, in consideration for the cancellation by the
Realty Partnership of intercompany indebtedness in 1994.  Such guaranty is
secured by first priority liens on all of the assets of the Operating
Partnership relating to the hotels owned or leased by the Realty Partnership
which are subject to liens under the Acquisition Facility.

               The Repo Facility and the Acquisition Facility (together, the
"Facilities") contain a number of covenants including (i) a requirement that
the Realty Partnership maintain a net worth equal to at least $215 million plus
75% of the net proceeds of equity offerings by the Trust; (ii) a restriction on
the ability of the Realty Partnership and the Trust to incur combined
indebtedness in excess of 55% of the net book value of their combined assets;
and (iii) maintenance of certain loan to value and debt service coverage
ratios.  The Facilities also provide a right of the Trust and the Corporation,
subject to certain limitations, to pay distributions to their shareholders.
See Item 5 - Distributions of this Joint Annual Report.

               In addition, on January 17, 1996, the Realty Partnership entered
into $100 million in notional amount Treasury Lock Transactions with Merrill
Lynch and Chemical Bank.  The transactions have the effect of fixing the base
interest rate at 5.7 percent for up to $100 million of debt, with an assumed
term of seven years from October 15, 1996, issued by the Realty Partnership on
or before October 15, 1996.  The actual rate of interest is expected to be the
base rate plus an amount determined at the time of issuance based on several
factors including, without limitation, any credit enhancements provided by
Starwood Lodging, the terms and conditions of the specific transaction, and
then existing market conditions.

                             PRIOR DEBT REFINANCING

               On March 24, 1995, the Realty Partnership and the Trust entered
into an Amended and Restated Credit Agreement (the "Prior Credit Agreement")
pursuant to which the Realty Partnership borrowed $131.75 million (the "Loan")
primarily to refinance all outstanding Senior Debt and approximately $27
million of first mortgage debt.  The Loan was to mature on April 1, 1997 and
bore interest at a rate based on LIBOR plus 300 basis points.  All amounts
outstanding under the Prior Credit Agreement were repaid with a portion of the
proceeds of the Offering and the Prior Credit Agreement was superseded and
replaced by the Acquisition Facility.





                                       7
<PAGE>   11
                           TAX STATUS OF THE TRUST

                 The Trust intends to elect to be taxed as a REIT, commencing
with its taxable year ended December 31, 1995.  The Trust expects to make this
election for the year ended December 31, 1995 when it files its tax return for
such period, which is due no later than September 15, 1996.  The Trust was
taxed as a REIT beginning in 1969 through and including its taxable year ended
December 31, 1990.  During 1994, the Trust discovered that it may not have
qualified as a REIT in 1991 through 1994 due to its failure to comply with
certain procedural requirements of the Code.  The Trust requested and received
a letter from the Internal Revenue Service providing that the Trust's election
to be taxed as a REIT terminated beginning with the Trust's taxable year ended
December 31, 1991 and permitting the Trust to re-elect to be taxed as a REIT
commencing with its taxable year ended December 31, 1995.  Because the Trust
had net losses for tax purposes for its 1991 through 1994 taxable years, the
Trust does not owe any federal income tax for such years.

                              OTHER INFORMATION

                 Seasonality and Competition.  The hotel industry is seasonal
in nature.  Generally, hotel revenues are greater in the second and third
quarters than in the first and fourth quarters due to generally decreased
travel during the winter months.

                 The hotel industry is highly competitive.  The properties of
the Trust and the Corporation compete with other hotel properties in their
geographic markets. Many of the competitors of the Trust and the Corporation
may have substantially greater marketing and financial resources than Starwood
Lodging.

                 The Trust and the Corporation may compete for acquisition
opportunities with entities which have substantially greater financial
resources than the Trust and the Corporation.  These entities may generally be
able to accept more risk than the Trust and the Corporation can prudently
manage.  Competition may generally reduce the number of suitable investment
opportunities and increase the bargaining power of property owners seeking to
sell.  Further, management of the Trust believes that it will face competition
for acquisition opportunities from entities organized for purposes
substantially similar to the objectives of the Trust.


                 Environmental Matters.  Neither the Trust, the Corporation,
the Realty Partnership nor the Operating Partnership has been identified by the
U.S. Environmental Protection Agency or any similar state agency as a
responsible or potentially responsible party for, nor have they been the
subject of any governmental proceeding with respect to, any hazardous waste
contamination.  If the Trust, the Corporation, the Realty Partnership or the
Operating Partnership were to be identified as a responsible party, they would
in most circumstances be strictly liable, jointly and severally with other
responsible parties, for environmental investigation and clean-up costs
incurred by the government and, to a more limited extent, by private persons.





                                       8
<PAGE>   12
                 In connection with the Acquisition Facility, preliminary or
"Phase I" environmental site assessments were prepared with respect to 29 of
the Trust's fee interest and ground leasehold properties.  The results of the
Phase I assessments and subsequent "Phase II" assessments performed at six of
the properties led to an assessment by the Trust and its outside consultants
that the Trust's overall potential for environmental impairment was low.

                 A release of petroleum from an underground storage tank at the
Bay Valley Hotel and Resort was reported to the appropriate state agency in
1992.  After the tank and surrounding soils were removed, additional soils and
groundwater testing was performed, which revealed environmental contamination
in a localized area. Environmental testing has been performed to identify the
vertical and horizontal extent of the contamination released from the tank.
The consultant initially proposed to remedy the contamination through
installation of a groundwater pump and treatment system to capture and treat
impacted groundwater and excavation of about 390 cubic yards of impacted soil.
Recent amendments to the relevant state environmental clean-up laws reduced the
extent of the clean-up required at the site and the Trust is now only required
to monitor the site.  Any further remediation costs that are incurred will be
borne by the Realty Partnership.

                 With respect to the remaining majority owned fee-interest
properties, a 1991 Phase I environmental assessment and a tank leak test
conducted at the Bourbon Street Hotel in early 1992 and a Phase I environmental
assessment prepared for the Milwaukee Marriott in 1991 revealed no material
impairments.  The last six properties acquired by Starwood Lodging (the Doral
Inn in New York, New York, the Terrace Garden Inn and Lenox Inn in Atlanta,
Georgia, the Holiday Inn in Beltsville, Maryland, the Grand Hotel in
Washington, D.C., and the Boston Park Plaza in Boston, Massachusetts) had Phase
I environmental assessments prepared in 1995 which evidenced no material
impairments.

                 Based upon the environmental reports described above, the
Trust believes that a substantial number of its hotels incorporate potentially
asbestos-containing materials.  Under applicable current Federal, state and
local laws, asbestos need not be removed from or encapsulated in a hotel unless
and until the hotel is renovated or remodeled.  The Trust has asbestos
operation and maintenance plans for each property testing positive for
asbestos.

                 Based upon the above-described environmental reports and
testing and facts known to the managements of the Trust and the Corporation,
future remediation costs are not expected to have a material adverse effect on
the results of operations, financial position or cash flows of the Trust or the
Corporation and compliance with environmental laws has not had and is not
expected to have a material effect on the capital expenditures, earnings or
competitive position of the Trust or the Corporation.

                 Regulation and Licensing.  The ownership and operation of the
casino gaming facilities of the Corporation in Nevada are subject to extensive
licensing and regulatory control by the Nevada Gaming Commission, the Nevada
Sate Gaming Control Board and the Clark County Liquor and Gaming Licensing
Board.  See Item 2, "Regulation and Licensing" of this Joint Annual Report.





                                       9
<PAGE>   13
                 Employees.  As of December 31, 1995, the Trust had four
employees and the Corporation had approximately 3,800 employees.

                 The Trust's executive offices are located at 11835 West
Olympic Boulevard, Suite 695, Los Angeles, California 90064 (telephone (310)
575-3900) and the Corporation's executive offices are located at 11835 West
Olympic Boulevard, Suite 675, Los Angeles, California 90064 (telephone (310)
575-3900).

                 Financial information with respect to the two segments of the
hospitality industry (hotels and gaming) in which the Corporation operates is
included in Note 16 of the Notes to Financial Statements included in Item 8 of
this Joint Annual Report.

ITEM 2.  PROPERTIES.

                 At December 31, 1995, the Trust owned and the Corporation
operated and managed, a portfolio of hotel assets, including fee, ground
leasehold and first mortgage interests.  At such date, all but four of the
Trust's fee and ground leasehold hotels were leased to the Corporation or its
subsidiaries pursuant to leases between the Trust and the Corporation (the
"Intercompany Leases").

                 As described in Item 1 of this Joint Annual Report, upon the
closing of the Reorganization, substantially all of the properties and assets
of the Trust were contributed to the Realty Partnership and substantially all
of the properties and assets of the Corporation and its subsidiaries (except
for their gaming assets, which are to be contributed upon approval by Nevada
gaming authorities) were contributed to the Operating Partnership.

                 Accordingly, since the Reorganization, the Trust has conducted
substantially all of its business and operations through the Realty Partnership
and the Corporation has conducted substantially all of its business and
operations (other than its gaming operations) through the Operating
Partnership.  As of the date of this Joint Annual Report, the Trust had an
approximate 69.9% interest in the Realty Partnership and the Corporation had an
approximate 69.9% interest in the Operating Partnership.

                      THE TRUST AND THE REALTY PARTNERSHIP

                 Equity Investments.  As of December 31, 1995, the Trust had
equity investments in 35 properties (including two hotel/casinos) containing a
total of over 7,100 guest rooms.  As of that date, the Trust owned fee
interests in 30 hotels (including two hotel/casinos), held three hotels
pursuant to ground leases, owned one hotel partially in fee and partially
pursuant to a ground lease, and also had a 5% equity interest in, and was the
general partner of, a limited partnership that owns the Omaha Marriott Hotel
which contains 303 guestrooms.  See Note 11 to the Financial Statements
included in Item 8 of this Joint Annual Report.  Of the 35 hotels in which the
Trust had an equity interest at December 31, 1995, 23 operate under one of the
following nationally recognized names:  Sheraton(R),





                                       10
<PAGE>   14
Marriott(R), Doubletree(R), Omni(R), Radisson(R), Embassy Suites(R), Holiday
Inn(R), Residence Inn(R), Days Inn(R), Best Western(R) and Vagabond Inn(R).

                 Each of the Intercompany Leases provides for the lessee's
payment of annual minimum rent in a specified amount plus additional rent based
on a percentage of the gross revenues (or items thereof) of the leased
property.  The Intercompany Leases have an average remaining term of four
years.  The Intercompany Leases are "triple-net" - i.e., the lessee is
generally responsible for paying all operating expenses of the hotel property,
including maintenance and repair costs, insurance premiums and real estate and
personal property taxes, and for making all rental and other payments required
pursuant to any underlying ground leases. As lessee, the Operating Partnership
retains all of the profits, net of rents and other expenses, and bears all risk
of losses, generated by the hotel property's operations.

                 In addition to the Intercompany Leases, the three Vagabond
Inns are leased to a third party and such leases expire in 2001, 2007 and 2008,
respectively.  The lease expiring in 2001 contains options to extend the term
of the lease for two additional five year periods.  Each of these leases
provides for the payment of percentage rent equal to 26% of room revenues
against specified minimum rents.  The leases are "triple net."

                 The following table sets forth the 1995, 1994, and 1993
average occupancy, room rates, revenue per available room ("REVPAR") and
certain other information concerning the hotels owned by the Trust as of
December 31, 1995:





                                       11
<PAGE>   15

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                      Year Constructed/                                 ------------------------                
 Property                             Year Acquired (1)       Property Description        1995    1994    1993 
 --------                             -----------------       --------------------        ----    ----    ---- 
                                                                                            Average Occupancy  
                                                                                            -----------------  
                                                                                                  Rate         
                                                                                                  ----         
 <S>                                     <C>             <C>                              <C>    <C>     <C>   
 ARIZONA                                                                                                       
                                                                                                               
 Embassy Suites                                                                                                
   Phoenix, Arizona                       1981/1983       227 suites, restaurant,          80%    76%     72%  
                                                          lounge and meeting                                   
                                                          facilities                                           
                                                                                                               
 Embassy Suites                           1984/1995       224 suites, restaurant,          80%    83%     82%  
   Tempe, Arizona                                         lounge and meeting                                   
                                                          facilities                                           
                                                                                                               
 Plaza Hotel                              1971/1983       149 guest rooms, restaurant,     77%    77%     74%  
   Tucson, Arizona (2)                                    lounge and meeting                                   
                                                          facilities                                           
                                                                                                               
 CALIFORNIA                                                                                                    
                                                                                                               
 Doubletree Hotel                         1988/1995       209 guest rooms, restaurant,     68%    66%     61% 
   Rancho Bernardo, California                            lounge and meeting facilities                         
                                                                                                               
                                                                                                               
 Vagabond Inn                             1974/1974       102 guest rooms and              33%    39%     44%  
   Rosemead, California (3)                               restaurant                                           
                                                                                                               
 Vagabond Inn                             1975/1975       108 guest rooms and              52%    63%     59%  
   Sacramento, California (3)                             restaurant                                           
                                                                                                               
 Vagabond Inn                             1973/1973       101 guest rooms and              52%    69%     58%  
   Woodland Hills, California (3)                         restaurant                                           

 DISTRICT OF COLUMBIA
</TABLE>


<TABLE>
<CAPTION>                                                                             
                                                                                             Years Ended December 31,
                                      Year Constructed/                                     -------------------------    
 Property                             Year Acquired (1)       Property Description          1995      1994       1993   
 --------                             -----------------       --------------------          ----      ----       ----   
                                                                                                  Average Room          
                                                                                                  -------------         
                                                                                                      Rate              
                                                                                                      ----              
 <S>                                     <C>             <C>                               <C>       <C>        <C>     
 ARIZONA                                                                                                                
                                                                                                                        
 Embassy Suites                                                                                                         
   Phoenix, Arizona                       1981/1983       227 suites, restaurant,          $85.14    $80.23     $74.04  
                                                          lounge and meeting                                            
                                                          facilities                                                    
                                                                                                                        
 Embassy Suites                           1984/1995       224 suites, restaurant,          $95.75    $83.37     $76.24  
   Tempe, Arizona                                         lounge and meeting                                            
                                                          facilities                                                    
                                                                                                                        
 Plaza Hotel                              1971/1983       149 guest rooms, restaurant,     $48.34    $46.12     $45.05  
   Tucson, Arizona (2)                                    lounge and meeting                                            
                                                          facilities                                                    
                                                                                                                        
 CALIFORNIA                                                                                                             
                                                                                                                        
 Doubletree Hotel                         1988/1995       209 guest rooms, restaurant,     $71.02    $65.68     $63.62  
   Rancho Bernardo, California                            lounge and meeting facilities                                  
                                                                                                                        
                                                                                                                        
 Vagabond Inn                             1974/1974       102 guest rooms and              $38.09    $37.47     $38.14  
   Rosemead, California (3)                               restaurant                                                    
                                                                                                                        
 Vagabond Inn                             1975/1975       108 guest rooms and              $59.57    $55.89     $52.17  
   Sacramento, California (3)                             restaurant                                                    
                                                                                                                        
 Vagabond Inn                             1973/1973       101 guest rooms and              $48.04    $46.72     $43.68  
   Woodland Hills, California (3)                         restaurant                       
                                                                                           
 DISTRICT OF COLUMBIA
</TABLE>


<TABLE>
<CAPTION>                                                                                 
                                                                                            Years Ended December 31,
                                      Year Constructed/                                    -------------------------
 Property                             Year Acquired (1)       Property Description         1995      1994       1993
 --------                             -----------------       --------------------         ----      ----       ----
                                                                                                  Revenue per
                                                                                                  -----------
                                                                                                Available Room
                                                                                                --------------          
 <S>                                     <C>             <C>                               <C>       <C>        <C>
 ARIZONA                                                                                 
                                                                                         
 Embassy Suites                                                                          
   Phoenix, Arizona                       1981/1983       227 suites, restaurant,          $68.34    $60.63     $53.20
                                                          lounge and meeting             
                                                          facilities                     
                                                                                         
 Embassy Suites                           1984/1995       224 suites, restaurant,          $76.78    $68.99     $62.29
   Tempe, Arizona                                         lounge and meeting             
                                                          facilities                     
                                                                                         
 Plaza Hotel                              1971/1983       149 guest rooms, restaurant,     $37.37    $35.58     $33.54
   Tucson, Arizona (2)                                    lounge and meeting             
                                                          facilities                     
                                                                                         
 CALIFORNIA                                                                              
                                                                                         
 Doubletree Hotel                         1988/1995       209 guest rooms, restaurant,     $48.52    $43.09     $38.68
   Rancho Bernardo, California                            lounge and meeting facilities   
                                                                                         
                                                                                         
 Vagabond Inn                             1974/1974       102 guest rooms and              $12.49    $14.53     $16.68
   Rosemead, California (3)                               restaurant                     
                                                                                         
 Vagabond Inn                             1975/1975       108 guest rooms and              $31.04    $34.93     $30.49
   Sacramento, California (3)                             restaurant                     
                                                                                         
 Vagabond Inn                             1973/1973       101 guest rooms and              $24.79    $32.26     $25.44
   Woodland Hills, California (3)                         restaurant

 DISTRICT OF COLUMBIA
</TABLE>


                                       12
<PAGE>   16
   
<TABLE>                                                                      
 <S>                                     <C>              <C>                             <C>    <C>     <C>   
 Capitol Hill Suites                     1955/1995        152 guest rooms                  69%     64%     63% 
   Washington, D.C.                                                                                            

 FLORIDA                                                                                                       
                                                                                                               
 Radisson Hotel                          1974/1986        195 guest rooms, restaurant,     58%     59%     62%  
   Gainesville, Florida                                   lounge and meeting                                   
                                                          facilities                                           
                                                                                                               
 GEORGIA                                                                                                       
                                                                                                               
                                                                                                               
 Holiday Inn                             1989/1989        151 guest rooms, restaurant,     77%     79%     74%  
   Albany, Georgia                                        lounge and meeting                                   
                                                          facilities                                           
                                                                                                               
 Lenox Inn                               1965/1995        180 guest rooms, restaurant      79%     77%     75% 
   Atlanta, Georgia                                       and meeting facilities                               
                                                                                                               
 Sheraton Colony Square                  1973/1995        462 guest rooms, restaurant,     72%     72%     67% 
   Atlanta, Georgia                                       lounge and meeting facilities                        
                                                                                                               
 Terrace Garden Inn                      1975/1995        368 guest rooms, restaurant,     65%     65%     63% 
   Atlanta, Georgia                                       lounge and meeting                                   
                                                          facilities.                                          
                                                                                                               
 Best Western Riverfront Inn             1971/1986        142 guest rooms, restaurant,     64%     57%     55% 
   Savannah, Georgia                                      lounge and meeting facilities                        
                                                                                                               
                                                                                                               
 KANSAS                                                                                                        
                                                                                                               
 Harvey Wichita                          1974/1995        259 guest rooms, restaurant,     64%     58%     59% 
   Wichita, Kansas                                        lounge and meeting facilities                        
</TABLE>
    


   
<TABLE>                                                                     
 <S>                                     <C>              <C>                              <C>       <C>        <C>    
 Capitol Hill Suites                     1955/1995        152 guest rooms                  $95.09     $91.93    $89.60 
   Washington, D.C.                                                                                                    

 FLORIDA                                                                                                               
                                                                                                                       
 Radisson Hotel                          1974/1986        195 guest rooms, restaurant,     $60.43     $59.89    $56.63 
   Gainesville, Florida                                   lounge and meeting                                           
                                                          facilities                                                   
                                                                                                                       
 GEORGIA                                                                                                               
                                                                                                                       
                                                                                                                       
 Holiday Inn                             1989/1989        151 guest rooms, restaurant,     $59.08     $56.06    $56.96 
   Albany, Georgia                                        lounge and meeting                                           
                                                          facilities                                                   
                                                                                                                       
 Lenox Inn                               1965/1995        180 guest rooms, restaurant      $69.48     $63.57    $60.10 
   Atlanta, Georgia                                       and meeting facilities                                       
                                                                                                                       
 Sheraton Colony Square                  1973/1995        462 guest rooms, restaurant,     $89.59     $86.57    $81.47 
   Atlanta, Georgia                                       lounge and meeting facilities                                
                                                                                                                       
 Terrace Garden Inn                      1975/1995        368 guest rooms, restaurant,     $93.51     $88.39    $82.62 
   Atlanta, Georgia                                       lounge and meeting                                           
                                                          facilities.                                                  
                                                                                                                       
 Best Western Riverfront Inn             1971/1986        142 guest rooms, restaurant,     $46.75     $47.27    $46.21 
   Savannah, Georgia                                      lounge and meeting facilities 
                                                                                        
                                                                                        
 KANSAS                                                                                 
                                                                                        
 Harvey Wichita                          1974/1995        259 guest rooms, restaurant,     $62.52     $50.62    $43.92   
   Wichita, Kansas                                        lounge and meeting facilities
</TABLE>


<TABLE>                                                                     
 <S>                                     <C>              <C>                              <C>       <C>        <C>
 Capitol Hill Suites                     1955/1995        152 guest rooms                  $65.82     $58.93    $56.72
   Washington, D.C.                                                                      

 FLORIDA                                                                                 
                                                                                         
 Radisson Hotel                          1974/1986        195 guest rooms, restaurant,     $35.07     $35.57    $35.21
   Gainesville, Florida                                   lounge and meeting             
                                                          facilities                     
                                                                                         
 GEORGIA                                                                                 
                                                                                         
                                                                                         
 Holiday Inn                             1989/1989        151 guest rooms, restaurant,     $45.59     $44.23    $41.92
   Albany, Georgia                                        lounge and meeting             
                                                          facilities                     
                                                                                         
 Lenox Inn                               1965/1995        180 guest rooms, restaurant      $55.00     $49.15    $45.10
   Atlanta, Georgia                                       and meeting facilities         
                                                                                         
 Sheraton Colony Square                  1973/1995        462 guest rooms, restaurant,     $64.84     $62.64    $54.91
   Atlanta, Georgia                                       lounge and meeting facilities  
                                                                                         
 Terrace Garden Inn                      1975/1995        368 guest rooms, restaurant,     $61.16     $57.73    $51.98
   Atlanta, Georgia                                       lounge and meeting             
                                                          facilities.                    
                                                                                         
 Best Western Riverfront Inn             1971/1986        142 guest rooms, restaurant,     $29.78     $26.92    $25.23
   Savannah, Georgia                                      lounge and meeting facilities  
                                                                                         
                                                                                         
 KANSAS                                                                                  
                                                                                         
 Harvey Wichita                          1974/1995        259 guest rooms, restaurant,     $39.85     $29.21    $25.74
   Wichita, Kansas                                        lounge and meeting facilities
</TABLE>
    




                                       13
<PAGE>   17
   
<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                      Year Constructed/                                 ------------------------
 Property                             Year Acquired (1)       Property Description        1995    1994    1993 
 --------                             -----------------       --------------------        ----    ----    ---- 
                                                                                            Average Occupancy  
                                                                                            -----------------  
                                                                                                  Rate         
                                                                                                  ----         
 <S>                                     <C>              <C>                             <C>     <C>     <C>  
 KENTUCKY                                                                                                      
                                                                                                               
 French Quarter Suites                   1989/1995        155 guest rooms, restaurant,     75%                
   Lexington, Kentucky (4)                                lounge, meeting facilities,                          
                                                          retail and office space                              
 MARYLAND                                                                                                      
                                                                                                               
 Calverton Holiday Inn                   1987/1995        206 guest rooms, restaurant,     63%     58%     58% 
   Beltsville, Maryland                                   lounge and meeting facilities                        
                                                                                                               
 MICHIGAN                                                                                                      
                                                                                                               
                                                                                                               
 Bay Valley Hotel & Resort               1973/1984        151 guest rooms, restaurant,     63%     64%     52% 
   Bay City, Michigan                                     lounge and meeting                                   
                                                          facilities; 18-hole golf                             
                                                          course and tennis club                               
                                                                                                               
 NEBRASKA                                                                                                      
                                                                                                               
 Omaha Marriott Hotel                    1982/1982        303 guest rooms, restaurant,     80%     76%     76% 
   Omaha, Nebraska (5)                                    lounge and meeting facilities                        
                                                                                                               
 NEVADA                                                                                                        
                                                                                                               
 Bourbon Street                          1975/1988        150 guest rooms, restaurant,     88%     90%     92% 
   Las Vegas, Nevada                                      lounge and casino
</TABLE>
    

   
<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,    
                                      Year Constructed/                                     -------------------------   
 Property                             Year Acquired (1)       Property Description          1995      1994       1993   
 --------                             -----------------       --------------------          ----      ----       ----   
                                                                                                  Average Room          
                                                                                                  -------------         
                                                                                                      Rate              
                                                                                                      ----              
 <S>                                     <C>              <C>                              <C>        <C>       <C>     
 KENTUCKY                                                                                                               
                                                                                                                        
 French Quarter Suites                   1989/1995        155 guest rooms, restaurant,     $82.93                       
   Lexington, Kentucky (4)                                lounge, meeting facilities,                                   
                                                          retail and office space                                       
 MARYLAND                                                                                                               
                                                                                                                        
 Calverton Holiday Inn                   1987/1995        206 guest rooms, restaurant,     $67.49    $63.37     $56.92  
   Beltsville, Maryland                                   lounge and meeting facilities                                 
                                                                                                                        
 MICHIGAN                                                                                                               
                                                                                                                      
 Bay Valley Hotel & Resort               1973/1984        151 guest rooms, restaurant,     $62.02    $62.22     $66.39  
   Bay City, Michigan                                     lounge and meeting                                            
                                                          facilities; 18-hole golf                                      
                                                          course and tennis club                                        
                                                                                                                        
 NEBRASKA                                                                                                               
                                                                                                                        
 Omaha Marriott Hotel                    1982/1982        303 guest rooms, restaurant,     $94.40    $87.21     $82.56  
   Omaha, Nebraska (5)                                    lounge and meeting facilities                                 
                                                                                                                        
 NEVADA                                                                                                                 
                                                                                                                        
 Bourbon Street                          1975/1988        150 guest rooms, restaurant,     $33.21    $32.89     $31.63  
   Las Vegas, Nevada                                      lounge and casino
</TABLE>
    

   
<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                      Year Constructed                                     -------------------------     
 Property                             Year Acquired (1)       Property Description         1995      1994       1993
 --------                             -----------------       --------------------         ----      ----       ----
                                                                                                  Revenue per
                                                                                                  -----------
                                                                                                 Available Room
                                                                                                 --------------          
 <S>                                     <C>              <C>                              <C>       <C>        <C>
 KENTUCKY                                                                                
                                                                                         
 French Quarter Suites                   1989/1995        155 guest rooms, restaurant,     $61.84     $58.57    $58.37
   Lexington, Kentucky (4)                                lounge, meeting facilities,    
                                                          retail and office space        
 MARYLAND                                                                                
                                                                                         
 Calverton Holiday Inn                   1987/1995        206 guest rooms, restaurant,     $42.39     $36.43    $32.94
   Beltsville, Maryland                                   lounge and meeting facilities  
                                                                                         
 MICHIGAN                                                                                
                                                                                         
                                                                                         
 Bay Valley Hotel & Resort               1973/1984        151 guest rooms, restaurant,     $39.13     $39.53    $34.62
   Bay City, Michigan                                     lounge and meeting             
                                                          facilities; 18-hole golf       
                                                          course and tennis club         
                                                                                         
 NEBRASKA                                                                                
                                                                                         
 Omaha Marriott Hotel                    1982/1982        303 guest rooms, restaurant,     $75.52     $66.42    $62.75
   Omaha, Nebraska (5)                                    lounge and meeting facilities  
                                                                                         
 NEVADA                                                                                  
                                                                                         
 Bourbon Street                          1975/1988        150 guest rooms, restaurant,     $29.09     $29.62    $29.16
   Las Vegas, Nevada                                      lounge and casino
</TABLE>
    





                                       14
<PAGE>   18
<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                      Year Constructed/                                 ------------------------
 Property                             Year Acquired (1)       Property Description        1995    1994    1993 
 --------                             -----------------       --------------------        ----    ----    ---- 
                                                                                            Average Occupancy  
                                                                                            -----------------  
                                                                                                  Rate         
                                                                                                  ----         
 <S>                                     <C>              <C>                             <C>     <C>     <C>  
 King 8 Hotel and Gambling Hall          1974/1988        300 guest rooms, restaurant,     81%     82%     82% 
   Las Vegas, Nevada                                      lounge and casino
</TABLE>

<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                      Year Constructed/                                    -------------------------              
 Property                             Year Acquired (1)       Property Description         1995      1994       1993  
 --------                             -----------------       --------------------         ----      ----       ----  
                                                                                                 Average Room         
                                                                                                 -------------        
                                                                                                     Rate             
                                                                                                     ----             
 <S>                                     <C>              <C>                              <C>       <C>        <C>   
 King 8 Hotel and Gambling Hall          1974/1988        300 guest rooms, restaurant,     $31.88    $32.80     $29.46
   Las Vegas, Nevada                                      lounge and casino
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                                    
                                                                                             Years Ended December 31,
                                      Year Constructed/                                     -------------------------
 Property                             Year Acquired (1)       Property Description          1995      1994       1993
 --------                             -----------------       --------------------          ----      ----       ----
                                                                                                   Revenue per
                                                                                                   -----------
                                                                                                 Available Room 
                                                                                                 --------------          
 <S>                                     <C>              <C>                              <C>       <C>       <C>
 King 8 Hotel and Gambling Hall          1974/1988        300 guest rooms, restaurant,     $25.77    $26.76    $24.15
   Las Vegas, Nevada                                      lounge and casino                
</TABLE>
             


                                       15
<PAGE>   19
<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                      Year Constructed/                                 ------------------------
 Property                             Year Acquired (1)       Property Description        1995    1994    1993  
 --------                             -----------------       --------------------        ----    ----    ----  
                                                                                            Average Occupancy   
                                                                                            -----------------   
                                                                                                  Rate          
                                                                                                  ----          
 <S>                                     <C>              <C>                             <C>     <C>     <C>   
 NEW MEXICO                                                                                                     
                                                                                                                
 Best Western Airport Inn                1980/1984        120 guest rooms and leased       83%     86%     80%  
  Albuquerque, New Mexico (6)                             restaurant adjacent to                                
                                                          property                                              
                                                                                                                
 Best Western Mesilla Valley Inn         1974/1982        166 guest rooms, restaurant,     75%     71%     71%  
   Las Cruces, New Mexico                                 lounge and meeting facilities                         
                                                                                                                
 NEW YORK                                                                                                       
                                                                                                                
 Doral Inn                               1927/1995        652 guest rooms, two             75%     81%     77%  
   New York, New York                                     restaurants, lounge, ball                             
                                                          room and meeting facilities                           
                                                                                                                
                                                                                                                
 NORTH CAROLINA                                                                                                 
                                                                                                               
 Omni Chapel Hill                        1981/1995        172 guest rooms, restaurant,     71%     65%     56%  
   Chapel Hill, North Carolina                            lounge and meeting facility.                          
                                                                                                                
 OHIO                                                                                                           
                                                                                                                
 Best Western North                      1974/1992        180 guest rooms, restaurant,     65%     70%     66%  
   Columbus, Ohio                                         lounge and meeting facilities
                                                          and sports club

 OREGON
</TABLE>

<TABLE>
<CAPTION>                                                                                                              
                                                                                           Years Ended December 31,    
                                      Year Constructed/                                    ------------------------        
 Property                             Year Acquired (1)       Property Description         1995      1994       1993   
 --------                             -----------------       --------------------         ----      ----       ----   
                                                                                                 Average Room          
                                                                                                 -------------         
                                                                                                     Rate              
                                                                                                     ----              
 <S>                                     <C>              <C>                              <C>       <C>        <C>    
 NEW MEXICO                                                                                                            
                                                                                                                       
 Best Western Airport Inn                1980/1984        120 guest rooms and leased        $56.70    $54.45     $52.38
  Albuquerque, New Mexico (6)                             restaurant adjacent to                                       
                                                          property                                                     
                                                                                                                       
 Best Western Mesilla Valley Inn         1974/1982        166 guest rooms, restaurant,      $44.94    $42.74     $41.67
   Las Cruces, New Mexico                                 lounge and meeting facilities                                
                                                                                                                       
 NEW YORK                                                                                                              
                                                                                                                       
 Doral Inn                               1927/1995        652 guest rooms, two              $96.34    $88.31     $87.71
   New York, New York                                     restaurants, lounge, ball                                    
                                                          room and meeting facilities                                  
                                                                                                                       
                                                                                                                       
 NORTH CAROLINA                                                                                                        
                                                                                                                       
 Omni Chapel Hill                        1981/1995        172 guest rooms, restaurant,      $84.33    $74.54     $67.35
   Chapel Hill, North Carolina                            lounge and meeting facility.                                 
                                                                                                                       
 OHIO                                                                                                                  
                                                                                                                       
 Best Western North                      1974/1992        180 guest rooms, restaurant,      $44.37    $42.34     $42.12
   Columbus, Ohio                                         lounge and meeting facilities
                                                          and sports club

 OREGON
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                                 
                                                                                             Years Ended December 31,
                                      Year Constructed/                                     -------------------------
 Property                             Year Acquired (1)       Property Description          1995      1994       1993
 --------                             -----------------       --------------------          ----      ----       ----
                                                                                                   Revenue per
                                                                                                   -----------
                                                                                                 Available Room 
                                                                                                 --------------          
 <S>                                     <C>              <C>                               <C>       <C>       <C>
 NEW MEXICO                                                                              
                                                                                         
 Best Western Airport Inn                1980/1984        120 guest rooms and leased        $47.02    $47.02    $41.98
  Albuquerque, New Mexico (6)                             restaurant adjacent to         
                                                          property                       
                                                                                         
 Best Western Mesilla Valley Inn         1974/1982        166 guest rooms, restaurant,      $33.73    $30.42    $29.44
   Las Cruces, New Mexico                                 lounge and meeting facilities  
                                                                                         
 NEW YORK                                                                                
                                                                                         
 Doral Inn                               1927/1995        652 guest rooms, two              $70.15    $72.07    $67.50
   New York, New York                                     restaurants, lounge, ball      
                                                          room and meeting facilities    
                                                                                         
                                                                                         
 NORTH CAROLINA                                                                          
                                                                                         
 Omni Chapel Hill                        1981/1995        172 guest rooms, restaurant,      $59.87    $48.28    $37.99
   Chapel Hill, North Carolina                            lounge and meeting facility.   
                                                                                         
 OHIO                                                                                    
                                                                                         
 Best Western North                      1974/1992        180 guest rooms, restaurant,      $29.02    $29.76    $27.88
   Columbus, Ohio                                         lounge and meeting facilities
                                                          and sports club

 OREGON
</TABLE>





                                       16
<PAGE>   20
<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                      Year Constructed/                                 ------------------------
 Property                             Year Acquired (1)       Property Description        1995    1994    1993 
 --------                             -----------------       --------------------        ----    ----    ---- 
                                                                                            Average Occupancy  
                                                                                            -----------------  
                                                                                                  Rate         
                                                                                                  ----         
 <S>                                     <C>             <C>                               <C>    <C>     <C>  
 Days Inn City Center                    1962/1984       173 guest rooms, restaurant,      78%    71%     63% 
   Portland, Oregon                                      lounge and meeting facilities                        
                                                                                                              
 Riverside Inn                           1964/1984       137 guest rooms, restaurant,      78%    78%     79% 
   Portland, Oregon                                      lounge and meeting facilities                        
                                                                                                              
 TEXAS                                                                                                        
                                                                                                              
 Park Central Hotel                      1972/1972       445 guest rooms, restaurant,      36%    42%     62% 
   Dallas, Texas                                         lounge and meeting facilities                        
                                                                                                              
 Best Western Airport Inn                1974/1985       175 guest rooms and leased        79%    80%     70% 
   El Paso, Texas                                        restaurant adjacent to                               
                                                         property                                             
                                                                                                              
                                                                                                              
 VIRGINIA                                                                                                     
                                                                                                              
 Residence Inn                           1984/1984       96 suites with full kitchens      85%    83%     78% 
   Tysons Corner, Virginia                               and fireplaces                                       
                                                                                                              
 WASHINGTON                                                                                                   
                                                                                                              
 Days Inn Town Center                    1957/1984       90 guest rooms, restaurant and    81%    79%     75% 
   Seattle, Washington (7)                               lounge
</TABLE>                                               
                                                       
<TABLE>                                                
<CAPTION>
                                                                                            Years Ended December 31,
                                      Year Constructed/                                     -------------------------        
 Property                             Year Acquired (1)       Property Description          1995      1994       1993  
 --------                             -----------------       --------------------          ----      ----       ----  
                                                                                                  Average Room         
                                                                                                  -------------        
                                                                                                      Rate             
                                                                                                      ----             
 <S>                                     <C>             <C>                               <C>        <C>       <C>    
 Days Inn City Center                    1962/1984       173 guest rooms, restaurant,      $60.71    $53.12     $57.50
   Portland, Oregon                                      lounge and meeting facilities                                
                                                                                                                      
 Riverside Inn                           1964/1984       137 guest rooms, restaurant,      $71.35    $64.69     $63.96
   Portland, Oregon                                      lounge and meeting facilities                                
                                                                                                                      
 TEXAS                                                                                                                
                                                                                                                      
 Park Central Hotel                      1972/1972       445 guest rooms, restaurant,      $55.03    $59.97     $62.34
   Dallas, Texas                                         lounge and meeting facilities                                
                                                                                                                      
 Best Western Airport Inn                1974/1985       175 guest rooms and leased        $36.12    $34.76     $35.56
   El Paso, Texas                                        restaurant adjacent to                                       
                                                         property                                                     
                                                                                                                      
                                                                                                                      
 VIRGINIA                                                                                                             
                                                                                                                      
 Residence Inn                           1984/1984       96 suites with full kitchens     $103.87    $99.68    $103.07
   Tysons Corner, Virginia                               and fireplaces                                               
                                                                                                                      
 WASHINGTON                                                                                                           
                                                                                                                      
 Days Inn Town Center                    1957/1984       90 guest rooms, restaurant and    $62.73    $60.99     $60.85 
   Seattle, Washington (7)                               lounge                         
</TABLE>                                               
                                                       
<TABLE>                                                
<CAPTION>                                              
                                                                              
                                                                                            Years Ended December 31,
                                      Year Constructed/                                     -------------------------
 Property                             Year Acquired (1)       Property Description          1995      1994       1993
 --------                             -----------------       --------------------          ----      ----       ----
                                                                                                  Revenue per
                                                                                                  -----------
                                                                                                Available Room
                                                                                                --------------           
 <S>                                     <C>             <C>                                <C>       <C>       <C>
 Days Inn City Center                    1962/1984       173 guest rooms, restaurant,       $47.25    $37.51    $36.32
   Portland, Oregon                                      lounge and meeting facilities 
                                                                                        
 Riverside Inn                           1964/1984       137 guest rooms, restaurant,       $55.30    $50.49    $50.21
   Portland, Oregon                                      lounge and meeting facilities 
                                                                                        
 TEXAS                                                                                  
                                                                                        
 Park Central Hotel                      1972/1972       445 guest rooms, restaurant,       $19.82    $25.37    $38.89
   Dallas, Texas                                         lounge and meeting facilities 
                                                                                        
 Best Western Airport Inn                1974/1985       175 guest rooms and leased         $28.68    $27.96    $25.01
   El Paso, Texas                                        restaurant adjacent to        
                                                         property                      
                                                                                        
                                                                                        
 VIRGINIA                                                                               
                                                                                        
 Residence Inn                           1984/1984       96 suites with full kitchens       $88.25    $82.70    $80.55
   Tysons Corner, Virginia                               and fireplaces                
                                                                                        
 WASHINGTON                                                                             
                                                                                        
 Days Inn Town Center                    1957/1984       90 guest rooms, restaurant and     $51.08    $48.40    $45.81
   Seattle, Washington (7)                               lounge                         
</TABLE>





                                       17
<PAGE>   21
<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                      Year Constructed/                                 ------------------------
 Property                             Year Acquired (1)       Property Description        1995    1994    1993 
 --------                             -----------------       --------------------        ----    ----    ---- 
                                                                                            Average Occupancy  
                                                                                            -----------------  
                                                                                                  Rate         
                                                                                                  ----         
 <S>                                     <C>             <C>                               <C>    <C>     <C>  
 Meany Tower Hotel                       1932/1984       155 guest rooms, restaurant,       73%    71%     62% 
   Seattle, Washington                                   lounge and meeting facilities,                        
                                                         including ballroom                                    
                                                                                                               
 Sixth Avenue Inn                        1959/1984       166 guest rooms, restaurant,       79%    75%     62% 
   Seattle, Washington (8)                               lounge and meeting facilities                         
                                                                                                               
 West Coast Tyee                         1961/1987       155 guest rooms, restaurant,       58%    57%     62% 
   Tumwater, Washington                                  lounge and meeting facilities
</TABLE>
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                             Years Ended December 31,
                                      Year Constructed/                                      ------------------------       
 Property                             Year Acquired (1)       Property Description           1995      1994       1993 
 --------                             -----------------       --------------------           ----      ----       ---- 
                                                                                                   Average Room        
                                                                                                   -------------       
                                                                                                       Rate            
                                                                                                       ----            
 <S>                                     <C>             <C>                                <C>        <C>       <C>   
 Meany Tower Hotel                       1932/1984       155 guest rooms, restaurant,       $72.83     $70.47    $76.29
   Seattle, Washington                                   lounge and meeting facilities,                                
                                                         including ballroom                                            
                                                                                                                       
 Sixth Avenue Inn                        1959/1984       166 guest rooms, restaurant,       $74.42     $70.04    $72.37
   Seattle, Washington (8)                               lounge and meeting facilities                                 
                                                                                                                       
 West Coast Tyee                         1961/1987       155 guest rooms, restaurant,       $61.64     $60.63    $56.28
   Tumwater, Washington                                  lounge and meeting facilities
</TABLE>
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                                    
                                                                                             Years Ended December 31,
                                      Year Constructed/                                      -------------------------
 Property                             Year Acquired (1)       Property Description           1995      1994       1993
 --------                             -----------------       --------------------           ----      ----       ----
                                                                                                   Revenue per
                                                                                                   -----------
                                                                                                  Available Room
                                                                                                  --------------          
 <S>                                     <C>             <C>                                <C>        <C>       <C>
 Meany Tower Hotel                       1932/1984       155 guest rooms, restaurant,       $53.07     $50.14    $46.92
   Seattle, Washington                                   lounge and meeting facilities,   
                                                         including ballroom               
                                                                                          
 Sixth Avenue Inn                        1959/1984       166 guest rooms, restaurant,       $58.53     $52.57    $44.67
   Seattle, Washington (8)                               lounge and meeting facilities    
                                                                                          
 West Coast Tyee                         1961/1987       155 guest rooms, restaurant,       $35.97     $34.78    $34.78
   Tumwater, Washington                                  lounge and meeting facilities    
</TABLE>





                                       18
<PAGE>   22
(1)      "Year constructed" represents the calendar year in which construction
         of the property was completed; "Year acquired" represents the calendar
         year in which the Trust (or a predecessor) made its initial investment
         in the property.

(2)      Property is held subject to ground leases expiring in (assuming that
         renewal options are exercised) 2019.

(3)      Property is leased to Imperial Hotels Corporation.

(4)      ADR and occupancy for 1993 and 1994 are not available.

(5)      The Trust is the general partner of, and owns a 5% equity interest in,
         the limited partnership which owns the property.

(6)      Property is held subject to a ground lease expiring in 2029.

(7)      Property is subject to a ground lease expiring in October 2007, which
         is terminable by the ground lessor after September 1, 1999 upon six
         months' notice under certain circumstances.

(8)      Property is subject to a ground lease expiring in September 2008,
         which is terminable by the ground lessor after September 1, 1999 upon
         six months' notice under certain circumstances.

                 Mortgage and Other Notes Receivables.  At December 31, 1995,
in addition to the three promissory notes related to the Milwaukee Marriott
referred to below, the Trust held eighteen promissory notes either contributed
by the Starwood Partners as part of the Reorganization or executed by
third-party purchasers of its hotels, all of which are secured by mortgages
(including deeds of trust) on thirteen hotels in the aggregate.  Eleven of the
notes ($104.1 million in aggregate principal amount at December 31, 1995) are
secured by first mortgages; five notes ($1.6 million in aggregate principal
amount as of December 31, 1995) are secured by second mortgages;  one note
($1.3 million in principal amount as of December 31, 1995) is secured by a
third mortgage; and one note ($173,000 in principal amount as of December 31,
1995) is secured by a fourth mortgage.  Ten of the notes have fixed interest
rates that currently range from 7.0% to 10.0% per annum and five of the notes
have variable interest rates that range from 7.16% to 9.75% per annum at
December 31, 1995.  The remaining three notes require principal payments only.
Two of the notes also provide for contingent interest based on a percentage of
the gross revenues of the properties securing such notes.  The maturity dates
of the notes range from 1996 to 2017.

         For additional information with respect to certain of the third-party
promissory notes and the three promissory notes held by the Trust and issued by
a partnership affiliated with the Corporation in connection with the Milwaukee
Marriott Hotel, see Notes 8 and 9 of Notes to Financial Statements included in
Item 8 of this Joint Annual Report.

         In December 1987, in connection with the Corporation's acquisition of
the leasehold interest in two Atlanta, Georgia area hotels owned by the Trust
(which have been subsequently sold) from an affiliated partnership, John F.
Rothman, former president and chief executive officer of the Trust and general
partner of the partnership, assumed certain obligations of such partnership,
which obligations are evidenced by an unsecured promissory note to the Trust in
the principal amount of $800,000.  Interest on the outstanding principal amount
of this note accrues interest at an annual rate of 10% and is payable annually;
the entire principal amount of the note is due in December 1999.





                                       19
<PAGE>   23
         All of the notes described above were contributed by the Trust or the
Starwood Partners to the Realty Partnership in connection with the
Reorganization.

                 THE CORPORATION AND THE OPERATING PARTNERSHIP

                 At December 31, 1995, 28 of the 31 hotel properties leased by
the Trust to the Corporation were operated directly by the Corporation, and the
remaining three were managed by three independent hotel companies.  The
Operating Partnership, the general partner of the partnership that owns the
Milwaukee Marriott, also operates the Milwaukee Marriott.

                 The following table sets forth the 1995, 1994 and 1993 average
occupancy and room rates, REVPAR, and certain other information concerning the
hotel in which the Operating Partnership is the general partner, Milwaukee
Marriott Hotel, as of December 31, 1995.


<TABLE>
<CAPTION>
                                                                         
                                                                         
                                                        Year Constructed/                 
                                                              Year                        
                              Property                      Acquired             Property Description
                              --------                  ----------------         --------------------
                              <S>                           <C>                  <C>
                              Milwaukee Marriott            1972/1990            393 guest rooms, restaurant, lounge and
                                Milwaukee, WI                                    meeting facilities.
</TABLE>



<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                              ------------------------------------------------------------------------------------------
                               1995    1994     1993       1995       1994       1993        1995       1994       1993
                               ----    ----     ----       ----       ----       ----        ----       ----       ----
                              Average Occupancy Rate              Average Room                 Revenue per Available 
                              ----------------------              ------------                 ----------------------
                                                                      Rate                              Room
                                                                      ----                              ----
                              <S>      <C>     <C>        <C>        <C>        <C>         <C>        <C>        <C>
                               71%      70%     55%       $72.19     $67.91     $71.99      $51.44     $47.42     $39.24
</TABLE>

                 Management Agreements.  Each management agreement with a third
party provides that the management company has the exclusive right to direct
the operations of the hotel subject to that agreement.  The management company
is responsible for maintaining and making all necessary repairs to the managed
hotel, hiring, training and supervising all hotel employees, and performing all
hotel bookkeeping and other administrative duties.

                 Each management company is required to submit to the Operating
Partnership for its approval an annual budget that includes proposed capital
expenditures, and the management company makes only those capital expenditures
that are approved by the





                                       20
<PAGE>   24
Operating Partnership.  The Realty Partnership is required to make available to
each management company sufficient working capital to permit that company to
operate the managed property.

                 For their services in managing the hotels, each third party
management company receives a management fee equal to a specified percentage
(generally 2% - 2-1/2%) of the gross revenues of the managed hotel, plus
additional incentive fees based upon the hotel's operating profits.  Two of the
management agreements expire in 1998 and one expires in 1999.  Of the remaining
four third-party management agreements currently in place, two are expected to
be terminated in early 1996 and management of the underlying properties assumed
by the Operating Partnership.

                 Franchise Agreements.  All but twelve of the hotel properties
in which Starwood Lodging had an equity interest at December 31, 1995 are
operated pursuant to franchise or license agreements ("Franchise Agreements").
The Franchise Agreements generally require the payment of a monthly royalty fee
based on gross sales and various other marketing fees associated with certain
marketing or advertising and centralized reservation service funds, usually
based on gross sales.  Such fees may vary among individual hotels within a
franchise system based on the type of marks, restaurants or other aspects of
the franchise system used.

                 The Franchise Agreements generally contain specific standards
for, and restrictions and limitations on, the operation and maintenance of the
hotels which are established by the franchisors to maintain uniformity in the
system created by each such franchisor.  Such standards generally regulate the
appearance of the hotel, quality and type of goods and services offered,
signage, and protection of marks.  Compliance with such standards could require
significant expenditures for capital improvements.

                 Ongoing training costs, requirements to purchase only from
approved suppliers, financial reporting requirements, insurance requirements
and various covenants not to compete imposed upon the franchisee are other
common terms in the Franchise Agreements.  Required insurance usually must
cover both the franchisor and franchisee with respect to certain specified
liabilities, must fall within certain approved coverage limits and be written
by an approved insurance company.

                 The Franchise Agreements generally require the consent of the
franchisor to a transfer of an interest in the applicable franchise, and both
the consent of the franchisor and the execution of a new franchise agreement in
the event of a transfer of all or controlling portion of the franchisee under
the relevant Franchise Agreement.  In addition, some franchise agreements may
require payment of an initial fee upon establishment of a franchise
relationship.

Mortgage Notes Payable Maturing During 1996

                 Six mortgage notes payable secured by two hotels mature in
1996.  Five of the mortgage notes, aggregating $31.2 million at December 31,
1995, are secured by the





                                       21
<PAGE>   25
Milwaukee Marriott, in which the Corporation holds a 51% interest.  All but
$2.9 million in principal amount of these notes are held by the Trust.  The net
book value of the Milwaukee Marriott is $22.1 million at December 31, 1995.
One mortgage note in the amount of $25.1 million at December 31, 1995, is
secured by the Boston Park Plaza, in which the Trust acquired a 58.2% interest
in January 1996.

Regulation and Licensing

                 The ownership and operation of the casino gaming facilities of
Starwood Lodging in Nevada are subject to extensive licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada
State Gaming Control Board (the "Nevada Board") and the Clark County Liquor and
Gaming Licensing Board (the "Clark County Board" and, together with the Nevada
Commission and the Nevada Board, the "Nevada Gaming Authorities").

                 The gaming laws, regulations and supervisory procedures of
Nevada seek to (i) prevent unsavory or unsuitable persons from having any
direct or indirect involvement with gaming at any time or in any capacity; (ii)
establish and maintain responsible accounting practices and procedures; (iii)
maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and the
safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports to the Nevada Gaming Authorities; (iv) prevent cheating
and fraudulent practices; and (v) provide a source of state and local revenues
through taxation and licensing fees.  Changes in these laws, regulations and
procedures could have an adverse effect on the Corporation's gaming operations.

                 The Corporation is registered with the Nevada Commission as a
publicly traded corporation and has been found suitable as a holding company by
the Nevada Gaming Authorities to own all of the outstanding capital stock of
HICN.  HICN which operates two hotel/casinos, the King 8 Hotel, Gambling Hall &
Truck Plaza (the "King 8") and the Bourbon Street Hotel & Casino ("Bourbon
Street") is licensed by the Nevada Gaming Authorities.  The Trust was likewise
found suitable by the Nevada Gaming Authorities to be the landlord of the King
8 and Bourbon Street.  No person may become a stockholder of, or receive any
percentage of profits from, HICN without first obtaining licenses and approvals
from the Nevada Gaming Authorities.  Prior approval of the Nevada Commission is
required for the sale, assignment, transfer, pledge or other disposition of any
security issued by HICN.

                 The licenses and approvals held by HICN are not transferable
and must be renewed periodically upon the payment of appropriate taxes and
license fees.  The licensing authorities have broad discretion with regard to
the renewal of the licenses.  The issuing agency may at any time revoke,
suspend, condition, limit or restrict a license or approval to own stock in a
corporate licensee for any cause deemed reasonable by the issuing agency.
Substantial fines for each violation of gaming laws or regulations may be
levied against HICN, the Corporation and the individuals involved.  A violation
under any one of the





                                       22
<PAGE>   26
licenses held by HICN may be deemed a violation of one or more other licenses
or approvals held by HICN.  If HICN's licenses are revoked or suspended or are
not renewed, the Nevada Commission may petition a Nevada district court to
appoint a supervisor to operate the affected property until it is sold.  When
sold, the net proceeds would be paid to the Trust.  The Trust could, however,
under certain circumstances, receive only the reasonable rental value of any
property earnings under the supervisor's management with any excess in earnings
over the reasonable rental value of the property being forfeited to the State
of Nevada.  Suspension or revocation of the license of HICN, disapproval of the
Corporation to own the stock of HICN or court appointment of a supervisor over
operations of the King 8 or Bourbon Street could have a material adverse effect
upon the Trust and the Corporation.

                 Directors, officers and certain key employees of HICN must
file license applications with the Nevada Gaming Authorities.  Certain
officers, directors and key employees of HICN are licensed by the Nevada Gaming
Authorities, and any required license applications of the remaining officers,
directors or key employees have been filed with the Nevada Board.  An
application for licensing may be denied for any cause deemed reasonable by the
issuing agency.  Changes in corporate management or executive positions must be
reported to the Nevada Gaming Authorities.  In addition to its authority to
deny an application for a license, the Nevada Commission has jurisdiction to
disapprove a change in a management or executive position with a regulated
corporation.  If the Nevada Gaming Authorities were to find a director, officer
or key employee unsuitable for licensing or unsuitable to continue having a
relationship with HICN or the Corporation, the Corporation and HICN would have
to sever all relationships with that person.  The Corporation and HICN would
have similar obligations with regard to any person who refused to file
appropriate applications.  Each gaming employee must obtain, and periodically
renew, a work permit, which may be revoked upon the occurrence of certain
specified events.

                 HICN must submit detailed financial and operating reports to
the Nevada Commission, which are subject to routine audit by the Nevada Board.
Substantially all loans, leases, sales of securities and similar financing
transactions entered into by HICN must be reported to or approved by the Nevada
Commission.  The fiscal stability of HICN must be adequate to satisfy gaming
financial obligations such as state and local government taxes and fees, and
the payment of winning wagers to patrons.  Failure to satisfy these gaming
financial obligations is grounds for the Nevada Gaming Authorities to limit,
condition, restrict, suspend or revoke the gaming licenses and approvals of
HICN and the registration and approvals of the Corporation, or to impose
administrative fines against HICN or the Corporation.

                 As a registered publicly traded holding company found suitable
as the sole stockholder of HICN, the Corporation is required periodically to
submit detailed financial and operating reports to the Nevada Commission and to
furnish any other information that the Nevada Commission or Nevada Board may
require.  The Corporation's directors, officers and key employees who are
actively and directly engaged in the administration or supervision of gaming
are subject to licensing and findings of suitability by the Nevada Commission.
Certain directors and officers of the Corporation have filed their license





                                       23
<PAGE>   27
applications as requested by the Nevada Board.  The finding of suitability is
comparable to licensing, and both require submission of detailed personal
background and personal financial information followed by a thorough
investigation, and payment by the applicant of all investigative costs and
charges.  Any individual who is found to have a material relationship to or
material involvement with the Corporation also may be required to be found
suitable or be licensed and may be investigated.  Key employees, controlling
persons or others who exercise significant influence upon the management or
affairs of the Corporation, or are actively engaged in the administration or
supervision of gaming activities, may be deemed to have this type of a
relationship or involvement.

                 Any beneficial holder of the Corporation's voting securities,
regardless of the number of shares owned, may be required to file an
application, be investigated, and have his suitability as a beneficial holder
of the Corporation's voting securities determined if the Nevada Commission has
reason to believe that such ownership would otherwise be inconsistent with the
declared policies of the state of Nevada.  The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in conducting any such
investigation.

                 Any person who acquires more than 5% of any class of voting
securities of the Corporation must report the acquisition to the Nevada
Commission.  Beneficial owners of more than 10% of any class of the
Corporation's voting securities must apply to be found suitable by the Nevada
Commission within 30 days after the Chairman of the Nevada Board mails the
written notice requiring such filing, and any beneficial owner of the
Corporation's voting securities, whether or not such person is a controlling
stockholder, may be required to be found suitable if the Nevada Commission has
reason to believe that such ownership would be inconsistent with the declared
policy of the state of Nevada that licensed gaming be conducted honestly and
competitively and that the gaming industry be free from criminal and corruptive
elements.

                 An "institutional investor" (as defined by the Regulations of
the Nevada Commission) holding at least 10%, and in certain circumstances up to
15%, of the voting securities of the Corporation may apply for and hold a
waiver of the mandatory suitability determination requirement prescribed by the
Nevada Gaming Control Act.  To qualify as an "institutional investor," a person
or entity must satisfy one of several alternative criteria under the federal
Securities Exchange Act of 1934, the Investment Company Act of 1940, or state
and federal pension and retirement laws, as well as acquire and hold the voting
securities for investment purposes in the ordinary course of business and not
for the purpose of effecting any change of control in or the management or
policies of the registered holding company or its gaming affiliates.
Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters
voted on by stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for informational
purposes and not to cause a change in its management, policies or operations;
and (iii) such other activities as the Nevada Commission may determine to be
consistent with such investment intent.





                                       24
<PAGE>   28
                 A change in investment intent of an institutional investor
must be reported to the Chairman of the Nevada Board within two business days
of such change of intent.  The Chairman of the Nevada Board may require an
institutional investor to apply for a finding of suitability upon receipt of
notice of change in investment intent, or at any time deemed necessary to
protect the public interest.  An aggrieved institutional investor may apply for
Nevada Commission review of the decision of the Chairman of the Nevada Board
ordering the filing of a suitability determination application.  The
Corporation or HICN must promptly report to the Nevada Commission any
information that materially affects the institutional investor's eligibility to
hold a waiver.

                 If the stockholder who must be found suitable is a
corporation, partnership or trust, that stockholder must submit detailed
business and financial information including a list of beneficial owners.  In
addition, the Clark County Board has taken the position that it has the
authority to approve all persons owning or controlling more than two percent of
the stock of a gaming licensee or of any corporation controlling a gaming
licensee.  The applicant is required to pay all costs of investigation.

                 Any stockholder found unsuitable by the Nevada Commission who
directly or indirectly holds any beneficial or ownership interest in the
Corporation's Common Stock beyond whatever period of time may be prescribed by
the Nevada Commission may be guilty of a criminal offense.  Any person who
fails or refuses to apply for a finding of suitability or a license within 30
days after being ordered to do so by the Nevada Commission or Chairman of the
Nevada Board may be found unsuitable.  The same restrictions that apply to a
security holder who is found unsuitable may be held to apply to a beneficial
owner of the Corporation's securities if the record owner, after request, fails
to identify the beneficial owner.  The Corporation is subject to disciplinary
action if, after receiving notice that a person is unsuitable to be a
stockholder or to have any other relations with the Corporation or its gaming
subsidiaries, the Corporation (i) pays the unsuitable person any dividend or
interest upon any voting securities of the Corporation or makes any other
unpermitted payment or distribution of any kind whatsoever; (ii) recognizes the
exercise, directly or indirectly, of any voting rights in the Corporation's
securities by the unsuitable person; (iii) pays the unsuitable person any
remuneration in any form for services rendered or otherwise, except in certain
limited and specific circumstances; or (iv) fails to pursue all lawful efforts
to require the unsuitable person to divest himself of his voting securities,
including, if necessary, the immediate purchase by the Corporation of the
voting securities for cash at fair market value.  In addition, Nevada law
requires that any holder or owner of a voting security who is found unsuitable
by the Nevada Commission immediately offer those securities to the Corporation
for purchase, which securities would be purchased by the Corporation for cash
at fair market value within 10 days from the date the securities are offered.

                 The Nevada Commission may, in its discretion, require the
holder of any debt security of a corporation registered under the Nevada Gaming
Control Act to file applications, be investigated and be found suitable to own
the debt security of a registered corporation.  If the Nevada Commission
determines that a person is unsuitable to own such debt security, then pursuant
to the Regulations of the Nevada Commission, the registered





                                       25
<PAGE>   29
corporation can be sanctioned, including the loss of its approvals, if without
the prior approval of the Nevada Commission it (i) pays to the unsuitable
person any dividend, interest or other distribution whatsoever; (ii) recognizes
any voting right of such unsuitable person in connection with such securities;
(iii) pays the unsuitable person remuneration in any form; or (iv) makes any
payment to the unsuitable person by way of principal, redemption, conversion,
exchange, liquidation, or similar transaction.

                 The Corporation is required to maintain a current and
comprehensive stock ledger in the state of Nevada, which ledger may be examined
by the Nevada Gaming Authorities at all reasonable times, but without notice.
If any securities are held in trust, by an agent or by a nominee, the owner of
record of those securities may be required to disclose the identity of the
beneficial owner to the Nevada Gaming Authorities.  A failure to make this
disclosure may be grounds for finding the owner of record unsuitable.  The
Corporation must render maximum assistance to the Nevada Gaming Authorities in
determining the identity of the beneficial owner.

                 The Nevada Commission has the power at any time to require
that the Corporation's stock certificates bear a legend to the general effect
that the securities of the Corporation are subject to the Nevada Gaming Control
Act and the regulations of the Nevada Commission.  However, to date, the Nevada
Commission has not imposed such a requirement on the Corporation.  The Clark
County Board also claims jurisdiction to approve or disapprove holders of the
Corporation's securities.  The Nevada Gaming Authorities, through the power to
regulate licensees and otherwise by Nevada law, have the power to impose
additional restrictions on the holders of the Corporation's securities at any
time.

                 The Regulations of the Nevada Commission provide that changes
in the control of the Corporation or HICN through a merger, consolidation,
acquisition of assets, management or consulting agreements or any form of
takeover cannot occur without the prior approval of the Nevada Commission.
Entities seeking to acquire control of the Corporation must satisfy the Nevada
Board and Nevada Commission in a variety of stringent standards prior to
assuming control of the Corporation.  The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.

                 The Nevada Legislature has declared that some corporate
acquisitions opposed by management, repurchases of securities and corporate
defense tactics affecting corporate gaming licensees in Nevada, and publicly
traded corporations affiliated with those licensees may be injurious to stable
and productive corporate gaming operations. The Nevada Commission has
established a regulatory scheme to ameliorate the potential adverse effects of
these business practices upon Nevada's gaming industry and to advance Nevada's
policy to (i) assure the financial stability of corporate gaming operators and
their affiliates; (ii) preserve the beneficial aspects of conducting business
in the corporate form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs.  Approvals may be required from the Nevada
Commission before the Corporation may make exceptional





                                       26
<PAGE>   30
repurchases of securities above current market price (commonly referred to as
"greenmail"), and before a corporate acquisition opposed by management can be
consummated.  Nevada's gaming regulations also require prior approval of the
Nevada Commission in the event of a Corporation plan of recapitalization
proposed by the board of directors in opposition to a tender offer made
directly to shareholders for the purpose of acquiring control of the
Corporation.

                 Nevada law prohibits the Corporation from making a public
offering of its securities without the approval of the Nevada Commission if any
part of the proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Nevada, or to retire or extend
obligations incurred for one or more such purposes.  Approval of the public
offering will not constitute a finding by the Nevada Commission as to the
accuracy, adequacy or investment merit of the securities offered to the public.
Any representation to the contrary is unlawful.

                 The gaming regulatory requirements discussed above apply to
certain aspects of the Reorganization.  The contribution by HICN of the Gaming
Assets (and the transfer of certain liabilities to be retained by HICN) to the
Operating Partnership will occur on receipt of certain licenses or approvals by
the Nevada Gaming Authorities.  Likewise, the election of the new members of
the Board of Directors of the Corporation since the Reorganization will be
effective upon receipt of certain licenses or approvals by the Nevada
Commission.  Nevada gaming regulatory approvals are expected to be received by
the end of 1997.  In conjunction with applying for and obtaining such licenses
and approvals, the Corporation has developed various policies and procedures
subject to review, approval and oversight by the Nevada Board.  The purpose of
these corporate policies and procedures is to ensure compliance with the
regulatory requirement that prior approval of the Nevada Commission is obtained
for any transaction that would result in either Starwood Capital or Starwood
Partners acquiring control of the Corporation or its Nevada gaming operations.
The Corporation expects that these policies and procedures will be eliminated
upon receipt of certain licenses and approvals from the Nevada Commission.  If
the required licenses or approvals of the Nevada Gaming Authorities are not
received on or before December 31, 1996, then on such date HICN has agreed to
contribute to the Operating Partnership cash equal to the fair value of the
Gaming Assets on such date.

                 License fees and taxes, computed in various ways depending on
the type of gaming involved, are payable to the State of Nevada and to the
County of Clark where HICN's gaming operations are conducted.  Depending upon
the particular fee or tax involved, these assessments are payable either
monthly, quarterly, or annually and are based upon either (i) a percentage of
the gross gaming revenues received by the casino operations; (ii) the number of
slot machines or other gaming devices operated by the casino; or (iii) the
number of table games operated by the casino.  A casino entertainment tax is
also paid by the licensees where entertainment is furnished in connection with
the selling of food or refreshments.





                                       27
<PAGE>   31
                 The sale of alcoholic beverages by HICN is subject to
licensing, control and regulation by the Clark County Board.  Such liquor
licenses are revocable and are not transferable.  The Clark County Board has
full power to limit, condition, suspend or revoke any liquor license, and any
disciplinary action of this nature or license revocation would have a material
adverse effect on HICN's gaming operations.

ITEM 3.  LEGAL PROCEEDINGS.

                 During the year ended December 31, 1995, the Trust and the
Corporation completed settlements of two purported class action complaints and
one complaint which was purportedly brought on behalf of the Trust and the
Corporation (collectively, the "Shareholder Actions").  The Shareholder Actions
were brought in 1991 and 1992 in each case in connection with the Trust's
purchase of the Ramada Inn in Indian Wells, California (which has been
subsequently sold) and its two hotel/casinos.

                 The two purported class actions were filed in the United
States District Court for the Southern District of California in August 1991
and February 1992 against the Trust, the Corporation and certain current and
former officers, Directors and Trustees.  The complaint alleged fraud,
violations of federal and California securities laws, the federal Racketeer
Influenced and Corrupt Organizations Act and ERISA.  The actions sought
compensatory damages, rescission and/or treble and exemplary damages plus
interest, costs and attorney's fees and statutory damages under ERISA.  The
third action was filed in the Superior Court for the State of California for
San Diego County in March 1992 against current and former officers, Directors
and Trustees and alleged breach of fiduciary duty, gross negligence and
corporate waste.  The action sought compensatory damages, certain remuneration
and costs.

                 The plaintiffs and defendants in the Shareholder Actions
entered into stipulations of settlement providing for the release of all claims
that were or might have been made in the Shareholder Actions and provided for a
$3,250,000 cash settlement fund which, after payment of fees and expenses of
plaintiffs' counsel, was distributed to the certified plaintiff classes.  The
Trust and the Corporation paid $400,000 into the settlement fund, with the
balance of the settlement being paid by the insurance company that issued the
directors and officers policy applicable to the period to which the Shareholder
Actions relate and by two former officers and Trustees of the Trust.  The Trust
and the Corporation paid the legal fees and other costs incurred prior to
October 12, 1993 by the defendants in the Shareholder Actions.  Holders of an
aggregate of 199,833 Paired Shares (as adjusted for the one-for-six reverse
stock split in June 1995), all of which were owned by Mr. Leonard Ross and his
affiliates (collectively, "Ross"), opted out of the Shareholder Action and did
not share in the settlement.

                 As required by the stipulation, the Trust's Board of Trustees
and the Corporation's Board of Directors established a joint transaction
committee of independent Trustees and Directors to make recommendations to
those Boards with respect to any transaction proposed by management and having
a fair market value of $20 million or more.





                                       28
<PAGE>   32
                 In connection with the settlement of the Shareholder Actions,
Messrs. Ronald A. Young and John F. Rothman and certain of their affiliated
partnerships terminated the management agreements (the "Management Contracts")
that existed between those partnerships and the Corporation's subsidiary,
Western Host, Inc. ("Western Host"), and Western Host agreed not to dispute
such action and withdrew as a general partner of two additional affiliated
partnerships.  In satisfaction of any damages that the Trust and the
Corporation may incur as a result of the termination of the Management
Contracts, Messrs. Rothman and Young paid $800,000 to the Trust and the
Corporation.  They also agreed to be responsible for a percentage of any
retroactive adjustments in worker's compensation insurance premiums.  Starwood
Lodging has paid $167,041 for retroactive worker's compensation insurance
premiums and has sought reimbursement from Messrs. Young and Rothman of their
share of that amount (in an aggregate amount of approximately $56,000).  In
October 1995, the Corporation commenced litigation against Messrs. Young and
Rothman to collect such amounts (Starwood Lodging Corp. v. Ronald A. Young, et
al., San Diego Superior Court Case No. 693822).

                 Ross, who as of December 31, 1994 held approximately 9.8% of
the outstanding Paired Shares of the Trust and Corporation (approximately 1.4%
as of December 31, 1995), opted out of the settlement of the Shareholder
Actions.  Ross threatened to bring a separate action alleging similar causes of
action as those alleged in the Shareholder Actions as well as other alleged
causes of action.  In November 1994, Ross assigned to Starwood Capital all of
his claims against the Trust and Corporation.  In connection with such
assignment, Starwood Capital agreed to purchase all of Ross's Paired Shares at
Ross's election during a 60-day period beginning in December 1995, at a price
of $33.75 per Paired Share subject to certain adjustments.  Starwood Capital,
as the assignee of Ross's claims against the Trust and the Corporation, agreed
that the maximum amount Starwood Capital may recover under such claims would
not exceed an aggregate of $1.8 million and the Trust and the Corporation
agreed to toll the statute of limitations respecting such claims until January
31, 1996.  The Trust and Corporation also agreed that under certain
circumstances they may be obligated severally to indemnify Starwood Capital
with respect to Starwood Capital's obligations to Ross, up to a maximum of $1.8
million, upon receipt of a full release from Starwood Capital of all of the
claims assigned by Ross.

                 Ross elected to sell his Paired Shares, and in January 1996
those Paired Shares were sold to a third party through Merrill Lynch.  The
Paired Shares were sold at a price of $29.625 per Paired Share; the Trust and
Corporation paid $1,375,743 in the aggregate pursuant to their indemnity
obligations, and Starwood Capital released the Trust and the Corporation from
all the claims assigned to it by Ross.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        On December 7, 1995, (i) the Trust held its 1995 annual meeting of
shareholders of the Trust (the "Trust Meeting") to elect two Trustees to the
Board of Trustees of the Trust and to approve a share option plan of the Trust
and (ii) the Corporation held its 1995 annual meeting of stockholders of the
Corporation (the "Corporation Meeting") to elect four





                                       29
<PAGE>   33
Directors to the Board of Directors of the Corporation and to approve a stock
option plan of the Corporation.

        At the Trust Meeting, shareholders of the Trust voted upon and approved
(i) the election as Trustees of the Trust of Messrs. Madison F. Grose and
William E. Simms, and (ii) the adoption of the 1995 Share Option Plan of the
Trust.  Messrs. Lapin, Quazzo, Duncan, Stern and Sternlicht continued as
Trustees after the Trust Meeting.

        The following sets forth, with respect to each matter voted upon at the
Trust Meeting, the number of votes cast for, the number of votes cast against,
and the number of votes abstaining (or, with respect to the election of
Trustees, the number of votes withheld) with respect to such matter:

<TABLE>
<CAPTION>
                                          Votes               Votes                                   Votes
                                           For               Against           Abstentions           Withheld
                                        ----------          ---------          -----------           --------
 <S>                                    <C>                 <C>                   <C>                 <C>
 Election of Trustees:                                                      
    Madison F. Grose                    12,336,209                  0                   0             209,107
    William E. Simms                    12,329,822                  0                   0             215,494
                                                                            
 Adoption of the 1995                                                       
    Share Option Plan                    8,289,406          2,752,511             163,279                   0
</TABLE>

        At the Corporation Meeting, stockholders of the Corporation voted upon
and approved (i) the election as Directors of the Corporation of the following
nominees:  Bruce M. Ford, Earle F. Jones, Graeme W. Henderson, and Daniel W.
Yih (Mr. Yih to take office upon receipt of Gaming Approval), and (ii) the
adoption of the 1995 Share Option Plan of the Corporation.  Messrs. Chapus,
Goldman, Leven, Eilian and Sternlicht continued as members of the Management
Committee and Directors (to take office upon receipt of Gaming Approval) after
the Corporation Meeting.

        The following sets forth, with respect to each matter voted upon at the
Corporation Meeting, the number of votes cast for, the number of votes cast
against, and the number of votes abstaining (or, with respect to the election
of Directors, the number of votes withheld) with respect to such matter:





                                       30
<PAGE>   34
<TABLE>
<CAPTION>
                                           Votes               Votes                                    Votes
                                            For               Against             Abstentions          Withheld
                                        ----------           ---------            -----------          --------
 <S>                                    <C>                  <C>                    <C>                 <C>
 Election of Directors:
    Bruce M. Ford                       12,354,381                   0                    0             204,890
    Earle F. Jones                      12,355,118                   0                    0             204,153
    Graeme W. Henderson                 12,355,252                   0                    0             204,019
    Daniel W. Yih                       12,354,634                   0                    0             204,637

 Adoption of 1995 Share                  7,305,949           2,742,455              185,675                   0
    Option Plan
</TABLE>

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

             The Paired Shares are traded principally on the New York Stock
Exchange (the "NYSE") under the symbol "HOT".

             The following table sets forth, for the fiscal periods indicated,
the high and low sales prices per Paired Share on the NYSE Composite Tape (as
adjusted for the one-for-six reverse stock split in June 1995).


<TABLE>
<CAPTION>
 1995                                                                                                 
                                                                                                      
                                                                  Distributions     Return of Capital 
                                High             Low                   Made           GAAP Basis (a)  
                                ----             ---               -----------        ----------      
 <S>                          <C>              <C>                  <C>                   <C>
 First quarter                $24.00           $15.75                None                  N/A
 Second quarter               $24.75           $21.00                None                  N/A
 Third quarter                $29.13           $23.63               $0.47                 $0.22
 Fourth quarter               $30.00           $26.88               $0.47 (b)             $0.07


 1994

 First quarter                $15.00           $11.25                 None                 N/A
 Second quarter               $18.00           $9.75                  None                 N/A
 Third quarter                $20.25           $17.25                 None                 N/A
 Fourth quarter               $20.25           $15.75                 None                 N/A
</TABLE>

(a)      Represents distributions per share in excess of net income per share
         on a GAAP basis, and is not the same as return of capital on a tax
         basis.





                                       31
<PAGE>   35
(b)      The Trust declared a dividend for the fourth quarter of 1995 to
         shareholders of record on December 29, 1995.  The dividend was paid in
         January 1996.

Holders
             As of February 27, 1996, there were approximately 1,276 holders of
record of Paired Shares.

Distributions Made/Declared

             The Trust declared and paid a dividend of $0.47 per Paired Share
for the third quarter of 1995.  In addition, the Trust declared a dividend of
$0.47 per Paired Share for the fourth quarter of 1995.  This dividend was paid
in January 1996.  No distributions were made by the Trust during 1994.  The
Corporation has not paid any cash dividend since its organization and does not
anticipate that it will make any such distributions in the foreseeable future.
Under the terms of the Facilities, Starwood Lodging is generally permitted to
distribute to its shareholders on an annual basis an amount equal to the
greatest of (1) 100% of funds from operations for any four consecutive calendar
quarters; (2) an amount sufficient to maintain the Trust's tax status as a real
estate investment trust; (3) the amount necessary for the Trust to avoid the
payment of federal income or excise tax; and (4) through June 30, 1996, $0.47
per share per quarter.

ITEM 6.      SELECTED FINANCIAL DATA.

             The following data sets forth certain financial information for
each of the Trust and the Corporation, and the Trust and the Corporation on a
combined basis.  This information is based on and should be read in conjunction
with the financial statements and the notes thereto appearing elsewhere in this
Joint Annual Report.

(in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                   
                                                             Historical                    
                              Pro    ----------------------------------------------------------
                              Forma       As and for the Year Ended December 31,       
                              ------------------------------------------------------------------
                              1995       1995        1994        1993        1992        1991
                              ----       ----        ----        ----        ----        ----
 <S>                         <C>        <C>         <C>       <C>         <C>          <C>
 Operating Data
 Revenue:
   Trust   . . . . . .      $ 48,953    $ 44,023   $ 21,671    $ 20,342    $ 26,784     $ 29,550
   Corporation   . . .       164,038     149,184    110,962     114,828     116,172      110,361
   Combined (1)  . . .       176,570     161,716    113,997     117,155     117,656      113,436
                                                           
</TABLE>





                                       32
<PAGE>   36
<TABLE>
<CAPTION>
                                   
                                                               Historical                    
                               Pro    ----------------------------------------------------------
                              Forma            As of and for the Year Ended December 31,
                              -----   ----------------------------------------------------------
                              1995        1995        1994        1993       1992        1991
                              ----        ----        ----        ----       ----        ----
 <S>                         <C>         <C>       <C>         <C>         <C>          <C>
 Net Income (Loss):
   Trust (2)   . . . .        23,239      10,709     (3,465)     (3,889)     (9,818)     (10,952)
   Corporation (2)   .        (2,094)     (1,739)    (1,198)     (3,143)     (9,925)     (11,132)
   Combined  . . . . .        21,145       8,970     (4,663)     (7,032)    (19,743)     (22,084)
 Net  Income  (Loss)  Per
  Share:
   Trust   . . . . . .       $  1.68     $  1.37   $  (1.72)   $  (1.92)   $  (4.86)    $  (5.42)
   Corporation   . . .          (.15)       (.22)     (0.59)      (1.56)      (4.90)       (5.50)
                             -------     -------   --------    --------    --------     --------
   Combined  . . . . .       $  1.53     $  1.15   $  (2.31)   $  (3.48)   $  (9.76)    $ (10.92)
                             -------     =======   ========    ========    ========     ========

<CAPTION>
                                                             Historical                    
                                      ----------------------------------------------------------
                                                           At December 31,
                                      ----------------------------------------------------------
                                          1995        1994        1993       1992        1991
                                          ----        ----        ----       ----        ----
 <S>                                     <C>       <C>         <C>         <C>          <C>
 Balance Sheet Data

 Total Assets:
   Trust   . . . . . .                   425,737   $162,245    $232,845    $245,540     $246,498
   Corporation   . . .                   120,721     48,626      49,993      53,611       55,807
   Combined (1)  . . .                   459,994    183,955     195,352     210,945      221,917
 Total Debt:
   Trust   . . . . . .                   119,200    146,734     156,526     157,541      158,295
   Corporation   . . .                    90,749     40,664     101,846     100,246       66,873
   Combined (1)  . . .                   123,485    160,482     170,886     170,297      171,271

 Shareholders' Equity
   (Deficit):
   Trust   . . . . . .                   204,728     10,450      72,205      76,371       86,188
   Corporation   . . .                    10,740     (1,742)    (58,879)    (55,752)     (45,828)
   Combined    . . . .                   215,467      8,708      13,326      20,351       40,083
 Shares outstanding at
  end of period  . . .                    13,825      2,022       2,022       2,022        2,022
</TABLE>






                                       33
<PAGE>   37
<TABLE>
<CAPTION>
                                  
                                                          Historical                    
                                      ----------------------------------------------------------
                                         As of and for the Year Ended December 31,
                                      ----------------------------------------------------------
                                          1995        1994       1993        1992        1991
                                          ----        ----       ----        ----        ----
 <S>                        <C>        <C>          <C>         <C>         <C>          <C>
 Cash Flow and Dividend                                                             
 Data                                                                               
                                                                                    
 Net cash provided by                                                               
  (used in) operating                                                               
  activities:                                                                       
   Trust   . . . . . .                 $  11,267    $  4,455    $ 3,136     $ 2,773      $(8,812)
   Corporation   . . .                     5,144       4,438      2,396       1,917        2,654
   Combined  . . . . .                    16,411       8,893      5,532       4,690       (6,158)
                                                                                    
 Net cash provided by                                                               
  (used in) investing                                                               
  activities:                                                                       
   Trust . . . . . . .                  (175,506)   $  8,239    $ 2,474     $  (161)     $12,889
   Corporation . . . .                   (44,003)        215     (4,426)       (942)         472
   Combined (1)  . . .                  (181,995)      4,489     (3,645)     (1,514)      12,159
                                                                                    
 Net cash provided by                                                               
  (used in) financing                                                               
  activities:                                                                       
   Trust . . . . . . .                   164,694     (13,357)    (7,307)       (850)      (7,507)
   Corporation . . . .                    42,671      (4,577)    (1,138)       (816)        (834)
   Combined (1)  . . .                   169,851     (13,969)    (6,752)     (1,255)      (7,139)
                                                                                    
 Dividends/Distributions                                                            
  to shareholders-Trust (3)                9,265          $0         $0          $0           $0
                                                                                    
 Dividends/Distributions                                                                        
  per share-Trust (3) .                    $0.47          $0         $0          $0           $0
</TABLE>
_______________

(1)      The individual amounts with respect to the Trust and Corporation do
         not add to Combined amounts due to accounting elimination entries.

(2)      For the Trust, includes gains (losses) on sales in the amount of
         ($125,000), $432,000, ($53,000), ($791,000) and $390,000 for the years
         ended December 31, 1995, 1994, 1993, 1992 and 1991, respectively, and
         provisions for investment losses of $759,000, $2,369,000, $3,419,000
         and $8,867,000 in the years ended December 31, 1994, 1993, 1992, and
         1991, respectively.  For the Corporation, includes gains on sales of
         $24,000, $74,000, $4,000 and $1,208,000 for the years ended December
         31, 1994, 1993, 1992, and 1991, respectively, and provisions for
         investment losses of $713,000 in the year ended December 31, 1991.

(3)      Presented only for the Trust, as the Corporation did not pay dividends
         for the periods presented.





                                       34
<PAGE>   38
Due to the impact of the Reorganization and other transactions during 1995,
management believes that the following presentation and discussion of the pro
forma results of operations is more meaningful to the users of the financial
statements for an understanding of the comparative operating results than the
historical information which follows the discussion of the pro forma results of
operations.

UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS

   
<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                               --------------------------------------
                                                                  1995                      1994
                                                                --------                  --------    
 <S>                                                           <C>                       <C>
 REVENUE
 Hotel   . . . . . . . . . . . . . . . . . . .                 $136,104,000              $118,558,000
 Gaming  . . . . . . . . . . . . . . . . . . .                   26,929,000                27,981,000
 Interest from mortgage and other notes  . . .                   10,905,000                10,858,000
 Rents from leased hotel properties
   and income from joint ventures  . . . . . .                      791,000                   927,000
 Other income  . . . . . . . . . . . . . . . .                    1,966,000                   411,000
 Gain (loss) on sales of hotel assets  . . . .                     (125,000)                  456,000
                                                               ------------              ------------
                                                                176,570,000               159,191,000
                                                               ------------              ------------
 EXPENSES
 Hotel operations  . . . . . . . . . . . . . .                   94,487,000                84,357,000
 Gaming operations   . . . . . . . . . . . . .                   24,242,000                24,454,000
 Interest  . . . . . . . . . . . . . . . . . .                    2,940,000                 3,257,000
 Depreciation and amortization . . . . . . . .                   18,934,000                16,666,000
 Administrative and operating  . . . . . . . .                    5,722,000                 4,203,000
                                                               ------------              ------------
                                                                146,325,000               132,937,000
                                                               ------------              ------------
 Income before minority interest   . . . . . .                   30,245,000                26,254,000
 Minority interest in Partnerships   . . . . .                    9,100,000                 7,900,000
                                                               ------------              ------------
 Net income  . . . . . . . . . . . . . . . . .                 $ 21,145,000              $ 18,354,000
                                                               ============              ============
 Net income per Paired Share   . . . . . . . .                        $1.53                     $1.33
                                                               ============              ============
 Funds from operations   . . . . . . . . . . .                 $ 48,634,000              $ 42,464,000
                                                               ============              ============
</TABLE>
    



                                       35
<PAGE>   39
NOTES TO THE UNAUDITED COMBINED PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1995

NOTE 1.  BASIS OF PRESENTATION

The Trust and the Corporation have unilateral control of the Realty Partnership
and the Operating Partnership, respectively, and, therefore, the historical
financial statements of the Realty Partnership and the Operating Partnership
are consolidated with those of the Trust and the Corporation.

Due to the impact of the Offering and the acquisition of properties acquired in
connection with the Offering, the historical results of operations and earnings
per share are not indicative of future results of operations and earnings per
share.  The Unaudited Combined Pro Forma Statements of Operations for the years
ended December 31, 1995 and 1994 give effect to the Reorganization, the
Offering, and the acquisition of the Sheraton Colony Square in Atlanta,
Georgia, the Embassy Suites in Tempe, Arizona, and the Omni Europa in Chapel
Hill, North Carolina as of the beginning of each period presented.  Pro forma
results include the results of the other acquired properties (the Doral Inn in
New York, New York - acquired on September 20, 1995, the Terrace Garden Inn and
Lenox Inn in Atlanta, Georgia - acquired on October 31, 1995, and the Holiday
Inn in Beltsville, Maryland - acquired on November 30, 1995) from their
respective dates of acquisition and exclude the results from properties sold in
1994.  Additional pro forma information reflecting the inclusion of the Doral
Inn, Terrace Garden Inn, Lenox Inn and the Beltsville Holiday Inn (the "New
Properties") from the beginning of each respective period is included in Note
18 to the historical financial statements included in Item 8 of this Joint
Annual Report.  The pro forma information is based upon historical information
and does not purport to present what actual results would have been had such
transactions, in fact, occurred at the beginning of each period presented, or
to project results for any future period.

Listed below are the combined pro forma adjustments for each contributed and
acquired hotel:

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                          Acquired Properties
                           ----------------------------------------------------------------------------------
                                 Omni                  Sheraton            Embassy Suites
                             Chapel Hill            Colony Square              Tempe                 Total
                             -----------            -------------          --------------            -----
 <S>                         <C>                     <C>                    <C>                   <C>
 Hotel Revenues              $ 1,265,000             $ 9,557,000            $ 4,032,000           $14,854,000

 Hotel Expenses  . . .           887,000               7,009,000              2,271,000            10,167,000
 Depreciation  . . . .           163,000               2,073,000              1,229,000             3,465,000
                             -----------             -----------            -----------           -----------
 Net Income                  $   215,000             $   475,000             $  532,000           $ 1,222,000
                             ===========             ===========            ===========           ===========
</TABLE>

FOR THE YEAR ENDED DECEMBER 31, 1994


<TABLE>
<CAPTION>
                                                 Contributed by Starwood Capital
                      ---------------------------------------------------------------------------------------
                        Capitol            French
                         Hill              Quarter          Doubletree           Wichita             Total
                        -------            -------          ----------           -------             -----
 <S>                  <C>                <C>                <C>                <C>                <C>
 Hotel Revenues       $3,484,000         $5,247,000         $3,753,000         $3,983,000         $16,467,000
 Hotel Expenses  .     2,228,000          3,789,000          2,795,000          3,939,000          12,751,000

 Depreciation  . .       556,000            858,000            481,000            601,000           2,496,000
                      ----------         ----------         ----------         ----------         -----------
 Net Income           $  700,000         $  600,000         $  477,000         $(557,000)         $ 1,220,000
                      ==========         ==========         ==========         ==========         ===========
</TABLE>





                                       36
<PAGE>   40
<TABLE>
<CAPTION>
                                                        Acquired Properties
                           ----------------------------------------------------------------------------------
                               Omni                 Sheraton            Embassy Suites
                           Chapel Hill           Colony Square               Tempe                   Total
                           -----------           -------------          --------------               -----
 <S>                        <C>                  <C>                      <C>                    <C>
 Hotel Revenues             $4,407,000            $16,200,000             $6,025,000              $26,632,000

 Hotel Expenses              3,024,000             12,656,000              3,823,000               19,503,000
 Depreciation                  884,000              3,363,000              2,006,000                6,253,000
                            ----------            -----------             ----------              -----------
 Net Income                 $  499,000            $   181,000             $  196,000              $   876,000
                            ==========            ===========             ==========              ===========
</TABLE>


NOTE 2.  NET INCOME PER PAIRED SHARE

Net income per Paired Share has been computed using the pro forma weighted
average number of Paired Shares and equivalent Paired Shares outstanding for
the period presented of 13,822,617 Paired Shares.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

                 As discussed in Item 1 of this Joint Annual Report under the
caption "The Reorganization", the Trust and the Corporation consummated the
Reorganization on the Closing Date effective as of January 1, 1995.  Since the
Reorganization, the Trust has conducted substantially all of its business and
operations through the Realty Partnership and the Corporation has conducted
substantially all of its business and operations (other than its gaming
operations) through the Operating Partnership.  The Trust controls the Realty
Partnership as its sole general partner.  The Corporation controls the
Operating Partnership as its managing general partner, although until the
receipt of required gaming approvals, a management committee of the Operating
Partnership will manage the Operating Partnership.

                 As discussed in Item 1 of this Joint Annual Report under the
caption "The Offering", on July 6, 1995, the Trust and Corporation consummated
a public offering of Paired Shares and received aggregate net proceeds of
approximately $245.7 million.

                 As discussed in Item 1 of this Joint Annual Report under the
caption, "Credit Facilities" in 1995 the Realty Partnership entered into the
Repo Facility and the Acquisition Facility and, as of December 31, 1995, had
borrowed $119.1 million to acquire hotel assets and for general corporate
purposes.

COMBINED PRO FORMA RESULTS OF OPERATIONS

PRO FORMA NET INCOME

                 On a pro forma basis (see Item 6, Pro Forma Financial
Statements), combined net income for the year ended December 31, 1995 grew by
15.2 % to $21.1 million, or $1.53 per Paired Share, on combined revenues of
$176.6 million, compared to combined net income of $18.4 million, or $1.33 per
Paired Share, on combined revenues of $159.2 million for the corresponding
period in 1994.  On a year-to-year basis, while occupancy rates





                                       37
<PAGE>   41
remained relatively constant, average daily rate ("ADR") for Starwood Lodging's
owned and operated nongaming hotels for the year ended December 31, 1995
(including the New Properties in each year), increased 11.2%, from $67.43 to
$74.98, and REVPAR for such hotels increased 12.9%, from $47.61 to $53.76.

                 The 10.9% increase in pro forma revenues for 1995 resulted
from the impact of revenues from the New Properties together with increases in
ADR for Starwood Lodging's upscale, midscale and economy segment hotels of
14.4%, 4.4% (2.2% excluding the Dallas, Texas property which lost the benefit of
a Marriott franchise in 1994) and 10.0 percent, respectively.  Management
believes that ADR increases, particularly in the upscale segment, reflect
increases in demand which continue to exceed increases in supply.  The increase
in the economy segment (consisting of two hotels) primarily reflects
management's decision to reposition and flag the formerly independent Portland,
Oregon property in October of 1994.

                 The following tables summarize average occupancy, ADR and
REVPAR on a year-to-year basis for Starwood Lodging's owned and operated,
nongaming hotels (including the New Properties for the period beginning with
their respective dates of acquisition and ending at the end of each period) for
the years ended December 31, 1995 and 1994.

<TABLE>
<CAPTION>
                                                                          Years Ended
                                                                         December 31,
                                                                       1995         1994
                                                                       ----         ----
                            <S>                                       <C>          <C>
                            All Nongaming Hotels:                                       
                            Occupancy rate                            71.7%         70.6%
                            ADR                                       $74.98       $67.43
                            REVPAR                                    $53.76       $47.61
                            REVPAR % change                           12.9%

                            Upscale Hotels:
                            Occupancy rate                            73.0%         71.8%
                            ADR                                       $86.39       $75.49
                            REVPAR                                    $63.78       $54.20
                            REVPAR % change                           17.7%

                            Midscale  Hotels (excluding  Dallas
                            Park Central):
                            Occupancy rate                            68.8%         68.5%
                            ADR                                       $58.44       $55.99
                            REVPAR                                    $39.92       $38.35
                            REVPAR % change                            4.1%
</TABLE>





                                       38
<PAGE>   42
<TABLE>
<CAPTION>
                            <S>                                       <C>          <C>
                            Economy Hotels:
                            Occupancy rate                            79.1%         73.6%
                            ADR                                       $61.40       $55.81
                            REVPAR                                    $48.57       $41.08

                            REVPAR % change                           18.2%
</TABLE>

                 Management believes that the increases in REVPAR resulted
primarily from increases in demand due to more favorable economic conditions
which have created increased business and leisure travel throughout the United
States, while the supply of hotel rooms has not increased as rapidly.  REVPAR
increases were greatest at the upscale hotels (16.3% increase) as well as the
Harvey Hotel in Wichita, Kansas (renovated in 1994) and the Days Inn in
Portland, Oregon, which was flagged a Days Inn in late 1994.

                 Management believes that there are several important factors
that have contributed to the improved profitability of Starwood Lodging's hotel
properties, including increased occupancy and average room rate and effective
cost management.  Because a substantial portion of the hotels' operating costs
and expenses are generally fixed, Starwood Lodging derives substantial
operating leverage from increases in revenue.  Consequently, primarily as a
result of the stronger growth in ADR than in occupancy, gross margins for the
year ended December 31, 1995 rose to 30.6% from 28.9% for the year ended
December 31, 1994.

ACQUISITIONS

                 During 1995, excluding the properties contributed as part of
the Reorganization, Starwood Lodging acquired: the 168-room Omni Hotel in
Chapel Hill, North Carolina; the 462-room Sheraton Colony Square Hotel in
Atlanta, Georgia; the 224-room Embassy Suites in Tempe, Arizona; the 652-room
Doral Inn in New York, New York; a $19.5 million mortgage interest in the
263-room Grand Hotel in Washington, D.C.; the 364-room Terrace Garden Inn and
the 180-room Lenox Inn in Atlanta, Georgia; and the 206-room Calverton Holiday
Inn in Beltsville, Maryland.  In the first month of 1996, Starwood Lodging
acquired the equity in the Grand Hotel in Washington, D.C., and a 58.2%
interest in a joint venture that acquired the Boston Park Plaza.  In total,
Starwood Lodging's growth through acquisitions since the beginning of 1995 has
exceeded $250 million, including the assumption by the Operating Partnership of
the management of eight of these hotels containing over 2,800 rooms.

SELF MANAGEMENT

                 Consistent with its business objective to capture the economic
benefits otherwise retained by a third-party operator, the Operating
Partnership has assumed management of eight hotels acquired since the beginning
of 1995 as well as seven properties owned as of January 1, 1995.  Of the
remaining four third-party management agreements currently in place, two are
expected to be terminated in early 1996 and management of the





                                       39
<PAGE>   43
underlying properties assumed by the Operating Partnership.  Management
believes that the assumption of direct control over the operations of these
hotels will allow Starwood Lodging to effectively use its experience to improve
operations and implement renovations and expansions.

RENOVATIONS AND REPOSITIONING HOTELS

                 Starwood Lodging has commenced an estimated $10.0 million
renovation and conversion of the Dallas property to a Radisson.  Additionally,
Starwood Lodging has commenced an estimated $6.0 million renovation of the
Atlanta Sheraton Colony Square Hotel and a $2.0 million renovation of the
Portland Riverside Inn.  Starwood Lodging reflagged the Grand Hotel in
Washington, D.C. as a Westin effective February 1, 1996 and is currently
negotiating the flagging of the French Quarter Suites Hotel in Lexington,
Kentucky which is expected to benefit from a national franchise affiliation and
reservation system.  Starwood Lodging is currently planning renovations of the
Doral Inn, the Boston Park Plaza and certain other properties and may plan and
commence other renovations of existing and new properties as it deems
appropriate.  Renovations of specific hotels are expected to have a negative
impact on the revenues of such hotels during the pendency of major renovations.

GAMING

                 Revenues from the two hotel/casinos in Las Vegas declined $1.1
million to $26.9 million reflecting a reduction in revenues primarily at the
Bourbon Street casino.  Earnings from the two hotel/casinos declined $840,000
in line with the decrease in revenues.  Both properties are currently being
marketed for sale.

INTEREST INCOME

                 Interest from mortgage and other notes, on a pro forma basis,
increased slightly reflecting interest received from the mortgage on the Grand
Hotel for the last three months of 1995 and which was partially offset by
overall reduced interest income for the year ended December 31, 1995, primarily
due to repayment of notes secured by mortgages on hotels in Albany, Georgia,
Irving, Texas, Stockton, California and Jefferson City, Missouri.

OTHER INCOME

                 Other income of $2.0 million for the year ended December 31,
1995 was $1.0 million higher than the previous year.

                 Included in other income for the year ended December 31, 1995
are (i) $800,000 received as a result of the termination of management
contracts in connection with the settlement of certain shareholder actions
against former officers of Starwood Lodging (see Item 3 of Part I) and (ii) the
retention of a $500,000 deposit related to the failure of the





                                       40
<PAGE>   44
prospective purchaser of the Bourbon Street Hotel and Casino to complete the
purchase of the hotel from Starwood Lodging.

ADMINISTRATIVE AND OPERATING EXPENSES

                 Administrative and operating expenses for the year ended
December 31, 1995 increased to $5.7 million representing 3.2 percent of total
revenue, from $4.2 million or 2.6 percent of revenue for the corresponding
period in 1994.  The increases were primarily a result of increases in payroll
costs due to additions to the corporate staffs of Starwood Lodging.

INTEREST EXPENSE

                 On a pro forma basis, interest expense declined approximately
$300,000 to $2.9 million in 1995, reflecting a lower amount outstanding in 1995
on notes payable secured by the Milwaukee Marriott together with lower overall
interest rates in 1995 as compared to 1994.

DEPRECIATION AND AMORTIZATION

                 Depreciation and amortization on a pro forma basis increased
to $18.9 million in 1995 reflecting depreciation relating primarily to the New
Properties.

ACCOUNTING POLICIES

                 In March and October 1995, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" and No. 123 "Accounting for Stock-Based Compensation,"
respectively.  These statements are effective for financial statements for
fiscal years beginning after December 15, 1995.  Management believes that
adoption of Standard No. 121 will not have a material effect on its financial
position or results of operations.  Management intends to adopt the disclosure
method of Standard No. 123 and, accordingly, there will be no impact on
Starwood Lodging's financial position or results of operations.

COMBINED LIQUIDITY AND CAPITAL RESOURCES

                 Cash Flow Provided by Operating Activities.  The principal
source of cash to be used to fund Starwood Lodging's operating expenses,
interest expense, recurring capital expenditures and dividend payments is cash
flow provided by operating activities.  Starwood Lodging anticipates that its
cash flow provided by operating activities will provide the necessary funds on
a short and long term basis to meet the cash requirements described above,
including all distributions to shareholders.





                                       41
<PAGE>   45
                 Cash flows from Investing and Financing Activities. Starwood
Lodging intends to finance the acquisition of additional hotel properties,
major hotel renovations and other non-recurring capital expenditures through
cash flow from operations, through borrowings under the Facilities and, when
market conditions warrant, through the issuance of equity or debt securities.
As of December 31, 1995, the Realty Partnership had borrowed approximately
$119.1 million under the Facilities to fund the acquisition of the New
Properties.

   
                The Companies intend from time to time to use interest rate
hedging agreements to reduce exposure to fluctuations in interest rates
relative to outstanding or future intended debt obligations. Gains or losses
will be capitalized and amortized over the life of the related debt obligation.

                In pursuance of this strategy, in January, 1996, the Trust
entered into two interest rate hedging agreements known as Treasury locks,
which have the effect of fixing the base rate of interest at 5.7 percent for
debt issued until October 1996 with a principal amount of $100 million and a
term to maturity of seven years. The actual interest rate will be determined
by reference to this base rate.

                At settlement, the Trust will pay or receive an amount which
will be capitalized and amortized over seven years. Such amount is not
anticipated to have a material effect on the Trust's liquidity or operating
results. If the Trust did not issue any such debt, such amount would still be
payable or receivable and would be treated as a loss or gain, accordingly. Such
a gain or loss could have a material effect on the Trust's results from
operations however due to Management's current intention to issue the related
debt, no such gain or loss is anticipated.
    

                 As previously discussed, Starwood Lodging has commenced an
approximately $10.0 million renovation and conversion of the Dallas Park
Central Hotel to a Radisson, an approximately $6.0 million renovation of the
Atlanta Sheraton Colony Square Hotel and an approximately $2.0 million
renovation of the Portland Riverside Inn.  Starwood Lodging is currently
planning renovations of the Doral Inn and the Boston Park Plaza and may plan
and commence other renovations of existing and new properties as it deems
appropriate.  Renovations of specific hotels are expected to have a negative
impact on the revenues of such hotels during the pendency of major renovations.
Management believes the renovations should result in increases in REVPAR and
cash flow after completion.

                 From January 1, 1995 to the date of the filing of this Joint
Annual Report, Starwood Lodging has invested over $225 million in acquiring
hotels ($171 million plus capital expenditures of $4.2 million for the year
ended December 31, 1995).  As part of its investment strategy, Starwood Lodging
plans to acquire additional hotels. Starwood Lodging intends to incur
additional indebtedness in a manner consistent with its policy of maintaining a
Ratio of Debt - to - Total Market Capitalization of not more than 50%.
Management of each of the Trust and the Corporation believes that it will have
access to capital resources sufficient to satisfy the cash requirements of each
of the Trust and of the Corporation and to expand and develop their business in
accordance with their strategy for future growth.

                 The Trust paid dividends in the fourth quarter of 1995 by
declaring a dividend of $0.47 per Paired Share for the quarter ended September
30, 1995 which was paid on October 27, 1995.  The Trust also declared a
dividend of $0.47 per Paired Share for the fourth quarter ended December 31,
1995 which was paid in January of 1996.

                 Pro Forma Funds From Operations.  Management believes that FFO
is one measure of financial performance of an equity REIT such as the Trust.
On a pro forma basis, combined FFO (as defined by the National Association of
Real Estate Investment Trusts ("NAREIT") (1)) for the year 1995 grew by 14.4
percent to $48.6 million, compared to combined FFO of $42.5 million, for the
corresponding period in 1994.  The following table shows the calculation of pro
forma combined FFO for the indicated periods:

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                                  -----------------------------
                                                                                   1995                  1994
                                                                                   ----                  ----
                                                                                         (in thousands)
                    <S>                                                           <C>                   <C>
                    Income before minority interest                               $30,245               $26,254
</TABLE>





                                       42
<PAGE>   46
<TABLE>
                    <S>                                                           <C>                   <C>
                    Real estate related depreciation and
                     amortization, net of amortization of financing
                     costs                                                         18,264                16,666
                    Loss (gain) on sales of hotel assets                              125                  (456)
                                                                                  -------               ------- 
                    Funds from Operations                                         $48,634               $42,464
                                                                                  =======               =======
</TABLE>


    (1)      With respect to the presentation of FFO, management elected early
             adoption of the "new definition" as recommended in the March 1995
             NAREIT White Paper on Funds from Operations beginning January 1,
             1995.  Management and industry analysts generally consider funds
             from operations to be one measure of the financial performance of
             an equity REIT that provides a relevant basis for comparison among
             REITs and it is presented to assist investors in analyzing the
             performance of Starwood Lodging.  Funds from operations is defined
             as income before minority interest (computed in accordance with
             generally accepted accounting principles), excluding gains and
             losses from debt restructuring and sales of property, and real
             estate related depreciation and amortization (excluding
             amortization of financing costs).  Funds from operations does not
             represent cash generated from operating activities in accordance
             with generally accepted accounting principles and is not
             necessarily indicative of cash available to fund cash needs.
             Funds from operations should not be considered an alternative to
             net income as an indication of Starwood Lodging's financial
             performance or as an alternative to cash flows from operating
             activities as a measure of liquidity.

FFO includes $1 million of interest income recognized in excess of the actual
cash received on mortgage notes receivable (as a result of the notes having
been purchased at a discount) for each of the years ended December 31, 1995 and
1994.

HISTORICAL RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

             The following discussion and analysis of the historical results of
operations for the years ended December 31, 1995 and 1994 give effect to
transactions on the actual date they were consummated; in the case of the
Reorganization, as of January 1, 1995; in the case of the Offering, July 6,
1995; and in the case of acquisitions of hotel properties as of the date each
was purchased.

             Combined Funds From Operations.  Management believes that FFO is
one measure of financial performance of an equity REIT such as the Trust.
Combined FFO for the twelve months of 1995 rose by 379 percent to $33.1 million
compared to combined FFO of $6.9 million on combined revenues of $161.7 million
for the comparable period in 1994.  The following table shows the calculation
of pro forma combined FFO for the indicated periods:

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                                  ------------------------------
                                                                                    1995                  1994
                                                                                    ----                  ----
                                                                                          (in thousands)
                    <S>                                                           <C>                   <C>
                    Income before minority interest and                           $18,138               $(4,663)
                    extraordinary items
</TABLE>





                                       43
<PAGE>   47
<TABLE>
                    <S>                                                           <C>                    <C>
                    Shareholder litigation expense                                    ---                 2,648
                    Provision for loss                                                ---                   759
                    Real estate related depreciation and                           14,799                 8,161
                      amortization, net of amortization of financing
                      costs
                    Loss (gain) on sales of hotel assets                              125                      
                                                                                  -------                ------

                    Funds from Operations                                         $33,062                $6,905
                                                                                  =======                ======
</TABLE>


THE TRUST

             Net income for the Trust for the year ended December 31, 1995 was
$10.7 million as compared to a loss of $3.5 million in the prior year.  Rents
from the Corporation, which are primarily based on hotel revenues, increased
$9.8 million to $26.7 million for the year ended December 31, 1995, as compared
to the corresponding period in 1994.  The increase was primarily the result of
rents earned by the Realty Partnership on four hotels contributed by the
Starwood Partners to the Realty Partnership and the Operating Partnership
effective January 1, 1995 and seven additional hotels acquired during the year
ended December 31, 1995.  The four contributed hotels (the Doubletree Hotel
located in Rancho Bernardo, California; Capitol Hill Suites located in
Washington, DC; the Harvey Wichita located in Wichita, Kansas; and the French
Quarter Suites located in Lexington, Kentucky) and the seven hotels acquired
during the year accounted for increased rents of $9.5 million for the year.  In
addition, rents earned by the Trust from continuously owned properties leased
by the Corporation increased $838,000.  These increases were offset by a
decrease in rents of $543,000 resulting from the sale of hotels in Austin,
Texas (May 1994), Brunswick, Georgia (August 1994), New Port Richey, Florida
(August 1994), Fayetteville, North Carolina (November 1994) and Jacksonville,
Florida (November 1994).

             Interest from the Corporation increased by $3.0 million to $4.8
million for the year ended December 31, 1995 as compared to the corresponding
period in 1994.  The increase in interest income resulted primarily from (i)
interest on the intercompany mortgage note relating to the Doral Inn from
September 20, 1995 to the end of the year; (ii) interest on unsecured notes
from the Corporation having an average balance of $11.1 million and bearing
interest at prime plus two percent for the year ended December 31, 1995 (a
moratorium on the payment of interest on such unsecured notes was in effect
throughout 1994); and (iii) interest on the first mortgage of the Milwaukee
Marriott Hotel (owned by a partnership of which the Operating Partnership is
the sole general partner) which was purchased by the Realty Partnership in July
1995.

             Interest from mortgage and other notes amounted to $10.8 million
for the year ended December 31, 1995, as compared to $1.5 million for the
corresponding period in 1994.  The increase primarily resulted from the
contribution of notes receivable by the Starwood Partners to the Realty
Partnership in the Reorganization, together with interest earned on the
mortgage note receivable relating to the Grand Hotel purchased in September
1995.





                                       44
<PAGE>   48
             Other income for the year ended December 31, 1995 of $1.1 million
resulted primarily from the retention of a $500,000 deposit related to the
proposed sale of the Bourbon Street hotel/casino and the receipt of $289,000
and $48,000 of proceeds relating to land comprising part of the King 8
hotel/casino and Bourbon Street hotel/casino, respectively, which was
transferred pursuant to eminent domain proceedings.

             The Trust and the Corporation periodically estimate the value of
their hotel assets and compare these values to the net book values of the hotel
assets.  For hotel assets not held for sale, the undiscounted future cash flows
of the assets on a hotel-by-hotel basis, are compared to the net book value of
the assets; and if the undiscounted future cash flows are less than the net
book value of the assets, the excess of the net book values over the estimated
fair values is charged to current earnings.  When it is the opinion of
management that the fair value of a hotel that has been identified for sale is
less than the net book value of the hotel, a reserve for losses is established.
Fair value is determined based upon the discounted cash flow of the properties
at rates (generally ranging from 11.0% to 21.0%) deemed reasonable for the type
of property and prevailing market conditions, and, if appropriate, then current
net proceeds of sale from pending offers.  In determining whether to accept an
offer for the sale of a property, management considers the fairness of the
offer in comparison to the value of the property, the terms of the offer, and
whether the offer is all cash or includes seller financing.

             Based on the foregoing methodology, a provision for loss in the
amount of $759,000 was recorded in 1994.  No provision for loss was recorded in
1995.

             Interest expense decreased by $3.8 million to $12.4 million for
the year ended December 31, 1995, as compared to the corresponding period in
1994.  The decrease was due to the repayment of approximately $206.5 million of
existing indebtedness following the Offering and to the retiring of mortgage
notes in 1995, which were secured by the Embassy Suites Hotel in Phoenix,
Arizona and the Bay Valley Resort in Bay City, Michigan and was partially
offset by the assumption of additional notes payable by the Realty Partnership
in the Reorganization, three of which were also repaid during 1995.

             Depreciation and amortization expense increased by $3.8 million
for the year ended December 31, 1995, as compared to the corresponding period
in 1994, principally due to the above mentioned property contributions and
acquisitions and to the amortization of reorganization and financing costs
which were partially offset by the above mentioned property sales.

             Administrative and operating expenses for the year ended December
31, 1995 increased $856,000 to $2.4 million reflecting increased payroll costs
due to the growth of the Trust and costs incurred relating to the potential
acquisition of hotels which ultimately were not acquired.

             Minority interest represents the interest of the Starwood Partners
in the Realty Partnership for the year ended December 31, 1995.





                                       45
<PAGE>   49
             During 1995, the Trust recognized an extraordinary loss of $2.2
million net of minority interests of $163,000 relating to two items:

             (a)     An extraordinary loss before minority interest of $3.6
                     million due to the early extinguishment of debt in respect
                     of the Prior Credit Agreement which was terminated during
                     the year; and

             (b)     An extraordinary gain before minority interest of $1.3
                     million relating to the reversal of outstanding amounts
                     accrued in 1993, due to the early extinguishment of debt.

THE CORPORATION

             Hotel revenues increased by $38.6 million for the year ended
December 31, 1995, as compared to the corresponding period in 1994.  The
addition of the four contributed properties and the seven acquired properties
as discussed above resulted in increases in hotel revenue of $42.2 million for
the year ended December 31, 1995.  This increase was offset by the hotel sales
discussed above resulting in decreased revenues of $7.2 million.  The remaining
increase of $3.6 million for the year ended December 31, 1995, is attributable
to other continuously owned properties.

             Gaming revenues for the year ended December 31, 1995 as compared
to the year ended December 31, 1994 decreased by $1.1 million to $26.9 million.
Management believes that operating performance from its gaming assets in 1996
will be comparable to that of the prior year.

             Included in other income for the year ended December 31, 1995 is
$800,000 received by the Corporation as a result of the termination of
management contracts in connection with the settlement of certain shareholder
actions against former officers of Starwood Lodging (see Item 3 of Part I).

             Administrative and operating expenses increased by $653,000 for
the year ended December 31, 1995, as compared to the corresponding period in
1994.  The increase was primarily the result of increases in payroll costs due
to the Corporation's growth.

             Depreciation and amortization expense increased by $3.5 million
for the year ended December 31, 1995, as compared to the corresponding period
in 1994.  The increase was primarily the result of the hotels contributed by
Starwood Capital in connection with the Reorganization and those hotels
acquired by Starwood Lodging and amortization of Reorganization costs as
discussed above.

             Minority interest represents the interest of the Starwood Partners
in the Operating Partnership for the year ended December 31, 1995.





                                       46
<PAGE>   50
             For information with respect to rent and interest paid to the
Trust during the years ended  December 31, 1995 and 1994, see "The Trust"
above.

HISTORICAL RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993

THE TRUST

             Rents from the Corporation totaled $16.9 million and $16.5 million
for the years ended December 31, 1994 and 1993, respectively.  The increase was
due to higher hotel revenues for the hotels leased by the Corporation from the
Trust (which resulted in higher percentage rents) offset by a decrease in
rental income of $802,000 resulting from the sale of hotels in Tucker, Georgia
(June 1993), St. Louis, Missouri (December 1993), Austin, Texas (April 1994),
New Port Richey, Florida (August 1994), Brunswick, Georgia (August 1994),
Fayetteville, North Carolina (November 1994) and Jacksonville, Florida
(November 1994).

             Interest from the Corporation increased to $1.7 million from $1.5
million for the years ended December 31, 1994 and 1993, respectively.  The
increase in interest income was a result of the higher amounts outstanding
under the Milwaukee notes, which increased from $15.2 million at December 31,
1993 to $16.9 million at December 31, 1994.  (For information pertaining to
such notes see Notes 4 and 5 of Notes to Financial Statements.)  For additional
information with respect to rents and interest from the Corporation in future
periods, see "Liquidity and Capital Resources" below.

             Interest from mortgage and other notes receivable increased by
$224,000 for the year ended December 31, 1994 as compared to 1993.  The
increase resulted from the higher balances outstanding from the additional
notes received upon sales of the hotel properties discussed above and the
receipt of the final payment under three notes receivable relating to the
Vagabond Inns in Rosemead, Sacramento and Woodland Hills, California, the
interest on such notes having been previously deferred.

             Gains on sales of hotel assets for the year ended December 31,
1994 totaling $432,000 reflected the sales of hotels discussed above and
$208,000 related to the in substance foreclosure and subsequent all cash sale
of the underlying property collateralizing the Trust's mortgage note receivable
on the Ramada Inn in Merrimack, New Hampshire.

             Interest expense totaled $16.3 million and $14.0 million for the
years ended December 31, 1994 and 1993, respectively, an increase of $2.3
million.  The increase was primarily due to an increase in the average interest
rate under a subsequently refinanced credit agreement, such rate varying with
the prime rate charged by one of the Senior Lenders.

             The sales of the properties discussed above and an increase in the
provision for investment losses are the primary reasons for the decline in
depreciation and amortization expense of $425,000 between 1994 and 1993.





                                       47
<PAGE>   51
             Administrative and operating expenses totaled $1.6 million and
$1.9 million for the years ended December 31, 1994 and 1993, respectively, a
decrease of $365,000.  The decrease was primarily the result of lower insurance
expense and professional fees unrelated to the debt restructuring.

             During 1994 a provision for investment losses (a non-cash charge
to operations) totaling $759,000 was recorded.  The provision included $439,000
which was recorded as a result of the acceptance of offers to sell the
Jacksonville and Fayetteville properties, which had previously been identified
for sale at amounts lower than the then current net book values.  The provision
also included $320,000 which was established based upon an analysis of the net
realizable value of the underlying property collateralizing the Trust's
mortgage note receivable on the Ramada Inn in Merrimack, New Hampshire.

   
             See Part I, Item 3, Legal Proceedings, of this Joint Annual Report
for a description of an agreement between Ross and Starwood Capital with
respect to certain claims of Ross purchased by Starwood Capital and an
agreement by Starwood Capital to purchase the Paired Shares of the Trust and
Corporation owned by Ross at a price of $33.75 per Paired Share subject to
certain adjustments.  Starwood Capital also had the right to purchase such
Paired Shares at the same time and on the same terms.  During 1994, the Trust
and the Corporation recorded a charge to shareholder litigation expense of $1.3
million and $1.3 million, respectively, the estimated fair market value of the
agreement, as determined by an investment banker using an option pricing model.
In 1995, Starwood Capital and Starwood Lodging agreed, among other things, that
the maximum amount Starwood Capital could recover under such claims would not
exceed an aggregate of $1.8 million.  In January 1996, Ross elected to sell his
Paired Shares, which were sold at a price of $29.625 per Paired Share and the
Trust and the Corporation paid $1,375,743 in the aggregate pursuant to their
indemnity obligations. Additionally, the Trust and the Corporation are entitled
to insurance proceeds totalling $205,000 and, as a result, will recognize
approximately $629,000 of income in the first quarter of 1996.
    

             No distributions were made by the Trust for the years ended
December 31, 1994 or 1993.

             The Trust's net loss totaled $3.5 million, or $(1.72) per share,
and $3.9 million or $(1.92) per share, for the years ended December 31, 1994
and 1993, respectively.

THE CORPORATION

             Hotel revenues totaled $82.7 million and $86.9 million for the
years ended December 31, 1994 and 1993, respectively, representing a decrease
of $4.2 million.  The hotel sales described under the caption "The Trust" above
resulted in decreased revenue of $5.3 million.  In March 1994, the franchise
agreement and management agreement with Marriott Corporation for the Dallas
property were terminated.  The property was then being managed for the
Corporation by Sage Hospitality, and operated as the Dallas Park Central Hotel.
Revenues at the Dallas property decreased by $3.8 million.  The decrease from
property sales and the Dallas property were offset by increased revenues of
$4.9 million at the properties which continued to be leased from the Trust by
the Corporation, including an





                                       48
<PAGE>   52
increase of $1.5 million at the Milwaukee Marriott, which was renovated during
1993.  The following table summarizes average occupancy and average room rates
for properties which were operated by the Corporation under lease from the
Trust at December 31, 1994:

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                             ------------------------------------
                                                              1994                          1993
                                                             ------                        ------
 <S>                                                         <C>                           <C>
 Including Dallas Park Central:
 Occupancy Rate                                              68.03%                        65.32%

 Average Room Rate                                           $59.85                        $60.30

 Excluding Dallas Park Central:
 Occupancy Rate                                              71.76%                        65.75%
 Average Room Rate                                           $59.84                        $59.88
</TABLE>

Management of the Corporation believes that the increases in the average
occupancy rate resulted primarily from more favorable economic conditions which
created increased business and pleasure travel throughout the United States and
improved operational systems.

             Gaming revenues totaled $28.0 million and $27.5 million for the
years ended December 31, 1994 and 1993, respectively.

             For information regarding the carrying value of properties held
for sale, see the Trust above.  Gain on sales of hotel assets totaled $24,000
and $74,000 for the years ended December 31, 1994 and 1993, respectively,
reflecting the property sales described above.

             Hotel expenses totaled $60.8 million and $68.1 million or 73.6%
and 78.4% of hotel revenues, for the years ended December 31, 1994 and 1993,
respectively.  The decrease in hotel expenses as a percentage of hotel revenue
are primarily due to the lower cost of operating the Dallas property (see
discussion of hotel revenues above) where operating expenses have historically
been higher than at other hotel properties, the improved operating margin
resulting from the renovation of the Milwaukee Marriott discussed above and the
effect of the sale of the properties having higher operating costs as a
percentage of revenues than properties that continue to be operated by the
Corporation.

             Gaming expenses totaled $24.4 million and $24.1 million, or 87.4%
and 87.5% of gaming revenues, for the years ended December 31, 1994 and 1993,
respectively.

             For information with respect to rent and interest to the Trust
during the years ended December 31, 1994 and 1993, see "The Trust - Results of
Operations for the Years Ended December 31, 1994 and 1993" above.

             Administrative and operating expenses decreased by $161,000, or
6%, for the year ended December 31, 1994 as compared to 1993.  The decrease was
primarily the result of a reduction in the level of corporate staff.





                                       49
<PAGE>   53
             The Corporation's net loss totaled $1.2 million, or $(0.59) per
share, in 1994, as compared to $3.1 million, or $(1.56) per share, for 1993.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

             The financial statements and supplementary data required by this
Item are included in Item 14 of this Joint Annual Report.

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

             The required disclosure has been previously reported in Starwood
Lodging's Joint Proxy Statement dated November 3, 1995.

                                   PART III

ITEM 10. TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.

Trustees and Executive Officers of the Trust

    The following table sets forth, for each of the current members of the
Trust's Board of Trustees as of the date of this Joint Annual Report, the class
of Trustees to which such Trustee has been elected, the name and age of such
Trustee, the principal occupation or employment of such Trustee during the past
five years and the principal business of such Trustee's employer, other
directorships held by such Trustee and the year in which such Trustee first
became a Trustee of the Trust.

Trustees Whose Terms Expire at the 1996 Annual Meeting

<TABLE>
<CAPTION>
                 Name and Age                      Principal Occupation and Business Experience                Trustee Since
                 ------------                      --------------------------------------------                -------------
                 <S>                               <C>                                                         <C>
                 Jeffrey C. Lapin (39)             President and Chief Operating Officer of the Trust.         September 1992
                                                   Mr. Lapin was President and Chief Executive Officer of
                                                   the Trust from May 1991 to December 1994 and has been
                                                   a Trustee since September 1992.  Prior to that time,
                                                   he was Vice President (from January 1988) and
                                                   Secretary (from September 1986) of the Trust.  Prior
                                                   to 1986 Mr. Lapin was a real estate attorney at
                                                   Mitchell, Silberberg & Knupp in Los Angeles.  Mr.
                                                   Lapin is a director of THQ, Inc., a licensee of
                                                   Nintendo products.


                 Stephen R. Quazzo (36)            President since April 1991 of Equity Institutional          
                                                   Investors, Inc., a subsidiary of Equity Group
                                                   Investments, Inc., a Chicago based holding company
                                                   controlled by Samuel Zell.  Prior to that time, Mr.
                                                   Quazzo was a Vice President of Goldman, Sachs & Co.,
                                                   responsible for the firm's real estate
</TABLE>





                                       50
<PAGE>   54
<TABLE>
                 <S>                               <C>                                                         <C>
                                                   investment banking activities in the Midwest.  Mr.
                                                   Quazzo is a member of the Urban Land Institute and is       August 1995
                                                   on the advisory board of City Year Chicago.
</TABLE>

Trustees Whose Terms Expire at the 1997 Annual Meeting

<TABLE>
<CAPTION>
                 Name and Age                      Principal Occupation and Business Experience                Trustee Since
                 ------------                      --------------------------------------------                -------------
                 <S>                               <C>                                                         <C>
                 Bruce W. Duncan (44)              President and Chief Executive Officer of The Cadillac       August 1995
                                                   Fairview Corporation Limited since January, 1996.
                                                   From October 1994 to December 1995, President of
                                                   Blakely Capital, Inc., a private firm focusing on
                                                   investments in real estate and telecommunications.
                                                   From 1992 to April 1994, Mr. Duncan was President and
                                                   Co-Chief Executive Officer of JMB Institutional Realty
                                                   Corporation and from 1984 to 1991 Executive Vice
                                                   President of JMB Realty Corporation. Mr. Duncan holds
                                                   an MBA from the University of Chicago.  He is on the
                                                   Board of Trustees of Kenyon College.

                 Daniel H. Stern (34)              Co-founder and President of Ziff Brothers Investments,      August 1995
                                                   L.L.C., a diversified New York based investment
                                                   management firm.  Prior to co-founding Ziff Brothers
                                                   Investments in December 1992, Mr.Stern was the Co-
                                                   Managing Director of William A.M. Burden & Co., a
                                                   private investment management firm where he was
                                                   responsible for asset allocation and investment
                                                   policy.  Mr. Stern is a member of the Board of
                                                   Directors of Commodore Media. Inc.

                 Barry S. Sternlicht (35)          Chairman and Chief Executive Officer of the Trust.  He       
                                                   is founder of Starwood Capital Group, L.P., a real
                                                   estate investment firm (and co-founder of its
                                                   predecessor entity in September 1991), and has been
                                                   the President and CEO of Starwood Capital Group, L.P.
                                                   since its formation.  Prior to forming Starwood
                                                   Capital, he was Vice President and then Senior Vice
                                                   President (from 1989 to 1991) of JMB Realty
                                                   Corporation, a real estate investment firm.  Mr.
                                                   Sternlicht is currently a member of the Management
                                                   Committee, a Trustee of each of Equity Residential
                                                   Properties Trust, a multi-family REIT, and Angeles
                                                   Participating Mortgage Trust, a REIT, Co-Chairman of
                                                   the board of directors of Westin Hotels & Resorts and
                                                   is a director of
</TABLE>





                                       51
<PAGE>   55
<TABLE>
                 <S>                               <C>                                                         <C>
                                                   U.S. Franchise Systems.  Mr. Sternlicht is on the            December 1994
                                                   Board of Governors of NAREIT and is a member of the
                                                   Urban Land Institute and of the National Multi-Family
                                                   Housing Council.
</TABLE>

Trustees Whose Terms Expire at 1998 Annual Meeting

<TABLE>
<CAPTION>
                 Name and Age                      Principal Occupation and Business Experience                Trustee Since
                 ------------                      --------------------------------------------                -------------
                 <S>                               <C>                                                         <C>
                 Madison F. Grose (42)             Executive Vice President and General Counsel of             December 1994
                                                   Starwood Capital Group, L.P. (and its predecessor
                                                   entity) since July 1992.  From November 1983 through
                                                   June 1992, Partner of the law firm of Pircher, Nichols
                                                   & Meeks.

                 William E. Simms (51)             President of the Risk Management Product Services           August 1995
                                                   Group, Transamerica Life Companies, and a member of
                                                   its board of directors.  Over the past 24 years, he
                                                   has held various other management positions with that
                                                   company.  He is active in civic organizations; he is
                                                   Chairman of the Charlotte-Mecklenburg Urban League and
                                                   the Charlotte-Mecklenburg Arts and Science Council,
                                                   and he is a member of the board of directors of the
                                                   Mecklenburg County United Way and the Mecklenburg
                                                   Hospital Authority.  He is a part owner of the
                                                   Carolina Panthers National Football League team.  Mr.
                                                   Simms is a director of NationsBank N.A.
</TABLE>

    The following table includes certain information with respect to the
current executive officers of the Trust other than Messrs. Sternlicht and
Lapin:


<TABLE>
<CAPTION>
Name                          Age              Position(s) with the Trust
----                          ---              --------------------------
<S>                           <C>              <C>
Ronald C. Brown               41               Vice President and Chief Financial Officer
</TABLE>


    Ronald C. Brown.  Mr. Brown has been Vice President and Chief Financial
Officer of the Trust since July 1995.  Prior to joining the Trust, Mr. Brown
was President of Sonoran Hotel Advisors, a hotel REIT advisory firm.  From
December 1993 to August 1994, Mr.  Brown was President of Doubletree
Corporation, a public hotel operating company.  From January 1991 to December
1993, Mr. Brown was Executive Vice President - Finance & Planning and then
Chairman of Doubletree





                                       52
<PAGE>   56
Hotels Corporation.  From March 1988 to April 1992, Mr. Brown was Vice
President - Finance & Accounting for Canadian Pacific Hotels Corporation.

    The executive officers of the Trust serve at the pleasure of the Board of
Trustees, subject in the case of Mr. Lapin to the provisions of his employment
agreement with the Trust.  (See "Employment Agreement with Executive Officer"
included in Item 11 of this Joint Annual Report.) There is no family
relationship among any of the Trustees or executive officers of the Trust.

Directors and Executive Officers of the Corporation

    The current Board of Directors of the Corporation consists of Earle F.
Jones, Bruce M. Ford, and Graeme W. Henderson.  In addition, the stockholders
of the Corporation have elected Mr. Sternlicht and Daniel W. Yih, Jean-Marc
Chapus, Steven R. Goldman, Michael A. Leven and Jonathan D. Eilian as directors
of the Corporation to take office upon the receipt of necessary regulatory
approvals from the Nevada Gaming Authorities ("Gaming Approval").  Gaming
Approvals are expected to be received by the end of 1997.  Messrs. Henderson
and Ford have indicated their intention to resign from the Board of Directors
of the Corporation when the required Gaming Approval is received.

    Pending receipt of any required Gaming Approval, the current Directors of
the Corporation are continuing as such and the Operating Partnership is being
managed by a management committee (the "Management Committee") consisting of
the current Directors of the Corporation, as well as the additional persons
elected to take office upon receipt of any required Gaming Approval.  While
awaiting Gaming Approval, the Corporation's existing management and Board of
Directors will be responsible for the operation and control of the gaming
assets of the Corporation, and the other Management Committee members will be
prohibited from any influence or control of the gaming assets.

    The following table sets forth, for each of the current members of the
Corporation's Board of Directors as of the date of this Joint Annual Report,
the name and age of such Director, the principal occupation or employment of
such Director during the past five years and the principal business of such
Director's employer, other directorships held by such Director and the year in
which such Director first became a Director of the Corporation.  The terms of
each of such Directors will expire at the 1998 Annual Meeting.

<TABLE>
<CAPTION>
                 Name and Age                      Principal Occupation and Business Experience                Director Since
                 ------------                      --------------------------------------------                --------------
                 <S>                               <C>                                                         <C>
                 Bruce M. Ford (56)                President of FST Management Corporation and President       September 1983
                                                   and Managing Partner of F.K.B. Management Corporation,
                                                   hotel and restaurant management companies, since
                                                   January 1988, and a member of Gibson 25 Associates,
                                                   LLC, a hotel developer since March 1995.  President of
                                                   Ford Management Corporation, a hotel/motel management
                                                   and development company, since June 1988.  Prior to
                                                   that time, Mr. Ford was Senior Vice President of
                                                   Operations of Ramada Inns.
</TABLE>





                                       53
<PAGE>   57
<TABLE>
                 <S>                               <C>                                                         <C>
                 Graeme W. Henderson (62)          Chairman of the Trust from July 1989 to December 1994       September 1986
                                                   and Trustee of the Trust from September 1986 to
                                                   December 1994.  He has been an independent financial
                                                   consultant since January 1990.  Prior to January 1990,
                                                   Mr. Henderson was President of Henderson Consulting,
                                                   Inc., a private financial consulting firm.  Mr.
                                                   Henderson has been President of Capstan, Inc.
                                                   (Formerly Seymour, Inc.), a manufacturer of machine
                                                   tool controls, since 1982.  Mr. Henderson is currently
                                                   a director of Capital Southwest Corporation.

                 Earle F. Jones (69)               Chairman of the Board of Directors of the Corporation       September 1985
                                                   since February 1989.  Co-Chairman since 1988 of MMI
                                                   Hotel Group, a hotel company.  From 1967 to 1968, Mr.
                                                   Jones was President of the International Association
                                                   of Holiday Inns and served two terms as a director.
                                                   Mr Jones is a Trustee and Chairman of Communications
                                                   Improvement Trust, whose beneficiaries are public
                                                   broadcasting and Tougaloo College, a member of the
                                                   Board of Trustees for Millsaps College and the
                                                   Catholic Foundation and Co-Chairman of the Mississippi
                                                   Olympic Committee.
</TABLE>

    The following table sets forth, for each of the current members of the
Management Committee who will become Directors of the Corporation upon receipt
of any required Gaming Approval, the name and age of such member, the principal
occupation or employment of such member during the past five years and the
principal business of such member's employer, other directorships held by such
member and the year in which such member first became a member of the
Management Committee.

Members Whose Terms Expire at the 1996 Annual Meeting

<TABLE>
<CAPTION>
                                                                                                                  Member of
                                                                                                                 Management
                 Name and Age                      Principal Occupation and Business Experience                Committee Since
                 ------------                      --------------------------------------------                ---------------
                 <S>                               <C>                                                         <C>
                 Jean-Marc Chapus (36)             Managing Director and Portfolio Manager of Trust            August 1995
                                                   Company of the West since March 1995.  Prior to that
                                                   time he was a Managing Director and Principal of
                                                   Crescent Capital Corporation with primary
                                                   responsibility of the firm's private lending and
                                                   private placement activities.  From 1986 to 1991, Mr.
                                                   Chapus served as First Vice President at Drexel
                                                   Burnham Lambert Incorporated.  From
</TABLE>





                                       54
<PAGE>   58
<TABLE>
                 <S>                               <C>                                                         <C>
                                                   1982 to 1984, Mr. Chapus was a member of the mergers
                                                   and acquisitions department at Lehman Brothers Kuhn
                                                   Loeb Incorporated.

                 Steven R. Goldman (34)            Senior Vice President of the Corporation since March        December 1994
                                                   1995.  Mr. Goldman was a Vice President of Starwood
                                                   Capital Group, L.P., specializing in hotel
                                                   acquisitions and hotel asset management, from August
                                                   1993 to February 1995.  From 1990 to 1993, he was
                                                   Senior Development Manger of Disney Development
                                                   Company, the real estate investment development and
                                                   management division of the Walt Disney Company.  From
                                                   1986 to 1990, Mr. Goldman was Director of Development
                                                   of The Hyatt Development Corporation.

                 Michael A. Leven (58)             President and Chief Executive Officer of U.S.               August 1995
                                                   Franchise Systems, a hotel franchising and development
                                                   company, since October 1995.  From November 1990 to
                                                   September 1995, Mr. Leven was President and Chief
                                                   Operating Officer of Holiday Inn Worldwide.  Prior to
                                                   that time he was President of Days Inn (from 1985 to
                                                   1990), a senior executive, including President and
                                                   Chief Operating Officer, of Americana hotels (from
                                                   1976 to 1985) and an executive at Dunfey Family Hotels
                                                   (1973 to 1976) and Sonesta hotels (1961 to 1973).  Mr.
                                                   Leven is also a member of the Board of Governors of
                                                   the American Red Cross.
</TABLE>

Members Whose Terms Expire at the 1997 Annual Meeting

<TABLE>
<CAPTION>
                                                                                                                  Member of      
                                                                                                                 Management     
                 Name and Age                      Principal Occupation and Business Experience                Committee Since
                 ------------                      --------------------------------------------                ---------------
                 <S>                               <C>                                                         <C>
                 Jonathan D. Eilian (28)           Vice President and then Senior Vice President of            August 1995
                                                   Starwood Capital Group, L.P. (and its predecessor
                                                   entity) since its formation in September 1991.  Prior
                                                   to 1991 he was Acquisitions Associate for JMB Realty
                                                   Corporation,a  real estate investment firm, and for
                                                   The Palmer Group, L.P., a private investment firm
                                                   specializing in corporate acquisitions.  Mr. Eilian
                                                   received an MBA from the Wharton Graduate School of
                                                   Business in 1991.
</TABLE>





                                       55
<PAGE>   59
<TABLE>
                 <S>                               <C>                                                         <C>
                 Barry S. Sternlicht (35)          Chairman and Chief Executive Officer of the Trust.  He      December 1994
                                                   was founder of Starwood Capital Group, L.P. (and co-
                                                   founder of its predecessor entity in September 1991)
                                                   and has been the President and CEO of Starwood Capital
                                                   Group, L.P. since its formation.  Prior to forming
                                                   Starwood Capital, he was Vice President and then
                                                   Senior Vice President (from 1989 to 1991) of JMB
                                                   Realty Corporation, a real estate investment firm.
                                                   Mr. Sternlicht is currently a Trustee of the Trust, a
                                                   Trustee of each of Equity Residential Properties
                                                   Trust, a multi-family REIT, and Angeles Participating
                                                   Mortgage Trust, a REIT, Co-Chairman of the board of
                                                   directors of Westin Hotels & Resorts and is a director
                                                   of U.S. Franchise Systems.  Mr. Sternlicht is on the
                                                   Board of Governors of NAREIT and is a member of the
                                                   Urban Land Institute and of the National Multi-Family
                                                   Housing Council.
</TABLE>

Members Whose Terms Expire at the 1998 Annual Meeting

<TABLE>
<CAPTION>
                                                                                                                  Member of
                                                                                                                 Management
                 Name and Age                      Principal Occupation and Business Experience                Committee Since
                 ------------                      --------------------------------------------                ---------------
                 <S>                               <C>                                                         <C>
                 Daniel W. Yih (37)                General partner of Chilmark Partners, L.P. since June       August 1995
                                                   1995.  Mr. Yih had served as Chief Financial Officer
                                                   of Midway Airlines Corporation (from September 1995 to      
                                                   December 1995) and as President of Merco-Savory, Inc.,
                                                   a manufacturer of food preparation equipment (from
                                                   March 1995 to June 1995) and as a senior executive of
                                                   Welbilt Corporation (from September 1990 to March
                                                   1995).  Prior to that time, Mr. Yih served as an
                                                   associate of Kohlberg & Co.
</TABLE>

    The following table includes certain information with respect to each of
the Corporation's current executive officers other than Mr. Goldman:

<TABLE>
<CAPTION>
Name                          Age              Position(s) with the Corporation
----                          ---              --------------------------------
<S>                           <C>              <C>
Kevin E. Mallory              36               Executive Vice President
</TABLE>


    Kevin E. Mallory.  Mr. Mallory has been Executive Vice President since July
1992.  From December 1991 to July 1992 he was President of Merit Hotel Group, a
hotel development and consulting company.  From September 1989 to November
1991, he was Development Director, Westin Hotels & Resorts, a hotel management
company.  Prior to that time he was Assistant Vice President and Asset Manager,
VMS Realty Partners, a real estate syndicator.





                                       56
<PAGE>   60
    The executive officers of the Corporation serve at the pleasure of the
Board of Directors.  There is no family relationship among any of the Directors
or executive officers of the Corporation.

ITEM 11.     EXECUTIVE COMPENSATION.

Summary of Cash and Certain Other Compensation

             The Trust.  The following table provides certain summary
information concerning the compensation paid for the fiscal years ended
December 31, 1995, 1994 and 1993 to the Trust's Chief Executive Officer and
each other executive officer of the Trust whose total compensation for 1995
exceeded $100,000 for services rendered in all capacities to the Trust.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                          Long Term           All Other
                            Annual Compensation          Compensation      Compensation ($)
                         -------------------------       ------------      ----------------
Name and                                                  Securities
Principal Position                                        Underlying
------------------      Year    Salary ($)   Bonus ($)   Options/SARs (#)                                            
                        ----    ----------   ---------   ----------------                                               
                                                                      
<S>                      <C>      <C>        <C>           <C>                 <C>
Barry S. Sternlicht      1995      91,667    150,000       417,000 (1)
   Chairman and Chief                                  
   Executive Officer                                   
                                                       
Jeffrey C. Lapin         1995     199,167     75,000        73,667 (1)
   President and Chief   1994     190,000     75,000         2,000 (1)(2)
   Operating Officer     1993     170,834     20,000   
                                                       
Ronald C. Brown          1995      66,666     65,000        55,000 (1)
   Vice President and                                  
   Chief Financial                                     
   Officer                                             
Michael W. Mooney        1995      50,000                                      75,000 (3)
   Vice President and    1994     150,000     20,000         1,500 (1)(2)
   Chief Financial       1993     140,416     11,667   
   Officer
</TABLE>

(1)      For information with respect to these options, see "Option Exercises
         and Holdings" below.

(2)      Adjusted for one-for-six reverse stock split which occurred in June
         1995.

(3)      Amount shown reflects cash paid for severance.

             The Corporation.  The following table provides certain summary
information concerning the compensation paid for the fiscal years ended
December 31, 1995, 1994 and




                                       57
<PAGE>   61
1993 to each executive officer of the Corporation whose total compensation for
1995 exceeded $100,000 for services rendered in all capacities to the
Corporation.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                         Long Term             All Other
                                        Annual Compensation             Compensation        Compensation ($)
                                   ----------------------------      -----------------      ----------------
                                                                         Securities
Name and                                                                 Underlying
Principal                                                                 Options/
Position                           Year      Salary($)    Bonus($)         SARs (#)
--------                           ----      ---------    --------   -----------------
<S>                                <C>        <C>          <C>         <C>                   <C>
Kevin E. Mallory                   1995       156,244      50,000        30,000(2)
  Executive Vice                   1994       150,000      37,500      1,500(1)(2)
  President                        1993       140,416      11,667

Steven R. Goldman                  1995       114,583      75,000        46,000(2)           19,800(3)
  Senior Vice
  President
</TABLE>

__________________

(1)      Adjusted for one-for-six reverse stock split which occurred in June
         1995.

(2)      For information with respect to these options, see "Option Exercises
         and Holdings" below.

(3)      Amount shown reflects cash paid for housing allowance.

Option Grants

             The following table shows, as to each executive officer of the
Trust and the Corporation named in the Summary Compensation Tables above,
information concerning the options granted to that officer during the year
ended December 31, 1995.





                                       58
<PAGE>   62
                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
                              INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
                                                 
                                                                                        Potential Realizable  
                                     % of Total                                           Value at Assumed    
                    Number of         Options/                                         Annual Rates of Stock  
                    Securities      SARs Granted                                       Price Appreciation for 
                    Underlying      to Employees                                            Option Term       
                     Options/         in Last        Exercise Price    Expiration      ----------------------                   
 Name            SARs Granted (#)   Fiscal Year          ($/Sh)           Date          5% ($)      10% ($)
 ----            ----------------   ------------     --------------    ----------       -------     -------
 <S>               <C>                  <C>           <C>              <C>              <C>         <C>
 Barry S.           417,000(3)          43.1           $23.00(6)       June 29,         479,550     959,100
  Sternlicht                                                           2005

 Jeffrey C.        36,667(1)(2)         3.79          $16.50(1)(6)     January 31,      30,250       60,501
   Lapin                                                               2000
                    31,000(3)           3.80           $23.00(6)       June 29,         35,650       71,300
                                                                       2005
 Ronald C.          55,000(4)           5.68           $24.375(6)      July 10,         67,031      134,063
   Brown                                                               2005
 Kevin E.           30,000(5)           3.0            $23.00(6)       June 29,         34,500       69,000
   Mallory                                                             2005
 Steven R.          46,000(3)           4.75           $23.00(6)       June 29,         52,900      105,800
   Goldman                                                             2005

</TABLE>

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

(1)      Adjusted for one-for-six reverse stock split which occurred in June
         1995.

(2)      Options will become exercisable as to one-third of the amount granted
         on January 31, 1995, as to an additional one-third of the amount
         granted on January 31, 1996 and as to the remaining amount granted on
         January 31, 1997.

(3)      Except for options for 6,000 shares which were exercisable upon
         granting, options will become exercisable as to one-third of the
         amount granted on June 29, 1996, as to an additional one-third of the
         amount granted on June 29, 1997 and as to the remaining amount granted
         on June 29, 1998.

(4)      Options will become exercisable as to one-third of the amount granted
         on July 10, 1996, as to an additional one-third of the amount granted
         on July 10, 1997 and as to the remaining amount granted on July 10,
         1998.

(5)      Options will become exercisable as to one-third of the amount granted
         on June 29, 1996, as to an additional one-third of the amount granted
         on June 29, 1997 and as to the remaining amount granted on June 29,
         1998.





                                       59
<PAGE>   63
(6)      The per Paired Share exercise prices are equal to the fair market
         value of a Paired Share on the day the options were granted.

Option Exercises and Holdings

             The following table provides information with respect to the
options held as of December 31, 1995 by the executive officers of the Trust and
the executive officers of the Corporation named in the Summary Compensation
Tables above.





                                       60
<PAGE>   64
                   AGGREGATED OPTION/SAR EXERCISES IN 1995
                         AND DECEMBER 31, 1995 OPTION
                                    VALUES


<TABLE>
<CAPTION>
                                                                   Number of Shares Underlying
                                                                           Unexercised                Value of Unexercised In-the-
                                                                     Options/SARs at Fiscal                Money Options/SARs
                              Shares                                      Year-End (#)                 at Fiscal Year-End ($) (1)
                           Acquired on         Value             -----------------------------        -----------------------------
 Name                      Exercise (#)     Realized ($)         Exercisable     Unexercisable        Exercisable     Unexercisable
 ----                      ------------     ------------         -----------     -------------        -----------     -------------
 <S>                          <C>             <C>                  <C>              <C>                <C>              <C>
 Barry S. Sternlicht                                                6,000           411,000             39,000          2,671,500
 Jeffrey C. Lapin             8,333           194,784              20,556            54,111            228,228            540,930
 Ronald C. Brown                                                      0              55,000                0              281,875
 Michael W. Mooney                                                  4,667             1,000             110,675            13,000
 Kevin E. Mallory                                                   4,667            31,000             110,675           208,000
 Steven R. Goldman                                                  6,000            40,000              39,000           260,000
</TABLE>

_________________

(1)      Value is defined as the market price of the Paired Shares at December
         31, 1995 less the exercise price of the option.  The average of the
         high and low market prices of the Paired Shares at December 31, 1995
         was $29.50.





                                       61
<PAGE>   65
Compensation of Trustees/Directors

             Each Trustee, Director or member of the Management Committee who
is not also an officer of the Trust or the Corporation receives annual
Trustee's or Director's fees of $6,000 (other than Directors of the Corporation
who will continue to receive annual Director's fees of $12,000) and is
reimbursed for any out-of-pocket expenses incurred in attending meetings of the
Board of Trustees or the Board of Directors.  Each Trustee, Director and member
of the Management Committee has received options to purchase 6,000 Paired
Shares and Trustees, Directors and members of the Management Committee will
each receive additional options to purchase 6,000 Paired Shares on June 30 of
each year, beginning June 30, 1996.  The Chairman of each Board receives an
additional fee of $2,500 per year.  In addition, each non-officer Trustee or
Director receives a fee of $750 for each meeting in which he participates (or,
in the case of telephonic meetings, $500) and a fee of $500 for each committee
meeting in which he participates ($1,000 per meeting for committee chairman).

Share Purchase Agreements

             Prior to December 1989, the Trust and the Corporation maintained
share purchase plans pursuant to which Trustees, Directors, officers and
employees of the Trust or the Corporation were granted rights to purchase
Paired Shares from the Trust and the Corporation at prices based upon the then
fair market value of the Paired Shares.  A purchaser of Paired Shares under a
share purchase plan made a cash down payment equal to 10% of the purchase price
and executed a promissory note in favor of the Trust or the Corporation for the
balance.  Certificates evidencing Paired Shares purchased under a share
purchase plan were pledged to the Trust or the Corporation as collateral to
secure payment of the promissory note.  Prior to the satisfaction of the
obligations represented by the note, the purchaser was entitled to vote the
Paired Shares held in pledge, but not to transfer the purchaser's interest in
those shares.

             In 1995, the only share purchase agreements remaining in effect
were those between the Trust and each of Mr. Henderson, a former trustee of
the Trust and a director of the Corporation, and Mr. Samuels, and between the
Corporation and each of Messrs. Jones and Ford.  Upon the effectiveness of the
Reorganization, the share purchase agreements with Messrs. Henderson, Samuels
and Ford were terminated and the non-recourse indebtedness thereunder was
canceled (an aggregate of $56,250 with respect to Mr. Henderson, $82,391 with
respect to Mr. Samuels, and $108,784 with respect to Mr. Ford).  In addition,
the Paired Shares pledged in respect of such indebtedness were either released
from such pledge, to the extent that such Paired Shares had been paid for (an
aggregate of 223 Paired Shares for which $20,625 was paid with respect to Mr.
Henderson, 356 Paired Shares for which $32,922 was paid with respect to Mr.
Samuels, and 465 Paired Shares for which $45,279 was paid with respect to Mr.
Ford) or were forfeited by the individual, to the extent such Paired Shares had
not been paid for.





                                       62
<PAGE>   66
Employment and Compensation Agreements with Executive Officers

             The Trust has an employment agreement with Mr. Lapin and the
Corporation had an employment agreement with Mr. Mallory which provide that
they receive annual salaries in 1995 of $200,000 and $150,000, respectively,
and such annual bonuses, if any, as the Boards of the Trust and the
Corporation, respectively, may determine.  Mr. Lapin's employment agreement
expires on January 31, 1997 and Mr. Mallory's employment agreement expired
June, 1995.  Mr. Lapin is entitled to an annual bonus of not less than $75,000
and was granted options to purchase 41,667 Paired Shares at an exercise price
equal to $16.50 per Paired Share (the fair market value of the Paired Shares on
the date of grant) which will vest at a rate no longer than the most rapid rate
of vesting of options granted to any other executive during the term of his
employment agreement.  Mr. Lapin's annual salary increased to $225,000 in 1996.
Mr. Lapin also is eligible to participate in all employee benefit plans and
fringe benefits, if any, the Trust or the Corporation, respectively, makes
available to its other executive officers.  Mr. Lapin may terminate his
employment for "Good Reason" as defined in his employment agreement including
an assignment of duties inconsistent with his position, a substantial
alteration of his responsibilities, a breach of the agreement by the Trust,
removal from office without cause (as defined), a change in the composition of
51% of the Trustees, a decision by the Board of Trustees that the Trust shall
merge, sell or dispose of all or substantially all of its assets, dissolve or
liquidate, or the failure of Mr. Lapin to be a member of the Board of Trustees
other than for cause (as defined).  If Mr. Lapin so terminates his employment,
he will be entitled to receive a lump sum payment equal to the base salary and
bonuses that would have been payable had he continued to be employed for the
remainder of the term of the employment agreement, and all fringe benefits to
which he would have been entitled through the remainder of the term of the
employment agreement (other than stock options or stock loans not granted prior
to the date of termination).

             Pursuant to Mr. Lapin's employment agreement, the Trust loaned
$250,000 to Mr. Lapin in 1995.  The loan has a term of 10 years, bears interest
at the lowest applicable rate prescribed by section 1274(d) of the Code and is
unsecured.  Mr. Lapin will have the right at any time to repay up to 50% of the
loan (plus 50% of accrued interest and any collection costs) by delivering
Paired Shares for credit at the rate of $11.50 per Paired Share (which is
one-half of the price to the public per Paired Share in the Offering).

             In February, 1996, the Trust granted to Barry S. Sternlicht,
Chairman and Chief Executive Officer, two warrants, each to purchase up to 
15,000 Paired Shares at an exercise price of $1.00 per Paired Share. One
warrant is exercisable immediately (the "1996 Warrant") and one is exercisable
only after January 1, 1997 (the "1997 Warrant"). Any Paired Shares purchased
upon exercise of such a warrant will vest ratably over the balance of the year 
in which that warrant first became exercisable, to the extent Mr. Sternlicht 
has not theretofore resigned or been discharged for "cause." Exercise of the
1997 Warrant is also subject to the condition that Mr. Sternlicht not have
previously resigned or been discharged for "cause." All Paired Shares 
purchased upon exercise of either the 1996 Warrant or the 1997 Warrant are 
non-transferable prior to February, 1998.  The Board of Trustees of the Trust 
and the Board of Directors of the Corporation intend to develop incentive 
compensation programs for





                                       63
<PAGE>   67
their officers and key employees which are expected to include similar grants
of warrants, options or restricted stock or other forms of incentive 
compensation.

                             COMPENSATION COMMITTEE
                      INTERLOCKS AND INSIDER PARTICIPATION

             During 1995 and early 1996, the compensation committee of the Trust
(the "Trust Compensation Committee") was comprised of Messrs.  Sternlicht, Grose
and Simms. Based on informal discussions, the Trust Compensation Committee made
recommendations to the Trust's Board of Trustees regarding the compensation of
the Trust's executive officers (other than with respect to Mr. Sternlicht, as to
which Messrs. Sternlicht and Grose recused themselves).  Based in part on the
recommendations of the Trust Compensation Committee, the Board of Trustees of
the Trust and the executive committee of the Board of Trustees (Messrs.
Sternlicht, Lapin and Grose) made decisions with respect to the compensation of
the Trust's executive officers. Messrs. Sternlicht and Lapin, who are executive
officers of the Trust and members of the Board of Trustees of the Trust, did
not participate at the meetings related to their own compensation.

             During 1995 and early 1996, the compensation committee of the
Management Committee (the "Corporation Compensation Committee") was made up of
Messrs. Sternlicht, Jones and Chapus.  The Corporation Compensation Committee
met informally during 1995 and early 1996 to discuss the compensation of the
Corporation's executive officers.  Based in part on the recommendations of the
Corporation Compensation Committee, the executive committee of the Management
Committee comprised of Messrs. Sternlicht, Eilian and Goldman, made decisions
with respect to the compensation of the Corporation's executive officers
(except that Mr. Goldman recused himself with respect to his own compensation).

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
             AND MANAGEMENT.

             Certain Beneficial Owners.  To the knowledge of the Trust and the
Corporation, no person owns beneficially 5% or more of the Paired Shares,
except as follows:


   
<TABLE>
<CAPTION>
         Name and Address                        Amount               Percent of
        of Beneficial Owner                Beneficially Owned         Class (1)
        -------------------                ------------------         ----------
 <S>                                         <C>                       <C>
 FMR Corp.                                   1,795,255 (2)             13.0%(2)   
 82 Devonshire Street
 Boston, MA  02109

 Starwood Capital Group, L.P. and            1,195,885 (3)              8.0%
   affiliated entities
 Three Pickwick Plaza, Suite 250
 Greenwich, CT  06830
</TABLE>
    





                                       64
<PAGE>   68
<TABLE>
 <S>                                         <C>                       <C>
 Cohen & Steers Capital                      1,033,300 (4)             7.5%
   Management, Inc.
 757 Third Avenue
 New York, NY  10017

 T. Rowe Price Associates, Inc.                799,500 (5)             5.7%
 100 East Pratt Street
 Baltimore, MD  21202
</TABLE>

(1)      Based on the number of Paired Shares outstanding on February 23, 1996.

   
(2)      Based on information contained in Amendment No. 1 to Schedule 13G
         dated February 14, 1996, 1,472,389 Paired Shares are held by Fidelity 
         Management & Research Company (a wholly owned subsidiary of FMR Corp.)
         and 322,866 Paired Shares are held by Fidelity Management Trust 
         Company (a wholly owned subsidiary of FMR Corp.).  FMR Corp. has sole 
         voting power with respect to 316,266 Paired Shares and dispositive 
         power with respect to all of these Paired Shares.  Based on additional
         information provided to Starwood Lodging, these Paired Shares are held
         by various distinct entities no one of which, directly or by 
         attribution, holds in excess of 8.0% of the outstanding Paired Shares.
    

(3)      Based on additional information contained in Amendment No. 1 to 
         Schedule 13D dated January 23, 1996 filed by Starwood Capital, Barry S.
         Sternlicht and the following Starwood Partners:  Berl Holdings L.P.,
         Starwood-Apollo Hotel Partners VIII, L.P., Starwood-Apollo Hotel
         Partners IX, L.P., Starwood-Nomura Hotel Investors, L.P.,
         Starwood/Wichita Investors, L.P., Starwood- Huntington Partners, L.P.,
         Woodstar Partners I, L.P., Firebird Consolidated Partners, L.P.,
         Starwood Opportunity Fund II, L.P. ("SOFI II"), Berl Holdings I, Inc.,
         SAHI, Inc., SNHI, Inc., BSS Capital Partners, L.P., Sternlicht Holdings
         II, Inc., and SRL Holdings, Inc.  Such Schedule 13D reports that Mr.
         Sternlicht has sole power to vote and dispose of 20,000 Paired Shares
         held by him and that SOFI II beneficially owns 49,933 Paired Shares and
         that SOFI II and Mr. Sternlicht have the power to vote and dispose of
         such Paired Shares and that the Starwood Partners hold units in the
         Realty Partnership and the Operating Partnership which are, subject to
         the 8.0% Paired Share ownership limit, exchangeable for an aggregate of
         5,944,027 Paired Shares (approximately 30.1% of the outstanding Paired
         Shares after such exchange).  Such units were acquired in the
         Reorganization described in Part I, Item 1 of this Joint Annual Report.
         Mr. Sternlicht also owns 15,000 Paired Shares, which are subject to 
         the terms of a presently exercisable restricted stock warrant and
         may not be transferred prior to February, 1998, and 6,000 Paired Shares
         subject to presently exercisable options.  Such Amendment No. 1 to
         Schedule 13D reports that because of the 8.0% ownership limit, the
         Starwood Partners cannot beneficially own more than 8.0% of the
         outstanding Paired Shares.  The amount beneficially owned and the
         percent of class assumes that Starwood Partners exchange units for
         Paired Shares to the maximum extent permitted within the ownership
         limit provision; provided, however, that prior to receipt of any
         required Gaming Approval, Starwood Capital's ownership of Paired Shares
         may not exceed 4.9% of the outstanding Paired Shares.

(4)      Based on information contained in Schedule 13G dated January 29, 1996.
         Cohen & Steers Capital Management, Inc. has sole voting power with
         respect to 879,400 Paired Shares and dispositive power with respect to
         all of these Paired Shares.





                                       65
<PAGE>   69
(5)      Based on information contained in Schedule 13G dated February 14,
         1996.  T. Rowe Price Associates, Inc. has sole dispositive power with
         respect to all these Paired Shares and T. Rowe Price Associates, Inc.
         and T. Rowe Price Growth Stock Fund, Inc. have sole voting power with
         respect to 10,200 and 700,000 Paired Shares, respectively.

             Trustees and Officers of the Trust.  The following table sets
forth the beneficial ownership of the Paired Shares as of February 23, 1996 by
each Trustee and each executive officer of the Trust named in the Summary Cash
Compensation Table included in Item 11 hereof who owns Paired Shares and by all
Trustees and executive officers of the Trust as a group.  Except as otherwise
provided below, each beneficial owner has sole voting and investment power with
respect to all Paired Shares beneficially owned.

<TABLE>
<CAPTION>                                                                  
                                          Amount                           
        Name of                        Beneficially            Percent of  
    Beneficial Owner                      Owned                Class (1)     
    ----------------                   -------------           ----------    
 <S>                                   <C>                        <C>      
 Barry S. Sternlicht                   1,195,885 (3)              8.0%     
 Jeffrey C. Lapin                         41,680 (4)              (2)      
 Ronald C. Brown                              0                   (2)      
                                                                           
 Bruce W. Duncan                          12,666 (5)              (2)      
 Stephen R. Quazzo                         6,465 (5)              (2)      
 Madison F. Grose                          7,200 (5)              (2)      
 William E. Simms                          6,000 (5)              (2)      
 Daniel H. Stern                           6,000 (5)              (2)      
                                                                           
 All Trustees and officers as a group  1,275,896 (6)              8.7%     
</TABLE>                                                                   
                                                                           
(1)      Based on the number of Paired Shares outstanding on February 23, 1996,
         including the exchange of units for Paired Shares as discussed in note
         (3) below..

(2)      Less than 1%.

(3)      See Note (3) under "Certain Beneficial Owners" above.

(4)      Includes 20,556 Paired Shares subject to presently exercisable options
         and 2,166 Paired Shares owned in a pension plan of which Mr. Lapin is
         sole trustee and beneficiary.

(5)      Includes 6,000 Paired Shares subject to presently exercisable options.





                                       66
<PAGE>   70

(6)      Includes 56,556 Paired Shares that may be acquired upon the exercise
         of presently exercisable options, and 1,104,952 Paired Shares issuable
         upon exchange of units of the Realty Partnership and the Operating
         Partnership (see Note (3) above).

             Directors and Officers of the Corporation.  The following table
sets forth the beneficial ownership of Paired Shares as of February 23, 1996 by
each Director and each executive officer of the Corporation named in the
Summary Cash Compensation Table included in Item 11 hereof who owns Paired
Shares and by all Directors and executive officers of the Corporation as a
group.  Except as otherwise provided below, each beneficial owner has sole
voting and investment power with respect to all Paired Shares beneficially
owned.

<TABLE>
<CAPTION>
              Name of                         Number of Shares      Percent of
          Beneficial Owner                   Beneficially Owned     Class (1) 
          ----------------                   ------------------     --------- 
 <S>                                            <C>                    <C>    
 Kevin E. Mallory                                   6,982 (3)          (2)    
 Bruce M. Ford                                      6,694 (4)          (2)    
 Earle F. Jones                                     8,748 (5)          (2)    
                                                                              
 Graeme W. Henderson                                6,962 (6)          (2)    
 Barry S. Sternlicht                            1,195,885 (7)          8.0%   
 Daniel W. Yih                                      7,474 (8)          (2)    
 Jean-Marc Chapus                                   6,000 (8)          (2)    
 Steven R. Goldman                                  7,000 (8)          (2)    
                                                                              
 Michael A. Leven                                   6,000 (8)          (2)    
 Jonathan D. Eilian                                 6,000 (8)          (2)    
 All Directors and officers as a group          1,257,745 (9)          8.6%   
</TABLE>

(1)      Based on the number of Paired Shares outstanding on February 23, 1996,
         including the exchange of units as described in note (7) below.

(2)      Less than 1%.

(3)      Includes 4,667 Paired Shares subject to presently exercisable options.

(4)      Includes 172 Paired Shares issuable upon exercise of paired warrants
         issued by the Trust and the Corporation, 57 Paired Shares owned by Mr.
         Ford's wife and 6,000 Paired Shares subject to presently exercisable
         options.

(5)      Includes 83 Paired Shares issuable upon exercise of paired warrants
         issued by the Trust and the Corporation and 6,000 Paired Shares
         subject to presently exercisable options.

(6)      Includes 850 Paired Shares owned in a Keogh Plan and 6,000 Paired
         Shares subject to presently exercisable options.





                                       67
<PAGE>   71
(7)      See Note (3) under "Certain Beneficial Owners" above.

(8)      Includes 6,000 Paired Shares subject to presently exercisable options.

(9)      Includes 58,667 Paired Shares that may be acquired upon the exercise
         of presently exercisable options, 255 Paired Shares issuable upon
         exercise of paired warrants issued by the Trust and the Corporation
         and 1,104,952 Paired Shares issuable upon exchange of units of the
         Realty Partnership and the Operating Partnership (see Note (7) above).

                 Compliance with the Reporting Requirements of Section 16(a).
Section 16(a) of the Exchange Act requires Starwood Lodging's Trustees,
Directors and executive officers, and persons who own more than ten percent of
a registered class of Starwood Lodging's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Paired Shares and other equity securities of Starwood
Lodging.  Trustees, Directors, officers and greater than ten percent
shareholders are required to furnish Starwood Lodging with copies of all
Section 16(a) forms they file.

                 To Starwood Lodging's knowledge, based solely on a review of
the copies of such reports furnished to Starwood Lodging and written
representations that no other reports were required, during the fiscal year
ended December 31, 1995, all Section 16(a) filing requirements applicable to
its Trustees, Directors, officers and greater than ten percent beneficial
owners were complied with; except that one report, covering one transaction
involving the purchase of Paired Shares, was filed late by Mr. Goldman, an
officer and Director of the Corporation.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Reorganization.

                 Pursuant to the Reorganization, the Trust contributed to the
Realty Partnership substantially all of the Trust's properties and assets,
subject to all of its liabilities, in exchange for a general partner interest
in the Realty Partnership and Starwood Capital contributed to the Realty
Partnership cash, certain hotel properties, first mortgage notes and senior
debt of the Realty Partnership in exchange for a limited partner interest in
the Realty Partnership.  In addition, the Corporation and its subsidiaries
contributed to the Operating Partnership substantially all of their assets,
excluding the Gaming Assets, subject to certain liabilities, in exchange for
general partner interests in the Operating Partnership and





                                       68
<PAGE>   72
Starwood Capital contributed to the Operating Partnership cash, furnishings,
equipment and other hotel operating assets in exchange for a limited partner
interest in the Operating Partnership.  The Reorganization was approved by the
shareholders of the Trust and the Corporation at meetings held on December 15,
1994.  The limited partnership interests of the Realty Partnership and the
Operating Partnership held by Starwood Capital are exchangeable on a
one-for-one basis for Paired Shares.  See "Security Ownership of Certain
Beneficial Owners and Management."

                 Barry S. Sternlicht, the President and Chief Executive Officer
of the general partners of Starwood Capital is also the Chairman and Chief
Executive Office of the Trust and is a Trustee of the Trust, is a member of the
Management Committee of the Operating Partnership and has been elected as a
Director of the Corporation to take office upon the receipt of any required
Gaming Approval.  In addition, Mr. Grose, a Trustee of the Trust, is Executive
Vice President and General Counsel of Starwood Capital and Mr. Eilian, who is a
member of the Management Committee of the Operating Partnership and has been
elected as a Director of the Corporation to take office upon the receipt of any
required Gaming Approval, is Senior Vice President of Starwood Capital.

Certain Reimbursements and Payments to Starwood Capital.

                 Starwood Capital and Starwood Lodging have agreed that,
subject to approval by the independent Trustees or Directors, as appropriate,
Starwood Capital will be reimbursed for out-of-pocket costs and expenses for
any services provided to Starwood Lodging.  Starwood Capital will also be
reimbursed for its internal cost (including allocation of overhead) for
services provided to Starwood Lodging, provided that, where such costs are
currently expensed by Starwood Lodging, such reimbursement will not exceed
$250,000 for the twelve months ending June 30, 1996.  As of December 31, 1995,
Starwood Lodging has not reimbursed Starwood Capital for any of these costs
since July 1, 1995, and accordingly has included an accrual of $250,000 in
accounts payable and other liabilities at December 31, 1995.

                 During 1995, the Trust reimbursed Starwood Capital
approximately $1.6 million, the majority of which represented a deposit on the
Boston Park Plaza.  Aside from Starwood Capital's internal cost (as referred to
above), during 1995 Starwood Capital incurred approximately $1.2 million of 
additional costs which were paid directly by Starwood Lodging to third party 
vendors for services provided to Starwood Lodging, representing costs 
associated with the Reorganization, the Offering and hotel acquisitions.

                 Starwood Capital provided to the Trust a $9.6 million loan,
all of which has been repaid, in order to enable the Trust to acquire the Omni 
Hotel in Chapel Hill, North Carolina.  This loan bore interest at 12% per annum.





                                       69
<PAGE>   73
                 The Trust also received a $5 million unsecured loan from
Starwood Capital to fund the deposit for the acquisition of the Sheraton Colony
Square Hotel in Atlanta, Georgia.  This loan bore interest at 12% per annum and
was repaid in July 1995.

                 As part of the consideration to Starwood Capital in connection
with the Reorganization (which was approved by the shareholders of the Trust
and the Corporation in December 1994), the Partnerships agreed to pay an amount
to Starwood Capital only if the Trust and the Corporation consummated a public
offering of Paired Shares prior to June 30, 1996, which offering results in the
receipt by the Trust and the Corporation of gross proceeds of not less than
$150 million.  Upon the consummation of the Offering in July 1995, the Trust
and the Corporation paid $3.7 million to Starwood Capital pursuant to such
agreement.

Westin Agreement.

                 Starwood Capital owns an interest in the Westin Hotel Company
and certain affiliates ("Westin"), which own equity interests in domestic and
international hotels and which manage, franchise or represent hotels worldwide.
The Trust and the Corporation have entered into an agreement with Westin
pursuant to which Westin has agreed that during the period in which an officer,
director, general partner or employee of Starwood Capital is on either the
Board of Trustees or the Board of Directors, and Starwood Capital co-controls
Westin, Westin will not acquire or seek to acquire United States hotel equity
interests, other than certain specified acquisitions, including, without
limitation, minority equity investments made in connection with Westin's
acquisition of a management company.  The Trust and the Corporation have agreed
that under certain circumstances if Westin is prohibited from consummating an
opportunity which was not being independently pursued by the Trust and the
Corporation prior to such prohibition, the Trust and the Corporation will not
pursue such opportunity for 270 days after such prohibition.

Management Obligations of Western Host.

                 In connection with the settlement of shareholder litigation
(see Item 3 - "Legal Proceedings"), Messrs. Rothman and Young caused each of the
Western Host Partnerships (other than Western Host Santa Maria Partners) to
terminate Western Host's management obligations with respect to that
partnership's hotel, indemnified the Corporation and Western Host against all
claims that might be made against Western Host in connection with its status as
a general partner of Western Host Santa Maria Partners, Western Host Pasadena
Partners and Western Host San Francisco Partners or in connection with any fact
or circumstance occurring since January 1, 1993 with respect to any of the
Western Host Hotels, and delivered to the Corporation an irrevocable letter of
credit in the amount of $800,000.  Western Host has agreed to accept the
termination of its management obligations with respect to the Western Host
Hotels and has drawn on the letter of credit for the full $800,000.  In
addition, $120,000 of the management fees and all costs and amounts advanced to
the





                                       70
<PAGE>   74
partnerships which were payable to Western Host were paid in full settlement of
such amounts due at December 31, 1993.

                 Messrs. Young and Rothman also agreed to be responsible for a
percentage of any retroactive adjustments in worker's compensation insurance
premiums.  Starwood Lodging has paid $167,041 for retroactive worker's
compensation insurance premiums and have sought reimbursement from Messrs.
Young and Rothman of their share of that amount (approximately an aggregate of
$56,000).  (See Item 3 - "Legal Proceedings.")

Senior Debt Related Transactions.

                 In May 1994, Starwood Capital purchased (at a discount)
approximately $21 million of the Trust's senior debt at a public auction by the
institutional holder of such debt.  In August 1994, an affiliate of Merrill
Lynch (the "New Lender") purchased $74 million of the Trust's senior debt,
including the senior debt previously held by Starwood Capital, pursuant to a
privately negotiated transaction and at a discount.  In conjunction with such
purchase by the New Lender, it entered into an agreement (the "Swap Agreement")
providing that (i) Starwood Capital could acquire such senior debt within a
specified period at the New Lender's cost basis and (ii) the excess of debt
service payments made on such senior debt over the New Lender's cost basis,
together with a specified return thereon, would be payable to Starwood Capital.
In March 1995, the senior debt was refinanced by the New Lender and the Swap
Agreement was terminated with Starwood Capital receiving (a) the return of
$13.1 million of cash collateral which it had deposited as security for its
obligations in respect of the Swap Agreement, (b) additional cash of $2.7
million, (c) $12 million of the senior debt and (d) certain warrants attendant
to the senior debt.  Starwood Capital contributed such senior debt to the
Partnerships in exchange for 813,880 Units of the Partnerships.  The Trust and
the Corporation paid $786,000 to Starwood Capital to cancel certain warrants
relating to the senior debt in accordance with the requirements of such senior
debt.

Other Relationships

                 Sherwin L. Samuels, the General Counsel and Secretary of the
Trust, is a partner through a professional corporation of the law firm of
Sidley & Austin.  Sidley & Austin provides legal services to the Trust, the
Corporation and Starwood Capital and certain of its affiliates.

                 On March 24, 1995, the Realty Partnership and the Trust
entered into the Prior Credit Agreement pursuant to which the Realty
Partnership borrowed $131.75 million under the Loan which was used primarily to
refinance all outstanding Senior Debt (after the exchange by a Starwood Partner
of $12 million of Senior Debt for units of the Realty Partnership and the
Operating Partnership) and approximately $27 million of first mortgage debt.
In connection with the refinancing under the Prior Credit Agreement, the Realty
Partnership paid $514,000 to one of the Senior Lenders and a portion of the
Lender Warrants





                                       71
<PAGE>   75
issued in connection with an existing credit agreement could be canceled upon
the payment to a Starwood Partner of a $786,000 cancellation fee.  Effective
March 31, 1995, the Realty Partnership issued an unsecured note payable to the
Starwood Partner and the remaining Lender Warrants were canceled.  The
transactions relating to the cancellation of Lender Warrants were recorded as a
reduction in paid-in capital.

                 For information with respect to the agreement with Ross, see
"Legal Proceedings" contained in Item 3 of this Joint Annual Report.

                 For information with respect to the Share Purchase Agreements
of Messrs. Henderson, Samuels, Jones and Ford see "Share Purchase Agreements"
contained in Item 11 of this Joint Annual Report.

                 For information with respect to the employment agreements of
Messrs. Lapin and Mallory see "Employment Agreements with Executive Officers"
contained in Item 11 of this Joint Annual Report.

                                    PART IV
ITEM 14.         EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES
                 AND REPORTS ON FORM 8-K.

             (a) Documents filed.


Financial Statements and Financial Statement Schedules

             The financial statements and financial statements schedules listed
in the Index to Financial Statements and Financial Statements Schedules
following the signature pages hereof are filed as part of this Joint Annual
Report.

             Exhibits

<TABLE>
<CAPTION>
Exhibit No.                   Description of Exhibit
-----------                   ----------------------
<S>   <C>
2.1   Formation Agreement dated as of November 11, 1994 among the Trust, the Corporation, Starwood Capital and the Starwood 
      Partners (incorporated by reference to Exhibit 2 to the Trust's and the Corporation's Joint Current Report on Form 8-K 
      dated November 16, 1994).2
</TABLE>





 __________________________________

 2 The Securities and Exchange Commission file
 numbers of all filings made pursuant to the Securities Act of
 1934, as amended, and referenced herein are:  1-6828 (Starwood
 Lodging Trust) and 1-7959 (Starwood Lodging Corporation).


                                       72
<PAGE>   76
<TABLE>
<S>   <C>
3.1   Amended and Restated Declaration of Trust of the Trust dated June 6, 1988, as amended (incorporated by reference to Exhibit 
      3A to the Trust's and the Corporation's Joint Current Report on Form 8-K dated January 31, 1995).

3.2   Amendment and Restatement of Articles of Incorporation of the Corporation (incorporated by reference to Exhibit 3B to the
      Trust's and the Corporation's Joint Current Report on Form 8-K dated January 31, 1995).

3.3   Trustees' Regulations of the Trust, as amended (incorporated by reference to Exhibit 3.3 to the Trust's and the 
      Corporation's Joint Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K")).

3.4   By-laws of the Corporation, as amended (incorporated by reference to Exhibit 3.4 to the 1994 Form 10-K).
</TABLE>





                                       73
<PAGE>   77
<TABLE>
<CAPTION>
Exhibit No.                   Description of Exhibit
-----------                   ----------------------
<S>      <C>
4.1      Pairing Agreement dated June 25, 1986, between the Trust and the Corporation, as amended (incorporated by reference
         to Exhibit 4.1 to the 1994 Form 10-K).

4.2      Amendment No. 1 to the Pairing Agreement dated as of February 1, 1995 between the Trust and the Corporation.

4.3      Form of Warrant Agreement dated as of September 16, 1986, between the Trust and City National Bank ("CNB") (incorporated
         by reference to Exhibit 4.3 to the Trust's and the Corporation's Registration Statement on Form S-4 (the "S-4 Registration
         Statement") filed with the Securities and Exchange Commission (the "SEC") on August 1, 1986 (Registration No. 33-7694)).

4.4      Form of Warrant Agreement dated as of September 16, 1986, between the Corporation and CNB (incorporated by
         reference to Exhibit 4.3A to the S-4 Registration Statement).

10.1     Incentive and Non-Qualified Share Option Plan (1986) of the Trust (incorporated by reference to Exhibit 10.8 to the
         Trust and the Corporation's Joint Annual Report on Form 10-K for the year ended August 31, 1986 (the "1986 Form 10-K")).3

10.2     Corporation Stock Non-Qualified Stock Option Plan (1986) of the Trust (incorporated by reference to Exhibit 10.9 to
         the 1986 Form 10-K).2

10.3     Stock Option Plan (1986) of the Corporation (incorporated by reference to Exhibit 10.10 to the 1986 Form 10-K).2

10.4     Trust Shares Option Plan (1986) of the Corporation (incorporated by reference to Exhibit 10.11 to the 1986 Form 10-K).2
</TABLE>





__________________________________

     2   Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K.


                                       74
<PAGE>   78
<TABLE>
<CAPTION>
Exhibit No.                       Description of Exhibit
-----------                       ----------------------
<S>      <C>
10.5     1995 Share Option Plan of the Corporation.2

10.6     1995 Share Option Plan of the Trust.2

10.7     Form of Indemnification Agreement and Amendment No. 1 to Indemnification Agreement between the Trust and each of
         Messrs. Barry S. Sternlicht, Jeffrey C. Lapin, Jonathan Eilian, Michael W. Mooney, Bruce M. Ford, Madison F. Grose, Bruce
         W. Duncan, Steven R. Quazzo, William E. Simms, Daniel H. Stern and Ronald C. Brown.2

10.8     Form of Indemnification Agreement and Amendment No. 1 to Indemnification Agreement between the Corporation and each
         of Messrs. Earle F. Jones, Kevin E. Mallory, Bruce M. Ford, Steven R. Goldman, Graeme W. Henderson, Barry S. Sternlicht,
         Jean-Marc Chapus, Jonathan Eilian, Michael A. Leven, Daniel W. Yih and Alan M. Schnaid.2
                                                                               

10.9     Form of Indemnification Agreement dated as of February 3, 1992, between the Corporation and each of Messrs. Ronald
         A. Young, Graeme W. Henderson, Bruce M. Ford, Earle M. Jones and William H. Ling (incorporated by reference to Exhibit
         10.30 to the Trust's and the Corporation's Joint Annual Report on Form 10-K for the year ended December 31, 1991).2

10.10    Executive Employment Agreement dated as of January 31, 1995, between the Trust and Jeffrey C. Lapin (incorporated
         by reference to Exhibit 10.12 to the 1994 Form 10-K).2

10.11    Form of Amended and Restated Lease Agreement entered into as of January 1, 1993, between the Trust as Lessor and
         the Corporation (or a subsidiary) as Lessee (incorporated by reference to Exhibit 10.19 to the Trust's and the 
         Corporation's Joint Annual Report on Form 10-K for the year ended December 31, 1992).

10.12    Exchange Rights Agreement dated as of January 1, 1995 among the Trust, the Corporation, the Realty Partnership, the
         Operating Partnership and the Starwood Partners (incorporated by reference to Exhibit 2B to the Trust's and the
         Corporation's Joint Current Report on Form 8-K dated January 31, 1995).

10.13    Registration Rights Agreement dated as of January 1, 1995 among the Trust, the Corporation and Starwood Capital
         (incorporated by reference to Exhibit 2C to the Trust's and the Corporation's Joint Current Report on Form 8-K dated
         January 31, 1995).

10.14    Amended and Restated Limited Partnership Agreement for the Realty Partnership among the Trust and the Starwood
         Partners dated as of December 15, 1994 (incorporated by reference to Exhibit 10.21 to the Trust's and the Corporation's
         Registration Statement on Form S-2 filed with the
</TABLE>





                                       75
<PAGE>   79
<TABLE>
<S>      <C>
         Securities and Exchange Commission (Registration Nos. 33-59155 and 33-59155-01) (the "S-2 Registration
         Statement")).

10.15    Amended and Restated Limited Partnership Agreement for the Operating Partnership among the Corporation and the
         Starwood Partners dated as of December 15, 1994 (incorporated by reference to Exhibit 10.22 to the S-2 Registration
         Statement).

10.16    Mortgage Loan Funding Facility Agreement, dated as of July 25, 1995, among the Realty Partnership and SLT Realty
         Company, LLC, as the borrower, and Lehman Commercial Paper, Inc., as lender, together with Amendment No. 1 thereto, dated
         as of October 30, 1995.

10.17    Collateral Substitution Agreement, dated as of January 4, 1996, between the Realty Partnership and SLT Realty
         Company, LLC, as borrower, and Lehman Commercial Paper, Inc., as lender.

10.18    Amended and Restated Line of Credit Agreement, dated as of October 25, 1995, among the Trust and the Realty
         Partnership, as borrower, and Bankers Trust Company, as collateral agent, and Lehman Brothers Holdings, Inc., d/b/a Lehman
         Capital, a division of Lehman Brothers Holdings, Inc., individually and as agent, together with First Amendment thereto,
         dated as of January 3, 1996 and effective as of October 25, 1995.

10.19    Form of Amendment No. 1 to Formation Agreement among the Trust, the Corporation and the Starwood Partners
         (incorporated by reference to Exhibit 10.23 to the S-2 Registration Statement).

10.20    Form of Westin/HOT Agreement among W&S Hotel L.L.C., W&S Hotel Holding Corp., Westin Hotel Company, the Realty
         Partnership, the Operating Partnership, WHWE L.L.C. and Woodstar Limited Partnership (incorporated by reference to Exhibit
         10.24 to the S-2 Registration Statement).

21.              Subsidiaries of the Corporation.

                 SLC Operating Limited Partnership
                 Hotel Investors of Arizona, Inc.
                 Hotel Investors of Nebraska, Inc.
                 Hotel Investors of Michigan, Inc.
                 Hotel Investors of Missouri, Inc.
                 Hotel Investors Corporation of Nevada
                 Hotel Investors of Virginia, Inc.
                 Columbus Operators, Inc.
                 Lyntex Properties, Inc.
                 Western Host, Inc.
</TABLE>





                                       76
<PAGE>   80
<TABLE>
<S>      <C>
         Subsidiaries of the Trust.

         SLT Realty Limited Partnership
         Starlex Company LLC
         SLT Realty Company LLC

23.      Consent of Independent Accountants.

27.1     Financial Data Schedule for Starwood Lodging Corporation.

27.2     Financial Data Schedule for Starwood Lodging Trust.

         (b)  Reports on Form 8-K.
              ------------------- 

                 During the fourth quarter of 1995, the Trust and the Corporation filed the following Joint Current Reports on
         Form 8-K:

                 On October 9, 1995, the Trust and Corporation filed a Joint Current Report on Form 8-K to report the purchase of
         the Doral Inn in New York, New York.  On December 1, 1995 the Trust and the Corporation filed an amendment to such Joint
         Current Report.

                 On October 31, 1995, the Trust and Corporation filed a Joint Current Report on Form 8-K to report a change in
         certifying accountants.
</TABLE>





                                       77
<PAGE>   81
                                   SIGNATURE

    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.

                                       STARWOOD LODGING TRUST
                                       (Registrant)
                                       
   
Date: March 27, 1996                   By:  /s/ Jeffrey C. Lapin
                                          ---------------------------------
                                                Jeffrey C. Lapin, President
    
                                       

    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 in the capacities and on the dates indicated.

   
<TABLE>
<CAPTION>
Signature                                      Title                                     Date
---------                                      -----                                     ----
<S>                                            <C>                                   <C>
/s/ Barry S. Sternlicht                        Chairman, Chief                       March 27, 1996
--------------------------                     Executive Officer                                 
    Barry S. Sternlicht                        and Trustee                  
                                               (Principal Executive Officer)
                                                                            

/s/ Jeffrey C. Lapin                           President, Chief                      March 27, 1996
--------------------------                     Operating Officer                                 
    Jeffrey C. Lapin                           and Trustee       
                                                                 

/s/ Ronald C. Brown                            Vice President and                    March 27, 1996
--------------------------                     Chief Financial Officer                           
    Ronald C. Brown                            (Principal Financial    
                                               and Accounting Officer) 
                                                                       

/s/ Madison F. Grose                           Trustee                               March 27, 1996
--------------------------                                                                       
    Madison F. Grose

/s/ Stephen R. Quazzo                          Trustee                               March 27, 1996
--------------------------                                                                       
    Stephen R. Quazzo

</TABLE>
    





                                       78
<PAGE>   82
                                   SIGNATURE

    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.

                                         STARWOOD LODGING CORPORATION
                                         (Registrant)
                                        
                                        
   
Date: March 27, 1996                     By:  /s/ Kevin E. Mallory
                                            --------------------------------
                                                  Kevin E. Mallory, 
                                                  Executive Vice President
    
                                        

    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 in the capacities and on the dates indicated.

   
<TABLE>
<CAPTION>
Signature                                      Title                                     Date
---------                                      -----                                     ----
<S>                                            <C>                                   <C>
/s/ Earle F. Jones                             Chairman of the Board of              March 27, 1996
-----------------------                                                                       
    Earle F. Jones                             Directors and Director

/s/ Kevin E. Mallory                           Executive Vice President              March 27, 1996
-----------------------                        (Principal Executive Officer)         
    Kevin E. Mallory                                                        

/s/ Alan M. Schnaid                            Corporate Controller                  March 27, 1996
-----------------------                        (Principal Accounting Officer)                 
    Alan M. Schnaid                                                           

/s/ Bruce M. Ford                              Director                              March 27, 1996
-----------------------                                                                               
    Bruce M. Ford

/s/ Graeme W. Henderson                        Director                              March 27, 1996
-----------------------                                                                               
    Graeme W. Henderson
</TABLE>
    





                                       79
<PAGE>   83
                             STARWOOD LODGING TRUST
                          STARWOOD LODGING CORPORATION

        INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                        AS OF DECEMBER 31, 1995 AND 1994
              AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
                               DECEMBER 31, 1995




<TABLE>
       <S>                                                           <C>
       INDEPENDENT AUDITORS' REPORT                              F-1, F-2

       STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION:

             Combined Balance Sheets                                  F-3
             Combined Statements of Operations                        F-4
             Combined Statements of Cash Flows                        F-5
             Combined Statements of Shareholders' Equity              F-6

       STARWOOD LODGING TRUST:

             Balance Sheets                                           F-7
             Statements of Operations                                 F-8
             Statements of Cash Flows                                 F-9
             Statements of Shareholders' Equity                      F-10

       STARWOOD LODGING CORPORATION:

             Balance Sheets                                          F-11
             Statements of Operations                                F-12
             Statements of Cash Flows                                F-13
             Statements of Shareholders' Deficit                     F-14

       NOTES TO FINANCIAL STATEMENTS                                 F-15

       SCHEDULES:

             Schedule III- Real Estate and Accumulated Depreciation  F-36
             Schedule -IV Mortgage Loans on Real Estate              F-41
</TABLE>



<PAGE>   84


INDEPENDENT AUDITORS' REPORT



To the Boards of Trustees and Directors and Shareholders of
  Starwood Lodging Trust and Starwood Lodging Corporation:


We have audited the accompanying separate and combined financial statements of
Starwood Lodging Trust (a Maryland real estate investment trust) (the "Trust")
and Starwood Lodging Corporation (a Maryland corporation) and its subsidiaries
(the "Corporation"), collectively the "Companies", as of December 31, 1995, and
for the year then ended, listed in the foregoing index to financial statements
and financial statement schedules.  Our audit also included the financial
statement schedules listed in the foregoing index to financial statements and
financial statement schedules.  These financial statements and financial
statement schedules are the responsibility of the Trust's, the Corporation's
and the Companies' managements.  Our responsibility is to express an opinion on
these financial statements and financial statement schedules based on our
audit.

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

In our opinion, such separate and combined financial statements present fairly,
in all material respects, the financial position of the Companies and the
financial position of the Trust and the Corporation at December 31, 1995, and
the respective results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.  Also,
in our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.




COOPERS & LYBRAND L.L.P.

Los Angeles, California
January 31, 1996

                                      F-1


<PAGE>   85



INDEPENDENT AUDITORS' REPORT



To The Board Of Trustees And Directors And Shareholders of
  Starwood Lodging Trust and Starwood Lodging Corporation:


We have audited the accompanying separate and combined financial statements of
Starwood Lodging Trust (a Maryland real estate investment trust) (the "Trust")
and Starwood Lodging Corporation (a Maryland corporation) and its subsidiaries
(the "Corporation"), collectively the "Companies", as of December 31, 1994, and
for each of the two years in the period ended December 31, 1994, listed in the
foregoing index to financial statements and financial statement schedules.  Our
audits also included the financial statements schedules listed in the foregoing
index to financial statements and financial statement schedules.  These
financial statements and financial statement schedules are the responsibility
of the Trust's, the Corporation's and the Companies' managements.  Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material missatement.  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, such separate and combined financial statements present fairly,
in all material respects, the financial position of the Companies and the
financial position of the Trust and the Corporation at December 31, 1994, and
the respective results of their operations and their cash flows for each of the
two years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.  Also, in our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.



DELOITTE & TOUCHE LLP

Los Angeles, California
March 24, 1995

                                      F-2


<PAGE>   86

STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                      December 31,         December 31,
                                                                          1995                 1994
                                                                   -------------------  -------------------
<S>                                                                <C>                  <C>
ASSETS
Hotel assets held for sale - net.................................         $ 21,063,000         $  8,585,000
Hotel assets - net...............................................          315,895,000          142,600,000
                                                                   -------------------  -------------------
                                                                           336,958,000          151,185,000
Mortgage notes receivable, net...................................           79,261,000           14,049,000
Investments......................................................            2,858,000              262,000
                                                                   -------------------  -------------------
     Total real estate investments...............................          419,077,000          165,496,000
Cash and cash equivalents........................................            9,332,000            5,065,000
Accounts and interest receivable.................................            9,595,000            4,040,000
Notes receivable, net............................................            1,796,000            1,627,000
Inventories, prepaid expenses and other assets...................           20,194,000            7,727,000
                                                                   -------------------  -------------------
                                                                          $459,994,000         $183,955,000
                                                                   ===================  ===================
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Collateralized notes payable and revolving line of credit........         $119,100,000         $113,896,000
Mortgage and other notes payable.................................            4,385,000           46,586,000
Accounts payable and other liabilities...........................           19,022,000           14,765,000
Dividends/Distributions payable..................................            9,284,000
                                                                   -------------------  -------------------
                                                                           151,791,000          175,247,000
                                                                   -------------------  -------------------
Commitments and contingencies

MINORITY INTEREST................................................           92,735,000
                                                                   -------------------  -------------------
SHAREHOLDERS' EQUITY
   Trust shares of beneficial interest at December 31, 1995 and 1994  
   $.01 and $6.00 par value, respectively; authorized 30,000,000      
   shares; outstanding 13,825,000 shares and 2,022,158 shares,        
   respectively..................................................              138,000           12,133,000
Corporation common stock at December 31, 1995 and 1994, $.01 and
   $.60 par value, respectively; authorized 30,000,000 shares;
   outstanding 13,825,000 and 2,022,158 shares, respectively.....              138,000            1,213,000
Additional paid-in capital.......................................          434,107,000          210,251,000
Distributions in excess of earnings..............................         (218,915,000)        (214,889,000)
                                                                   -------------------  -------------------
                                                                           215,468,000            8,708,000
                                                                   -------------------  -------------------
                                                                          $459,994,000         $183,955,000
                                                                   ===================  ===================
</TABLE>

See accompanying notes to financial statements.


                                      F-3


<PAGE>   87


STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                    ------------------------------------------------
                                                         1995            1994             1993
                                                    --------------  ---------------  ---------------
<S>                                                   <C>               <C>              <C>
REVENUE
Hotel.............................................    $121,250,000      $82,668,000      $86,903,000
Gaming............................................      26,929,000       27,981,000       27,505,000
Interest from mortgage and other notes............      10,905,000        1,554,000        1,412,000
Management fees and other income..................       1,966,000          411,000          475,000
Rents from leased hotel properties
   and income from investments.......................      791,000          927,000          839,000
Gain (loss) on sales of hotel assets..............        (125,000)         456,000           21,000
                                                    --------------  ---------------  ---------------
                                                       161,716,000      113,997,000      117,155,000
                                                    --------------  ---------------  ---------------
EXPENSES
Hotel operations..................................      85,017,000       60,829,000       68,132,000
Gaming operations.................................      24,242,000       24,454,000       24,055,000
Interest..........................................      13,138,000       17,606,000       15,187,000
Depreciation and amortization.....................      15,469,000        8,161,000        9,232,000
Administrative and operating......................       5,712,000        4,203,000        4,729,000
Shareholder litigation............................                        2,648,000          483,000
Provision for losses..............................                          759,000        2,369,000
                                                    --------------  ---------------  ---------------
                                                       143,578,000      118,660,000      124,187,000
                                                    --------------  ---------------  ---------------
Income (loss) before extraordinary items and
   minority interest.................................   18,138,000       (4,663,000)      (7,032,000)
Minority interest.................................       7,013,000
                                                    --------------  ---------------  ---------------
Income (loss) before extraordinary items..........      11,125,000       (4,663,000)      (7,032,000)
Extraordinary items due to early extinguishment
of debt (net of $163,000 minority interest).......      (2,155,000)
                                                    --------------  ---------------  ---------------
                                 NET INCOME (LOSS)      $8,970,000     $ (4,663,000)     $(7,032,000)
                                                    ==============  ===============  ===============
EARNINGS PER PAIRED SHARE
Income (loss) before extraordinary items..........           $1.43           $(2.31)          $(3.48)
Extraordinary items...............................           (0.28)
                                                    --------------  ---------------  ---------------
                NET INCOME (LOSS) PER PAIRED SHARE           $1.15           $(2.31)          $(3.48)
                                                    ==============  ===============  ===============
          Weighted Average Number of Paired Shares       7,771,000        2,022,158        2,022,158
                                                    ==============  ===============  ===============
</TABLE>

See accompanying notes to financial statements.


                                      F-4


<PAGE>   88


STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                          ---------------------------------------------
                                                                              1995            1994            1993
                                                                          -------------  --------------  --------------
<S>                                                                        <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..........................................                  $8,970,000     $(4,663,000)    $(7,032,000)
Extraordinary items due to early extinguishment of debt....                   2,155,000
Adjustments to reconcile net income (loss ) to net cash
   provided by operating activities:                 
   Minority interest.......................................                   7,013,000
   Depreciation and amortization...........................                  15,469,000       8,161,000       9,232,000
   Accretion of discount...................................                  (3,285,000)
   Deferred interest.......................................                     649,000       3,610,000       3,287,000
   (Gain) loss on sales of real estate investments.........                     125,000        (456,000)        (21,000)
   Provision for losses....................................                                     759,000       2,369,000
Changes in assets and liabilities:
   Accounts receivable, inventories       
   and prepaid expenses....................................                 (21,335,000)        (86,000)      2,118,000
   Accounts payable and other liabilities..................                   6,650,000       1,568,000      (4,421,000)
                                                                          -------------  --------------  --------------
       Net cash provided by operating activities...........                  16,411,000       8,893,000       5,532,000
                                                                          -------------  --------------  --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets..................................                (166,211,000)     (2,941,000)     (6,577,000)
Net proceeds from sales of hotel assets....................                                  12,536,000       6,130,000
Purchase of mortgage notes receivable......................                 (19,795,000)     (6,270,000)     (1,985,000)
Principal received on notes receivable.....................                   6,825,000       2,451,000         409,000
Reorganization costs.......................................                  (2,814,000)     (1,287,000)
Increase in other assets...................................                                                     (47,000)
Acquisition of minority interest/hotels....................                                                  (1,575,000)
       Net cash provided by (used in) investing activities.                (181,995,000)      4,489,000      (3,645,000)
                                                                          -------------  --------------  --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and
   other notes payable.....................................                (104,722,000)     (1,498,000)     (1,666,000)
Borrowing under lines of credit............................                 119,100,000
Borrowings under mortgage and other notes..................                   9,637,000       6,000,000         632,000
Principal (payments) borrowings on secured notes payable
   and revolving line of credit; net.......................                (102,899,000)    (18,516,000)     (5,695,000)
Proceeds from offering.....................................                 245,701,000
Purchase of warrants.......................................                  (1,300,000)
Capital contributions......................................                  13,599,000
Dividends/Distributions paid...............................                  (9,265,000)
Payments to minority shareholders..........................                                                     (28,000)
Principal received on share purchase notes.................                                      45,000           5,000
       Net cash provided by (used in) financing activities.                 169,851,000     (13,969,000)     (6,752,000)
                                                                          -------------  --------------  --------------
INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS....................................                   4,267,000        (587,000)     (4,865,000)
CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR....................................                   5,065,000       5,652,000      10,517,000
                                                                          -------------  --------------  --------------
CASH AND CASH EQUIVALENTS
   AT END OF YEAR..........................................                  $9,332,000      $5,065,000      $5,652,000
                                                                          =============  ==============  ==============
</TABLE>

See accompanying notes to financial statements.



                                      F-5


<PAGE>   89

STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                       Trust Shares
                                            of       Corporation   Additional     Share                         Total
                                        Beneficial     Common      Paid - in     Purchase    Accumulated    Shareholders'
                                         Interest       Stock       Capital       Notes        Deficit         Equity
                                       ------------  -----------  ------------  ----------  --------------  -------------

<S>                                    <C>           <C>          <C>           <C>         <C>               <C>
Balance January 1, 1993..............  $ 12,133,000   $1,213,000  $210,673,000   $(474,000)  $(203,194,000)   $20,351,000
   Principal payments and reductions
     of share purchase notes.........                                 (176,000)    183,000                          7,000
   Net loss..........................                                                           (7,032,000)    (7,032,000)
                                       ------------  -----------  ------------  ----------   -------------   ------------
Balance December 31, 1993............    12,133,000    1,213,000   210,497,000    (291,000)   (210,226,000)     13,326,000
   Principal payments and reductions
     of share purchase notes.........                                 (246,000)    291,000                         45,000
   Net loss..........................                                                           (4,663,000)    (4,663,000)
                                       ------------  -----------  ------------  ----------   -------------   ------------
Balance December 31, 1994............    12,133,000    1,213,000   210,251,000                (214,889,000)    $8,708,000
   Decrease in par value to $0.01....   (12,012,000)  (1,092,000)   13,104,000
   One for six reverse stock split...      (101,000)    (101,000)      202,000
   Contributed Capital...............                               59,120,000                                 59,120,000
   Public Offering...................       118,000      118,000   245,465,000                                245,701,000
   Minority Interest.................                              (92,735,000)                               (92,735,000)
   Net Income........................                                                            8,970,000      8,970,000
   Dividends/Distributions...........                                                          (12,996,000)   (12,996,000)
   Warrant Purchase..................                               (1,300,000)                                (1,300,000)
                                       ------------  -----------  ------------  ----------  --------------   ------------
Balance December 31, 1995............      $138,000     $138,000  $434,107,000  $            $(218,915,000)  $215,468,000
                                       ============  ===========  ============  ==========  ==============   ============
</TABLE>

See accompanying notes to financial statements.


                                      F-6


<PAGE>   90

STARWOOD LODGING TRUST
BALANCE SHEETS

<TABLE>
<CAPTION>

                                                            December 31,   December 31,
                                                                1995           1994
                                                            -------------  -------------
<S>                                                         <C>            <C>
ASSETS
Hotel assets held for sale - net..........................  $  20,547,000  $   8,281,000
Hotel assets - net........................................    221,063,000    108,428,000
                                                            -------------  -------------
                                                              241,610,000    116,709,000
Mortgage notes receivable - net...........................     79,261,000     14,049,000
Mortgage notes receivable - Corporation...................     68,486,000     16,916,000
Investments...............................................      2,841,000        240,000
                                                            -------------  -------------
     Total real estate investments........................    392,198,000    147,914,000
Cash and cash equivalents.................................        710,000        255,000
Rent and interest  receivable.............................      1,841,000        698,000
Notes receivable - net....................................      1,232,000      1,004,000
Notes receivable - Corporation............................     17,978,000     10,000,000
Prepaid expenses and other assets.........................     11,778,000      2,374,000
                                                            -------------  -------------
                                                            $ 425,737,000  $ 162,245,000
                                                            =============  =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving line of credit.  $ 119,100,000  $ 113,896,000
Mortgage and other notes payable..........................        100,000     32,838,000
Accounts payable and other liabilities....................      4,412,000      5,061,000
Dividends/Distributions payable...........................      9,284,000
                                                            -------------  -------------
                                                              132,896,000    151,795,000
                                                            -------------  -------------
Commitments and contingencies
MINORITY INTEREST.........................................     88,113,000
                                                            -------------  -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at December 31, 1995
   and 1994, $.01 and $6.00 par value, respectively;
   authorized 30,000,000 shares; outstanding 13,825,000 and
   2,022,158 shares, respectively                                 138,000     12,133,000
Additional paid-in capital................................    354,619,000    146,059,000
Distributions in excess of earnings.......................   (150,029,000)  (147,742,000)
                                                            -------------  -------------
                                                              204,728,000     10,450,000
                                                            -------------  -------------
                                                            $ 425,737,000  $ 162,245,000
                                                            =============  =============
</TABLE>

See accompanying notes to financial statements.

                                      F-7


<PAGE>   91

STARWOOD LODGING TRUST
STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>

                                                        Years Ended December 31,
                                              --------------------------------------------
                                                   1995           1994           1993
                                              --------------  -------------  -------------
<S>                                              <C>             <C>            <C>
REVENUE
Rents from Corporation......................     $26,730,000    $16,906,000    $16,481,000
Interest from Corporation...................       4,761,000      1,730,000      1,534,000
Interest from mortgage and other notes......      10,792,000      1,512,000      1,288,000
Rents from other leased hotel properties
   and income from joint ventures...........         791,000        927,000        839,000
Other income................................       1,074,000        164,000        253,000
Gain (loss) on sales of hotel assets........        (125,000)       432,000        (53,000)
                                              --------------  -------------  -------------
                                                  44,023,000     21,671,000     20,342,000
                                              --------------  -------------  -------------
EXPENSES
Interest....................................      12,429,000     16,265,000     14,020,000
Depreciation and amortization...............       8,977,000      5,205,000      5,630,000
Administrative and operating................       2,439,000      1,583,000      1,948,000
Shareholder litigation......................                      1,324,000        264,000
Provision for losses........................                        759,000      2,369,000
                                              --------------  -------------  -------------
                                                  23,845,000     25,136,000     24,231,000
                                              --------------  -------------  -------------
Income (loss) before extraordinary items and
   minority interest........................      20,178,000     (3,465,000)    (3,889,000)
Minority interest...........................       7,314,000
                                              --------------  -------------  -------------
Income (loss) before extraordinary items....      12,864,000     (3,465,000)    (3,889,000)
Extraordinary items due to early
   extinguishment of debt (net of $163,000
   minority interest).......................      (2,155,000)
                                              --------------  -------------  -------------
                           NET INCOME (LOSS)     $10,709,000    $(3,465,000)   $(3,889,000)
                                              ==============  =============  =============
EARNINGS PER PAIRED SHARE
Income (loss) before extraordinary items....           $1.66         $(1.72)        $(1.92)
Extraordinary items.........................           (0.28)
                 NET INCOME (LOSS) PER SHARE           $1.38         $(1.72)        $(1.92)
                                              ==============  =============  =============
</TABLE>

See accompanying notes to financial statements.


                                      F-8


<PAGE>   92

STARWOOD LODGING TRUST
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                     -----------------------------------------
                                                                         1995           1994          1993
                                                                     -------------  ------------  ------------
<S>                                                                 <C>              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..........................................            $10,709,000   $(3,465,000)  $(3,889,000)
Extraordinary items due to early extinguishment of debt....              2,155,000
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:                
   Minority interest.......................................              7,314,000
   Depreciation and amortization...........................              8,977,000     5,205,000     5,630,000
   Accretion of discount...................................             (3,285,000)
   Deferred interest.......................................                649,000     3,610,000     2,243,000
   (Gain) loss on sales of real estate investments.........                125,000      (432,000)       53,000
   Provision for losses....................................                              759,000     2,369,000
Changes in operating assets and liabilities:
   Rent and interest receivable - Corporation..............             (3,012,000)   (1,730,000)   (1,519,000)
   Accounts receivable and prepaid expenses................            (14,044,000)      (54,000)    1,037,000
   Accounts payable and other liabilities..................              1,679,000       562,000    (2,788,000)
                                                                     -------------  ------------  ------------
      Net cash provided by operating activities............             11,267,000     4,455,000     3,136,000
                                                                     -------------  ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets..................................           (123,556,000)   (2,270,000)   (1,372,000)
Net proceeds from sales of hotel assets....................                           11,719,000     5,360,000
Purchase of mortgage notes receivable......................            (19,795,000)   (6,270,000)   (1,985,000)
Principal received on mortgage and other notes receivable..              6,766,000     2,382,000       353,000
Reorganization costs.......................................             (1,407,000)   (1,287,000)
Net change in notes receivable - Corporation...............            (37,514,000)    3,965,000     1,693,000
Acquisition of minority interest...........................                                         (1,575,000)
                                                                     -------------  ------------  ------------
      Net cash provided by (used in) investing activities..           (175,506,000)    8,239,000     2,474,000
                                                                     -------------  ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes payable.....            (95,259,000)     (886,000)   (1,594,000)
Borrowing under lines of credit............................            119,100,000
Borrowings under mortgage and other notes payable..........              9,637,000     6,000,000
Principal (payments) borrowings on secured notes
   payable, net............................................           (102,899,000)  (18,516,000)   (5,695,000)
Proceeds from offering.....................................            233,418,000
Purchase of warrants.......................................             (1,235,000)
Capital contributions......................................             11,197,000
Dividends/Distributions paid...............................             (9,265,000)
Payments to minority shareholders..........................                                            (18,000)
Principal received on share purchase notes.................                               45,000
                                                                     -------------  ------------  ------------
      Net cash provided by (used in) financing activities..            164,694,000   (13,357,000)   (7,307,000)
                                                                     -------------  ------------  ------------
INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS....................................                455,000      (663,000)   (1,697,000)
CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR....................................                255,000       918,000     2,615,000
                                                                     -------------  ------------  ------------
CASH AND CASH EQUIVALENTS
   AT END OF YEAR..........................................          $     710,000  $    255,000  $    918,000
                                                                     =============  ============  ============
</TABLE>

See accompanying notes to financial statements.



                                      F-9


<PAGE>   93

STARWOOD LODGING TRUST
STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                         Shares of     Additional     Share                         Total
                                         Beneficial    Paid - in     Purchase    Accumulated    Shareholders'
                                          Interest      Capital       Notes        Deficit         Equity
                                        ------------  ------------  ----------  --------------  -------------
<S>                                      <C>          <C>            <C>         <C>             <C>
Balance January 1, 1993...............   $12,133,000  $204,816,000   $(190,000)  $(140,388,000)  $ 76,371,000
   Principal payments, reductions and
      transfer of share purchase notes
      from the Corporation-net........                    (176,000)   (101,000)                      (277,000)
Net loss..............................                                              (3,889,000)    (3,889,000)
                                        ------------  ------------   ---------   -------------   ------------
   Balance December 31, 1993..........    12,133,000   204,640,000    (291,000)   (144,277,000)    72,205,000
   Forgiveness of intercompany debt...                 (58,335,000)                               (58,335,000)
   Principal payments and reductions
      of share purchase notes.........                    (246,000)    291,000                         45,000
Net loss..............................                                              (3,465,000)    (3,465,000)
                                        ------------  ------------   ---------   -------------   ------------
Balance December 31, 1994.............    12,133,000   146,059,000                (147,742,000)    10,450,000
   Decrease in par value to $0.01.....   (12,012,000)   12,012,000
   One for six reverse stock split....      (101,000)      101,000
   Contributed Capital................                  52,495,000                                 52,495,000
   Public Offering....................       118,000   233,300,000                                233,418,000
   Minority Interest..................                 (88,113,000)                               (88,113,000)
   Net Income.........................                                              10,709,000     10,709,000
   Dividends/Distributions............                                             (12,996,000)   (12,996,000)
   Warrant Purchase...................                  (1,235,000)                                (1,235,000)
                                        ------------  ------------   ---------   -------------   ------------
Balance December 31, 1995.............     $ 138,000  $354,619,000   $           $(150,029,000)  $204,728,000
                                        ============  ============   =========   =============   ============
</TABLE>

See accompanying notes to financial statements.



                                      F-10


<PAGE>   94

STARWOOD LODGING CORPORATION
BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   December 31,        December 31,
                                                       1995                1994
                                                 -----------------  ------------------

<S>                                              <C>                <C>
ASSETS
Hotel assets held for sale - net...............      $     516,000         $   304,000
Hotel assets - net.............................         94,832,000          34,172,000
                                                 -----------------  ------------------
                                                        95,348,000          34,476,000
Investments....................................             17,000              22,000
                                                 -----------------  ------------------
  Total real estate investments................         95,365,000          34,498,000
Cash and cash equivalents......................          8,622,000           4,810,000
Accounts receivable............................          7,754,000           3,342,000
Notes receivable...............................            564,000             623,000
Inventories, prepaid expenses and other assets.          8,416,000           5,353,000
                                                 -----------------  ------------------
                                                     $ 120,721,000         $48,626,000
                                                 =================  ==================
LIABILITIES AND SHAREHOLDERS' DEFICIT

LIABILITIES
Mortgage and other notes payable...............      $   4,285,000         $13,748,000
Mortgage notes payable - Trust.................         68,486,000          16,916,000
Notes payable - Trust..........................         17,978,000          10,000,000
Accounts payable and other liabilities.........         14,610,000           9,704,000
                                                 -----------------  ------------------
                                                       105,359,000          50,368,000
                                                 -----------------  ------------------
Commitments and contingencies
MINORITY INTEREST..............................          4,622,000
                                                 -----------------
SHAREHOLDERS' EQUITY (DEFICIT)
Corporation common stock at December 31, 1995
  and 1994, $.01 and $.60 par value,
  respectively; authorized 30,000,000 shares;
  outstanding 13,825,000 and 2,022,158 shares,
  respectively.................................            138,000           1,213,000
Additional paid-in capital.....................         79,488,000          64,192,000
Distributions in excess of earnings............        (68,886,000)        (67,147,000)
                                                 -----------------  ------------------
                                                        10,740,000          (1,742,000)
                                                 -----------------  ------------------
                                                     $ 120,721,000         $48,626,000
                                                 =================  ==================
</TABLE>

See accompanying notes to financial statements.


                                      F-11


<PAGE>   95


STARWOOD LODGING CORPORATION
STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                  Years Ended December 31,
                                   -------------------------------------------------------
                                         1995               1994               1993
                                   -----------------  -----------------  -----------------

<S>                                <C>                <C>                <C>
REVENUE
Hotel............................       $121,250,000       $ 82,668,000       $ 86,903,000
Gaming...........................         26,929,000         27,981,000         27,505,000
Interest from notes receivable...            113,000             42,000            124,000
Management fees and other income.            892,000            247,000            222,000
Gain on sales of hotel assets....                                24,000             74,000
                                   -----------------  -----------------  -----------------
                                         149,184,000        110,962,000        114,828,000
                                   -----------------  -----------------  -----------------
EXPENSES
Hotel operations.................         85,017,000         60,829,000         68,132,000
Gaming operations................         24,242,000         24,454,000         24,055,000
Rent - Trust.....................         26,730,000         16,906,000         16,481,000
Interest - Trust.................          4,761,000          1,730,000          1,534,000
Interest - other.................            709,000          1,341,000          1,167,000
Depreciation and amortization....          6,492,000          2,956,000          3,602,000
Administrative and operating.....          3,273,000          2,620,000          2,781,000
Shareholder litigation...........                             1,324,000            219,000
                                   -----------------  -----------------  -----------------
                                         151,224,000        112,160,000        117,971,000
                                   -----------------  -----------------  -----------------
Loss before minority interest....         (2,040,000)        (1,198,000)        (3,143,000)
Minority interest................            301,000
                                   -----------------  -----------------  -----------------
                         NET LOSS       $ (1,739,000)      $ (1,198,000)      $ (3,143,000)
                                   =================  =================  =================
               NET LOSS PER SHARE       $      (0.22)      $      (0.59)      $      (1.56)
                                   =================  =================  =================
</TABLE>

See accompanying notes to financial statements.


                                      F-12


<PAGE>   96




<TABLE>
<CAPTION>


STARWOOD LODGING CORPORATION
STATEMENTS OF CASH FLOWS
                                                                             Years Ended December 31,
                                                                    -------------------------------------------
                                                                        1995           1994           1993
                                                                    -------------  -------------  -------------
<S>                                                                  <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss..................................................           $ (1,739,000)   $(1,198,000)   $(3,143,000)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
  Minority interest.......................................               (301,000)
  Depreciation and amortization...........................              6,492,000      2,956,000      3,602,000
  Deferred Interest.......................................                                            1,044,000
  Gain on sales of real estate investments................                               (24,000)       (74,000)
Changes in operating assets and liabilities:
  Accounts receivable, inventories
    and prepaid expenses..................................             (7,291,000)       (32,000)     1,081,000
  Rent and  interest payable - Trust......................              3,012,000      1,730,000      1,519,000
  Accounts payable and other liabilities..................              4,971,000      1,006,000     (1,633,000)
                                                                    -------------  -------------  -------------
    Net cash provided by operating activities.............              5,144,000      4,438,000      2,396,000
                                                                    -------------  -------------  -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets.................................            (42,655,000)      (671,000)    (5,205,000)
Net proceeds from sales of hotel assets...................                               817,000        770,000
Increase in other assets..................................                                              (47,000)
Principal received on notes receivable....................                 59,000         69,000         56,000
Reorganization costs......................................             (1,407,000)
                                                                    -------------  -------------  -------------
    Net cash provided by (used in) investing activities...            (44,003,000)       215,000    (4,426,000)
                                                                    -------------  -------------  -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes payable....             (9,463,000)      (612,000)       (72,000)
Borrowings under mortgage and other notes.................                                              632,000
Net change in notes payable - Trust.......................             37,514,000     (3,965,000)    (1,693,000)
Proceeds from offering....................................             12,283,000
Purchase of warrants......................................                (65,000)
Capital contributions.....................................              2,402,000
Payments to minority shareholders.........................                                              (10,000)
Principal received on share purchase notes................                                                5,000
                                                                    -------------  -------------  -------------
    Net cash provided by (used in) financing activities...             42,671,000     (4,577,000)    (1,138,000)
                                                                    -------------  -------------  -------------
INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS....................................              3,812,000         76,000     (3,168,000)
CASH AND CASH EQUIVALENTS
  AT BEGINNING OF YEAR....................................              4,810,000      4,734,000      7,902,000
                                                                    -------------  -------------  -------------
CASH AND CASH EQUIVALENTS
  AT END OF YEAR..........................................             $8,622,000     $4,810,000     $4,734,000
                                                                    =============  =============  =============
</TABLE>

See accompanying notes to financial statements.




                                      F-13


<PAGE>   97

STARWOOD LODGING CORPORATION
STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>

                                                    Additional     Share                       Total
                                         Common      Paid - in   Purchase    Accumulated   Shareholders'
                                          Stock       Capital      Notes       Deficit        Deficit
                                       -----------  -----------  ---------  -------------  -------------
<S>                                    <C>          <C>          <C>        <C>            <C>
Balance January 1, 1993..............   $1,213,000  $ 5,857,000   $(16,000)  $(62,806,000)  $(55,752,000)
  Principal payments, reductions and
    transfer of share purchase notes
    to the Trust.....................                               16,000                        16,000
  Net loss...........................                                          (3,143,000)    (3,143,000)
                                       ===========  ===========   ========   ============    ===========
Balance December 31, 1993............    1,213,000    5,857,000               (65,949,000)   (58,879,000)
  Forgiveness of intercompany debt...                58,335,000                               58,335,000
  Net loss...........................                                          (1,198,000)    (1,198,000)
                                       -----------  -----------   --------   ------------    -----------
Balance December 31, 1994............    1,213,000   64,192,000               (67,147,000)    (1,742,000)
  Decrease in par value to $0.01.....   (1,092,000)   1,092,000
  One for six reverse stock split....     (101,000)     101,000
  Contributed Capital................                 6,625,000                                6,625,000
  Public Offering....................      118,000   12,165,000                               12,283,000
  Minority Interest..................                (4,622,000)                              (4,622,000)
  Net Loss...........................                                          (1,739,000)    (1,739,000)
  Dividends/Distributions Payable....
  Warrant Purchase...................                   (65,000)                                 (65,000)
                                       -----------  -----------   --------   ------------    -----------
Balance December 31, 1995............  $   138,000  $79,488,000   $          $(68,886,000)   $10,740,000
                                       ===========  ===========   ========   ============    ===========
</TABLE>

See accompanying notes to financial statements.


                                      F-14


<PAGE>   98


                             STARWOOD LODGING TRUST
                        AND STARWOOD LODGING CORPORATION

                         NOTES TO FINANCIAL STATEMENTS



1.   Organization and Summary of Significant Accounting Policies.

General

     The accompanying financial statements include the accounts of Starwood
Lodging Trust (the "Trust") and Starwood Lodging Corporation and their
subsidiaries (the "Corporation").  The Trust was formed as a real estate
investment trust ("REIT") under the Internal Revenue Code in 1969.  In 1980,
the Trust formed the Corporation and made a distribution to the Trust's
shareholders of one share of common stock of the Corporation for each share of
beneficial interest of the Trust.  The shares of the Trust and the shares of
the Corporation are paired on a one-for-one basis, and can only be transferred
in units ("Paired Shares") consisting of the same number of shares of the Trust
and of the Corporation.

     The combined financial statements include the accounts of the Trust and
the Corporation (the "Companies").  All material intercompany balances and
transactions have been eliminated in the combined and separate consolidated
financial statements.  The intercompany balances and transactions which have
been eliminated in arriving at the combined balance sheets and combined
statements of operations include the elimination of notes receivable from the
Corporation recorded on the Trust's balance sheets, and the related notes
payable to the Trust recorded on the Corporation's balance sheets.  Rent and
interest income recorded on the Trust's statements of operations are eliminated
against the related rent and interest expense on the Corporation's statements
of operations.

     The Companies own and operate hotels located throughout the United States
and two hotel/casinos in Las Vegas, Nevada.  The hotels range in size from 90
to 960 rooms and offer services to both business and leisure travelers.

Reorganization

     Effective January 1, 1995 (the "Closing Date"), the Trust and the
Corporation consummated a reorganization (the "Reorganization") with Starwood
Capital Group, L.P. ("Starwood Capital") and certain affiliates of Starwood
Capital (the "Starwood Partners").

     The Reorganization involved a number of related transactions that occurred
simultaneously on the Closing Date.  Such transactions included (i) the
contribution by the Trust to SLT Realty Limited Partnership (the "Realty
Partnership") of substantially all of the properties and assets of the Trust,
at book values, subject to substantially all of the liabilities of the Trust
(including the Senior Debt of the Trust ), in exchange for an approximate
28.3% interest as a general partner in the Realty Partnership, (ii) the
contribution by the Starwood Partners to the Realty Partnership of
approximately $12,600,000 in cash and certain hotel properties and first
mortgage notes, at book values in exchange for limited partnership units
representing the remaining approximate 71.7% interest in the Realty
Partnership, (iii) the contribution by the Corporation and its subsidiaries to
SLC Operating Limited Partnership (the "Operating Partnership", and together
with the Realty Partnership, the "Partnerships") of all of their properties and
operating assets (except for their gaming assets, which are to be contributed
upon approval by Nevada gaming authorities), subject to substantially all of
their liabilities, in exchange for an approximate 28.3% interest as a general
partner in the Operating Partnership, and (iv) the contribution by the Starwood
Partners to the Operating Partnership of approximately $1,400,000 in cash and
furniture, fixtures and equipment of the hotel properties, at book values, in
exchange for limited partnership units representing the remaining approximate
71.7% interest in the Operating Partnership.

     Immediately following the Reorganization, the Trust and the Corporation
accounted for their respective investment in the Realty Partnership and the
Operating Partnership under the equity method of accounting, in accordance with
generally accepted accounting principles.  For accounting purposes, neither the
Trust nor Starwood

                                      F-15

<PAGE>   99

Capital unilaterally controlled the Starwood Lodging Realty Partnership and
neither the Corporation nor Starwood Capital unilaterally controlled the
Starwood Lodging Operating Partnership.

     In addition on March 24, 1995, a Starwood Partner exchanged $12 million of
Senior Debt for additional limited partnership units of the Realty Partnership
and the Operating Partnership.  After giving effect to the Reorganization and
this exchange of Senior Debt, the Trust had an approximate 25.4% interest in
the Realty Partnership, the Corporation had an approximate 25.4% interest in
the Operating Partnership, and the Starwood Partners held limited partnership
interests representing the remaining approximate 74.6% interest in each of the
Realty Partnership and the Operating Partnership.

The Offering

     On July 6, 1995, Starwood Lodging completed a public offering (the
"Offering") of 11,787,500 Paired Shares at a price of $23.00 per Paired Share.
Net proceeds of the Offering of approximately $245.7 million in aggregate were
contributed by the Trust and the Corporation to the Realty Partnership and the
Operating Partnership, respectively, thereby increasing the general partnership
interest of the Trust and the Corporation to approximately 69.9% of each of the
Realty Partnership and Operating  Partnership with the Starwood Partners'
limited partnership interests representing the remaining approximate 30.1%
interest in each of the Realty Partnership and Operating Partnership. From the
completion of the Offering, the Companies have consolidated the results of the
respective Partnerships.

     The 30.1% limited partnership interests of the Realty Partnership and the
Operating Partnership is reflected in the Financial Statements as Minority
Interest.  The total number of operating units outstanding in the Partnership
was 19,768,000 at December 31, 1995.

Hotel assets

     Hotel assets are stated at the lower of cost or the amounts described
below and are depreciated using straight-line and declining-balance methods
over estimated useful lives of five to thirty-five years for buildings and
improvements and three to twelve years for furniture, fixtures and equipment.
Amounts allocated to leasehold interests are amortized using the straight-line
method over lease terms of eight to forty-three years.

     The Trust and the Corporation estimate the fair values of each of their
hotel assets on a quarterly basis.  For each hotel asset not held for sale,
fair value is estimated as the expected undiscounted future cash flows of the
asset (generally over a five-year period), which is compared to the net book
values of the asset.  If the expected undiscounted future cash flows are less
than the net book value of the asset, the excess of the net book value over the
estimated fair value is charged to current earnings.  When it is the opinion of
management that the fair value of a hotel asset which has been identified for
sale is less than the net book value of the asset, a reserve for losses is
established.  Fair value is determined based upon discounted cash flows of the
hotel assets at rates (11.0% to 21.0%) deemed reasonable for the type of
property and prevailing market conditions, appraisals and, if appropriate,
current estimated net sales proceeds from pending offers.  A gain or loss is
recorded to the extent the amounts ultimately received differ from the adjusted
book values of the hotel assets.  Gains on sales of hotel assets are recognized
at the time the hotel assets are sold provided there is reasonable assurance of
the collectability of the sales price and any future activities to be performed
by the Companies relating to the hotel assets sold are insignificant.

Mortgage notes receivable

     If a loan becomes delinquent or upon the occurrence of other events it
becomes known that the collectability of a specific loan is uncertain, interest
income is no longer accrued and an allowance for loss is established based upon
an analysis of the net realizable value of the underlying property
collateralizing the loan.


                                      F-16

<PAGE>   100


Provision for losses

     Provision for losses for the years ended December 31, 1994 and 1993 for
the Trust are as follows:


<TABLE>
<CAPTION>


                             1994        1993
                           ---------  -----------
<S>                        <C>        <C>
Hotel assets                $439,000   $2,369,000
Mortgage notes receivable    320,000
                            --------   ---------                              
                            $759,000   $2,369,000
                            ========   ==========
</TABLE>

     There were no provisions for losses for the year ended December 31, 1995.

Cash and cash equivalents

     Cash and cash equivalents are defined as cash on hand and in banks plus
all short-term investments with a maturity, at the date of purchase, of three
months or less.

Inventories

     Inventories are stated at the lower of cost or market with cost determined
on a first-in, first-out basis.

Organization Costs

     Organization costs related to the formation of each of the Partnerships in
the amount of $2,891,000 and $1,672,000 for the Trust and $2,891,000 and
$1,672,000 for the Corporation are included in inventories, prepaid expenses
and other assets at December 31, 1995 and 1994, respectively.  The costs are
amortized over a five-year period beginning in January 1995.  Both the Trust
and the Corporation amortized $650,000 during the year ended December 31, 1995.

Hotel Revenue

     Revenue is recognized as earned.  Earned is generally defined as the date
upon which a guest occupies a room and/or utilizes the hotel's services.
Ongoing credit evaluations are performed and potential credit losses are
expensed at the time the account receivable is estimated to be uncollectible.
Historically, credit losses have not been material to the hotels' results of
operations.  The Companies have recorded an allowance for doubtful accounts
totalling $60,000 and $100,000 at December 31, 1995 and 1994, respectively.

Gaming revenue

     Gaming revenue relates to the two hotel/casinos and includes the net win
from gaming activities, as well as room, food and beverage and other revenues,
net of promotional allowances.

Fair value of financial instruments and concentration of credit risk

     The following disclosure of estimated fair value was determined by
available market information and appropriate valuation methodologies.  However,
considerable judgment is necessary to interpret market data and develop the
related estimates of fair value.  Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments.  The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

     Cash and cash equivalents, accounts receivable and accounts payable and
other liabilities are carried at amounts which reasonably approximate their
fair value.

     Investments of $2,841,000 for the Trust at December 31, 1995 had a fair
value of $2,674,000.


                                      F-17

<PAGE>   101


     At December 31, 1995, fixed rate mortgage notes receivable of $29,016,000
approximate their fair value.  The Companies believe that the fair value of
mortgage notes receivable of $50,245,000 is at least $62,000,000.

     Fixed rate mortgage notes receivable of $14,049,000 for the Trust at
December 31, 1994 had a fair value of $13,488,000 as estimated based upon debt
with similar terms and maturities.

     The carrying value of the secured notes payable, fixed rate notes payable,
and revolving line of credit approximate fair value at December 31, 1995 and
1994, as the related interest rates are either variable or in line with market
rates.

     Fixed rate notes payable with carrying values of $32,838,000 and
$13,748,000 for the Trust and Corporation, respectively, at December 31, 1994
had a fair value of $34,442,000 and $11,648,000 as estimated based on debt with
similar terms and maturities

     At December 31, 1995, the Company had significant amounts in banks that
was in excess of the federally insured amounts.

   
Interest Rate Agreements

     The Companies enter into interest rate forward contracts as a means of
managing interest rate exposure on anticipated transactions.  The agreements
are with major financial institutions which are expected to fully perform under
the terms of the agreements thereby mitigating the credit risk from the
transactions.  The differential to be paid or received under these agreements
is accrued consistent with the terms of the agreements and market interest
rates and is recognized in interest expense over the remaining term of the
related debt.
    

Net income (loss) per share

     Net income (loss) per share is based on the weighted average number of
common and common equivalent shares outstanding during the year which is on a
Paired Share basis for purposes of the combined financial statements.
Outstanding options and warrants are included as common equivalent shares using
the treasury stock method when the effect is dilutive.  The weighted average
number of shares and Paired Shares used in determining net income (loss) per
share and per Paired Share was 7,771,000 for the year ended December 31, 1995
and 2,022,158 for the years ended December 31, 1994 and 1993.  The weighted
average number of shares and Paired Shares were determined as if the six for
one reverse stock split that occurred June 19, 1995 was effective January 1,
1993.  Historical per share information has been revised accordingly.

Use of estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Reclassifications

     Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform with the 1995 financial statement presentation.

Impact of recently issued accounting standards

     In March and October 1995, the Financial Accounting Standards Board
issued Statements of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of"
and No. 123 "Accounting for Stock-Based Compensation", respectively.  These
statements shall be effective for financial statements for fiscal years
beginning after December 15, 1995.  Management believes that adoption of
Standard No. 121 will not have a material effect on its financial position or
results of operations.  Management intends to adopt the disclosure method of
Standard No. 123 and, accordingly, there will be no impact on the Company's
financial position or results of operations.

2.   Income Taxes.

     The Trust will elect to be treated as a REIT under the provisions of the
Internal Revenue Code beginning with the 1995 year.  As a result, the Trust
will not be subject to Federal income tax on its taxable income at corporate
rates to the extent it distributes annually at 95% of its taxable income to its
shareholders and complies

                                      F-18

<PAGE>   102

with certain other requirements.  The Trust is subject to state income and
franchise taxes in certain states which it operates.  Therefore, a tax
provision has been reflected for these income and franchise tax amounts.

     Components of deferred income taxes as of December 31, 1995 and 1994 are
as follows:


<TABLE>
<CAPTION>

                                                   1995                              1994
                                         -------------------------      ---------------------------------
                                            Trust      Corporation          Trust            Corporation
                                         ------------  -----------      -------------       -------------
<S>                                      <C>           <C>                <C>              <C>
Deferred income tax assets:
  Operating loss carryforwards           $ 28,084,000  $   804,000       $  28,910,000
  Losses from investments in partnerships                2,583,000                            2,133,000
  Property and equipment                      850,000      512,000           3,041,000        6,586,000
  Other                                       172,000      372,000             476,000          492,000
Total deferred income tax assets           29,106,000    4,271,000          32,427,000        2,625,000
                                         ------------  -----------       -------------      -----------
Valuation allowance                       (29,106,000)  (4,271,000)        (32,427,000)      (2,625,000)
                                         ------------  -----------       -------------      -----------
Net deferred income tax                  $    ---      $   ---            $   ---           $   ---    
                                         ============  ===========        ============      ===========
</TABLE>

     As of December 31, 1995, the Trust and Corporation had net operating loss
carry forwards for federal income tax purposes of approximately $83,000,000 and
$3,400,000 respectively.  The NOL's expire in various years beginning in 2,006
through 2,009 for the Trust, and 2,006 through 2,010 for the Corporation.

     The utilization of each entities' NOL will be limited by the provisions of
IRC Section 382, and in the case of the Trust the use of approximately $50
million of the NOL will be predicated on the recognition of gain from the sale
of certain of the assets of the Trust within 5 years of the ownership change
date which occured in July 1995.  A valuation allowance is provided for the
full amount of the NOL's as the realization of tax benefits from such NOL's is
not assured.

3.   Extraordinary Items.

     Under the terms of a Credit Agreement dated January 28, 1993 (the "1993
Credit Agreement") the Trust restructured its debt existing at such time.
Management concluded that that restructuring represented a "troubled debt
restructuring" as defined under generally accepted accounting principles, and
accordingly, upon execution of the 1993 Credit Agreement, accrued all known
current or future identifiable debt restructuring costs as of December 31,
1992.  Upon execution of an Amended and Restated Credit Agreement dated March
24, 1995 (the "Prior Credit Agreement"), the Realty Partnership recognized
extraordinary income of $1,284,000 relating to the extinguishment of debt under
the terms of the 1993 Credit Agreement, representing the remaining amount of
the accrual at March 24, 1995.  Additionally, in July 1995 subsequent to the
Offering, the Realty Partnership repaid existing indebtedness borrowed under
the Prior Credit Agreement and recorded an extraordinary charge to net income
of $3,602,000 relating to the extinguishment of such debt.

4.   Loan Restructuring Costs.

     All restructuring costs in relation to the "troubled debt restructuring"
referred to in Note 3 have been expensed as incurred.  In 1993, upon execution
of the definitive debt restructuring agreement, $700,000 was paid by the Trust
to the certain institutional lenders and $4,032,000 was added to the loan
balance under the terms of a credit agreement for restructuring costs due the
institutional lenders for legal and other experts.  Previously accrued
restructuring costs of $611,000, $778,000 and $3,152,000 were paid during the
years ended December 31, 1995, 1994 and 1993, respectively.  As noted above, an
additional $1,284,000 of previously accrued restructuring costs was recognized
as extraordinary income during 1995.  At December 31, 1995, there are no
accrued loan restructuring costs included in accounts payable and other
liabilities.

5.   Supplemental Cash Flow Disclosure.

     Interest paid in cash by the Trust in the years ended December 31, 1995,
1994, and 1993 was $15,235,000 $12,736,000 and $13,205,000, respectively.


                                      F-19

<PAGE>   103


     Interest paid in cash by the Corporation in the years ended December 31,
1995, 1994, and 1993 was $1,345,000, $1,342,000 and $140,000, respectively.

     The Corporation deferred interest of $3,012,000, $1,730,000 and $1,519,000
on its intercompany debt with the Trust in the years ended December 31, 1995,
1994, and 1993 respectively.

     In December 1993, the Corporation transferred $278,000 of share purchase
loans to the Trust and reduced notes payable - Trust.

     During 1993, $4,032,000 of accrued loan restructuring costs were added to
the loan balance of the secured notes payable and revolving line of credit.

     During 1994, a charge of $246,000 to additional paid-in capital was made
relating to the cancellation of share purchase notes.  Paired Shares which
secured the portion of the principal canceled on the original notes were
returned to the Companies.

     In December 1994, the Trust forgave $58,335,000 of notes payable to the
Trust by the Corporation and its subsidiaries.  Because of the common ownership
of the Trust and the Corporation, the Trust charged, and the Corporation
credited, the amount of debt forgiven to additional paid-in capital of the
Trust and Corporation, respectively.

     In connection with the Reorganization, the Starwood Partners contributed
$30.2 million (net of $474,000 of depreciation) in land and buildings, $49.2
million (net of discounts of $24.9 million and allowances of $2.9 million) in
mortgage notes receivable, and $52.9 million (net of $6.0 million of debt
forgiven by the Starwood Partners) in long term debt obligations for
partnership units in the Realty Partnership.  In addition, the Starwood
Partners contributed $3.7 million (net of $757,000 of depreciation) of
furniture, fixtures and equipment for partnership units of the Operating
Partnership.

     During 1995, a Starwood Partner exchanged $12 million of Senior Debt for
partnership units of the Realty Partnership and the Operating Partnership.

   
     In connection with the agreement with Starwood Capital relating to the
Ross litigation, the Trust and the Corporation reduced their accrued
liabilities by $848,000 and adjusted capital contributions by the same amount
(see Note 14).
    

     During 1995, the Trust transferred approximately $7.2 million (net of
accumulated depreciation) in furniture, fixtures and equipment to the
Corporation and increased the intercompany receivable by the same amount.

     In December 1995, the Companies declared approximately $9.3 million in
dividends to be paid in January 1996.

6.   Senior Notes Payable and Revolving Line of Credit.

     Effective March 24, 1995 the Realty Partnership and the Trust entered into
the Prior Credit Agreement pursuant to which the Realty Partnership borrowed
approximately $131.7 million which was used primarily to refinance the
outstanding Senior Debt of $113,896,000 at December 31, 1994 (after the
exchange by a Starwood Partner of $12 million of Senior Debt for units of the
Realty Partnership and the Operating Partnership) and approximately $27 million
of first mortgage debt.  The Senior Debt carried an interest rate of LIBOR plus
3.00% and at December 31, 1994, the Senior Debt balance of $113,896,000 had an
interest rate of 8.69%.  The Prior Credit Agreement contained a clause which
stated that upon the payment to a Starwood Partner of a $786,000 cancellation
fee, the remaining Lender Warrants issued in connection with the 1993 Credit
Agreement, would be canceled.  Effective March 31, 1995 the Realty Partnership
settled the cancellation fee by issuing an unsecured note payable to the
Starwood Partner and the remaining Lender Warrants were canceled.

     On July 25, 1995, the Realty Partnership entered into a Mortgage Loan
Funding Facility Agreement (the "Repo Facility") providing for advances up to
$71 million for a period of 18 months ending January 25, 1997.  Advances under
the Repo Facility bear interest at a rate based on one month LIBOR plus 1.5%
for the period ending July 25, 1996 and one month LIBOR plus 1.75% thereafter
and are secured by certain mortgage notes receivable and other collateral of
the Realty Partnership.

                                      F-20

<PAGE>   104



     On October 25, 1995, the Realty Partnership entered into a Credit
Agreement (the "Acquisition Facility") providing for advances of up to $135
million for a period expiring on October 1, 1998.  The Acquisition Facility
superseded and replaced the Prior Credit Agreement.

     Advances under the Acquisition Facility bear interest at a rate based upon
one, two or three-month LIBOR plus 1.625 percent and are collateralized by
liens on 29 of the hotel equity interests of the Realty Partnership and may be
collateralized by other properties, all on a cross-collateralized basis.  As
of December 31, 1995, borrowings under the Repo Facility and the Acquisition
Facility (together, the "Facilities") totaled $119.1 million with interest
rates ranging from 7.4% to 7.6%.  The Acquisition Facility provides for an
annual fee of 0.25% of the average daily unfunded portion of the Facility
Amount.

     The Facilities require the Companies to maintain a specified minimum
adjusted net worth, a specified minimum ratio of actual consolidated EBITDA to
debt service plus fixed charges and a restriction against total debt exceeding
a specified maximum percent of net book value.  In addition, the Facilities
place restrictions on distributions and require the Trust to maintain its REIT
status, maintain a minimum borrowing base (defined as Net Operating Income per
Facility Agreement divided by stated interest rates) and maintain minimum
replacement reserves.  As of December 31, 1995, the Companies were in
compliance with their covenants.

     The Companies intend to finance the acquisition of additional hotel
properties, hotel renovations and capital improvements and provide for general
corporate purposes through the Facilities and when market conditions warrant,
to issue additional equity or debt securities.

7.   Hotel Sales and Reserve for Losses.

     During the year ended December 31, 1993, the Companies sold their
interests in four hotel assets, the Best Western located in Smyrna, Georgia,
the Vantage Hotel located in Tucker, Georgia, the Best Western Motor Hotel in
Santa Maria, California, and the Ramada Inn-Westport in St. Louis, Missouri.
The Smyrna property was sold for an all cash price of $1,600,000.  The Tucker
property was sold for $2,485,000, consisting of approximately $500,000 in cash
and a $1,985,000 promissory note collateralized by the hotel.  The Tucker note
bears interest at 9% per annum with accrued interest and principal due monthly
based upon a 25-year amortization schedule, with all unpaid principal and
interest due in June 1998.  The Santa Maria property was sold for an all cash
price of $140,000.  The St. Louis property was sold for an all cash price of
$2,500,000.

     For the year ended December 31, 1993, the Trust recognized a loss of
$53,000 and the Corporation recognized a gain of $74,000 on sales of hotel
assets.  In 1993, the Trust recorded a provision for investment losses of
$2,369,000 primarily as a result of the acceptance of offers for the sale of
hotels at amounts lower than net book value.

     During the year ended December 31, 1994, the Companies sold their 
interests in five hotel assets, the Best Western South located in Austin,
Texas, the Sheraton Hotel located in New Port Richey, Florida, the Holiday Inn
in Brunswick, Georgia, the Holiday Inn in Jacksonville, Florida and the Ramada
Inn in Fayetteville, North Carolina.  The Austin property was sold pursuant to
eminent domain proceedings for the purpose of highway construction to an agency
of the State of Texas for an all cash price of $3,594,000.  The New Port Richey
and Brunswick properties were sold together for $4,306,000, consisting of
approximately $1,236,000 in cash and a $3,070,000 promissory note
collateralized by the hotels.  The New Port Richey/Brunswick note bears
interest at 8% per annum for the first twelve months and 9.25% thereafter, with
accrued interest and principal due monthly based upon a 25-year amortization
schedule, with all unpaid principal and interest due in August 2001.  The
Jacksonville property was sold for $3,200,000, consisting of approximately
$900,000 in cash and a $2,300,000 promissory note collateralized by the hotel.
The Jacksonville note bears interest at 9% per annum with accrued interest and
principal due monthly based upon a 30-year amortization schedule, with all
unpaid principal and interest due in December 2001.  The Fayetteville property
was sold for $1,000,000, consisting of approximately $200,000 in cash and a
$800,000 promissory note collateralized by the hotel.  The Fayetteville note
bears interest at 9% per annum with accrued interest and principal due monthly
based upon a 12-year amortization schedule, with all unpaid principal and
interest due in December 2006.  In connection with the Reorganization (see Note
1), the Holiday Inn located in Albany, Georgia was sold to the Starwood
Partners for an all cash purchase price of $6,000,000.  The transaction 
        


                                    F-21

<PAGE>   105

was accounted for as a financing activity and the Starwood Partners subsequently
contributed the property to the Partnerships .  No gain or loss was recorded on
the sale.
        
     For the year ended December 31, 1994, the Trust recognized a gain of
$224,000 and the Corporation recognized a gain of $24,000 on sales of hotel
assets, including a $55,000 discount recorded by the Trust resulting from the
early payoff in 1994 of the mortgage note receivable related to the
Spartanburg, South Carolina property sold in 1992.  In 1994, the Trust recorded
a provision for investment losses of $439,000 primarily as a result of the
acceptance of offers for the sale of hotels at amounts lower than net book
value.

     During the year ended December 31, 1995, the Companies did not sell any of
their hotel assets.

8.   Mortgage Notes Receivable.

     In 1992, the Trust sold a hotel asset in Merrimack, New Hampshire and
received as partial consideration a promissory note in an original principal
amount of $1,440,000, collateralized by a first mortgage on the property.  In
September 1994, the Trust initiated foreclosure proceedings and recorded a
provision for investment losses of $320,000, resulting in a net book value of
$983,000.  The property was subsequently sold to a third party in December 1994
for net proceeds of $1,191,000 and the Trust recorded a gain on sale of
$208,000.

     At December 31, 1995, in addition to the MHLP notes discussed in Note 9,
the Trust held eighteen promissory notes collateralized by mortgages.  Eleven
notes ($78,996,000 carrying amount at December 31, 1995), representing 12
hotels, are collateralized by first mortgages, and seven notes ($365,000
carrying amount at December 31, 1995) are collateralized by second, third and
fourth mortgages.  Ten of the notes have fixed interest rates ranging from 7%
to 10% per annum, and five of the notes have variable interest rates that range
from 7.16% to 9.75% per annum at December 31, 1995.  Two of the notes
(representing two properties) provide for contingent interest based on a
percentage of gross revenues of the properties securing such notes.  Three of
the notes are principal only.  The maturity dates of the notes range from 1996
to 2017.  Aggregate principal payments under the mortgage notes receivable due
within one year of December 31, 1995 are $3,266,000.  As of December 31, 1995
and 1994, the reserve for investment losses for the mortgage notes receivable
amounted to $100,000 in both years.

9.   Milwaukee Marriott Hotel.

     In December 1985, the Trust sold its interest in the Milwaukee Marriott
Hotel to Milwaukee Brookfield Limited Partnership ("Brookfield").  In
connection with the sale, the Trust received a second mortgage note (the
"Original Trust Note") from Brookfield.

     In July 1991, ownership and operation of the Milwaukee Marriott was
reorganized and ownership of the hotel was transferred from Brookfield to
Moorland Hotel Limited Partnership, ("MHLP"), a limited partnership in which
the Corporation has a 51% interest and is the sole general partner and
Brookfield is the sole limited partner.  The operations of MHLP are
consolidated into the Corporation's financial statements from the date of
reorganization and, accordingly, the Trust has recorded the note receivable
from MHLP as a note receivable from the Corporation.  The Corporation and MHLP
entered into an agreement for the Corporation to manage the property.

     In addition, MHLP entered into an assignment and forbearance agreement
with Marriott Corporation ("Marriott"), the franchisor.  This agreement, among
other things, required MHLP to renovate the hotel to Marriott standards.  The
renovation was completed in January 1994.

     During 1992, MHLP, Aetna Life Insurance Company ("Aetna"), the holder of
the first mortgage on the Milwaukee Marriott (the "Aetna Note"), Marriott, the
Trust, the Corporation, and Brookfield and various partners of Brookfield
reached agreements arranging financing for the renovation of the Milwaukee
Marriott and restructuring of debt for MHLP.

     Effective December 1, 1992, Aetna agreed to defer for the period December
1, 1992 through November 30, 1993, the monthly principal and interest payments
on the Aetna Note, which accrues interest at 11.25% per annum, with the
deferred interest added to principal monthly.  Beginning December 1, 1993, the
loan amortizes in equal monthly installments over a period of 17 years at 10%
interest per annum until January 1, 1996, at which time all 




                                      F-22

<PAGE>   106


unpaid interest and principal are due, including appreciation interest
("Appreciation Interest"). The due date of the unpaid interest and principal
was extended to June 30, 1996 by an amendment executed on December 31, 1995. 
Appreciation Interest is defined as 50% of the aggregate principal reduction in
the Aetna Note from December 1, 1993 until the loan is due in full as provided
in the agreement. On July 31, 1995, the Trust purchased the Aetna Note from
Aetna.  The amount of the Aetna Note outstanding totaled $9,899,000 at December
31, 1994.
        
     In 1993, Marriott agreed to loan MHLP $750,000 collateralized by a second
deed of trust on the hotel (the "Marriott Note") for the purchase of equipment
from a Marriott subsidiary.  The Marriott Note bore interest at 9% per annum,
payable monthly beginning May 31, 1993 through April 30, 1994, at which time
fixed monthly payments of principal and interest of approximately $49,000
became due until December 31, 1994, at which time all unpaid interest and
principal were due.  In 1994, Marriott agreed to extend the Marriott Note with
interest at 10% per annum beginning January 1, 1995 at which time fixed monthly
payments of principal and interest of approximately $31,000 become due until
June 30, 1995.  All unpaid interest and principal was paid on June 30, 1995.

     In 1993, the Trust agreed to loan MHLP $1,000,000 to be used to complete
the renovation of the Milwaukee Marriott.  The loan is collateralized by a
third deed of trust on the hotel (the "Renovation Note") and bears interest at
10.5% per annum, payable monthly.  Under certain circumstances, interest is
deferred and added to the principal of the Renovation Note monthly.  The
amounts outstanding under the Renovation Note totaled $1,000,000 and $1,225,000
as of December 31, 1995 and 1994, respectively.  The Trust may declare due and
payable the principal balance and any unpaid accrued interest thereon at any
time through the maturity date of the Renovation Note on January 1, 1996.  The
due date of the unpaid interest and principal was extended to June 30, 1996 by
an amendment executed on December 31, 1995.  The Renovation Note became a
second mortgage following repayment of the Marriott Note in 1995.

     The Original Trust Note held by the Trust of $11,000,000 was modified as
of December 31, 1992 by adding deferred and previously unpaid interest of
$1,667,000 to principal due under the note and converting the note to a fourth
mortgage note.  Further, $1,790,000 and $1,607,000 of interest at 10.5% per
annum for the years ended December 31, 1995 and 1994, respectively, was
deferred monthly and added to principal due under the loan.  The fourth
mortgage note outstanding totaled $17,481,000 and $15,691,000 as of December
31, 1995 and 1994, respectively.  Interest is payable monthly unless deferred
under the provisions of the loan agreement until January 1, 1996, at which time
all remaining unpaid interest and principal are due.  The due date of the
unpaid interest and principal was extended to June 30, 1996 by an amendment
executed on December 31, 1995.  The Original Trust Note became a third mortgage
following repayment of the Marriott Note in 1995.

     The Corporation agreed to defer and convert to a note up to $250,000 of
management fees due under its management agreement with MHLP for a period of up
to twelve months commencing with base  management fees due after January 1,
1993.  The deferred fees bear interest at 9% per annum, which were added to the
principal balance of the note through December 1, 1993.  Thereafter, the note
is due in twelve equal monthly installments of principal and interest
commencing on January 1, 1994 at 12% interest per annum.  All unpaid interest
and principal was due and paid December 1, 1994.

     The $600,000 original loan (the "GSI Fourth Note")made by GSI Acquisition
Company, L.P., a limited partner of Brookfield, ("GSI"), was modified as of
December 31, 1992, by converting deferred and previously unpaid interest of
approximately $86,000 to principal.  For the years ending December 31, 1995 and
1994 interest at 10.5% per annum was deferred monthly and added to the
principal balance, which balance totals $946,000 and $849,000 at December 31,
1995 and 1994, respectively.  Thereafter, interest is payable monthly unless
deferred under the provisions of the agreement until January 1, 1996, at which
time all remaining unpaid interest and principal are due.  On December 31,
1995, the due date for the unpaid interest and principal was extended to June
30, 1996.

     The GSI Fourth Note became a fourth mortgage following repayment of the
Marriott Note in 1995, however it ranks pari passu with the Original Trust
Note.

     As of December 31, 1992, MHLP also agreed to pay GSI $2,000,000 pursuant
to a note (the "GSI Fifth Note") bearing non-accruing interest at 12% payable
out of available monthly cash flow (as defined in the GSI Fifth 


                                      F-23

<PAGE>   107



Note).  The principal balance outstanding is $2,000,000 at December 31, 1995 and
1994.  The GSI Fifth Note became a fifth mortgage following repayment of the
Marriott Note in 1995.
        
     Of the five notes outstanding at December 31, 1995, the Trust held three -
the Aetna Note, the Renovation Note, and the Original Trust Note.

     The Trust evaluates the collectability of the notes receivable
collateralized by the Milwaukee Marriott Hotel at the end of each quarter.
Factors considered by the Trust in performing the evaluations include the
discounted estimated future cash flow (at 11.0%) over a five-year period.  The
Corporation evaluates the recoverability of the net book value of the property
at the end of each quarter.  Factors considered by the Corporation in
performing the evaluation included the undiscounted estimated future cash flow
of the property over a five-year period.  Based upon the evaluations no
provision for losses was required.

10.  Hotel Properties.

     A summary of hotel assets at December 31, 1995 and 1994 is as follows (in
thousands):


<TABLE>
<CAPTION>

                                            Trust                 Corporation
                                      --------------------    -------------------
                                        1995        1994        1995       1994    
                                      --------    --------    --------   --------  
<S>                                   <C>         <C>          <C>        <C>      
Land and leasehold interests in land  $ 65,629    $ 41,184     $13,797    $13,796  
Buildings and improvements..........   231,174     122,300      56,349     22,315  
Furniture, fixtures and equipment...     8,834      25,124      64,576     15,630  
Accumulated depreciation and                                                       
  amortization......................   (40,827)    (48,699)    (38,986)   (16,877) 
Reserve for losses..................   (23,200)    (23,200)       (388)      (388) 
                                      --------    --------     -------    -------  
  Hotel assets - net................  $241,610    $116,709     $95,348    $34,476  
                                      ========    ========     =======    =======  
</TABLE>

11.  Real Estate Investments and Intercompany Transactions.

     At December 31, 1995, the Trust owned equity interests in thirty-five
hotels, including two hotel/casinos.  Of that number, thirty properties were
owned in fee, four were held pursuant to long-term leases and one was owned
through a 5% general partnership interest in a joint venture that owns the
Omaha Marriott Hotel.

     Thirty-one of the Trust's hotels (including the two hotel/casinos) are
leased to the Corporation or its subsidiaries.  Three hotels have been leased
to and are operated by Imperial Hotels Corporation, formerly Vagabond Inns,
Inc.  The Omaha Marriott Hotel has been leased to an affiliate of the
Corporation, and is managed by Marriott pursuant to a long-term management
agreement.  As of December 31, 1995, three of the hotels leased by the
Corporation from the Trust are being managed by third-party operators.  Two of
the third-party management agreements are for three-year terms expiring in
1998, and one of the management agreements is a five-year term expiring in
1999.  The management agreements are subject to certain cancellation
provisions.  Base management fees range from 2% to 2-1/2% of gross revenues
with incentive management fees based upon hotel profitability.

     The leases are generally long-term and generally provide for annual 
base, or minimum rents, plus contingent, or percentage rents based on the gross
revenues of the properties and are accounted for as operating leases.  The
leases are "triple-net" in that the lessee is generally responsible for paying
all operating expenses of the properties, including maintenance, insurance and
real property taxes.  Total rental expense paid by the Corporation to the Trust
under such leases was $26,730,000, $16,906,000 and $16,481,000 for the years
ended December 31, 1995, 1994 and 1993, respectively, of which $5,443,000,
$2,456,000 and $1,939,000 were contingent.  The lessee is also generally
responsible for any payments required pursuant to underlying ground leases. 
Most leases provide for cancellation by the Trust in the event that the Trust
does not earn a specified rent, or by the lessee (including the Corporation) in
the event the lessee does not earn a specified net operating profit.

     As of December 31, 1995 and 1994, the Corporation was indebted to the
Trust for an aggregate of $86,464,000 and $26,916,000, respectively, (including
the MHLP mortgage notes of $28,236,000 and $16,916,000 as of December 31, 1995
and December 31, 1994, respectively - see Note 5 and the Doral lease obligation
of      

                                      F-24

<PAGE>   108


$40,250,000-see discussion below).  The Corporation borrowings were non-interest
bearing for the years ended December 31, 1994 and 1993.  In December 1994, the
Trust forgave $58,335,000 of notes receivable payable to the Trust by the
Corporation and its subsidiaries.  Effective January 1, 1995, the remaining
notes bear interest at prime plus 2% with interest payable monthly and are due
on January 1, 2000.

     On September 20, 1995, the Realty Partnership purchased land for $3
million and mortgage notes receivable collateralized by the Doral Inn for $40.3
million.  The note bears interest at 9.5% and matures on October 1, 2006.  The
Realty Partnership also entered into a long-term lease agreement with SBK
Delaware Realty Holdings, L.L.C. ("SBK"), the owners of the Doral Inn, to lease
SBK the land for $240,000 per year.  Simultaneously, the Operating Partnership
entered into a long-term lease agreement with SBK to lease the land and the
building for $240,000 per year, plus the debt service on the mortgage held by
the Realty Partnership.  The Operating Partnership lease agreement includes a
clause under which SBK is paid a management fee of 0.5% of gross revenues.  The
Realty Partnership has the option of acquiring the building for the value of
the mortgage note plus $400,000 after ten years.  It is management's intention
to exercise that option.  The Operating Partnership has recorded the
transaction as a capitalized lease with an intercompany obligation to the
Realty Partnership.

     Rents accrued by the Trust from leased hotel properties are summarized as
follows (in thousands):


<TABLE>
<CAPTION>

                 Years Ended December 31,
               ----------------------------
                 1995      1994      1993
               --------  --------  --------
<S>            <C>       <C>       <C>
Corporation:
   Minimum            -   $14,373   $14,184
   Contingent         -     2,533     2,297
               --------  --------  --------
                      -    16,906    16,481
               --------  --------  --------
Other:
   Minimum          437       437       437
   Contingent       354       490       402
               --------  --------  --------
                    791       927       839
               --------  --------  --------
Total              $791   $17,833   $17,320
               ========  ========  ========
</TABLE>

     The Trust's minimum future rents at December 31, 1995 due under
non-cancelable operating leases for the years ending December 31 are as follows
(in thousands):


<TABLE>
<CAPTION>

                    1996     1997     1998     1999     2000    Thereafter
                   -------  -------  -------  -------  ------  -----------

      <S>          <C>      <C>      <C>      <C>      <C>       <C>
      Corporation  $33,220  $33,220  $33,220  $33,220  $7,335    $30,315
      Other .....      437      437      437      300     300      1,150
                   -------  -------  -------  -------  ------    -------  
      Total .....  $33,657  $33,657  $33,657  $33,520  $7,635    $31,465
                   =======  =======  =======  =======  ======    =======
</TABLE>


     The Corporation's future rents at December 31, 1995 payable under
noncancelable operating leases for the years ended December 31 are as follows:


<TABLE>
<CAPTION>

                  1996     1997     1998     1999     2000    Thereafter
                 -------  -------  -------  -------  ------  -----------

       <S>       <C>      <C>      <C>      <C>      <C>       <C>
       Trust ..  $33,220  $33,220  $33,220  $33,220  $7,335    $30,315
       Other ..      918      755      616      243     187      2,846
                 -------  -------  -------  -------  ------    -------
       Total ..  $34,138  $33,975  $33,836  $33,463  $7,522    $33,161
                 =======  =======  =======  =======  ======    =======
</TABLE>

     The Corporation is committed under its leases with the Trust to pay the
rents payable with respect to four ground leases which expire in 1997 through
2029, including renewal options.  The leases generally provide for a minimum
rent plus a percentage of gross revenues of the properties in excess of the
minimum rent.  Future minimum lease payments under the leases are included in
"other" rents payable in the table above.  The Trust is the primary obligor
under the leases; however, the Corporation as lessee/operator of the hotels
makes payments under


                                      F-25

<PAGE>   109


these leases directly to the lessors.  Rent expense incurred by the Corporation
as a lessee/operator under these ground leases was $549,000, $879,000 and
$854,000, in the years ended December 31, 1995, 1994 and 1993, respectively.
        
12. Mortgage and Other Notes Payable.

     At December 31, 1994, the Trust had outstanding six mortgage notes payable
which were collateralized by seven of the Trust's hotels, with a net book value
at December 31, 1994 of $55,027,000.

     At December 31, 1995 and 1994, the Trust had the following outstanding
debt obligations (exclusive of Senior Debt and Lines of Credit - See Note 6):


<TABLE>
<CAPTION>
                                                   December 31,  December 31,
                                                       1995          1994
                                                   ------------  ------------
<S>                                                  <C>          <C>
Mortgage Notes:
11.75% first mortgage note, due in 2015, callable
  by lender in 1995, 2000, 2005, or 2010                          $ 6,349,000
12.875% first mortgage note, due in 1997                            9,173,000
12.625% first mortgage note, due in 1995                            4,075,000
9.25% first mortgage note, due in 1995                              1,854,000
10.25% first mortgage note, due in 2001                             5,148,000
9.0% first mortgage note, due in 1997                                 139,000
                                                                  -----------
Total mortgage notes payable                                       26,738,000
Advance from the Starwood Partners                                  6,000,000
Other                                                $100,000         100,000
                                                                  -----------
Total mortgage and other notes payable               $100,000     $32,838,000
                                                     ========     ===========
</TABLE>

     As described in Note 7, in August 1994 Starwood Partners acquired the
Trust's Albany, Georgia property for $6,000,000.  Interest expense of $313,000
in 1994 related to the advance was the greater of the net cash flow of the
property or 10% until the property was contributed to the Partnerships.

     At December 31, 1995 and 1994, the Corporation had the following
outstanding debt obligations (exclusive of Notes Payable to Trust):


<TABLE>
<CAPTION>
                                                    December 31,  December 31,
                                                        1995          1994
                                                    ------------  ------------
<S>                                                  <C>           <C>
Collateralized by Milwaukee Marriott Hotel:
10.0% first mortgage note, due 1996                                $ 9,899,000
9.0% second mortgage note, due 1995                                    358,000
10.5% fifth mortgage note, interest only, due 1996  $  946,000         849,000
12.0% sixth mortgage note, interest only (to the                
  extent of available cash flow), due 1996           2,000,000       2,000,000
                                                                
9-10% notes payable, due 1995-1996                                     164,000
                                                     2,946,000      13,270,000
Other:                                                          
9.75% first mortgage note, due 1997                    372,000         403,000
Obligations under capital leases                       967,000          75,000
Total mortgage and other notes payable              $4,285,000     $13,748,000
                                                    ==========     ===========
</TABLE>

     At December 31, 1995, the Milwaukee Marriott Hotel had a net book value of
$22,150,000.




                                      F-26



<PAGE>   110


     Minimum lease and principal payments on the Corporation's indebtedness for
the years ending December 31 are due as follows:

<TABLE>
<CAPTION>

                                       Minimum Future  Principal Payments
            Year                       Lease Payments   Due Under Notes
            ----                       --------------  ------------------
<C>                                      <C>               <C>
            1996                         $  166,000        $2,994,000
            1997                            166,000           324,000
            1998                            166,000      
            1999                            166,000      
            2000                            166,000      
         Thereafter                         600,000      
            Total                         1,430,000        $3,318,000
                                                           ==========
Amount representing interest                463,000
Future minimum lease payments            $  967,000
                                         ==========
</TABLE>

     At December 31, 1995 and 1994 the Corporation had $845,000 and $175,000,
respectively, in assets (less $127,000, and $117,000, respectively, in
accumulated amortization) recorded under capital leases.  Such amounts are
included in furniture, fixtures and equipment.

13. Shareholders' Equity.

Warrants to purchase Paired Shares

     At December 31, 1995 and 1994, there were outstanding 276,662 warrants to
purchase Paired Shares at an exercise price of $101.70 per Paired Share (as
adjusted for the one for six reverse stock split in June 1995) through
September 15, 1996.  At the expiration date, each 600 warrants are convertible
into one Paired Share of stock.  In lieu of fractional shares, holders will be
paid an amount equal to the same fraction of the current market value of a
single share.

Share option plans

     The Trust and the Corporation each adopted Incentive and Non-Qualified
Share Option Plans in 1986 which provided for the purchase of up to an
aggregate of 116,667 Paired Shares (as adjusted for the one for six reverse
stock split in June 1995) by Trustees, Directors, officers and employees
pursuant to option grants.  During the year ended December 31, 1995, the Trust
and the Corporation granted options to purchase 56,892 Paired Shares at
excercise prices ranging from $16.50 to $21.75 per Paired Share.  During the
year ended December 31, 1994, the Trust and the Corporation granted options to
purchase 16,500 Paired Shares at an exercise price of $16.50 per Paired Share.
During the year ended December 31, 1993, the Trust and the Corporation granted
options to purchase 3,333 Paired Shares at an exercise price of $15.75 per
Paired Share.  Such options, which are granted at fair market value on the date
of grant, vest over three years.  As of December 31, 1995, 10,860 options have
been exercised.

     During 1995, the Trust and the Corporation each also adopted a 1995 Share
Option Plan which provides for the purchase of Paired Shares by Trustees,
Directors, officers, employees, consultants and advisors, pursuant to option
grants.  The aggregate number of Paired Shares subject to options which may be
granted under the Plans is 1,573,000 plus 8% of any additional partnership
units or Paired Shares issued subsequent to August 17, 1995 (other than Paired
Shares issued in exchange for partnership units, Paired Shares issued pursuant
to employee benefit plans or Paired Shares that were previously issued and
re-acquired by the Trust or the Corporation).  During the year ended December
31, 1995, the Trust and the Corporation granted options under the 1995 Plans to
purchase 926,750 Paired Shares to Trustees, Directors, officers and employees, 
at exercise prices ranging from $23.00 to $29.00 per Paired Share.

     At December 31, 1995, outstanding options granted under all plans of the 
Trust and Corporation (including options granted to officers and directors of a
company previously acquired by the Trust) aggregated 1,004,640 Paired Shares. 
At December 31, 1995, options for 130,112 Paired Shares are fully vested with
exercise prices ranging from $4.50 to $120.00 per Paired Share.
        

                                      F-27

<PAGE>   111


Share purchase plans

     Prior to December 1989, the Trust and the Corporation each had a Share
Purchase Plan, whereby an aggregate of 33,333 Paired Shares (as adjusted for
the one for six reverse stock split in June 1995) were available to be
purchased by Trustees, Directors, officers and employees at their fair market
value on the date of sale with monies borrowed from the Trust or Corporation.

     In December 1989, the Trust's Board of Trustees and the Corporation's
Board of Directors voted to terminate the Share Purchase Plans for purposes of
prospective eligibility, and to irrevocably waive the right of the Trust and
the Corporation to accelerate the payment of a note executed by a participating
Trustee or Director upon termination of such participant's relationship with
the Companies.

     In January 1991, the Companies entered into agreements with certain
Trustees and Directors who had agreements outstanding pursuant to the Share
Purchase Plans to which each such Board member agreed to stand for re-election
as a Trustee or Director at the next annual shareholders' meeting if requested
to do so by their respective Boards, or if the Boards did not so request, to
act, for a period of up to two years and at mutually agreed upon times and
places, as an advisor to the Trust or the Corporation on matters within such
Board member's experience and expertise, and the Trust or the Corporation
agreed that any outstanding promissory note executed by such Board member in
partial payment for Paired Shares purchased under the Share Purchase Plans
would be amended to cause such promissory note to be without recourse to the
maker.

     In March 1992, certain of the aforementioned notes were restructured to
bear an annual interest rate of 8% as of February 2, 1992, with such notes to
accrue interest only from February 2, 1992 until February 15, 1995, at which
time the principal and accrued interest would become payable in equal monthly
installments over a ten-year period.

     The share purchase agreement between a former officer and director and the
Corporation was terminated in connection with his December 31, 1992 resignation
as an officer of the Corporation, and the 1,667 Paired Shares (as adjusted for
the one for six reverse split in June 1995) acquired pursuant to that agreement
were assigned by him to the Corporation.  The share purchase note in the amount
of $112,500, was written off at December 31, 1993.  The share purchase notes of
other former officers, directors and employees aggregating $63,500 were also
written off at December 31, 1993.

     During 1994, the parties agreed to cancel the remaining outstanding share
purchase notes of $246,000 and during 1995 such notes were canceled and the
unpaid Paired Shares were forfeited by the purchasers.

Preferred shares

     The Corporation has 10,000,000 authorized preferred shares, $0.01 par
value, none of which are issued or outstanding.

14. Commitments and Contingencies.

Litigation

     In late 1991 and early 1992 three complaints were filed against the Trust
and the Corporation and certain other related persons (the "Shareholder
Actions").  As amended, two of the complaints allege that the Trust and the
Corporation, a Director and officer of the Corporation and a former
officer/Trustee of the Trust violated the Racketeer Influenced and Corrupt
Organizations Act and Federal and California securities laws and acted
fraudulently in connection with the Trust's and the Corporation's public
disclosures with respect to the Trust's purchase of its two hotel/casinos and
the Ramada Inn in Indian Wells, California.  Both of these complaints sought
class action certification.  The third complaint was filed purportedly on behalf
of the Trust and the Corporation and alleged that certain former and present
Trustees and Directors breached their fiduciary duties in connection with the
purchase of the Ramada Inn in Indian Wells and the two hotel/casinos
        

                                      F-28

<PAGE>   112


     On July 20, 1994, the United States District Court for the Southern
District of California entered a Final Judgment of Dismissal With Prejudice
(the "Final Judgment") of the two purported class actions filed in that Court.

     Pursuant to the Final Judgment, the District Court, among other things,
approved the settlement set forth in stipulations of settlement (the
"Stipulation") entered into among the plaintiffs and defendants in the
Shareholder Actions, as well as the insurance company that issued the
Companies' directors and officers policy applicable to the period to which
Shareholder Actions relate.

     Under the Final Judgment, all claims that were or might have been made in
the Shareholder Actions were deemed released as of the Effective Date (as
defined in the Stipulation), and a $3,250,000 cash settlement fund was
established which, after the deduction of fees and costs to plaintiffs'
counsel, was to be distributed to qualified members of the certified plaintiff
classes according to an allocation formula that includes a calculation based on
certain shares that opted out of the settlement.  Of the settlement fund,
$2,500,000 was paid by the insurance company, $400,000 was paid by the
Companies, and $350,000 was paid by former officers of the Companies.  Upon
completion of the claims administration process, any funds remaining, up to a
limit of $325,000, was to be returned to the parties who contributed to the
settlement fund on a pro rata basis.  The parties contributing to the
settlement fund have previously established a separate $45,000 fund to be used
for purposes of notifying the classes and otherwise administering the
settlement.  Legal fees and other costs incurred by the defendants in the
Shareholder Actions prior to October 12, 1993 were paid by the Companies;
subsequent defense costs were paid by the insurance company.  Holders of
approximately 198,398 Paired Shares (as adjusted for the one for six reverse
stock split in June 1995) opted out of the settlement.  All amounts relating to
the Shareholder Actions paid or expected to be paid, had been accrued and
expensed as of December 31, 1994.

     Pursuant to the Final Judgment, notice was given to the class plaintiffs
to submit claims and claims were received.  Final distribution of the Net
Settlement Fund and payment of costs and expenses was ordered by the Court on
December 15, 1995.

     The Stipulation also requires that the Trust's Board of Trustees and the
Corporation's Board of Directors establish a joint transaction committee of
independent Trustees and Directors to make recommendations to those Boards with
respect to any transaction proposed in the future by management and having a
fair market value of $20 million or more.

     In connection with the settlement of the Shareholder Actions, Messrs.
Young and Rothman and certain of their affiliated partnerships terminated the
management agreements (the "Management Contracts") that existed between those
partnerships and the Corporation's subsidiary, Western Host, Inc., ("Western
Host).  Western Host agreed to forbear from disputing such action and withdrew
as a general partner of two additional affiliated partnerships.  Messrs. Young
and Rothman paid $800,000 to Starwood Lodging in satisfaction of any damages
resulting from the termination of the management contracts.  They also agreed
to be responsible for a percentage of any retroactive adjustments in worker's
compensation insurance premiums.  Starwood Lodging has paid $167,041 for
retroactive worker's compensation insurance premiums and have sought
reimbursement from Messrs. Young and Rothman of their share of that amount (an
aggregate approximately $56,000).  The Corporation has commenced litigation
against Messrs. Young and Rothman to collect such amounts (Starwood Lodging
Corp. v. Ronald A. Young, et al., San Diego Superior Court Case No. 693822)

Ross Settlement Agreement

     Subsequent to the settlement of the Shareholder Actions, Leonard M. Ross
and his affiliates ("Ross"), who held 198,398 Paired Shares (as adjusted for
the one for six reverse split in June 1995) and opted out of the settlement,
threatened litigation against the Trust and the Corporation.

   
     In October 1994, Starwood Capital entered into an agreement with Ross to
settle the threatened litigation in which Starwood Capital agreed, in exchange
for an assignment of Ross' claims against the Trust and the Corporation,  to
purchase Ross' Paired Shares, at Ross' election, in a 60-day period beginning on
the earlier of the first anniversary of the closing of the Reorganization or
December 15, 1995 at a price of $33.75 subject to certain adjustments. Starwood
Capital also had the right to elect to purchase such Paired Shares at the same
time and on the same terms.

     In light of this agreement, the Trust and the Corporation accrued a
liability as of December 31, 1994 of $2,648,000 reflecting a reasonable
estimate of the cost of settling the Ross claims.

     In connection with the Reorganization, which took place in 1995, the Trust
and Corporation severally agreed that under certain circumstances they would
indemnify Starwood Capital with respect to Starwood Capital's obligations to
Ross, up to a maximum of
    





                                      F-29

<PAGE>   113

   
$1.8 million, upon receipt of a full release from Starwood Capital of all of the
claims assigned by Ross.  At December 31, 1995, the Companies had accrued $1.8
million in respect of this potential liability. The $848,000 reduction in this
liability was recorded as an adjustment to contributed capital during 1995 (see
Note 5).  
        
     Ross elected to sell his Paired Shares, and in January 1996 those Paired
Shares were sold to a third party through the New York Stock Exchange.  The
Paired Shares were sold at $29.625 per Paired Share; the Trust and the
Corporation paid $1,375,743 in aggregate pursuant to their indemnity
obligations, and Starwood Capital released the Trust and the Corporation from
all claims assigned by Ross. Additionally the Trust and the Corporation are
entitled to insurance proceeds totalling $205,000 and, as a result, will
recognize approximately $629,000 of income in the first quarter of 1996. 
    

Environmental matters

     In the latter part of 1995, in connection with either the Acquisition
Facility or the purchase of the relevant hotel, preliminary or "Phase I"
environmental site assessments were prepared with respect to 35 of the Trust's
fee interest and ground leasehold properties.  The results of those Phase I
assessments and subsequent Phase II assessments performed  at six of the
properties revealed that the overall potential for environmental impairment was
assessed as low.

     A 1991 Phase I environmental assessment and a tank leak test performed in
1992 at the Bourbon Street Hotel and Casino and a Phase I environmental
assessment prepared for the Milwaukee Marriott in 1991 revealed no material
impairments.

     Neither the Trust, the Corporation, the Realty Partnership nor the
Operating Partnership has been identified by the U.S. Environmental Protection
Agency as a responsible or potentially responsible party for, nor have they
been the subject of any governmental proceeding with respect to, any hazardous
waste contamination.  If the Trust, the Corporation, the Realty Partnership or
the Operating Partnership were to be identified as a responsible party, they
would in most circumstances be strictly liable, jointly and severally with
other responsible parties, for environmental investigation and clean-up costs
incurred by the government and, to a more limited extent, by private persons.

     Based upon the environmental reports described above, the Trust believes
that a substantial number of its hotels incorporate potentially
asbestos-containing materials.  Under applicable current Federal, state and
local laws, asbestos need not be removed from or encapsulated in a hotel unless
and until the hotel is renovated or remodeled.  In that context, upon the
performance of a material renovation, the appropriate measures will need to be
taken.  Meanwhile, the Trust has placed in effect an asbestos operation and
maintenance plan for all those properties testing positive for asbestos.

     Based upon the above-described environmental reports and testing and facts
known to the managements of the Trust and the Corporation, future remediation
costs are not expected to have a material adverse effect on the results of
operations, financial position or cash flows of the Trust or the Corporation
and compliance with environmental laws has not had and is not expected to have
a material effect on the capital expenditures, earnings or competitive position
of the Trust or the Corporation.

Performance bonds and restricted cash

     The Corporation is required to post performance bonds or cash collateral
as security for certain obligations.  At December 31, 1995 and 1994, the
Corporation had posted performance bonds totaling approximately $756,000 and
$747,000, respectively, to cover such obligations; however, no amounts had been
drawn against such bonds.  In addition, at December 31, 1995, the Corporation
has a $250,000 letter of credit with First Interstate Bank included in cash and
cash equivalents, which was restricted as to use.

     At December 31, 1995, inventories, prepaid expenses and other assets
include $756,000 for the Corporation which was restricted as to use.  At
December 31, 1994, inventories, prepaid expenses and other assets include 
$246,000 and $1,606,000 for the Trust and the Corporation, respectively, 
which were restricted as to use.  Other than the performance bonds, the 
restricted cash of the Corporation primarily is the cash of MHLP
(see Note 9).


                                      F-30


<PAGE>   114


15. Related Party Transactions.

     At December 31, 1995 and 1994, the Trust holds an $800,000
uncollateralized note receivable from John Rothman, the former President and
Chief Executive Officer of the Trust.  The principal amount of the note
receivable is due in 1999 and bears interest due annually at 10%.

     The Companies incurred legal fees from law firms in which a Trustee and
officer of the Trust was or currently is a partner during the years ended
December 31, 1995, 1994 and 1993 totaling $1,728,000, $940,000, and $235,000,
respectively.

     The Companies and Starwood Capital have agreed that, subject to approval
by the Independent Trustees or Directors, as appropriate, Starwood Capital will
be reimbursed for out-of-pocket costs and expenses for any services provided to
the Company.  Starwood Capital will also be reimbursed for its internal costs
(including allocation of overhead) for services provided to the Company,
provided that, where such costs are currently expensed by the Company, such
reimbursement will not exceed $250,000 in the year ending June 30, 1996.  The
Companies have not reimbursed Starwood Capital for any of these costs since
July 1, 1995, and accordingly have included an accrual of $250,000 in accounts
payable and other liabilities at December 31, 1995.

     During 1995, the Trust reimbursed Starwood Capital approximately
$1,649,000, the majority of which represented a deposit on the Boston Park
Plaza.  Aside from Starwood Capital's internal cost, during 1995 Starwood
Capital incurred approximately $1,198,000 of costs paid directly by the Company
to third party vendors for services provided to the Company, representing costs
associated with the Reorganization, the Offering and hotel acquisitions.

     During 1995, the Trust loaned an officer of the Trust $250,000.  The loan
has a term of 10 years, bears interest, to be paid quarterly, at the lowest
applicable rate prescribed by section 1274(d) of the Internal Revenue Code.  At
December 31, 1995, the loan had an applicable rate of 6.6% and was current.

                                      F-31

<PAGE>   115


16. Industry Segment Information.

     The Corporation operates in two segments of the hospitality industry,
hotel and gaming.  The hotel segment consists of room, food and beverage and
other revenues recognized in connection with the operation of hotels owned by
the Corporation or under lease from the Trust, and income from management
contracts.  The gaming segment consists of net win from casino operations, as
well as room, food and beverage and other revenues recognized in connection
with the operation of the two hotel/casinos under lease from the Trust.  The
following information summarizes revenue and operating results by industry
segment:


<TABLE>
<CAPTION>

                                             Years Ended December 31,
                                       -------------------------------------
                                          1995         1994         1993
                                       -----------  -----------  -----------
<S>                                    <C>          <C>          <C>
HOTEL:
Revenue:
Room................................. $ 87,270,000  $56,387,000  $58,917,000
Food and beverage....................   26,609,000   21,603,000   23,337,000
Other................................    7,371,000    4,678,000    4,649,000
                                      ------------  -----------  -----------
Hotel revenue........................  121,250,000   82,668,000   86,903,000
Management fees......................      373,000      247,000       90,000
                                      ------------  -----------  -----------
Total revenue........................  121,623,000   82,915,000   86,993,000
                                      ------------  -----------  -----------
Expenses:
Rooms................................   37,121,000   25,177,000   27,633,000
Food and beverage....................   19,520,000   16,364,000   15,116,000
Other (including undistributed
operating expenses and fixed
charges).............................   28,376,000   19,288,000   25,383,000
Rent to Trust........................   24,330,000   14,506,000   14,081,000
Depreciation and amortization........    5,126,000    2,072,000    3,060,000
Allocated Corporate overhead.........    1,731,000    1,001,000      950,000
                                      ------------  -----------  -----------
Total expenses.......................  116,204,000   78,408,000   86,223,000
                                      ------------  -----------  -----------
Operating income..................... $  5,419,000  $ 4,507,000  $   770,000
                                      ============  ===========  ===========
GAMING:
Revenue:
Casino...............................   14,009,000  $15,137,000  $14,861,000
Room.................................    4,682,000    4,516,000    4,305,000
Food and beverage....................    5,155,000    5,166,000    5,226,000
Other................................    5,313,000    5,506,000    5,370,000
Less promotional allowances..........   (2,230,000)  (2,344,000)  (2,257,000)
                                      ------------  -----------  -----------
Gaming revenues......................   26,929,000   27,981,000   27,505,000
                                      ------------  -----------  -----------
Expenses:
Casino...............................    6,156,000    6,308,000    6,019,000
Rooms................................    2,220,000    2,156,000    2,042,000
Food and beverage....................    4,896,000    4,514,000    4,564,000
Other (including undistributed
operating expenses and fixed
charges).............................   10,970,000   11,476,000   11,430,000
                                      ------------  -----------  -----------
Expenses of gaming operations........   24,242,000   24,454,000   24,055,000
Rent to Trust........................    2,400,000    2,400,000    2,400,000
Depreciation and amortization........      205,000      382,000      477,000
                                      ------------  -----------  -----------
Total expenses.......................   26,847,000   27,236,000   26,932,000
                                      ------------  -----------  -----------
Operating income..................... $     82,000  $   745,000  $   573,000
                                      ============  ===========  ===========
</TABLE>


                                      F-32

<PAGE>   116


A reconciliation of the combined segment operating income to the net loss of
the Corporation is as follows:


<TABLE>
<CAPTION>

                                     Years Ended December 31,
                                     ----------------------------------------
                                         1995          1994          1993
                                     ------------  ------------  ------------

  <S>                                <C>           <C>           <C>
  Combined operating income .......  $  5,501,000  $  5,252,000  $  1,343,000
  Interest and other income .......       632,000        66,000       330,000
  Interest expense ................    (5,470,000)   (3,071,000)   (2,701,000)
  Corporate expenses ..............    (2,703,000)   (3,445,000)   (2,115,000)
                                     ------------  ------------  ------------
   Loss before minority interest ..  $(2,040,000)  $(1,198,000)  $(3,143,000)
                                     ============  ============  ============
</TABLE>


Additional financial data by industry segment for the Corporation is as
follows:


<TABLE>
<CAPTION>

                                         December 31,
                           ----------------------------------------
                                1995          1994         1993
                           --------------  -----------  -----------
<S>                        <C>             <C>          <C>
IDENTIFIABLE ASSETS:
Hotel....................    $103,304,000  $40,357,000  $41,712,000
Gaming...................       5,058,000    3,710,000    3,743,000
Corporate and other......      12,359,000    4,559,000    4,538,000
Total....................    $120,721,000  $48,626,000  $49,993,000
                             ============  ===========  ===========
CAPITAL EXPENDITURES:
Hotel....................    $ 42,392,000  $   421,000  $ 4,859,000
Gaming...................         191,000      221,000      220,000
Corporate and other......          72,000       29,000      126,000
Total....................    $ 42,655,000  $   671,000  $ 5,205,000
                             ============  ===========  ===========
DEPRECIATION AND
AMORTIZATION:
Hotel....................    $  5,126,000  $ 2,072,000  $ 3,060,000
Gaming...................         205,000      389,000      477,000
Corporate and other......       1,161,000      495,000       65,000
Total....................    $  6,492,000  $ 2,956,000  $ 3,602,000
                             ============  ===========  ===========
</TABLE>

The Trust is an owner/lessor of real property and does not "operate" in
different segments, and is therefore not subject to disclosure by segment.  The
Trust's net investment (initial cost less accumulated depreciation and
provision for loss) in the two Las Vegas hotel/casinos was $20,547,000, and
$21,306,000 at December 31, 1995 and 1994, respectively.




                                      F-33

<PAGE>   117

17.      Selected Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>

                                      Combined                              Trust                           Corporation
                        ------------------------------     ----------------------------     --------------------------------
                           1995               1994            1995              1994             1995               1994
                           ----               ----            ----              ----             ----               ----
<S>                     <C>                <C>             <C>               <C>             <C>                 <C>
First Quarter                                                                                                 
   Revenue              $32,138,000        $28,338,000     $8,576,000        $5,243,000      $29,492,000         $27,823,000
   Net income (loss)        348,000           (335,000)       652,000          (154,000)        (304,000)           (181,000)
   Net income (loss)                                                                                          
    per share               0.17              (0.17)          0.32            (0.08)            (0.15)              (0.09)
Second Quarter                                                                                                
   Revenue              $37,630,000        $29,994,000     $9,448,000        $5,953,000      $34,789,000         $28,610,000
   Net income (loss)        978,000            933,000        560,000           288,000          418,000             645,000
   Net income (loss)                                                                                          
    per share               0.49               0.46           0.28             0.14              0.21                0.32
Third Quarter                                                                                                 
   Revenue              $42,379,000        $29,666,000    $11,751,000        $5,737,000      $39,007,000         $28,809,000
   Net income (loss)      3,469,000(2)      (2,715,000)     3,479,000(3)     (2,313,000)         (10,000)           (402,000)
   Net income (loss)                                                                                          
    per share               0.58              (1.34)          0.58            (1.14)            (0.00)              (0.20)
Fourth Quarter                                                                                                
   Revenue              $49,569,000        $25,999,000    $14,248,000        $4,738,000      $45,896,000         $25,720,000
   Net income (loss)      4,175,000         (2,546,000)     6,018,000        (1,286,000)      (1,843,000)(1)      (1,260,000)(1)
   Net income (loss)                                                                                          
    per share               0.54              (1.26)           0.77            (0.64)           (0.23)              (0.62)
</TABLE>

-----------------------
(1)  During the quarter ended March 31, 1995, the Trust recorded an
     extraordinary gain of $363,000 (net of minority interest of $921,000)
     relating to extinguishment of debt (see Note 3).

(2)  During the quarter ended September 30, 1995, the Trust recorded an
     extraordinary loss of $2,518,000 (net of minority interest of $1,084,000)
     related to the extinguishment of debt under the 1995 Credit Agreement
     which was terminated during the year (see Note 3).

(3)  During the quarter ended September 30, 1994, the Trust recorded a
     provision for investment losses of $759,000 (see Note 1) and the Trust and
     the Corporation each recorded a provision of $1,324,000 for expenses
     related to the settlement of shareholder litigation (see Note 13).

                                      F-34

<PAGE>   118



18.  Pro Forma Financial Information

       Due to the impact of the Reorganization of the Companies and other
  transactions in 1995, the following pro forma statements of operations are
  presented to supplement the historical statements of operations.  These pro
  forma statements reflect the Reorganization, the Offering and certain
  property acquisitions, including the acquisition of the Doral Inn in New
  York, the Terrace Garden Inn and Lenox Inn in Atlanta, Georgia, and the
  Holiday Inn in Beltsville, Maryland as if they occurred on January 1, 1994:



<TABLE>
<CAPTION>

                                   Year Ended December 31, 1995
                             ----------------------------------------
                                Trust     Corporation     Combined
                             -----------  ------------  -------------
<S>                          <C>          <C>           <C>
Revenues                     $57,578,000  $193,502,000   $206,034,000
Net income (loss)            $24,753,000  $ (4,836,000)  $ 19,917,000 
Net income (loss) per share     $1.79        $(0.35)        $1.44
</TABLE>

<TABLE>
<CAPTION>

                                    Year End December 31, 1994
                             ----------------------------------------
                                Trust     Corporation     Combined
                             -----------  ------------  -------------
<S>                          <C>          <C>           <C>
Revenues                     $50,203,000  $190,522,000   $202,053,000
Net income (loss)            $19,277,000  $ (4,694,000)  $ 14,583,000
Net income (loss) per share     $1.40        $(0.34)        $1.06
</TABLE>

19.  Subsequent events

     On January 4, 1996, the Companies completed the purchase of the Grand
Hotel, a 263-room luxury hotel, located in Washington, D.C., for an additional
$13.5 million.  The Company had purchased the mortgage interest in September
1995 for $19.5 million.

   
     On January 17, 1996, the Trust entered into interest rate hedging
agreements known as Treasury locks.  The Trust entered into these agreements to
eliminate exposure to fluctuations in seven year interest rates.  The
agreements are with two large financial institutions and have the effect of
fixing a base rate (5.7 percent) at which the Trust can issue debt with a
principal amount of $100 million and a term of seven years.  The agreement
extends until October 1996 at which time the difference between the current
market rate and the base rate will be determined.  The resulting impact on
interest over the term of the debt will be calculated and the Trust will
accordingly pay or receive an amount equal to the calculation.  Such amount
will be capitalized and amortized over the term of the debt.  If the Trust did
not issue any such debt, such amount would still be payable or receivable and
would be treated as a loss or gain, accordingly.
    

     On January 24, 1996, the Companies completed the acquisition of the
960-room Boston Park Plaza Hotel Complex in Boston, Massachusetts.  The
Companies formed the Starwood Saunders Partnership (the "Partnership") with
Donald L. Saunders of Saunders Real Estate Corporation.  The Trust contributed
approximately $41.6 million in exchange for a 58 percent interest in the
Partnership, while Mr. Saunders contributed his existing interest in the asset
for the remaining 42 percent interest in the Partnership.

     On February 26, 1996, the Companies acquired a debt interest for $21
million and entered into an agreement to purchase the equity interest in the
251-room Doubletree Guest Suites Hotel and the 175-room Days Inn, both located
at the Philadelphia Airport in Philadelphia, PA.




                                      F-35

<PAGE>   119
SCHEDULE III                            
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995                       

<TABLE>
<CAPTION>
                                                                                                         Costs         
                                                                                                      Subsequent to     
                                                       Initial Cost to Company                         Acquisition      
                                                    -----------------------------             ------------------------------
STARWOOD LODGING TRUST                                                                                              (1)         
                                                                     Building and                               Building and    
Description                                             Land         Improvements                Land           Improvements    
---------------------------------------             -----------      ------------             ---------         ------------    
<S>                                                  <C>              <C>                     <C>                  <C>
HOTEL ASSETS:                                                                                                                  
Embassy Suites - Phoenix, AZ                         $2,889,000       $11,658,000                                  $610,000    
Embassy  Suites - Tempe, AZ                           1,000,000        14,458,000                                              
Plaza Hotel - Tucson, AZ (2)                            898,000         3,809,000                                   105,000    
Doubletree Hotel - Rancho Bernardo, CA                1,256,000         6,275,000                                              
Vagabond Inn - Rosemead, CA                             700,000         2,100,000                                              
Vagabond Inn - Sacramento, CA                           700,000         3,200,000                                              
Vagabond Inn - Woodland Hills, CA                     1,200,000         3,200,000                                              
Hilton Inn - Gainesville, FL                          1,002,000         3,759,000                                 1,624,000    
Holiday Inn - Albany, GA                                796,000         4,980,000                                   189,000    
Lenox Hill Inn - Atlanta, GA                          4,383,000         4,197,000                                              
Sheraton Colony Square Hotel - Atlanta,                                                                                        
  GA                                                  2,000,000        25,285,000                                              
Terrace Garden Inn - Atlanta, GA                      5,875,000        19,944,000                                    (1,000)    
Best Western Riverfront Inn - Savannah,                                                                                        
  GA                                                    431,000         3,745,000                                   237,000    
Harvey Wichita - Wichita, KS                            341,000         3,571,000                                              
French Quarter Suites - Lexington, KY                 1,237,000        10,176,000                                              
Calverton Holiday Inn - Beltsville, MD                1,636,000         8,489,000                                              
Bay Valley Hotel - Bay City, MI                       2,500,000         5,472,000                 1,000           1,212,000    
Omni Chapel Hill Hotel - Chapel Hill, NC                500,000         8,920,000                                              
Bourbon Street Hotel and Casino -                                                                                              
  Las Vegas, NV                                       8,435,000         8,668,000                                 5,548,000    
King 8 Hotel and Casino - Las Vegas, NV               5,396,000        13,579,000                                 1,957,000    
Best Western Airport Inn -                                                                                                     
  Albuquerque, NM (3)                                   285,000         4,880,000                                    25,000    
Best Western Mesilla Valley Inn -                                                                                              
Las Cruces, NM                                        1,150,000         3,295,000              (290,000)             44,000    
Doral Inn - New York, NY                              3,112,000                                                                
Columbus Best Western - Columbus, OH                    854,000         2,300,000                                   120,000    
Days Inn - Portland, OR                               1,900,000         3,768,000               120,000             302,000    
Riverside Inn - Portland, OR                          1,300,000         3,375,000               120,000             236,000    
Park Central - Dallas, TX                             3,814,000         8,018,000             1,829,000             621,000    
Best Western Airport Inn - El Paso, TX                1,400,000         3,409,000                                   108,000    
Residence Inn - Tysons Corner, VA                     1,418,000         4,119,000                                   457,000    
Days Inn Town Center - Seattle, WA                      250,000         1,483,000                                    41,000    
Meany Tower Hotel - Seattle, WA (3)                   1,700,000         6,270,000               120,000             244,000    
Sixth Avenue Inn - Seattle, WA                        1,150,000         1,570,000                                    40,000    
Tyee Inn - Tumwater, WA (3)                           1,008,000         1,562,000               (63,000)          1,053,000    
Capitol Hill Suites - Washington, D.C.                1,276,000         6,868,000                                              
                                                    -----------      ------------             ---------         -----------    
                                                    $63,792,000      $216,402,000             1,837,000         $14,772,000    
                                                    -----------      ------------             ---------         -----------    
</TABLE>      




SCHEDULE III                             
REAL ESTATE AND ACCUMULATED DEPRECIATION 
DECEMBER 31, 1995                        

<TABLE>
<CAPTION>
                                                       Gross Amount             
                                                        Book Value              
                                                   at December 31, 1995               (4)
                                              ------------------------------    
STARWOOD LODGING TRUST                           (1)                             Accumulated
                                                             Building and      Depreciation &       Year of        Date
Description                                     Land         Improvement        Amortization     Construction    Acquired       Life
---------------------------------------        ----------    ------------      --------------    ------------    --------       ----
<S>                                            <C>            <C>                <C>                 <C>         <C>             <C>
HOTEL ASSETS:                                                                
Embassy Suites - Phoenix, AZ                   $2,889,000     $12,268,000        $4,040,000          1981        12/13/83        35
Embassy  Suites - Tempe, AZ                     1,000,000      14,458,000           409,000          1984        07/25/95        35
Plaza Hotel - Tucson, AZ (2)                      898,000       3,914,000         1,023,000          1971        09/16/86        35
Doubletree Hotel - Rancho Bernardo, CA          1,256,000       6,275,000           443,000          1988        01/01/95        35
Vagabond Inn - Rosemead, CA                       700,000       2,100,000           555,000          1974        09/16/86        35
Vagabond Inn - Sacramento, CA                     700,000       3,200,000           797,000          1975        09/16/86        35
Vagabond Inn - Woodland Hills, CA               1,200,000       3,200,000           797,000          1973        09/16/86        35
Hilton Inn - Gainesville, FL                    1,002,000       5,383,000         1,311,000          1974        11/24/86        35
Holiday Inn - Albany, GA                          796,000       5,169,000           957,000          1989        06/08/89        35
Lenox Hill Inn - Atlanta, GA                    4,383,000       4,197,000            35,000          1965        10/31/95        35
Sheraton Colony Square Hotel - Atlanta,                                                                                  
  GA                                            2,000,000      25,285,000           913,000          1973        07/18/95        35
Terrace Garden Inn - Atlanta, GA                5,875,000      19,943,000           168,000          1975        10/31/95        35
Best Western Riverfront Inn - Savannah,                                                                                  
  GA                                              431,000       3,982,000         1,802,000          1971        12/11/86        35
Harvey Wichita - Wichita, KS                      341,000       3,571,000           233,000          1974        01/01/95        35
French Quarter Suites - Lexington, KY           1,237,000      10,176,000           652,000          1989        01/01/95        35
Calverton Holiday Inn - Beltsville, MD          1,636,000       8,489,000                            1987        11/30/95        35
Bay Valley Hotel - Bay City, MI                 2,501,000       6,684,000         2,195,000          1973        05/10/84        35
Omni Chapel Hill Hotel - Chapel Hill, NC          500,000       8,920,000           475,000          1981        04/07/95        35
Bourbon Street Hotel and Casino -                                                                                        
  Las Vegas, NV                                 8,435,000      14,216,000        14,057,000        1964/1975     02/01/88        35
King 8 Hotel and Casino - Las Vegas, NV         5,396,000      15,536,000         8,480,000        1974/1979     02/01/88        35
Best Western Airport Inn -                                                                                               
  Albuquerque, NM (3)                             285,000       4,905,000         1,296,000          1980        09/16/86        35
Best Western Mesilla Valley Inn -                                                                                        
Las Cruces, NM                                    860,000       3,339,000           927,000          1974        09/16/86        35
Doral Inn - New York, NY                        3,112,000                                            1927        09/20/95        35
Columbus Best Western - Columbus, OH              854,000       2,420,000           264,000          1971        01/24/92        35
Days Inn - Portland, OR                         2,020,000       4,070,000         1,015,000          1962        09/16/86        35
Riverside Inn - Portland, OR                    1,420,000       3,611,000           913,000          1964        09/16/86        35
Park Central - Dallas, TX                       5,643,000       8,639,000         4,076,000          1972        09/09/88        35
Best Western Airport Inn - El Paso, TX          1,400,000       3,517,000           915,000          1974        09/16/86        35
Residence Inn - Tysons Corner, VA               1,418,000       4,576,000         1,458,000          1984        07/01/84        35
Days Inn Town Center - Seattle, WA                250,000       1,524,000         1,353,000          1957        09/16/86        13
Meany Tower Hotel - Seattle, WA (3)             1,820,000       6,514,000         1,676,000          1932        09/16/86        35
Sixth Avenue Inn - Seattle, WA                  1,150,000       1,610,000         1,283,000          1959        09/16/86        13
Tyee Inn - Tumwater, WA (3)                       945,000       2,615,000           602,000          1961        02/17/87        35
Capitol Hill Suites - Washington, D.C.          1,276,000       6,868,000           392,000          1955        01/01/95        35
                                              -----------    ------------       -----------   
                                              $65,629,000    $231,174,000       $55,512,000    
                                              -----------                    
          Land                                                 65,629,000    1,864,000
          Furniture, Fixtures & Equipment                       8,834,000    6,651,000
                                                             ------------  -----------
          Total hotels and land under lease                  $305,637,000  $64,027,000
                                                             ============  ===========
</TABLE>

                                  (Continued)


                                      F-36

<PAGE>   120




(1) As of December 31, 1995, real estate and furniture, fixtures and equipment
    have a cost for federal income tax purposes which reasonably approximates 
    their carrying value.
(2) Land cost includes costs allocated to leasehold interest in land of
    $548,000 at the Tucson property.
(3) Land costs represent costs allocated to leasehold interest in land.
(4) Includes reserve for losses discussed in Notes 1 and 3 of Notes to the 
    Financial Statements.





                                      F-37

<PAGE>   121

SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION - TRUST

A reconciliation of the Trust's investment in real estate, furniture
and fixtures and related accumulated depreciation is as follows:


<TABLE>
<CAPTION>

                                                              Year Ended                           
                                                             December 31,                          
                                              1995               1994               1993           
                                          ------------       ------------       ------------       
<S>                                       <C>                <C>                <C>                
REAL ESTATE AND FURNITURE,                                                                         
 FIXTURES AND EQUIPMENT                                                                             
Balance at beginning of period            $188,608,000       $224,170,000       $246,356,000       
Additions during period:                                                                           
 Acquisitions                              100,749,000                                             
 Contributed properties                     30,642,000                                             
 Improvements                                4,660,000          2,270,000          1,372,000       
Step-up in Basis                                                                     899,000       
Deductions during period:                                                                          
 Sales of properties                                          (37,832,000)       (24,457,000)      
 Transfer of property to the                                                                       
  Operating Partnership                   (19,022,000)                                             
                                          ============       ============       ============       
Balance at end of period                   305,637,000        188,608,000        224,170,000       
                                          ============       ============       ============       
ACCUMULATED DEPRECIATION:                                                                          
Balance at beginning of period             $71,899,000        $94,252,000       $105,338,000       
Additions during period:                                                                           
 Depreciation expense                        7,674,000          5,205,000          5,630,000       
 Contributed properties                        890,000                                             
Deductions during period:                                                                          
 Sale of properties                                           (27,997,000)       (19,085,000)      
 Transfer of properties                    (16,436,000)                                            
Provision for investment losses:                                                                   
 St. Louis, MO                                                                       858,000(1)(2) 
 Dallas, TX                                                                          459,000(2)    
 Jacksonville, FL                                                 389,000(2)         272,000(2)    
 Savannah, GA                                                                        300,000(2)    
 New Port Richey, FL                                                                 200,000(1)(2) 
 Brunswick, GA                                                                       150,000(1)(2) 
 Fayetteville, NC                                                  50,000(2)         100,000(1)(2) 
 Rosemead, CA                                                                         30,000(2)    
                                          ------------       ------------       ------------       
                                                                  439,000          2,369,000       
                                          ------------       ------------       ------------       
Balance at end of period                  $ 64,027,000       $ 71,899,000       $ 94,252,000       
                                          ============       ============       ============       
</TABLE>

(1)  Provision for loss was recorded primarily as a result of all cash offers
     to sell hotels, previously identified for sale, at amounts lower than
     their current net book values.
(2)  Provision for loss was recorded as a result of the difference between NBV
     of properties which had been identified for sale and their estimated fair
     value.

                                  (Continued)

                                      F-38

<PAGE>   122







SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CORPORATION
DECEMBER 31, 1995

<TABLE>
<CAPTION>

                                                                                                                             
                                                                                           Costs                 
                                                                                        Subsequent to            
                                                    Initial Cost to Company              Acquisition             
                                                 -----------------------------    ------------------------       
STARWOOD LODGING CORPORATION                                                                                     
                                                                Building and                 Building and        
Description                                         Land        Improvements       Land      Improvements        
-------------------------------------------      ----------     ------------      -------    -------------       
<S>                                     <C>      <C>             <C>              <C>          <C>               
HOTEL ASSETS:                                                                                                    
Embassy Suites - Phoenix, AZ                                                                   $  45,000         
Plaza Hotel - Tucson, AZ                (3)         595,000                       383,000                        
Hilton Inn - Gainesville, FL                                                                      39,000         
Holiday Inn - Albany, GA                                                                          64,000         
Best Western Riverfront - Savannah, GA                                                            47,000         
Bay Valley Hotel - Bay City, MI                                                                  179,000         
Best Western Airport Inn -                                                                                       
 Albuquerque, NM                        (3)         325,000                        47,000                        
Best Western Mesilla Valley Inn -                                                                                
 Las Cruces, NM                                                                   252,000                        
Doral Inn - New York, NY                                         33,948,000                                      
Columbus Best Western - Columbus, OH                                                5,000         61,000         
Days Inn - Portland, OR                 (3)       2,185,000                                       78,000         
Riverside Inn - Portland, OR            (3)       2,123,000          87,000         1,000         25,000         
Best Western Airport Inn - El Paso, TX                                                            18,000         
Residence Inn - Tysons Corner, VA                                                                 33,000         
Days Inn Town Center - Seattle, WA      (3)         429,000           4,000                      204,000         
Meany Tower Hotel - Seattle, WA         (3)       3,437,000         302,000                       66,000         
Sixth Avenue Inn - Seattle, WA          (3)       1,515,000          24,000                      118,000         
Marriott Hotel - Milwaukee, WI          (3)       2,500,000      17,422,000                    3,585,000         
                                                 ----------      ----------       -------      ---------        
                                                 13,109,000      51,787,000       688,000      4,562,000         
                                                 ----------      ----------       -------      ---------         

--------------------------------------------------------------------------------------------------------------------------------   
</TABLE>
<TABLE>
<CAPTION>                                              Gross Amount
                                                        Book Value
                                                   at December 31, 1995
                                                 ---------------------------         (2)
STARWOOD LODGING CORPORATION                        (1)             (1)           Accumulated
                                                               Building and     Depreciation &      Year of        Date
Description                                         Land       Improvements      Amortization     Construction   Acquired   Life
--------------------------------------------     ----------    -------------    --------------    ------------   --------   ----
<S>                                     <C>      <C>            <C>                <C>                <C>        <C>        <C>
HOTEL ASSETS:
Embassy Suites - Phoenix, AZ                                    $   45,000             9,000          1981       12/13/83    35 
Plaza Hotel - Tucson, AZ                (3)         978,000                          214,000          1971       09/16/86    35 
Hilton Inn - Gainesville, FL                                        39,000            14,000          1974       09/16/86    35 
Holiday Inn - Albany, GA                                            64,000             8,000          1989       06/08/89    35  
Best Western Riverfront - Savannah, GA                              47,000             3,000          1971       12/11/86    35 
Bay Valley Hotel - Bay City, MI                                    179,000            30,000          1973       05/10/84    35 
Best Western Airport Inn -
 Albuquerque, NM                        (3)         372,000                           92,000          1980       09/16/86    35
Best Western Mesilla Valley Inn -
 Las Cruces, NM                                     252,000                           33,000          1974       09/16/86    35
Doral Inn - New York, NY                                        33,948,000                            1927       09/20/95    35 
Columbus  Best Western - Columbus, OH                 5,000         61,000             6,000          1971       01/24/92    35 
Days Inn - Portland, OR                 (3)       2,185,000         78,000            17,000          1962       09/16/86    35 
Riverside Inn - Portland, OR            (3)       2,124,000        112,000            36,000          1964       09/16/86    35 
Best Western Airport Inn - El Paso, TX                              18,000             3,000          1974       09/16/86    35 
Residence Inn - Tysons Corner, VA                                   33,000            10,000          1984       07/01/84    35 
Days Inn Town Center - Seattle, WA      (3)         429,000        208,000            45,000          1957       09/16/86    13 
Meany Tower Hotel - Seattle, WA         (3)       3,437,000        368,000           108,000          1932       09/16/86    35 
Sixth Avenue Inn - Seattle, WA          (3)       1,515,000        142,000            31,000          1959       09/16/86    13 
Marriott Hotel - Milwaukee, WI          (3)       2,500,000     21,007,000         2,795,000          1972
                                                 ----------     ----------         ---------
                                                 13,797,000     56,349,000         3,454,000 
                                                 ----------     ----------         
</TABLE>                                            


<TABLE>
           <S>                              <C>           <C>
           Land                               13,797,000
           Furniture, Fixtures & Equipment    64,576,000   35,920,000
                                            ------------  -----------
                                            $134,722,000  $39,374,000
                                            ============  ===========
</TABLE>


(1) As of December 31, 1995, real estate and furniture, fixtures, and equipment
    have a cost for federal income tax purposes which reasonably approximates
    their carrying value.
(2) Includes reserve for losses discussed in Notes 1 and 3 of Notes to the
    Financial Statements.
(3) Land costs represent costs allocated to leasehold interest in land.


                                  (Continued)



                                      F-39

<PAGE>   123

SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CORPORATION

A reconciliation of the Corporation's investment in real estate, furniture
and fixtures and related accumulated depreciation is as follows:


<TABLE>
<CAPTION>


                                                     Year Ended December 31,
                                           1995                 1994                 1993
                                       ------------          -----------          -----------
<S>                                     <C>                  <C>                 <C>
REAL ESTATE AND FURNITURE
  AND FIXTURES:
Balance at beginning of period          $51,741,000          $54,790,000          $51,972,000
  Additions during period:
  Acquisitions                           38,396,000
  Contributed properties                  4,459,000
  Improvements                           21,104,000              671,000            5,205,000
  Transfers                              19,022,000
Deductions during period:
  Reclassification                                                                    388,000
  Sales of properties                                         (3,720,000)          (2,775,000)
                                       ------------          -----------          -----------
Balance at end of year                 $134,722,000          $51,741,000          $54,790,000
                                       ============          ===========          ===========
ACCUMULATED DEPRECIATION:
Balance at beginning of year            $17,266,000          $17,459,000          $15,413,000
Additions -                     
  Depreciation expense                    5,269,000            2,956,000            3,602,000
  Transfers                              16,436,000
  Contributed properties                    403,000
Deductions -                    
  Sales of properties                                         (3,149,000)          (1,842,000)
  Reclassifications                                                                   286,000
                                       ------------          -----------          -----------
Balance at end of period                 39,374,000           17,266,000           17,459,000
                                       ============          ===========          ===========
</TABLE>

                                  (Concluded)



                                       F-40
<PAGE>   124


SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995                                                           


<TABLE>                                                                      
<CAPTION>                                                                   
                                                                                                                                  
                                                                                                                      Principal   
                                                                                                                       amount     
                                                                                                                      of loans   
                                                                                                                     subject to   
STARWOOD LODGING TRUST                                                                    Face         Carrying      delinquent   
                                      Interest   Final          Periodic        Prior   Amount of      Amount of    principal or 
Description                             Rate    Maturity        Payment         Liens   Mortgages    Mortgages(1)     interest   
----------------------------          --------  -------- ---------------------  -----   ---------    ------------   -------------
<S>                                   <C>        <C>     <C>         <C>          <C>   <C>          <C>            <C>
First Mortgages:
Vagabond Inns - Modesto, CA             10.00%   1996                    (2)      no    $1,995,000   $1,161,000     
Vantage Hotel - Tucker, GA               9.00%   1998        16,700      (3)      no     1,985,000    1,928,000     
Sheraton - New Port Richey,                                                                                         
  FL and Holiday Inn -
  Brunswick, GA                         9.25%    2001        26,200      (4)      no     3,070,000    3,022,000     
Ramada Inn - Fayetteville, NC           9.00%    2006         9,100      (5)      no       800,000      761,000     
Holiday Inn - Jacksonville, FL          9.00%    2001        18,500      (6)      no     2,300,000    2,284,000     
Ramada Suites - Secaucus, NJ             (21)    1999    Adjustable      (8)      no    13,813,000    8,630,000     
Bristol Suites - Dallas, TX             8.00%    2002       517,800    (9)(18)    no    18,000,000   11,713,000     
Harvey DFW Airport Hotel -                                                                                          
  Dallas, TX                            8.00%    2002       805,500    (9)(19)    no    28,000,000   18,218,000     
Harvey Hotel, Addison -                                                                                             
  Dallas, TX                            8.00%    2002       431,500  (9)(20)(22)  no    15,000,000    7,331,000     
Quality Inn - Atlantic                                                                                              
  City, NJ                       80% of prime    2010    Adjustable     (10)      no    10,000,000    4,179,000     
The Grand - Washington, D.C.             (11)    2000    Adjustable     (11)      no    22,930,000   19,769,000     

Second Mortgages:                                                                                                   
Viscount Hotel - Dallas, TX             8.72%    2017         2,800      (7)      yes      264,000      231,000     
Bristol Suites - Dallas, TX        Prin. Only    2002         4,800   (12)(23)    yes      190,000                  
Harvey DFW Airport Hotel -                                                                                          
  Dallas, TX                       Prin. Only    2002         1,800   (13)(23)    yes       73,000                  
Harvey Hotel, Addison -                                                                                             
  Dallas, TX                       Prin. Only    2002         1,900   (14)(23)    yes      100,000                  
Quality Inn - Atlantic City,                                                                                        
  NJ (SCA Loan)                         7.00%    1996         6,700     (15)      yes    1,350,000      134,000     

Third Mortgages:                                                                                                    
Quality Inn - Atlantic City,                                                                                        
  NJ (Guerra Loan)                 1% + Prime    1996    Adjustable     (16)      yes    1,335,000                  

Fourth Mortgages:                                                                                                   
Quality Inn - Atlantic City, NJ                                                                                     
  (Marshall Loan)                  1% + Prime    1997    Adjustable     (17)      yes      225,000                  

Allowance for loan losses                                                                              (100,000)     
                                                                                      ------------  -----------
                                                                                      $121,430,000  $79,261,000     
                                                                                      ============  ===========     
Intercompany Mortgage Loans                                                                                         
---------------------------                                                                                         
First Mortgages:                                                                                                    
Milwaukee Marriott - Milwaukee,                                                                                     
  WI (Aetna)                            10.5%    1996                   (24)      no   $10,000,000   $9,495,000     
Milwaukee Marriott -                                                                                                
  Milwaukee, WI                                                                                                     
  (Aetna Addition)                               1996                   (24)      yes                   260,000     
Doral Inn - New York, NY                 9.5%    2006                   (25)      no    40,250,000   40,250,000     

Third Mortgages:                                                                                                    
Milwaukee Marriott -                                                                                                
  Milwaukee, WI                         10.5%    1996                   (24)      yes    1,000,000    1,000,000     

Fourth Mortgages:                                                                                                   
Milwaukee Marriott -                                                                                                
  Milwaukee, WI                         10.5%    1996                   (24)      yes   12,667,000   17,481,000     
                                                                                      ------------  -----------
                                                                                      $ 63,917,000  $68,486,000     
                                                                                      ============  ===========     
</TABLE>                                                                   
                                      
                                  (Continued)



                                      F-41

<PAGE>   125


(1)  As of December 31, 1995 the aggregate cost (before
     allowance for loan losses) for federal income tax
     purposes is not significantly different from that used
     for book purposes.
(2)  The note provides for monthly payments of interest plus
     additional annual payments based on a percentage of the
     hotel's sales, a portion of which is applied to
     principal.
(3)  Principal and interest due monthly based on a 25-year
     amortization schedule with unpaid principal of
     $1,857,000 due in June 1998.
(4)  Principal and interest due monthly based on a 25-year
     amortization schedule with unpaid principal of
     $2,761,000 due in August 2001.
(5)  Principal and interest due monthly based on a 12-year
     amortization schedule with unpaid principal of $9,000
     due in December 2006.
(6)  Principal and interest due monthly based on a 30-year
     amortization schedule with unpaid principal of
     $2,156,000 due in December 2001.
(7)  Principal and Interest, plus contingent interest of 4%
     of hotel room sales, due monthly based on a 40 year
     amortization schedule.  Note fully amortized.
(8)  Principal and interest due monthly.  Principal amount
     adjusts annually based on note schedule.  Note carry
     amount net of $3,698,000 discount.
(9)  Principal and interest due quarterly based on note
     schedule.
(10) Principal and interest due monthly based on note
     schedule.  Note carrying amount net of $4,254,000
     discount.
(11) Step rate note.  Rate increases based on note
     schedule.  At December 31, 1995, the rate was 4%.
     Note carrying amount net of $3,160,000 discount.
(12) Forty equal principal payments of $237,500 each of
     which the Realty Partnership has a 2% interest.
     Note carrying amount net of $152,000 allowance.
(13) Forty equal principal payments of $90,000 each of
     which the Realty Partnership has a 2% interest.
     Note carrying amount net of $58,000 allowance.
(14) Forty equal principal payments of $125,125 each of
     which the Realty Partnership has a 2% interest.
     Note carrying amount net of $70,000 allowance.
(15) Interest only, payable monthly.  Note carrying
     amount net of $975,000 allowance.
(16) Interest only, payable monthly.  Note carrying
     amount net of $1,444,000 allowance.
(17) Principal and interest payable monthly based on
     note schedule. Note carrying amount net of $213,000
     allowance.
(18) Note carrying amount net of $4,349,000 discount.
(19) Note carrying amount net of $6,783,000 discount.
(20) Note carrying amount net of $2,710,000 discount.
(21) Libor plus 1.25% or prime at borrower's option.
(22) A 25% participation on both the first and second
     mortgages has been sold to a third party.
(23) The face amount represents the Realty
     Partnership's 2% interest in the mortgage loan.
     The remaining payment amounts are passed through to
     participants.
(24) Principal and interest due June 30, 1996.
(25) One hundred thirty-two equal installments of
     interest only.  Principal and all accrued and
     unpaid interest due October 1, 2006.

                                  (Continued)




                                      F-42

<PAGE>   126

SCHEDULE IV (Continued)
RECONCILIATION OF MORTGAGE LOANS

<TABLE>
<CAPTION>

                                             Year Ended December 31,            
                                       1995           1994             1993     
                                   -----------     -----------      ----------- 
                                                                                
                                                                                
<S>                                <C>             <C>              <C>         
Balance at beginning of period     $14,049,000     $11,642,000      $10,010,000 
                                                                                
Additions -                                                                     
  New mortgage loans                71,779,000       6,270,000        1,985,000 
  Amortization of discount           3,285,000                                  
                                                                                
Deductions -                                                                    
  Principal repayments              (6,940,000)     (2,382,000)        (353,000)
  Allowance for loan loss           (2,912,000)       (320,000)                 
  Discount for pre-payment                             (55,000)(1)              
  Proceeds from foreclosure sale                    (1,106,000)(2)              
                                   -----------     -----------      ----------- 
Balance at end of period           $79,261,000     $14,049,000      $11,642,000 
                                   ===========     ===========      =========== 
</TABLE>


Intercompany Mortgage Loans
---------------------------

<TABLE>
<CAPTION>
                                              Year Ended December 31,          
                                        1995           1994            1993    
                                    -----------     -----------     -----------
<S>                                 <C>             <C>             <C>        
Balance at beginning of period      $16,916,000     $15,185,000     $12,667,000
                                                                               
Additions -                                                                    
  New mortgage loans                 50,073,000                       1,000,000
  Amortization of discount                                                     
  Other - accrued interest (3)        2,010,000       1,731,000       1,518,000
                                                                               
Deductions -                                                                   
  Principal repayments              $  (513,000)                               
  Allowance for loan loss                                                      
  Discount for pre-payment                                                     
  Proceeds from foreclosure sale                                               
                                    -----------     -----------     -----------
Balance at end of period            $68,486,000     $16,916,000     $15,185,000
                                    ===========     ===========     ===========
</TABLE> 
------------------
(1)  In 1994, the Trust discounted the note on the Spartanburg, South Carolina
     property as consideration for the early payoff of the note.
(2)  In 1994, the Trust foreclosed on the Merrimack, New Hampshire property.
(3)  Per mortgage loan agreement, the borrower is not required to pay monthly
     interest if the cash flows are insufficient.  Thus, the Trust has accrued
     interest on the notes.







                                  (Concluded)


                                      F-43
<PAGE>   127
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit No.                                      Description of Exhibit                                                     Page
<S>           <C>                                                                                                           <C> 
    3.1       Amended and Restated Declaration of Trust of the Trust dated June 6, 1988, as amended (incorporated by
              reference to Exhibit 3A to the Trust's and the Corporation's Joint Current Report on Form 8-K dated
              January 31, 1995) .........................................................................................

    3.2       Amendment and Restatement of Articles of Incorporation of the Corporation (incorporated by reference to
              Exhibit 3B to the Trust's and the Corporation's Joint Current Report on Form 8-K dated January 31, 1995) ..

    3.3       Trustees' Regulations of the Trust, as amended (incorporated by reference to Exhibit 3.3 to the Trust's
              and the Corporation's Joint Annual Report on Form 10-K for the year ended December 31, 1994
              (the "1994 Form 10-K")) ...................................................................................

    3.4       By-laws of the Corporation, as amended (incorporated by reference to Exhibit 3.4 to the 1994 Form 10-K) ...

    4.1       Pairing Agreement dated June 25, 1986, between the Trust and the Corporation, as amended (incorporated
              by reference to Exhibit 4.1 to the 1994 Form 10-K) ........................................................

    4.2       Amendment No. 1 to the Pairing Agreement dated as of February 1, 1995 between the Trust and
              the Corporation ...........................................................................................

    4.3       Form of Warrant Agreement dated as of September 16, 1986, between the Trust and City National Bank ("CNB")
              (incorporated by reference to Exhibit 4.3 to the Trust's and the Corporation's Registration Statement on
              Form S-4 (the "S-4 Registration Statement") filed with the Securities and Exchange Commission (the "SEC")
              on August 1, 1986 (Registration No. 33-7694)) .............................................................

    4.4       Form of Warrant Agreement dated as of September 16, 1986, between the Corporation and CNB (incorporated by
              reference to Exhibit 4.3A to the S-4 Registration Statement) ..............................................

   10.1       Incentive and Non-Qualified Share Option Plan (1986) of the Trust (incorporated by reference to
              Exhibit 10.8 to the Trust and the Corporation's Joint Annual Report on Form 10-K for the year ended
              August 31, 1986 (the "1986 Form 10-K")).3 .................................................................
 
   10.2       Corporation Stock Non-Qualified Stock Option Plan (1986) of the Trust (incorporated by reference to
              Exhibit 10.9 to the 1986 Form 10-K).2 .....................................................................

   10.3       Stock Option Plan (1986) of the Corporation (incorporated by reference to Exhibit 10.10 to the
              1986 Form 10-K).2 .........................................................................................

   10.4       Trust Shares Option Plan (1986) of the Corporation (incorporated by reference to Exhibit 10.11
              to the 1986 Form 10-K).2 ..................................................................................

   10.5       1995 Share Option Plan of the Corporation.2 ...............................................................

   10.6       1995 Share Option Plan of the Trust.2 .....................................................................

   10.7       Form of Indemnification Agreement and Amendment No. 1 to Indemnification Agreement between the Trust
              and each of Messrs. Barry S. Sternlicht, Jeffrey C. Lapin, Jonathan Eilian, Michael W. Mooney,
              Bruce M. Ford, Madison F. Grose, Bruce W. Duncan, Steven R. Quazzo, William E. Simms,
              Daniel H. Stern and Ronald C. Brown.2 .....................................................................

   10.8       Form of Indemnification Agreement and Amendment No. 1 to Indemnification Agreement between the
              Corporation and each of Messrs. Earle F. Jones, Kevin E. Mallory, Bruce M. Ford, Steven R. Goldman,
              Graeme W. Henderson, Barry S. Sternlicht, Jean-Marc Chapus, Jonathan Eilian, Michael A. Leven,
              Daniel W. Yih and Alan M. Schnaid.2 ......................................................................

   10.9       Form of Indemnification Agreement dated as of February 3, 1992, between the Corporation and each of Messrs.
              Ronald A. Young, Graeme W. Henderson, Bruce M. Ford, Earle M. Jones and William H. Ling (incorporated by
              reference to Exhibit 10.30 to the Trust's and the Corporation's Joint Annual Report on Form 10-K for the 
              year ended December 31, 1991).2 ...........................................................................

</TABLE>


__________________________________

     2   Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
<PAGE>   128
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit No.                                      Description of Exhibit                                                     Page
<S>           <C>                                                                                                           <C> 
   10.10      Executive Employment Agreement dated as of January 31, 1995, between the Trust and Jeffrey C. Lapin
              (incorporated by reference to Exhibit 10.12 to the 1994 Form 10-K).2 .....................................

   10.11      Form of Amended and Restated Lease Agreement entered into as of January 1, 1993, between the Trust
              as Lessor and the Corporation (or a subsidiary) as Lessee (incorporated by reference to Exhibit 10.19
              to the Trust's and the Corporation's Joint Annual Report on Form 10-K for the year ended
              December 31, 1992)........................................................................................

   10.12      Exchange Rights Agreement dated as of January 1, 1995 among the Trust, the Corporation, the Realty
              Partnership, the Operating Partnership and the Starwood Partners (incorporated by reference to
              Exhibit 2B to the Trust's and the Corporation's Joint Current Report on Form 8-K dated January 31, 1995)..

   10.13      Registration Rights Agreement dated as of January 1, 1995 among the Trust, the Corporation and Starwood
              Capital (incorporated by reference to Exhibit 2C to the Trust's and the Corporation's Joint Current
              Report on Form 8-K dated January 31, 1995)................................................................

   10.14      Amended and Restated Limited Partnership Agreement for the Realty Partnership among the Trust
              and the Starwood Partners dated as of December 15, 1994 (incorporated by reference to Exhibit 10.21
              to the Trust's and the Corporation's Registration Statement on Form S-2 filed with the Securities
              and Exchange Commission (Registration Nos. 33-59155 and 33-59155-01) (the "S-2 Registration
              Statement")) .............................................................................................

   10.15      Amended and Restated Limited Partnership Agreement for the Operating Partnership among the Corporation
              and the Starwood Partners dated as of December 15, 1994 (incorporated by reference to Exhibit 10.22
              to the S-2 Registration Statement) .......................................................................

   10.16      Mortgage Loan Funding Facility Agreement, dated as of July 25, 1995, among the Realty Partnership
              and SLT Realty Company, LLC, as the borrower, and Lehman Commercial Paper, Inc., as lender, together
              with Amendment No. 1 thereto, dated as of October 30, 1995 ...............................................

   10.17      Collateral Substitution Agreement, dated as of January 4, 1996, between the Realty Partnership and
              SLT Realty Company, LLC, as borrower, and Lehman Commercial Paper, Inc., as lender .......................

   10.18      Amended and Restated Line of Credit Agreement, dated as of October 25, 1995, among the Trust and
              the Realty Partnership, as borrower, and Bankers Trust Company, as collateral agent, and Lehman
              Brothers Holdings, Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings, Inc.,
              individually and as agent, together with First Amendment thereto, dated as of January 3, 1996
              and effective as of October 25, 1995 .....................................................................

   10.19      Form of Amendment No. 1 to Formation Agreement among the Trust, the Corporation and the Starwood Partners
              (incorporated by reference to Exhibit 10.23 to the S-2 Registration Statement) ...........................

   10.20      Form of Westin/HOT Agreement among W&S Hotel L.L.C., W&S Hotel Holding Corp., Westin Hotel Company,
              the Realty Partnership, the Operating Partnership, WHWE L.L.C. and Woodstar Limited Partnership
              (incorporated by reference to Exhibit 10.24 to the S-2 Registration Statement) ...........................

   21.        Subsidiaries of the Corporation.

                 SLC Operating Limited Partnership
                 Hotel Investors of Arizona, Inc.
                 Hotel Investors of Nebraska, Inc.
                 Hotel Investors of Michigan, Inc.
                 Hotel Investors of Missouri, Inc.
                 Hotel Investors Corporation of Nevada
                 Hotel Investors of Virginia, Inc.
                 Columbus Operators, Inc.
                 Lyntex Properties, Inc.
                 Western Host, Inc.

              Subsidiaries of the Trust.

                 SLT Realty Limited Partnership
                 Starlex Company LLC
                 SLT Realty Company LLC

   23.        Consent of Independent Accountants.

   27.1       Financial Data Schedule for Starwood Lodging Corporation.

   27.2       Financial Data Schedule for Starwood Lodging Trust.

</TABLE>


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     2   Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K.