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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-K

| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| | x | Joint Annual Report Pursuant to
	Section 13 or 15(d) of the Securities Exchange Act of
	1934

| |                                             
| | --------------------------------------------
| | For the Fiscal Year Ended December 31,
	2001
|
| | OR                                          



| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| | o | Transition Report Pursuant to Section 13
	or 15(d) of the Securities Exchange Act of 1934

| |                                                            
| | -----------------------------------------------------------
| | For the Transition Period
	from                          to

|                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Commission File Number: 1-7959
	STARWOOD HOTELS &
	RESORTS WORLDWIDE, INC.(Exact name of Registrant as specified
	in its charter)                                                                                                                                                                    |  | Commission File Number: 1-6828
	 STARWOOD HOTELS & RESORTS(Exact name of Registrant as specified
	in its charter)                                                                                                                                                                                   
|Maryland(State or other jurisdiction
	of incorporation or organization)52-1193298(I.R.S. employer identification no.)1111 Westchester Avenue
	White Plains, NY 10604(Address of principal executive
	offices, including zip code)(914) 640-8100(Registrants telephone number,
	including area code) |  | Maryland(State or other jurisdiction
	of incorporation or organization)52-0901263(I.R.S. employer identification no.)1111 Westchester Avenue
	White Plains, NY 10604(Address of principal executive
	offices, including zip code)(914) 640-8100(Registrants telephone number,
	including area code)

Securities Registered Pursuant to
Section 12(b) of the Act:

|                                                                                                                                                                                                                                                                                                                                                                                             |  |                                          
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Title of Each Class                                                                                                                                                                                                                                                                                                                                                                          |  | Name of Each Exchange on Which Registered
|                                                                                                                                                                                                                                                                                                                                                                                             |  |                                          
|Common Stock, par value $0.01 per share
	(Corporation Share), of Starwood Hotels &
	Resorts Worldwide, Inc. (the Corporation), the
	Class B shares of beneficial interest, par value $0.01 per
	share (Class B Shares), of Starwood Hotels
	& Resorts (the Trust), and Preferred Stock
	Purchase Rights of the Corporation, all of which are attached
	and trade together as a Share |  | New York Stock Exchange                  

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 o

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

As of March 15, 2002, the aggregate market
value of the Registrants voting and non-voting common
equity held by non-affiliates (for purposes of this Joint Annual
Report only, includes all shares other than those held by the
Registrants Directors, Trustees and executive officers)
was $7,072,295,483.

As of March 15, 2002, the Corporation had
outstanding 198,481,585 Corporation Shares and the Trust had
outstanding 198,481,585 Class B Shares and 100 Class A
shares of beneficial interest, par value $0.01 per share
(Class A Shares).

For information concerning ownership of shares,
see the Proxy Statement for the Corporations Annual
Meeting of Stockholders that is currently expected to be held on
May 17, 2002 (the Proxy Statement), which is
incorporated by reference under various Items of this Joint
Annual Report.

Document Incorporated by Reference:

|                |  |                           
|--------------- |  | --------------------------
|Document        |  | Where Incorporated        
|                |  |                           
|Proxy Statement |  | Part III (Items 11 and 12)



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TABLE OF CONTENTS



|                                                |                                                                                                 |  |  |  |  |  |  | 
|----------------------------------------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                         
|                                                | Forward-Looking Statements                                                                     
|                                                | Item 1. Business.                                                                              
|                                                | Item 2. Properties.                                                                            
|                                                | Item 3. Legal Proceedings.                                                                     
|                                                | Item 4. Submission of Matters to a Vote of Security Holders.                                   
|                                                | Executive Officers of the Registrants                                                          
|PART II                                        
|                                                | Item 5. Market for Registrants Common Equity and Related Stockholder Matters.                 
|                                                | Item 6. Selected Financial Data.                                                               
|                                                | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. 
|                                                | Item 7A. Quantitative and Qualitative Disclosures about Market Risk.                           
|                                                | Item 8. Financial Statements and Supplementary Data.                                           
|                                                | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.  
|PART III                                       
|                                                | Item 10. Directors, Trustees and Executive Officers of the Registrants.                        
|                                                | Item 11. Executive Compensation.                                                               
|                                                | Item 12. Security Ownership of Certain Beneficial Owners and Management.                       
|                                                | Item 13. Certain Relationships and Related Transactions.                                       
|PART IV                                        
|                                                | Item 14. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K.
|INDEX TO FINANCIAL STATEMENTS AND SCHEDULES    
|                                                | REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                                       
|STARWOOD HOTELS & RESORTS WORLDWIDE, INC.      
|CONSOLIDATED BALANCE SHEETS                    
|CONSOLIDATED STATEMENTS OF OPERATIONS          
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|CONSOLIDATED STATEMENTS OF EQUITY              
|CONSOLIDATED STATEMENTS OF CASH FLOWS          
|STARWOOD HOTELS & RESORTS                      
|CONSOLIDATED BALANCE SHEETS                    
|CONSOLIDATED STATEMENTS OF INCOME              
|CONSOLIDATED STATEMENTS OF CASH FLOWS          
|NOTES TO FINANCIAL STATEMENTS                  
|SCHEDULE II                                    
|SCHEDULE III                                   
|SCHEDULE IV                                    
|EX-12.1                                        
|EX-21.1                                        
|EX-23.1                                        
|EX-99.1                                        
|EX-99.2                                        



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TABLE OF CONTENTS

|         |  |                                                                                        |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                        |  | Page
|         |  |                                                                                        |  |     
|PART I  
|         |  | Forward-Looking Statements                                                             |  |      | 1  | 
|Item 1.  |  | Business                                                                               |  |      | 7  | 
|Item 2.  |  | Properties                                                                             |  |      | 13 | 
|Item 3.  |  | Legal Proceedings                                                                      |  |      | 15 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
	Holders                                   |  |      | 16 | 
|         |  | Executive Officers of the Registrants                                                  |  |      | 16 | 
|PART II 
|Item 5.  |  | Market for Registrants Common Equity and
	Related Stockholder Matters                 |  |      | 16 | 
|Item 6.  |  | Selected Financial Data                                                                |  |      | 17 | 
|Item 7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 19 | 
|Item 7A  |  | Quantitative and Qualitative Disclosures about
	Market Risk                            |  |      | 29 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                            |  |      | 30 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |      | 30 | 
|PART III
|Item 10. |  | Directors, Trustees and Executive Officers of the
	Registrants                         |  |      | 31 | 
|Item 11. |  | Executive Compensation                                                                 |  |      | 35 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
	and Management                        |  |      | 35 | 
|Item 13. |  | Certain Relationships and Related Transactions                                         |  |      | 35 | 
|PART IV 
|Item 14. |  | Exhibits, Financial Statements, Financial
	Statement Schedules and Reports on Form 8-K |  |      | 38 | 



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This Joint Annual Report is filed by Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation
(the Corporation), and its subsidiary, Starwood
Hotels & Resorts, a Maryland real estate investment trust
(the Trust). Unless the context otherwise requires,
all references to the Corporation include those entities owned
or controlled by the Corporation, including SLC Operating
Limited Partnership, a Delaware limited partnership (the
Operating Partnership), but excluding the Trust; all
references herein to the Trust include the Trust and those
entities owned or controlled by the Trust, including SLT Realty
Limited Partnership, a Delaware limited partnership (the
Realty Partnership); and all references to
Starwood or the Company refer to the
Corporation, the Trust and their respective subsidiaries,
collectively. The shares of common stock, par value $0.01 per
share, of the Corporation (Corporation Shares) and
the Class B shares of beneficial interest, par value $0.01
per share, of the Trust (Class B Shares) are
attached and trade together and may be held or transferred only
in units consisting of one Corporation Share and one
Class B Share (a Share). Prior to the
reorganization of Starwood (the Reorganization) on
January 6, 1999, the common shares of beneficial interest,
par value $0.01 per share, of the Trust were traded together
with the Corporation Shares as Paired Shares, just
as the Class B Shares and the Corporation Shares are
currently traded as Shares. Unless otherwise stated herein, all
information with respect to Shares refers to Shares on and since
January 6, 1999 and to Paired Shares for periods before
January 6, 1999.




PART I




Forward-Looking Statements

This Joint Annual Report contains statements that
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
statements appear in a number of places in this Joint Annual
Report, including, without limitation, the section of
Item 1, Business, captioned Business
Strategy and Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations. Such forward-looking statements may include
statements regarding the intent, belief or current expectations
of Starwood, its Directors or Trustees or its officers with
respect to the matters discussed in this Joint Annual Report.
All such forward-looking statements involve risks and
uncertainties that could cause actual results to differ
materially from those projected in the forward-looking
statements including, without limitation, the risks and
uncertainties set forth below. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements to reflect current or future events or circumstances.

Risks Relating to Hotel and Resort
Operations

We Are Subject to All the Operating Risks
Common to the Hotel and Leisure
Industry.Operating risks common
to the hotel and leisure industry include:



| |   |                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in general economic conditions, including
	the severity and duration of the current economic downturn
	exacerbated by the September 11, 2001 terrorist attacks in
	New York, Washington, D.C. and Pennsylvania (the
	September 11 Attacks) and their aftermath;
|
| |  | decreases in the level of demand for rooms and
	related services, including the recent reduction in business
	travel as a result of general economic conditions and the
	September 11 Attacks;                                                                           
|
| |  | cyclical over-building in the hotel and leisure
	industry;                                                                                                                                                                                                               
|
| |  | restrictive changes in zoning and similar land
	use laws and regulations or in health, safety and environmental
	laws, rules and regulations;                                                                                                                            
|
| |  | changes in travel patterns;                                                                                                                                                                                                                                              
|
| |  | changes in operating costs including, but not
	limited to, energy and labor costs;                                                                                                                                                                                       
|
| |  | the availability of capital to allow us and
	potential hotel owners and franchisees to fund investments; and                                                                                                                                                             
|
| |  | the financial condition of third-party property
	owners and franchisees.                                                                                                                                                                                                 

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In addition, our hotel management contracts are
typically long-term arrangements, but most allow the hotel owner
to replace us if certain financial or performance criteria are
not met. Our ability to meet these financial and performance
criteria is subject to, among other things, the risks described
in this section. Additionally, our operating results would be
adversely affected if we could not maintain existing management,
franchise or representation agreements or obtain new agreements
on favorable terms.

We Must Compete for Customers.The hotel and leisure industry is
highly competitive. Our properties compete for customers with
other hotel and resort properties, and, with respect to our
vacation ownership resorts, with owners reselling their vacation
ownership interests (VOIs), in their geographic
markets. Some of our competitors may have substantially greater
marketing and financial resources than we do, and they may
improve their facilities, reduce their prices or expand or
improve their marketing programs in ways that adversely affect
our operating results.

We Must Compete for Properties.We compete with other hotel and
leisure companies for properties, which may increase the cost of
acquiring properties. Some of these competitors may have
substantially greater financial resources than we do and may be
able to pay more to acquire properties than we are able to pay.
In addition, competition for properties may increase the cost of
acquiring properties. We also compete with other hotel and
leisure companies for management and franchise agreements. As a
result, the terms of such agreements may not be as favorable. In
connection with entering into management or franchise
agreements, we may be required to make investments in or
guarantee the obligations of third parties.

The Hotel and Leisure Industry Is Seasonal
in Nature.The hotel and leisure
industry is seasonal in nature; however, the periods during
which we experience higher revenue vary from property to
property and depend principally upon location. Our revenue
historically has been lower in the first quarter than in the
second, third or fourth quarters.

The Hotel and Leisure Business Is Capital
Intensive.In order for our owned,
managed and franchised properties to remain attractive and
competitive, we, the property owners and the franchisees have to
spend money periodically to keep them well maintained,
modernized and refurbished. This creates an ongoing need for
cash and, to the extent we, property owners and franchisees
cannot fund expenditures from cash generated by operations,
funds must be borrowed or otherwise obtained. Accordingly, our
financial results may be sensitive to the cost and availability
of funds.

Real Estate Investments Are Subject to
Numerous Risks.Because we own and
lease hotels and resorts, we are subject to the risks that
generally relate to investments in real property. The investment
returns available from equity investments in real estate depend
in large part on the amount of income earned and capital
appreciation generated by the related properties, as well as the
expenses incurred. In addition, a variety of other factors
affect income from properties and real estate values, including
governmental regulations, real estate, zoning, tax and eminent
domain laws, interest rate levels and the availability of
financing. For example, new or existing real estate, zoning or
tax laws can make it more expensive and/or time-consuming to
develop real property or expand, modify or renovate hotels. When
interest rates increase, the cost of acquiring, developing,
expanding or renovating real property increases and real
property values may decrease as the number of potential buyers
decreases. Similarly, as financing becomes less available, it
becomes more difficult both to acquire and to sell real
property. Finally, governments can, under eminent domain laws,
take real property. Sometimes this taking is for less
compensation than the owner believes the property is worth. Any
of these factors could have a material adverse impact on our
results of operations or financial condition, as well as on our
ability to make distributions to our shareholders. In addition,
equity real estate investments, such as the investments we hold
and any additional properties that we may acquire, are
relatively difficult to sell quickly. If our properties do not
generate revenue sufficient to meet operating expenses,
including debt service and capital expenditures, our income will
be adversely affected.

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Hotel and Resort Development Is Subject to
Timing, Budgeting and Other Risks.We intend to develop hotel and
resort properties as suitable opportunities arise, taking into
consideration the general economic climate. New project
development has a number of risks, including risks associated
with:



| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | construction delays or cost overruns that may
	increase project costs;                                         
|
| |  | receipt of zoning, occupancy and other required
	governmental permits and authorizations;                      
|
| |  | development costs incurred for projects that are
	not pursued to completion;                                   
|
| |  | so-called acts of God such as earthquakes,
	hurricanes, floods or fires that could adversely impact a
	project;
|
| |  | ability to raise capital; and                                                                                  
|
| |  | governmental restrictions on the nature or size
	of a project.                                                 

We cannot assure you that any development project
will be completed on time or within budget.

Our Vacation Ownership Business Is Subject
to Extensive Regulation and Risk of Default.We market and sell VOIs, which
typically entitle the buyer to ownership of a fully-furnished
resort unit for a one-week period on either an annual or an
alternate-year basis. We also acquire, develop and operate
vacation ownership resorts, and provide financing to purchasers
of VOIs. These activities are all subject to extensive
regulation by the federal government and the states in which
vacation ownership resorts are located and in which VOIs are
marketed and sold. In addition, the laws of most states in which
we sell VOIs grant the purchaser of this type of interest the
right to rescind the purchase contract at any time within a
statutory rescission period. Although we believe that we are in
material compliance with all applicable federal, state, local
and foreign laws and regulations to which vacation ownership
marketing, sales and operations are currently subject, changes
in these requirements or a determination by a regulatory
authority that we were not in compliance could adversely affect
us. Additionally, if the purchaser of a VOI defaults, we may not
have recovered our marketing, selling, and general and
administrative costs related to the sale of the VOI.

Environmental Regulations Could Make Us
Liable for Cleaning Up Hazardous Substances.Environmental laws, ordinances and
regulations of various federal, state, local and foreign
governments regulate certain of our properties and could make us
liable for the costs of removing or cleaning up hazardous or
toxic substances on, under or in property we currently own or
operate or that we previously owned or operated. Those laws
could impose liability without regard to whether we knew of, or
were responsible for, the presence of hazardous or toxic
substances. The presence of hazardous or toxic substances, or
the failure to properly clean up such substances when present,
could jeopardize our ability to develop, use, sell or rent the
real property or to borrow using the real property as
collateral. If we arrange for the disposal or treatment of
hazardous or toxic wastes, we could be liable for the costs of
removing or cleaning up wastes at the disposal or treatment
facility, even if we never owned or operated that facility.
Other laws, ordinances and regulations could require us to
manage, abate or remove lead- or asbestos-containing materials.
Similarly, the operation and closure of storage tanks are often
regulated by federal, state, local and foreign laws. Finally,
certain laws, ordinances and regulations, particularly those
governing the management or preservation of wetlands, coastal
zones and threatened or endangered species, could limit our
ability to develop, use, sell or rent our real property.

General Economic Conditions May Negatively
Impact Our Results.Moderate or
severe economic downturns or adverse conditions may negatively
affect our operations. These conditions may be widespread or
isolated to one or more geographic regions. Our results in North
America were negatively impacted by the significant drop in
industry-wide lodging demand, resulting primarily from the
September 11 Attacks, particularly impacting New York City,
where we have seven owned hotels with approximately 3,900 rooms,
and where we manage three additional hotels with approximately
1,100 rooms. In addition, a tightening of the labor markets in
one or more geographic regions may result in fewer and/or less
qualified applicants for job openings in our facilities and
higher wages.

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International Operations Are Subject to
Special Political and Monetary Risks.We have significant international
operations which as of December 31, 2001 included 167
owned, managed or franchised properties in Europe, Africa and
the Middle East (including 34 properties with majority
ownership); 41 owned, managed or franchised properties in
Latin America (including 13 properties with majority
ownership); and 78 owned, managed or franchised properties in
the Asia Pacific region (including 4 properties with majority
ownership). International operations generally are subject to
various political and other risks that are not present in U.S.
operations. These risks include the risk of war or civil unrest,
expropriation and nationalization. In addition, some
international jurisdictions restrict the repatriation of
non-U.S. earnings. Various international jurisdictions also have
laws limiting the right and ability of non-U.S. entities to pay
dividends and remit earnings to affiliated companies unless
specified conditions have been met. In addition, sales in
international jurisdictions typically are made in local
currencies, which subject us to risks associated with currency
fluctuations. Currency devaluations and unfavorable changes in
international monetary and tax policies could have a material
adverse effect on our profitability and financing plans, as
could other changes in the international regulatory climate and
international economic conditions. Other than Italy, where our
risks are heightened due to the 18 properties we own, our
international properties are geographically diversified and are
not concentrated in any particular region.

Acquisition Opportunities

We intend to make acquisitions that complement
our business. There can be no assurance, however, that we will
be able to identify acquisition candidates or complete
acquisitions on commercially reasonable terms or at all. If
additional acquisitions are made, there can be no assurance that
any anticipated benefits will actually be realized. Similarly,
there can be no assurance that we will be able to obtain
additional financing for acquisitions, or that the ability to
obtain such financing will not be restricted by the terms of our
debt agreements.

Investing Through Partnerships or Joint
Ventures Decreases Our Ability to Manage Risk

In addition to acquiring or developing hotels and
resorts directly, we have from time to time invested, and may
continue to invest, as a co-venturer. Joint venturers often have
shared control over the operation of the joint venture assets.
Therefore, joint venture investments may involve risks such as
the possibility that the co-venturer in an investment might
become bankrupt, or have economic or business interests or goals
that are inconsistent with our business interests or goals, or
be in a position to take action contrary to our instructions or
requests or contrary to our policies or objectives.
Consequently, actions by a co-venturer might subject hotels and
resorts owned by the joint venture to additional risk. Although
we generally seek to maintain sufficient control of any joint
venture, we may be unable to take action without the approval of
our joint venture partners. Alternatively, our joint venture
partners could take actions binding on the joint venture without
our consent. Additionally, should a joint venture partner become
bankrupt, we could become liable for our partners share of
joint venture liabilities.

Disposition Opportunities

We periodically review our business with the view
to identifying properties or other assets that we believe either
no longer complement our business or could be sold at
significant premiums. There can be no assurance, however, that
if we identify such properties that we will be able to complete
dispositions on commercially reasonable terms or at all. In
particular, we have initiated the formal sale process for the
CIGA S.p.A. (CIGA) portfolio of 25 luxury hotels,
land, golf courses and marinas, potentially encumbered by our
management contracts in whole or in part. We began reviewing
preliminary indications of interest in the first quarter of
2002. There is, however, no guarantee that such a sale will
materialize or be consummated within our projected time frame,
and if consummated, there is no guarantee of the terms of any
such transaction.

Debt Financing

As a result of incurring debt, we are subject to
the following risks associated with debt financing: (i) the
risk that cash flow from operations will be insufficient to meet
required payments of principal and interest;

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(ii) the risk that (to the extent that we
maintain floating rate indebtedness) interest rates will
fluctuate; and (iii) risks resulting from the fact that the
agreements governing our loan and credit facilities contain
covenants imposing certain limitations on our ability to acquire
and dispose of assets. In addition, we have significant
indebtedness maturities in 2003, and although we anticipate that
we will be able to repay or refinance our existing indebtedness
and any other indebtedness when it matures, there can be no
assurance that we will be able to do so or that the terms of
such refinancings will be favorable. Our leverage may have
important consequences including the following: (i) our
ability to obtain additional financing for acquisitions, working
capital, capital expenditures or other purposes, if necessary,
may be impaired or such financing may not be available on terms
favorable to us; (ii) a substantial decrease in operating
cash flow or an increase in our expenses could make it difficult
for us to meet our debt service requirements and force us to
modify our operations; and (iii) our higher level of debt
and resulting interest expense may place us at a competitive
disadvantage with respect to certain competitors with lower
amounts of indebtedness and/or higher credit ratings. While our
senior debt is currently rated investment grade by one of the
two major rating agencies, there can be no assurance we will be
able to maintain this rating. In the event our senior debt is
not investment grade, we would likely incur higher borrowing
costs.


Risks Relating to Acts of God, Terrorist
Activity and War

Our financial and operating performance may be
adversely affected by acts of God, such as natural disasters, in
locations where we own and/or operate significant properties and
areas of the world from which we draw a large number of
customers. Some types of losses, such as from earthquake and
environmental hazards may be either uninsurable or too expensive
to justify insuring against. Should an uninsured loss or a loss
in excess of insured limits occur, we could lose all or a
portion of the capital we have invested in a hotel or resort, as
well as the anticipated future revenue from the hotel or resort.
In that event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the
property. Similarly, wars, terrorist activity (including threats
of terrorist activity), political unrest and other forms of
civil strife have caused in the past, and may cause in the
future, our results to differ materially from anticipated
results.

Certain Interests

Barry S. Sternlicht is the Chairman and
Chief Executive Officer the Corporation and the Trust.
Mr. Sternlicht also serves as the President and Chief
Executive Officer of, and may be deemed to control, Starwood
Capital Group, L.L.C. (Starwood Capital), a real
estate investment firm. Starwood Capital and the Company have
entered into a non-compete agreement whereby Starwood Capital
may not purchase a hotel property in the United States until
such opportunity is first presented to the Company. See
Item 13, Certain Relationships and Related
Transactions. Although Starwood Capital is free to compete
with the Company for hotel properties outside of the United
States, as a matter of practice, all opportunities to purchase
such properties are also first presented to the Company. In each
case, the Governance Committee of the Board of Directors (or
other committee of independent directors) will make a decision
as to whether or not the Company will pursue the opportunity. In
addition, certain officers and directors of the Company have
interests in businesses that may, from time to time, do business
with the Company. To the extent such individuals have a material
interest in such businesses, any agreements relating thereto are
subject to Governance Committee (or other committee of
independent directors) approval.

Ability to Manage Rapid Growth

Our future success and our ability to manage
future growth depend in large part upon the efforts of our
senior management and our ability to attract and retain key
officers and other highly qualified personnel. Competition for
such personnel is intense. There can be no assurance that we
will continue to be successful in attracting and retaining
qualified personnel. Accordingly, there can be no assurance that
our senior management will be able to successfully execute and
implement our growth and operating strategies.

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Internet Reservation Channels

Some of our hotel rooms are booked through
internet travel intermediaries such as Travelocity.com, Inc.,
Expedia, Inc. and Priceline.com, Inc. As the percentage of
internet bookings increases, these intermediaries may be able to
obtain higher commissions, reduced room rates or other
significant contract concessions from us. Moreover, some of
these internet travel intermediaries are attempting to
commoditize hotel rooms, by increasing the importance of price
and general indicators of quality (such as three-star
downtown hotel) at the expense of brand identification.
These agencies hope that consumers will eventually develop brand
loyalties to their reservations system rather than to our
lodging brands. Although most of our business is expected to be
derived from traditional channels, if the amount of sales made
through internet intermediaries increases significantly, our
business and profitability may be significantly harmed.

Tax Risks

Failure of the Trust to Qualify as a REIT
Would Increase Our Tax Liability.Qualifying as a real estate
investment trust (a REIT) requires compliance with
highly technical and complex tax provisions that courts and
administrative agencies have interpreted only to a limited
degree. Due to the complexities of our ownership, structure and
operations, the Trust is more likely than are other REITs to
face interpretative issues for which there are no clear answers.
Also, facts and circumstances that we do not control may affect
the Trusts ability to qualify as a REIT. The Trust
believes that since the taxable year ended December 31,
1995, it has qualified as a REIT under the Internal Revenue Code
of 1986, as amended. The Trust intends to continue to operate so
as to qualify as a REIT. However, the Trust cannot assure you
that it will continue to qualify as a REIT. If the Trust failed
to qualify as a REIT for any prior tax year, the Trust would be
liable to pay a significant amount of taxes for those years.
Similarly, if the Trust fails to qualify as a REIT in the
future, our liability for taxes would increase.

Additional Legislation Could Eliminate or
Reduce Certain Benefits of Our Structure.On January 6, 1999, we
consummated the Reorganization pursuant to an Agreement and Plan
of Restructuring dated as of September 16, 1998, as
amended, among the Corporation, ST Acquisition Trust, a
wholly owned subsidiary of the Corporation, and the Trust.
Pursuant to the Reorganization, the Trust became a subsidiary of
the Corporation, which holds all the outstanding Class A
shares of beneficial interest, par value $0.01 per share, of the
Trust (Class A Shares). The Reorganization was
proposed in response to the Internal Revenue Service
Restructuring and Reform Act of 1998
(H.R. 2676), which made it difficult for us to
acquire and operate additional hotels while still maintaining
our former status as a grandfathered paired share real
estate investment trust. While we believe that the
Reorganization was the best alternative in light of
H.R. 2676 and that our new structure does not raise the
same concerns that led Congress to enact such legislation, no
assurance can be given that additional legislation, regulations
or administrative interpretations will not be adopted that could
eliminate or reduce certain benefits of the Reorganization and
have a material adverse effect on our results of operations,
financial condition and prospects.

The Company undertakes global tax planning in the
normal course of business. These activities may be subject to
review by tax authorities. As a result of the review process,
uncertainties exist and it is possible that some matters could
be resolved adversely to the Company.

Risks Relating to Ownership of Our
Shares

No Person or Group May Own More Than 8% of
Our Shares.Our governing
documents provide (subject to certain exceptions) that no one
person or group may own or be deemed to own more than 8% of our
outstanding stock or Shares of beneficial interest, whether
measured by vote, value or number of Shares. There is an
exception for shareholders who owned more than 8% as of
February 1, 1995, who may not own or be deemed to own more
than the lesser of 9.9% or the percentage of Shares they held on
that date, provided, that if the percentage of Shares
beneficially owned by such a holder decreases after
February 1, 1995, such a holder may not own or be deemed to
own more than the greater of 8% or the percentage owned after
giving effect to the decrease. We may waive this limitation if
we are satisfied that such ownership will not jeopardize the
Trusts status as a REIT. In addition, if Shares which
would cause the Trust to be beneficially owned by

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fewer than 100 persons are issued or transferred
to any person, such issuance or transfer shall be null and void.
This ownership limit may have the effect of precluding a change
in control of us by a third party without the consent of our
Board of Directors, even if such change in control would
otherwise give the holders of Shares or other of our equity
securities the opportunity to realize a premium over
then-prevailing market prices, and even if such change in
control would not reasonably jeopardize the status of the Trust
as a REIT.


At Least Two Annual Meetings Must Be Held
Before a Majority of Our Board of Directors Can Be Changed.Our Board of Directors is divided
into three classes. Each class is elected for a three-year term.
At each annual meeting of shareholders, approximately one-third
of the members of the Board of Directors are elected for a
three-year term and the other directors remain in office until
their three-year terms expire. Furthermore, our governing
documents provide that no director may be removed without cause.
Any removal for cause requires the affirmative vote of the
holders of at least two-thirds of all the votes entitled to be
cast for the election of directors.

Thus, control of the Board of Directors cannot be
changed in one year without removing the directors for cause as
described above. Consequently, at least two annual meetings must
be held before a majority of the members of the Board of
Directors can be changed. Our charter provides that the charter
cannot be amended without the approval of the holders of at
least a majority of the outstanding Shares entitled to vote
thereon.

Our Board of Directors May Issue Preferred
Stock and Establish the Preferences and Rights of Any Such
Preferred Stock.Our charter
provides that the total number of Shares of stock of all classes
which the Corporation has authority to issue is 1,350,000,000,
initially consisting of one billion Shares of common stock,
50 million Shares of excess common stock, 200 million
Shares of preferred stock and 100 million Shares of excess
preferred stock. Our Board of Directors has the authority,
without a vote of shareholders, to establish the preferences and
rights of any preferred or other class or series of Shares to be
issued and to issue such Shares. The issuance of preferred
shares or other shares having special preferences or rights
could delay or prevent a change in control even if a change in
control would be in the interests of our shareholders. Because
our Board of Directors has the power to establish the
preferences and rights of additional classes or series of shares
without a shareholder vote, our Board of Directors may give the
holders of any class or series preferences, powers and rights,
including voting rights, senior to the rights of holders of our
Shares.

Certain Provisions of Our Charter May
Require the Approval of Two-Thirds of Our Shares and Only Our
Directors May Amend Our Bylaws.Our charter contains provisions
relating to restrictions on transferability of the Corporation
Shares, which may be amended only by the affirmative vote of our
shareholders holding two-thirds of the votes entitled to be cast
on the matter. As permitted under the Maryland General
Corporation Law, our Bylaws provide that directors have the
exclusive right to amend our Bylaws.

Our Shareholder Rights Plan Would Cause
Substantial Dilution to Any Shareholder That Attempts to Acquire
Us on Terms Not Approved by Our Board of Directors.We adopted a shareholder rights
plan which provides, among other things, that when specified
events occur, our shareholders will be entitled to purchase from
us a newly created series of junior preferred stock, subject to
the ownership limit described above. The preferred stock
purchase rights are triggered by the earlier to occur of
(i) ten days after the date of a public announcement that a
person or group acting in concert has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of our
outstanding Corporation Shares or (ii) ten business days
after the commencement of or announcement of an intention to
make a tender offer or exchange offer, the consummation of which
would result in the acquiring person becoming the beneficial
owner of 15% or more of our outstanding Corporation Shares. The
preferred stock purchase rights would cause substantial dilution
to a person or group that attempts to acquire us on terms not
approved by our Board of Directors.




Item 1.     Business.

General

Starwood is one of the worlds largest hotel
and leisure companies. Starwoods status as one of the
leading hotel and leisure companies resulted from the 1998
acquisition of Westin Hotels & Resorts Worldwide, Inc. and
certain of its affiliates (Westin) (the Westin
Merger) and the acquisition of ITT Corporation (the

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ITT Merger), renamed Sheraton Holding
Corporation (Sheraton Holding). The Company conducts
its hotel and leisure business both directly and through its
subsidiaries. The Companys brand names include St.
Regis®, The Luxury Collection®, Sheraton®,
Westin®, W® and Four Points® by Sheraton. Through
these brands, Starwood is well represented in most major markets
around the world.(1)


The Companys revenue and earnings are
derived primarily from hotel and leisure operations, which
include the operation of the Companys owned hotels;
management fees earned from hotels the Company manages pursuant
to long-term management contracts; the receipt of franchise
fees; and the development, ownership and operation of vacation
ownership resorts, marketing and selling VOIs in the resorts and
providing financing to customers who purchase such interests.

The Companys hotel and leisure business
emphasizes the global operation of hotels and resorts primarily
in the luxury and upscale segment of the lodging industry.
Starwood seeks to acquire interests in or management rights with
respect to properties in this segment. At December 31,
2001, the Companys portfolio included owned, managed and
franchised hotels totaling 743 hotels with approximately 224,000
rooms in over 80 countries and 15 vacation ownership resorts,
all in the United States. The hotel portfolio is comprised of
165 hotels that Starwood owns or leases or in which Starwood has
a majority equity interest (substantially all of which hotels
Starwood also manages), 265 hotels managed by Starwood on behalf
of third-party owners (including entities in which Starwood has
a minority equity interest) and 313 hotels for which Starwood
receives franchise fees.

The Trust was organized in 1969, and the
Corporation was incorporated in 1980, both under the laws of
Maryland. Sheraton Hotels & Resorts, Starwoods largest
brand, has been serving guests for more than 60 years.

The Companys principal executive offices
are located at 1111 Westchester Avenue, White Plains, New
York 10604, and its telephone number is (914) 640-8100.

For a discussion of the Companys revenues,
profits, assets and geographical segments, see the notes to
financial statements of this Joint Annual Report. For additional
information concerning the Companys business, see
Item 2, Properties, of this Joint Annual Report.

Competitive Strengths

Management believes that the following factors
contribute to the Companys position as a leader in the
lodging industry and provide a foundation for the Companys
business strategy:

Brand Strength.Starwood believes that it has
strong brand leadership in major markets worldwide based on the
global recognition of the Companys lodging brands. The
strength of the Companys brands is evidenced, in part, by
the superior ratings received from the Companys hotel
guests and from industry publications. For example, Starwood was
again designated as the Worlds Best Global Hotel
Company by Global Financemagazine in their
September 2001 issue. Also, for the third year in a row,
Starwood brands took top honors in Business Travel News
2001 Survey of Top Hotel Chains. W Hotels and Westin
Hotels & Resorts earned first and second place in the
upscale category, and Four Points by Sheraton was voted number
one in the mid-price category. With the Companys well
known lodging brands, Starwood benefits from a luxury and
upscale branding strategy that provides strong operating
performance from new customer penetration and customer loyalty.
During 2001, Starwood converted four of its owned hotels, which
had been operated on a non-branded or non-proprietary-branded
basis, to proprietary brands owned by the Company. These
conversions have enhanced and expanded the Companys global
presence and brand recognition. In 2001, the Company also added
an additional 48 hotels with approximately 9,800 rooms to its
branded hotel system. In total, approximately 1,500 rooms were
added to the W brand in 2001.





---

|    |                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company owns or has rights to various
	trademarks, trade names and service marks used in our business,
	including those listed above, and related logos. This Joint
	Annual Report also includes trademarks, trade names and service
	marks owned by other companies.

8



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Frequent Guest Program.The Companys loyalty
program, Starwood Preferred Guest® (SPG), was
awarded the 2000 Hotel Program of the Year for the second year
in a row by consumers via the prestigious Freddie Awards.
SPG, despite being the newest hotel loyalty program in the
industry, also received awards for Best Customer Service, Best
Web Site, Best Elite-Level Program and Best Award Redemption.
SPG, deemed unique in the hotel and leisure industry for its
policy of no blackout dates and no capacity controls, enables
members to redeem stays when they want and where they want, a
feature not offered by competitors.

Significant Presence in Top Markets.The Companys luxury and
upscale hotel and resort assets are well positioned in North
America, Europe, Asia, Latin America and Africa. These assets
are primarily located in major cities and resort areas that
management believes have historically demonstrated a strong
breadth, depth and growing demand for luxury and upscale hotels
and resorts, in which the supply of sites suitable for hotel
development has been limited and in which development of such
sites is relatively expensive.

Premier and Distinctive Properties.Starwood controls a distinguished
and diversified group of hotel properties throughout the world,
including The St. Regis in New York, New York; The
Phoenician in Scottsdale, Arizona; the Hotel Danieli in Venice,
Italy; and the Westin Palace in Madrid, Spain. These are among
the leading hotels in the industry and are at the forefront of
providing the highest quality and service. The Condé
Nast Traveler Magazine 2002 Gold List Readers Choice Pollincluded 56 Starwood properties as part of the top hotels to
stay at in the world. Starwood owns or manages more Gold
List winners than any other hotel company in the world.

Scale.As one
of the largest hotel and leisure companies focusing on the
luxury and upscale full-service lodging market, Starwood has the
scale to support its core marketing and reservation functions.
The Company also believes that its scale will contribute to
lowering its cost of operations through purchasing economies in
such areas as insurance, energy, telecommunications, employee
benefits, food and beverage, furniture, fixtures and equipment
and operating supplies.

Diversification of Cash Flow and Assets.Management believes that the
diversity of the Companys brands, market segments served,
revenue sources and geographic locations provides a broad base
from which to enhance revenue and profits and to strengthen the
Companys global brands. This diversity limits the
Companys exposure to any particular lodging asset, brand
or geographic region.

While Starwood focuses on the luxury and upscale
portion of the full-service lodging market, the Companys
brands cater to a diverse group of sub-markets within this
market. For example, the St. Regis hotels cater to high-end
hotel and resort clientele while Four Points by Sheraton hotels
deliver extensive amenities and services at more affordable
rates. Management believes that the diversity of the
Companys brands and customer base reduces the likelihood
of competition for customers at any one of the Companys
hotels from other hotels within its portfolio. Instead,
management believes that this diversity serves to increase the
Companys market share within markets where Starwood
operates more than one brand.

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Starwood derives its cash flow from multiple
sources, including owned hotels, management and franchise fees,
and VOI sales, and is geographically diverse with operations on
six continents. The following table reflects the Companys
properties by revenue source as of December 31, 2001:

|                                    |  |            |     |       |  |  |         | 
|----------------------------------- |  | ---------- | --- | ----- |  |  | ------- | 
|                                    |  | Number of  |     |      
|                                    |  | Properties |     | Rooms
|                                    |  |            |     |      
|Owned hotels(a)                     |  |            | 165 |       |  |  | 57,000  | 
|Managed hotels                      |  |            | 222 |       |  |  | 73,000  | 
|Franchised hotels                   |  |            | 313 |       |  |  | 78,000  | 
|Unconsolidated joint venture hotels |  |            | 43  |       |  |  | 16,000  | 
|                                    |  |            |     |       |  |  |         | 
|Total hotel properties              |  |            | 743 |       |  |  | 224,000 | 
|                                    |  |            |     |       |  |  |         | 
|Vacation ownership resorts          |  |            | 15  |       |  |  | N/A     | 
|                                    |  |            |     |       |  |  |         | 



---



|    |                                                          
|--- | ---------------------------------------------------------
|(a) | Includes wholly owned, majority owned and leased
	hotels.

The following table shows the Companys
geographical presence by major geographic area for the year
ended December 31, 2001:

|                                   |  |        |     |       |  |  |         | 
|---------------------------------- |  | ------ | --- | ----- |  |  | ------- | 
|                                   |  | Hotels |     | Rooms
|                                   |  |        |     |      
|North America(a)                   |  |        | 457 |       |  |  | 149,000 | 
|Europe, Africa and the Middle East |  |        | 167 |       |  |  | 40,000  | 
|Latin America                      |  |        | 41  |       |  |  | 9,000   | 
|Asia Pacific                       |  |        | 78  |       |  |  | 26,000  | 
|                                   |  |        |     |       |  |  |         | 
|Total                              |  |        | 743 |       |  |  | 224,000 | 
|                                   |  |        |     |       |  |  |         | 



---



|    |                                        
|--- | ---------------------------------------
|(a) | Excludes 15 vacation ownership resorts.

Business Segment and Geographical
Information

Incorporated by reference in Note 21,
Business Segment and Geographical Information, in
the notes to financial statements set forth in Part II,
Item 8, Financial Statements and Supplementary
Data.

Business Strategy

The Companys primary business objective is
to maximize earnings and cash flow by increasing the
profitability of the Companys existing portfolio;
selectively acquiring interests in additional assets; increasing
the number of the Companys hotel management contracts and
franchise agreements; acquiring, developing and selling VOIs;
and maximizing the value of its owned real estate properties,
including selectively disposing of non-core hotels and
trophy assets that may be sold at significant
premiums. The Company plans to meet these objectives by
leveraging its global assets, broad customer base and other
resources and by taking advantage of the Companys scale to
reduce costs. The September 11 Attacks and their aftermath make
financial planning and implementation of our strategy more
challenging.

Growth Opportunities.Management has identified several
growth opportunities with a goal of enhancing the Companys
operating performance and profitability, including:



| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continuing to expand the Companys role as a
	third-party manager of hotels and resorts. This allows Starwood
	to expand the presence of its lodging brands and gain additional
	cash flow generally with modest capital commitment;                          
|
| |  | Franchising the Sheraton, Westin and Four Points
	by Sheraton brands to selected third-party operators, thereby
	expanding the Companys market presence, enhancing the
	exposure of its hotel brands and providing additional income
	through franchise fees;

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expanding the Companys internet presence
	and sales capabilities to increase revenue and improve customer
	service;                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Continuing to grow the Companys frequent
	guest program, thereby increasing occupancy rates while
	providing the Companys customers with benefits based upon
	loyalty to the Companys hotels;                                                                                                                                                                                                                                                                                                      
|
| |  | Enhancing the Companys marketing efforts by
	integrating the Companys proprietary customer databases,
	so as to sell additional products and services to existing
	customers, improve occupancy rates and create additional
	marketing opportunities;                                                                                                                                                                                                                                               
|
| |  | Optimizing the Companys use of its real
	estate assets to improve ancillary revenue, such as restaurant,
	beverage and parking revenue from the Companys hotels and
	resorts;                                                                                                                                                                                                                                                                                                                       
|
| |  | Continuing to build the W hotel brand
	to appeal to upscale business travelers and other customers
	seeking full-service hotels in major markets;                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Refining the positioning of the Companys
	brands to further its strategy of strengthening brand identity.
	By re-branding certain owned hotels to one of Starwoods
	proprietary brands, Starwood will seek to further solidify its
	brand reputation and market presence, leading to enhanced
	revenue per available room (REVPAR), which we
	consider to be a meaningful indicator of our performance, as it
	measures the period-over-period growth in rooms revenue for
	comparable properties;
|
| |  | Developing additional vacation ownership resorts
	near select hotel locations, thereby allowing us to leverage our
	hotel assets; and                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Becoming the first hospitality company in the
	world to embrace Six Sigma, the internationally recognized
	program that dramatically accelerates and maximizes business
	performance. This initiative is expected to deliver significant
	long-term financial benefits.                                                                                                                                                                                                                               

Starwood intends to explore opportunities to
expand and diversify the Companys hotel portfolio through
minority investments and selective acquisitions of properties
domestically and internationally that meet some or all of the
following criteria:



| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Luxury and upscale hotels and resorts in major
	metropolitan areas and business centers;                                                                                                                                                                                                        
|
| |  | Major tourist hotels, destination resorts or
	conference centers that have favorable demographic trends and
	are located in markets with significant barriers to entry or
	with major room demand generators such as office or retail
	complexes, airports, tourist attractions or universities;
|
| |  | Undervalued hotels whose performance can be
	increased by re-branding to one of the Companys hotel
	brands, the introduction of better and more efficient management
	techniques and practices and/or the injection of capital for
	renovating, expanding or repositioning the property;       
|
| |  | Hotels or brands which would enable the Company
	to provide a wider range of amenities and services to customers;
	and                                                                                                                                                                          
|
| |  | Portfolios of hotels or hotel companies that
	exhibit some or all of the criteria listed above, where the
	purchase of several hotels in one transaction enables Starwood
	to obtain favorable pricing or obtain attractive assets that
	would otherwise not be available.                      

Starwood may also selectively choose to develop
and construct desirable hotels and resorts to help the Company
meet its strategic goals, such as the development of the
W Times Square, the conversion of the Days Inn Chicago to
the W Lakeshore and the conversion of the Midland Hotel to
the W Chicago, all completed in the second half of 2001.

Competition

The hotel and leisure industry is highly
competitive. Competition is generally based on quality and
consistency of room, restaurant and meeting facilities and
services, attractiveness of locations, availability of a global
distribution system, price and other factors. Management
believes that Starwood competes favorably in

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these areas. Starwoods properties compete
with other hotels and resorts, including facilities owned by
local interests and facilities owned by national and
international chains, in their geographic markets. The principal
competitors of Starwood include other hotel operating companies,
ownership companies (including hotel REITs) and national and
international hotel brands.


Starwood encounters strong competition as a hotel
and resort operator and developer. While some of the
Companys competitors are private management firms, several
are large national and international chains that own and operate
their own hotels, as well as manage hotels for third-party
owners, under a variety of brands that compete directly with the
Companys brands. In addition, hotel management contracts
are typically long-term arrangements, but most allow the hotel
owner to replace the management firm if certain financial or
performance criteria are not met.

Environmental Matters

Starwood is subject to certain requirements and
potential liabilities under various federal, state and local
environmental laws, ordinances and regulations
(Environmental Laws). For example, a current or
previous owner or operator of real property may become liable
for the costs of removal or remediation of hazardous or toxic
substances on, under or in such property. Such laws often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of hazardous or toxic substances
may adversely affect the owners ability to sell or rent
such real property or to borrow using such real property as
collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic wastes may be liable for the costs of removal
or remediation of such wastes at the treatment, storage or
disposal facility, regardless of whether such facility is owned
or operated by such person. Starwood uses certain substances and
generates certain wastes that may be deemed hazardous or toxic
under applicable Environmental Laws, and Starwood from time to
time has incurred, and in the future may incur, costs related to
cleaning up contamination resulting from historic uses of
certain of the Companys current or former properties or
the Companys treatment, storage or disposal of wastes at
facilities owned by others. Other Environmental Laws require
abatement or removal of certain asbestos-containing materials
(ACMs) (limited quantities of which are present in
various building materials such as spray-on insulation, floor
coverings, ceiling coverings, tiles, decorative treatments and
piping located at certain of the Companys hotels) in the
event of damage or demolition, or certain renovations or
remodeling. These laws also govern emissions of and exposure to
asbestos fibers in the air. Environmental Laws also regulate
polychlorinated biphenyls (PCBs), which may be
present in electrical equipment. A number of the Companys
hotels have underground storage tanks (USTs) and
equipment containing chlorofluorocarbons (CFCs); the
operation and subsequent removal or upgrading of certain USTs
and the use of equipment containing CFCs also are regulated by
Environmental Laws. In connection with the Companys
ownership, operation and management of its properties, Starwood
could be held liable for costs of remedial or other action with
respect to PCBs, USTs or CFCs.

Environmental Laws are not the only source of
environmental liability. Under the common law, owners and
operators of real property may face liability for personal
injury or property damage because of various environmental
conditions such as alleged exposure to hazardous or toxic
substances (including, but not limited to, ACMs, PCBs and CFCs),
poor indoor air quality, radon or poor drinking water quality.

Although Starwood has incurred and expects to
incur remediation and other environmental costs during the
ordinary course of operations, management anticipates that such
costs will not have a material adverse effect on the operations
or financial condition of the Company.

Seasonality and Diversification

The hotel and leisure industry is seasonal in
nature; however, the periods during which the Companys
properties experience higher revenue activities vary from
property to property and depend principally upon location. Other
than 2001, which was dramatically impacted by the
September 11 Attacks, the Companys

12



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##### Table of Contents



revenues and EBITDA(1) historically
have been lower in the first quarter than in the second, third
or fourth quarters.


Comparability of Owned Hotel Results

Starwood continually updates and renovates its
owned, leased and consolidated joint venture hotels. While
undergoing renovation, these hotels are generally not operating
at full capacity and, as such, these renovations can initially
negatively impact Starwoods revenues and EBITDA.

Employees

At December 31, 2001, Starwood employed
approximately 115,000 persons at its corporate offices, owned
and managed hotels and vacation ownership resorts, of whom
approximately 42% were employed in the United States. At
December 31, 2001, approximately 34% of the U.S.-based
employees were covered by various collective bargaining
agreements providing, generally, for basic pay rates, working
hours, other conditions of employment and orderly settlement of
labor disputes. Generally, labor relations have been maintained
in a normal and satisfactory manner, and management believes
that the Companys employee relations are good.




Item 2.     Properties.

Starwood is one of the largest hotel and leisure
companies in the world, with operations in over 80 countries.
Starwood considers its hotels generally to be premier
establishments with respect to desirability of location, size,
facilities, physical condition, quality and variety of services
offered in the markets in which they are located. Although
obsolescence arising from age and condition of facilities can
adversely affect the Companys hotels and resorts, Starwood
and third-party owners of managed and franchised hotels expend
substantial funds to renovate and maintain their facilities in
order to remain competitive. For further information, see
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Liquidity and Capital Resources  Capital
Expenditures, in this Joint Annual Report.

The Companys hotel and leisure business
included 743 owned, managed or franchised hotels with
approximately 224,000 rooms and 15 vacation ownership
resorts at December 31, 2001, predominantly under six
brands. All brands are full-service properties that range in
amenities from luxury, upscale hotels and resorts to more
moderately priced hotels:

St. Regis Hotels & Resorts(luxury full-service hotels and
resorts) deliver the most discreet, personalized and
anticipatory level of service to high-end leisure and business
travelers. St. Regis hotels typically have individual
design characteristics to accentuate each individual location
and city. Most St. Regis hotels have spacious, luxurious
rooms and suites with highly designed, residential surroundings
and include a 4- or 5-Star restaurant on premise.

The Luxury Collection(luxury full-service hotels and
resorts) is a group of unique hotels and resorts offering
exceptional service to an elite clientele. The Luxury Collection
includes some of the worlds most renowned and legendary
hotels. These hotels are distinguished by magnificent decor,
spectacular settings and impeccable service.

Sheraton Hotels & Resorts(upscale full-service hotels and
resorts) is the Companys largest brand serving the needs
of upscale business and leisure travelers worldwide. Sheraton
hotels offer the entire spectrum of comfort, from full-service
hotels in major cities to luxurious resorts. These hotels
typically feature a wide



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | EBITDA is defined as income before interest
	expense, income tax expense, depreciation and amortization.
	Special items and gains and losses from sales of real estate and
	investments are also excluded from EBITDA as these items do not
	impact operating results on a recurring basis. Management
	considers EBITDA to be one measure of the cash flows from
	operations of the Company before debt service that provides a
	relevant basis for comparison, and EBITDA is presented to assist
	investors in analyzing the performance of the Company. This
	information should not be considered as an alternative to any
	measure of performance as promulgated under accounting
	principles generally accepted in the United States, nor should
	it be considered as an indicator of the overall financial
	performance of the Company. The Companys calculation of
	EBITDA may be different from the calculation used by other
	companies and, therefore, comparability may be limited.

13



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##### Table of Contents



variety of on-site business services and a full
range of amenities including rooms that feature generous work
spaces, allowing business travelers to stay productive on the
road.


Westin Hotels & Resorts(luxury and upscale full-service
hotels and resorts) are first-class, signature hotels that
typically make up an integral part of a city or region in which
the hotels are located. Westin hotels deliver unmatched comfort
to affluent professional business and leisure travelers.

W Hotels(stylish boutique full-service
urban hotels) was first established in December 1998 with the
opening of the W New York. W hotels provide a
unique hotel alternative to business travelers. W hotels
feature modern, sophisticated design with custom-made
furnishings and accessories, fully wired rooms with the most
advanced technology in the industry, and unique, high-quality
signature restaurants and bars.

Four Points by Sheraton(moderately priced full-service
hotels) deliver extensive amenities and services such as room
service, dry cleaning, fitness centers, meeting facilities and
business centers to frequent business travelers at reasonable
prices. These hotels provide a comfortable, well-appointed room,
which typically includes a two-line telephone, a large desk for
working or in-room dining, comfortable seating and full-service
restaurants.

Owned Hotels

The following table summarizes
REVPAR(1), average daily rates (ADR) and
average occupancy rates on a year-to-year basis for the
Companys 155 owned, leased and consolidated joint venture
hotels (excluding 2 hotels under significant renovation in 2001,
8 hotels without prior year results and 10 hotels sold during
2000 and 2001) (Same-Store Owned Hotels) for the
years ended December 31, 2001 and 2000:

|                                                           |  |                         |        |      |  |          |        |   |  |  |       |   
|---------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | -------- | ------ | - |  |  | ----- | --
|                                                           |  |                         |        |     
|                                                           |  | Year Ended December 31, |        |     
|                                                           |  |                         |        |     
|                                                           |  | 2001                    |        | 2000 |  | Variance
|                                                           |  |                         |        |      |  |         
|Worldwide(155
	hotels with approximately 53,000 rooms)     |  |                         |        |      |  |          |        |   |  |  |       |   
|REVPAR                                                     |  | $                       | 101.98 |      |  | $        | 115.01 |   |  |  | (11.3 | )%
|ADR                                                        |  | $                       | 156.73 |      |  | $        | 161.59 |   |  |  | (3.0  | )%
|Occupancy                                                  |  |                         | 65.1   | %    |  |          | 71.2   | % |  |  | (6.1  | ) 
|North America(110
	hotels with approximately 40,000 rooms) |  |                         |        |      |  |          |        |   |  |  |       |   
|REVPAR                                                     |  | $                       | 100.27 |      |  | $        | 113.81 |   |  |  | (11.9 | )%
|ADR                                                        |  | $                       | 152.26 |      |  | $        | 157.44 |   |  |  | (3.3  | )%
|Occupancy                                                  |  |                         | 65.9   | %    |  |          | 72.3   | % |  |  | (6.4  | ) 
|International(45
	hotels with approximately 13,000 rooms)  |  |                         |        |      |  |          |        |   |  |  |       |   
|REVPAR                                                     |  | $                       | 107.47 |      |  | $        | 118.86 |   |  |  | (9.6  | )%
|ADR                                                        |  | $                       | 171.87 |      |  | $        | 175.87 |   |  |  | (2.3  | )%
|Occupancy                                                  |  |                         | 62.5   | %    |  |          | 67.6   | % |  |  | (5.1  | ) 

During the years ended December 31, 2001 and
2000, the Company invested approximately $477 million and
$544 million, respectively, for capital improvements
primarily at owned hotel assets. These capital expenditures
included significant new growth investment for the acquisition
of a second fully-entitled site adjacent to the San Francisco
Museum of Modern Art. Other major expenditures during 2001
included the development of the W Times Square, the
conversion of the Days Inn Chicago to the W Lakeshore and
the conversion of the Midland Hotel to the W Chicago.
During 2000, the Company also expanded the Westin Mission Hills
Resort and completed significant renovation work at the Sheraton
Bal Harbour and Westin Maui. Internationally, during 2000 the
100-room expansion of the Westin Turnberry Resort in Scotland,
including the addition of a second golf course and the Colin
Montgomerie links golf academy, was completed.





---

|    |                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | REVPAR is calculated by dividing rooms revenue,
	which is derived from rooms and suites rented or leased, by
	total room nights available for a given period. REVPAR may not
	be comparable to similarly titled measures such a revenues.

14



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##### Table of Contents



Hotel Management and Franchising

Hotel and resort properties in the United States
are often owned by entities that neither manage hotels nor own a
brand name. Hotel owners typically enter into management
contracts with hotel management companies to operate their
hotels. When a management company does not offer a brand
affiliation, the hotel owner often chooses to pay separate
franchise fees to secure the benefits of brand marketing,
centralized reservations and other centralized administrative
functions, particularly in the sales and marketing area.
Management believes that companies, such as Starwood, that offer
both hotel management services and well-established worldwide
brand names appeal to hotel owners by providing the full range
of management and marketing services.

Managed Hotels.Through its subsidiaries, Starwood
manages hotels worldwide, usually under a long-term agreement
with the hotel owner (including entities in which Starwood has a
minority equity interest). The Companys responsibilities
under hotel management contracts typically include hiring,
training and supervising the managers and employees that operate
these facilities. For additional fees, Starwood provides
reservation services and coordinates national advertising and
certain marketing and promotional services. Starwood prepares
and implements annual budgets for the hotels it manages and is
responsible for allocating property-owner funds for periodic
maintenance and repair of buildings and furnishings. At
December 31, 2001, Starwood managed 265 hotels
worldwide under long-term agreements.

Management contracts typically provide for base
fees tied to gross revenue and incentive fees tied to profits.
In the Companys experience, owners seek hotel managers
that can provide attractively priced base, incentive, marketing
and franchise fees combined with demonstrated sales and
marketing expertise and operations-focused management designed
to enhance profitability. Some of the Companys management
contracts permit the hotel owner to terminate the agreement when
the hotel is sold or otherwise transferred to a third party, as
well as if Starwood fails to meet established performance
criteria. In addition, many hotel owners seek equity, debt or
other investments from Starwood to help finance hotel
renovations or conversion to a Starwood brand so as to align the
interests of the owner and the Company. The Companys
ability or willingness to make such investments may determine,
in part, whether Starwood will be offered, will accept, or will
retain a particular management contract. During 2001, the
Company signed management agreements with 23 hotels with
approximately 4,500 rooms.

Brand Franchising.Through its subsidiaries, Starwood
franchises its Sheraton, Westin and Four Points by Sheraton
brand names and generally derives licensing and other fees from
franchisees based on a fixed percentage of the franchised
hotels room revenue, as well as fees for other services,
including centralized reservations, sales and marketing, public
relations and national and international media advertising. In
addition, a franchisee may also purchase hotel supplies,
including brand-specific products, from certain
Starwood-approved vendors. Starwood approves certain plans for,
and the location of, franchised hotels and reviews their design.
At December 31, 2001, there were 299 franchised
properties with approximately 76,000 rooms operating under
the Sheraton, Westin and Four Points by Sheraton brands. During
2001, the Company signed franchise agreements with 25 hotels
with approximately 4,600 rooms.

Vacation Ownership Interest

The Company currently has 15 interval ownership
resorts in its portfolio with 10 currently selling VOIs,
two under construction and three that have sold all existing
inventory. The Company invested $49 million and
$114 million in 2001 and 2000, respectively, on vacation
ownership resort construction. Two and three new interval
ownership resorts were added in 2001 and 2000, respectively.




Item 3.     Legal
Proceedings.

Incorporated by reference to the description of
legal proceedings in Note 20, Commitments and
Contingencies, in the notes to financial statements set
forth in Part II, Item 8, Financial Statements
and Supplementary Data.

15



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##### Table of Contents






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

Not applicable.




Executive Officers of the
Registrants

See Part III, Item 10, of this Joint
Annual Report for information regarding the executive officers
of the Registrants, which information is incorporated herein by
reference.




PART II




Item 5.     Market
for Registrants Common Equity and Related Stockholder
Matters.

Market Information

The Shares are traded on the New York Stock
Exchange (the NYSE) under the symbol
HOT. The Class A Shares are all currently held
by the Corporation and have never been traded.

The following table sets forth, for the fiscal
periods indicated, the high and low sale prices per Share on the
NYSE Composite Tape.

|               |  |      |       |     |  |   |       | 
|-------------- |  | ---- | ----- | --- |  | - | ----- | 
|               |  | High |       | Low
|               |  |      |       |    
|2001           |  |      |       |     |  |   |       | 
|Fourth quarter |  | $    | 29.95 |     |  | $ | 21.25 | 
|Third quarter  |  | $    | 37.50 |     |  | $ | 17.75 | 
|Second quarter |  | $    | 40.77 |     |  | $ | 31.64 | 
|First quarter  |  | $    | 38.88 |     |  | $ | 32.10 | 
|2000           |  |      |       |     |  |   |       | 
|Fourth quarter |  | $    | 37.50 |     |  | $ | 25.56 | 
|Third quarter  |  | $    | 35.18 |     |  | $ | 28.26 | 
|Second quarter |  | $    | 33.14 |     |  | $ | 22.88 | 
|First quarter  |  | $    | 27.11 |     |  | $ | 19.30 | 

Holders

As of March 15, 2002, there were
approximately 20,000 holders of record of Shares and one holder
of record (the Corporation) of the Class A Shares.

16



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##### Table of Contents



Distributions Made/ Declared

The following table sets forth the frequency and
amount of distributions made by the Trust to holders of Shares
for the years ended December 31, 2001 and 2000:

|               |  |               |        |    
|-------------- |  | ------------- | ------ | ---
|               |  | Distributions
|               |  | Made         
|               |  |              
|2001           |  |               |        |    
|Fourth quarter |  | $             | 0.20(a | )  
|Third quarter  |  | $             | 0.20   |    
|Second quarter |  | $             | 0.20   |    
|First quarter  |  | $             | 0.20   |    
|2000           |  |               |        |    
|Fourth quarter |  | $             | 0.1725 | (a)
|Third quarter  |  | $             | 0.1725 |    
|Second quarter |  | $             | 0.1725 |    
|First quarter  |  | $             | 0.1725 |    



---



|    |                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The Trust declared distributions for the fourth
	quarter of 2001 and 2000 to shareholders of record on
	December 31, 2001 and 2000, respectively. The distributions
	were paid in January 2002 and 2001, respectively.

The Corporation has not paid any cash dividends
since its organization and does not anticipate that it will make
any such distributions in the foreseeable future.

As a consequence of the Reorganization, holders
of Class B Shares are entitled, subject to certain
conditions, to receive a non-cumulative annual dividend, which
was set at an initial rate of $0.60 per Share for 1999, to the
extent the dividend is authorized by the Board of Trustees of
the Trust. The annual dividend was increased to an annual rate
of $0.69 and $0.80 per Share in 2000 and 2001, respectively. We
intend to shift from paying a quarterly dividend to holders of
Shares to paying an annual dividend. The final determination of
the amount of the dividends will be subject to economic and
financial consideration, as well as approval by our Board of
Trustees of the Trust. Unless dividends for the then current
dividend period have been paid on the Class B Shares, the
Trust is not permitted to pay a dividend on the Class A
Shares (except in certain circumstances). Under the terms of the
Companys Senior Credit Facility, the Trust may pay
unlimited dividends to the Corporation or any wholly owned
subsidiary thereof and during any period of twelve consecutive
calendar months, the Trust may pay cash dividends to its
shareholders (excluding the Corporation and any wholly owned
subsidiary) in an aggregate initial amount not to exceed the
lesser of (a) $150,000,000 in 1999 and increasing 20% annually
thereafter and (b) 10% of EBITDA as defined in the Senior
Credit Facility. In September 2001 and November 2001, the
Company obtained waivers of this dividend restriction from its
lenders, allowing the Company to pay its regularly scheduled
dividends for the third and fourth quarters of 2001.

Conversion of Securities; Sale of Unregistered
Securities

During 2001, the Trust consented to the exchange
of approximately 1,939,000 shares of Class B Exchangeable
Preferred Shares (Class B EPS) by certain
stockholders for an equal number of shares of Class A
Exchangeable Preferred Shares (Class A EPS).
Additionally, the Trust consented to the exchange of
approximately 2.0 million shares of Class A EPS for an
equal number of Shares.

During 2001, the Company exchanged approximately
1.8 million limited partnership units of the Realty
Partnership and the Operating Partnership held by third parties
for Shares on a one-for-one basis.




Item 6.     Selected
Financial Data.

The following financial and operating data should
be read in conjunction with the information set forth under
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the

17



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##### Table of Contents



consolidated financial statements of the Company
and related notes thereto appearing elsewhere in this Joint
Annual Report and incorporated herein by reference. The
historical information represents the historical results of
Sheraton Holding up to the date of the ITT Merger, because the
ITT Merger was treated as a reverse purchase for accounting
purposes. This income statement and operating data excludes the
results of the discontinued lines of business, which include the
Companys gaming operations, ITT Educational Services, Inc.
(Educational Services) and ITT World Directories
(WD), all of which were substantially disposed of in
1999 and 1998.


|                                                            |  |                                      |       |      |  |      |       |      |  |      |        |   |  |   |        |     |  |   |       |  
|----------------------------------------------------------- |  | ------------------------------------ | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ------ | - |  | - | ------ | --- |  | - | ----- | -
|                                                            |  |                                     
|                                                            |  | Year Ended December 31,             
|                                                            |  |                                     
|                                                            |  | 2001                                 |       | 2000 |  | 1999 |       | 1998 |  | 1997
|                                                            |  |                                      |       |      |  |      |       |      |  |     
|                                                            |  |                                     
|                                                            |  | (In millions, except per Share data)
|Income Statement Data                                       |  |                                      |       |      |  |      |       |      |  |      |        |   |  |   |        |     |  |   |       |  
|Revenues                                                    |  | $                                    | 3,967 |      |  | $    | 4,345 |      |  | $    | 3,829  |   |  | $ | 3,281  |     |  | $ | 1,735 |  
|Operating income (loss)                                     |  | $                                    | 615   |      |  | $    | 1,028 |      |  | $    | 841    |   |  | $ | 537    |     |  | $ | (330  | )
|Income (loss) from continuing operations                    |  | $                                    | 151   |      |  | $    | 401   |      |  | $    | (638   | ) |  | $ | 220    |     |  | $ | (233  | )
|Basic earnings (loss) per Share from
	continuing operations |  | $                                    | 0.75  |      |  | $    | 1.99  |      |  | $    | (3.41  | ) |  | $ | 1.06   |     |  | $ | (1.85 | )
|Operating Data                                              |  |                                      |       |      |  |      |       |      |  |      |        |   |  |   |        |     |  |   |       |  
|Cash from continuing operations                             |  | $                                    | 761   |      |  | $    | 852   |      |  | $    | 571    |   |  | $ | 43     |     |  | $ | 8     |  
|Cash from (used for) investing activities                   |  | $                                    | (621  | )    |  | $    | (659  | )    |  | $    | 3,172  |   |  | $ | 2,340  |     |  | $ | 1,132 |  
|Cash from (used for) financing activities                   |  | $                                    | (169  | )    |  | $    | (420  | )    |  | $    | (3,335 | ) |  | $ | (2,056 | )   |  | $ | (425  | )
|Aggregate cash distributions                                |  | $                                    | 156   |      |  | $    | 134   |      |  | $    | 116    |   |  | $ | 324    | (a) |  | $ |      |  
|Cash distribution per Share                                 |  | $                                    | 0.80  |      |  | $    | 0.69  |      |  | $    | 0.60   |   |  | $ | 1.71   |     |  | $ |      |  



---



|    |                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------
|(a) | Excludes approximately $3.0 billion of
	consideration paid to Sheraton Holding stockholders in
	connection with the ITT Merger.

|                                                                                |  |                 |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |       | 
|------------------------------------------------------------------------------- |  | --------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ----- | 
|                                                                                |  |                
|                                                                                |  | At December 31,
|                                                                                |  |                
|                                                                                |  | 2001            |        | 2000 |  | 1999 |        | 1998 |  | 1997
|                                                                                |  |                 |        |      |  |      |        |      |  |     
|                                                                                |  |                
|                                                                                |  | (In millions)  
|Balance Sheet Data                                                              |  |                 |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |       | 
|Total assets                                                                    |  | $               | 12,461 |      |  | $    | 12,697 |      |  | $    | 12,940 |  |  | $ | 13,417 |  |  | $ | 6,790 | 
|Long-term debt, net of current maturities and
	including redeemable Class B EPS |  | $               | 5,269  |      |  | $    | 5,074  |      |  | $    | 4,779  |  |  | $ | 5,951  |  |  | $ |      | 

The following table presents a reconciliation of
operating income to EBITDA (in millions):

|                                                  |  |                         |       |      |  |      |       |  |  |   |       | 
|------------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                  |  |                        
|                                                  |  | Year Ended December 31,
|                                                  |  |                        
|                                                  |  | 2001                    |       | 2000 |  | 1999
|                                                  |  |                         |       |      |  |     
|Operating income                                  |  | $                       | 615   |      |  | $    | 1,028 |  |  | $ | 841   | 
|Depreciation(a)                                   |  |                         | 460   |      |  |      | 418   |  |  |   | 394   | 
|Amortization                                      |  |                         | 93    |      |  |      | 90    |  |  |   | 82    | 
|Interest expense of unconsolidated joint ventures |  |                         | 25    |      |  |      | 18    |  |  |   | 16    | 
|Interest income                                   |  |                         | 11    |      |  |      | 19    |  |  |   | 16    | 
|Restructuring and other special charges           |  |                         | 50    |      |  |      |      |  |  |   | 3     | 
|Argentina foreign exchange gain                   |  |                         | (24   | )    |  |      |      |  |  |   |      | 
|                                                  |  |                         |       |      |  |      |       |  |  |   |       | 
|EBITDA                                            |  | $                       | 1,230 |      |  | $    | 1,573 |  |  | $ | 1,352 | 
|                                                  |  |                         |       |      |  |      |       |  |  |   |       | 



---



|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(a) | Includes the Companys share of depreciation
	expense of unconsolidated joint ventures.

18



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##### Table of Contents






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

RESULTS OF OPERATIONS

Managements Discussion and Analysis of
Financial Condition and Results of Operations
(MD&A) discusses the Companys consolidated
financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United
States. The preparation of these consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts
of revenues and costs and expenses during the reporting periods.
On an ongoing basis, management evaluates its estimates and
judgments, including those relating to revenue recognition, bad
debts, inventories, investments, plant, property and equipment,
goodwill and intangible assets, income taxes, financing
operations, frequent guest program liability, self-insurance
claims payable, restructuring costs, retirement benefits and
contingencies and litigation.

Management bases its estimates and judgments on
historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily available
from other sources. Actual results may differ from these
estimates under different assumptions and conditions.

On December 20, 2001, the Securities and
Exchange Commission (SEC) requested that all
registrants list their most critical accounting
policies in MD&A. The SEC indicated that a
critical accounting policy is one which is both
important to the portrayal of the Companys financial
condition and results and requires managements most
difficult, subjective or complex judgments, often as a result of
the need to make estimates about the effect of matters that are
inherently uncertain. The Company believes that the following
accounting policies fit this definition:

Revenue Recognition.The Companys revenues are
primarily derived from the following sources: (1) hotel and
resort revenues at the Companys owned, leased and
consolidated joint venture properties; (2) management and
franchise fees; (3) vacation ownership revenues; and
(4) other revenues which are ancillary to the
Companys operations. Generally, revenues are recognized
when the services have been rendered. The following is a
description of the composition of revenues for the Company:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Owned, Leased and Consolidated Joint
	Ventures  Represents revenue primarily derived from
	hotel and leisure operations, including the rental of rooms and
	food and beverage sales, from a worldwide network of owned,
	leased or consolidated joint venture hotels and resorts operated
	primarily under the Companys proprietary brand names
	including St. Regis, The Luxury Collection, Sheraton, Westin, W
	and Four Points by Sheraton. Revenue is recognized when rooms
	are occupied and services have been rendered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Management and Franchise Fees 
	Represents fees earned on hotels managed worldwide, usually
	under long-term contracts with the hotel owner, and franchise
	fees received in connection with the franchise of the
	Companys Sheraton, Westin and Four Points by Sheraton
	brand names. Management fees are comprised of a base fee, which
	is generally based on a percentage of gross revenues, and an
	incentive fee, which is generally based on the propertys
	profitability. Base fee revenues are recognized when earned in
	accordance with the terms of the contract. For any time during
	the year, incentive fees are recognized for the fees due as if
	the contract was terminated at that date, exclusive of any
	termination fees due or payable. Franchise fees are generally
	based on a percentage of hotel room revenues and are recognized
	in accordance with Statement of Financial Accounting Standards
	(SFAS) No. 45, Accounting for Franchise
	Fee Revenue, as the fees are earned and become due from
	the franchisee. Management and franchise fees are recognized in
	other hotel and leisure revenues in the consolidated statements
	of operations.
|
| |  | Vacation Ownership  The Company
	recognizes revenue from VOI sales in accordance with SFAS
	No. 66, Accounting for Sales of Real Estate.
	The Company recognizes sales when a minimum of 10% of the
	purchase price for the VOI has been received, the period of
	cancellation with refund has                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

19



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##### Table of Contents



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expired and receivables are deemed collectible.
	For sales that do not qualify for full revenue recognition as
	the project has progressed beyond the preliminary stages but has
	not yet reached completion, all revenue and profit are initially
	deferred and recognized in earnings through the
	percentage-of-completion method. Vacation ownership revenues are
	recognized in other hotel and leisure revenues in the
	consolidated statements of operations.

Goodwill and Intangible Assets.Goodwill and intangible assets
arise in connection with acquisitions, including the acquisition
of management contracts, and are amortized using the
straight-line method over the useful life of the asset.
Effective January 1, 2002, the Company adopted SFAS
No. 142, Goodwill and Other Intangible Assets.
In accordance with this guidance, the Company will cease
amortizing goodwill and intangible assets with indefinite lives.
Intangible assets with finite lives will continue to amortize on
a straight-line basis over their respective useful lives. The
Company will also review all goodwill and intangible assets for
impairment by comparisons of fair value to book value annually,
or upon the occurrence of a trigger event. Impairments,
excluding those in the year of adoption, will be recognized in
operating results. In connection with the adoption of this
standard, the Company has completed its initial recoverability
test on goodwill and intangible assets, which did not result in
any impairment write-downs. Estimates based on existing goodwill
and intangible assets indicate that adoption will result in an
annual increase in net income of approximately $64 million in
2002.

Frequent Guest Program.SPG is the Companys frequent
guest incentive marketing program. SPG members earn points based
on their spending at the Companys properties and, to a
lesser degree, through participation in affiliated
partners programs, such as those offered by airlines.
Points can be redeemed at most Company owned, leased, managed
and franchised properties; however, points cannot be redeemed
for cash.

SPG is provided as a marketing program to the
Companys properties. The cost of operating the program,
including the estimated cost of award redemption, is charged to
properties based on members qualifying expenditures.
Revenue is recognized by participating hotels and resorts when
points are redeemed for hotel stays.

The Company, through the services of third-party
actuarial analysts, determines the fair value of the future
redemption obligation based on statistical formulas which
project timing of future point redemption based on historical
experience, including an estimate of the breakage
for points that will never be redeemed, and an estimate of the
points that will eventually be redeemed. These factors determine
the required liability for outstanding points. The
Companys management and franchise agreements require that
the Company be reimbursed currently for the costs of operating
the program, including marketing, promotion, communications
with, and performing member services for the SPG members. Actual
expenditures for SPG may differ from the actuarially determined
liability.

The liability for the SPG program is included in
other long-term liabilities and accrued expenses in the
accompanying consolidated balance sheets. The total actuarially
determined liability as of December 31, 2001 and 2000 is
$159 million and $137 million, respectively.

Valuation of Long-Lived Assets and
Investments.The Company evaluates
the carrying value of each of the Companys long-lived
assets for impairment. The expected undiscounted future cash
flows of the assets are compared to the net book value of the
assets. If the expected undiscounted future cash flows are less
than the net book value of the assets, the excess of the net
book value over the estimated fair value is charged to current
earnings. Fair value is based upon discounted cash flows of the
assets at a rate deemed reasonable for the type of asset and
prevailing market conditions, appraisals and, if appropriate,
current estimated net sales proceeds from pending offers.

The Company also assesses the carrying value of
its long-term investments. The fair market value of investments
is based on the market prices for the last day of the period if
the investment trades on quoted exchanges. For non-traded
investments, fair value is estimated based on the underlying
value of the investment, which is dependent on the performance
of the companies or ventures in which the Company has invested,
as well as the volatility inherent in external markets for these
types of investments.

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In assessing potential impairment for these
investments, the Company will consider these factors as well as
forecasted financial performance of its investees. If these
forecasts are not met, the Company may have to record impairment
charges. Thus, the carrying value of investments at
December 31, 2001 approximates fair value based on market
prices and the value of the underlying collateral.

The following discussion presents an analysis of
results of our operations for the years ended December 31,
2001, 2000 and 1999.

Year Ended December 31, 2001 Compared
with Year Ended December 31, 2000

Continuing Operations

The Companys operating results for 2001
were dramatically impacted by the continued weakening of the
general global economy and, in particular, the U.S. economy
which was exacerbated by the September 11 Attacks, leading
to an unprecedented decline in industry-wide demand in the U.S.
and internationally. The initial closing of all airports in the
United States and the significant decline in business and
leisure travel following the September 11 Attacks resulted
in significant decreases in revenues and earnings for September
and the fourth quarter of 2001 when compared to the same periods
in 2000. Immediately following the September 11 Attacks,
the Company began developing operating plans commensurate with
the reduced demand levels and began implementing cost reduction
plans at all owned and managed hotels worldwide as well as
corporate and division offices.

Revenues.Total revenues decreased 8.7% from
$4.345 billion to $3.967 billion for the year ended
December 31, 2001 when compared to the corresponding period
in 2000. The decrease in revenues reflects an 8.6% decrease in
revenues from the Companys owned, leased and consolidated
joint venture hotels to $3.343 billion for the year ended
December 31, 2001 when compared to $3.659 billion in
the corresponding period of 2000 and a slight decrease in other
hotel and leisure revenues to $624 million for the year
ended December 31, 2001 when compared to $686 million
in the corresponding periods of 2000 due primarily to a decline
in management and franchise fees, offset by a slight increase in
revenues from the sale of VOIs.

The decrease in revenues from owned, leased and
consolidated joint venture hotels is due primarily to decreased
revenues at the Companys hotels owned during both periods
(Comparable Owned Hotels) (157 hotels for the year
ended December 31, 2001, excluding 10 hotels sold and 8
hotels without comparable results during 2000 and 2001).
Revenues at the Companys Comparable Owned Hotels decreased
10.8% to $3.211 billion for the year ended
December 31, 2001 when compared to the same period of 2000
due primarily to a decrease in REVPAR. REVPAR at the
Companys Same-Store Owned Hotels decreased 11.3% to
$101.98 for the year ended December 31, 2001 when compared
to the corresponding 2000 period. The decrease in REVPAR at
these 155 Same-Store Owned Hotels was attributed to a decrease
in occupancy to 65.1% from 71.2% in the year ended
December 31, 2001 when compared to the same period of 2000.
ADR decreased slightly to $156.73 for the year ended
December 31, 2001 when compared to $161.59 in the
corresponding 2000 period. REVPAR at Same-Store Owned Hotels in
North America decreased 11.9% for the year ended
December 31, 2001 when compared to the same period of 2000
due to the weakening of the U.S. economy which was exacerbated
by the September 11 Attacks, resulting in an unprecedented
decline in industry-wide demand, particularly in New York City,
where the Company has seven owned hotels with a total of
approximately 3,900 rooms. REVPAR at the Companys
international Same-Store Owned Hotels, which decreased by 9.6%
for the year ended December 31, 2001 when compared to the
same period of 2000, was also impacted by the September 11
Attacks as international travel from the U.S. declined
dramatically. The unfavorable effect of foreign currency
translation and adverse political and economic conditions,
primarily in countries like Argentina and Australia, also
contributed to these declines in REVPAR. REVPAR for Same-Store
Owned Hotels in Europe, the Companys largest international
presence, decreased 1.0% excluding the unfavorable effect of
foreign currency translation.

EBITDA.Total
Company EBITDA decreased $343 million to
$1.230 billion as of December 31, 2001, primarily due
to EBITDA declines at the Companys owned, leased and
consolidated joint venture hotels. EBITDA for the Companys
owned, leased and consolidated joint venture hotels decreased
$248 million to $978 million for the year ended
December 31, 2001 when compared to the corresponding period
in 2000. This

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decrease was primarily due to a $255 million
or 21.0% decrease in EBITDA at the Companys Comparable
Owned Hotels, with North America accounting for most of this
decline, due to a $209 million decrease in EBITDA over the
same period in 2000 resulting primarily from the weakening U.S.
economy and the September 11 Attacks. As mentioned above,
the Companys significant presence in New York contributed
to the decline as EBITDA at seven owned hotels in this city
decreased $73 million in 2001 when compared to 2000. The
sale of nine hotels during 2000 and early 2001 and the effective
closure of two hotels in Chicago which were being converted to W
hotels also contributed to the decline in EBITDA.


Selling, General, Administrative and Other.Selling, general, administrative
and other expenses were $411 million and $403 million
for the years ended December 31, 2001 and 2000,
respectively. The increase in selling, general, administrative
and other expenses is due primarily to increased expenses
associated with Starwood Vacation Ownership, Inc.
(SVO) in connection with increased sales, offset by
a $24 million foreign exchange gain as a result of the
devaluation of the Argentinean Peso and reduced corporate
overhead, including a $14 million pretax gain resulting
from the termination of a pension plan.

Restructuring and Other Special Charges.During the year ended
December 31, 2001, the Company recorded $70 million in
restructuring and other special charges related primarily to the
September 11 Attacks and the resulting decline in
industry-wide demand.

Immediately following the September 11
Attacks, the Company began analyzing and implementing a cost
reduction plan and began reviewing the carrying value of certain
assets for potential impairment, resulting in restructuring and
other special charges aggregating approximately
$47 million. These charges consisted primarily of severance
and retention costs (approximately $25 million); bad debt
expense associated with receivables no longer deemed collectible
(approximately $17 million); and impairments of certain
investments and other assets (approximately $5 million).
Approximately $14 million of these special items represent
cash charges, with the remaining amount being non-cash. In
addition, during the year ended December 31, 2001, the
Company recorded a charge to write down the Companys
investments in various e-business ventures by approximately
$23 million.

These charges were offset in part by the reversal
of a $20 million bad debt charge taken in 1998 relating to
a note receivable which is now fully performing.

Depreciation and Amortization.Depreciation and amortization
expense increased to $433 million and $93 million,
respectively, in the year ended December 31, 2001 compared
to $391 million and $90 million, respectively, in the
corresponding period of 2000. The increase in depreciation
expense for the year ended December 31, 2001 was primarily
attributable to the additional depreciation resulting from
capital expenditures at many of the Companys owned, leased
and consolidated joint venture hotels over the past two years.

Net Interest Expense.Interest expense for the years
ended December 31, 2001 and 2000, which is net of interest
income of $11 million and $19 million, respectively,
and discontinued gaming operations allocations of
$6 million in the year ended December 31, 2000,
decreased to $358 million from $420 million. This
decrease was due primarily to lower interest rates compared to
2000 due to reduced LIBOR rates and the impact of certain
financing transactions, including the issuance of zero coupon
convertible debt in May 2001. The Companys weighted
average interest rate was 5.10% at December 31, 2001 versus
7.44% at December 31, 2000.

Gain (Loss) on Asset Dispositions, Net, and
Asset Impairments.Due to the
September 11 Attacks and the weakening of the U.S. economy,
the Company conducted a comprehensive review of the carrying
value of certain assets for potential impairment. As a result,
the Company recorded a net charge relating primarily to the
impairment of certain investments in the fourth quarter of 2001
totaling $57 million.

Income Tax Expense.The effective income tax rate for
the year ended December 31, 2001 decreased to 23.2%
compared to 33.0% in the corresponding period in 2000. The
Companys effective income tax rate is determined by the
level and composition of pretax income subject to varying
foreign, state and local taxes and other items. The decrease
from prior year is due to the combination of lower pretax income
in 2001 due primarily to the weakening U.S. economy and the
September 11 Attacks, while maintaining the Companys
normal dividend level.

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Year Ended December 31, 2000 Compared
with Year Ended December 31, 1999

Continuing Operations

Revenues.Total revenues increased 13.5% to
$4.345 billion for the year ended December 31, 2000
when compared to the corresponding period in 1999. The increase
in revenues was due to the 7.9% increase in revenues for the
Companys owned, leased and consolidated joint venture
hotels to $3.659 billion for the year ended
December 31, 2000 when compared to $3.391 billion in
the corresponding period of 1999 and the increase in other hotel
and leisure revenues to $686 million for the year ended
December 31, 2000 when compared to $438 million in the
corresponding period of 1999.

The increase in revenues from owned, leased and
consolidated joint venture hotels is due primarily to the
increased revenues at the Companys 158 Comparable Owned
Hotels (excluding 16 hotels sold or without comparable results
during 1999 and 2000) and the addition of four hotels, including
a full year of operations at the W hotels in San Francisco,
California and Seattle, Washington, which opened in May 1999 and
September 1999, respectively. These increases were offset by the
loss of revenues on 12 hotels sold since April 1999 and the
impact of hotels with rooms out of service due to significant
renovations. The increase in revenues was further offset by
currency weaknesses, primarily in the Euro.

Revenues at the Companys Comparable Owned
Hotels increased 6.7% to $3.527 billion for the year ended
December 31, 2000 when compared to the same period of 1999
due primarily to an increase in REVPAR. REVPAR at 122 Same-Store
Owned Hotels increased 7.3% to $114.90 for the year ended
December 31, 2000 when compared to the corresponding 1999
period. The increase in REVPAR at these hotels was attributed to
the increase in ADR of 4.5% to $160.55 for the year ended
December 31, 2000 when compared to the corresponding 1999
period. Occupancy for these 122 Same-Store Owned Hotels rose to
71.6% from 69.7% in the year ended December 31, 2000 when
compared to the same period in 1999. REVPAR at Same-Store Owned
Hotels in North America increased 11.0% for the year ended
December 31, 2000 when compared to the same period of 1999.
REVPAR at the Companys international Same-Store Owned
Hotels, which decreased by 0.3% for the year ended
December 31, 2000 when compared to the same period of 1999,
was impacted primarily by the unfavorable effect of foreign
currency translation.

The increase in other hotel and leisure revenues
resulted primarily from the acquisition of SVO in October 1999.
The increase is also due to the addition of hotels to the
Companys management and franchise system and the stronger
performance at the Companys existing managed and
franchised hotels.

EBITDA.Total
Company EBITDA increased $221 million to
$1.573 billion as of December 31, 2000 primarily due
to EBITDA increases at the Companys owned, leased and
consolidated joint venture hotels. EBITDA for the Companys
owned, leased and consolidated joint venture hotels increased
$148 million or 13.7% to $1.226 billion for the year
ended December 31, 2000 when compared to $1.078 billion in
the corresponding period in 1999. Most of this increase resulted
from the Companys Comparable Owned Hotels, which increased
$115 million or 10.7% to $1.186 billion. These results
were strongest in North America, where the Company has its
largest concentration of hotels, offset by weak results
internationally due primarily to unfavorable political and
economic conditions. The addition of four hotels, including a
full year of operations at the W hotels in San Francisco,
California and Seattle, Washington, which opened in May 1999 and
September 1999, respectively, contributed to the overall
increase, offset by the sale of seven hotels since
December 31, 1999.

Selling, General, Administrative and Other.Selling, general, administrative
and other expenses were $403 million and $220 million
for the years ended December 31, 2000 and 1999,
respectively. The increase in selling, general, administrative
and other expenses is due primarily to a full year of costs
associated with the vacation ownership operations due to the
acquisition of SVO in October 1999.

Depreciation and Amortization.Depreciation and amortization
expense increased to $391 million and $90 million,
respectively, in the year ended December 31, 2000 compared
to $370 million and $82 million, respectively, in the
corresponding period of 1999. The increase in depreciation
expense for the year ended December 31, 2000 was primarily
attributable to the acquisition of SVO in October 1999, the
addition of four new hotels, including a full year of
depreciation on the W hotels in San Francisco, California and
Seattle,

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Washington, which opened in May 1999 and
September 1999, respectively, and the additional depreciation
resulting from an extensive renovation program, offset, in part,
by the suspension of depreciation on hotels held for sale and
hotels sold during the year.


Net Interest Expense.Interest expense for the years
ended December 31, 2000 and 1999, which is net of interest
income of $19 million and $16 million, respectively,
and discontinued gaming operations allocations of
$6 million and $163 million, respectively, decreased
to $420 million from $484 million. This decrease was
due primarily to the paydown of debt with approximately
$3.3 billion of cash proceeds from the Caesars World, Inc.
(Caesars) and the Desert Inn Resort & Casino
(the Desert Inn) sales (interest reflected in
discontinued operations and thereby excluded from net interest
expense in 1999 was limited to $2.1 billion of allocated
debt) and cash repatriation from overseas, partially offset by
additional borrowings during 1999 and 2000 for Share
repurchases, capital expenditures and the acquisition of the
CIGA minority interest.

Income Tax Expense.The effective income tax rate for
2000 was 33.0%. As a result of the Reorganization, the tax
provision for the year ended December 31, 1999 included a
$936 million one-time charge to establish a deferred tax
liability related to the difference between the book and tax
basis in the assets of the Trust. Excluding this charge, a
one-time tax benefit of $37 million attributable to the
resolution of certain employment related contingencies and other
one-time pro forma comparable adjustments, the Companys
effective tax rate for the year ended December 31, 1999 was
36.5%. The Companys effective income tax rate is
determined by the level and composition of pretax income subject
to varying foreign, state and local taxes and other items.

Minority Equity in Net Income.In June 2000, the Company
completed the acquisition of the minority ownership interest of
CIGA not previously owned by Starwood. The aggregate purchase
price of the incremental shares was approximately
$312 million. This acquisition resulted in an increase in
net income of $10 million in 2000 when compared to 1999,
excluding the minority interest in the gain on the sale of
CIGAs investment in Lampsa, SA, a Greek company that owned
the Grande Bretagne Hotel in Athens, Greece.

Discontinued Operations

During the first quarter of 1999, the Company
provided for estimated after-tax losses on the gaming
dispositions of $180 million ($158 million pretax),
which included anticipated operating results through the
expected closing date. In addition, the Company recorded, on an
after-tax basis, a $173 million gain on the sale of the
Companys remaining interest in Educational Services during
the first quarter of 1999.

Due to the sale of Caesars in December 1999 and
the Desert Inn in June 2000, results for the Companys
gaming operations are included in discontinued operations in the
years ended December 31, 1999 and 2000. Results for the
Desert Inn are included in discontinued operations through
June 23, 2000 and for Caesars through December 30,
1999. The gaming operations net loss of $8 million and
$27 million for the years ended December 31, 2000 and
1999, respectively, includes the allocation of pretax corporate
interest expense of $6 million and $163 million,
respectively.

Gaming revenues decreased to $57 million for
the year ended December 31, 2000 when compared to
$1.541 billion in the corresponding period of 1999, and
operating income (loss) for year ended December 31,
2000 decreased to a loss of $3 million when compared to
operating income of $154 million for the same period of
1999. The decreases in 2000 were due to the sales of Caesars and
the Desert Inn in December 1999 and June 2000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Based upon the current level of operations,
management believes that the Companys cash flow from
operations, together with available borrowings under the
Companys domestic and international revolving facilities
(approximately $487 million at December 31, 2001) and
capacity with additional borrowings, will be adequate to meet
the Companys anticipated requirements for working capital,
capital expenditures, marketing and advertising expenditures,
program and other discretionary investments, interest payments
and scheduled principal payments for the foreseeable future,
including at least the next three years. Starwood had a

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substantial amount of indebtedness and a working
capital deficiency of $690 million at December 31,
2001, including $332 million of current maturities of
long-term debt. The Company continues to monitor the credit
markets and in light of the possibility of a portion of the zero
coupon convertible notes being put back to the Company at a
price of approximately $202 million in May 2002 and the
maturities of certain existing credit facilities totaling
$2.187 billion in 2003, Starwood expects to access the
credit markets this year as well as enter into a new senior bank
facility to refinance this indebtedness. There can be no
assurance, however, that the Company will be able to refinance
the indebtedness and if refinanced, whether it can do so on
favorable terms, nor can there be any assurance that the
Companys business will continue to generate cash flow at
or above current levels or that currently anticipated
improvements will be achieved. If Starwood is unable to generate
sufficient cash flow from operations in the future to service
the Companys debt, the Company may be required to sell
assets, reduce capital expenditures, refinance all or a portion
of its existing debt or obtain additional financing. The
Companys ability to make scheduled principal payments, to
pay interest or to refinance the Companys indebtedness
depends on its future performance and financial results, which,
to a certain extent, are subject to general conditions in or
affecting the hotel and leisure industry and to general
economic, political, financial, competitive, legislative and
regulatory factors beyond the Companys control, including
the duration and severity of the current economic downturn
exacerbated by the September 11 Attacks. There can be no
assurance that sufficient funds will be available to enable
Starwood to service its indebtedness or to make necessary
capital expenditures, marketing and advertising expenditures and
program and other discretionary investments. Since the
September 11 Attacks, the Company successfully amended
certain terms of its Senior Credit Facility. The amendment gives
the Company greater financial flexibility by modifying various
financial covenants until the expiration of the facility in
early 2003. The amended provisions include adjustments to the
Companys combined leverage ratio and interest coverage
ratio as well as modification of the timing of amortization
payments. See Debt Financing in Part I for risks.


The Company has been adversely affected in the
aftermath of the September 11 Attacks. Since the attacks,
the Companys owned hotels have experienced significant
short-term declines in occupancy compared to the prior year. At
present, it is not possible to predict either the severity or
duration of such declines in the medium- or long-term range, or
the potential impact on the Companys results of
operations, financial condition or cash flows. However, as a
result of the significant short-term declines in occupancy, the
Company has taken steps to reduce costs, including reductions in
force. The Company has undertaken a comprehensive analysis of
its cost structure including, among other things, overall
staffing levels and facilities related costs. Furthermore, the
Company has evaluated hotel financial performance subsequent to
the September 11 Attacks and its impact on the
Companys investments and contingent obligations.
Impairments to investments in hotel management contracts,
receivables or other investments due to declines in hotel
profitability and reduced management and franchise fees have
been reviewed and recognized where considered necessary. The
outcome of the Companys analysis has resulted in
write-downs through restructuring and other special charges and
losses on asset dispositions as discussed in Notes 9 and 4,
respectively, in the notes to financial statements filed as part
of this Joint Annual Report.

Capital Expenditures

Starwood incurs capital expenditures for
upgrading and, in some cases, repositioning its owned hotels and
for ongoing maintenance of acquired and existing hotels in
accordance with the Companys standards. During the year
ended December 31, 2001, the Company spent approximately
$526 million on improving and upgrading its owned hotels
and resorts and VOI construction, including costs to convert two
hotels in Chicago to W hotels, expenditures at the
W Times Square which opened in December 2001, continuing
construction of the St. Regis San Francisco and land in
Maui for a VOI project. Due to the September 11 Attacks and
the continued weakening of the worldwide economies, the Company
reevaluated its planned capital expenditures, significantly
reducing these expenditures until signs of the economic recovery
become evident.

Cash Flow from Operating Activities

Cash flow from operating activities is the
principal source of cash to be used to fund the Companys
operating expenses, interest expense, capital expenditures and
distributions. Starwood anticipates that cash

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flow provided by operating activities will be
sufficient to service short-term indebtedness, fund maintenance
capital expenditures and meet operating cash requirements,
including distributions to shareholders. Other general economic
considerations, such as those experienced after the
September 11 Attacks, may have a negative impact on the
Companys results of operations.


In addition, while our vacation ownership
operations generate strong operating cash flow, annual amounts
are affected by the timing of cash outlays for the acquisition
and development of new resorts and cash received from purchaser
financing and asset securitizations. Cash proceeds from asset
securitizations in 2001 were $202 million. See Note 5 in
the notes to financial statements filed as part of this Joint
Annual Report.

Cash Flow from Investing and Financing
Activities

In limited cases, the Company has made loans to
owners or partners in hotel or resort ventures whereby the
Company has a management or franchise agreement. Loans
outstanding under this program totaled $155 million at
December 31, 2001. The Company evaluates these loans for
impairment, and at December 31, 2001, believes these loans
are collectible. Unfunded commitments aggregating
$26 million were outstanding at December 31, 2001, of
which $11 million are expected to be funded in 2002 and
$13 million are expected to be funded in total. These loans
typically are secured by pledges of project ownership interests
and/ or mortgages on the projects.

The Company participates in programs with
unaffiliated lenders in which the Company may partially
guarantee loans made to facilitate third-party ownership of
hotels that the Company manages or franchises. At
December 31, 2001, loan guarantees totaled
$153 million relating to three projects: the St. Regis
in Monarch Beach, California, which opened in mid-2001; the
Westin Kierland hotel in Arizona, which is scheduled to open at
the end of 2002; and the Westin in Charlotte, North Carolina,
which is scheduled to open at the end of 2002. With respect to
the Westin Kierland, the guarantee is joint and several with
another equity partner. The Company does not anticipate any
funding under these loan guarantees in 2002, as all projects are
well capitalized.

Furthermore, in order to secure management and
franchise contracts, the Company may provide performance
guarantees to third-party owners. Most of these performance
guarantees allow the Company to abandon a contract rather than
fund shortfalls if certain performance levels are not met. In
limited cases, the Company is obliged to fund shortfalls in
performance levels. As of December 31, 2001, the Company
had six management contracts with performance guarantees with
possible cash outlays of up to $68 million,
$50 million of which, if required, would be funded over a
period of 25 years. Many of the performance tests are
multi-year tests, are tied to the results of a competitive set
of hotels, and have exclusions for force majeure clauses and
acts of war and terrorism. The Company does not anticipate any
funding under the performance guarantees in 2002. Lastly, the
Company does not anticipate losing any significant management or
franchise contracts in 2002.

The Company had the following contractual
obligations outstanding as of December 31, 2001 (in
millions):

|                                      |  |       |       |             |  |           |     |           |  |           |       |     |  |   |     |  |  |   |       | 
|------------------------------------- |  | ----- | ----- | ----------- |  | --------- | --- | --------- |  | --------- | ----- | --- |  | - | --- |  |  | - | ----- | 
|                                      |  |       |       | Due in Less |  |           |     |           |  |          
|                                      |  |       |       | Than 1      |  | Due in    |     | Due in    |  | Due After
|                                      |  | Total |       | Year        |  | 1-3 Years |     | 4-5 Years |  | 5 Years  
|                                      |  |       |       |             |  |           |     |           |  |          
|Long-term debt                        |  | $     | 5,557 |             |  | $         | 330 |           |  | $         | 2,807 | (a) |  | $ | 548 |  |  | $ | 1,872 | 
|Capital lease obligations             |  |       | 2     |             |  |           | 2   |           |  |           |      |     |  |   |    |  |  |   |      | 
|Operating lease obligations           |  |       | 1,087 |             |  |           | 82  |           |  |           | 152   |     |  |   | 130 |  |  |   | 723   | 
|Unconditional purchase obligations(b) |  |       | 216   |             |  |           | 75  |           |  |           | 112   |     |  |   | 29  |  |  |   |      | 
|Other long-term obligations           |  |       |      |             |  |           |    |           |  |           |      |     |  |   |    |  |  |   |      | 
|                                      |  |       |       |             |  |           |     |           |  |           |       |     |  |   |     |  |  |   |       | 
|Total contractual obligations         |  | $     | 6,862 |             |  | $         | 489 |           |  | $         | 3,071 |     |  | $ | 707 |  |  | $ | 2,595 | 
|                                      |  |       |       |             |  |           |     |           |  |           |       |     |  |   |     |  |  |   |       | 



---



|    |                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | $2.187 billion due on February 23, 2003.                                                                                                                                                                                                                                                                   
|   
|(b) | The Companys owned, managed and franchised
	hotels participate in various national purchasing agreements. As
	these agreements do not require specific purchasing thresholds
	for the Company or the Companys owned, leased and
	consolidated joint venture hotels, no such amounts are reflected
	above.

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The Company had the following commercial
commitments outstanding as of December 31, 2001 (in
millions):

|                             |  |       |     |                                            |  |           |   |           |  |         |     |  |  |   |    |  |  |   |    | 
|---------------------------- |  | ----- | --- | ------------------------------------------ |  | --------- | - | --------- |  | ------- | --- |  |  | - | -- |  |  | - | -- | 
|                             |  |       |     |                                           
|                             |  |       |     | Amount of Commitment Expiration Per Period
|                             |  |       |     |                                           
|                             |  |       |     | Less Than                                  |  |           |   | After    
|                             |  | Total |     | 1 Year                                     |  | 1-3 Years |   | 4-5 Years |  | 5 Years
|                             |  |       |     |                                            |  |           |   |           |  |        
|Standby letters of credit    |  | $     | 49  |                                            |  | $         |  |           |  | $       | 43  |  |  | $ |   |  |  | $ | 6  | 
|Hotel loan guarantees        |  |       | 153 |                                            |  |           |  |           |  |         | 78  |  |  |   | 45 |  |  |   | 30 | 
|Other commercial commitments |  |       |    |                                            |  |           |  |           |  |         |    |  |  |   |   |  |  |   |   | 
|                             |  |       |     |                                            |  |           |   |           |  |         |     |  |  |   |    |  |  |   |    | 
|Total commercial commitments |  | $     | 202 |                                            |  | $         |  |           |  | $       | 121 |  |  | $ | 45 |  |  | $ | 36 | 
|                             |  |       |     |                                            |  |           |   |           |  |         |     |  |  |   |    |  |  |   |    | 

In April 2001, the Company completed the
acquisition of the remaining 50% interest not previously owned
by the Company in the 1,377-room Sheraton Centre Toronto for
$75 million Canadian dollars (approximately U.S.
$48 million based on exchange rates at the time).
Additionally, in April 2001, the Company completed the
acquisition of 44% of an entity which owns the Royal Orchid
Hotel in Bangkok, Thailand for $27 million.

In addition to cash flow from operating
activities, Starwood intends to finance the acquisition of, or
investment in, additional hotels and resorts, hotel renovations
and capital improvements and provide for general corporate
purposes through the Companys credit facilities described
below, through dispositions of certain non-core assets and, when
market conditions warrant, through the issuance of additional
equity or debt securities. In January 2002, the Company
announced that it has initiated the formal sale process of the
CIGA portfolio of 25 luxury hotels, land, golf courses and
marinas potentially encumbered by the Companys management
contracts in whole or in part. Deutsche Bank, Jones Lang LaSalle
Hotels and J.P. Morgan are advising the Company on the
disposition of this portfolio and have begun actively marketing
these assets. The Company began reviewing preliminary
indications of interest in the first quarter of 2002.

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##### Table of Contents



Loans and Credit Facilities.Following is a summary of the
Companys debt portfolio as of December 31, 2001:

|                                         |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |           | 
|---------------------------------------- | ------------------------- | --------------------- | ----- | -------------- |  | ---------------- | ------------- | ------------ |  |  | ---- | ---- | - |  | ---------- | --------- | 
|                                         |                           | Amount                |       |                |  | Interest Rate at |               |             
|                                         |                           | Outstanding at        |       |                |  | December 31,     |               | Average     
|                                         |                           | December 31, 2001(a)  |       | Interest Terms |  | 2001             |               | Maturity    
|                                         |                           |                       |       |                |  |                  |               |             
|                                         |                           | (Dollars in millions) |       |                |  |                  |               |             
|Floating Rate Debt                       |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Senior Credit Facility:                  |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|                                         | Five-Year Term Loan       |                       | $     | 800            |  |                  |               | LIBOR+0.725% |  |  |      | 2.60 | % |  |            | 1.0 years | 
|                                         | Term Loan Add-on          |                       |       | 423            |  |                  |               | LIBOR+1.25%  |  |  |      | 3.12 | % |  |            | 1.1 years | 
|                                         | Revolving Credit Facility |                       |       | 664            |  |                  |               | LIBOR+0.725% |  |  |      | 2.60 | % |  |            | 1.1 years | 
|Senior Secured Notes Facility:           |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|                                         | Tranche II Loans          |                       |       | 500            |  |                  |               | LIBOR+2.75%  |  |  |      | 4.62 | % |  |            | 1.1 years | 
|Euro Loan                                |                           |                       | 240   |                |  |                  | Euribor+1.95% |              |  |  | 5.25 | %    |   |  | 1.5 years  |          
|Mortgages and Other                      |                           |                       | 302   |                |  |                  | Various       |              |  |  | 4.94 | %    |   |  | 2.9 years  |          
|Interest Rate Swaps                      |                           |                       | (497  | )              |  |                  |               |              |  |  | 3.23 | %    |   |  |           |          
|                                         |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Total/ Average                           |                           | $                     | 2,432 |                |  |                  |               |              |  |  | 3.53 | %    |   |  | 1.3 years  |          
|                                         |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Fixed Rate Debt                          |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Sheraton Holding Public Debt             |                           | $                     | 1,296 |                |  |                  |               |              |  |  | 7.08 | %    |   |  | 9.2 years  |          
|Convertible Senior Notes 
	Series A & B |                           |                       | 507   |                |  |                  |               |              |  |  | 2.36 | %    |   |  | 1.9 years  |          
|Mortgages and Other                      |                           |                       | 827   |                |  |                  |               |              |  |  | 7.38 | %    |   |  | 10.0 years |          
|Interest Rate Swaps                      |                           |                       | 497   |                |  |                  |               |              |  |  | 6.68 | %    |   |  |           |          
|                                         |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Total/ Average                           |                           | $                     | 3,127 |                |  |                  |               |              |  |  | 6.32 | %    |   |  | 8.1 years  |          
|                                         |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Total Debt                               |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          
|Total Debt and Average Terms             |                           | $                     | 5,559 |                |  |                  |               |              |  |  | 5.10 | %    |   |  | 4.5 years  |          
|                                         |                           |                       |       |                |  |                  |               |              |  |  |      |      |   |  |            |          



---



|    |                                                                                                  
|--- | -------------------------------------------------------------------------------------------------
|(a) | Excludes approximately $300 million of the
	Companys share of unconsolidated joint venture debt.

On February 23, 1998, Starwood entered into
two credit facilities with Lehman Brothers, Bankers Trust
Company, The Chase Manhattan Bank and other financial
institutions. The Senior Credit Facility and the Senior Secured
Notes Facility comprise Starwoods primary existing credit
facilities. In September 1998, the Company increased its
borrowings under the Senior Secured Notes Facility with a
$1 billion, five-year term borrowing facility
(Tranche II Loans). In December 2000, the Company
increased the amount available under the Senior Credit Facility
by $172.5 million (Term Loan Add-on). In
January 2001 and May 2001, the Company completed add-on
financings to its Term Loan Add-on of $150 million and
$100 million, respectively. The proceeds from the Term Loan
Add-ons were used to reduce the amount outstanding under the
Companys Revolving Credit Facility. In November 2001, the
Company successfully amended certain terms of its Senior Credit
Facility. The amendment gives the Company greater financial
flexibility by modifying various financial covenants until the
expiration of the facility in early 2003. The amended provisions
include adjustments to the Companys combined leverage
ratio and interest coverage ratio as well as modification of the
timing of amortization payments.

In January 1999, the Company completed a
$542 million long-term financing (the Mortgage
Loan), secured by mortgages on a portfolio of 11 hotels.
The Mortgage Loan is due in February 2009, and the proceeds from
the Mortgage Loan were used to pay down the one-year term loan
under the Senior Credit Facility, which has subsequently been
paid off.

In July 2000, the Company entered into a
one-year, Euro 270 million loan (approximately
$252 million based on exchange rates at the time) at an
initial average interest rate of Euribor plus 112.5 basis points
for

28



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##### Table of Contents



the first six months and increasing to Euribor
plus 137.5 basis points for the remaining six months. The loan
was subsequently extended through July 2002. In December 2001,
the Company entered into an 18-month Euro 450 million loan
(approximately $399 million based on exchange rates at the
time) with an interest rate of Euribor plus 195 basis points.
The proceeds of the Euro 450 million loan were drawn down
in two tranches: the first 270 million Euros was drawn down
in December 2001 and used to repay the previously outstanding
Euro 270 million facility and the remaining
180 million Euros was drawn down in January 2002, and the
proceeds were used to repay a portion of the Companys
Revolving Credit Facility.


In May 2001, the Company sold an aggregate face
amount of $816 million zero coupon convertible senior notes
due 2021 (the Notes). The Company received gross
proceeds from these sales of approximately $500 million,
which were used to repay a portion of its Tranche II Loans
that bore interest at LIBOR plus 275 basis points. The Notes
have an initial blended yield to maturity of 2.35%. The Notes,
consisting of two series, are convertible, subject to certain
conditions, into an aggregate 9,657,000 Shares. On May 25,
2002, each Series A holder may require the Company to
purchase the notes, subject to certain conditions. Series A
notes that may be presented to the Company in May 2002 total
approximately $202 million. These Series A notes have
been included in long-term debt at December 31, 2001 based
upon the Companys ability and intent to refinance them
with availability under the Revolving Credit Facility.
Series B holders may first present their aggregate notes to
the Company in May 2004 for approximately $330 million.

During each of the quarters of 2001, the Trust
paid a distribution of $0.20 per Share, a 16% annual increase
over 2000. Total dividends paid in 2001 and 2000 were
$156 million and $134 million, respectively. In 2002,
the Company intends to shift from a quarterly dividend to an
annual dividend. The final determination of the amount of the
dividend will be subject to economic and financial
considerations and Board approval in the fourth quarter of 2002.

Stock Sales and Repurchases

At December 31, 2001, Starwood had
outstanding approximately 197.7 million Shares and
1.6 million partnership units and 1.6 million
exchangeable preferred shares outstanding, which are convertible
into Shares. Approximately 1.1 million of the Class B EPS
can be put to the Company at $38.50 per Share in 2003.

In 1998, the Board of Directors of the Company
approved the repurchase of up to $1 billion of Shares under
a Share repurchase program (the Share Repurchase
Program). On April 2, 2001, the Companys Board
of Directors authorized the repurchase of up to an additional
$500 million of Shares under the Share Repurchase Program,
subject to the terms of the Senior Credit Facility. Pursuant to
the Share Repurchase Program, Starwood repurchased
3.2 million Shares in the open market for an aggregate cost
of $96 million during 2001. As of December 31, 2001,
approximately $633 million remains available under the
Share Repurchase Program.

During 2001, the Trust consented to the exchange
of approximately 1,939,000 shares of Class B EPS into an
equal number of shares of Class A EPS. Additionally, the
Trust consented to the exchange of approximately
2.0 million shares of Class A EPS for an equal number
of Shares.




Item 7A.     Quantitative
and Qualitative Disclosures about Market Risk.

The Company seeks to reduce earnings and cash
flow volatility associated with changes in interest rates and
foreign currency exchange rates by entering into financial
arrangements intended to provide a hedge against a portion of
the risks associated with such volatility. The Company continues
to have exposure to such risks to the extent they are not hedged.

Interest rate swap agreements are the primary
instruments used to manage interest rate risk. The Company
currently has five outstanding long-term interest rate swap
agreements under which the Company pays a fixed interest rate
and receives variable interest rates. At December 31, 2001,
the Company also has three long-term interest rate swap
agreements under which the Company pays a variable interest rate
and

29



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##### Table of Contents



receives a fixed interest rate. The following
table sets forth the scheduled maturities and the total fair
value of the Companys debt portfolio:


|                                          |                      |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       |       |   |   |       |  | 
|----------------------------------------- | -------------------- | --------------- | --- | ---- |  | ------------ | ----- | ------------ |  | ---- | -- | ---------- |  | ---- | --- | ---- |  | - | -- |  |  | - | ----- |  |  | - | ----- | ----- | - | - | ----- |  | 
|                                          |                      |                 |     |      |  |              |       | Total Fair  
|                                          |                      | At December 31, |     |      |  | Total at     |       | Value at    
|                                          |                      |                 |     |      |  | December 31, |       | December 31,
|                                          |                      | 2002            |     | 2003 |  | 2004         |       | 2005         |  | 2006 |    | Thereafter |  | 2001 |     | 2001
|                                          |                      |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |     
|Liabilities                               |                      |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       |       |   |   |       | 
|Fixed rate (in millions)                  |                      | $               | 23  |      |  | $            | 270   |              |  | $    | 19 |            |  | $    | 470 |      |  | $ | 20 |  |  | $ | 1,828 |  |  | $ | 2,630 |       |   | $ | 2,398 | 
|Average interest rate                     |                      |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   | 6.26  | %     |   |   |       | 
|Floating rate (in millions)               |                      | $               | 309 |      |  | $            | 2,505 |              |  | $    | 13 |            |  | $    | 13  |      |  | $ | 45 |  |  | $ | 44    |  |  | $ | 2,929 |       |   | $ | 2,929 | 
|Average interest rate                     |                      |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   | 3.63  | %     |   |   |       | 
|Interest Rate Swaps                       |                      |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       |       |   |   |       | 
|Long-term variable to fixed (in millions) |                      | $               | 247 |      |  | $            | 700   |              |  |      |   |            |  |      |    |      |  |   |   |  |  |   |      |  |  | $ | 947   |       |   |   |       | 
|                                          | Average pay rate     |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       | 5.80  | % |   |       |  | 
|                                          | Average receive rate |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       | LIBOR |   |   |       |  | 
|Long-term fixed to variable (in millions) |                      |                 |    |      |  |              |      |              |  |      |   |            |  | $    | 450 |      |  |   |   |  |  |   |      |  |  | $ | 450   |       |   |   |       | 
|                                          | Average pay rate     |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       | LIBOR |   |   |       |  | 
|                                          | Average receive rate |                 |     |      |  |              |       |              |  |      |    |            |  |      |     |      |  |   |    |  |  |   |       |  |  |   |       | 4.73  | % |   |       |  | 

Foreign currency forward transactions are used by
the Company to hedge exposure to foreign currency exchange rate
fluctuations. The gains or losses on the forward contracts are
largely offset by the gains or losses of the underlying
transactions, and consequently, a sudden significant change in
foreign currency exchange rates would not have a material impact
on future net income or cash flows on such underlying
transactions. The Company monitors its foreign currency exposure
on a monthly basis to maximize the overall effectiveness of its
foreign currency hedge positions. As of December 31, 2001,
the Euro and the British Pound were the principal currencies
hedged by the Company. Changes in the value of forward foreign
exchange contracts designated as hedges of foreign currency
denominated assets and liabilities are classified in the same
manner as changes in the underlying assets and liabilities. At
December 31, 2001, the notional amount of the
Companys open forward foreign exchange contracts
protecting the value of the Companys foreign currency
denominated assets and liabilities was approximately $366
million. Of these contracts, $353 million matured in
January 2002. A hypothetical 10% change in currency exchange
rates under the remaining contracts would result in an increase
or decrease of approximately $1.2 million to the fair value
of the forward foreign exchange contracts at December 31,
2001, which would be offset by an opposite effect on the related
hedged positions.

The Company enters into a derivative financial
arrangement only to the extent it meets the objectives described
above, and the Company does not engage in such transactions for
trading or speculative purposes.

See Note 18 in the notes to financial
statements filed as part of this Joint Annual Report and
incorporated herein by reference for further description of
derivative financial instruments.




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 and are incorporated herein by reference.




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

Not applicable.

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##### Table of Contents






PART III




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

The Board of Directors of the Corporation and the
Board of Trustees of the Trust are currently comprised of 11
members, each of whom is elected for a three-year term. The
following table sets forth, for each of the members of the Board
of Directors and the Board of Trustees as of the date of this
Joint Annual Report, the class to which such Director or Trustee
has been elected and certain other information regarding such
Director or Trustee.

|                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                      |  | 
|--------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- |  | 
|Name (Age)                                                            |  | Principal Occupation and Business Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Service Period                                      
|                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                     
|Directors and Trustees Whose Terms Expire at
	the 2004 Annual Meeting |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                     
|Eric Hippeau (50)                                                     |  | President of Softbank International Ventures and
	Managing Director of Softbank Capital Partners, an Internet
	venture capital firm, since March 2000. Mr. Hippeau served
	as Chairman and Chief Executive Officer of Ziff-Davis Inc., an
	integrated media and marketing company, from 1993 to March 2000
	and held various other positions with Ziff-Davis from 1989 to
	1993. Mr. Hippeau is a director of CNET Networks, Inc.,
	Asia Global Crossing Ltd., Key 3 Media Group, Inc. and
	Yahoo! Inc.                                                                                                                                                                                                                                                                                                                                                  |  | Director since April 1999Trustee since April 1999   
|George J. Mitchell (68)                                               |  | Chairman of the law firm of Verner, Liipfert,
	Bernhard, McPherson and Hand since November 2001, and Special
	Counsel to the firm from January 1995 to October 2001. He served
	as a United States Senator from January 1980 to January 1995,
	and was the Senate Majority Leader from 1989 to 1995. From 1995
	to 1997, Senator Mitchell served as the Special Advisor to the
	President of the United States on economic initiatives in
	Ireland. At the request of the British and Irish Governments, he
	served as Chairman of the peace negotiations in Northern
	Ireland. Senator Mitchell is a director of The Walt Disney
	Company, Federal Express Corporation, Xerox Corporation, UNUM
	Provident Corp., Casella Waste Systems, Inc. and Staples, Inc.
	In addition, Senator Mitchell serves as President of the
	Economic Club of Washington. |  | Director since April 1999Trustee since November 1997
|Daniel W. Yih (43)                                                    |  | Principal, Portfolio Management, with GTCR Golder
	Rauner, LLC, a venture capital firm, since March 2000. From June
	1995 until March 2000, Mr. Yih was a general partner of
	Chilmark Partners, L.P., an investment advisory firm. He is a
	director of US Aggregates, Inc., Comsys, Cardinal Logistics
	Management, American Sanitary, Inc., AETEA Information
	Technology, Inc. and InteCap, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Director since August 1995Trustee since April 1999  
|Kneeland C. Youngblood (46)                                           |  | Managing partner of Pharos Capital Group, L.L.C.,
	a private equity fund focused on technology companies, business
	service companies and health care companies, since January 1998.
	From July 1985 to December 1997, he was in private medical
	practice. He is a director of the American Advantage Funds, a
	mutual fund company managed by AMR Investments, an investment
	affiliate of American Airlines.                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Director since April 2001Trustee since April 2001   

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|                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                         |  | 
|--------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | 
|Name (Age)                                                            |  | Principal Occupation and Business Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Service Period                                                                         
|                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                        
|Directors and Trustees Whose Terms Expire at
	the 2003 Annual Meeting |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                        
|Jean-Marc Chapus (42)                                                 |  | Group Managing Director and Portfolio Manager of
	Trust Company of the West, an investment management firm, and
	President of TCW/ Crescent Mezzanine L.L.C., a private
	investment fund, since March 1995. Mr. Chapus is a director
	of MEMC Electrical Materials, Inc. He also serves as a director
	of several privately held companies, including Magnequench
	International, Inc. and TCW Asset Management Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Director from August 1995 to November 1997; since April 1999Trustee since November 1997
|Thomas O. Ryder (57)                                                  |  | Chairman of the Board and Chief Executive Officer
	and a Director of The Readers Digest Association, Inc.
	since April 1998. Mr. Ryder was President, American Express
	Travel Related Services International, a division of American
	Express Company, which provides travel, financial and network
	services, from October 1995 to April 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Director since April 2001Trustee since April 2001                                      
|Barry S. Sternlicht (41)                                              |  | Chairman and Chief Executive Officer of the
	Company since September 1997 and January 1999, respectively.
	Mr. Sternlicht has served as Chairman and Chief Executive
	Officer of the Trust since January 1995. Mr. Sternlicht
	also has been the President and Chief Executive Officer of
	Starwood Capital and its predecessor entities since its
	formation in 1991. Mr. Sternlicht was Chief Executive
	Officer of iStar Financial, Inc. (iStar), a real
	estate investment firm, from September 1996 to November 1997 and
	served as the Chairman of the Board of Directors of iStar from
	September 1996 to April 2000. Mr. Sternlicht has been a
	Director (or Trustee, as applicable) of iStar since September
	1996. Mr. Sternlicht is a member of the Urban Land Institute and
	of the National Multi-Family Housing Council.
	Mr. Sternlicht is a member of the Board of Directors of the
	Juvenile Diabetes Research Foundation and the Council for
	Christian and Jewish Understanding. He is a member of the Young
	Presidents Organization and is on the Board of Directors of
	Junior Achievement for Fairfield County, Connecticut and the
	Board of Trustees of Thirteen/WNET. |  | Director since December 1994Trustee since December 1994                                
|Directors and Trustees Whose Terms Expire at
	the 2002 Annual Meeting |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                        
|Charlene Barshefsky (51)                                              |  | Senior International Partner at the law firm of
	Wilmer, Cutler & Pickering, Washington, D.C. From April 1996
	to January 2001, Ambassador Barshefsky was the United States
	Trade Representative, the chief trade negotiator and principal
	trade policy maker for the United States and a member of the
	Presidents Cabinet. Ambassador Barshefsky is a director of
	The Estee Lauder Companies, Inc., American Express Company and
	serves on the Corporation Policy Advisory Board of Intel
	Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Director since October 2001Trustee since October 2001                                  

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|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                    |  | 
|---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- |  | 
|Name (Age)             |  | Principal Occupation and Business Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Service Period                                    
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                   
|Bruce W. Duncan (50)   |  | President of Equity Residential Properties Trust
	(EQR) effective April 8, 2002, the largest
	publicly traded apartment company in the United States. From
	April 2000 until March 2002, he was a private investor. From
	December 1995 until March 2000, Mr. Duncan served as
	Chairman, President and Chief Executive Officer of The Cadillac
	Fairview Corporation Limited, a real estate operating company.
	Mr. Duncan is a trustee of Amresco Capital Trust, a
	director of EQR and a member of the Partnership Committee of the
	Rubenstein Company, L.P., a real estate operating company
	focused on office properties in the mid-atlantic region. In
	addition, Mr. Duncan is a member and past trustee of the
	International Council of Shopping Centres. |  | Director since April 1999Trustee since August 1995
|Stephen R. Quazzo (42) |  | Managing Director, Chief Executive Officer and
	co- founder of Transwestern Investment Company, L.L.C., a real
	estate principal investment firm, since March 1996. From April
	1991 to March 1996, Mr. Quazzo was President of Equity
	Institutional Investors, Inc., a subsidiary of Equity Group
	Investments, Inc., a Chicago-based holding company controlled by
	Samuel Zell. Mr. Quazzo is an advisory board member of City
	Year Chicago and a trustee of The Latin School of Chicago.                                                                                                                                                                                                                                                                         |  | Director since April 1999Trustee since August 1995
|Raymond S. Troubh (75) |  | Financial Consultant and a former Governor of the
	American Stock Exchange. He was also a general partner of Lazard
	Frères & Co., an investment banking firm.
	Mr. Troubh is a director of ARIAD Pharmaceuticals, Inc.,
	Diamond Offshore Drilling, Inc., General American Investors Co.,
	Inc., Gentiva Health Services, Inc., Health Net, Inc., Hercules
	Incorporated, Triarc Companies, Inc. and WHX Corp. and is a
	trustee of Petrie Stores Liquidating Trust. Mr. Troubh was
	appointed to the Enron Corp. board of directors on
	November 27, 2001 afterthe events that led to its
	filing for bankruptcy. Mr. Troubh is one of the co-authors of
	The Powers Report which investigated these events.                                                         |  | Director since April 1999Trustee since April 1998 

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Executive Officers of the
Registrants

The following table includes certain information
with respect to each of Starwoods current executive
officers.

|                    |  |     |    |             |  |                                                                                                                                                                
|------------------- |  | --- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                |  | Age |    | Position(s)
|                    |  |     |    |            
|Barry S. Sternlicht |  |     | 41 |             |  | Chairman, Chief Executive Officer and a Director
	of the Corporation and Chairman, Chief Executive Officer and a
	Trustee of the Trust                         
|Robert F. Cotter    |  |     | 50 |             |  | Chief Operating Officer of the Corporation and a
	Vice President of the Trust                                                                                  
|Ronald C. Brown     |  |     | 47 |             |  | Executive Vice President and Chief Financial
	Officer of the Corporation and Vice President, Chief Financial
	Officer and Chief Accounting Officer of the Trust
|Kenneth S. Siegel   |  |     | 46 |             |  | Executive Vice President, General Counsel and
	Secretary of the Corporation and Vice President, General Counsel
	and Secretary of the Trust                    
|David K. Norton     |  |     | 47 |             |  | Executive Vice President  Human
	Resources of the Corporation and Vice President 
	Human Resources of the Trust                                              
|Steven R. Goldman   |  |     | 40 |             |  | Executive Vice President, Acquisitions and
	Development, of the Corporation and a Vice President of the Trust                                                  

Barry S. Sternlicht.Mr. Sternlicht has been
Chairman and Chief Executive Officer of the Corporation since
September 1997 and January 1999, respectively.
Mr. Sternlicht has served as Chairman and Chief Executive
Officer of the Trust since January 1995. Mr. Sternlicht
also has been the President and Chief Executive Officer of
Starwood Capital and its predecessor entities since its
formation in 1991. Mr. Sternlicht was Chief Executive
Officer of iStar, a real estate investment firm, from September
1996 to November 1997 and served as the Chairman of the Board of
Directors (previously the Board of Trustees) of iStar from
September 1996 to April 2000. Mr. Sternlicht has been a
Director (or Trustee, as applicable) of iStar since September
1996.

Robert F. Cotter.Mr. Cotter has been the Chief
Operating Officer of the Corporation since February 2000 and a
Vice President of the Trust since August 2000. From December
1999 to February 2000, he was President, International
Operations, and from March 1998 to December 1999, he served as
President, Europe, of the Company. Prior to joining the Company,
Mr. Cotter was President, Sheraton Europe Division, from
June 1994 to March 1998 and previously held various other
positions with Sheraton including President, Sheraton
Asia-Pacific Divisions, and numerous sales and marketing
positions in the United States and Asia.

Ronald C. Brown.Mr. Brown has been the
Executive Vice President and Chief Financial Officer of the
Corporation since March 1998 and has served as Vice President,
Chief Financial Officer and Chief Accounting Officer of the
Trust since January 1999. From July 1995 to March 1998, he was
the Senior Vice President and Chief Financial Officer of the
Trust.

Kenneth S. Siegel.Mr. Siegel has been the
Executive Vice President and General Counsel of the Corporation
and Vice President and General Counsel of the Trust since
November 2000. In February 2001, he was also appointed as the
Secretary to both the Corporation and the Trust. Mr. Siegel
was formerly the Senior Vice President and General Counsel of
Gartner, Inc., a provider of research and analysis on
information technology industries, from January 2000 to November
2000. Prior to that time, he served as Senior Vice President,
General Counsel and Corporate Secretary of IMS Health
Incorporated, an information services company, and its
predecessors from February 1997 to December 1999. Prior to that
time, Mr. Siegel was a Partner at Baker & Botts, LLP.

David K. Norton.Mr. Norton has been the
Executive Vice PresidentHuman Resources of the Corporation
and Vice PresidentHuman Resources of the Trust since May
2000. Prior to joining the Company, Mr. Norton held various
positions with PepsiCo, Inc. from September 1990 to April 2000
including

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Senior Vice President, Human Resources, of
Frito-Lay, a division of PepsiCo, from November 1995 to April
2000 and Senior Vice President, Human Resources, of PepsiCo Food
Systems from December 1994 to October 1995.


Steven R. Goldman.Mr. Goldman has been the
Executive Vice President, Acquisitions and Development, of the
Corporation and a Vice President of the Trust since January
1999. He was Executive Vice President of the Trust from March
1998 to January 1999. From September 1996 March 1998, he was the
Senior Vice President of the Trust and from March 1995 to
September 1996, he served as Senior Vice President of the
Corporation.

Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Securities Exchange Act
of 1934, as amended, requires that Directors and executive
officers of the Company, and persons who own more than
10 percent of the outstanding Shares, file with the SEC
(and provide a copy to the Company) certain reports relating to
their ownership of Shares and other equity securities of the
Company.

To the Companys knowledge, based solely on
a review of the copies of these reports furnished to the Company
for the fiscal year ended December 31, 2001, and written
representations that no other reports were required, all
Section 16(a) filing requirements applicable to its
Directors, executive officers and greater than 10 percent
beneficial owners were complied with for the most recent fiscal
year.




Item 11.     Executive
Compensation.

The information called for by Item 11 is
incorporated by reference from the information under the
following captions in the Proxy Statement: Compensation of
Directors and Trustees, Summary of Cash and Certain
Other Compensation, Executive Compensation,
Option Grants, Option Exercises and
Holdings, Employment and Compensation Agreements
with Executive Officers, Compensation Committee
Interlocks and Insider Participation and Certain
Relationships and Related Transactions.




Item 12.     Security
Ownership of Certain Beneficial Owners and
Management.

The information called for by Item 12 is
incorporated by reference from the information under the caption
Security Ownership of Certain Beneficial Owners and
Management in the Proxy Statement.




Item 13.     Certain
Relationships and Related Transactions.

Policies of the Board of Directors of the
Corporation and the Board of Trustees of the Trust

The policy of the Board of Directors of the
Corporation and the Board of Trustees of the Trust provides that
any contract or transaction between the Corporation or the
Trust, as the case may be, and any other entity in which one or
more of its Directors, Trustees or officers are directors or
officers, or have a financial interest, must be approved or
ratified by the Governance Committee (which is comprised of
Senator Mitchell and Messrs. Ryder and Youngblood) or by a
majority of the disinterested Directors or Trustees in either
case after the material facts as to the relationship or interest
and as to the contract or transaction are disclosed or are known
to them.

Starwood Capital

General.Barry S. Sternlicht,
Chairman, Chief Executive Officer and a Director of the
Corporation, and Chairman, Chief Executive Officer and a Trustee
of the Trust, controls and has been the President and Chief
Executive Officer of Starwood Capital since its formation in
1991. Prior to joining Starwood in 1995, Steven R. Goldman
was an employee of Starwood Capital, and he continues to own an
interest in a portfolio investment of Starwood Capital.

Trademark License.An affiliate of Starwood Capital
has granted to Starwood, subject to Starwood Capitals
unrestricted right to use such name, an exclusive,
non-transferable, royalty-free license to use the

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Starwood name and trademarks in
connection with the acquisition, ownership, leasing, management,
merchandising, operation and disposition of hotels worldwide,
and to use the Starwood name in its corporate name
worldwide, in perpetuity.


Starwood Capital Noncompete.In connection with a restructuring
of the Company in 1995, Starwood Capital agreed that, with
certain exceptions, Starwood Capital would not compete directly
or indirectly with the Company within the United States and
would present to the Company all opportunities presented to
Starwood Capital to acquire fee interests in hotels in the
United States and debt interests in hotels in the United States
where it is anticipated that the equity will be acquired by the
debt holder within one year from the acquisition of such debt
(the Starwood Capital Noncompete). During the term
of the Starwood Capital Noncompete, neither Starwood Capital nor
any of its affiliates is permitted to acquire any such interest,
or any ground lease interest or other equity interest, in hotels
in the United States. The Starwood Capital Noncompete continues
until no officer, director, general partner or employee of
Starwood Capital is on either the Board of Directors of the
Corporation or the Board of Trustees of the Trust (subject to
exceptions for certain restructurings, mergers or other
combination transactions with unaffiliated parties). Several
properties owned or managed by the Company, including the Westin
Innisbrook Resort (the Innisbrook Resort), the
Westin Mission Hills Resort and the Turnberry Hotel, were
opportunities brought to the Company or its predecessors by
Starwood Capital. With the approval in each case of the Audit
Committee of the Board of Directors of the Corporation and the
Board of Trustees of the Trust, from time to time the Company
has waived the restrictions of the Starwood Capital Noncompete
in whole or in part with respect to particular acquisition
opportunities in which the Company had no interest.

Portfolio Investments.An affiliate of Starwood Capital
holds an approximately 25% non-controlling interest in Troon
Golf (Troon), a golf course management company that
currently manages over 100 high-end golf courses.
Mr. Sternlichts indirect interest in Troon held
through such affiliate is approximately 12%. Troon is the
largest third-party manager of golf courses in the United
States. In 2001, Troon managed thirteen golf courses at resorts
owned or managed by the Company. The Company paid Troon a total
of $911,000 ($432,000 of which represents management fees and
payments for other services and $479,000 of which represents
reimbursement of expenses), $1,003,000 ($458,000 of which
represents management fees and payments for other services and
$545,000 of which represents reimbursement of expenses) and
$950,000 ($454,000 of which represents management fees and
payments for other services and $496,000 of which represents
reimbursement of expenses) in 2001, 2000 and 1999, respectively,
for the golf courses at the two resorts owned by the Company. In
January 2002, after extensive review of alternatives and with
the unanimous approval of the Governance Committee, the Company
entered into a Master Agreement with Troon covering the United
States and Canada whereby the Company has agreed to have Troon
manage all courses in the United States and Canada that are
owned by the Company and to use reasonable efforts to have Troon
manage courses at resorts that the Company manages and
franchises. The Company believes that the terms of the Troon
agreement are at or better than market terms.
Mr. Sternlicht did not participate in the negotiations or
the approval of the Troon Master Agreement.

An entity in which Mr. Sternlicht has a 38%
interest owned the common area of the Sheraton Tamarron Resort,
which the Company managed until December 2001. As of the date of
this filing, management fees earned and paid were $197,000,
$219,000 and $240,000 relating to 2001, 2000 and 1999,
respectively. In addition, approximately $620,000 of
reimbursable expenses were also paid. The Company has
outstanding receivables of approximately $314,000, which arose
as a result of the termination of the Tamarron management
agreement. The Company believes that the terms of the Tamarron
agreement were at or better than market terms.

In addition, a subsidiary of Starwood Capital is
a general partner of a limited partnership which owns
approximately 45% in an entity that manages over 40 health
clubs, including one health club and spa space in a hotel owned
by the Company. In 2001, the Company paid approximately $84,000
to the management company for such management. The Company
believes that the terms of the management agreement are at or
better than market terms.

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Other Management-Related Investments.Mr. Sternlicht has a 38%
interest in an entity (the Innisbrook Entity) that
owns the common area facilities and certain undeveloped land
(but not the hotel) at the Innisbrook Resort. In May 1997, the
Innisbrook Entity entered into a management agreement for the
Innisbrook Resort with Westin, which was then a privately held
company partly owned by Starwood Capital and Goldman, Sachs
& Co. When the Company acquired Westin in January 1998, it
acquired Westins rights and obligations under the
management and other related agreements. Under these agreements,
the hotel manager was obligated to loan up to $12.5 million
to the owner in the event certain performance levels were not
achieved. Management fees earned under these agreements were
$716,000, $885,000 and $907,000 in 2001, 2000 and 1999,
respectively. The Innisbrook Entity, the Company and other
lenders are currently in discussions regarding the terms and
timing of payments owed to the Company and such other lenders.
The discussions relate to approximately $9 million in loans by
the Company which funded resort operations and approximately
$5 million of deferred management fees and reimbursable
expenses as well as amounts owed by the Innisbrook Entity to
other parties. Any settlement of this matter would be subject to
the approval of the Governance Committee.

Aircraft Lease.In February 1998, the Company
leased a Gulfstream III Aircraft from Star Flight LLC, an
affiliate of Starwood Capital. The term of the lease was one
year and automatically renews for one-year terms until either
party terminates the lease upon 90 days written
notice. The rent for the aircraft, which was set at
approximately 90% of fair market value (based on two estimates
from unrelated third parties), is (i) a monthly payment of
1.25% of the lessors total costs relating to the aircraft
(approximately $123,000 at the beginning of the lease with this
amount increasing as additional costs are incurred by the
lessor), plus (ii) $300 for each hour that the aircraft is
in use. Payments to Star Flight LLC were $1,682,000, $840,000
and $910,000 in 2001, 2000 and 1999, respectively.

Other

Starwood has made non-interest-bearing loans to
Steven R. Goldman, Executive Vice President, Acquisitions and
Development, and Ronald C. Brown, Executive Vice President and
Chief Financial Officer, during 1999 and to David K. Norton,
Executive Vice President of Human Resources, during 2000. Each
of these loans was made in connection with such executives
employment and is secured by a second mortgage on such
executives home. These loans had initial principal amounts
of $525,000, $600,000 and $500,000, respectively. The loans to
Messrs. Goldman and Norton are currently outstanding. These
loans are due five years from the date of issuance or,
generally, upon the individuals termination. The loan made
to Mr. Brown was repaid in 2001.

In 2001, Starwood retained the law firm Verner,
Liipfert, Bernhard, McPherson and Hand, of which Senator
George J. Mitchell, a Director of the Corporation and
Trustee of the Trust, serves as Chairman. We expect that this
firm will continue to provide services to the Company in 2002.

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PART IV






|         |                                                                                        
|-------- | ---------------------------------------------------------------------------------------
|Item 14. | Exhibits, Financial Statements, Financial
	Statement Schedules and Reports on Form 8-K.



|    |                                                                          
|--- | -------------------------------------------------------------------------
|(a) | The following documents are filed as a part of
	this Joint Annual Report:



|   |                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | The financial statements and financial statement
	schedules listed in the Index to Financial Statements and
	Schedules following the signature pages hereof.

2.     Exhibits:

|        |   |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | - | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                       
|Number  |   | Description of Exhibit
|        |   |                       
|        | 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). (The SEC file numbers of all filings
	made by the Corporation and the Trust pursuant to the Securities
	Act of 1934, as amended, and referenced herein are: 1-7959 (the
	Corporation) and 1-6828 (the Trust)).                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 2 | .2                     |  | Form of Amendment No. 1 to Formation
	Agreement, dated as of July 1995, among the Trust, the
	Corporation and the Starwood Partners (incorporated by reference
	to Exhibit 10.23 to the Trusts and the
	Corporations Joint Registration Statement on Form S-2
	filed with the SEC on June 29, 1995 (Registration
	Nos. 33-59155 and 33-59155-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 2 | .3                     |  | Transaction Agreement, dated as of
	September 8, 1997, by and among the Trust, the Corporation,
	Realty Partnership, Operating Partnership, WHWE L.L.C., Woodstar
	Investor Partnership (Woodstar), Nomura Asset
	Capital Corporation, Juergen Bartels, Westin Hotels &
	Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S
	Seattle Corp., Westin St. John Hotel Company, Inc., W&S
	Denver Corp., W&S Atlanta Corp. and W&S Hotel L.L.C.
	(incorporated by reference to Exhibit 2 to the Trusts
	and the Corporations Joint Current Report on Form 8-K
	dated September 9, 1997, as amended by the Form 8-K/ A
	dated December 18, 1997).                                                                                                                                                                                                                                                                                                    
|        | 2 | .4                     |  | Amended and Restated Agreement and Plan of
	Merger, dated as of November 12, 1997, by and among the
	Corporation, the Trust, Chess Acquisition Corp.
	(Chess) and ITT Corporation (incorporated by
	reference to Exhibit 2.1 to the Trusts and the
	Corporations Joint Current Report on Form 8-K dated
	November 13, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 2 | .5                     |  | Agreement and Plan of Restructuring, dated as of
	September 16, 1998, and amended as of November 30,
	1998, among the Corporation, ST Acquisition Trust (ST
	Trust) and the Trust (incorporated by reference to Annex A
	to the Trusts and the Corporations Joint Proxy
	Statement dated December 3, 1998 (the 1998 Proxy
	Statement)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 2 | .6                     |  | Form of Stock Purchase Agreement, dated as of
	February 23, 1998, between the Trust and the Corporation
	(incorporated by reference to Exhibit 10.4 to the
	Trusts and the Corporations Joint Annual Report on
	Form 10-K for the year ended December 31, 1997 (the
	1997 Form 10-K)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3 | .1                     |  | Amended and Restated Declaration of Trust of the
	Trust, amended and restated as of January 6, 1999
	(incorporated by reference to Exhibit 1 to the Trusts
	Registration Statement on Form 8-A filed on
	December 21, 1998 (the Trust Form 8-A),
	except that the following changes were made on January 6,
	1999, upon the filing by the Trust and ST Trust of the Articles
	of Merger of ST Trust into the Trust (the Articles of
	Merger) with, and the acceptance thereof for record by,
	the State Department of Assessments and Taxation of the State of
	Maryland (the SDAT): Section 6.14 specifies
	January 6, 1999 as the date of the Intercompany Agreement;
	Section 6.19.1 specifies January 6, 1999 as the date
	of the acceptance for record by the SDAT of the Articles of
	Merger; and the definition of Intercompany Agreement
	in Section 6.19.2 specifies January 6, 1999 as the
	date of the Intercompany Agreement).

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|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 3  | .2                     |  | Charter of the Corporation, amended and restated
	as of February 1, 1995, as amended through March 26,
	1999 (incorporated by reference to Exhibit 3.2 to the
	Trusts and the Corporations Joint Annual Report on
	Form 10-K for the year ended December 31, 1998, as
	amended by the Form 10-K/ A filed May 17, 1999 (as so
	amended, the 1998 Form 10-K)).                                 
|        | 3  | .3                     |  | Bylaws of the Trust, as amended through
	April 16, 1999 (incorporated by reference to
	Exhibit 3.3 to the Corporations and the Trusts
	Joint Quarterly Report on Form 10-Q for the quarterly
	period ended March 31, 1999 (the 1999
	Form 10-Q1)).                                                                                                                                           
|        | 3  | .4                     |  | Bylaws of the Corporation, as amended through
	March 15, 1999 (incorporated by reference to Exhibit 3
	to the Corporations and the Trusts Joint Current
	Report on Form 8-K dated March 15, 1999 (the
	March 15 Form 8-K)).                                                                                                                                                                  
|        | 4  | .1                     |  | Amended and Restated Intercompany Agreement,
	dated as of January 6, 1999, between the Corporation and
	the Trust (incorporated by reference to Exhibit 3 to the
	Trust Form 8-A, except that on January 6, 1999, the
	Intercompany Agreement was executed and dated as of
	January 6, 1999).                                                                                                    
|        | 4  | .2                     |  | Rights Agreement, dated as of March 15,
	1999, between the Corporation and Chase Mellon Shareholder
	Services, L.L.C., as Rights Agent (incorporated by reference to
	Exhibit 4 to the March 15 Form 8-K).                                                                                                                                                                                       
|        | 4  | .3                     |  | Amended and Restated Indenture, dated as of
	November 15, 1995, as Amended and Restated as of
	December 15, 1995 between ITT Corporation (formerly known
	as ITT Destinations, Inc.) and the First National Bank of
	Chicago, as trustee (incorporated by reference to
	Exhibit 4.A.IV to the First Amendment to ITT
	Corporations Registration Statement on Form S-3 filed
	November 13, 1996).
|        | 4  | .4                     |  | First Indenture Supplement, dated as of
	December 31, 1998, among ITT Corporation, the Corporation
	and the Bank of New York (incorporated by reference to
	Exhibit 4.1 to the Trusts and the Corporations
	Joint Current Report on Form 8-K filed January 8,
	1999).                                                                                                                          
|        | 4  | .5                     |  | The Registrants hereby agree to file with the
	Commission a copy of any instrument, including indentures,
	defining the rights of long-term debt holders of the Registrants
	and their consolidated subsidiaries upon the request of the
	Commission.                                                                                                                                            
|        | 10 | .1                     |  | Third Amended and Restated Limited Partnership
	Agreement for Realty Partnership, dated January 6, 1999,
	among the Trust and the limited partners of Realty Partnership
	(incorporated by reference to Exhibit 10.1 to the 1998
	Form 10-K).                                                                                                                                                    
|        | 10 | .2                     |  | Third Amended and Restated Limited Partnership
	Agreement for Operating Partnership, dated January 6, 1999,
	among the Corporation and the limited partners of Operating
	Partnership (incorporated by reference to Exhibit 10.2 to
	the 1998 Form 10-K).                                                                                                                                        
|        | 10 | .3                     |  | 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 | .4                     |  | Employment Agreement, dated May 24, 1999,
	between the Corporation and Ronald C. Brown. (incorporated by
	reference to Exhibit 10.4 to the Corporations and the
	Trusts Joint Annual Report on Form 10-K for the year
	ended December 31, 1999 (the 1999
	Form 10-K)).(1)                                                                                                                    
|        | 10 | .5                     |  | Employment Agreement, dated March 25, 1998,
	between the Trust and Steven R. Goldman (incorporated by
	reference to Exhibit 10.11 to the 1997
	Form 10-K).(1)                                                                                                                                                                                                                                    
|        | 10 | .6                     |  | Starwood Hotels & Resorts 1995 Long-Term
	Incentive Plan (Amended and Restated as of December 3,
	1998) (incorporated by reference to Annex D to the 1998 Proxy
	Statement).(1)                                                                                                                                                                                                                  
|        | 10 | .7                     |  | Starwood Hotels & Resorts Worldwide, Inc.
	1995 Long-Term Incentive Plan (Amended and Restated as of
	December 3, 1998) (incorporated by reference to
	Annex E to the 1998 Proxy Statement).(1)                                                                                                                                                                                                  

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|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .8                     |  | Incentive and Non-Qualified Share Option Plan
	(1986) of the Trust (incorporated by reference to
	Exhibit 10.8 to the Trusts and the Corporations
	Joint Annual Report on Form 10-K for the year ended
	August 31, 1986 (the 1986
	Form 10-K)).(1)                                                                                                                                                           
|        | 10 | .9                     |  | Corporation Stock Non-Qualified Stock Option Plan
	(1986) of the Trust (incorporated by reference to
	Exhibit 10.9 to the 1986 Form 10-K).(1)                                                                                                                                                                                                                                                                    
|        | 10 | .10                    |  | Stock Option Plan (1986) of the Corporation
	(incorporated by reference to Exhibit 10.10 to the 1986
	Form 10-K).(1)                                                                                                                                                                                                                                                                                             
|        | 10 | .11                    |  | Trust Shares Option Plan (1986) of the
	Corporation (incorporated by reference to Exhibit 10.11 to
	the 1986 Form 10-K).(1)                                                                                                                                                                                                                                                                                      
|        | 10 | .12                    |  | Form of Indemnification Agreement and Amendment
	No. 1 to Indemnification Agreement between the Trust and
	each of its Trustees and executive officers (incorporated by
	reference to Exhibit 10.7 to the Trusts and the
	Corporations Joint Annual Report on Form 10-K for the
	year ended December 31, 1995 (the 1995
	Form 10-K)).(1)                                                                     
|        | 10 | .13                    |  | Form of Indemnification Agreement and Amendment
	No. 1 to Indemnification Agreement between the Corporation
	and each of its Directors and executive officers (incorporated
	by reference to Exhibit 10.8 to the 1995
	Form 10-K).(1)                                                                                                                                                                            
|        | 10 | .14                    |  | Form of Amendment No. 2 to Indemnification
	Agreement, dated June 26, 1997, between the Trust and each
	of its Trustees and executive officers (incorporated by
	reference to Exhibit 10.1 to the Trusts and the
	Corporations Joint Quarterly Report on Form 10-Q for
	the quarterly period ended June 30, 1997 (the 1997
	Form 10-Q2)).(1)                                                                 
|        | 10 | .15                    |  | Form of Amendment No. 2 to Indemnification
	Agreement, dated June 26, 1997, between the Corporation and
	each of its Directors and executive officers (incorporated by
	reference to Exhibit 10.2 to the 1997
	Form 10-Q2).(1)                                                                                                                                                                                   
|        | 10 | .16                    |  | Form of Trademark License Agreement, dated as of
	December 10, 1997, between Starwood Capital and the Trust
	(incorporated by reference to Exhibit 10.22 to the 1997
	Form 10-K).                                                                                                                                                                                                                                
|        | 10 | .17                    |  | Exchange Rights Agreement, dated as of
	January 1, 1995, among the Trust, the Corporation, Realty
	Partnership, 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 (the Formation
	Form 8-K)).                                                                           
|        | 10 | .18                    |  | 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 Formation Form 8-K).                                                                                                                                                                                                                        
|        | 10 | .19                    |  | Exchange Rights Agreement, dated as of
	June 3, 1996, among the Trust, the Corporation, Realty
	Partnership, Operating Partnership, Philadelphia HIR Limited
	Partnership and Philadelphia HSR Limited Partnership
	(incorporated by reference to Exhibit 10.1 to the
	Trusts and the Corporations Joint Quarterly Report
	on Form 10-Q for the quarterly period ended June 30,
	1996 (the 1996 Form 10-Q2)).
|        | 10 | .20                    |  | Registration Rights Agreement, dated as of
	June 3, 1996, among the Trust, the Corporation and
	Philadelphia HSR Limited Partnership (incorporated by reference
	to Exhibit 10.2 to the 1996 Form 10-Q2).                                                                                                                                                                                                        
|        | 10 | .21                    |  | Units Exchange Rights Agreement, dated as of
	February 14, 1997, by and among, inter alia, the
	Trust, the Corporation, Realty Partnership, Operating
	Partnership and the Starwood Partners (incorporated by reference
	to Exhibit 10.34 to the 1997 Form 10-K).                                                                                                                                                
|        | 10 | .22                    |  | Class A Exchange Rights Agreement, dated as
	of February 14, 1997, by and among, inter alia, the
	Trust, the Corporation, Operating Partnership and the Starwood
	Partners (incorporated by reference to Exhibit 10.35 to the
	1997 Form 10-K).                                                                                                                                                                  

40



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .23                    |  | Credit Agreement, dated as of September 10,
	1997, between Realty Partnership and the Trust and Bankers Trust
	Company (BTC), Lehman Brothers Holdings Inc. d/b/a
	Lehman Capital, a division of Lehman Brothers Holdings Inc.
	(Lehman Capital), BankBoston, N.A., and Bank of
	Montreal (incorporated by reference to Exhibit 10.1 to the
	Trusts and the Corporations Joint Quarterly Report
	on Form 10-Q for the quarterly period ended
	September 30, 1997, as amended by the Form 10-Q/ A
	dated November 10, 1997).                               
|        | 10 | .24                    |  | Exchange Rights Agreement, dated as of
	January 2, 1998, among, inter alia, the Trust,
	Realty Partnership and Woodstar (incorporated by reference to
	Exhibit 10.50 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .25                    |  | Exchange Rights Agreement, dated as of
	January 2, 1998, among, inter alia, the Corporation,
	Operating Partnership and Woodstar (incorporated by reference to
	Exhibit 10.51 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .26                    |  | Registration Rights Agreement, dated as of
	January 2, 1998, among, inter alia, the Trust, the
	Corporation, and Woodstar (incorporated by reference to
	Exhibit 10.52 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .27                    |  | Credit Agreement, dated as of February 23,
	1998, among the Trust, Realty Partnership, the Corporation,
	Chess (and ITT Corporation as its successor by merger), certain
	additional borrowers, various lenders, BTC and The Chase
	Manhattan Bank (Chase Bank), as Administrative
	Agents, and Lehman Commercial Paper Inc. (Lehman
	Paper) and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.1 to the
	Trusts and the Corporations Joint Current Report on
	Form 8-K dated February 23, 1998 (the ITT
	Form 8-K)).
|        | 10 | .28                    |  | First Amendment to the Credit Agreement, dated as
	of March 3, 1998, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, and
	Lehman Paper and Bank of Montreal, as Syndication Agents, and
	the new lenders (incorporated by reference to Exhibit 10.2
	to the ITT Form 8-K).                                                                                                                                                                    
|        | 10 | .29                    |  | Second Amendment to the Credit Agreement, dated
	as of April 30, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.2 to the
	Trusts and the Corporations Joint Quarterly Report
	on Form 10-Q for the quarterly period ended June 30,
	1998 (the 1998 Form 10-Q2)).                                                           
|        | 10 | .30                    |  | Third Amendment to the Credit Agreement, dated as
	of June 15, 1998, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, and
	Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.3 to the 1998
	Form 10-Q2).                                                                                                                                                                                      
|        | 10 | .31                    |  | Fourth Amendment to the Credit Agreement, dated
	as of July 15, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.4 to the 1998
	Form 10-Q2).                                                                                                                                                                                     
|        | 10 | .32                    |  | Fifth Amendment to the Credit Agreement, dated as
	of August 26, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.2 to the 1998
	Form 10-Q3).                                                                                                                                                                                    
|        | 10 | .33                    |  | Sixth Amendment to the Credit Agreement, dated as
	of December 15, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.50 to the 1998
	Form 10-K).                                                                                                                                                                                  

41



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .34                    |  | Seventh Amendment to the Credit Agreement, dated
	as of February 1999, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, and
	Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.51 to the 1998
	Form 10-K).                                                                                                                                                                                                                                                                                  
|        | 10 | .35                    |  | Eighth Amendment to the Credit Agreement and
	Modification to Pledge and Security Agreement, dated as of
	July 2, 1999, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, Lehman
	Paper and Bank of Montreal, as Syndication Agents, and BTC, as
	Collateral Agent (incorporated by reference to Exhibit 10.1
	to the Corporations and the Trusts Joint Quarterly
	Report on Form 10-Q for the quarterly period ended
	September 30, 1999, as amended by the Form 10-Q/ A
	filed November 16, 1999 (as so amended, the 1999
	Form 10-Q3)).
|        | 10 | .36                    |  | Ninth Amendment to the Credit Agreement and
	Modification to Pledge and Security Agreement, dated as of
	September 20, 1999, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	Lehman Paper and Bank of Montreal, as Syndication Agents, and
	BTC, as Collateral Agent (incorporated by reference to
	Exhibit 10.2 to the 1999 Form 10-Q3).                                                                                                                                                                                                  
|        | 10 | .37                    |  | Tenth Amendment to the Credit Agreement and
	Modification to Pledge and Security Agreement, dated as of
	June 12, 2000, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, Lehman
	Paper and Bank of Montreal, as Syndication Agents, and BTC, as
	Collateral Agent (incorporated by reference to
	Exhibit 10.43 to the Corporations and the
	Trusts Joint Annual Report on Form 10-K for the year
	ended December 31, 2000 (the 2000
	Form 10-K)).                                                                                        
|        | 10 | .38                    |  | Eleventh Amendment to the Credit Agreement, dated
	as of November 20, 2001, among the Trust, Realty
	Partnership, the Corporation, Sheraton Holding, the lenders
	party to the Credit Agreement, BTC and Chase Bank, as
	Administrative Agents, Lehman Paper and Bank of Montreal, as
	Syndication Agents, and BTC, as Collateral Agent (incorporated
	by reference to Exhibit 10.1 to the Corporations and
	the Trusts Joint Current Report on Form 8-K filed
	December 4, 2001).                                                                                                                                                                          
|        | 10 | .39                    |  | Pledge and Security Agreement, dated as of
	February 23, 1998, executed and delivered by the Trust, the
	Corporation and the other Pledgors party thereto, in favor of
	BTC as Collateral Agent (incorporated by reference to
	Exhibit 10.63 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .40                    |  | Second Amended and Restated Senior Secured Note
	Agreement, dated December 30, 1999, among the Corporation,
	the Trust, the guarantors listed therein, the lenders listed
	therein, Lehman Paper, as Arranger and Administrative Agent, and
	Alex Brown and Chase Securities Inc., as Syndication Agents
	(incorporated by reference to Exhibit 10.46 to the 1999
	Form 10-K).                                                                                                                                                                                                                                                                                
|        | 10 | .41                    |  | Loan Agreement, dated as of February 23,
	1998, between the Trust and the Corporation, together with
	Promissory Note executed in connection therewith, by the
	Corporation to the order of the Trust, in the principal amount
	of $3,282,000,000 (incorporated by reference to
	Exhibit 10.65 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .42                    |  | Loan Agreement, dated as of February 23,
	1998, between the Trust and the Corporation, together with
	Promissory Note executed in connection therewith, by the
	Corporation to the order of the Trust, in the principal amount
	of $100,000,000 (incorporated by reference to Exhibit 10.66
	to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .43                    |  | Loan Agreement, dated as of February 23,
	1998, between the Trust and the Corporation, together with
	Promissory Note executed in connection therewith, by the
	Corporation to the order of the Trust, in the principal amount
	of $50,000,000 (incorporated by reference to Exhibit 10.67
	to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                           

42



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|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .44                    |  | Loan Agreement, dated as of January 27,
	1999, among the Borrowers named therein, as Borrowers, Starwood
	Operator I LLC, as Operator, and Lehman Capital (incorporated by
	reference to Exhibit 10.58 to the 1998 Form 10-K).                                                                                                   
|        | 10 | .45                    |  | Aircraft Dry Lease Agreement, entered into as of
	February 6, 1998, between Star Flight, L.L.C. and ITT
	Flight Operation, Inc., as amended by First Amendment thereto,
	dated as of August 25, 1998 (incorporated by reference to
	Exhibit 10.4 to the 1998 Form 10-Q3).                                                        
|        | 10 | .46                    |  | Form of Severance Agreement, dated December 1999,
	between the Corporation and each of Barry S. Sternlicht, Ronald
	C. Brown and Steve R. Goldman (incorporated by reference to
	Exhibit 10.52 to the 1999 Form 10-K).(1)                                                                                                        
|        | 10 | .47                    |  | Amended and Restated Employment Agreement,
	effective as of January 1, 2000, between Barry S.
	Sternlicht and the Company (incorporated by reference to
	Exhibit 10.1 to the Corporations and the Trusts
	Joint Quarterly Report on Form 10-Q for the quarterly
	period ended March 31, 2000). (1)                             
|        | 10 | .48                    |  | Employment Agreement, dated as of April 7,
	2000, between the Corporation and David K. Norton (incorporated
	by reference to Exhibit 10.1 to the Corporations and
	the Trusts Joint Quarterly Report on Form 10-Q for
	the quarterly period ended June 30, 2000).(1)                                                           
|        | 10 | .49                    |  | Employment Agreement, dated as of June 27,
	2000, between the Corporation and Robert F. Cotter (incorporated
	by reference to Exhibit 10.1 to the Corporations and
	the Trusts Joint Quarterly Report on Form 10-Q for
	the quarterly period ended September 30,
	2000).(1)                                                    
|        | 10 | .50                    |  | Form of Severance Agreement, dated as of
	August 14, 2000, between the Corporation and Robert F.
	Cotter (incorporated by reference to Exhibit 10.56 to the
	2000 Form 10-K).(1)                                                                                                                                                 
|        | 10 | .51                    |  | Employment Agreement, dated as of
	September 25, 2000, between the Corporation and Kenneth S.
	Siegel (incorporated by reference to Exhibit 10.57 to the
	2000 Form 10-K).(1)                                                                                                                                                    
|        | 10 | .52                    |  | Form of Severance Agreement, dated as of
	September 26, 2000, between the Corporation and Kenneth S.
	Siegel (incorporated by reference to Exhibit 10.58 to the
	2000 Form 10-K).(1)                                                                                                                                             
|        | 10 | .53                    |  | Form of Severance Agreement, dated as of
	June 9, 2000, between the Corporation and David K. Norton
	(incorporated by reference to Exhibit 10.59 to the 2000
	Form 10-K).(1)                                                                                                                                                     
|        | 10 | .54                    |  | Stock Purchase Agreement, dated as of
	April 27, 1999, among the Corporation, ITT Sheraton
	Corporation, Starwood Canada Corp., Caesars World, Inc.,
	Sheraton Desert Inn Corporation, Sheraton Tunica Corporation and
	Park Place Entertainment Corporation (incorporated by reference
	to Exhibit 10.5 to the 1999 Form 10-Q1).
|        | 10 | .55                    |  | Starwood Hotels & Resorts Worldwide, Inc.
	1999 Long-Term Incentive Compensation Plan (incorporated by
	reference to Exhibit 10.4 to the Corporations and the
	Trusts Joint Quarterly Report on Form 10-Q for the
	quarterly period ended June 30, 1999 (the 1999
	Form 10-Q2)).(1)                                          
|        | 10 | .56                    |  | Starwood Hotels & Resorts Worldwide, Inc.
	1999 Annual Incentive Plan for Certain Executives (incorporated
	by reference to Exhibit 10.5 to the 1999
	Form 10-Q2).(1)                                                                                                                                                            
|        | 10 | .57                    |  | First Amendment to the Starwood Hotels &
	Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation
	Plan, dated as of August 1, 2001 (incorporated by reference
	to Exhibit 10.1 to the Corporations and the
	Trusts Joint Quarterly Report on Form 10-Q for the
	quarterly period ended September 30, 2001).(1)          
|        | 10 | .58                    |  | Starwood Hotels & Resorts Worldwide, Inc.
	Deferred Compensation Plan, effective as of January 1, 2001
	(incorporated by reference to Exhibit 10.1 to the
	Corporations and the Trusts Joint Quarterly Report
	on Form 10-Q for the quarterly period ended June 30,
	2001 (the 2001 Form 10-Q2)).(1)                         
|        | 10 | .59                    |  | Indenture, dated as of May 25, 2001, by and
	among the Corporation, as Issuer, Guarantors and Firstar Bank,
	N.A., as Trustee (incorporated by reference to Exhibit 10.2
	to the 2001 Form 10-Q2).                                                                                                                               
|        | 10 | .60                    |  | Registration Rights Agreement, dated as of
	May 25, 2001, among the Corporation and Salomon Smith
	Barney Inc. (incorporated by reference to Exhibit 10.3 to
	the 2001 Form 10-Q2).                                                                                                                                              

43



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|        |    |                        |  |                                                                                          
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 12 | .1                     |  | Calculation of Ratio of Earnings to Total Fixed
	Charges. (2)                            
|        | 21 | .1                     |  | Subsidiaries of the Registrants.(2)                                                      
|        | 23 | .1                     |  | Consent of Arthur Andersen LLP.(2)                                                       
|        | 99 | .1                     |  | Letter from Starwood Hotels & Resorts
	Worldwide, Inc. related to Arthur Andersen LLP.(2)
|        | 99 | .2                     |  | Letter from Starwood Hotel & Resorts related
	to Arthur Andersen LLP.(2)                 



---



|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Management contract or compensatory plan or
	arrangement required to be filed as an exhibit pursuant to
	Item 14(c) of Form 10-K.
|   
|(2) | Filed herewith.                                                                                                                  



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

During the fourth quarter of 2001, Starwood filed
a Joint Current Report on Form 8-K dated November 20,
2001, reporting under Items 5 and 7 the amendment of its
Senior Credit Facility. In addition, the Company reported that
it will shift from a quarterly dividend to an annual dividend
beginning in 2002.

44



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##### Table of Contents



SIGNATURES

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



| |                          
| | -------------------------
| | STARWOOD HOTELS & RESORTS
| | WORLDWIDE, INC.          



| |     |                    
| | --- | -------------------
| | By: | /s/ RONALD C. BROWN

| |                             
| | ----------------------------
| |                             
| | Ronald C. Brown             
| | Executive Vice President and
| | Chief Financial Officer     

Date: March 27, 2002

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.

|                                           |  |                                                                                                    |  |                |  | 
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                           |  |                                                                                                    |  |               
|Signature                                  |  | Title                                                                                              |  | Date          
|                                           |  |                                                                                                    |  |               
|                                          
|/s/ BARRY S. STERNLICHTBarry S. Sternlicht |  | Chairman, Chief Executive Officer and Director
	(Principal Executive Officer)                      |  | March 27, 2002
|                                          
|/s/ RONALD C. BROWNRonald C. Brown         |  | Executive Vice President and Chief Financial
	Officer (Principal Financial and Accounting Officer) |  | March 27, 2002
|                                          
|/s/ CHARLENE BARSHEFSKYCharlene Barshefsky |  | Director                                                                                           |  | March 27, 2002
|                                          
|/s/ JEAN-MARC CHAPUSJean-Marc Chapus       |  | Director                                                                                           |  | March 27, 2002
|                                          
|/s/ BRUCE W. DUNCANBruce W. Duncan         |  | Director                                                                                           |  | March 27, 2002
|                                          
|/s/ ERIC HIPPEAUEric Hippeau               |  | Director                                                                                           |  | March 27, 2002
|                                          
|/s/ GEORGE J. MITCHELLGeorge J. Mitchell   |  | Director                                                                                           |  | March 27, 2002
|                                          
|/s/ STEPHEN R. QUAZZOStephen R. Quazzo     |  | Director                                                                                           |  | March 27, 2002
|                                          
|/s/ THOMAS O. RYDERThomas O. Ryder         |  | Director                                                                                           |  | March 27, 2002

45



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|                                                 |  |          |  |                |  | 
|------------------------------------------------ |  | -------- |  | -------------- |  | 
|                                                 |  |          |  |               
|Signature                                        |  | Title    |  | Date          
|                                                 |  |          |  |               
|                                                
|/s/ RAYMOND S. TROUBHRaymond S. Troubh           |  | Director |  | March 27, 2002
|                                                
|/s/ DANIEL W. YIHDaniel W. Yih                   |  | Director |  | March 27, 2002
|                                                
|/s/ KNEELAND C. YOUNGBLOODKneeland C. Youngblood |  | Director |  | March 27, 2002

46



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SIGNATURES

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



| |                          
| | -------------------------
| | STARWOOD HOTELS & RESORTS



| |     |                    
| | --- | -------------------
| | By: | /s/ RONALD C. BROWN

| |                                        
| | ---------------------------------------
| |                                        
| | Ronald C. Brown                        
| | Vice President, Chief Financial Officer
| | and Chief Accounting Officer           

Date: March 27, 2002

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.

|                                           |  |                                                                                                                    |  |                |  |     
|------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------ |  | -------------- |  | ----
|Signature                                  |  |                                                                                                                    |  | Title          |  | Date
|                                           |  |                                                                                                                    |  |                |  |     
|/s/ BARRY S. STERNLICHTBarry S. Sternlicht |  | Chairman, Chief Executive Officer and Trustee
	(Principal Executive Officer)                                       |  | March 27, 2002
|                                          
|/s/ RONALD C. BROWNRonald C. Brown         |  | Vice President, Chief Financial Officer and Chief
	Accounting Officer (Principal Financial and Accounting Officer) |  | March 27, 2002
|                                          
|/s/ CHARLENE BARSHEFSKYCharlene Barshefsky |  | Trustee                                                                                                            |  | March 27, 2002
|                                          
|/s/ JEAN-MARC CHAPUSJean-Marc Chapus       |  | Trustee                                                                                                            |  | March 27, 2002
|                                          
|/s/ BRUCE W. DUNCANBruce W. Duncan         |  | Trustee                                                                                                            |  | March 27, 2002
|                                          
|/s/ ERIC HIPPEAUEric Hippeau               |  | Trustee                                                                                                            |  | March 27, 2002
|                                          
|/s/ GEORGE J. MITCHELLGeorge J. Mitchell   |  | Trustee                                                                                                            |  | March 27, 2002
|                                          
|/s/ STEPHEN R. QUAZZOStephen R. Quazzo     |  | Trustee                                                                                                            |  | March 27, 2002
|                                          
|/s/ THOMAS O. RYDERThomas O. Ryder         |  | Trustee                                                                                                            |  | March 27, 2002

47



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|                                                 |  |         |  |                |  |     
|------------------------------------------------ |  | ------- |  | -------------- |  | ----
|Signature                                        |  |         |  | Title          |  | Date
|                                                 |  |         |  |                |  |     
|/s/ RAYMOND S. TROUBHRaymond S. Troubh           |  | Trustee |  | March 27, 2002
|                                                
|/s/ DANIEL W. YIHDaniel W. Yih                   |  | Trustee |  | March 27, 2002
|                                                
|/s/ KNEELAND C. YOUNGBLOODKneeland C. Youngblood |  | Trustee |  | March 27, 2002

48



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.

AND STARWOOD HOTELS & RESORTS







INDEX TO FINANCIAL STATEMENTS AND
SCHEDULES

|                                           |                                                                                                       |      |      |      | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------------- | ---- | ---- | ---- | 
|                                           |                                                                                                       | Page
|                                           |                                                                                                       |     
|Report of Independent Public Accountants   |                                                                                                       |      | F-2  |     
|Starwood Hotels & Resorts Worldwide, Inc.: |                                                                                                       |      |      |     
|                                           | Consolidated Balance Sheets as of
	December 31, 2001 and 2000                                         |      |      | F-3  | 
|                                           | Consolidated Statements of Operations for the
	Years Ended December 31, 2001, 2000 and 1999           |      |      | F-4  | 
|                                           | Consolidated Statements of Comprehensive Income
	for the Years Ended December 31, 2001, 2000 and 1999 |      |      | F-5  | 
|                                           | Consolidated Statements of Equity for the Years
	Ended December 31, 2001, 2000 and 1999               |      |      | F-6  | 
|                                           | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999           |      |      | F-7  | 
|Starwood Hotels & Resorts:                 |                                                                                                       |      |      |     
|                                           | Consolidated Balance Sheets as of
	December 31, 2001 and 2000                                         |      |      | F-8  | 
|                                           | Consolidated Statements of Income for the Years
	Ended December 31, 2001, 2000 and 1999               |      |      | F-9  | 
|                                           | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999           |      |      | F-10 | 
|Notes to Financial Statements              |                                                                                                       |      | F-11 |     
|Schedules:                                 |                                                                                                       |      |      |     
|                                           | Schedule II   Valuation
	and Qualifying Accounts                                                     |      |      | S-1  | 
|                                           | Schedule III  Real Estate
	and Accumulated Depreciation                                              |      |      | S-2  | 
|                                           | Schedule IV   Mortgage
	Loans on Real Estate                                                         |      |      | S-4  | 

F-1



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##### Table of Contents






REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

To Starwood Hotels & Resorts Worldwide, Inc.
and Starwood Hotels & Resorts:

We have audited the accompanying consolidated
balance sheets of Starwood Hotels & Resorts Worldwide, Inc.
(a Maryland corporation) and its subsidiaries (the
Company) and Starwood Hotels & Resorts (a
Maryland real estate investment trust) and its subsidiaries (the
Trust) as of December 31, 2001 and 2000, and
the related consolidated statements of operations, comprehensive
income, equity and cash flows of the Company for each of the
three years in the period ended December 31, 2001 and the
consolidated statements of income and cash flows of the Trust
for each of the three years in the period ended
December 31, 2001 as set forth in the accompanying Index to
Financial Statements and Schedules. These financial statements
and schedules are the responsibility of the Companys and
Trusts management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of the Company and the Trust as of December 31,
2001 and 2000, and the results of the Companys and the
Trusts operations and cash flows for each of the three
years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United
States.

Our audits were made for the purpose of forming
an opinion on the basic financial statements taken as a whole.
The schedules listed in the Index to Financial Statements and
Schedules are presented for purposes of complying with the
Securities and Exchange Commissions rules and are not part
of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set
forth therein in relation to the basic financial statements
taken as a whole.



| |                    
| | -------------------
| | ARTHUR ANDERSEN LLP

New York, New York

January 30, 2002


F-2



---



##### Table of Contents






STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.






CONSOLIDATED BALANCE SHEETS


(In millions, except share data)


|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |       |       | 
|---------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                                                                                   |                                                                                                                                                                                              |                           
|                                                                                   |                                                                                                                                                                                              | December 31,              
|                                                                                   |                                                                                                                                                                                              |                           
|                                                                                   |                                                                                                                                                                                              | 2001                       |        | 2000 
|                                                                                   |                                                                                                                                                                                              |                            |        |      
|ASSETS                                                                            
|Current assets:                                                                    |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   | Cash and cash equivalents                                                                                                                                                                    |                            | $      | 157   |       |   | $      | 189   |      
|                                                                                   | Accounts receivable, net of allowance for
	doubtful accounts of $48 and $45                                                                                                                  |                            |        | 432   |       |   |        | 538   |      
|                                                                                   | Inventories                                                                                                                                                                                  |                            |        | 219   |       |   |        | 238   |      
|                                                                                   | Prepaid expenses and other                                                                                                                                                                   |                            |        | 89    |       |   |        | 120   |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   |                                                                                                                                                                                              | Total current assets       |        |       | 897   |   |        |       | 1,085 | 
|Investments                                                                        |                                                                                                                                                                                              |                            | 400    |       |       |   | 412    |      
|Plant, property and equipment, net                                                 |                                                                                                                                                                                              |                            | 7,835  |       |       |   | 7,889  |      
|Goodwill and intangible assets, net                                                |                                                                                                                                                                                              |                            | 2,825  |       |       |   | 2,881  |      
|Other assets                                                                       |                                                                                                                                                                                              |                            | 504    |       |       |   | 430    |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   |                                                                                                                                                                                              | $                          | 12,461 |       |       | $ | 12,697 |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                             
|Current liabilities:                                                               |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   | Short-term borrowings and current maturities of
	long-term debt                                                                                                                              |                            | $      | 332   |       |   | $      | 585   |      
|                                                                                   | Accounts payable                                                                                                                                                                             |                            |        | 225   |       |   |        | 186   |      
|                                                                                   | Accrued expenses                                                                                                                                                                             |                            |        | 556   |       |   |        | 584   |      
|                                                                                   | Accrued salaries, wages and benefits                                                                                                                                                         |                            |        | 154   |       |   |        | 164   |      
|                                                                                   | Accrued taxes and other                                                                                                                                                                      |                            |        | 320   |       |   |        | 326   |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   |                                                                                                                                                                                              | Total current liabilities  |        |       | 1,587 |   |        |       | 1,845 | 
|Long-term debt                                                                     |                                                                                                                                                                                              |                            | 5,227  |       |       |   | 4,957  |      
|Deferred income taxes                                                              |                                                                                                                                                                                              |                            | 1,314  |       |       |   | 1,444  |      
|Other liabilities                                                                  |                                                                                                                                                                                              |                            | 494    |       |       |   | 435    |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   |                                                                                                                                                                                              |                            | 8,622  |       |       |   | 8,681  |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|Minority interest                                                                  |                                                                                                                                                                                              |                            | 41     |       |       |   | 48     |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|Class B exchangeable preferred shares of the
	Trust, at redemption value of $38.50 |                                                                                                                                                                                              |                            | 42     |       |       |   | 117    |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|Commitments and contingencies                                                      |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|Stockholders equity:                                                              |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   | Class A exchangeable preferred shares of the
	Trust; $0.01 par value; authorized 30,000,000 shares;
	outstanding 549,951 and 609,576 shares at December 31, 2001
	and 2000, respectively     |                            |        |      |       |   |        |      |      
|                                                                                   | Corporation common stock; $0.01 par value;
	authorized 1,050,000,000 shares; outstanding 197,718,872 and
	194,485,448 shares at December 31, 2001 and 2000,
	respectively                    |                            |        | 2     |       |   |        | 2     |      
|                                                                                   | Trust Class B shares of beneficial interest;
	$0.01 par value; authorized 1,000,000,000 shares; outstanding
	197,718,872 and 194,485,448 shares at December 31, 2001 and
	2000, respectively |                            |        | 2     |       |   |        | 2     |      
|                                                                                   | Additional paid-in capital                                                                                                                                                                   |                            |        | 4,861 |       |   |        | 4,796 |      
|                                                                                   | Deferred compensation                                                                                                                                                                        |                            |        | (16   | )     |   |        | (4    | )    
|                                                                                   | Accumulated other comprehensive income                                                                                                                                                       |                            |        | (484  | )     |   |        | (353  | )    
|                                                                                   | Accumulated deficit                                                                                                                                                                          |                            |        | (609  | )     |   |        | (592  | )    
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   |                                                                                                                                                                                              | Total stockholders equity |        |       | 3,756 |   |        |       | 3,851 | 
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      
|                                                                                   |                                                                                                                                                                                              | $                          | 12,461 |       |       | $ | 12,697 |      
|                                                                                   |                                                                                                                                                                                              |                            |        |       |       |   |        |      

The accompanying notes to financial statements
are an integral part of the above statements.

F-3



---



##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.






CONSOLIDATED STATEMENTS OF
OPERATIONS


(In millions, except per Share data)


|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |     |  
|-------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ------ | --- | -
|                                                               |                                                                                    |                        
|                                                               |                                                                                    | Year Ended December 31,
|                                                               |                                                                                    |                        
|                                                               |                                                                                    | 2001                    |       | 2000 |  | 1999
|                                                               |                                                                                    |                         |       |      |  |     
|Revenues                                                       |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Owned, leased and consolidated joint venture
	hotels           |                                                                                    | $                       | 3,343 |      |  | $    | 3,659 |   |  | $ | 3,391  |    
|Other hotel and leisure                                        |                                                                                    |                         | 624   |      |  |      | 686   |   |  |   | 438    |    
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|                                                               |                                                                                    |                         | 3,967 |      |  |      | 4,345 |   |  |   | 3,829  |    
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Costs and Expenses                                             |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Owned, leased and consolidated joint venture
	hotels           |                                                                                    |                         | 2,365 |      |  |      | 2,433 |   |  |   | 2,313  |    
|Selling, general, administrative and other                     |                                                                                    |                         | 411   |      |  |      | 403   |   |  |   | 220    |    
|Restructuring and other special charges                        |                                                                                    |                         | 50    |      |  |      |      |   |  |   | 3      |    
|Depreciation                                                   |                                                                                    |                         | 433   |      |  |      | 391   |   |  |   | 370    |    
|Amortization                                                   |                                                                                    |                         | 93    |      |  |      | 90    |   |  |   | 82     |    
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|                                                               |                                                                                    |                         | 3,352 |      |  |      | 3,317 |   |  |   | 2,988  |    
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Operating income                                               |                                                                                    |                         | 615   |      |  |      | 1,028 |   |  |   | 841    |    
|Interest expense, net of interest income of $11,
	$19 and $16. |                                                                                    |                         | (358  | )    |  |      | (420  | ) |  |   | (484   | )  
|Gain (loss) on asset dispositions, net, and
	asset impairments |                                                                                    |                         | (57   | )    |  |      | 2     |   |  |   | 191    |    
|Miscellaneous expense                                          |                                                                                    |                         |      |      |  |      |      |   |  |   | (15    | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|                                                               |                                                                                    |                         | 200   |      |  |      | 610   |   |  |   | 533    |    
|Income tax expense                                             |                                                                                    |                         | (46   | )    |  |      | (201  | ) |  |   | (1,076 | )  
|Minority equity in net income                                  |                                                                                    |                         | (3    | )    |  |      | (8    | ) |  |   | (95    | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Income (loss) from continuing operations                       |                                                                                    |                         | 151   |      |  |      | 401   |   |  |   | (638   | )  
|Discontinued operations:                                       |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|                                                               | Gain (loss) on dispositions, net of tax and
	minority interest of $0,
	$2 and $125 |                         |       |     |  |      |       | 5 |  |   |        | (71 | )
|Extraordinary item, net of tax                                 |                                                                                    |                         | (6    | )    |  |      | (3    | ) |  |   | (32    | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Net income (loss)                                              |                                                                                    | $                       | 145   |      |  | $    | 403   |   |  | $ | (741   | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Earnings (Loss) Per Share 
	Basic                             |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Continuing operations                                          |                                                                                    | $                       | 0.75  |      |  | $    | 1.99  |   |  | $ | (3.41  | )  
|Discontinued operations                                        |                                                                                    |                         |      |      |  |      | 0.02  |   |  |   | (0.38  | )  
|Extraordinary item                                             |                                                                                    |                         | (0.03 | )    |  |      | (0.01 | ) |  |   | (0.17  | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Net income (loss)                                              |                                                                                    | $                       | 0.72  |      |  | $    | 2.00  |   |  | $ | (3.96  | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Earnings (Loss) Per Share 
	Diluted                           |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Continuing operations                                          |                                                                                    | $                       | 0.73  |      |  | $    | 1.96  |   |  | $ | (3.41  | )  
|Discontinued operations                                        |                                                                                    |                         |      |      |  |      | 0.02  |   |  |   | (0.38  | )  
|Extraordinary item                                             |                                                                                    |                         | (0.03 | )    |  |      | (0.01 | ) |  |   | (0.17  | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Net income (loss)                                              |                                                                                    | $                       | 0.70  |      |  | $    | 1.97  |   |  | $ | (3.96  | )  
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Weighted average number of Shares                              |                                                                                    |                         | 201   |      |  |      | 202   |   |  |   | 189    |    
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    
|Weighted average number of Shares assuming
	dilution           |                                                                                    |                         | 206   |      |  |      | 205   |   |  |   | 189    |    
|                                                               |                                                                                    |                         |       |      |  |      |       |   |  |   |        |    

The accompanying notes to financial statements
are an integral part of the above statements.

F-4



---



##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.






CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME


(In millions)


|                                                 |                                                                       |                         |      |      |   |      |      |      |   |   |      |      |  
|------------------------------------------------ | --------------------------------------------------------------------- | ----------------------- | ---- | ---- | - | ---- | ---- | ---- | - | - | ---- | ---- | -
|                                                 |                                                                       |                        
|                                                 |                                                                       | Year Ended December 31,
|                                                 |                                                                       |                        
|                                                 |                                                                       | 2001                    |      | 2000 |   | 1999
|                                                 |                                                                       |                         |      |      |   |     
|Net income (loss)                                |                                                                       | $                       | 145  |      |   | $    | 403  |      |   | $ | (741 | )   
|                                                 |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|Other comprehensive income (loss), net of taxes: |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|Foreign currency translation
	adjustments       |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|                                                 | Foreign currency translation arising during the
	period               |                         |      | (106 | ) |      |      | (104 | ) |   |      | (128 | )
|                                                 | Reclassification adjustment for losses included
	in net income (loss) |                         |      |     |   |      |      |     |   |   |      | 1    |  
|Minimum pension liability adjustment             |                                                                       |                         | (5   | )    |   |      |     |      |   |   |     |     
|Unrealized gains (losses) on securities,
	net   |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|                                                 | Unrealized holding gains (losses) arising
	during the period          |                         |      | 1    |   |      |      | (11  | ) |   |      | 9    |  
|Derivative instruments, net                     |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|                                                 | Change in fair value of derivative instruments                        |                         |      | (21  | ) |      |      |     |   |   |      |     |  
|                                                 |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|                                                 |                                                                       |                         | (131 | )    |   |      | (115 | )    |   |   | (118 | )   
|                                                 |                                                                       |                         |      |      |   |      |      |      |   |   |      |     
|Comprehensive income (loss)                      |                                                                       | $                       | 14   |      |   | $    | 288  |      |   | $ | (859 | )   
|                                                 |                                                                       |                         |      |      |   |      |      |      |   |   |      |     

The accompanying notes to financial statements
are an integral part of the above statements.

F-5



---



##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.






CONSOLIDATED STATEMENTS OF EQUITY


(In millions)


|                             |                                                                                |                |    |             |   |             |   |        |   |            |     |          |   |               |   |              |   |              |   |           |  |          |     |    |   |   |   |   |  |   |       |     |   |   |     |     |   |   |      |      |   |   |      |      |  
|---------------------------- | ------------------------------------------------------------------------------ | -------------- | -- | ----------- | - | ----------- | - | ------ | - | ---------- | --- | -------- | - | ------------- | - | ------------ | - | ------------ | - | --------- |  | -------- | --- | -- | - | - | - | - |  | - | ----- | --- | - | - | --- | --- | - | - | ---- | ---- | - | - | ---- | ---- | -
|                             |                                                                                | Forward Equity |    |             |   |             |   |        |   |            |     |          |   | Accumulated   |   | Retained    
|                             |                                                                                | Contracts      |    | Class B EPS |   | Class A EPS |   | Shares |   | Additional |     |          |   | Other         |   | Earnings    
|                             |                                                                                | and Equity     |    |             |   |             |   |        |   | Paid-in    |     | Deferred |   | Comprehensive |   | (Accumulated
|                             |                                                                                | Put Options    |    | Shares      |   | Amount      |   | Shares |   | Amount     |     | Shares   |   | Amount        |   | Capital      |   | Compensation |   | Income(a) |  | Deficit)
|                             |                                                                                |                |    |             |   |             |   |        |   |            |     |          |   |               |   |              |   |              |   |           |  |         
|Balance at December 31, 1998 |                                                                                | $              | 32 |             |   |             | 4 |        |   | $          | 149 |          |   |               | 4 |              |   | $            |  |           |  |          | 176 |    |   | $ | 4 |   |  | $ | 4,571 |     |   | $ | (1  | )   |   | $ | (120 | )    |   | $ | 2    |     
|                             | Net loss                                                                       |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      |     |   |   |      | (741 | )
|                             | Stock option and restricted stock award
	transactions, net                     |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | 1  |   |   |   |  |  |   |       | 12  |   |   |     | (4  | ) |   |      |     |   |   |      |     |  
|                             | Issuance of equity put options                                                 |                |    | 19          |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       | (13 | ) |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Settlement of equity put options                                               |                |    | (32         | ) |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       | 17  |   |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Share repurchases                                                              |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | (3 | ) |   |   |  |  |   |       | (64 | ) |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Conversion and cancellation of Class A EPS,
	Class B EPS and Partnership Units |                |    |            |   |             |   |       |   |            |     | (13      | ) |               |   |             |   |              |   |          |  |          |     | 5  |   |   |   |  |  |   |       | 14  |   |   |     |    |   |   |      |     |   |   |      |     |  
|                             | SVO acquisition                                                                |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | 10 |   |   |   |  |  |   |       | 248 |   |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Foreign currency translation                                                   |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | (127 | ) |   |      |     |  
|                             | Unrealized gain on securities, net                                             |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | 9    |   |   |      |     |  
|                             | Dividends declared                                                             |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      |     |   |   |      | (117 | )
|                             |                                                                                |                |    |             |   |             |   |        |   |            |     |          |   |               |   |              |   |              |   |           |  |          |     |    |   |   |   |   |  |   |       |     |   |   |     |     |   |   |      |      |   |   |      |     
|Balance at December 31, 1999 |                                                                                |                | 19 |             |   |             | 4 |        |   |            | 136 |          |   |               | 4 |              |   |              |  |           |  |          | 189 |    |   |   | 4 |   |  |   | 4,785 |     |   |   | (5  | )   |   |   | (238 | )    |   |   | (856 | )   
|                             | Net income                                                                     |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      |     |   |   |      | 403  |  
|                             | Stock option and restricted stock award
	transactions, net                     |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | 2  |   |   |   |  |  |   |       | 47  |   |   |     | 1   |   |   |      |     |   |   |      |     |  
|                             | Settlement of equity put options                                               |                |    | (19         | ) |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       | 13  |   |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Share repurchases                                                              |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | (3 | ) |   |   |  |  |   |       | (69 | ) |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Conversion and cancellation of Class A EPS,
	Class B EPS and Partnership Units |                |    |            |   |             |   | (1     | ) |            |     | (19      | ) |               |   | (3           | ) |              |   |          |  |          |     | 6  |   |   |   |  |  |   |       | 20  |   |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Foreign currency translation                                                   |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | (104 | ) |   |      |     |  
|                             | Unrealized loss on securities, net                                             |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | (11  | ) |   |      |     |  
|                             | Dividends declared                                                             |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      |     |   |   |      | (139 | )
|                             |                                                                                |                |    |             |   |             |   |        |   |            |     |          |   |               |   |              |   |              |   |           |  |          |     |    |   |   |   |   |  |   |       |     |   |   |     |     |   |   |      |      |   |   |      |     
|Balance at December 31, 2000 |                                                                                |                |   |             |   |             | 3 |        |   |            | 117 |          |   |               | 1 |              |   |              |  |           |  |          | 194 |    |   |   | 4 |   |  |   | 4,796 |     |   |   | (4  | )   |   |   | (353 | )    |   |   | (592 | )   
|                             | Net income                                                                     |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      |     |   |   |      | 145  |  
|                             | Stock option and restricted stock award
	transactions, net                     |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | 3  |   |   |   |  |  |   |       | 86  |   |   |     | (12 | ) |   |      |     |   |   |      |     |  
|                             | Share repurchases                                                              |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     | (3 | ) |   |   |  |  |   |       | (96 | ) |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Conversion and cancellation of Class A EPS,
	Class B EPS and Partnership Units |                |    |            |   |             |   | (2     | ) |            |     | (75      | ) |               |   |             |   |              |   |          |  |          |     | 4  |   |   |   |  |  |   |       | 75  |   |   |     |    |   |   |      |     |   |   |      |     |  
|                             | Foreign currency translation                                                   |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | (106 | ) |   |      |     |  
|                             | Minimum pension liability adjustment                                           |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | (5   | ) |   |      |     |  
|                             | Unrealized loss on derivative instruments                                      |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | (21  | ) |   |      |     |  
|                             | Unrealized gain on securities, net                                             |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      | 1    |   |   |      |     |  
|                             | Dividends declared                                                             |                |    |            |   |             |   |       |   |            |     |         |   |               |   |             |   |              |   |          |  |          |     |   |   |   |   |  |  |   |       |    |   |   |     |    |   |   |      |     |   |   |      | (162 | )
|                             |                                                                                |                |    |             |   |             |   |        |   |            |     |          |   |               |   |              |   |              |   |           |  |          |     |    |   |   |   |   |  |   |       |     |   |   |     |     |   |   |      |      |   |   |      |     
|Balance at December 31, 2001 |                                                                                | $              |   |             |   |             | 1 |        |   | $          | 42  |          |   |               | 1 |              |   | $            |  |           |  |          | 198 |    |   | $ | 4 |   |  | $ | 4,861 |     |   | $ | (16 | )   |   | $ | (484 | )    |   | $ | (609 | )   
|                             |                                                                                |                |    |             |   |             |   |        |   |            |     |          |   |               |   |              |   |              |   |           |  |          |     |    |   |   |   |   |  |   |       |     |   |   |     |     |   |   |      |      |   |   |      |     



---



|    |                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As of December 31, 2001, this balance is
	comprised of $457 million of cumulative translation
	adjustments, $21 million of cumulative unrealized losses on
	derivative instruments, $1 million of cumulative unrealized
	losses on securities and $5 million of cumulative minimum
	pension liability adjustment.

The accompanying notes to financial statements
are an integral part of the above statements.

F-6



---



##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.






CONSOLIDATED STATEMENTS OF CASH
FLOWS


(In millions)


|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |        |  
|--------------------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ----- | ---- | - | ---- | ------ | ---- | - | - | ------ | ------ | -
|                                                          |                                                                |                        
|                                                          |                                                                | Year Ended December 31,
|                                                          |                                                                |                        
|                                                          |                                                                | 2001                    |       | 2000 |   | 1999
|                                                          |                                                                |                         |       |      |   |     
|Operating Activities                                      |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Net income (loss)                                         |                                                                | $                       | 145   |      |   | $    | 403    |      |   | $ | (741   | )     
|Exclude:                                                  |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Discontinued operations, net                              |                                                                |                         |      |      |   |      | (5     | )    |   |   | 71     |       
|Extraordinary item, net                                   |                                                                |                         | 6     |      |   |      | 3      |      |   |   | 32     |       
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Income (loss) from continuing operations                  |                                                                |                         | 151   |      |   |      | 401    |      |   |   | (638   | )     
|Adjustments to income (loss) from continuing
	operations: |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Depreciation and amortization                                  |                         |       | 526  |   |      |        | 481  |   |   |        | 452    |  
|                                                          | Amortization of deferred loan costs                            |                         |       | 15   |   |      |        | 11   |   |   |        | 16     |  
|                                                          | Amortization of hedge premiums                                 |                         |       | 2    |   |      |        |     |   |   |        |       |  
|                                                          | Non-cash portion of restructuring and other
	special charges   |                         |       | 34   |   |      |        |     |   |   |        | 7      |  
|                                                          | Non-cash foreign currency loss (gain)                          |                         |       | (27  | ) |      |        | 7    |   |   |        | (3     | )
|                                                          | Non-cash portion of Reorganization                             |                         |       |     |   |      |        |     |   |   |        | 936    |  
|                                                          | Provision for doubtful accounts                                |                         |       | 14   |   |      |        | 19   |   |   |        | 9      |  
|                                                          | Minority equity in net income                                  |                         |       | 3    |   |      |        | 8    |   |   |        | 95     |  
|                                                          | Equity income, net of dividends received                       |                         |       | 14   |   |      |        | 13   |   |   |        | (6     | )
|                                                          | Loss (gain) on asset dispositions, net, and
	asset impairments |                         |       | 57   |   |      |        | (2   | ) |   |        | (191   | )
|Changes in working capital:                               |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Accounts receivable                                            |                         |       | 98   |   |      |        | (13  | ) |   |        | 7      |  
|                                                          | Inventories                                                    |                         |       | 6    |   |      |        | (63  | ) |   |        | (17    | )
|                                                          | Accounts payable                                               |                         |       | 34   |   |      |        | (16  | ) |   |        | 37     |  
|                                                          | Accrued expenses                                               |                         |       | (23  | ) |      |        | (37  | ) |   |        | (6     | )
|Accrued and deferred income taxes                         |                                                                |                         | (87   | )    |   |      | 22     |      |   |   | 8      |       
|Other, net                                                |                                                                |                         | (56   | )    |   |      | 21     |      |   |   | (135   | )     
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Cash from continuing operations                                |                         |       | 761  |   |      |        | 852  |   |   |        | 571    |  
|                                                          | Cash from (used for) discontinued operations                   |                         |       |     |   |      |        | 3    |   |   |        | (114   | )
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Cash from operating activities                                 |                         |       | 761  |   |      |        | 855  |   |   |        | 457    |  
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Investing Activities                                      |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Purchases of plant, property and equipment                |                                                                |                         | (477  | )    |   |      | (544   | )    |   |   | (521   | )     
|Proceeds from asset sales, net                            |                                                                |                         | 39    |      |   |      | 261    |      |   |   | 3,853  |       
|Issuance/ collection of notes receivable, net             |                                                                |                         | (23   | )    |   |      | (12    | )    |   |   | 78     |       
|Acquisitions, net of acquired cash                        |                                                                |                         | (51   | )    |   |      | (284   | )    |   |   | (111   | )     
|Investments                                               |                                                                |                         | (77   | )    |   |      | (45    | )    |   |   | (107   | )     
|Other, net                                                |                                                                |                         | (32   | )    |   |      | (35    | )    |   |   | (20    | )     
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Cash from (used for) investing activities                      |                         |       | (621 | ) |      |        | (659 | ) |   |        | 3,172  |  
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Financing Activities                                      |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Revolving credit facility and short-term
	borrowings, net |                                                                |                         | (244  | )    |   |      | 547    |      |   |   | (620   | )     
|Long-term debt issued                                     |                                                                |                         | 1,048 |      |   |      | 231    |      |   |   | 681    |       
|Long-term debt repaid                                     |                                                                |                         | (743  | )    |   |      | (1,015 | )    |   |   | (3,165 | )     
|Settlement of forward equity contracts                    |                                                                |                         |      |      |   |      | (6     | )    |   |   | (16    | )     
|Dividends paid                                            |                                                                |                         | (156  | )    |   |      | (134   | )    |   |   | (116   | )     
|Share repurchases                                         |                                                                |                         | (96   | )    |   |      | (69    | )    |   |   | (64    | )     
|Other, net                                                |                                                                |                         | 22    |      |   |      | 26     |      |   |   | (35    | )     
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Cash used for financing activities                             |                         |       | (169 | ) |      |        | (420 | ) |   |        | (3,335 | )
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Exchange rate effect on cash and cash equivalents         |                                                                |                         | (3    | )    |   |      | (23    | )    |   |   | (15    | )     
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Increase (decrease) in cash and cash
	equivalents         |                                                                |                         | (32   | )    |   |      | (247   | )    |   |   | 279    |       
|Cash and cash equivalents  beginning
	of period          |                                                                |                         | 189   |      |   |      | 436    |      |   |   | 157    |       
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Cash and cash equivalents  end of
	period                |                                                                | $                       | 157   |      |   | $    | 189    |      |   | $ | 436    |       
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Supplemental Disclosures of Cash Flow
	Information        |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|Cash paid during the period for:                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Interest                                                       |                         | $     | 360  |   |      | $      | 403  |   |   | $      | 651    |  
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       
|                                                          | Income taxes, net of refunds                                   |                         | $     | 141  |   |      | $      | 179  |   |   | $      | 132    |  
|                                                          |                                                                |                         |       |      |   |      |        |      |   |   |        |       

The accompanying notes to financial statements
are an integral part of the above statements.

F-7



---



##### Table of Contents






STARWOOD HOTELS & RESORTS






CONSOLIDATED BALANCE SHEETS


(In millions, except share data)


|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |        |       | 
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----- | ------ | ----- | - | ----- | ------ | ----- | 
|                                                                      |                                                                                                                                                                                              |                           
|                                                                      |                                                                                                                                                                                              | December 31,              
|                                                                      |                                                                                                                                                                                              |                           
|                                                                      |                                                                                                                                                                                              | 2001                       |       | 2000  
|                                                                      |                                                                                                                                                                                              |                            |       |       
|ASSETS                                                               
|Current assets:                                                       |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      | Cash and cash equivalents                                                                                                                                                                    |                            | $     | 3      |       |   | $     | 9      |      
|                                                                      | Receivable, Corporation                                                                                                                                                                      |                            |       | 35     |       |   |       | 34     |      
|                                                                      | Prepaid expenses and other                                                                                                                                                                   |                            |       | 1      |       |   |       | 4      |      
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      |                                                                                                                                                                                              | Total current assets       |       |        | 39    |   |       |        | 47    | 
|Investments, Corporation                                              |                                                                                                                                                                                              |                            | 848   |        |       |   | 848   |       
|Investments                                                           |                                                                                                                                                                                              |                            | 30    |        |       |   | 35    |       
|Plant, property and equipment, net                                    |                                                                                                                                                                                              |                            | 4,201 |        |       |   | 4,260 |       
|Long-term receivables, Corporation, net                               |                                                                                                                                                                                              |                            | 1,619 |        |       |   | 1,604 |       
|Goodwill and intangible assets, net                                   |                                                                                                                                                                                              |                            | 233   |        |       |   | 239   |       
|Other assets                                                          |                                                                                                                                                                                              |                            | 14    |        |       |   | 15    |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      |                                                                                                                                                                                              | $                          | 6,984 |        |       | $ | 7,048 |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                
|Current liabilities:                                                  |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      | Short-term borrowings and current maturities of
	long-term debt                                                                                                                              |                            | $     | 36     |       |   | $     | 35     |      
|                                                                      | Accounts payable                                                                                                                                                                             |                            |       | 7      |       |   |       | 5      |      
|                                                                      | Accrued expenses                                                                                                                                                                             |                            |       | 64     |       |   |       | 57     |      
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      |                                                                                                                                                                                              | Total current liabilities  |       |        | 107   |   |       |        | 97    | 
|Long-term debt                                                        |                                                                                                                                                                                              |                            | 447   |        |       |   | 483   |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      |                                                                                                                                                                                              |                            | 554   |        |       |   | 580   |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|Minority interest                                                     |                                                                                                                                                                                              |                            | 31    |        |       |   | 39    |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|Class B exchangeable preferred shares, at
	redemption value of $38.50 |                                                                                                                                                                                              |                            | 42    |        |       |   | 117   |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|Commitments and contingencies                                         |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|Stockholders equity:                                                 |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      | Class A exchangeable preferred shares; $0.01
	par value; authorized 30,000,000 shares; outstanding 549,951 and
	609,576 shares at December 31, 2001 and 2000, respectively                   |                            |       |       |       |   |       |       |      
|                                                                      | Class A shares of beneficial interest; $0.01
	par value; authorized 5,000 shares; outstanding 100 shares at
	December 31, 2001 and 2000.                                                     |                            |       |       |       |   |       |       |      
|                                                                      | Trust Class B shares of beneficial interest;
	$0.01 par value; authorized 1,000,000,000 shares; outstanding
	197,718,872 and 194,485,448 shares at December 31, 2001 and
	2000, respectively |                            |       | 2      |       |   |       | 2      |      
|                                                                      | Additional paid-in capital                                                                                                                                                                   |                            |       | 7,703  |       |   |       | 7,630  |      
|                                                                      | Accumulated deficit                                                                                                                                                                          |                            |       | (1,348 | )     |   |       | (1,320 | )    
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      |                                                                                                                                                                                              | Total stockholders equity |       |        | 6,357 |   |       |        | 6,312 | 
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       
|                                                                      |                                                                                                                                                                                              | $                          | 6,984 |        |       | $ | 7,048 |       
|                                                                      |                                                                                                                                                                                              |                            |       |        |       |   |       |       

The accompanying notes to financial statements
are an integral part of the above statements.

F-8



---



##### Table of Contents



STARWOOD HOTELS & RESORTS






CONSOLIDATED STATEMENTS OF INCOME


(In millions)


|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  
|-------------------------------------------------------------- |  | ----------------------- | --- | ---- |  | ---- | --- | - |  | - | ---- | -
|                                                               |  |                        
|                                                               |  | Year Ended December 31,
|                                                               |  |                        
|                                                               |  | 2001                    |     | 2000 |  | 1999
|                                                               |  |                         |     |      |  |     
|Revenues                                                       |  |                         |     |      |  |      |     |   |  |   |      |  
|Unconsolidated joint ventures and other                        |  | $                       | 3   |      |  | $    | 3   |   |  | $ | 4    |  
|Rent and interest, Corporation                                 |  |                         | 633 |      |  |      | 692 |   |  |   | 787  |  
|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  
|                                                               |  |                         | 636 |      |  |      | 695 |   |  |   | 791  |  
|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  
|Costs and Expenses                                             |  |                         |     |      |  |      |     |   |  |   |      |  
|Selling, general and administrative                            |  |                         | 3   |      |  |      | 3   |   |  |   | 5    |  
|Depreciation                                                   |  |                         | 206 |      |  |      | 183 |   |  |   | 169  |  
|Amortization                                                   |  |                         | 6   |      |  |      | 7   |   |  |   | 6    |  
|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  
|                                                               |  |                         | 215 |      |  |      | 193 |   |  |   | 180  |  
|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  
|                                                               |  |                         | 421 |      |  |      | 502 |   |  |   | 611  |  
|Interest expense, net of interest income of $0 in
	all periods |  |                         | (37 | )    |  |      | (39 | ) |  |   | (47  | )
|Gain (loss) on asset dispositions, net, and
	asset impairments |  |                         | (3  | )    |  |      | 1   |   |  |   | (137 | )
|Income tax expense                                             |  |                         | (4  | )    |  |      | (1  | ) |  |   | (2   | )
|Minority equity in net income                                  |  |                         | (1  | )    |  |      | (3  | ) |  |   | (2   | )
|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  
|Net income                                                     |  | $                       | 376 |      |  | $    | 460 |   |  | $ | 423  |  
|                                                               |  |                         |     |      |  |      |     |   |  |   |      |  

The accompanying notes to financial statements
are an integral part of the above statements.

F-9



---



##### Table of Contents



STARWOOD HOTELS & RESORTS






CONSOLIDATED STATEMENTS OF CASH
FLOWS


(In millions)


|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |      |  
|--------------------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ---- | ---- | - | ---- | ---- | ---- | - | - | ---- | ---- | -
|                                                          |                                                                |                        
|                                                          |                                                                | Year Ended December 31,
|                                                          |                                                                |                        
|                                                          |                                                                | 2001                    |      | 2000 |   | 1999
|                                                          |                                                                |                         |      |      |   |     
|Operating Activities                                      |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Net income                                                |                                                                | $                       | 376  |      |   | $    | 460  |      |   | $ | 423  |     
|Adjustments to net income:                                |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Depreciation and amortization                                  |                         |      | 212  |   |      |      | 190  |   |   |      | 175  |  
|                                                          | Minority equity in net income                                  |                         |      | 1    |   |      |      | 3    |   |   |      | 2    |  
|                                                          | Equity income, net of dividends received                       |                         |      | 3    |   |      |      | 3    |   |   |      | 1    |  
|                                                          | Loss (gain) on asset dispositions, net, and asset
	impairments |                         |      | 3    |   |      |      | (1   | ) |   |      | 137  |  
|Changes in working capital:                               |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Receivable, Corporation                                        |                         |      | (1   | ) |      |      |     |   |   |      | 2    |  
|                                                          | Accounts payable                                               |                         |      | 2    |   |      |      |     |   |   |      | (2   | )
|                                                          | Accrued expenses                                               |                         |      | 2    |   |      |      | (14  | ) |   |      | 33   |  
|Other, net                                                |                                                                |                         | 4    |      |   |      |     |      |   |   | 1    |     
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Cash from operating activities                                 |                         |      | 602  |   |      |      | 641  |   |   |      | 772  |  
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Investing Activities                                      |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Purchases of plant, property and equipment                |                                                                |                         | (169 | )    |   |      | (204 | )    |   |   | (271 | )   
|Proceeds from asset sales, net                            |                                                                |                         | 21   |      |   |      | 54   |      |   |   | 126  |     
|Acquisitions, net of acquired cash                        |                                                                |                         | (6   | )    |   |      |     |      |   |   |     |     
|Investments                                               |                                                                |                         |     |      |   |      | (1   | )    |   |   | (6   | )   
|Collections on notes receivable                           |                                                                |                         |     |      |   |      |     |      |   |   | 56   |     
|Long-term receivables, Corporation                        |                                                                |                         | (10  | )    |   |      | 73   |      |   |   | 60   |     
|Other, net                                                |                                                                |                         |     |      |   |      | 10   |      |   |   | (1   | )   
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Cash used for investing activities                             |                         |      | (164 | ) |      |      | (68  | ) |   |      | (36  | )
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Financing Activities                                      |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Revolving credit facility and short-term
	borrowings, net |                                                                |                         |     |      |   |      |     |      |   |   | (421 | )   
|Long-term debt issued                                     |                                                                |                         |     |      |   |      | 23   |      |   |   | 291  |     
|Long-term debt repaid                                     |                                                                |                         | (35  | )    |   |      | (106 | )    |   |   | (7   | )   
|Dividends paid                                            |                                                                |                         | (156 | )    |   |      | (134 | )    |   |   | (116 | )   
|Dividends paid to Corporation                             |                                                                |                         | (243 | )    |   |      | (338 | )    |   |   | (470 | )   
|Share repurchases                                         |                                                                |                         | (14  | )    |   |      |     |      |   |   |     |     
|Other, net                                                |                                                                |                         | 4    |      |   |      | (10  | )    |   |   | (24  | )   
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Cash used for financing activities                             |                         |      | (444 | ) |      |      | (565 | ) |   |      | (747 | )
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Increase (decrease) in cash and cash equivalents          |                                                                |                         | (6   | )    |   |      | 8    |      |   |   | (11  | )   
|Cash and cash equivalents  beginning
	of period          |                                                                |                         | 9    |      |   |      | 1    |      |   |   | 12   |     
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Cash and cash equivalents  end of
	period                |                                                                | $                       | 3    |      |   | $    | 9    |      |   | $ | 1    |     
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Supplemental Disclosures of Cash Flow
	Information        |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|Cash paid during the period for:                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Interest                                                       |                         | $    | 37   |   |      | $    | 35   |   |   | $    | 36   |  
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     
|                                                          | Income taxes                                                   |                         | $    | 4    |   |      | $    | 1    |   |   | $    | 2    |  
|                                                          |                                                                |                         |      |      |   |      |      |      |   |   |      |     

The accompanying notes to financial statements
are an integral part of the above statements.

F-10



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.

AND STARWOOD HOTELS & RESORTS







NOTES TO FINANCIAL STATEMENTS




|        |                      
|------- | ---------------------
|Note 1. | Basis of Presentation

The accompanying consolidated balance sheets as
of December 31, 2001 and 2000 and the consolidated
statements of operations/income, comprehensive income, equity
and cash flows for the years ended December 31, 2001, 2000
and 1999 represent (i) Starwood Hotels & Resorts
Worldwide, Inc. and its subsidiaries (the
Corporation), including Sheraton Holding Corporation
and its subsidiaries (Sheraton Holding) (formerly
ITT Corporation) and Starwood Hotels & Resorts and its
subsidiaries (the Trust and, together with the
Corporation, Starwood or the Company),
and (ii) the Trust.

In the first quarter of 1998, Starwood completed
two major transactions: the acquisition of Westin
Hotels & Resorts Worldwide, Inc. and certain of its
affiliates (Westin) (the Westin Merger)
and the acquisition of ITT Corporation (the ITT
Merger), currently Sheraton Holding, and as a result is
one of the largest hotel companies in the world and the Trust is
one of the largest real estate investment trusts
(REITs) in the United States. The Companys
principal business is hotels and leisure, which is comprised of
a worldwide hospitality network of more than 700 full-service
hotels as well as vacation ownership resorts primarily serving
two markets: luxury and upscale. The Companys hotel
operations are represented in nearly every major world market.

The Trust was formed in 1969 and elected to be
taxed as a REIT under the Internal Revenue Code (the
Code). In 1980, the Trust formed the Corporation and
made a distribution to the Trusts shareholders of one
share of common stock, par value $0.01 per share, of the
Corporation (a Corporation Share) for each common
share of beneficial interest, par value $0.01 per share, of the
Trust (a Trust Share). Until January 6, 1999,
the Corporation Shares and Trust Shares were paired on a
one-for-one basis and, pursuant to an agreement between the
Corporation and the Trust, could be held or transferred only in
units (Paired Shares) consisting of one Corporation
Share and one Trust Share.

During 1998, Congress enacted tax legislation
that had the effect of eliminating the grandfathering for
certain interests in real property acquired after March 26,
1998 by a formation of a paired share REIT. In
response to this legislation, a reorganization of the
Corporation and the Trust (the Reorganization) was
proposed by the Company and was approved by the Corporation and
Trust shareholders on January 6, 1999. As a result of the
Reorganization, the Trust became a subsidiary of the
Corporation, which indirectly holds all outstanding shares of
the new Class A shares of beneficial interest in the Trust
(Class A Shares). Each outstanding Trust Share
was converted into one share of the new non-voting Class B
shares of beneficial interest in the Trust (a Class B
Share). The Corporation Shares and the Class B Shares
trade together on a one-for-one basis, and pursuant to an
agreement between the Corporation and the Trust, may be
transferred only in units (Shares) consisting of one
Corporation Share and one Class B Share. The Reorganization
was accounted for as a reorganization of two companies under
common control. As such, there was no revaluation of the assets
and liabilities of the combining companies. Unless otherwise
stated herein, all information with respect to Shares refers to
Shares on or since January 6, 1999 and to Paired Shares for
periods before January 6, 1999.

During the first quarter of 1999, the Company
recorded pretax charges of $15 million for costs directly
attributable to the Reorganization, such as legal, accounting
and investment banking fees. As a result of the Reorganization,
the Company also recorded a one-time charge of $936 million
to establish a deferred tax liability relating to the difference
between the book and tax basis in the assets of the Trust.

The Corporation, through its subsidiaries, is the
general partner of, and held, as of December 31, 2001, an
aggregate 97.8% partnership interest in, SLC Operating Limited
Partnership (the Operating Partnership). The Trust,
through its subsidiaries, is the general partner of, and held an
aggregate 97.1% partnership interest in, SLT Realty Limited
Partnership (the Realty Partnership and, together
with the Operating Partnership, the Partnerships) as
of December 31, 2001. The units of the Partnerships
(LP Units) held by the limited

F-11



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

partners of the respective Partnerships are
exchangeable on a one-for-one basis for Shares. At
December 31, 2001, there were approximately
5.9 million LP Units outstanding (including
4.3 million LP Units held by the Corporation). For all
periods presented, the LP Units are assumed to have been
converted to Shares for purposes of calculating basic and
diluted weighted average Shares outstanding.



|        |                                
|------- | -------------------------------
|Note 2. | Significant Accounting Policies

Principles of Consolidation.The accompanying consolidated
financial statements of the Company and the Trust and their
subsidiaries include the assets, liabilities, revenues and
expenses of majority-owned subsidiaries over which the Company
and/or the Trust exercise control, and for which control is
other than temporary. Intercompany transactions and balances
have been eliminated in consolidation.

Cash and Cash Equivalents.The Company considers all highly
liquid investments purchased with an original maturity of three
months or less to be cash equivalents.

Inventories.Inventories are comprised
principally of vacation ownership interests (VOIs)
and hotel operating supplies. VOI inventory is carried at cost,
which is lower than fair value less cost to sell. Operating
supplies are generally valued at the lower of cost (first-in,
first-out) or market. Potential losses from obsolete and
slow-moving inventories are provided for in the current period.

Investments.Investments in partnerships and
joint ventures are accounted for using the equity method of
accounting when the Company has a 20% to 50% ownership interest
or exercises significant influence over the venture. If the
Companys interest exceeds 50% and the Company exercises
control over the venture, the results of the partnership or
joint venture are consolidated herein. All other investments are
generally accounted for under the cost method.

Equity in earnings of unconsolidated subsidiaries
accounted for on the equity basis was $20 million,
$37 million and $32 million in 2001, 2000 and 1999,
respectively, and is included in hotel and leisure revenues in
the accompanying consolidated financial statements.

The fair market value of investments is based on
the market prices for the last day of the period if the
investment trades on quoted exchanges. For non-traded
investments, fair value is estimated based on the underlying
value of the investment, which is dependent on the performance
of the companies or ventures in which the Company has invested,
as well as the volatility inherent in external markets for these
types of investments.

In assessing potential impairment for these
investments, the Company will consider these factors as well as
forecasted financial performance of its investees. If these
forecasts are not met, the Company may have to record impairment
charges. Thus, the carrying value of other investments
approximates fair value based on market prices and the value of
the underlying collateral.

Plant, Property and Equipment.Plant, property and equipment,
including capitalized interest of $7 million,
$3 million and $8 million in 2001, 2000 and 1999,
respectively, applicable to major project expenditures, are
recorded at cost. The cost of improvements that extend the life
of plant, property and equipment are capitalized. These
capitalized costs may include structural improvements, equipment
and fixtures. Costs for normal repairs and maintenance are
expensed as incurred. Depreciation is provided on a
straight-line basis over the estimated useful economic lives of
15 to 40 years for buildings and improvements; 3 to
10 years for furniture, fixtures and equipment; and the
lesser of the lease term or 40 years for leasehold
improvements. Gains or losses on the sale or retirement of
assets are included in income when the assets are sold provided
there is reasonable assurance of the collectibility of the sales
price and any future activities to be performed by the Company
relating to the hotel assets sold are insignificant.

F-12



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

The Company evaluates the carrying value of each
of the Companys assets for impairment. For assets in use,
the expected undiscounted future cash flows of the assets are
compared to the net book value of the assets. If the expected
undiscounted future cash flows are less than the net book value
of the assets, the excess of the net book value over the
estimated fair value is charged to current earnings. When assets
are identified by management as held for sale, the Company
discontinues depreciating the assets and estimates the fair
value of such assets. If, in managements opinion, the fair
value of the assets which have been identified for sale is less
than the net book value of the assets, the carrying value of the
assets is reduced to fair value. Fair value is determined based
upon discounted cash flows of the assets at rates deemed
reasonable for the type of property and prevailing market
conditions, appraisals and, if appropriate, current estimated
net sales proceeds from pending offers.

Goodwill and Intangible Assets.Goodwill and intangible assets
arise in connection with acquisitions, including the acquisition
of management contracts, and are amortized using the
straight-line method over the useful life of the asset.
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. In accordance
with this guidance, the Company will cease amortizing goodwill
and intangible assets with indefinite lives. Intangible assets
with finite lives will continue to amortize on a straight-line
basis over their respective useful lives. The Company will also
review all goodwill and intangible assets for impairment by
comparisons of fair value to book value annually, or upon the
occurrence of a trigger event. Impairments will be recognized in
operating results. In connection with the adoption of this
standard, the Company has completed its initial recoverability
test on goodwill and intangible assets, which did not result in
any impairment write-downs. Estimates based on existing goodwill
and intangible assets indicate that adoption will result in an
annual increase in net income of approximately $64 million
in 2002.

Frequent Guest Program.Starwood Preferred Guest®
(SPG) is the Companys frequent guest incentive
marketing program. SPG members earn points based on their
spending at the Companys properties and, to a lesser
degree, through participation in affiliated partners
programs, such as those offered by airlines. Points can be
redeemed at most Company owned, leased, managed and franchised
properties; however, points cannot be redeemed for cash.

SPG is provided as a marketing program to the
Companys properties. The cost of operating the program,
including the estimated cost of award redemption, is charged to
properties based on members qualifying expenditures.
Revenue is recognized by participating hotels and resorts when
points are redeemed for hotel stays.

The Company, through the services of third-party
actuarial analysts, determines the fair value of the future
redemption obligation based on statistical formulas which
project timing of future point redemption based on historical
experience, including an estimate of the breakage
for points that will never be redeemed, and an estimate of the
points that will eventually be redeemed. These factors determine
the required liability for outstanding points. The
Companys management and franchise agreements require that
the Company be reimbursed currently for the costs of operating
the program, including marketing, promotion, communications
with, and performing member services for the SPG members. Actual
expenditures for SPG may differ from the actuarially determined
liability.

The liability for the SPG program is included in
other long-term liabilities and accrued expenses in the
accompanying consolidated balance sheets. The total actuarially
determined liability as of December 31, 2001 and 2000 is
$159 million and $137 million, respectively.

Derivative Financial Instruments.Effective January 1, 2001,
the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended
by SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, which
established new accounting

F-13



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

rules and disclosure requirements for most
derivative instruments and hedging activities. The adoption of
SFAS No. 133, as amended, resulted in an initial reduction
of other comprehensive income of approximately $6.2 million
but did not impact earnings. The Company enters into interest
rate swap agreements to manage interest rate exposure. The net
settlements to be paid or received under these agreements are
accrued consistent with the terms of the agreements and are
recognized in interest expense over the term of the related
debt. The related fair value of the swaps is included in other
liabilities or assets.

The Company enters into foreign currency forward
contracts and foreign currency swaps as a means of hedging
exposure to foreign currency fluctuations. All foreign currency
forward contracts have an inverse correlation to the hedged
items and are designated as, and considered effective as, hedges
of the underlying assets or liabilities. Changes in the value of
the derivative instruments designated as hedges of foreign
currency denominated assets and liabilities are classified in
the same manner as the classification of the changes in the
underlying assets and liabilities. Discounts or premiums related
to the contracts are recognized in income over the life of the
contract.

The Company does not enter into derivative
financial instruments for trading or speculative purposes and
monitors the financial stability and credit standing of its
counterparties.

Foreign Currency Translation.Balance sheet accounts are
translated at the exchange rates in effect at each year-end and
income and expense accounts are translated at the average rates
of exchange prevailing during the year. The national currencies
of foreign operations are generally the functional currencies.
Gains and losses from foreign currency translation and the
effect of exchange rate changes on intercompany transactions of
a long-term investment nature are generally included as a
separate component of stockholders equity. Gains and
losses from foreign currency translation of intercompany
receivables and payables that are not of a long-term investment
nature are reported currently in costs and expenses and amounted
to a gain (loss) of $27 million, $(7) million and
$3 million in 2001, 2000 and 1999, respectively. The
$27 million gain in 2001 includes a $24 million gain
recorded in selling, general, administrative and other expenses
related to the translation of U.S. dollar intercompany
receivables in Argentina as a result of the devaluation of the
Argentine Peso. Gains and losses from foreign currency
transactions are reported currently in costs and expenses and
were insignificant for all periods presented.

Income Taxes.Under the asset and liability
method of accounting for income taxes, deferred tax assets and
liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets, including net
operating loss carryforwards, and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period when
the new rate is enacted.

The Trust has elected to be treated as a REIT
under the provisions of the Code. As a result, the Trust is not
subject to federal income tax on its taxable income at corporate
rates provided it distributes annually all of its taxable income
to its shareholders and complies with certain other requirements.

F-14



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Earnings Per Share.The following reconciliation of
basic earnings per Share to diluted earnings per Share for
income (loss) from continuing operations assumes the conversion
of LP Units to Shares (in millions, except per Share data):

|                                               |                             |                         |     |        |  |           |     |          |  |        |      |           |  |          |     |        |  |           |     |   |  |   |      |  |  |   |      |   |  |  |     |   |  |   |       |   | 
|---------------------------------------------- | --------------------------- | ----------------------- | --- | ------ |  | --------- | --- | -------- |  | ------ | ---- | --------- |  | -------- | --- | ------ |  | --------- | --- | - |  | - | ---- |  |  | - | ---- | - |  |  | --- | - |  | - | ----- | - | 
|                                               |                             |                        
|                                               |                             | Year Ended December 31,
|                                               |                             |                        
|                                               |                             |                         |     |        |  |          
|                                               |                             | 2001                    |     | 2000   |  | 1999(c)  
|                                               |                             |                         |     |        |  |          
|                                               |                             | Earnings                |     | Shares |  | Per Share |     | Earnings |  | Shares |      | Per Share |  | Earnings |     | Shares |  | Per Share
|                                               |                             |                         |     |        |  |           |     |          |  |        |      |           |  |          |     |        |  |          
|Income (loss) from continuing operations       |                             | $                       | 151 |        |  |           |     |          |  |        |      |           |  | $        | 401 |        |  |           |     |   |  |   |      |  |  | $ | (638 | ) |  |  |     |   |  |   |       |  
|Dividends on Class A EPS(a)and
	Class B EPS(b) |                             |                         |    |        |  |           |     |          |  |        |      |           |  |          |    |        |  |           |     |   |  |   |      |  |  |   | (5   | ) |  |  |     |   |  |   |       |  
|                                               |                             |                         |     |        |  |           |     |          |  |        |      |           |  |          |     |        |  |           |     |   |  |   |      |  |  |   |      |   |  |  |     |   |  |   |       |  
|Basic earnings (loss)                          |                             |                         | 151 |        |  |           | 201 |          |  | $      | 0.75 |           |  |          | 401 |        |  |           | 202 |   |  | $ | 1.99 |  |  |   | (643 | ) |  |  | 189 |   |  | $ | (3.41 | )
|Effect of dilutive securities:                 |                             |                         |     |        |  |           |     |          |  |        |      |           |  |          |     |        |  |           |     |   |  |   |      |  |  |   |      |   |  |  |     |   |  |   |       |  
|                                               | Employee stock options      |                         |     |       |  |           |     | 5        |  |        |      |           |  |          |     |       |  |           |     | 3 |  |   |      |  |  |   |      |  |  |  |     |  |  |   |       |   | 
|                                               | Class A EPS and Class B EPS |                         |     |       |  |           |     |         |  |        |      |           |  |          |     |       |  |           |     |  |  |   |      |  |  |   |      |  |  |  |     |  |  |   |       |   | 
|                                               |                             |                         |     |        |  |           |     |          |  |        |      |           |  |          |     |        |  |           |     |   |  |   |      |  |  |   |      |   |  |  |     |   |  |   |       |  
|Diluted earnings (loss)                        |                             | $                       | 151 |        |  |           | 206 |          |  | $      | 0.73 |           |  | $        | 401 |        |  |           | 205 |   |  | $ | 1.96 |  |  | $ | (643 | ) |  |  | 189 |   |  | $ | (3.41 | )
|                                               |                             |                         |     |        |  |           |     |          |  |        |      |           |  |          |     |        |  |           |     |   |  |   |      |  |  |   |      |   |  |  |     |   |  |   |       |  



---



|    |                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Class A Exchangeable Preferred Shares.                                                                                                                                                                
|   
|(b) | Class B Exchangeable Preferred Shares.                                                                                                                                                                
|   
|(c) | For the period ended December 31, 1999,
	8 million Class A and B EPS and 1 million stock
	options were excluded from the computations of diluted earnings
	per Share as the effects were antidilutive.

In April 2001, the Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board
(FASB) issued Topic No. D-95, Effect of
Participating Convertible Securities on the Computation of Basic
Earnings Per Share. EITF Topic No. D-95 clarifies
SFAS No. 128, Earnings Per Share, as it relates
to convertible securities that participate in the Companys
dividends. The EITF Topic notes that these securities should be
included in the computation of basic earnings per share, if
dilutive. Prior to the adoption of this Topic, the Company
included these securities (Class A and B EPS) in the
computation of diluted earnings per share. Prior periods
affected by this EITF Topic have been restated. The adoption of
this Topic had no effect on diluted earnings per share.

Revenue Recognition.The Companys revenues are
primarily derived from the following sources: (1) hotel and
resort revenues at the Companys owned, leased and
consolidated joint venture properties; (2) management and
franchise fees; (3) vacation ownership revenues; and
(4) other revenues which are ancillary to the
Companys operations. Generally, revenues are recognized
when the services have been rendered. The following is a
description of the composition of revenues for the Company:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Owned, Leased and Consolidated Joint
	Ventures  Represents revenue primarily derived from
	hotel and leisure operations, including the rental of rooms and
	food and beverage sales, from a worldwide network of owned,
	leased or consolidated joint venture hotels and resorts operated
	primarily under the Companys proprietary brand names
	including St. Regis, The Luxury Collection, Sheraton,
	Westin, W and Four Points by Sheraton. Revenue is recognized
	when rooms are occupied and services have been rendered.
|
| |  | Management and Franchise Fees 
	Represents fees earned on hotels managed worldwide, usually
	under long-term contracts with the hotel owner, and franchise
	fees received in connection with the franchise of the
	Companys Sheraton, Westin and Four Points by Sheraton
	brand names. Management fees are comprised of a base fee, which
	is generally based on a percentage of gross revenues, and an
	incentive fee, which is generally based on the propertys
	profitability. Base fee revenues are recognized           

F-15



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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | when earned in accordance with the terms of the
	contract. For any time during the year, incentive fees are
	recognized for the fees due as if the contract was terminated at
	that date, exclusive of any termination fees due or payable.
	Franchise fees are generally based on a percentage of hotel room
	revenues and are recognized in accordance with SFAS No. 45,
	Accounting for Franchise Fee Revenue, as the fees
	are earned and become due from the franchisee. Management and
	franchise fees are recognized in other hotel and leisure
	revenues in the consolidated statements of operations.                                                                                                                                                      
|
| |  | Vacation Ownership  The Company
	recognizes revenue from VOI sales in accordance with SFAS
	No. 66, Accounting for Sales of Real Estate.
	The Company recognizes sales when a minimum of 10% of the
	purchase price for the VOI has been received, the period of
	cancellation with refund has expired and receivables are deemed
	collectible. For sales that do not qualify for full revenue
	recognition as the project has progressed beyond the preliminary
	stages but has not yet reached completion, all revenue and
	profit are initially deferred and recognized in earnings through
	the percentage-of-completion method. Vacation ownership revenues
	are recognized in other hotel and leisure revenues in the
	consolidated statements of operations.

Self-Insurance.Through its captive insurance
company, the Company provides insurance coverage for
workers compensation, property and general liability
claims arising at hotel properties owned or managed by the
Company through policies written directly and through assumed
reinsurance arrangements. Estimated insurance claims payable
represent outstanding claims and those estimated to have been
incurred but not reported based upon historical loss experience.
Actual costs may vary from estimates based on trends of losses
for filed claims and claims estimated to be incurred but not yet
filed. Estimated costs of these self-insurance programs are
accrued, based on the analysis of third-party actuaries.

Use of Estimates.The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States 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 prior years financial statements to
conform to the current year presentation.

Impact of Recently Issued Accounting
Standards.In response to a FASB
staff announcement in November 2001, the Company is in the
process of reviewing the reporting of the reimbursement of costs
incurred on behalf of managed hotel property owners and
franchisees. The Company expects to record the reimbursements
received as revenues and the costs incurred on behalf of managed
hotel property owners and franchisees as expenses commencing in
the first quarter of 2002. These costs relate primarily to
payroll costs at managed properties where the Company is the
employer. Although the Company is in the process of summarizing
such amounts, it estimates that revenues and expenses would have
been between $700 million and $900 million higher had
the change been made in 2001. The impact on years prior to 2001
is still being accumulated since such information is not readily
determinable from the Companys existing financial
reporting systems. Upon application of this staff announcement,
comparative financial statements for prior periods will be
reclassified to conform with the presentation in the 2002
financial statements. Since the reimbursements are made based
upon the costs incurred with no added margin, the adoption of
this guidance will have no effect on the operating income, total
or per Share net income, cash flows or financial position of the
Company.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The new rules apply to the
classification and impairment analysis conducted on long-lived
assets other than intangible assets and became effective
January 1, 2002. The new rules provide a single

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

accounting treatment for the impairment of
long-lived assets and implementation guidance regarding
impairment calculations. This statement also modifies accounting
and disclosure requirements for discontinued operations. The
adoption of SFAS No. 144 is not anticipated to have a
material impact on the Company.

Note 3.     Acquisitions

Acquisition of Sheraton Centre Toronto.In April 2001, the Company
completed the acquisition of the remaining 50% interest not
previously owned by the Company in the 1,377-room Sheraton
Centre Toronto for $75 million Canadian dollars
(approximately U.S. $48 million based on exchange rates at
the time). The Company accounted for the acquisition as a step
acquisition in accordance with Accounting Principles Board
(APB) Opinion No. 16, Business
Combinations. The results of the acquisition have been
included in the accompanying consolidated financial statements
since the acquisition date.

Acquisition of Royal Orchid Hotel.In April 2001, the Company
completed the acquisition of 44% of an entity which owns the
Royal Orchid Hotel in Bangkok, Thailand for $27 million.

Acquisition of CIGA S.p.A.In June 2000, the Company
completed the acquisition of the minority ownership interest of
CIGA S.p.A. (CIGA) not previously owned by Starwood.
The aggregate purchase price of the incremental shares was
approximately $312 million. The Company accounted for the
acquisition of the outstanding CIGA shares as a step acquisition
in accordance with APB Opinion No. 16, resulting in an
allocation to property and goodwill of approximately
$102 million. The results of the acquisition have been
included in the accompanying consolidated financial statements
since the acquisition date.

Acquisition of Starwood Vacation Ownership,
Inc.On October 1, 1999, the
Company completed the acquisition of Starwood Vacation
Ownership, Inc. (formerly Vistana, Inc.) (SVO),
whereby SVO merged with and into a subsidiary of the Corporation
and thereby became a wholly owned subsidiary of the Corporation.
The Company financed the acquisition of SVO with cash of
approximately $110 million, the assumption of approximately
$280 million of debt and the issuance of approximately
10.1 million Shares. SVOs principal operations
include the acquisition, development and operation of vacation
ownership resorts; marketing and selling VOIs in the resorts;
and providing financing to customers who purchase such
interests. The Company accounted for the acquisition of SVO as a
purchase in accordance with APB Opinion No. 16. As such,
the carrying values of the assets acquired (including net cash
of approximately $35 million) and liabilities assumed were
recorded at fair market value, resulting in goodwill of
approximately $256 million. The results of SVOs
operations have been included in the accompanying financial
statements since the acquisition date.

The pro forma effect on the Companys
revenues, net income and earnings per Share, as though these
acquisitions occurred as of January 1 of the respective
years, is not material.

Note 4.     Gain
(Loss) on Asset Dispositions, Net, and Asset
Impairments

Due to the September 11, 2001 terrorist
attacks in New York, Washington, D.C. and Pennsylvania (the
September 11 Attacks) and the weakening of the
U.S. economy, the Company conducted a comprehensive review of
the carrying value of certain assets for potential impairment.
As a result, the Company recorded a net charge relating
primarily to the impairment of certain investments in the fourth
quarter of 2001 totaling $57 million.

In September and October of 1999, the Company
sold its 52.8% stake in Lampsa, SA, a Greek company that owns
the Grande Bretagne Hotel in Athens, Greece. The Company owned
its interest in Lampsa, SA through its then 70.3% ownership of
CIGA. The Company received gross proceeds (before minority
interest) of approximately $287 million as a result of this
sale and recorded a pretax gain (before minority interest) of
$276 million.

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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

During 2001 and 2000, the Company sold one and
seven hotels, respectively. The Company recorded a net gain on
these sales of $2 million in 2000, which includes an
impairment write-down of the hotel subsequently sold in early
2001.

Note 5.     Asset
Securitizations

The Company accounted for asset securitizations
as sales under SFAS No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities, through March 31, 2001 and accounts for
these transactions under SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities  a Replacement of FASB Statement
No. 125, thereafter.

During 2001, the Company sold, without recourse,
through a bankruptcy-remote qualified special purpose entity
(QSPE), notes receivable originated by the
Companys vacation ownership operations in connection with
the sale of VOIs. The Company continues to service the notes.
The Company retains interests in the securitizations in the form
of over-collateralization and interest-only strips
(Beneficial Interests), both of which provide credit
enhancement to the third party investors in the QSPE. The
Companys right to receive cash flows from these Beneficial
Interests is limited to cash available after paying the
QSPEs financing expenses, program fees and absorbing the
QSPEs credit losses. Gains from the sales of notes
receivable totaled $12 million in 2001 and are included in
other hotel and leisure revenues in the consolidated statements
of operations.

At the date of securitization and at the end of
each reporting period, the Company estimates the fair value of
the Beneficial Interests using a discounted cash flow model. The
Beneficial Interests are debt securities that are accounted for
under the provisions of SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and
classified as either available-for-sale or
trading. The Company has elected to classify the
Beneficial Interests as trading securities with
changes in fair values reported through operating results.
During the year ended December 31, 2001, the Company
recognized a $2 million gain, included in gain (loss) on
asset dispositions, net, and asset impairments relating to
changes in the fair value of these Beneficial Interests. The key
assumptions used in measuring the fair value of the Beneficial
Interests at the time of securitization and at the end of each
reporting period during the year ended December 31, 2001,
were as follows: discount rate of 16.0%; annual prepayment rate
based upon a curve, which yields an average expected life of
prepayable notes receivable of 70 months; and expected annual
gross credit losses of 1.7%. The key assumptions are based on
historical experience. To date, actual results compared with the
assumptions used at the time of securitization have not
materially affected the carrying value of the Beneficial
Interests.

Cash flows between the Company and the QSPE
during the year ended December 31, 2001 were as follows:
net proceeds to the Company from new securitizations of
$202 million, servicing fees received of $1 million
and cash flows received on Beneficial Interests of
$10 million.

At December 31, 2001, $192 million of
principal remains outstanding in all securitizations in which
the Company has a Beneficial Interest. Delinquencies of more
than 90 days at December 31, 2001 amounted to
$5 million. The Company has been able to resell vacation
ownership units underlying repurchased loans without incurring
material losses.

The Company has completed a sensitivity analysis
on the net present value of the Beneficial Interests with the
objective of measuring the change in value associated with
independent changes in individual key variables. The methodology
used applied unfavorable changes that would be considered
statistically significant for the key variables of prepayment
rate, discount rate and expected gross credit losses. The net
present value of the Beneficial Interests was $31 million
at December 31, 2001, before any sensitivity analysis
changes were applied. An increase of 100 basis points in
the annual prepayment rate would decrease the year-end valuation
by $0.3 million, or 1.0%, and an increase of 200 basis
points in the annual prepayment rate would decrease the

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

year-end valuation by $0.6 million, or 1.9%.
An increase of 100 basis points in the discount rate would
decrease the year-end valuation by $0.4 million, or 1.3%,
and an increase of 200 basis points in the discount rate
would decrease the year-end valuation by $0.9 million, or
3.0%. An increase of 100 basis points in the expected gross
annual rate of credit losses would decrease the year-end
valuation by $2.1 million, or 6.8%, and an increase of
200 basis points in the expected credit losses would
decrease the year-end valuation by $4.3 million, or 14.0%.
These estimates should not be considered predictions of how the
value of the Companys Beneficial Interests would actually
change in the future as they do not consider the interaction of
these factors which may move independently of each other.

The Company also periodically sells, without
recourse, through special purpose entities (SPEs),
notes receivable originated by the Companys vacation
ownership operations in connection with the sale of VOIs. The
Company continues to service the notes. The Company also holds
retained interests in these mortgage-receivable sales
(Retained Interests). The Companys right to
receive cash flows from these Retained Interests are limited to
cash available after paying the related SPEs financing
expenses, program fees and absorbing the related SPEs
credit losses. Gains from such sales totaled $0 in 2001,
$14 million in 2000 and $6 million in 1999 and are
included in other hotel and leisure revenues in the consolidated
statements of operations. In connection with the 2001
securitization, the Company repurchased all existing receivables
under the SPEs.

Note 6.     Discontinued
Operations

Gaming.On
December 30, 1999, the sale of Caesars World, Inc.
(Caesars) was completed. On June 23, 2000, the
sale of the Desert Inn Resort & Casino (the Desert
Inn) was completed (together with the sale of Caesars, the
Gaming Dispositions). The Company received
approximately $3.3 billion in proceeds from the Gaming
Dispositions which was used to pay off $2.5 billion of
increasing rate notes and to reduce its bank revolver. These
sales constituted the disposition of Starwoods gaming
operations.

As a result of the Gaming Dispositions, the
accompanying consolidated financial statements were restated in
1999 to reflect the results of operations and net assets of the
gaming segment as a discontinued operation. This restatement
includes the allocation of long-term debt of $165 million
for the year ended December 31, 1999 and the related
interest expense of $6 million and $163 million for
the years ended December 31, 2000 and 1999, respectively,
to the discontinued gaming operations. These allocations were
based upon the ratio of net gaming segment assets to the
Companys total capitalization. During the first quarter of
1999, the Company provided for estimated after-tax losses on the
disposal of the discontinued gaming operations of
$180 million ($158 million pretax), which included
anticipated operating income of approximately $50 million
prior to the disposal. In the fourth quarter of 1999, the
Company provided for additional losses on the sale of its gaming
operations in the amount of $55 million (including tax of
$9 million), primarily due to the delay in the closing of
the sale, lower than estimated operating profits prior to the
sale and certain adjustments to the sale price made at closing.
Additionally, the Company provided for additional losses on the
disposal of the Desert Inn of $9 million (net of a
$5 million tax benefit), primarily as a result of
additional anticipated operating losses prior to the sale.
During 2000, the Company reversed $5 million (after-tax) of
the amount previously provided related to these dispositions
following the finalization of the purchase price with the buyers.

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Summary financial information of the discontinued
gaming operations is as follows (in millions):

|                                               |  |                  |    |              |  |   |       |  
|---------------------------------------------- |  | ---------------- | -- | ------------ |  | - | ----- | -
|                                               |  | Period from      |    | Year Ended  
|                                               |  | January 1, 2000  |    | December 31,
|                                               |  | to June 23, 2000 |    | 1999        
|                                               |  |                  |    |             
|Income Statement Data                          |  |                  |    |              |  |   |       |  
|Revenues                                       |  | $                | 57 |              |  | $ | 1,541 |  
|Operating income (loss)                        |  | $                | (3 | )            |  | $ | 154   |  
|Interest expense, including allocated interest |  | $                | (6 | )            |  | $ | (174  | )
|Income tax benefit (expense)                   |  | $                | 1  |              |  | $ | (11   | )
|Minority equity in net loss                    |  | $                |   |              |  | $ | 4     |  
|Loss from discontinued operations              |  | $                | (8 | )            |  | $ | (27   | )

ITT Educational Services, Inc.In February 1999, the Company
completed the sale of its remaining interest in ITT Educational
Services, Inc. (Educational Services), selling
8.0 million shares of common stock of Educational Services
in an underwritten public offering at a price per share of
$34.00 and sold 1.5 million shares of common stock at
$32.73 per share directly to Educational Services. Starwood
received aggregate net proceeds of approximately
$310 million from these transactions, which were used to
repay a portion of the Companys outstanding debt. The
Company recognized a gain of $272 million, before income
taxes of $99 million, on the sale.

Note 7.     Goodwill
and Intangible Assets

Goodwill and intangible assets consisted of the
following (in millions):

|                                    |  |              |       |      |  |   |       |  
|----------------------------------- |  | ------------ | ----- | ---- |  | - | ----- | -
|                                    |  |             
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 2001         |       | 2000
|                                    |  |              |       |     
|Goodwill                            |  | $            | 2,737 |      |  | $ | 2,761 |  
|Trademarks and trade names          |  |              | 226   |      |  |   | 226   |  
|Management and franchise agreements |  |              | 143   |      |  |   | 128   |  
|Other                               |  |              | 57    |      |  |   | 15    |  
|                                    |  |              |       |      |  |   |       |  
|                                    |  |              | 3,163 |      |  |   | 3,130 |  
|Accumulated amortization            |  |              | (338  | )    |  |   | (249  | )
|                                    |  |              |       |      |  |   |       |  
|                                    |  | $            | 2,825 |      |  | $ | 2,881 |  
|                                    |  |              |       |      |  |   |       |  

Prior to the adoption of SFAS No. 142,
goodwill and trademarks and trade names were amortized on a
straight-line basis over a 40-year period. Commencing
January 1, 2002, goodwill and trademarks and trade names,
which are deemed intangible assets with an indefinite life, are
no longer amortized. Intangible assets associated with
management and franchise contracts are amortized on a
straight-line basis over the initial life of the respective
contract.

Note 8.     Extraordinary
Item

During the second quarter of 2001, the Company
prepaid $500 million on the Tranche II Senior Secured
Notes Facility, resulting in an extraordinary loss on the early
extinguishment of debt of $9 million (pretax).

During the first quarter of 2000, the Company
prepaid $28.4 million on a mortgage loan resulting in an
extraordinary loss on the early extinguishment of debt of
$3 million (pretax).

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

In December 1999, the Company used the proceeds
from the sale of Caesars to pay off $2.5 billion of
increasing rate notes. This early extinguishment of debt
required termination fees of $38 million and the write-off
of $10 million of deferred loan fees associated with this
debt. This $48 million (pretax) charge was recorded in
December 1999 as an extraordinary loss on the early
extinguishment of debt.

In August 1999, Caesars redeemed its senior
subordinated notes for an aggregate payment of
$152 million, recognizing an extraordinary loss of $3
million (pretax).

Note 9.     Restructuring
and Other Special Charges

At December 31, 2001, the Company has
remaining accruals related to restructuring and other special
charges, described below, of $98 million, $21 million of
which is included in other long-term liabilities in the
accompanying 2001 consolidated balance sheet. These accruals
consist of $65 million for certain litigation costs and
$33 million primarily related to severance payouts in
connection with the 2001 reduction in force and remaining lease
commitments which expire through 2006.

2001 Restructuring and Other Special
Charges.During 2001, the Company
recorded restructuring and other special charges of
$70 million (pretax), primarily related to the
September 11 Attacks and the resulting decline in
industry-wide demand, including a $23 million
(pretax) write-down of the Companys investments in
various e-business ventures. These charges were offset by the
reversal of a $20 million (pretax) bad debt charge
taken in 1998 related to a note receivable, which is now fully
performing.

Due to the September 11 Attacks and the
weakening of the U.S. economy, the Company began analyzing and
implementing a cost reduction plan and conducted a comprehensive
review of the carrying value of certain assets for potential
impairment, resulting in restructuring and other special charges
aggregating approximately $47 million. These charges
consisted primarily of severance and retention costs
(approximately $25 million); bad debt expense associated
with receivables no longer deemed collectible (approximately
$17 million); and impairments of certain investments and
other assets (approximately $5 million). Approximately
$14 million of these special items represent cash charges,
with the remaining amount being non-cash.

1999 Restructuring and Other Special
Charges (Credits).During 1999,
the Company recorded restructuring charges of $5 million
(pretax) attributed to the rationalization of one of its
technology centers. In addition, the Company recorded other
special charges of $13 million attributed to severance
benefits for the former President and Chief Operating Officer of
the Corporation and $75 million attributed primarily to an
accrual for certain litigation costs related to an unfavorable
judgment in a matter involving the former Sheraton hotel in
Washington, D.C. as well as expected legal costs associated with
the Intelnet International Corporation (Intelnet)
dispute (see Note 20).

ITT Merger-Related Charges (Credits).In connection with the ITT Merger,
the Company recorded restructuring and other special charges
totaling $172 million (pretax) in 1998 for ITT
Merger-related costs and the write-down of certain assets.
During 1999, the Company reversed $8 million of these
charges as the ITT Merger costs were less than originally
anticipated.

During 1997, Sheraton Holding recorded special
charges as a result of the ITT Merger for conversion of the
accounting of Sheraton Holdings stock option plan to
variable accounting due to limited stock appreciation rights
subject to exercise and related charges for tax reimbursements
to employees of $404 million. During 1999, the Company reversed
approximately $50 million in accruals related to the
resolution of certain employment related contingencies.

Other Sheraton Holding Restructuring and
Other Special Charges (Credits).During 1997, Sheraton Holding
recorded pretax charges totaling $236 million to
restructure and rationalize operations at its world

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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

headquarters and the headquarters of its field
operations. During 1999, the Company reversed $32 million of
these charges, as the costs were less than anticipated.

Note 10.     Plant,
Property and Equipment

Plant, property and equipment consisted of the
following (in millions):

|                                               |  |              |        |      |  |   |        |  
|---------------------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | -
|                                               |  |             
|                                               |  | December 31,
|                                               |  |             
|                                               |  | 2001         |        | 2000
|                                               |  |              |        |     
|Land and improvements                          |  | $            | 1,354  |      |  | $ | 1,395  |  
|Buildings and improvements                     |  |              | 6,434  |      |  |   | 6,265  |  
|Furniture, fixtures and equipment              |  |              | 1,727  |      |  |   | 1,603  |  
|Construction work in process                   |  |              | 160    |      |  |   | 113    |  
|                                               |  |              |        |      |  |   |        |  
|                                               |  |              | 9,675  |      |  |   | 9,376  |  
|Less accumulated depreciation and amortization |  |              | (1,840 | )    |  |   | (1,487 | )
|                                               |  |              |        |      |  |   |        |  
|                                               |  | $            | 7,835  |      |  | $ | 7,889  |  
|                                               |  |              |        |      |  |   |        |  

As of December 31, 2000, the Company
identified six hotels totaling $70 million as non-core
assets and classified them as held for sale. These hotels were
included in plant, property and equipment in the accompanying
2000 consolidated balance sheet. In January 2001, the Company
sold one hotel for proceeds of $21 million. As a result of
the September 11 Attacks and the economic climate in the
United States at the end of 2001, the Company determined that it
was not prudent at this time to sell the remaining hotels. The
Company has reclassified the hotels from held for sale to
in-service plant, property and equipment as of December 31,
2001.

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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Note 11.     Income
Taxes

Income tax data from continuing operations of the
Company is as follows (in millions):

|                         |                 |                         |     |      |   |      |     |    |  |   |       |     | 
|------------------------ | --------------- | ----------------------- | --- | ---- | - | ---- | --- | -- |  | - | ----- | --- | 
|                         |                 |                        
|                         |                 | Year Ended December 31,
|                         |                 |                        
|                         |                 | 2001                    |     | 2000 |   | 1999
|                         |                 |                         |     |      |   |     
|Pretax income            |                 |                         |     |      |   |      |     |    |  |   |       |    
|U.S.                     |                 | $                       | 75  |      |   | $    | 437 |    |  | $ | 277   |    
|Foreign                  |                 |                         | 125 |      |   |      | 173 |    |  |   | 256   |    
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    
|                         |                 | $                       | 200 |      |   | $    | 610 |    |  | $ | 533   |    
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    
|Provision for income tax |                 |                         |     |      |   |      |     |    |  |   |       |    
|Current:                 |                 |                         |     |      |   |      |     |    |  |   |       |    
|                         | U.S. federal    |                         | $   | 57   |   |      | $   | 71 |  |   | $     | 65  | 
|                         | State and local |                         |     | 8    |   |      |     | 9  |  |   |       | 13  | 
|                         | Foreign         |                         |     | 70   |   |      |     | 95 |  |   |       | 95  | 
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    
|                         |                 |                         | 135 |      |   |      | 175 |    |  |   | 173   |    
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    
|Deferred:                |                 |                         |     |      |   |      |     |    |  |   |       |    
|                         | U.S. federal    |                         |     | (88  | ) |      |     | 19 |  |   |       | 718 | 
|                         | State and local |                         |     |     |   |      |     |   |  |   |       | 180 | 
|                         | Foreign         |                         |     | (1   | ) |      |     | 7  |  |   |       | 5   | 
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    
|                         |                 |                         | (89 | )    |   |      | 26  |    |  |   | 903   |    
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    
|                         |                 | $                       | 46  |      |   | $    | 201 |    |  | $ | 1,076 |    
|                         |                 |                         |     |      |   |      |     |    |  |   |       |    

No provision was made for U.S. taxes payable on
undistributed foreign earnings amounting to approximately
$117 million since these amounts are permanently reinvested.

Deferred income taxes represent the tax effect of
the differences between the book and tax bases of assets and
liabilities. Deferred tax assets (liabilities) include the
following (in millions):

|                                                     |  |              |        |      |  |   |        |  
|---------------------------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | -
|                                                     |  |             
|                                                     |  | December 31,
|                                                     |  |             
|                                                     |  | 2001         |        | 2000
|                                                     |  |              |        |     
|Plant, property and equipment                        |  | $            | (712   | )    |  | $ | (779   | )
|Intangibles                                          |  |              | (342   | )    |  |   | (335   | )
|Allowances for doubtful accounts and other
	reserves |  |              | 193    |      |  |   | 161    |  
|Employee benefits                                    |  |              | 35     |      |  |   | 36     |  
|Deferred gain on ITT World Directories disposition   |  |              | (524   | )    |  |   | (524   | )
|Net operating loss and tax credit carryforwards      |  |              | 231    |      |  |   | 188    |  
|Deferred income                                      |  |              | (121   | )    |  |   | (115   | )
|Other                                                |  |              | (19    | )    |  |   | (11    | )
|                                                     |  |              |        |      |  |   |        |  
|                                                     |  |              | (1,259 | )    |  |   | (1,379 | )
|Less valuation allowance                             |  |              | (55    | )    |  |   | (65    | )
|                                                     |  |              |        |      |  |   |        |  
|Deferred income taxes                                |  | $            | (1,314 | )    |  | $ | (1,444 | )
|                                                     |  |              |        |      |  |   |        |  

F-23



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

At December 31, 2001, the Company has net
operating loss and tax credit carryforwards of approximately
$591 million and $24 million, respectively, for
federal income tax purposes. Substantially all operating loss
carryforwards, which are expected to provide future tax
benefits, expire between 2018 and 2021.

In February 1998, the Company disposed of ITT
World Directories. The Company provided for income taxes of
$524 million on this transaction, which are included in
deferred income taxes in the accompanying consolidated balance
sheets. While the Company strongly believes this transaction was
completed on a tax deferred basis, this position is currently
under review by the Internal Revenue Service. The results of
such a review are unpredictable. If this transaction were deemed
fully taxable in 1998, then the Companys tax liability
would be approximately $524 million, the amount of deferred
income tax indicated above, plus interest, and would be
partially offset by the Companys net operating loss
discussed above. The Company plans to vigorously defend its
position in this matter.

A reconciliation of the tax provision of the
Company at the U.S. statutory rate to the provision for income
tax as reported is as follows (in millions):

|                                        |  |                         |     |      |  |      |     |   |  |   |       |  
|--------------------------------------- |  | ----------------------- | --- | ---- |  | ---- | --- | - |  | - | ----- | -
|                                        |  |                        
|                                        |  | Year Ended December 31,
|                                        |  |                        
|                                        |  | 2001                    |     | 2000 |  | 1999
|                                        |  |                         |     |      |  |     
|Tax provision at U.S. statutory rate    |  | $                       | 70  |      |  | $    | 214 |   |  | $ | 187   |  
|U.S. state and local income taxes       |  |                         | 5   |      |  |      | 6   |   |  |   | 8     |  
|Exempt Trust income                     |  |                         | (57 | )    |  |      | (49 | ) |  |   | (41   | )
|Tax on repatriation of foreign earnings |  |                         | 13  |      |  |      | 21  |   |  |   | 16    |  
|Foreign tax rate differential           |  |                         | 10  |      |  |      | 14  |   |  |   | (5    | )
|Non-deductible goodwill                 |  |                         | 16  |      |  |      | 16  |   |  |   | 14    |  
|Reorganization                          |  |                         |    |      |  |      |    |   |  |   | 936   |  
|Transaction costs                       |  |                         |    |      |  |      |    |   |  |   | (58   | )
|Deferred asset valuation allowance      |  |                         | (10 | )    |  |      | (18 | ) |  |   | 5     |  
|Other                                   |  |                         | (1  | )    |  |      | (3  | ) |  |   | 14    |  
|                                        |  |                         |     |      |  |      |     |   |  |   |       |  
|Provision for income tax                |  | $                       | 46  |      |  | $    | 201 |   |  | $ | 1,076 |  
|                                        |  |                         |     |      |  |      |     |   |  |   |       |  

F-24



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Note
12.     Debt

Long-term debt and short-term borrowings
consisted of the following (in millions):

|                                                                                                  |                                                                                                      |              |       |      |  |   |       |       | 
|------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------ | ----- | ---- |  | - | ----- | ----- | 
|                                                                                                  |                                                                                                      |             
|                                                                                                  |                                                                                                      | December 31,
|                                                                                                  |                                                                                                      |             
|                                                                                                  |                                                                                                      | 2001         |       | 2000
|                                                                                                  |                                                                                                      |              |       |     
|Senior Credit Facility:                                                                           |                                                                                                      |              |       |      |  |   |       |      
|                                                                                                  | Five-year term loan, interest at LIBOR+0.725%
	(2.60% at December 31, 2001), maturing through 2003.  |              | $     | 800  |  |   | $     | 925   | 
|                                                                                                  | Term Loan Add-on, interest at LIBOR+1.25% (3.12%
	at December 31, 2001), maturing in 2003.           |              |       | 423  |  |   |       | 173   | 
|                                                                                                  | Revolving Credit Facility, interest at
	LIBOR+0.725% (2.60% at December 31, 2001), maturing in 2003. |              |       | 664  |  |   |       | 620   | 
|Senior Secured Notes Facility:                                                                    |                                                                                                      |              |       |      |  |   |       |      
|                                                                                                  | Tranche II Loans, interest at LIBOR+2.75%
	(4.62% at December 31, 2001), maturing in 2003.           |              |       | 500  |  |   |       | 1,000 | 
|Sheraton Holding public debt, interest rates
	ranging from 6.75% to 7.75%, maturing through 2025. |                                                                                                      |              | 1,296 |      |  |   | 1,296 |      
|Convertible Senior Notes 
	Series A & B                                                          |                                                                                                      |              | 507   |      |  |   |      |      
|Euro loan, Euribor+1.95% (5.25% at
	December 31, 2001)                                            |                                                                                                      |              | 240   |      |  |   | 254   |      
|Mortgages and other, interest rates ranging from
	3.1% to 11.9%                                   |                                                                                                      |              | 1,129 |      |  |   | 1,274 |      
|                                                                                                  |                                                                                                      |              |       |      |  |   |       |      
|                                                                                                  |                                                                                                      |              | 5,559 |      |  |   | 5,542 |      
|Less current maturities                                                                           |                                                                                                      |              | (332  | )    |  |   | (585  | )    
|                                                                                                  |                                                                                                      |              |       |      |  |   |       |      
|Long-term debt                                                                                    |                                                                                                      | $            | 5,227 |      |  | $ | 4,957 |      
|                                                                                                  |                                                                                                      |              |       |      |  |   |       |      

Aggregate debt maturities for each of the years
ended December 31 are as follows (in millions):

|           |  |   |       | 
|---------- |  | - | ----- | 
|2002       |  | $ | 332   | 
|2003       |  |   | 2,775 | 
|2004       |  |   | 32    | 
|2005       |  |   | 483   | 
|2006       |  |   | 65    | 
|Thereafter |  |   | 1,872 | 
|           |  |   |       | 
|           |  | $ | 5,559 | 
|           |  |   |       | 

On February 23, 1998, Starwood entered into
two credit facilities with Lehman Brothers, Bankers Trust
Company, The Chase Manhattan Bank and other financial
institutions. The Senior Credit Facility and the Senior Secured
Notes Facility comprise Starwoods primary existing credit
facilities. In September 1998, the Company increased its
borrowings under the Senior Secured Notes Facility with a
$1 billion, five-year term borrowing facility
(Tranche II Loans). In December 2000, the Company
increased the amount available under the Senior Credit Facility
by $172.5 million (Term Loan Add-on). In
January 2001 and May 2001, the Company completed add-on
financings to its Term Loan Add-on of $150 million and
$100 million, respectively. The proceeds from the Term Loan
Add-ons were used to reduce the amount outstanding under the
Companys Revolving Credit Facility. In November 2001, the
Company successfully amended certain terms of its Senior Credit
Facility. The amendment gives the Company greater financial
flexibility by modifying various financial covenants until the
expiration of the facility in early 2003. The amended provisions

F-25



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

include adjustments to the Companys
combined leverage ratio and interest coverage ratio as well as
modification of the timing of amortization payments.

In January 1999, the Company completed a
$542 million long-term financing (the Mortgage
Loan), secured by mortgages on a portfolio of 11 hotels.
The Mortgage Loan is due in February 2009, and the proceeds from
the Mortgage Loan were used to pay down the one-year term loan
under the Senior Credit Facility, which was subsequently paid
off.

In July 2000, the Company entered into a
one-year, Euro 270 million loan (approximately
$252 million based on exchange rates at the time) at an
initial average interest rate of Euribor plus 112.5 basis points
for the first six months and increasing to Euribor plus 137.5
basis points for the remaining six months. This loan was
extended through July 2002. In December 2001, the Company
entered into an 18-month Euro 450 million loan
(approximately $399 million based on exchange rates at the time)
with an interest rate of Euribor plus 195 basis points. The
proceeds of the Euro 450 million loan were drawn down in
two tranches: the first 270 million Euros was drawn down in
December 2001 and used to repay the previously outstanding Euro
270 million facility and the remaining 180 million
Euros was drawn down in January 2002, and the proceeds were used
to repay a portion of the Companys domestic Revolving
Credit Facility.

In May 2001, the Company sold an aggregate face
amount of $816 million zero coupon convertible senior notes
due 2021 (the Notes). The Company received gross
proceeds from these sales of approximately $500 million,
which were used to repay a portion of its Tranche II Loans
that bore interest at LIBOR plus 275 basis points. The Notes
have an initial blended yield to maturity of 2.35%. The Notes,
consisting of two series, are convertible, subject to certain
conditions, into an aggregate 9,657,000 Shares. On May 25,
2002, each Series A holder may require the Company to
purchase the notes, subject to certain conditions. Series A
notes that may be presented to the Company in May 2002 total
approximately $202 million. These Series A notes have
been included in long-term debt at December 31, 2001 based
upon the Companys ability and intent to refinance.
Series B holders may first present their aggregate notes to
the Company in May 2004 for approximately $330 million.

The Company has the ability to draw down on its
Revolving Credit Facility in various currencies. Drawdowns in
currencies other than the U.S. dollar represent a natural hedge
of the Companys international net assets. At
December 31, 2001, the Company had $43 million drawn
in Canadian dollars, with the remaining $621 million drawn
in U.S. dollars.

Repayment of amounts borrowed under the Senior
Credit Facility is guaranteed by the Trust, the Company and
substantially all their respective significant subsidiaries
(including the Partnerships) other than foreign subsidiaries and
joint venture entities (the Guarantor Subsidiaries)
to the extent such entities are not borrowers or co-borrowers,
and is secured by a pledge of primarily all the capital stock,
partnership interests and other equity interests of the
Guarantor Subsidiaries.

The Company maintains lines of credit under which
bank loans and other short-term debt are drawn. In addition,
smaller credit lines are maintained by the Companys
foreign subsidiaries. The Company had approximately
$487 million of available borrowing capacity under its
domestic and international facilities as of December 31,
2001.

The Company is subject to certain restrictive
debt covenants under its short-term borrowing and long-term debt
obligations including defined financial covenants, escrow
account funding requirements for capital purchases, tax payments
and insurance premiums, limitations on capital expenditures and
on the Companys right to incur further debt and
restrictions on transactions with affiliates and related
persons, among other restrictions. Under the terms of the
Companys Senior Credit Facility, the Trust may pay
unlimited dividends to the Corporation or any wholly owned
subsidiary thereof and during any period of twelve consecutive

F-26



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

calendar months, the Trust may pay cash dividends
to its shareholders (excluding the Corporation and any wholly
owned subsidiary) in an aggregate initial amount not to exceed
the lesser of (a) $150,000,000 in 1999 and increasing 20%
annually thereafter and (b) 10% of EBITDA as defined in the
Senior Credit Facility. In September 2001 and November 2001, the
Company obtained waivers of this dividend restriction from its
lenders, allowing the Company to pay its regularly scheduled
dividends for the third and fourth quarter of 2001. The Company
was in compliance with all of the short-term borrowing and
long-term debt obligation covenants, as amended, at
December 31, 2001.

The weighted average interest rate for short-term
borrowings was 4.85% and 6.04% at December 31, 2001 and
2000, respectively, and their fair values approximated carrying
value given their short-term nature. These average interest
rates are composed of interest rates on both U.S. dollar and
non-U.S. dollar denominated indebtedness.

For adjustable rate debt, fair value approximates
carrying value due to the variable nature of the interest rates.
For fixed rate debt, fair value is determined based upon
discounted cash flows for the debt at rates deemed reasonable
for the type of debt and prevailing market conditions and the
length to maturity for the debt. The estimated fair value of
debt at December 31, 2001 and 2000 was $5.3 billion
and $5.4 billion, respectively, and was determined based on
quoted market prices and/or discounted cash flows.

Note 13.     Employee
Benefit Plans

Pension and Postretirement Benefit Plans.The Company and its subsidiaries
sponsor numerous pension plans, including the ITT Corporation
Salaried Retirement Plan and the ITT Sheraton Corporation
Pension Plan for Hourly Employees (ITT Plans), the
Starwood Hotels & Resorts Worldwide, Inc. Retirement Plan
for Foreign Service Employees and the Westin Supplemental
Executive Retirement Plan. Effective January 1, 2000, the
ITT Plans were merged and the ITT Corporation Salaried
Retirement Plan (Salaried Plan) name was retained.
Immediately after the merger, the merged Plans spun off an
allocated portion of assets and liabilities to form the ITT
Sheraton Corporation Ongoing Retirement Plan (Ongoing
Plan). Additionally, the Company filed a request for an
Internal Revenue Service determination letter concerning the
termination of the Salaried Plan as of July 31, 2000, which
was approved in April 2001.

Due to the termination of the Salaried Plan, all
plan liabilities have been settled either as lump sum
disbursements, annuity purchases, transfers to the Ongoing Plan
or transfers to Pension Benefit Guaranty Corporation for the
missing participants. Termination lump sum distributions of
$85 million and an additional $10 million of
disbursements in the normal course of operations are reflected
in the 2001 activity in the table below. The Company recorded
$14 million of settlement gains as a result of the Salaried
Plans termination primarily from the annuity purchases and
lump sum distributions. As of December 31, 2001, the
Ongoing Plan assets included approximately 348,000 Shares of the
Companys common stock.

The Ongoing Plan is funded; assets are comprised
primarily of fixed income investments. The Westin Supplemental
Executive Retirement Plan is a non-contributory, non-qualified
plan that provides benefits for certain executives. The plan is
unfunded apart from general assets of the Company. The
non-U.S.-based plans are funded, except in certain countries
where funding is not required.

The Company also sponsors the ITT Sheraton
Post-Retirement Welfare Program. The plan provides health care
and life insurance benefits for certain eligible retired
employees. The Company has prefunded a portion of the health
care and life insurance obligations through trust funds where
such prefunding can be accomplished on a tax effective basis.
The Company also funds the health plan on a pay-as-you-go basis.

The following table sets forth the benefit
obligation, fair value of plan assets, and the funded status of
the Companys pension and other benefit plans, amounts
recognized in the Companys consolidated balance sheets

F-27



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

at December 31, 2001 and 2000, and the
principal weighted average assumptions inherent in their
determination (amounts are in millions):

|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |     |  
|------------------------------------------------------------------ | -------------------------------------- | ---------------- | --- | ---------------- | - | -------------- | --- | ---- | - | ---- | --- | ---- | - | - | --- | -- | - | - | -- | -- | - | - | --- | --- | -
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |     
|                                                                   |                                        |                  |     | Foreign          |   |               
|                                                                   |                                        | Pension Benefits |     | Pension Benefits |   | Other Benefits
|                                                                   |                                        |                  |     |                  |   |               
|                                                                   |                                        | 2001             |     | 2000             |   | 2001           |     | 2000 |   | 2001 |     | 2000
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |     
|Change in Benefit Obligation                                       |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Benefit obligation at beginning of year                            |                                        | $                | 180 |                  |   | $              | 240 |      |   | $    | 94  |      |   | $ | 53  |    |   | $ | 31 |    |   | $ | 31  |    
|                                                                   | Service cost                           |                  |     |                 |   |                |     |     |   |      |     | 3    |   |   |     | 1  |   |   |    |   |   |   |     |    |  
|                                                                   | Interest cost                          |                  |     | 8                |   |                |     | 15   |   |      |     | 6    |   |   |     | 3  |   |   |    | 2  |   |   |     | 2   |  
|                                                                   | Actuarial (gain) loss                  |                  |     | (20              | ) |                |     | 31   |   |      |     |     |   |   |     | 4  |   |   |    | (3 | ) |   |     |    |  
|                                                                   | Acquisitions                           |                  |     |                 |   |                |     |     |   |      |     |     |   |   |     | 37 |   |   |    |   |   |   |     |    |  
|                                                                   | Settlements                            |                  |     | (95              | ) |                |     | (105 | ) |      |     |     |   |   |     | 2  |   |   |    |   |   |   |     |    |  
|                                                                   | Annuity purchase                       |                  |     | (24              | ) |                |     |     |   |      |     |     |   |   |     |   |   |   |    |   |   |   |     |    |  
|                                                                   | Effect of foreign exchange rates       |                  |     |                 |   |                |     |     |   |      |     | (1   | ) |   |     | (4 | ) |   |    |   |   |   |     |    |  
|                                                                   | Benefits paid                          |                  |     | (1               | ) |                |     | (1   | ) |      |     | (5   | ) |   |     | (2 | ) |   |    | (2 | ) |   |     | (2  | )
|                                                                   | Premiums for missing participants      |                  |     | (2               | ) |                |     |     |   |      |     |     |   |   |     |   |   |   |    |   |   |   |     |    |  
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Benefit obligation at end of year                                  |                                        | $                | 46  |                  |   | $              | 180 |      |   | $    | 97  |      |   | $ | 94  |    |   | $ | 28 |    |   | $ | 31  |    
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Change in Plan Assets                                              |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Fair value of plan assets at beginning of year                     |                                        | $                | 168 |                  |   | $              | 242 |      |   | $    | 103 |      |   | $ | 63  |    |   | $ | 22 |    |   | $ | 22  |    
|                                                                   | Actual return on plan assets           |                  |     | (11              | ) |                |     | 31   |   |      |     | (12  | ) |   |     | 6  |   |   |    | (1 | ) |   |     |    |  
|                                                                   | Employer contribution                  |                  |     | 1                |   |                |     | 1    |   |      |     | 3    |   |   |     | 1  |   |   |    | 2  |   |   |     | 2   |  
|                                                                   | Acquisitions                           |                  |     |                 |   |                |     |     |   |      |     |     |   |   |     | 37 |   |   |    |   |   |   |     |    |  
|                                                                   | Settlements                            |                  |     | (95              | ) |                |     | (105 | ) |      |     |     |   |   |     | 2  |   |   |    |   |   |   |     |    |  
|                                                                   | Annuity purchase                       |                  |     | (24              | ) |                |     |     |   |      |     |     |   |   |     |   |   |   |    |   |   |   |     |    |  
|                                                                   | Effect of foreign exchange rates       |                  |     |                 |   |                |     |     |   |      |     | (1   | ) |   |     | (4 | ) |   |    |   |   |   |     |    |  
|                                                                   | Benefits paid                          |                  |     | (1               | ) |                |     | (1   | ) |      |     | (5   | ) |   |     | (2 | ) |   |    | (2 | ) |   |     | (2  | )
|                                                                   | Premiums for missing participants      |                  |     | (2               | ) |                |     |     |   |      |     |     |   |   |     |   |   |   |    |   |   |   |     |    |  
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Fair value of plan assets at end of year                           |                                        | $                | 36  |                  |   | $              | 168 |      |   | $    | 88  |      |   | $ | 103 |    |   | $ | 21 |    |   | $ | 22  |    
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Funded status                                                      |                                        | $                | (10 | )                |   | $              | (12 | )    |   | $    | (9  | )    |   | $ | 9   |    |   | $ | (7 | )  |   | $ | (9  | )  
|                                                                   | Unrecognized net actuarial gain        |                  |     | (7               | ) |                |     | (20  | ) |      |     | 17   |   |   |     | (4 | ) |   |    | (2 | ) |   |     | (3  | )
|                                                                   | Unrecognized prior service cost        |                  |     |                 |   |                |     |     |   |      |     |     |   |   |     |   |   |   |    |   |   |   |     | (1  | )
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Accrued benefit cost                                               |                                        | $                | (17 | )                |   | $              | (32 | )    |   | $    | 8   |      |   | $ | 5   |    |   | $ | (9 | )  |   | $ | (13 | )  
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Amounts recognized in the consolidated balance
	sheets consist of: |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|                                                                   | Prepaid benefit cost                   |                  | $   |                 |   |                | $   |     |   |      | $   | 5    |   |   | $   | 8  |   |   | $  |   |   |   | $   |    |  
|                                                                   | Accrued benefit cost                   |                  |     | (17              | ) |                |     | (32  | ) |      |     | (4   | ) |   |     | (3 | ) |   |    | (9 | ) |   |     | (13 | )
|                                                                   | Accumulated other comprehensive income |                  |     |                 |   |                |     |     |   |      |     | 7    |   |   |     |   |   |   |    |   |   |   |     |    |  
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    
|Net amount recognized at end of year                               |                                        | $                | (17 | )                |   | $              | (32 | )    |   | $    | 8   |      |   | $ | 5   |    |   | $ | (9 | )  |   | $ | (13 | )  
|                                                                   |                                        |                  |     |                  |   |                |     |      |   |      |     |      |   |   |     |    |   |   |    |    |   |   |     |    

F-28



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

|                                                 |  |                  |      |                  |  |                |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |  
|------------------------------------------------ |  | ---------------- | ---- | ---------------- |  | -------------- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                                 |  |                  |      |                  |  |                |      |      |  |     
|                                                 |  |                  |      | Foreign          |  |               
|                                                 |  | Pension Benefits |      | Pension Benefits |  | Other Benefits
|                                                 |  |                  |      |                  |  |               
|                                                 |  | 2001             |      | 2000             |  | 2001           |      | 2000 |  | 2001 |      | 2000
|                                                 |  |                  |      |                  |  |                |      |      |  |      |      |     
|Weighted Average Assumptions as of
	December 31, |  |                  |      |                  |  |                |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |  
|Discount rate                                    |  |                  | 6.00 | %                |  |                | 7.25 | %    |  |      | 6.44 | %    |  |  | 6.63 | % |  |  | 7.25 | % |  |  | 7.25 | %
|Expected return on plan assets                   |  |                  | 7.00 | %                |  |                | 7.00 | %    |  |      | 8.11 | %    |  |  | 8.11 | % |  |  | 9.75 | % |  |  | 9.75 | %
|Rate of compensation increase                    |  |                  | N/A  |                  |  |                | N/A  |      |  |      | 4.29 | %    |  |  | 4.51 | % |  |  | N/A  |   |  |  | N/A  |  

For measurement purposes, a 5.50% annual rate of
increase in the per capita cost of covered health care benefits
was assumed for 2001. The rate was assumed to decrease gradually
to 5.00% in 2002 and remain at that level thereafter. Assumed
health care cost trend rates can have a significant effect on
the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend
rates would not have a material effect on the total of service
and interest cost components or on the postretirement benefit
obligation.

|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |    |  
|---------------------------------------- | ---------------------------------- | ---------------- | --- | ---------------- | - | -------------- | --- | ---- | - | ---- | --- | ---- |  | ---- | -- | ---- |  | ---- | -- | - |  | - | -- | - |  | - | -- | -- | - | - | -- | -- | - | - | -- | -- | -
|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |     
|                                         |                                    |                  |     | Foreign          |   |               
|                                         |                                    | Pension Benefits |     | Pension Benefits |   | Other Benefits
|                                         |                                    |                  |     |                  |   |               
|                                         |                                    | 2001             |     | 2000             |   | 1999           |     | 2001 |   | 2000 |     | 1999 |  | 2001 |    | 2000 |  | 1999
|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |     
|Components of Net Periodic Benefit
	Cost |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   
|Service cost                             |                                    | $                |    |                  |   | $              |    |      |   | $    | 3   |      |  | $    | 2  |      |  | $    | 1  |   |  | $ | 1  |   |  | $ |   |    |   | $ |   |    |   | $ |   |   
|Interest cost                            |                                    |                  | 3   |                  |   |                | 15  |      |   |      | 17  |      |  |      | 6  |      |  |      | 3  |   |  |   | 3  |   |  |   | 2  |    |   |   | 2  |    |   |   | 2  |   
|Expected return on plan assets           |                                    |                  | (3  | )                |   |                | (14 | )    |   |      | (20 | )    |  |      | (8 | )    |  |      | (5 | ) |  |   | (3 | ) |  |   | (2 | )  |   |   | (2 | )  |   |   | (2 | ) 
|Amortization of:                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   
|                                         | Prior service cost                 |                  |     |                 |   |                |     |     |   |      |     |     |  |      |    |     |  |      |    |  |  |   |    |  |  |   |    | (1 | ) |   |    | (1 | ) |   |    | (1 | )
|                                         | Actuarial (gain) loss              |                  |     | (1               | ) |                |     | (1   | ) |      |     |     |  |      |    |     |  |      |    |  |  |   |    |  |  |   |    |   |   |   |    |   |   |   |    |   |  
|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   
|SFAS 87 cost/ SFAS 106 cost              |                                    |                  | (1  | )                |   |                |    |      |   |      |    |      |  |      |   |      |  |      | (1 | ) |  |   | 1  |   |  |   | (1 | )  |   |   | (1 | )  |   |   | (1 | ) 
|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   
|SFAS 88 charges:                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   
|                                         | Special termination benefit charge |                  |     |                 |   |                |     |     |   |      |     |     |  |      |    |     |  |      |    |  |  |   |    |  |  |   |    |   |   |   |    |   |   |   |    |   |  
|                                         | Curtailment charge                 |                  |     |                 |   |                |     |     |   |      |     |     |  |      |    |     |  |      |    |  |  |   |    |  |  |   |    |   |   |   |    |   |   |   |    |   |  
|                                         | Settlement credit                  |                  |     | (14              | ) |                |     | (8   | ) |      |     |     |  |      |    |     |  |      |    |  |  |   |    |  |  |   |    |   |   |   |    |   |   |   |    |   |  
|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   
|Net periodic benefit cost                |                                    | $                | (15 | )                |   | $              | (8  | )    |   | $    |    |      |  | $    |   |      |  | $    | (1 | ) |  | $ | 1  |   |  | $ | (1 | )  |   | $ | (1 | )  |   | $ | (1 | ) 
|                                         |                                    |                  |     |                  |   |                |     |      |   |      |     |      |  |      |    |      |  |      |    |   |  |   |    |   |  |   |    |    |   |   |    |    |   |   |    |   

|                                                |                           |                  |   |                  |  |      |   |      |  |  |   |    |  |  |   |   | 
|----------------------------------------------- | ------------------------- | ---------------- | - | ---------------- |  | ---- | - | ---- |  |  | - | -- |  |  | - | - | 
|                                                |                           |                  |   |                  |  |     
|                                                |                           |                  |   | Foreign         
|                                                |                           | Pension Benefits |   | Pension Benefits
|                                                |                           |                  |   |                 
|                                                |                           | 2001             |   | 2000             |  | 2001 |   | 2000
|                                                |                           |                  |   |                  |  |      |   |     
|Plans with ABO exceeding assets at end of year: |                           |                  |   |                  |  |      |   |      |  |  |   |    |  |  |   |  
|                                                | ABO                       |                  | $ | 12               |  |      | $ | 12   |  |  | $ | 32 |  |  | $ | 1 | 
|                                                | PBO                       |                  | $ |                 |  |      | $ |     |  |  | $ |   |  |  | $ | 1 | 
|                                                | Fair value of plan assets |                  | $ |                 |  |      | $ |     |  |  | $ |   |  |  | $ |  | 

Defined Contribution Plans.The Company sponsors the Starwood
Hotels & Resorts Worldwide, Inc. Savings and Retirement Plan
(Retirement Plan), which is a voluntary defined
contribution plan allowing participation by employees on U.S.
payroll who meet certain age and service requirements. On
July 1, 2001, the defined contribution plan maintained by
SVO was merged into the Retirement Plan. Each participant may
contribute on a pretax basis between 1% and 18% of his or her
compensation to the plan subject to certain maximum limits. The
plan also contains additional provisions for matching
contributions to be made by the

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Company which are based on a portion of a
participants eligible compensation. The amount of expense
for matching contributions totaled $15 million in 2001,
$17 million in 2000 and $19 million in 1999.

Note 14.     Leases
and Rentals

The Corporation leases certain equipment for the
hotels operations under various lease agreements. The
leases extend for varying periods through 2038 and generally are
for a fixed amount each month. In addition, 16 of the
Corporations hotels are subject to leases of building
facilities from third parties which extend for varying periods
through 2064 and generally contain fixed and variable
components. In September 2001, the Company entered into a
building lease of the Westin Dublin hotel in Dublin, Ireland.
The lease term is 25 years with fixed annual payments of
$3 million. In December 2001, the Company entered into a
building lease of the W Times Square hotel in New York City.
This lease has a term of 25 years with fixed annual lease
payments of $16 million.

The Companys minimum future rents at
December 31, 2001 payable under non-cancelable operating
leases with third parties are as follows (in millions):

|           |  |   |     | 
|---------- |  | - | --- | 
|2002       |  | $ | 82  | 
|2003       |  |   | 76  | 
|2004       |  |   | 76  | 
|2005       |  |   | 60  | 
|2006       |  |   | 70  | 
|Thereafter |  |   | 723 | 

Rent expense under non-cancelable operating
leases was $75 million, $64 million and $41 million in
2001, 2000 and 1999, respectively.

The Trust owns equity interests in 91 hotels, all
of which are leased to the Corporation as of December 31,
2001. The leases between the Trust and the Corporation are
generally for three-year terms and 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. The lessee is also generally responsible
for any payments required pursuant to underlying ground leases.
Total rental expense incurred by the Corporation under such
leases with the Trust was approximately $457 million for the
year ended December 31, 2001, of which approximately $139
million related to percentage rent. The Trusts rents
receivable from the Corporation relating to leased hotel
properties at December 31, 2001 and 2000 was
$35 million and $34 million, respectively.

The Corporations minimum future rents at
December 31, 2001 payable under non-cancelable operating
leases with the Trust, as if existing leases were extended under
their original terms, are approximately $335 million per
year.

Note 15.     Equity
Put Options

In November 1999, in connection with the
termination of a certain executives employment, the
Company granted this executive the option to cause the Company
to purchase from the executive 566,166 Shares for a purchase
price of $34.25 per Share. This option was exercisable in the
fourth quarter of 2000 at which time the executive sold 366,166
of these Shares on the open market and put the remaining 200,000
Shares to the Company at a total cost of $6.9 million. The
Company recorded the fair market value of the options as
compensation expense of $6.7 million in 1999.

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Note
16.     Stockholders
Equity

Share Repurchases.In 1998, the Board of Directors of
the Company approved the repurchase of up to $1 billion of
Shares under a Share repurchase program (the Share
Repurchase Program). On April 2, 2001, the
Companys Board of Directors authorized the repurchase of
up to an additional $500 million of Shares, subject to the
terms of the Senior Credit Facility. Pursuant to the Share
Repurchase Program, through December 31, 2001, Starwood has
repurchased 19.0 million Shares (including 500,000 Shares
under equity put option contracts) in the open market for an
aggregate cost of $618 million. As of December 31,
2001, approximately $633 million remains available under
the Share Repurchase Program.

Exchangeable Preferred Shares.During 1998, 6.3 million
shares of Class A EPS and 5.5 million shares of
Class B EPS were issued by the Trust in connection with the
Westin Merger. Class A EPS have a par value of $0.01 per
share and are convertible on a one-for-one basis (subject to
certain adjustments) to Shares. Class B EPS have a
liquidation preference of $38.50 per share and provide the
holders with the right, from and after the fifth anniversary of
the closing date of the Westin Merger which will begin on
January 2, 2003, to require the Trust to redeem such shares
at a price of $38.50. Shares of Class B EPS are convertible
on a one-for-one basis (subject to certain adjustments) to
Class A EPS. During 2001, the Trust consented to the
conversion of approximately 1,939,000 shares of Class B EPS
by certain stockholders into an equal number of shares of
Class A EPS. Additionally, the Trust consented to the
exchange of approximately 2.0 million shares of
Class A EPS into an equal number of Shares. At
December 31, 2001, the Trust had 150 million preferred
shares authorized and approximately 550,000 and 1.1 million
of Class A EPS and Class B EPS outstanding,
respectively.

Note 17.     Stock
Incentive Plans

In 1999, the Company adopted the 1999 Long-Term
Incentive Compensation Plan (1999 LTIP) which
superseded the 1995 Share Option Plan (the 1995
LTIP) and provides for the purchase of Shares by
Directors, officers, employees, consultants and advisors,
pursuant to option grants. In August 2001, the Company amended
the 1999 LTIP for certain retiree provisions. Although no
additional awards will be granted under the 1995 LTIP, the 1995
LTIP will continue to govern awards that have been granted and
remain outstanding under the 1995 LTIP. The aggregate number of
Shares subject to non-qualified or incentive stock options,
performance shares, restricted stock or any combination of the
foregoing which are available to be granted under the 1999 LTIP
at December 31, 2001 was approximately 9.7 million.

The Company applies APB Opinion No. 25,
Accounting for Stock Issued to Employees, and
related interpretations; accordingly, compensation cost is not
recognized for grants of stock options at market price. Had
compensation cost for grants been determined based on the fair
value of the options at the grant dates consistent with SFAS
No. 123, Accounting for Stock-Based
Compensation, the Companys net income
(loss) would have been negatively impacted by $67 million
($0.33 per basic Share), $60 million ($0.30 per basic
Share) and $49 million ($0.26 per basic Share) in 2001, 2000 and
1999, respectively. The fair value of each option grant used in
the 2001, 2000 and 1999 pro forma amounts was estimated on the
date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in
2001, 2000 and 1999, respectively: dividend yield of 2.2%, 2.4%
and 2.9%, expected volatility of 47.0%, 46.1% and 41.9%,
risk-free interest rates of 4.3%, 6.5% and 6.3% and an expected
life of three years for all options.

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

The following table summarizes stock option
activity for the Company:

|                                 |           |         |            |                  |   |   |       |       | 
|-------------------------------- | --------- | ------- | ---------- | ---------------- | - | - | ----- | ----- | 
|                                 |           |         |            | Weighted Average
|                                 |           |         |            | Exercise        
|                                 |           | Options |            | Price Per Share 
|                                 |           |         |            |                 
|Outstanding at December 31, 1998 |           |         | 18,122,776 |                  |   | $ | 43.80 |      
|                                 | Granted   |         |            | 9,155,246        |   |   |       | 23.76 | 
|                                 | Exercised |         |            | (346,575         | ) |   |       | 22.46 | 
|                                 | Forfeited |         |            | (6,009,005       | ) |   |       | 50.41 | 
|                                 |           |         |            |                  |   |   |       |      
|Outstanding at December 31, 1999 |           |         | 20,922,442 |                  |   |   | 34.26 |      
|                                 | Granted   |         |            | 10,614,800       |   |   |       | 24.22 | 
|                                 | Exercised |         |            | (1,682,653       | ) |   |       | 21.10 | 
|                                 | Forfeited |         |            | (1,689,378       | ) |   |       | 33.96 | 
|                                 |           |         |            |                  |   |   |       |      
|Outstanding at December 31, 2000 |           |         | 28,165,211 |                  |   |   | 31.33 |      
|                                 | Granted   |         |            | 8,279,160        |   |   |       | 36.55 | 
|                                 | Exercised |         |            | (1,686,986       | ) |   |       | 23.03 | 
|                                 | Forfeited |         |            | (1,892,081       | ) |   |       | 30.17 | 
|                                 |           |         |            |                  |   |   |       |      
|Outstanding at December 31, 2001 |           |         | 32,865,304 |                  |   | $ | 33.22 |      
|                                 |           |         |            |                  |   |   |       |      
|Exercisable at December 31, 2000 |           |         | 13,362,454 |                  |   | $ | 37.00 |      
|                                 |           |         |            |                  |   |   |       |      
|Exercisable at December 31, 2001 |           |         | 16,298,472 |                  |   | $ | 35.88 |      
|                                 |           |         |            |                  |   |   |       |      

The following table summarizes information about
outstanding stock options at December 31, 2001:

|                |                 |                     |  |                     |            |                  |  |             |      |                  |  |   |       |  |  |  |            |  |  |   |       | 
|--------------- | --------------- | ------------------- |  | ------------------- | ---------- | ---------------- |  | ----------- | ---- | ---------------- |  | - | ----- |  |  |  | ---------- |  |  | - | ----- | 
|                |                 |                     |  |                    
|                |                 | Options Outstanding |  | Options Exercisable
|                |                 |                     |  |                    
|                |                 |                     |  | Weighted Average    |            |                  |  |            
|                |                 |                     |  | Remaining           |            | Weighted Average |  |             |      | Weighted Average
|Range of        |                 | Number              |  | Contractual Life    |            | Exercise         |  | Number      |      | Exercise        
|Exercise Prices |                 | Outstanding         |  | in Years            |            | Price/Share      |  | Exercisable |      | Price/Share     
|                |                 |                     |  |                     |            |                  |  |             |      |                 
|                | $11.00 - $21.81 |                     |  |                     | 2,884,715  |                  |  |             | 6.47 |                  |  | $ | 19.42 |  |  |  | 2,267,840  |  |  | $ | 18.85 | 
|                | $22.00 - $23.92 |                     |  |                     | 2,779,098  |                  |  |             | 5.49 |                  |  |   | 23.21 |  |  |  | 2,335,549  |  |  |   | 23.38 | 
|                | $24.00 - $24.00 |                     |  |                     | 9,179,468  |                  |  |             | 7.74 |                  |  |   | 24.00 |  |  |  | 2,744,092  |  |  |   | 24.00 | 
|                | $24.25 - $35.97 |                     |  |                     | 3,600,708  |                  |  |             | 7.68 |                  |  |   | 30.26 |  |  |  | 1,423,846  |  |  |   | 30.76 | 
|                | $36.09 - $37.84 |                     |  |                     | 7,150,230  |                  |  |             | 8.79 |                  |  |   | 37.69 |  |  |  | 676,262    |  |  |   | 36.69 | 
|                | $38.00 - $50.23 |                     |  |                     | 2,651,405  |                  |  |             | 6.31 |                  |  |   | 45.90 |  |  |  | 2,320,500  |  |  |   | 46.03 | 
|                | $52.19 - $54.63 |                     |  |                     | 3,474,621  |                  |  |             | 5.77 |                  |  |   | 54.09 |  |  |  | 3,391,496  |  |  |   | 54.13 | 
|                | $54.85 - $58.81 |                     |  |                     | 1,145,059  |                  |  |             | 6.03 |                  |  |   | 54.88 |  |  |  | 1,138,887  |  |  |   | 54.88 | 
|                |                 |                     |  |                     |            |                  |  |             |      |                  |  |   |       |  |  |  |            |  |  |   |       | 
|                | Total/average   |                     |  |                     | 32,865,304 |                  |  |             | 7.28 |                  |  |   | 33.22 |  |  |  | 16,298,472 |  |  |   | 35.88 | 
|                |                 |                     |  |                     |            |                  |  |             |      |                  |  |   |       |  |  |  |            |  |  |   |       | 

During 2001, the Company granted restricted stock
awards for 1,232,339 Shares. Restricted stock awards outstanding
as of December 31, 2001 totaled 1,060,079 Shares, and
approximately 95,193 Shares were vested. Compensation expense of
approximately $17.5 million, $3.8 million and
$0.6 million was recorded during 2001, 2000 and 1999,
respectively, related to restricted stock awards. The 2001
compensation expense includes an $11 million special charge
related to the accelerated amortization of 50% of restricted
stock awards granted in February 2001. The vesting was
accelerated to enhance employee retention efforts following the
September 11 Attacks.

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Note
18.     Derivative Financial
Instruments

The Company enters into interest rate swap
agreements to manage interest rate risk. The Companys
objective is to manage the impact of interest rate changes on
the results of operations, cash flows and the market value of
the Companys debt. At December 31, 2001, the Company
had five outstanding interest rate swap agreements under which
the Company pays a fixed rate and receives variable rates of
interest. These swaps (the Cash Flow Swaps) are
classified as cash flow hedges and mature through 2003. The
Company adjusts the Cash Flow Swaps to current market value
through other comprehensive income as they are effective in
offsetting the interest rate exposure of the interest payments
being hedged. The Company anticipates that the Cash Flow Swaps
will continue to be effective but will recognize the unrealized
loss related to these contracts immediately into the results of
operations if they are deemed to be no longer effective. The
aggregate notional amount of the Cash Flow Swaps was
approximately $947 million and the estimated unrealized
loss on these interest rate swaps was approximately
$31.1 million at December 31, 2001.

At December 31, 2001, the Company also had
three outstanding interest rate swap agreements under which the
Company pays a floating rate and receives a fixed rate of
interest (the Fair Value Swaps). The aggregate
notional amount of the Fair Value Swaps was approximately
$450 million. The Fair Value Swaps hedge the change in fair
value of certain fixed rate debt related to fluctuations in
interest rates and mature in 2005. The Fair Value Swaps modify
the Companys interest rate exposure by effectively
converting debt with a fixed rate to a floating rate. The fair
value of the Fair Value Swaps was a liability of approximately
$840,000 at December 31, 2001.

The Company also enters into forward foreign
exchange contracts to hedge the potential volatility of earnings
and cash flow associated with changing foreign exchange rates
and the effects on the Companys foreign currency
denominated assets and liabilities. At December 31, 2001,
the Company had seven forward foreign exchange contracts
outstanding with a dollar equivalent of the contractual amounts
of these hedges at December 31, 2001 of approximately
$366 million. The aggregate fair value of these contracts
outstanding at December 31, 2001 was $162,000. These
contracts matured in the first quarter of 2002.

The counterparties to the Companys
derivative financial instruments are major financial
institutions.

Note 19.     Related
Party Transactions

General.Barry S. Sternlicht,
Chairman, Chief Executive Officer and a Director of the
Corporation, and Chairman, Chief Executive Officer and a Trustee
of the Trust, controls and has been the President and Chief
Executive Officer of Starwood Capital Group, L.L.C.
(Starwood Capital) since its formation in 1991.
Prior to joining Starwood in 1995, Steven R. Goldman was an
employee of Starwood Capital, and he continues to own an
interest in a portfolio investment of Starwood Capital.

Trademark License.An affiliate of Starwood Capital
has granted to Starwood, subject to Starwood Capitals
unrestricted right to use such name, an exclusive,
non-transferable, royalty-free license to use the
Starwood name and trademarks in connection with the
acquisition, ownership, leasing, management, merchandising,
operation and disposition of hotels worldwide, and to use the
Starwood name in its corporate name worldwide, in
perpetuity.

Starwood Capital Noncompete.In connection with a restructuring
of the Company in 1995, Starwood Capital agreed that, with
certain exceptions, Starwood Capital would not compete directly
or indirectly with the Company within the United States and
would present to the Company all opportunities presented to
Starwood Capital to acquire fee interests in hotels in the
United States and debt interests in hotels in the United States
where it is anticipated that the equity will be acquired by the
debt holder within one year from the acquisition of such debt
(the Starwood Capital Noncompete). During the term
of the Starwood Capital Noncompete, neither Starwood Capital nor
any of its affiliates is permitted to acquire any such interest,
or any

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STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

ground lease interest or other equity interest,
in hotels in the United States. The Starwood Capital Noncompete
continues until no officer, director, general partner or
employee of Starwood Capital is on either the Board of Directors
of the Corporation or the Board of Trustees of the Trust
(subject to exceptions for certain restructurings, mergers or
other combination transactions with unaffiliated parties).
Several properties owned or managed by the Company, including
the Westin Innisbrook Resort (the Innisbrook
Resort), the Westin Mission Hills Resort and the Turnberry
Hotel, were opportunities brought to the Company or its
predecessors by Starwood Capital. With the approval in each case
of the Audit Committee of the Board of Directors of the
Corporation and the Board of Trustees of the Trust, from time to
time the Company has waived the restrictions of the Starwood
Capital Noncompete in whole or in part with respect to
particular acquisition opportunities in which the Company had no
interest.

Portfolio Investments.An affiliate of Starwood Capital
holds an approximately 25% non-controlling interest in Troon
Golf (Troon), a golf course management company that
currently manages over 100 high-end golf courses.
Mr. Sternlichts indirect interest in Troon held
through such affiliate is approximately 12%. Troon is the
largest third-party manager of golf courses in the United
States. In 2001, Troon managed thirteen golf courses at resorts
owned or managed by the Company. The Company paid Troon a total
of $911,000 ($432,000 of which represents management fees and
payments for other services and $479,000 of which represents
reimbursement of expenses), $1,003,000 ($458,000 of which
represents management fees and payments for other services and
$545,000 of which represents reimbursement of expenses) and
$950,000 ($454,000 of which represents management fees and
payments for other services and $496,000 of which represents
reimbursement of expenses) in 2001, 2000 and 1999, respectively,
for the golf courses at the two resorts owned by the Company. In
January 2002, after extensive review of alternatives and with
the unanimous approval of the Governance Committee, the Company
entered into a Master Agreement with Troon covering the United
States and Canada whereby the Company has agreed to have Troon
manage all courses in the United States and Canada that are
owned by the Company and to use reasonable efforts to have Troon
manage courses at resorts that the Company manages and
franchises. The Company believes that the terms of the Troon
agreement are at or better than market terms.
Mr. Sternlicht did not participate in the negotiations or
the approval of the Troon Master Agreement.

An entity in which Mr. Sternlicht has a 38%
interest owned the common area of the Sheraton Tamarron Resort,
which the Company managed until December 2001. As of the date of
this filing, management fees earned and paid were $197,000,
$219,000 and $240,000 relating to 2001, 2000 and 1999,
respectively. In addition, approximately $620,000 of
reimbursable expenses were also paid. The Company has
outstanding receivables of approximately $314,000, which arose
as a result of the termination of the Tamarron management
agreement. The Company believes that the terms of the Tamarron
agreement were at or better than market terms.

In addition, a subsidiary of Starwood Capital is
a general partner of a limited partnership which owns
approximately 45% in an entity that manages over 40 health
clubs, including one health club and spa space in a hotel owned
by the Company. In 2001, the Company paid approximately $84,000
to the management company for such management. The Company
believes that the terms of the management agreement are at or
better than market terms.

Other Management-Related Investments.Mr. Sternlicht has a 38%
interest in an entity (the Innisbrook Entity) that
owns the common area facilities and certain undeveloped land
(but not the hotel) at the Innisbrook Resort. In May 1997, the
Innisbrook Entity entered into a management agreement for the
Innisbrook Resort with Westin, which was then a privately held
company partly owned by Starwood Capital and Goldman, Sachs
& Co. When the Company acquired Westin in January 1998, it
acquired Westins rights and obligations under the
management and other related agreements. Under these agreements,
the hotel manager was obligated to loan up to $12.5 million
to the owner in the event certain performance levels were

F-34



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

not achieved. Management fees earned under these
agreements were $716,000, $885,000 and $907,000 in 2001, 2000
and 1999, respectively. The Innisbrook Entity, the Company and
other lenders are currently in discussions regarding the terms
and timing of payments owed to the Company and such other
lenders. The discussions relate to approximately $9 million
in loans by the Company which funded resort operations and
approximately $5 million of deferred management fees and
reimbursable expenses as well as amounts owed by the Innisbrook
Entity to other parties. Any settlement of this matter would be
subject to the approval of the Governance Committee.

Aircraft Lease.In February 1998, the Company
leased a Gulfstream III Aircraft from Star Flight LLC, an
affiliate of Starwood Capital. The term of the lease was one
year and automatically renews for one-year terms until either
party terminates the lease upon 90 days written
notice. The rent for the aircraft, which was set at
approximately 90% of fair market value (based on two estimates
from unrelated third parties), is (i) a monthly payment of
1.25% of the lessors total costs relating to the aircraft
(approximately $123,000 at the beginning of the lease with this
amount increasing as additional costs are incurred by the
lessor), plus (ii) $300 for each hour that the aircraft is
in use. Payments to Star Flight LLC were $1,682,000, $840,000
and $910,000 in 2001, 2000 and 1999, respectively.

Note
20.     Commitments and
Contingencies

The Company had the following contractual
obligations outstanding as of December 31, 2001 (in
millions):

|                                      |  |       |     |             |  |           |    |           |  |           |     |  |  |   |    |  |  |   |   | 
|------------------------------------- |  | ----- | --- | ----------- |  | --------- | -- | --------- |  | --------- | --- |  |  | - | -- |  |  | - | - | 
|                                      |  |       |     | Due in Less |  | Due in    |    | Due in    |  | Due After
|                                      |  | Total |     | Than 1 Year |  | 1-3 Years |    | 4-5 Years |  | 5 Years  
|                                      |  |       |     |             |  |           |    |           |  |          
|Unconditional purchase obligations(a) |  | $     | 216 |             |  | $         | 75 |           |  | $         | 112 |  |  | $ | 29 |  |  | $ |  | 
|Other long-term obligations           |  |       |    |             |  |           |   |           |  |           |    |  |  |   |   |  |  |   |  | 
|                                      |  |       |     |             |  |           |    |           |  |           |     |  |  |   |    |  |  |   |   | 
|Total contractual obligations         |  | $     | 216 |             |  | $         | 75 |           |  | $         | 112 |  |  | $ | 29 |  |  | $ |  | 
|                                      |  |       |     |             |  |           |    |           |  |           |     |  |  |   |    |  |  |   |   | 



---



|    |                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The Companys owned, managed and franchised
	hotels participate in various national purchasing agreements. As
	these agreements do not require specific purchasing thresholds
	for the Company or the Companys owned, leased and
	consolidated joint venture hotels, no such amounts are reflected
	above.

The Company had the following commercial
commitments outstanding as of December 31, 2001 (in
millions):

|                             |  |       |     |                                            |  |           |   |           |  |         |     |  |  |   |    |  |  |   |    | 
|---------------------------- |  | ----- | --- | ------------------------------------------ |  | --------- | - | --------- |  | ------- | --- |  |  | - | -- |  |  | - | -- | 
|                             |  |       |     |                                           
|                             |  |       |     | Amount of Commitment Expiration Per Period
|                             |  |       |     |                                           
|                             |  |       |     | Less                                       |  |           |   | After    
|                             |  | Total |     | Than 1 Year                                |  | 1-3 Years |   | 4-5 Years |  | 5 Years
|                             |  |       |     |                                            |  |           |   |           |  |        
|Standby letters of credit    |  | $     | 49  |                                            |  | $         |  |           |  | $       | 43  |  |  | $ |   |  |  | $ | 6  | 
|Hotel loan guarantees        |  |       | 153 |                                            |  |           |  |           |  |         | 78  |  |  |   | 45 |  |  |   | 30 | 
|Other commercial commitments |  |       |    |                                            |  |           |  |           |  |         |    |  |  |   |   |  |  |   |   | 
|                             |  |       |     |                                            |  |           |   |           |  |         |     |  |  |   |    |  |  |   |    | 
|Total commercial commitments |  | $     | 202 |                                            |  | $         |  |           |  | $       | 121 |  |  | $ | 45 |  |  | $ | 36 | 
|                             |  |       |     |                                            |  |           |   |           |  |         |     |  |  |   |    |  |  |   |    | 

Guaranteed Loans and Commitments.In limited cases, the Company has
made loans to owners or partners in hotel or resort ventures
whereby the Company has a management or franchise agreement.
Loans outstanding under this program totaled $155 million
at December 31, 2001. Unfunded commitments aggregating
$26 million were outstanding at December 31, 2001, of
which $11 million are expected to be funded in 2002 and
$13 million are expected to be funded in total. These loans
typically are secured by pledges of project ownership interests
and/or mortgages on the projects.

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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

The Company participates in programs with
unaffiliated lenders in which the Company may partially
guarantee loans made to facilitate third-party ownership of
hotels that the Company manages or franchises. At
December 31, 2001, loan guarantees totaled
$153 million relating to three projects: the St. Regis in
Monarch Beach, California, which opened in mid-2001; the Westin
Kierland hotel in Arizona, which is scheduled to open at the end
of 2002; and the Westin in Charlotte, North Carolina, which is
scheduled to open at the end of 2002. With respect to the Westin
Kierland, the guarantee is joint and several with another equity
partner. The Company does not anticipate any funding under these
loan guarantees in 2002, as all projects are well capitalized.

Furthermore, in order to secure management and
franchise contracts, the Company may provide performance
guarantees to third-party owners. Most of these performance
guarantees allow the Company to abandon a contract rather than
fund shortfalls if certain performance levels are not met. In
limited cases, the Company is obliged to fund shortfalls in
performance levels. As of December 31, 2001, the Company
had six management contracts with performance guarantees with
possible cash outlays of up to $68 million,
$50 million of which, if required, would be funded over a
period of 25 years. Many of the performance tests are
multi-year tests, are tied to the results of a competitive set
of hotels, and have exclusions for force majeure clauses and
acts of war and terrorism. The Company does not anticipate any
funding under the performance guarantees in 2002. Lastly, the
Company does not anticipate losing any significant management or
franchise contracts in 2002.

Litigation.The Sheraton Corporation
(Sheraton Corp.) (formerly ITT Sheraton
Corporation), a subsidiary of the Company, is a defendant in
certain litigation relating to Sheraton Corp.s management
of a hotel. The case is titled 2660 Woodley Road Joint
Venture v. ITT Sheraton Corporation, Civil Action
No. 97-450-JJF (U.S.D.C., D. Del.). In December 1999,
following trial, the jury returned a verdict finding that
Sheraton Corp. had violated its contractual obligations to the
hotel owner and awarded contractual damages totaling
$11 million. The jury also found for the plaintiff on
certain common law and other claims and awarded compensatory and
other damages of $2 million and punitive damages of
$38 million. These amounts were fully reserved for as of
December 31, 1999. The jury found for Sheraton Corp. and
rejected the plaintiffs additional claims that Sheraton
Corp. had violated the Racketeer Influenced and Corrupt
Organizations Act (RICO), and that Sheraton Corp.
had engaged in fraud. Sheraton Corp. believes that the
jurys determination against it on liability issues was
erroneous as a matter of law, and that the damage awards were
excessive and not supported by the evidence. Sheraton Corp.
sought to have the verdict set aside in the trial court. In
response to Sheraton Corp.s motion, the court, in January
2002, amended the judgment and reduced the punitive damages
award from $38 million to $17 million; the court also
trebled the jurys $750,000 award for Robinson-Patman Act
violations to $2.25 million on the basis of the
courts interpretation of that statute. The amount of the
judgment, as a result, will be $31.4 million. Sheraton has
filed a Notice of Appeal with the United States Court of Appeals
and plaintiffs have filed a Cross-Notice of Appeal. There can be
no assurance that Sheraton Corp. will be successful in having
the verdict set aside, overturned or reduced on appeal, or that
other owners of properties managed by Sheraton Corp. will not
seek to assert similar claims.

The Corporation, Sheraton Corp. and Sheraton
Holding are defendants in certain litigations arising out of
purported contracts allegedly requiring the purchase of
telecommunication, video and power services from Intelnet. The
first suit was commenced in late 1997 by Intelnet, alleging that
Sheraton Corp. violated what Intelnet claimed were
Intelnets exclusive rights to provide telecommunications
and other services to Sheraton Holding and its affiliates. The
complaint sought injunctive relief to enforce alleged
exclusivity rights and unquantified monetary damages. The
complaint was subsequently amended in November 1998 to seek
specific monetary and unspecified punitive damages. Sheraton
Holding and Sheraton Corp. served an answer denying
Intelnets claims, and asserting counterclaims seeking
damages and a declaration that the purported contracts at issue
were unenforceable.

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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

In June 1999, Intelnet commenced a second lawsuit
naming Boardwalk Regency Corp. (formerly a subsidiary of the
Corporation) and the Corporation. The claims in this case are
similar in nature to those made in the first suit, and relate to
an alleged breach of a purported exclusive contract to provide
certain services to the Caesars Atlantic City hotel and
casino. The two suits have been consolidated and were in
mediation until 2001. The mediation ended during the first half
of 2001 and the parties are now proceeding with discovery. The
Company believes that Intelnets claims are meritless and
will continue to contest them vigorously. The Company does not
expect that the resolution will have a material adverse effect
on the consolidated results of operations, financial position or
cash flows.

In November 2001, the Corporation, Sheraton
Holding and Sheraton Corp. commenced a separate litigation in
the United States District Court for the District of New Jersey,
asserting claims arising under RICO as well as fraud claims
against the principals of Intelnet.

The Company is involved in various other legal
matters that have arisen in the normal course of business, some
of which include claims for substantial sums. Accruals have been
recorded when the outcome is probable and can be reasonably
estimated. While the ultimate results of claims and litigation
cannot be determined, the Company does not expect that the
resolution of all legal matters will have a material adverse
effect on its consolidated results of operations, financial
position or cash flow.

Environmental Matters.The Company is subject to certain
requirements and potential liabilities under various federal,
state and local environmental laws, ordinances and regulations.
Such laws often impose liability without regard to whether the
current or previous owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic
substances. Although the Company has incurred and expects to
incur remediation and other environmental costs during the
ordinary course of operations, management anticipates that such
costs will not have a material adverse effect on the operations
or financial condition of the Company.

Captive Insurance Company.Estimated insurance claims payable
at December 31, 2001 were $54 million. At
December 31, 2001, standby letters of credit amounting to
$28 million had been issued to provide collateral for the
estimated claims. The letters of credit are guaranteed by the
Companys captive insurance company.

ITT Industries.In 1995, the former ITT
Corporation, renamed ITT Industries, Inc. (ITT
Industries), distributed to its stockholders all of the
outstanding shares of common stock of ITT Corporation, then a
wholly owned subsidiary of ITT Industries (the
Distribution). In connection with this Distribution,
ITT Corporation, which was then named ITT Destinations, Inc.,
changed its name to ITT Corporation.

For purposes of governing certain of the ongoing
relationships between the Company and ITT Industries after the
Distribution and spin-off of ITT Corporation and to provide for
an orderly transition, the Company and ITT Industries have
entered into various agreements including a spin-off agreement,
Employee Benefits Services and Liability Agreement, Tax
Allocation Agreement and Intellectual Property Transfer and
License Agreements. The Company may be liable to or due
reimbursement from ITT Industries relating to the resolution of
certain pre-spin-off matters under these agreements. Based on
available information, management does not believe that these
matters would have a material impact on the consolidated results
of operations, financial position or cash flows.

For discussion of certain other matters, see
Note 11, Income Taxes.

Note 21.     Business
Segment and Geographical Information

The Company has one operating segment, hotels and
leisure. The hotels and leisure segment represents a worldwide
network of owned, leased and consolidated joint venture hotels,
VOIs and resorts operated primarily under the Companys
proprietary brand names including St. Regis, The Luxury
Collection,

F-37



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)

Sheraton, Westin, W and Four Points by Sheraton
hotels and resorts which are managed or franchised under these
brand names in exchange for fees. Also included are earnings and
losses from the Companys interest in unconsolidated joint
ventures.

The performance of the hotels and leisure segment
is evaluated primarily on operating profit before corporate
selling, general and administrative expense, interest, gains on
the sale of real estate, investments and restructuring and other
special charges. The Company does not allocate these items to
the segment.

The following table presents revenues, operating
income, assets and capital expenditures for the Companys
reportable segment (in millions):

|                              |                         |      |        |        |  |      |        |        |  |   |        |        | 
|----------------------------- | ----------------------- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                              |                         | 2001 |        | 2000   |  | 1999
|                              |                         |      |        |        |  |     
|Revenues                      |                         | $    | 3,967  |        |  | $    | 4,345  |        |  | $ | 3,829  |       
|                              |                         |      |        |        |  |      |        |        |  |   |        |       
|Operating income(a)           |                         | $    | 740    |        |  | $    | 1,118  |        |  | $ | 921    |       
|                              |                         |      |        |        |  |      |        |        |  |   |        |       
|Depreciation and amortization |                         | $    | 526    |        |  | $    | 481    |        |  | $ | 452    |       
|                              |                         |      |        |        |  |      |        |        |  |   |        |       
|Assets:                       |                         |      |        |        |  |      |        |        |  |   |        |       
|                              | Hotel and leisure       |      | $      | 12,352 |  |      | $      | 12,566 |  |   | $      | 12,668 | 
|                              | Corporate               |      |        | 109    |  |      |        | 131    |  |   |        | 168    | 
|                              | Discontinued operations |      |        |       |  |      |        |       |  |   |        | 104    | 
|                              |                         |      |        |        |  |      |        |        |  |   |        |       
|                              |                         | $    | 12,461 |        |  | $    | 12,697 |        |  | $ | 12,940 |       
|                              |                         |      |        |        |  |      |        |        |  |   |        |       
|Capital expenditures:         |                         |      |        |        |  |      |        |        |  |   |        |       
|                              | Hotel and leisure       |      | $      | 477    |  |      | $      | 544    |  |   | $      | 521    | 
|                              |                         |      |        |        |  |      |        |        |  |   |        |       



---



|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(a) | The following costs are not allocated to hotel
	and leisure in evaluating operating income (in millions):

|                                              |  |      |    |      |  |      |    |  |  |   |    | 
|--------------------------------------------- |  | ---- | -- | ---- |  | ---- | -- |  |  | - | -- | 
|                                              |  | 2001 |    | 2000 |  | 1999
|                                              |  |      |    |      |  |     
|Corporate selling, general and administrative |  | $    | 75 |      |  | $    | 90 |  |  | $ | 77 | 
|Restructuring and other special charges       |  | $    | 50 |      |  | $    |   |  |  | $ | 3  | 

|                        |  |               |       |                   |  |      |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|----------------------- |  | ------------- | ----- | ----------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                        |  |               |       |                  
|                        |  | Revenues      |       | Long-Lived Assets
|                        |  |               |       |                  
|                        |  | 2001          |       | 2000              |  | 1999 |       | 2001 |  | 2000 |       | 1999
|                        |  |               |       |                   |  |      |       |      |  |      |       |     
|                        |  |              
|                        |  | (In millions)
|United States           |  | $             | 2,871 |                   |  | $    | 3,230 |      |  | $    | 2,705 |      |  | $ | 6,370 |  |  | $ | 6,362 |  |  | $ | 6,329 | 
|All other international |  |               | 1,096 |                   |  |      | 1,115 |      |  |      | 1,124 |      |  |   | 1,865 |  |  |   | 1,939 |  |  |   | 1,900 | 
|                        |  |               |       |                   |  |      |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|Total                   |  | $             | 3,967 |                   |  | $    | 4,345 |      |  | $    | 3,829 |      |  | $ | 8,235 |  |  | $ | 8,301 |  |  | $ | 8,229 | 
|                        |  |               |       |                   |  |      |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 

There were no individual international countries
which comprised over 10% of the total revenues and long-lived
assets of the Company as of December 31, 2001, 2000 or 1999.

F-38



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##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)



|         |                              
|-------- | -----------------------------
|Note 22. | Quarterly Results (Unaudited)

|                                         |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |       |  
|---------------------------------------- | ---------------------------------------- | ------------------------------------ | ----- | ------- | - | ------------ | ----- | ----------- | - | ---- | ----- | ---- |  | - | ----- | ----- | - | - | ----- | ----- | -
|                                         |                                          |                                      |       |        
|                                         |                                          | Three Months Ended                   |       |        
|                                         |                                          |                                      |       |        
|                                         |                                          | March 31                             |       | June 30 |   | September 30 |       | December 31 |   | Year
|                                         |                                          |                                      |       |         |   |              |       |             |   |     
|                                         |                                          |                                     
|                                         |                                          | (In millions, except per Share data)
|2001                                     |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|Revenues                                 |                                          | $                                    | 1,014 |         |   | $            | 1,110 |             |   | $    | 965   |      |  | $ | 878   |       |   | $ | 3,967 |      
|Costs and expenses                       |                                          | $                                    | 821   |         |   | $            | 856   |             |   | $    | 830   |      |  | $ | 845   |       |   | $ | 3,352 |      
|Income (loss) from continuing operations |                                          | $                                    | 62    |         |   | $            | 113   |             |   | $    | 30    |      |  | $ | (54   | )     |   | $ | 151   |      
|Discontinued operations                  |                                          | $                                    |      |         |   | $            |      |             |   | $    |      |      |  | $ |      |       |   | $ |      |      
|Extraordinary item                       |                                          | $                                    |      |         |   | $            | (6    | )           |   | $    |      |      |  | $ |      |       |   | $ | (6    | )    
|Net income (loss)                        |                                          | $                                    | 62    |         |   | $            | 107   |             |   | $    | 30    |      |  | $ | (54   | )     |   | $ | 145   |      
|Earnings (loss) per Share:               |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|Basic                                   |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|                                         | Income (loss) from continuing operations |                                      | $     | 0.31    |   |              | $     | 0.56        |   |      | $     | 0.15 |  |   | $     | (0.28 | ) |   | $     | 0.75  |  
|                                         | Discontinued operations                  |                                      | $     |        |   |              | $     |            |   |      | $     |     |  |   | $     |      |   |   | $     |      |  
|                                         | Extraordinary item                       |                                      | $     |        |   |              | $     | (0.03       | ) |      | $     |     |  |   | $     |      |   |   | $     | (0.03 | )
|                                         | Net income (loss)                        |                                      | $     | 0.31    |   |              | $     | 0.53        |   |      | $     | 0.15 |  |   | $     | (0.28 | ) |   | $     | 0.72  |  
|Diluted                                 |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|                                         | Income (loss) from continuing operations |                                      | $     | 0.30    |   |              | $     | 0.55        |   |      | $     | 0.14 |  |   | $     | (0.28 | ) |   | $     | 0.73  |  
|                                         | Discontinued operations                  |                                      | $     |        |   |              | $     |            |   |      | $     |     |  |   | $     |      |   |   | $     |      |  
|                                         | Extraordinary item                       |                                      | $     |        |   |              | $     | (0.03       | ) |      | $     |     |  |   | $     |      |   |   | $     | (0.03 | )
|                                         | Net income (loss)                        |                                      | $     | 0.30    |   |              | $     | 0.52        |   |      | $     | 0.14 |  |   | $     | (0.28 | ) |   | $     | 0.70  |  
|2000                                     |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|Revenues                                 |                                          | $                                    | 996   |         |   | $            | 1,142 |             |   | $    | 1,102 |      |  | $ | 1,105 |       |   | $ | 4,345 |      
|Costs and expenses                       |                                          | $                                    | 811   |         |   | $            | 857   |             |   | $    | 834   |      |  | $ | 815   |       |   | $ | 3,317 |      
|Income from continuing operations        |                                          | $                                    | 53    |         |   | $            | 114   |             |   | $    | 103   |      |  | $ | 131   |       |   | $ | 401   |      
|Discontinued operations                  |                                          | $                                    |      |         |   | $            | 5     |             |   | $    |      |      |  | $ |      |       |   | $ | 5     |      
|Extraordinary item                       |                                          | $                                    | (3    | )       |   | $            |      |             |   | $    |      |      |  | $ |      |       |   | $ | (3    | )    
|Net income                               |                                          | $                                    | 50    |         |   | $            | 119   |             |   | $    | 103   |      |  | $ | 131   |       |   | $ | 403   |      
|Earnings per Share:                      |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|Basic                                   |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|                                         | Income from continuing operations        |                                      | $     | 0.26    |   |              | $     | 0.57        |   |      | $     | 0.51 |  |   | $     | 0.65  |   |   | $     | 1.99  |  
|                                         | Discontinued operations                  |                                      | $     |        |   |              | $     | 0.02        |   |      | $     |     |  |   | $     |      |   |   | $     | 0.02  |  
|                                         | Extraordinary item                       |                                      | $     | (0.01   | ) |              | $     |            |   |      | $     |     |  |   | $     |      |   |   | $     | (0.01 | )
|                                         | Net income                               |                                      | $     | 0.25    |   |              | $     | 0.59        |   |      | $     | 0.51 |  |   | $     | 0.65  |   |   | $     | 2.00  |  
|Diluted                                 |                                          |                                      |       |         |   |              |       |             |   |      |       |      |  |   |       |       |   |   |       |      
|                                         | Income from continuing operations        |                                      | $     | 0.26    |   |              | $     | 0.56        |   |      | $     | 0.50 |  |   | $     | 0.64  |   |   | $     | 1.96  |  
|                                         | Discontinued operations                  |                                      | $     |        |   |              | $     | 0.02        |   |      | $     |     |  |   | $     |      |   |   | $     | 0.02  |  
|                                         | Extraordinary item                       |                                      | $     | (0.01   | ) |              | $     |            |   |      | $     |     |  |   | $     |      |   |   | $     | (0.01 | )
|                                         | Net income                               |                                      | $     | 0.25    |   |              | $     | 0.58        |   |      | $     | 0.50 |  |   | $     | 0.64  |   |   | $     | 1.97  |  

F-39



---



##### Table of Contents



STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.


AND STARWOOD HOTELS & RESORTS


NOTES TO
FINANCIAL STATEMENTS  (Continued)



|         |                 
|-------- | ----------------
|Note 23. | Subsequent Event

We have initiated the formal sale process for the
CIGA portfolio of 25 luxury hotels, land, golf courses and
marinas, potentially encumbered by our management contracts in
whole or in part. The Company began reviewing preliminary
indications of interest in the first quarter of 2002.

F-40



---



##### Table of Contents






SCHEDULE II

STARWOOD HOTELS & RESORTS WORLDWIDE,
INC.

AND STARWOOD HOTELS & RESORTS


VALUATION AND QUALIFYING ACCOUNTS


(In millions)


|                                                     |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |     | 
|---------------------------------------------------- | --------------------------------------- | ---------- | -- | ---------------------- |  | ------------- | -- | --------- | --- | ------------ | -- | --- | - | - | --- | --- | - | - | -- | --- | 
|                                                     |                                         |            |    |                        |  |              
|                                                     |                                         |            |    | Additions (Deductions) |  |              
|                                                     |                                         |            |    |                        |  |              
|                                                     |                                         |            |    |                        |  | Charged       |    |           |     |             
|                                                     |                                         | Balance    |    | Charged                |  | to/from Other |    | Payments/ |     | Balance     
|                                                     |                                         | January 1, |    | to Expenses            |  | Accounts(a)   |    | Other     |     | December 31,
|                                                     |                                         |            |    |                        |  |               |    |           |     |             
|2001                                                 |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |    
|Trade receivables  allowance for
	doubtful accounts |                                         | $          | 45 |                        |  | $             | 3  |           |     | $            |   |     |   | $ |    |     |   | $ | 48 |    
|Notes receivable  allowance for
	doubtful accounts  |                                         | $          | 42 |                        |  | $             | 17 |           |     | $            |   |     |   | $ | (18 | )   |   | $ | 41 |    
|Reserves included in accrued and other
	liabilities: |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |    
|                                                     | Restructuring and other special charges |            | $  | 100                    |  |               | $  | 50        |     |              | $  | (19 | ) |   | $   | (33 | ) |   | $  | 98  | 
|2000                                                 |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |    
|Trade receivables  allowance for
	doubtful accounts |                                         | $          | 62 |                        |  | $             | 2  |           |     | $            | (8 | )   |   | $ | (11 | )   |   | $ | 45 |    
|Notes receivable  allowance for
	doubtful accounts  |                                         | $          | 43 |                        |  | $             | 17 |           |     | $            | 6  |     |   | $ | (24 | )   |   | $ | 42 |    
|Reserves included in accrued and other
	liabilities: |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |    
|                                                     | Restructuring and other special charges |            | $  | 121                    |  |               | $  |          |     |              | $  | (13 | ) |   | $   | (8  | ) |   | $  | 100 | 
|1999                                                 |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |    
|Trade receivables  allowance for
	doubtful accounts |                                         | $          | 55 |                        |  | $             | 5  |           |     | $            |   |     |   | $ | 2   |     |   | $ | 62 |    
|Notes receivable  allowance for
	doubtful accounts  |                                         | $          | 31 |                        |  | $             | 4  |           |     | $            |   |     |   | $ | 8   |     |   | $ | 43 |    
|Reserves included in accrued and other
	liabilities: |                                         |            |    |                        |  |               |    |           |     |              |    |     |   |   |     |     |   |   |    |    
|                                                     | Restructuring and other special charges |            | $  | 202                    |  |               | $  | 3         | (b) |              | $  | (15 | ) |   | $   | (69 | ) |   | $  | 121 | 



---



|    |                                
|--- | -------------------------------
|(a) | Charged to/from other accounts:

|                                     |  |                   |    |                 |  |   |     |  
|------------------------------------ |  | ----------------- | -- | --------------- |  | - | --- | -
|                                     |  | Trade and Notes   |    |                
|                                     |  | Receivable       |    | Restructuring  
|                                     |  | Allowance for     |    | and Other      
|                                     |  | Doubtful Accounts |    | Special Charges
|                                     |  |                   |    |                
|2001                                 |  |                   |    |                 |  |   |     |  
|Other assets                         |  | $                 |   |                 |  | $ | (19 | )
|Other liabilities                    |  |                   |   |                 |  |   |    |  
|                                     |  |                   |    |                 |  |   |     |  
|Total charged to/from other accounts |  | $                 |   |                 |  | $ | (19 | )
|                                     |  |                   |    |                 |  |   |     |  
|2000                                 |  |                   |    |                 |  |   |     |  
|Other assets                         |  | $                 | (2 | )               |  | $ |    |  
|Other liabilities                    |  |                   |   |                 |  |   | (13 | )
|                                     |  |                   |    |                 |  |   |     |  
|Total charged to/from other accounts |  | $                 | (2 | )               |  | $ | (13 | )
|                                     |  |                   |    |                 |  |   |     |  
|1999                                 |  |                   |    |                 |  |   |     |  
|Other assets                         |  | $                 |   |                 |  | $ | (3  | )
|Other liabilities                    |  |                   |   |                 |  |   | (12 | )
|                                     |  |                   |    |                 |  |   |     |  
|Total charged to/from other accounts |  | $                 |   |                 |  | $ | (15 | )
|                                     |  |                   |    |                 |  |   |     |  



|    |                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------
|(b) | Includes reversals of prior years
	restructuring and other special charges reserves of
	$90 million.

S-1



---



##### Table of Contents






SCHEDULE III

STARWOOD HOTELS & RESORTS

REAL ESTATE AND ACCUMULATED
DEPRECIATION


December 31, 2001


(In millions)


|                                             |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|-------------------------------------------- |  | ---- | ------- | ----- |  | --------------- | ------- | ---------------- |  | -------------------- | --- | ------------ |  | ---- | ----- | ------------ |  | - | - |  |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|                                             |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |     
|                                             |  |      |         |       |  |                 |         |                  |  | Gross Amount        
|                                             |  |      |         |       |  | Initial Cost to |         | Costs Subsequent |  | Book Value          
|                                             |  |      |         |       |  | Company         |         | to Acquisition   |  | at December 31, 2001
|                                             |  |      |         |       |  |                 |         |                  |  |                     
|                                             |  |      |         |       |  |                 |         |                  |  | (a)                  |     |             
|                                             |  |      |         |       |  |                 |         |                  |  |                      |     | (a)(b)      
|                                             |  |      |         |       |  |                 |         | Building and     |  |                      |     | Building and |  |      |       | Building and
|Description                                  |  | City |         | State |  | Land            |         | Improvements     |  | Land                 |     | Improvements |  | Land |       | Improvements
|                                             |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |             
|Hotel properties, each less than 5% of total |  |      | Various |       |  |                 | Various |                  |  | $                    | 457 |              |  | $    | 3,487 |              |  | $ | 1 |  |  | $ | 398 |  |  | $ | 458 |  |  | $ | 3,885 | 
|Land                                         |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  |   | 458   | 
|Furniture, fixtures and equipment            |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  |   | 536   | 
|Construction in progress                     |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  |   | 13    | 
|                                             |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|                                             |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  | $ | 4,892 | 
|                                             |  |      |         |       |  |                 |         |                  |  |                      |     |              |  |      |       |              |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                             |  |                |     |              |  |          |         |      |  |  |         |  |  |  |         | 
|-------------------------------------------- |  | -------------- | --- | ------------ |  | -------- | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|                                             |  | Accumulated    |     |              |  |          |         |     
|                                             |  | Depreciation & |     | Year of      |  | Date     |         |     
|Description                                  |  | Amortization   |     | Construction |  | Acquired |         | Life
|                                             |  |                |     |              |  |          |         |     
|Hotel properties, each less than 5% of total |  | $              | 415 |              |  |          | Various |      |  |  | Various |  |  |  | Various | 
|Land                                         |  |                |    |              |  |          |         |      |  |  |         |  |  |  |         | 
|Furniture, fixtures and equipment            |  |                | 276 |              |  |          |         |      |  |  |         |  |  |  |         | 
|Construction in progress                     |  |                |    |              |  |          |         |      |  |  |         |  |  |  |         | 
|                                             |  |                |     |              |  |          |         |      |  |  |         |  |  |  |         | 
|                                             |  | $              | 691 |              |  |          |         |      |  |  |         |  |  |  |         | 
|                                             |  |                |     |              |  |          |         |      |  |  |         |  |  |  |         | 



---



|    |                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As of December 31, 2001, land, building,
	furniture, fixtures and equipment and construction in progress
	have a cost basis of $391 million, $2,262 million,
	$197 million and $12 million, respectively, for
	federal income tax purposes.
|   
|(b) | Building and improvements include amounts
	allocated for leasehold interest in land.                                                                                                                                                       

S-2



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##### Table of Contents



SCHEDULE III (Continued)


STARWOOD HOTELS & RESORTS

REAL ESTATE AND ACCUMULATED
DEPRECIATION


(In millions)


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

|                                        |                      |                   |       |      |  
|--------------------------------------- | -------------------- | ----------------- | ----- | ---- | -
|                                        |                      | Year Ended       
|                                        |                      | December 31, 2001
|                                        |                      |                  
|Real Estate and Furniture and
	Fixtures |                      |                   |       |     
|Balance at beginning of period          |                      | $                 | 4,749 |     
|Additions during period:                |                      |                   |       |     
|                                        | Acquisitions         |                   |       |     |  
|                                        | Improvements         |                   |       | 169  |  
|                                        | Other                |                   |       |     |  
|Deductions during period:               |                      |                   |       |     
|                                        | Sale of properties   |                   |       | (26  | )
|                                        |                      |                   |       |     
|Balance at end of period                |                      | $                 | 4,892 |     
|                                        |                      |                   |       |     
|Accumulated Depreciation                |                      |                   |       |     
|Balance at beginning of period          |                      | $                 | (489  | )   
|Additions during period:                |                      |                   |       |     
|                                        | Depreciation expense |                   |       | (206 | )
|                                        | Other                |                   |       |     |  
|Deductions during period:               |                      |                   |       |     
|                                        | Sale of properties   |                   |       | 2    |  
|                                        | Other                |                   |       | 2    |  
|                                        |                      |                   |       |     
|Balance at end of period                |                      | $                 | (691  | )   
|                                        |                      |                   |       |     

S-3



---



##### Table of Contents






SCHEDULE IV

STARWOOD HOTELS & RESORTS

MORTGAGE LOANS ON REAL ESTATE


December 31, 2001


(In millions)


|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |   | 
|--------------------------- | ------------------------------------------ | -------- |  | -------- | - | ------------- |  | ----------- |  | ------------ |  | ------------ |  | --------------------- |  | --- |  | - | ----- | ----- |  | - | ----- | ----- |  |  | - | - | 
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  | Principal Amount of  
|                            |                                            |          |  |          |   |               |  |             |  | Original     |  | Carrying     |  | Loans Subject to     
|                            |                                            | Interest |  | Final    |   | Periodic      |  |             |  | Face Amount  |  | Amount of    |  | Delinquent           
|Description                 |                                            | Rate     |  | Maturity |   | Payment Terms |  | Prior Liens |  | of Mortgages |  | Mortgages(a) |  | Principal or Interest
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                      
|First Mortgages:            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|                            | Ramada Inn  Tucker, GA                    |          |  | 9.00     | % |               |  | 2002        |  |              |  | (b)          |  |                       |  | No  |  |   | $     | 2     |  |   | $     | 2     |  |  |   |  | 
|Second Mortgages:           |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|                            | Westin Portland  Portland, OR             |          |  | 11.50    | % |               |  | 2003        |  |              |  | (c)          |  |                       |  | Yes |  |   |       | 2     |  |   |       | 2     |  |  |   |  | 
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  | $ | 4     |       |  | $ | 4     |       |  |  |  |  
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|Intercompany Mortgage Loans |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|First Mortgages:            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|                            | W New York  New York, NY                  |          |  | 9.50     | % |               |  | 2006        |  |              |  | (d)          |  |                       |  | No  |  |   | $     | 40    |  |   | $     | 40    |  |  |   |  | 
|                            | Westin Maui  Maui, HI                     |          |  | 10.00    | % |               |  | 2006        |  |              |  | (e)          |  |                       |  | No  |  |   |       | 105   |  |   |       | 132   |  |  |   |  | 
|                            | Westin Regina  Cancun, Mexico             |          |  | 9.00     | % |               |  | 2004        |  |              |  | (f)          |  |                       |  | No  |  |   |       | 41    |  |   |       | 41    |  |  |   |  | 
|                            | Westin Regina  Los Cabos, Mexico          |          |  | 9.00     | % |               |  | 2004        |  |              |  | (f)          |  |                       |  | No  |  |   |       | 53    |  |   |       | 42    |  |  |   |  | 
|                            | Westin Regina  Puerto Vallarta, Mexico    |          |  | 9.00     | % |               |  | 2004        |  |              |  | (f)          |  |                       |  | No  |  |   |       | 25    |  |   |       | 20    |  |  |   |  | 
|                            | Westin Hotel  Turnberry, Scotland         |          |  | 10.00    | % |               |  | 2005        |  |              |  | (g)          |  |                       |  | No  |  |   |       | 27    |  |   |       | 17    |  |  |   |  | 
|                            | Sheraton Holding Corporation Mortgage Note |          |  | 10.00    | % |               |  | 2014        |  |              |  | (h)          |  |                       |  | No  |  |   |       | 2,489 |  |   |       | 1,289 |  |  |   |  | 
|                            | Sheraton Holding Corporation Mortgage Note |          |  | 8.50     | % |               |  | 2014        |  |              |  | (h)          |  |                       |  | No  |  |   |       | 210   |  |   |       | 210   |  |  |   |  | 
|                            | Starwood Hotels & Resorts Worldwide, Inc.  |          |  | 8.50     | % |               |  | 2014        |  |              |  | (i)          |  |                       |  | No  |  |   |       | 150   |  |   |       | 150   |  |  |   |  | 
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  | $ | 3,140 |       |  | $ | 1,941 |       |  |  |  |  
|                            |                                            |          |  |          |   |               |  |             |  |              |  |              |  |                       |  |     |  |   |       |       |  |   |       |       |  |  |   |  



---



|    |                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As of December 31, 2001, the aggregate cost
	(before allowance for loan losses) for federal income tax
	purposes is not significantly different from that used for book
	purposes.                                                                                                             
|   
|(b) | Payment of principal and interest due monthly and
	based upon an 18-year amortization schedule with interest rate
	of 9% per annum. Principal and all accrued and unpaid interest
	are due June 1, 2002.                                                                                       
|   
|(c) | Interest only payable monthly; interest
	calculated based upon 11.5% interest rate, $1.8 million
	principal balance and actual/365-day basis. Principal and all
	accrued and unpaid interest are due June 4, 2003.                                                                             
|   
|(d) | Interest only payable monthly; principal and all
	accrued and unpaid interest due October 1, 2006.                                                                                                                                                                                             
|   
|(e) | Interest only payable monthly; interest based on
	current principal balance and 10% interest rate. Principal
	balance comprised of initial advance of $105 million with
	additional advances up to $121 million available. Principal
	and all accrued and unpaid interest are due January 2006.



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(f) | Interest only payable monthly; principal and all
	accrued and unpaid interest are due December 2004.



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(g) | Interest only payable monthly; principal and all
	accrued and unpaid interest are due December 2005.
|   
|(h) | Interest only payable monthly; principal and all
	accrued and unpaid interest are due February 2014.



|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(i) | Interest only payable monthly; principal and all
	accrued and unpaid interest are due February 2014.

S-4



---



##### Table of Contents



SCHEDULE IV (Continued)

STARWOOD HOTELS & RESORTS

RECONCILIATION OF MORTGAGE LOANS


(In millions)


|                               |                      |                         |       |      |   |      |       |    |   |   |       |        |  
|------------------------------ | -------------------- | ----------------------- | ----- | ---- | - | ---- | ----- | -- | - | - | ----- | ------ | -
|                               |                      |                        
|                               |                      | Year Ended December 31,
|                               |                      |                        
|                               |                      | 2001                    |       | 2000 |   | 1999
|                               |                      |                         |       |      |   |     
|Balance at beginning of period |                      | $                       | 1,935 |      |   | $    | 1,925 |    |   | $ | 3,189 |       
|Additions:                     |                      |                         |       |      |   |      |       |    |   |   |       |       
|                               | Accrued interest(a)  |                         |       | 13   |   |      |       | 12 |   |   |       | 10     |  
|Deductions:                    |                      |                         |       |      |   |      |       |    |   |   |       |       
|                               | Principal repayments |                         |       | (3   | ) |      |       | (2 | ) |   |       | (1,274 | )
|                               |                      |                         |       |      |   |      |       |    |   |   |       |       
|Balance at end of period       |                      | $                       | 1,945 |      |   | $    | 1,935 |    |   | $ | 1,925 |       
|                               |                      |                         |       |      |   |      |       |    |   |   |       |       



---



|    |                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Per mortgage loan agreements, the Westin
	Regina  Cancun, Mexico, Westin Regina  Los
	Cabos, Mexico and Westin Hotel  Turnberry, Scotland
	are not required to pay monthly interest if the cash flows are
	insufficient. Thus, the Trust has accrued interest on the notes.

S-5



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##### Table of Contents



EXHIBIT INDEX

|        |   |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | - | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                       
|Number  |   | Description of Exhibit
|        |   |                       
|        | 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). (The SEC file numbers of all filings
	made by the Corporation and the Trust pursuant to the Securities
	Act of 1934, as amended, and referenced herein are: 1-7959 (the
	Corporation) and 1-6828 (the Trust)).                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 2 | .2                     |  | Form of Amendment No. 1 to Formation
	Agreement, dated as of July 1995, among the Trust, the
	Corporation and the Starwood Partners (incorporated by reference
	to Exhibit 10.23 to the Trusts and the
	Corporations Joint Registration Statement on Form S-2
	filed with the SEC on June 29, 1995 (Registration
	Nos. 33-59155 and 33-59155-01)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 2 | .3                     |  | Transaction Agreement, dated as of
	September 8, 1997, by and among the Trust, the Corporation,
	Realty Partnership, Operating Partnership, WHWE L.L.C., Woodstar
	Investor Partnership (Woodstar), Nomura Asset
	Capital Corporation, Juergen Bartels, Westin Hotels &
	Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S
	Seattle Corp., Westin St. John Hotel Company, Inc., W&S
	Denver Corp., W&S Atlanta Corp. and W&S Hotel L.L.C.
	(incorporated by reference to Exhibit 2 to the Trusts
	and the Corporations Joint Current Report on Form 8-K
	dated September 9, 1997, as amended by the Form 8-K/ A
	dated December 18, 1997).                                                                                                                                                                                                                                                                                                    
|        | 2 | .4                     |  | Amended and Restated Agreement and Plan of
	Merger, dated as of November 12, 1997, by and among the
	Corporation, the Trust, Chess Acquisition Corp.
	(Chess) and ITT Corporation (incorporated by
	reference to Exhibit 2.1 to the Trusts and the
	Corporations Joint Current Report on Form 8-K dated
	November 13, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 2 | .5                     |  | Agreement and Plan of Restructuring, dated as of
	September 16, 1998, and amended as of November 30,
	1998, among the Corporation, ST Acquisition Trust (ST
	Trust) and the Trust (incorporated by reference to
	Annex A to the Trusts and the Corporations
	Joint Proxy Statement dated December 3, 1998 (the
	1998 Proxy Statement)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 2 | .6                     |  | Form of Stock Purchase Agreement, dated as of
	February 23, 1998, between the Trust and the Corporation
	(incorporated by reference to Exhibit 10.4 to the
	Trusts and the Corporations Joint Annual Report on
	Form 10-K for the year ended December 31, 1997 (the
	1997 Form 10-K)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 3 | .1                     |  | Amended and Restated Declaration of Trust of the
	Trust, amended and restated as of January 6, 1999
	(incorporated by reference to Exhibit 1 to the Trusts
	Registration Statement on Form 8-A filed on
	December 21, 1998 (the Trust Form 8-A),
	except that the following changes were made on January 6,
	1999, upon the filing by the Trust and ST Trust of the Articles
	of Merger of ST Trust into the Trust (the Articles of
	Merger) with, and the acceptance thereof for record by,
	the State Department of Assessments and Taxation of the State of
	Maryland (the SDAT): Section 6.14 specifies
	January 6, 1999 as the date of the Intercompany Agreement;
	Section 6.19.1 specifies January 6, 1999 as the date
	of the acceptance for record by the SDAT of the Articles of
	Merger; and the definition of Intercompany Agreement
	in Section 6.19.2 specifies January 6, 1999 as the
	date of the Intercompany Agreement).
|        | 3 | .2                     |  | Charter of the Corporation, amended and restated
	as of February 1, 1995, as amended through March 26,
	1999 (incorporated by reference to Exhibit 3.2 to the
	Trusts and the Corporations Joint Annual Report on
	Form 10-K for the year ended December 31, 1998, as
	amended by the Form 10-K/ A filed May 17, 1999 (as so
	amended, the 1998 Form 10-K)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3 | .3                     |  | Bylaws of the Trust, as amended through
	April 16, 1999 (incorporated by reference to
	Exhibit 3.3 to the Corporations and the Trusts
	Joint Quarterly Report on Form 10-Q for the quarterly
	period ended March 31, 1999 (the 1999
	Form 10-Q1)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3 | .4                     |  | Bylaws of the Corporation, as amended through
	March 15, 1999 (incorporated by reference to Exhibit 3
	to the Corporations and the Trusts Joint Current
	Report on Form 8-K dated March 15, 1999 (the
	March 15 Form 8-K)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 4  | .1                     |  | Amended and Restated Intercompany Agreement,
	dated as of January 6, 1999, between the Corporation and
	the Trust (incorporated by reference to Exhibit 3 to the
	Trust Form 8-A, except that on January 6, 1999, the
	Intercompany Agreement was executed and dated as of
	January 6, 1999).                                                                                                    
|        | 4  | .2                     |  | Rights Agreement, dated as of March 15,
	1999, between the Corporation and Chase Mellon Shareholder
	Services, L.L.C., as Rights Agent (incorporated by reference to
	Exhibit 4 to the March 15 Form 8-K).                                                                                                                                                                                       
|        | 4  | .3                     |  | Amended and Restated Indenture, dated as of
	November 15, 1995, as Amended and Restated as of
	December 15, 1995 between ITT Corporation (formerly known
	as ITT Destinations, Inc.) and the First National Bank of
	Chicago, as trustee (incorporated by reference to
	Exhibit 4.A.IV to the First Amendment to ITT
	Corporations Registration Statement on Form S-3 filed
	November 13, 1996).
|        | 4  | .4                     |  | First Indenture Supplement, dated as of
	December 31, 1998, among ITT Corporation, the Corporation
	and the Bank of New York (incorporated by reference to
	Exhibit 4.1 to the Trusts and the Corporations
	Joint Current Report on Form 8-K filed January 8,
	1999).                                                                                                                          
|        | 4  | .5                     |  | The Registrants hereby agree to file with the
	Commission a copy of any instrument, including indentures,
	defining the rights of long-term debt holders of the Registrants
	and their consolidated subsidiaries upon the request of the
	Commission.                                                                                                                                            
|        | 10 | .1                     |  | Third Amended and Restated Limited Partnership
	Agreement for Realty Partnership, dated January 6, 1999,
	among the Trust and the limited partners of Realty Partnership
	(incorporated by reference to Exhibit 10.1 to the 1998
	Form 10-K).                                                                                                                                                    
|        | 10 | .2                     |  | Third Amended and Restated Limited Partnership
	Agreement for Operating Partnership, dated January 6, 1999,
	among the Corporation and the limited partners of Operating
	Partnership (incorporated by reference to Exhibit 10.2 to
	the 1998 Form 10-K).                                                                                                                                        
|        | 10 | .3                     |  | 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 | .4                     |  | Employment Agreement, dated May 24, 1999,
	between the Corporation and Ronald C. Brown. (incorporated by
	reference to Exhibit 10.4 to the Corporations and the
	Trusts Joint Annual Report on Form 10-K for the year
	ended December 31, 1999 (the 1999 Form
	10-K)).(1)                                                                                                                    
|        | 10 | .5                     |  | Employment Agreement, dated March 25, 1998,
	between the Trust and Steven R. Goldman (incorporated by
	reference to Exhibit 10.11 to the 1997
	Form 10-K).(1)                                                                                                                                                                                                                                    
|        | 10 | .6                     |  | Starwood Hotels & Resorts 1995 Long-Term
	Incentive Plan (Amended and Restated as of December 3,
	1998) (incorporated by reference to Annex D to the 1998
	Proxy Statement).(1)                                                                                                                                                                                                                  
|        | 10 | .7                     |  | Starwood Hotels & Resorts Worldwide, Inc.
	1995 Long-Term Incentive Plan (Amended and Restated as of
	December 3, 1998) (incorporated by reference to
	Annex E to the 1998 Proxy Statement).(1)                                                                                                                                                                                                  
|        | 10 | .8                     |  | Incentive and Non-Qualified Share Option Plan
	(1986) of the Trust (incorporated by reference to
	Exhibit 10.8 to the Trusts and the Corporations
	Joint Annual Report on Form 10-K for the year ended
	August 31, 1986 (the 1986
	Form 10-K)).(1)                                                                                                                                           
|        | 10 | .9                     |  | Corporation Stock Non-Qualified Stock Option Plan
	(1986) of the Trust (incorporated by reference to
	Exhibit 10.9 to the 1986 Form 10-K).(1)                                                                                                                                                                                                                                                    
|        | 10 | .10                    |  | Stock Option Plan (1986) of the Corporation
	(incorporated by reference to Exhibit 10.10 to the 1986
	Form 10-K).(1)                                                                                                                                                                                                                                                                             
|        | 10 | .11                    |  | Trust Shares Option Plan (1986) of the
	Corporation (incorporated by reference to Exhibit 10.11 to
	the 1986 Form 10-K).(1)                                                                                                                                                                                                                                                                      



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .12                    |  | Form of Indemnification Agreement and Amendment
	No. 1 to Indemnification Agreement between the Trust and
	each of its Trustees and executive officers (incorporated by
	reference to Exhibit 10.7 to the Trusts and the
	Corporations Joint Annual Report on Form 10-K for the
	year ended December 31, 1995 (the 1995
	Form 10-K)).(1)                                                                                                                                                                                     
|        | 10 | .13                    |  | Form of Indemnification Agreement and Amendment
	No. 1 to Indemnification Agreement between the Corporation
	and each of its Directors and executive officers (incorporated
	by reference to Exhibit 10.8 to the 1995
	Form 10-K).(1)                                                                                                                                                                                                                                                                                            
|        | 10 | .14                    |  | Form of Amendment No. 2 to Indemnification
	Agreement, dated June 26, 1997, between the Trust and each
	of its Trustees and executive officers (incorporated by
	reference to Exhibit 10.1 to the Trusts and the
	Corporations Joint Quarterly Report on Form 10-Q for
	the quarterly period ended June 30, 1997 (the 1997
	Form 10-Q2)).(1)                                                                                                                                                                                 
|        | 10 | .15                    |  | Form of Amendment No. 2 to Indemnification
	Agreement, dated June 26, 1997, between the Corporation and
	each of its Directors and executive officers (incorporated by
	reference to Exhibit 10.2 to the 1997
	Form 10-Q2).(1)                                                                                                                                                                                                                                                                                                   
|        | 10 | .16                    |  | Form of Trademark License Agreement, dated as of
	December 10, 1997, between Starwood Capital and the Trust
	(incorporated by reference to Exhibit 10.22 to the 1997
	Form 10-K).                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .17                    |  | Exchange Rights Agreement, dated as of
	January 1, 1995, among the Trust, the Corporation, Realty
	Partnership, 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 (the Formation
	Form 8-K)).                                                                                                                                                                                           
|        | 10 | .18                    |  | 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 Formation Form 8-K).                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .19                    |  | Exchange Rights Agreement, dated as of
	June 3, 1996, among the Trust, the Corporation, Realty
	Partnership, Operating Partnership, Philadelphia HIR Limited
	Partnership and Philadelphia HSR Limited Partnership
	(incorporated by reference to Exhibit 10.1 to the
	Trusts and the Corporations Joint Quarterly Report
	on Form 10-Q for the quarterly period ended June 30,
	1996 (the 1996 Form 10-Q2)).                                                                                                                
|        | 10 | .20                    |  | Registration Rights Agreement, dated as of
	June 3, 1996, among the Trust, the Corporation and
	Philadelphia HSR Limited Partnership (incorporated by reference
	to Exhibit 10.2 to the 1996 Form 10-Q2).                                                                                                                                                                                                                                                                                                                        
|        | 10 | .21                    |  | Units Exchange Rights Agreement, dated as of
	February 14, 1997, by and among, inter alia, the
	Trust, the Corporation, Realty Partnership, Operating
	Partnership and the Starwood Partners (incorporated by reference
	to Exhibit 10.34 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                
|        | 10 | .22                    |  | Class A Exchange Rights Agreement, dated as
	of February 14, 1997, by and among, inter alia, the
	Trust, the Corporation, Operating Partnership and the Starwood
	Partners (incorporated by reference to Exhibit 10.35 to the
	1997 Form 10-K).                                                                                                                                                                                                                                                                                  
|        | 10 | .23                    |  | Credit Agreement, dated as of September 10,
	1997, between Realty Partnership and the Trust and Bankers Trust
	Company (BTC), Lehman Brothers Holdings Inc. d/b/a
	Lehman Capital, a division of Lehman Brothers Holdings Inc.
	(Lehman Capital), BankBoston, N.A., and Bank of
	Montreal (incorporated by reference to Exhibit 10.1 to the
	Trusts and the Corporations Joint Quarterly Report
	on Form 10-Q for the quarterly period ended
	September 30, 1997, as amended by the Form 10-Q/ A
	dated November 10, 1997).
|        | 10 | .24                    |  | Exchange Rights Agreement, dated as of
	January 2, 1998, among, inter alia, the Trust,
	Realty Partnership and Woodstar (incorporated by reference to
	Exhibit 10.50 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .25                    |  | Exchange Rights Agreement, dated as of
	January 2, 1998, among, inter alia, the Corporation,
	Operating Partnership and Woodstar (incorporated by reference to
	Exhibit 10.51 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                            
|        | 10 | .26                    |  | Registration Rights Agreement, dated as of
	January 2, 1998, among, inter alia, the Trust, the
	Corporation, and Woodstar (incorporated by reference to
	Exhibit 10.52 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                   



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .27                    |  | Credit Agreement, dated as of February 23,
	1998, among the Trust, Realty Partnership, the Corporation,
	Chess (and ITT Corporation as its successor by merger), certain
	additional borrowers, various lenders, BTC and The Chase
	Manhattan Bank (Chase Bank), as Administrative
	Agents, and Lehman Commercial Paper Inc. (Lehman
	Paper) and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.1 to the
	Trusts and the Corporations Joint Current Report on
	Form 8-K dated February 23, 1998 (the ITT
	Form 8-K)).                                                                                              
|        | 10 | .28                    |  | First Amendment to the Credit Agreement, dated as
	of March 3, 1998, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, and
	Lehman Paper and Bank of Montreal, as Syndication Agents, and
	the new lenders (incorporated by reference to Exhibit 10.2
	to the ITT Form 8-K).                                                                                                                                                                                                                                                                  
|        | 10 | .29                    |  | Second Amendment to the Credit Agreement, dated
	as of April 30, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.2 to the
	Trusts and the Corporations Joint Quarterly Report
	on Form 10-Q for the quarterly period ended June 30,
	1998 (the 1998 Form 10-Q2)).                                                                                                                                                         
|        | 10 | .30                    |  | Third Amendment to the Credit Agreement, dated as
	of June 15, 1998, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, and
	Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.3 to the 1998
	Form 10-Q2).                                                                                                                                                                                                                                                                                    
|        | 10 | .31                    |  | Fourth Amendment to the Credit Agreement, dated
	as of July 15, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.4 to the 1998
	Form 10-Q2).                                                                                                                                                                                                                                                                                   
|        | 10 | .32                    |  | Fifth Amendment to the Credit Agreement, dated as
	of August 26, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.2 to the 1998
	Form 10-Q3).                                                                                                                                                                                                                                                                                  
|        | 10 | .33                    |  | Sixth Amendment to the Credit Agreement, dated as
	of December 15, 1998, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	and Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.50 to the 1998
	Form 10-K).                                                                                                                                                                                                                                                                                
|        | 10 | .34                    |  | Seventh Amendment to the Credit Agreement, dated
	as of February 1999, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, and
	Lehman Paper and Bank of Montreal, as Syndication Agents
	(incorporated by reference to Exhibit 10.51 to the 1998
	Form 10-K).                                                                                                                                                                                                                                                                                  
|        | 10 | .35                    |  | Eighth Amendment to the Credit Agreement and
	Modification to Pledge and Security Agreement, dated as of
	July 2, 1999, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, Lehman
	Paper and Bank of Montreal, as Syndication Agents, and BTC, as
	Collateral Agent (incorporated by reference to Exhibit 10.1
	to the Corporations and the Trusts Joint Quarterly
	Report on Form 10-Q for the quarterly period ended
	September 30, 1999, as amended by the Form 10-Q/ A
	filed November 16, 1999 (as so amended, the 1999
	Form 10-Q3)).
|        | 10 | .36                    |  | Ninth Amendment to the Credit Agreement and
	Modification to Pledge and Security Agreement, dated as of
	September 20, 1999, among the Trust, Realty Partnership,
	the Corporation, ITT Corporation, the lenders party to the
	Credit Agreement, BTC and Chase Bank, as Administrative Agents,
	Lehman Paper and Bank of Montreal, as Syndication Agents, and
	BTC, as Collateral Agent (incorporated by reference to
	Exhibit 10.2 to the 1999 Form 10-Q3).                                                                                                                                                                                                  



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .37                    |  | Tenth Amendment to the Credit Agreement and
	Modification to Pledge and Security Agreement, dated as of
	June 12, 2000, among the Trust, Realty Partnership, the
	Corporation, ITT Corporation, the lenders party to the Credit
	Agreement, BTC and Chase Bank, as Administrative Agents, Lehman
	Paper and Bank of Montreal, as Syndication Agents, and BTC, as
	Collateral Agent (incorporated by reference to
	Exhibit 10.43 to the Corporations and the
	Trusts Joint Annual Report on Form 10-K for the year
	ended December 31, 2000 (the 2000
	Form 10-K)).
|        | 10 | .38                    |  | Eleventh Amendment to the Credit Agreement, dated
	as of November 20, 2001, among the Trust, Realty
	Partnership, the Corporation, Sheraton Holding, the lenders
	party to the Credit Agreement, BTC and Chase Bank, as
	Administrative Agents, Lehman Paper and Bank of Montreal, as
	Syndication Agents, and BTC, as Collateral Agent (incorporated
	by reference to Exhibit 10.1 to the Corporations and
	the Trusts Joint Current Report on Form 8-K filed
	December 4, 2001).                                                                                  
|        | 10 | .39                    |  | Pledge and Security Agreement, dated as of
	February 23, 1998, executed and delivered by the Trust, the
	Corporation and the other Pledgors party thereto, in favor of
	BTC as Collateral Agent (incorporated by reference to
	Exhibit 10.63 to the 1997 Form 10-K).                                                                                                                                                                                                                                                                                                  
|        | 10 | .40                    |  | Second Amended and Restated Senior Secured Note
	Agreement, dated December 30, 1999, among the Corporation,
	the Trust, the guarantors listed therein, the lenders listed
	therein, Lehman Paper, as Arranger and Administrative Agent, and
	Alex Brown and Chase Securities Inc., as Syndication Agents
	(incorporated by reference to Exhibit 10.46 to the 1999
	Form 10-K).                                                                                                                                                                                        
|        | 10 | .41                    |  | Loan Agreement, dated as of February 23,
	1998, between the Trust and the Corporation, together with
	Promissory Note executed in connection therewith, by the
	Corporation to the order of the Trust, in the principal amount
	of $3,282,000,000 (incorporated by reference to
	Exhibit 10.65 to the 1997 Form 10-K).                                                                                                                                                                                                                                                
|        | 10 | .42                    |  | Loan Agreement, dated as of February 23,
	1998, between the Trust and the Corporation, together with
	Promissory Note executed in connection therewith, by the
	Corporation to the order of the Trust, in the principal amount
	of $100,000,000 (incorporated by reference to Exhibit 10.66
	to the 1997 Form 10-K).                                                                                                                                                                                                                                                  
|        | 10 | .43                    |  | Loan Agreement, dated as of February 23,
	1998, between the Trust and the Corporation, together with
	Promissory Note executed in connection therewith, by the
	Corporation to the order of the Trust, in the principal amount
	of $50,000,000 (incorporated by reference to Exhibit 10.67
	to the 1997 Form 10-K).                                                                                                                                                                                                                                                   
|        | 10 | .44                    |  | Loan Agreement, dated as of January 27,
	1999, among the Borrowers named therein, as Borrowers, Starwood
	Operator I LLC, as Operator, and Lehman Capital
	(incorporated by reference to Exhibit 10.58 to the 1998
	Form 10-K).                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .45                    |  | Aircraft Dry Lease Agreement, entered into as of
	February 6, 1998, between Star Flight, L.L.C. and ITT
	Flight Operation, Inc., as amended by First Amendment thereto,
	dated as of August 25, 1998 (incorporated by reference to
	Exhibit 10.4 to the 1998 Form 10-Q3).                                                                                                                                                                                                                                                                                             
|        | 10 | .46                    |  | Form of Severance Agreement, dated December 1999,
	between the Corporation and each of Barry S. Sternlicht, Ronald
	C. Brown and Steve R. Goldman (incorporated by reference to
	Exhibit 10.52 to the 1999 Form 10-K).(1)                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .47                    |  | Amended and Restated Employment Agreement,
	effective as of January 1, 2000, between Barry S.
	Sternlicht and the Company (incorporated by reference to
	Exhibit 10.1 to the Corporations and the Trusts
	Joint Quarterly Report on Form 10-Q for the quarterly
	period ended March 31, 2000). (1)                                                                                                                                                                                                                                                                  
|        | 10 | .48                    |  | Employment Agreement, dated as of April 7,
	2000, between the Corporation and David K. Norton (incorporated
	by reference to Exhibit 10.1 to the Corporations and
	the Trusts Joint Quarterly Report on Form 10-Q for
	the quarterly period ended June 30, 2000).(1)                                                                                                                                                                                                                                                                                                
|        | 10 | .49                    |  | Employment Agreement, dated as of June 27,
	2000, between the Corporation and Robert F. Cotter (incorporated
	by reference to Exhibit 10.1 to the Corporations and
	the Trusts Joint Quarterly Report on Form 10-Q for
	the quarterly period ended September 30,
	2000).(1)                                                                                                                                                                                                                                                                                         



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .50                    |  | Form of Severance Agreement, dated as of
	August 14, 2000, between the Corporation and Robert F.
	Cotter (incorporated by reference to Exhibit 10.56 to the
	2000 Form 10-K).(1)                                                                                                                                                 
|        | 10 | .51                    |  | Employment Agreement, dated as of
	September 25, 2000, between the Corporation and Kenneth S.
	Siegel (incorporated by reference to Exhibit 10.57 to the
	2000 Form 10-K).(1)                                                                                                                                                    
|        | 10 | .52                    |  | Form of Severance Agreement, dated as of
	September 26, 2000, between the Corporation and Kenneth S.
	Siegel (incorporated by reference to Exhibit 10.58 to the
	2000 Form 10-K).(1)                                                                                                                                             
|        | 10 | .53                    |  | Form of Severance Agreement, dated as of
	June 9, 2000, between the Corporation and David K. Norton
	(incorporated by reference to Exhibit 10.59 to the 2000
	Form 10-K).(1)                                                                                                                                                     
|        | 10 | .54                    |  | Stock Purchase Agreement, dated as of
	April 27, 1999, among the Corporation, ITT Sheraton
	Corporation, Starwood Canada Corp., Caesars World, Inc.,
	Sheraton Desert Inn Corporation, Sheraton Tunica Corporation and
	Park Place Entertainment Corporation (incorporated by reference
	to Exhibit 10.5 to the 1999 Form 10-Q1).
|        | 10 | .55                    |  | Starwood Hotels & Resorts Worldwide, Inc.
	1999 Long-Term Incentive Compensation Plan (incorporated by
	reference to Exhibit 10.4 to the Corporations and the
	Trusts Joint Quarterly Report on Form 10-Q for the
	quarterly period ended June 30, 1999 (the 1999
	Form 10-Q2)).(1)                                          
|        | 10 | .56                    |  | Starwood Hotels & Resorts Worldwide, Inc.
	1999 Annual Incentive Plan for Certain Executives (incorporated
	by reference to Exhibit 10.5 to the 1999
	Form 10-Q2).(1)                                                                                                                                                            
|        | 10 | .57                    |  | First Amendment to the Starwood Hotels &
	Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation
	Plan, dated as of August 1, 2001 (incorporated by reference
	to Exhibit 10.1 to the Corporations and the
	Trusts Joint Quarterly Report on Form 10-Q for the
	quarterly period ended September 30, 2001).(1)          
|        | 10 | .58                    |  | Starwood Hotels & Resorts Worldwide, Inc.
	Deferred Compensation Plan, effective as of January 1, 2001
	(incorporated by reference to Exhibit 10.1 to the
	Corporations and the Trusts Joint Quarterly Report
	on Form 10-Q for the quarterly period ended June 30,
	2001 (the 2001 Form 10-Q2)).(1)                         
|        | 10 | .59                    |  | Indenture, dated as of May 25, 2001, by and
	among the Corporation, as Issuer, Guarantors and Firstar Bank,
	N.A., as Trustee (incorporated by reference to Exhibit 10.2
	to the 2001 Form 10-Q2).                                                                                                                               
|        | 10 | .60                    |  | Registration Rights Agreement, dated as of
	May 25, 2001, among the Corporation and Salomon Smith
	Barney Inc. (incorporated by reference to Exhibit 10.3 to
	the 2001 Form 10-Q2).                                                                                                                                              
|        | 12 | .1                     |  | Calculation of Ratio of Earnings to Total Fixed
	Charges. (2)                                                                                                                                                                                                                                                                    
|        | 21 | .1                     |  | Subsidiaries of the Registrants.(2)                                                                                                                                                                                                                                                                                              
|        | 23 | .1                     |  | Consent of Arthur Andersen LLP.(2)                                                                                                                                                                                                                                                                                               
|        | 99 | .1                     |  | Letter from Starwood Hotels & Resorts
	Worldwide, Inc. related to Arthur Andersen LLP.(2)                                                                                                                                                                                                                                        
|        | 99 | .2                     |  | Letter from Starwood Hotel & Resorts related
	to Arthur Andersen LLP.(2)                                                                                                                                                                                                                                                         



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|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Management contract or compensatory plan or
	arrangement required to be filed as an exhibit pursuant to
	Item 14(c) of Form 10-K.
|   
|(2) | Filed herewith.