<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
                                       --
               X Annual Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

For the fiscal year ended December 31, 1998      Commission File Number 01-12073

                                EQUITY INNS, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

         Tennessee                                              62-1550848
-------------------------------                           ----------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                            Identification Number)

             7700 Wolf River Boulevard, Germantown, Tennessee 38138
         ---------------------------------------------------------------
         (Address of Registrant's Principal Executive Office) (Zip Code)

                                 ( 901) 754-7774
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

   Securities registered pursuant to Section 12(b) of the Act: Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
           9 1/2% Series A Cumulative Preferred Stock, $.01 par value
           ----------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  proceeding  12 months and (2) has been subject to such filing  requirements
for the past 90 days.

                         Yes     X        No
                               -----           -----

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

Aggregate market value of voting stock and non-voting stock held by
nonaffiliates of the Registrant as of March 10, 1999:  $316,240,785.
Number of shares of Common Stock, $.01 par value, outstanding as of March 10,
1999:  36,663,715

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy  Statement  for the 1999 Annual  Meeting of
Shareholders to be held May 7, 1999 (the "Proxy  Statement") are incorporated by
reference into Part III of this Report.

Exhibit Index beginning on Page 60.



                                  Page 1 of 65


<PAGE>



                                EQUITY INNS, INC
                           ANNUAL REPORT ON FORM 10-K
                      For the Year Ended December 31, 1998


                                TABLE OF CONTENTS


                                     PART I
                                                                            Page

Item 1.   Business                                                             3

Item 2.   Properties                                                          12

Item 3.   Legal Proceedings                                                   18

Item 4.   Submission of Matters to a Vote of Security Holders                 18

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
            Stockholder Matters                                               18

Item 6.   Selected Financial Data                                             19

Item 7.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                               21

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk          27

Item 8.   Financial Statements and Supplementary Data                         28

Item 9.   Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                               51

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant                  51

Item 11.  Executive Compensation                                              51

Item 12.  Security Ownership of Certain Beneficial Owners and
            Management                                                        51

Item 13.  Certain Relationships and Related Transactions                      51

                                     PART IV

Item 14.  Exhibits, Financial Statements, Schedules, and Reports
            on Form 8-K                                                       52


                                        2

<PAGE>



THIS REPORT CONTAINS AND  INCORPORATES BY REFERENCE  FORWARD-LOOKING  STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE  SECURITIES  EXCHANGE  ACT OF 1934,  AS  AMENDED,  INCLUDING,
WITHOUT LIMITATION,  STATEMENTS CONTAINING THE WORDS "BELIEVES,"  "ANTICIPATES,"
"EXPECTS" AND SIMILAR WORDS.  SUCH  FORWARD-LOOKING  STATEMENTS RELATE TO FUTURE
EVENTS AND THE FUTURE  FINANCIAL  PERFORMANCE OF THE COMPANY,  AND INVOLVE KNOWN
AND UNKNOWN  RISKS,  UNCERTAINTIES  AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS,  PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY  DIFFERENT
FROM THE RESULTS OR  ACHIEVEMENTS  EXPRESSED OR IMPLIED BY SUCH  FORWARD-LOOKING
STATEMENTS.  ATTENTION  SHOULD  BE PAID TO THE  VARIOUS  FACTORS  IDENTIFIED  OR
INCORPORATED  BY REFERENCE  IN THIS REPORT  WHICH COULD CAUSE ACTUAL  RESULTS TO
DIFFER,  INCLUDING BUT NOT LIMITED TO THOSE  DISCUSSED IN THE SECTIONS  ENTITLED
"INTERNAL GROWTH STRATEGY," "ACQUISITION STRATEGY,"  "COMPETITION,"  "LEVERAGE,"
"ENVIRONMENTAL  MATTERS," "TAX STATUS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS." THE COMPANY IS NOT OBLIGATED
TO UPDATE ANY SUCH FACTORS OR TO REFLECT THE IMPACT OF ACTUAL  FUTURE  EVENTS OR
DEVELOPMENTS ON SUCH FORWARD-LOOKING STATEMENTS.

                                     PART I

ITEM 1.       BUSINESS

(a)      General Development of Business

Equity  Inns,  Inc.  (the  "Company")  is in the  business of  acquiring  equity
interests in hotel properties.  The Company  commenced  operations in March 1994
and is a real estate  investment trust ("REIT") for federal income tax purposes.
The  Company,  through  its  wholly-owned  subsidiary,  Equity  Inns  Trust (the
"Trust"),  is the sole general  partner of Equity Inns  Partnership,  L.P.  (the
"Partnership") and, at December 31, 1998, owned an approximate 95.0% interest in
the  Partnership.  The Company conducts its business through the Partnership and
its subsidiaries.

(b)      Financial Information About Industry Segment

The  Company  is  in  the  business  of  acquiring  equity  interests  in  hotel
properties. See the Consolidated Financial Statements and notes thereto included
in Item 8 of this Annual Report on Form 10-K for certain  financial  information
required in Item 1.

(c)      Narrative Description of Business

In order to qualify as a REIT,  neither  the  Company  nor the  Partnership  can
operate  hotels.  The Company has  implemented a strategy of utilizing  multiple
lessees and hotel management companies for its hotel properties. At December 31,
1998,  the  Partnership  leased  80 of the  current  hotels to  subsidiaries  or
affiliates of Patriot American  Hospitality,  Inc.  (collectively,  the "Patriot
Lessee"),  successor by merger to Interstate  Hotels  Company  ("Patriot").  All
payments  due under these  Percentage  Leases are  guaranteed  by Patriot and by
Interstate Hotels, LLC ("Interstate"),  successor by merger to Interstate Hotels
Corporation and an indirect  subsidiary of Patriot.  The  Partnership  leased 19
hotels to a wholly-owned subsidiary of Prime Hospitality Corporation (the "Prime
Lessee").



                                        3

<PAGE>



Ninety-nine hotels owned by the Company are leased to the Patriot Lessee and the
Prime Lessee (collectively, the "Lessees" and individually, a "Lessee") pursuant
to percentage leases ("Percentage Leases") which provide for rent payments equal
to the greater of (i) a fixed base rent ("Base  Rent") or (ii)  percentage  rent
based on the revenue of the hotels  ("Percentage  Rent").  The Percentage Leases
allow the  Company  to  participate  in  increased  revenue  from the  hotels by
providing for the payment of  Percentage  Rent.  The remaining  three hotels are
operated by third parties under management agreements.

At December 31, 1998, the Partnership owned 102 hotel properties with a total of
12,640 rooms in 36 states (the "Hotels"). The diversity of the portfolio is such
that, at December 31, 1998, no individual  hotel  exceeded 2% of the total rooms
in the portfolio.  This  geographical  distribution  and franchise  diversity is
further illustrated by the following charts.

                               Franchise Diversity
<TABLE>
<CAPTION>
                                               # of Hotel         # of Rooms/
         Franchise Affiliation                 Properties           Suites    
         ---------------------                 ----------         -----------    
         <S>                                   <C>                <C>
         Premium Limited Service Hotels:
              Hampton Inn                          55                 6,856
              Hampton Inn & Suites                  1                   125
              Comfort Inn                           2                   182
                                                  ---                ------
                  Sub-total                        58                 7,163
                                                  ---                ------

         All-Suite Hotels:
              AmeriSuites                          19                 2,403

         Premium Extended Stay Hotels:
              Residence Inn                        12                 1,431
              Homewood Suites                       7                   808
                                                  ---                ------
                  Sub-total                        19                 2,239
                                                  ---                ------

         Full Service Hotels:
              Holiday Inn                           3                   397
              Comfort Inn                           1                   177
                                                  ---                ------
                  Sub-total                         4                   574
                                                  ---                ------

         Independent Hotels:                        2                   261
                                                  ---                ------

                  Total                           102                12,640
                                                  ===                ======
</TABLE>



                                        4

<PAGE>



                             Geographical Diversity
<TABLE>
<CAPTION>

                                    Number of      Number of      Percentage of
State                                Hotels       Suites/Rooms    Suites/Rooms
-----                               ---------     ------------    -------------
<S>                                 <C>           <C>             <C>
Alabama                                  4              460             3.6%
Arizona                                  4              495             3.9%
Arkansas                                 1              123             1.0%
Colorado                                 3              356             2.8%
Connecticut                              3              405             3.2%
Florida                                  8              931             7.4%
Georgia                                  4              443             3.5%
Idaho                                    1              104             0.8%
Illinois                                 2              264             2.1%
Indiana                                  2              255             2.0%
Kansas                                   2              260             2.1%
Kentucky                                 1              119             0.9%
Louisiana                                1              128             1.0%
Maryland                                 2              244             1.9%
Michigan                                 4              526             4.2%
Minnesota                                2              248             2.0%
Mississippi                              1               86             0.7%
Missouri                                 2              242             1.9%
Nebraska                                 1               80             0.6%
Nevada                                   1              202             1.6%
New Jersey                               3              424             3.4%
New Mexico                               1              128             1.0%
New York                                 1              154             1.2%
North Carolina                           5              614             4.9%
Ohio                                     6              736             5.8%
Oklahoma                                 1              135             1.1%
Oregon                                   1              168             1.3%
Pennsylvania                             2              249             2.0%
South Carolina                           3              404             3.2%
Tennessee                               11            1,286            10.2%
Texas                                    9            1,230             9.7%
Vermont                                  2              200             1.6%
Virginia                                 2              245             1.9%
Washington                               1              161             1.3%
West Virginia                            4              455             3.6%
Wisconsin                                1               80             0.6%
                                       ---           ------           -----

                                       102           12,640           100.0%
                                       ===           ======           =====
</TABLE>

In 1998,  the Company  agreed to  purchase,  upon their  completion,  a 252-room
Homewood Suites hotel in Orlando, Florida for $22.8 million, a 235-room Homewood
Suites  hotel in downtown  Chicago,  Illinois  for $30.4  million and a 300-room
Hawthorn Suites hotel in Chicago-Rosemont,  Illinois for $33.0 million.  Each of
these hotels is currently under  construction  with completion dates expected in
May 1999, June 1999 and September 1999, respectively. The Company also purchased
land in Salt Lake City, Utah at a cost of $2.4 million,  to be held for possible
construction of an Embassy Suites hotel at a later date.


                                        5

<PAGE>



BUSINESS STRATEGY

The Company's primary objective is to increase funds from operations and enhance
shareholder value by participating in increased revenues from the Hotels through
leases which provide for rent payments based on the revenues from the Hotels and
by acquiring  equity  interests  in  additional  hotels that meet the  Company's
investment criteria.

ACQUISITION STRATEGY

The Company intends to acquire  additional  existing hotel  properties that meet
its  investment   criteria,   primarily   premier   upscale   limited   service,
extended-stay, all-suite and underperforming hotels that can be renovated and/or
converted  to  premium  franchise   brands.  In  particular,   the  Company  has
increasingly  emphasized  the  acquisition  of  hotel  portfolios  in  order  to
capitalize on the Company's  efficiency and  experience in acquisition  analysis
and transaction structuring and to enable the Company to more rapidly expand its
hotel portfolio.

The Company has entered into alliances  with two major  franchisors of all-suite
hotels,  Prime  Hospitality   Corporation  and  U.S.  Franchise  Systems.  These
alliances  allow the Company  the right of first offer  through the year 2000 to
purchase up to thirty-two  hotels per year. These alliances  provide the Company
with a distinct  advantage by avoiding the necessity to bid against  competition
for new acquisitions.

The Company  considers  investment in hotel properties which meet some or all of
the following criteria:

     Particular emphasis is given to premium extended stay and all-suite
     properties in the upscale and mid-price segment, such as AmeriSuites(R),
     Homewood Suites(R), Residence Inn(R), Hampton Inn & Suites(R), Embassy
     Suites(R) and Hawthorn Suites(R) and premium limited service hotels, such
     as Hampton Inn(R) and Marriott Courtyard(R), with major franchisors such as
     Promus Hotel Corporation, Marriott Corporation, Prime Hospitality
     Corporation and U.S. Franchise Systems;

     Properties in attractive  locations that the Company believes could benefit
     significantly  by changing  franchise  affiliations  to a brand the Company
     believes will  strengthen the acquired  hotel's  competitive  position.  In
     general,  the Company focuses on acquisitions in markets with the following
     characteristics:

        o high barriers to entry,  such as the scarcity or high cost of land for
          additional   development,    restrictive   zoning,   stringent   local
          development laws, extended permit-approval processes, and a relatively
          low supply of competing hotels;

        o historically stable demand generators,  such as major corporate office
          or retail complexes,  airports, major universities and medical centers
          with convenient access to major thoroughfares and airports;

    Properties with relatively stable operating histories; and

    Properties  with purchase  prices  which,  coupled with the  elimination  or
    significant  reduction of debt, may allow the Company to realize a favorable
    return on its investment.



                                        6

<PAGE>



The  Company  continually  evaluates  its hotel  portfolio  with  respect to the
potential  sale of  certain  of its hotel  properties  that no  longer  meet its
investment criteria.  Proceeds from the sale of its hotels will be used to repay
indebtedness or re-invested in hotels meeting the Company's investment criteria.

DEVELOPMENT STRATEGY

The Company may consider  selective  internal  development of hotel  properties,
principally in the premium extended stay,  all-suite and limited service segment
of the market.  At December 31,  1998,  the Company held land in Salt Lake City,
Utah for possible construction of an Embassy Suites hotel.

The  Company  may also seek to obtain  certain of the  benefits  of  development
without  incurring  certain  of the  risks  of  development,  by  (a)  acquiring
newly-developed  hotels or (b) contracting  with developers to build hotels that
the  Company  will buy upon  completion.  The  Company  has  established  and is
pursuing  relationships  with developers who have established good relationships
with the franchisors of the Company's  preferred hotel brands. The Company seeks
established developers who have demonstrated, among other things, the ability to
(a) find  attractive  sites  which,  when  developed,  would meet the  Company's
acquisition criteria and (b) manage the franchise brand approval and development
processes.

INTERNAL GROWTH STRATEGY

The  Percentage  Leases are designed to allow the Company to  participate in any
growth in room revenues at the Hotels and to a lesser extent,  food and beverage
revenue,  if any. The Percentage Leases provide for rent equal to the greater of
(i) a fixed Base Rent or (ii)  Percentage  Rent. The  Percentage  Leases provide
that the Base Rent and the thresholds for the payment of Percentage Rent will be
adjusted  annually  (subject  to an annual  cap of 7%) based on  changes  in the
United States Consumer Price Index ("CPI").

EMPLOYEES

At March 1, 1999, the Company employed,  through a wholly-owned  subsidiary,  16
employees.

COMPETITION

The hotel  industry  is highly  competitive.  Each of the Hotels is located in a
developed area that includes other hotel  properties.  The number of competitive
hotel  properties in a particular  area could have a material  adverse effect on
occupancy,  Average Daily Rate ("ADR") and Revenue Per Available Room ("REVPAR")
of the  Hotels  or at hotel  properties  acquired  in the  future.  The  Company
believes  that  brand  recognition,  location,  the  quality  of the  hotel  and
consistency  of  services  provided,  and  price are the  principal  competitive
factors affecting the Company's hotels.

The Company may be competing for  investment  opportunities  with entities which
have substantially greater financial resources than the Company.  These entities
generally may be able to accept more risk than the Company prudently can manage.
Competition generally may reduce the number of suitable investment opportunities
available to the Company and increase the  bargaining  power of property  owners
seeking to sell.  Further,  the Company  believes that competition from entities
organized for purposes  substantially  similar to the Company's  objectives will
increase significantly.



                                        7

<PAGE>



FRANCHISE AGREEMENTS

One hundred of the Hotels operate under  franchise  licenses.  Two of the Hotels
are  operated as  independent  hotels  without any  franchise  affiliation.  The
Company  anticipates  that most of the additional  hotel  properties in which it
invests will be operated under franchise licenses. The Company believes that the
public's  perception  of quality  associated  with a franchisor  is an important
feature in the operation of a hotel.  Franchisors  provide a variety of benefits
for  franchisees  which  include  national  advertising,   publicity  and  other
marketing programs designed to increase brand awareness,  training of personnel,
continuous review of quality standards and centralized reservation systems.

The Lessees hold the  franchise  licenses for the leased  hotels.  The franchise
licenses  generally  specify  certain  management,  operational,  recordkeeping,
accounting,  reporting and marketing  standards  and  procedures  with which the
applicable  Lessee must comply.  The franchise  licenses  obligate the Lessee to
comply with the franchisors' standards and requirements with respect to training
of operation personnel,  safety,  maintaining specified insurance,  the types of
services and products  ancillary to guest room  services that may be provided by
the Lessee,  display of  signage,  and the type,  quality and age of  furniture,
fixtures and equipment included in guest rooms, lobbies and other common areas.

Each  franchise  license  generally  gives the Lessee  the right to operate  the
particular  Hotel under a franchise  license for periods ranging up to 20 years.
The franchise agreements provide for termination at the franchisor's option upon
the  occurrence  of  certain  events,  including  the  Lessee's  failure  to pay
royalties and fees or perform its other covenants  under the license  agreement,
bankruptcy,  abandonment of the franchise, commission of a felony, assignment of
the license  without the  consent of the  franchisor,  or failure to comply with
applicable  law in the  operation  of the  relevant  Hotel.  The Lessee  will be
entitled to terminate the  franchise  license only by giving at least 12 months'
notice and paying a specific amount of liquidated damages. The Percentage Leases
require the  Company's  consent to any change or  termination  in the  franchise
brand. The license agreements will not renew automatically upon expiration.  The
Partnership  made  franchise   transfer  payments  to  franchisors   aggregating
approximately $200,000 in 1998. The Partnership is also committed to franchisors
to fund certain capital improvements to hotel properties,  which are funded from
borrowings,  working capital, or the room renovation  accounts.  The Partnership
made capital  improvements of approximately  $26 million to its hotel properties
in 1998,  including  approximately  $11.4  million in  renovations  required  by
franchisors.  In 1999, the Partnership expects to fund approximately $23 million
of capital  improvements,  approximately  $8.6  million  of which is  renovation
required by franchisors, for the hotel properties owned and contracted to own at
December 31, 1998. The Lessee is responsible  for making royalty  payments under
the franchise agreements to the franchisors. Under the franchise agreements, the
Lessee pays a franchise  fee ranging  from 6.5% to 8.05% of room  revenue  (plus
additional  fees). A portion of these fees may be designated for a marketing and
reservation fund for the benefit of franchised hotels systemwide.

SEASONALITY

The Hotels'  operations  historically  have been  seasonal in nature,  generally
reflecting  higher  occupancy rates during the second and third  quarters.  This
seasonality  can be expected to cause  fluctuations  in the Company's  quarterly
lease revenue to the extent that it receives Percentage Rent.



                                        8

<PAGE>



TAX STATUS

The  Company  intends  to  operate  so as to be taxed as a REIT  under  Sections
856-860 of the Internal  Revenue Code of 1986, as amended (the "Code").  As long
as the Company  qualifies for taxation as a REIT, with certain  exceptions,  the
Company will not be taxed at the corporate  level on its taxable  income that is
distributed to its shareholders. A REIT is subject to a number of organizational
and  operational  requirements,  including  a  requirement  that  it  distribute
annually at least 95% of its taxable  income.  Failure to qualify as a REIT will
render the Company subject to tax (including any applicable  minimum tax) on its
taxable income at regular  corporate rates and distributions to the shareholders
in any such year will not be  deductible  by the  Company.  Even if the  Company
qualifies  for taxation as a REIT,  the Company may be subject to certain  state
and local taxes on its income and  property.  In  connection  with the Company's
election  to  be  taxed  as  a  REIT,  the  Company's  Charter  imposes  certain
restrictions on the transfer of shares of Common Stock.  The Company has adopted
the calendar year as its taxable year.

ENVIRONMENTAL MATTERS

Under  various  federal,  state  and  local  laws and  regulations,  an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain  hazardous or toxic substances on such property.  Such laws often impose
such liability  without regard to whether the owner knew of, or was  responsible
for, the presence of hazardous or toxic substances.  Furthermore,  a person that
arranges  for the disposal or  transports  for disposal or treatment a hazardous
substance at a property  owned by another may be liable for the costs of removal
or remediation  of hazardous  substances  released into the  environment at that
property.  The  costs  of  remediation  or  removal  of such  substances  may be
substantial  and the  presence  of such  substances,  or the failure to promptly
remediate such substances, may adversely affect the owner's ability to sell such
real  estate  or to use such  real  estate  as  collateral  for  borrowings.  In
connection  with the  ownership and  operation of the Hotels,  the Company,  the
Partnership or the Lessee, as the case may be, may be potentially liable for any
such costs.

In  connection  with  the  Partnership's  acquisition  of the  Hotels,  Phase  I
environmental site assessments  ("ESAs") were obtained on all of the Hotels from
various independent  environmental  engineers. The Phase I ESAs were intended to
identify  potential  environmental  contamination  for which the  Hotels  may be
responsible   and  the  potential  for   environmental   regulatory   compliance
liabilities.  The Phase I ESAs included historical review of the Hotels, reviews
of  certain  public  records,   preliminary  investigations  of  the  sites  and
surrounding  properties,  screening  for the presence of  hazardous  substances,
toxic substances and underground storage tanks, and the preparation and issuance
of a written report. The Phase I ESAs did not include invasive procedures,  such
as soil  sampling or ground water  analysis to detect  contaminants  from former
operations on the Current  Hotels or migrating from neighbors or caused by third
parties.

The Phase I ESAs have not revealed any environmental  liability that the Company
believes would have a material adverse effect on the Company's business, assets,
results  of  operations  or  liquidity,  nor is the  Company  aware  of any such
liability  or that there are  material  environmental  liabilities  of which the
Company is unaware.  Nevertheless,  no  assurances  can be given that (i) future
laws,  ordinances  or  regulations  will not impose any  material  environmental
liability or (ii) the current environmental  condition of the Hotels will not be
affected by the  condition of the  properties in the vicinity of Hotels (such as
the presence of leaking underground storage tanks) or by third parties unrelated
to the Partnership or the Company.




                                        9

<PAGE>



EXECUTIVE OFFICERS OF THE COMPANY

The executive  officers of the Company,  listed below, serve in their respective
capacities  for  approximate  one year  terms  and are  subject  to  re-election
annually by the Board of Directors, normally in May of each year.
<TABLE>
<CAPTION>

           NAME                                   POSITION
    -----------------------      -----------------------------------------------
    <S>                          <C> 
    Phillip H. McNeill, Sr.      Chairman of the Board, Chief Executive Officer
                                 and Director

    Howard A. Silver             President, Chief Operating Officer and Director

    Donald H. Dempsey            Executive Vice President, Secretary, Treasurer,
                                 Chief Financial Officer and Director

    Phillip H. McNeill, Jr.      Executive Vice President of Development

    J. Ronald Cooper             Vice President, Assistant Secretary, Assistant
                                 Treasurer and Controller
</TABLE>

Phillip H. McNeill, Sr. (age 60) is Chairman and Chief Executive Officer of the
Company  and has been Chairman of McNeill Hospitality Corporation since 1984.
From 1963 to 1977, he served in various capacities, including President and
Chief Executive Officer, with Schumacher Mortgage Company, Inc., a mortgage
banking firm and subsidiary of Time, Inc. Mr. McNeill has served as President
and Director of the Memphis Mortgage Bankers Association and the Tennessee State
Mortgage Bankers Association.  He has served as a member of the Board of
Trustees of the University of Memphis  Foundation and as a Director of First
Commercial Bank of Memphis.  He is currently serving as a member of the Board of
Directors of National Commerce Bancorporation.  Mr. McNeill holds both a B.S.
and a J.D. degree from the University of Memphis and is a graduate of the
Northwestern School of Mortgage Banking.

Howard A.  Silver  (age 44) is  President  and Chief  Operating  Officer  of the
Company and has been a certified public accountant since 1980. Mr. Silver joined
the Company in May 1994 and has served as Executive  Vice  President of Finance,
Secretary, Treasurer and Chief Financial Officer of the Company until June 1998.
From 1992 until  joining  the  Company,  Mr.  Silver  served as Chief  Financial
Officer of Alabaster  Originals,  L.P.,  Memphis,  Tennessee,  a fashion jewelry
wholesaler. From 1978 to 1985, Mr. Silver was a certified public accountant with
the national  accounting firm of Coopers & Lybrand L.L.P., and from 1987 to 1992
Mr.  Silver was  employed as a certified  public  accountant  with the  national
accounting firm of Ernst & Young. Mr. Silver holds a B.S. in Accounting from the
University of Memphis.

Donald H. Dempsey (age 54) is Executive Vice President, Secretary, Treasurer and
Chief  Financial  Officer of the  Company.  Prior to joining the Company in July
1998, Mr. Dempsey served as Executive Vice President and Chief Financial Officer
of Choice Hotels International,  Inc. from January 1998 to July 1998. From April
1995 to December  1997,  Mr.  Dempsey  served as Senior Vice President and Chief
Financial Officer of Promus Hotel  Corporation,  from October 1993 to April 1995
as Senior Vice President of Finance and  Administration of the Hotel Division of
The Promus  Companies  Incorporated,  and from  December 1991 to October 1993 as
Vice President, Finance of the Hampton Inn/Homewood Suites Hotel Division of The
Promus  Companies  Incorporated.  Mr.  Dempsey  served in various  other  senior
financial and  development  officer  positions  within the Hotel Division of The
Promus Companies  Incorporated and its predecessor  companies from 1983 to 1991.
From 1969 to 1983,  Mr.  Dempsey held various  corporate and division  financial
management and administration positions with Holiday Inns, Inc.  Mr. Dempsey was

                                       10

<PAGE>



first appointed to the Board of Directors in December 1998.  Mr. Dempsey holds a
B.S. in Accounting from Mississippi State University.

Phillip H. McNeill, Jr. (age 37) is Executive Vice President of Development of
the Company.  From 1994 to 1996, he served as President of Trust Leasing, Inc.,
formerly McNeill Hotel Co., Inc., the Company's former lessee (the "Former
Lessee"), and from 1984 to 1996 served as Vice President of Trust Management,
Inc., formerly McNeill Hospitality Corporation, which was an affiliate of the
Former Lessee.  Mr. McNeill is the son of Phillip H. McNeill, Sr. and holds a
B.B.A. from the University of Memphis and is a graduate of the Northwestern
School of Mortgage Banking.

J. Ronald  Cooper (age 50) is Vice  President,  Assistant  Secretary,  Assistant
Treasurer and  Controller of the Company.  From 1994 to 1996, he was  Controller
and Director of Financial  Reporting for the Former Lessee and joined the Former
Lessee in October 1994. Mr. Cooper has been a certified public  accountant since
1972.  From 1978 until  joining the Former  Lessee,  Mr.  Cooper was employed as
Secretary,  Treasurer and Controller of Wall Street Deli, Inc., a publicly-owned
delicatessen  company.  Prior  to  that,  Mr.  Cooper  was  a  certified  public
accountant with the national  accounting  firm of Coopers & Lybrand L.L.P.  from
1970 to 1976.  Mr. Cooper holds a B.S.  degree in  accounting  from Murray State
University.




                                       11

<PAGE>



ITEM 2.       PROPERTIES

The following  table sets forth certain  information for the year ended December
31, 1998 with respect to the Hotels on a pro forma basis:
<TABLE>
<CAPTION>
                                                Year Ended December 31, 1998
                                                                                                          Revenue
                                        Number     Pro Forma       Pro Forma                    Average     Per
                            Date          Of          Room           Lease                      Daily    Available
                           Opened       Rooms      Revenue(3)    Payment (1)(3)   Occupancy      Rate     Room (2)
                           ------      -------     ----------    --------------   ---------    ---------  ---------
<S>                        <C>         <C>          <C>           <C>              <C>          <C>        <C>
Hampton Inn:
   Albany, New York         1986         154     $    3,334       $  1,612          70.5%      $84.13     $59.31
   Ann Arbor, Michigan      1986         150          2,854          1,337          70.6%      $73.80     $52.12
   Atlanta (Northlake),
       Georgia              1988         130          1,860            874          62.9%      $62.28     $39.19
   Austin, Texas            1987         122          2,240          1,080          73.8%      $68.76     $50.72
   Baltimore (Glen Burnie),
       Maryland             1989         116          2,396          1,090          79.6%      $71.73     $57.08
   Beckley, West Virginia   1992         108          1,987          1,036          76.1%      $66.22     $50.40
   Birmingham (Mountain
       Brook), Alabama      1987         131          2,251          1,181          67.8%      $69.40     $47.07
   Birmingham (Vestavia),
       Alabama              1986         123          1,977            866          67.8%      $64.94     $44.04
   Chapel Hill, North
       Carolina             1986         122          2,474          1,321          76.7%      $72.43     $55.56
   Charleston, South
       Carolina             1985         125          2,168          1,022          71.5%      $66.48     $47.52
   Chattanooga, Tennessee   1988         168          2,372          1,003          60.5%      $63.95     $38.67
   Chicago (Gurnee),
       Illinois             1988         134          2,238            980          63.2%      $72.40     $45.76
   Chicago (Naperville),
       Illinois             1987         130          2,349          1,065          73.4%      $67.46     $49.50
   Cleveland, Ohio          1987         123          2,191          1,118          70.8%      $68.95     $48.80
   College Station, Texas   1986         135          2,226          1,043          70.5%      $64.02     $45.17
   Colorado Springs,
       Colorado             1985         128          2,111            985          68.4%      $66.09     $45.19
   Columbia, South Carolina 1985         121          1,704            774          60.9%      $63.34     $38.59
   Columbus, Georgia        1986         119          2,072          1,007          78.3%      $60.90     $47.69
   Columbus (Dublin), Ohio  1988         123          1.983            921          63.0%      $70.17     $44.18
   Dallas (Addison), Texas  1985         160          2,793          1,472          67.0%      $71.37     $47.83
   Dallas (Arlington),
       Texas                1985         141          1,540            600          50.4%      $59.41     $29.92
   Dallas (Garland), Texas  1987         125          1,225            422          51.9%      $51.70     $26.85
   Dallas (Richardson),
       Texas                1987         130          1,846            839          62.3%      $62.49     $38.91
   Denver (Aurora),
       Colorado             1985         132          1,975            860          66.0%      $62.13     $40.99
   Destin, Florida          1994         104          1,802            957          55.9%      $84.87     $47.46
   Detroit (Madison
       Heieghts), Michigan  1987         124          2,234          1,054          71.6%      $68.92     $49.37
   Detroit (Northfield),
       Michigan             1989         125          2,629          1,336          78.7%      $73.21     $57.63
   Fayetteville, North
       Carolina             1986         122          1,437            547          60.1%      $53.73     $32.27
   Ft. Worth, Texas         1987         125          1,658            615          59.9%      $60.69     $36.34
   Gastonia, North Carolina 1989         109          1,812            927          71.3%      $63.89     $45.55
   Indianapolis, Indiana    1987         129          2,453          1,175          69.1%      $75.36     $52.09
   Jacksonville, Florida    1986         122          1,842            736          70.0%      $59.08     $41.36
   Kansas City (Overland
       Park), Kansas        1991         134          2,460          1,189          68.1%      $73.87     $50.30
   Kansas City, Missouri    1987         120          2,261          1,090          69.5%      $74.31     $51.62
   Knoxville, Tennessee     1991         118          1,924            817          72.5%      $61.64     $44.66
   Little Rock (North),
       Arkansas             1985         123          1,568            653          61.1%      $57.16     $34.92
   Louisville, Kentucky     1986         119          1,933            886          64.9%      $68.57     $44.50
   Memphis (Poplar),
       Tennessee            1985         126          2,754          1,440          79.2%      $75.63     $59.88
   Memphis (Sycamore View),
       Tennessee            1984         117          1,762            693          68.6%      $60.12     $41.26
   Meriden, Connecticut     1988         125          2,087          1,004          67.8%      $67.51     $45.75
   Milford, Connecticut     1986         148          3,102          1,537          79.9%      $71.84     $57.42
   Morgantown, West
       Virginia             1991         108          2,045          1,035          71.5%      $72.54     $51.88
   Nashville (Brentwood),
       Tennessee            1985         114          2,028            887          64.5%      $75.56     $48.74
   Nashville (Briley
       Parkway), Tennessee  1987         120          2,340          1,081          71.4%      $74.83     $53.42
   Norfolk, Virginia        1990         119          2,079          1,014          70.1%      $68.26     $47.87
   Pickwick, Tennessee      1994          50            756            252          61.3%      $67.59     $41.43
   San Antonio (Bowie),
       Texas                1995         169          3,657          2,023          70.2%      $84.46     $59.29
   Sarasota, Florida        1987          97          1,401            504          60.4%      $65.56     $39.58
   Savannah, Georgia        1986         129          1,992            951          70.5%      $60.03     $42.31
</TABLE>

                                       12

<PAGE>


<TABLE>
<CAPTION>

                                                           Year Ended December 31, 1998
                                                                                                          Revenue
                                        Number      Pro Forma      Pro Forma                    Average     Per
                            Date         Of           Room           Lease                       Daily    Available
                           Opened       Rooms      Revenue (3)   Payment (1)(3)   Occupancy      Rate     Room (2)
                           ------      -------     -----------   --------------   ---------    ---------  ---------
<S>                        <C>         <C>          <C>           <C>              <C>         <C>        <C>

Hampton Inn (Continued):
   Scottsdale, Arizona      1996         126          2,063            967          50.2%      $89.33     $44.86
   Scranton, Pennsylvania   1994         129          2,396          1,070          73.2%      $69.50     $50.88
   Southaven (Memphis),
       Mississippi          1995          86          1,588            724          80.0%      $63.21     $50.59
   St. Louis (Westport),
       Missouri             1987         122          1,690            663          55.9%      $67.84     $37.95
   State College,
       Pennsylvania         1987         120          2,279          1,118          71.3%      $72.93     $52.05
   Traverse City, Michigan  1987         127          2,165          1,023          59.6%      $78.36     $46.70

Hampton Inn & Suites:
   Memphis (Bartlett),
       Tennessee (4)        1998         125                           875

Comfort Inn:
   Enterprise, Alabama      1987          78            959            393          66.9%      $50.38     $33.69
   Jacksonville Beach,
       Florida              1973         177          3,403          1,471          62.0%      $85.04     $52.68
   Rutland, Vermont         1985         104          1,713            719          72.3%      $62.41     $45.12

Residence Inn:
   Boise, Idaho (5)         1986         104          2,527          1,213          83.8%      $79.47     $66.56
   Burlington, Vermont      1988          96          2,633          1,303          83.1%      $90.40     $75.13
   Colorado Springs,
       Colorado             1984          96          2,345          1,204          76.4%      $87.61     $66.92
   Madison, Wisconsin       1988          80          1,529            495          70.2%      $74.53     $52.35
   Minneapolis (Eagan),
       Minnesota            1988         120          3,372          1,715          84.3%      $91.33     $77.00
   Oklahoma City, Oklahoma  1982         135          3,057          1,474          79.9%      $77.67     $62.04
   Omaha, Nebraska          1981          80          1,986            800          78.5%      $86.68     $68.01
   Portland, Oregon (5)     1990         168          5,551          2,664          82.9%     $108.86     $90.27
   Princeton, New Jersey    1988         208          6,172          3,270          74.3%     $109.47     $81.30
   Somers Point,
       New Jersey (5)       1988         120          3,291          1,580          80.0%      $94.66     $75.77
   Tinton Falls, New Jersey 1988          96          3,010          1,439          82.5%     $104.13     $85.91
   Tucson, Arizona          1985         128          3,214          1,576          83.0%      $82.86     $68.80

Holiday Inn:
   Bluefield, West Virginia 1980         120          1,953            893          64.0%      $69.75     $44.60
   Charleston (Mt. Pleasant),
       South Carolina       1988         158          3,134          1,589          70.7%      $76.89     $54.35
   Oak Hill, West Virginia  1983         119          1,252            599          48.4%      $59.55     $28.82

Independents:
   Wilkesboro, North
       Carolina             1985         101          1,400            728          59.5%      $63.87     $37.98
   Winston-Salem, North
       Carolina             1969         160          1,736            495          50.9%      $58.37     $29.72

Homewood Suites:
   Augusta, Georgia         1997          65          1,393            659          64.7%      $90.72     $58.73
   Cincinnati
       Sharonville), Ohio   1990         111          2,327          1,086          74.4%      $77.19     $57.43
   Hartford, Connecticut    1990         132          3,777          1,862          82.5%      $95.06     $78.40
   Memphis (Germantown),
       Tennessee            1996          92          2,104          1,032          69.7%      $89.92     $62.67
   Phoenix, Arizona         1996         124          3,698          1,742          78.9%     $103.68     $81.76
   San Antonio, Texas       1996         123          2,865          1,273          77.7%      $82.10     $63.78
   Seattle, Washington (4)  1998         161                         2,216

AmeriSuites:
   Albuquerque, New Mexico  1997         128          2,377          1,190          73.6%      $69.16     $50.88
   Baltimore, Maryland      1996         128          2,740          1,378          73.5%      $79.78     $58.64
   Baton Rouge, Louisiana   1997         128          2,498          1,306          71.9%      $74.40     $53.46
   Birmingham, Alabama      1997         128          1,787            764          52.3%      $73.18     $38.25
   Cincinnati (Blue Ash),
       Ohio                 1990         127          2,087            971          60.4%      $74.53     $45.03
   Cincinnati (Forest
       Park), Ohio          1992         126          2,413          1,167          70.0%      $75.00     $52.48
   Columbus, Ohio           1994         126          2,692          1,347          72.3%      $80.93     $58.53
   Flagstaff, Arizona       1993         117          1,799            774          64.4%      $65.40     $42.14
</TABLE>

                                       13

<PAGE>


<TABLE>
<CAPTION>
                                                   Year Ended December 31, 1998
                                                                                                           Revenue
                                        Number     Pro Forma       Pro Forma                    Average      Per
                            Date          Of          Room           Lease                       Daily    Available
                           Opened       Rooms      Revenue(3)    Payment (1)(3)   Occupancy      Rate     Room (2)
                           ------      -------     ----------    --------------   ---------    ---------  ---------
<S>                        <C>         <C>         <C>           <C>              <C>          <C>         <C>
AmeriSuites (Continued):
    Indianapolis, Indiana   1992          126         2,555           1,330         68.4%      $81.28     $55.56
    Jacksonville, Florida   1996          112         1,842             853         65.7%      $68.57     $45.06
    Las Vegas, Nevada (4)   1998          202                         2,230
    Kansas City (Overland
       Park), Kansas        1994          126         2,628           1,317         70.4%      $81.18     $57.14
    Memphis (Wolfchase),
        Tennessee           1996          128         2,534           1,208         67.6%      $80.27     $54.24
    Miami, Florida          1996          126         3,146           1,805         83.0%      $82.44     $68.41
    Miami (Kendall),
       Florida              1996           67         2,122           1,293         89.5%      $96.93     $86.78
    Minneapolis, Minnesota  1997          128         2,666           1,302         73.5%      $77.64     $57.07
    Nashville, Tennessee    1997          128         2,321           1,166         65.4%      $75.98     $49.68
    Richmond, Virginia      1992          126         3,036           1,671         73.5%      $89.75     $66.01
    Tampa, Florida          1994          126         3,093           1,761         75.3%      $89.30     $67.25
                                       ------      --------        --------         ----       ------     ------

Consolidated Totals/Weighted
    Average for all Hotels             12,640      $231,100        $115,674         69.5%      $74.18     $52.08
                                       ======      ========        ========         ====       ======     ======
</TABLE>
------------------------

(1)   Represents lease payments  calculated on a pro forma basis by applying the
      rent provisions in the Percentage Leases using historical room revenues of
      the hotels as if January 1, 1998 was the beginning of the lease year.

(2)   Determined by multiplying occupancy and the average daily rate.

(3)   Amounts in thousands.

(4)   Hotel was not open for the entire period; therefore, pro forma results are
      not available, minimum rent has been assumed.

(5)   Hotel operated under a management contract;  lease payment amount
      represents operating income


THE PERCENTAGE LEASES

All but three of the Hotels owned by the  Partnership  are separately  leased to
the Lessees under a Percentage  Lease.  All  Percentage  Leases with the Lessees
have a non-cancelable  initial term of ten to fifteen years,  subject to earlier
termination  upon the  occurrence  of  certain  contingencies  described  in the
Percentage  Leases.  During the term of each Percentage  Lease,  the Lessees are
obligated  to pay (i) the  greater  of Base  Rent or  Percentage  Rent  and (ii)
certain  other  amounts,  including  interest  accrued on any late  payments  or
charges.  Base Rent accrues and is required to be paid monthly.  Percentage Rent
is based on  percentages  of room  revenues  and to a  lesser  extent,  food and
beverage  revenues,  if any, for each of the Hotels.  Both the Base Rent and the
threshold room revenue amount in each  Percentage  Rent formula will be adjusted
annually for changes in the CPI. The  adjustment  is calculated at the beginning
of each lease year after a holding period of a full calendar year based upon the
average  change in the CPI  during the prior 24 months.  The  adjustment  in any
lease year may not exceed 7% of the Base Rent and threshold room revenue amounts
for the prior fiscal year.  Percentage Rent is payable  quarterly,  on or before
the 30th day following  the end of each of the calendar  quarters in each fiscal
year.



                                       14

<PAGE>



The following  table  summarizes  the  percentages of room revenues in excess of
certain  levels  payable as Percentage  Rent under the  Percentage  Leases as of
January 1, 1999.
<TABLE>
<CAPTION>
                                  Range of Percentages of Room Revenue
                                  ------------------------------------
                                     First Tier            Top Tier  
                                     ----------            --------  
<S>                                   <C>                   <C>
Full Service (1)                    28% to 38%             65% to 77%

Extended Stay                       27% to 38.0%           65% to 75%

All-Suite                           35.7% to 59.7%         71.3% to 76.1%

Limited Service                     22% to 37%             62% to 74%
</TABLE>

(1) Percentage Rent formula also includes 15%-30% of beverage revenue and 5%-15%
of food revenue.

Three of the Hotels are operated  pursuant to  management  agreements  between a
subsidiary  of the  Company  and third  party  management  companies,  with fees
ranging from 3% to 5% of total hotel revenues.

Other  than  real  estate  and  personal   property  taxes  and  maintenance  of
underground  utilities and  structural  elements,  which are  obligations of the
Partnership,  the  Percentage  Leases  require  the  Lessees  to pay  insurance,
utilities  and all other costs and  expenses  incurred in the  operation  of the
Hotels. The Percentage Leases also provide for rent reductions and abatements in
the event of damage or destruction or a partial taking of any Hotel.

Maintenance and  Modifications.  Under the Percentage Leases, the Partnership is
required to maintain the  underground  utilities and the structural  elements of
the improvements,  including exterior and interior load bearing walls (excluding
plate glass) and the roof of each Hotel.  In  addition,  the  Percentage  Leases
obligate the  Partnership  to fund certain  capital  expenditures  at the Hotels
pursuant to the capital budgets approved by the Partnership,  when and as deemed
necessary  by the Lessees,  up to an amount equal to 4% of annual room  revenue,
net of amounts actually expended for capital  expenditures for each Hotel during
any fiscal year. The  Partnership's  obligation  will be carried  forward to the
extent  that the Lessees  have not  expended  such  amount,  and any  unexpended
amounts  will remain the property of the  Partnership  upon  termination  of the
Percentage Leases.  Otherwise,  the Lessees are required,  at their expense,  to
maintain the Hotels in good order and repair, except for ordinary wear and tear,
and  to  make  non-structural,   foreseen  and  unforeseen,   and  ordinary  and
extraordinary, repairs which may be necessary and appropriate to keep the Hotels
in good order and repair.

Insurance and Property  Taxes.  The  Partnership is responsible  for paying real
estate and  personal  property  taxes on the Hotels  (except to the extent  that
personal  property  associated  with the  Hotels  is owned by the  Lessee).  The
Lessees are required to keep in force and pay or reimburse the  Partnership  for
all  insurance  on the  Hotels,  with  extended  coverage,  including  casualty,
comprehensive general public liability, workers' compensation, earthquake, flood
and other  insurance  appropriate  and customary for  properties  similar to the
Hotels and is required to name the Partnership as an additional named insured.

Indemnification.  Under each of the Percentage Leases, the Lessees are obligated
to  indemnify,  and are obligated to hold  harmless,  the  Partnership  from and
against liabilities,  costs and expenses (including  reasonable  attorneys' fees
and expenses)  incurred by, imposed upon or asserted  against the Partnership on
account of, among other things, (i) any accident or injury to person or property
on or about the Hotels, (ii) any misuse by the Lessees or any of their agents of
the leased property, (iii) any environmental liability resulting from any action
or negligence of the Lessees, (iv) taxes and

                                       15

<PAGE>



assessments  in respect  of the  Hotels  (other  than real  estate and  personal
property taxes and income taxes of the Partnership on income attributable to the
Hotels),  (v) the sale or consumption  of alcoholic  beverages on or in the real
property or improvements thereon, or (vi) any breach of the Percentage Leases by
Lessees;  provided,  however, that such indemnification will not be construed to
require the Lessees to indemnify the Partnership  against the  Partnership's own
grossly  negligent  acts or  omissions  or  willful  misconduct  or  third-party
contractual liabilities arising from termination of the Percentage Leases due to
an event of default by the Partnership thereunder.

Damage to Hotels.  In the event of damage to or destruction of any Hotel covered
by  insurance  which  renders  the Hotel  unsuitable  for the  Lessee's  use and
occupancy,  the Lessee, at its option, will be obligated to (i) repair, rebuild,
or restore  the Hotel or (ii) offer to acquire  the Hotel on the terms set forth
in the  applicable  Percentage  Lease.  If a  Lessee  rebuilds  the  Hotel,  the
Partnership  is obligated to disburse to the Lessee,  from time to time and upon
satisfaction of certain conditions,  any insurance proceeds actually received by
the Partnership as a result of such damage or destruction,  and any excess costs
of repair or restoration  will be paid by the Lessee.  If the Lessee decides not
to  rebuild  and the  Partnership  exercises  its right to reject  the  Lessee's
mandatory  offer to purchase the Hotel on the terms set forth in the  Percentage
Lease,  the Percentage  Lease will terminate and the insurance  proceeds will be
retained by the  Partnership.  If the Partnership  accepts the Lessee's offer to
purchase the Hotel,  the Percentage  Lease will terminate and the Lessee will be
entitled to the insurance  proceeds.  In the event that damage to or destruction
of a Hotel  which is covered  by  insurance  does not  render  the Hotel  wholly
unsuitable  for the Lessee's use and  occupancy,  the Lessee  generally  will be
obligated  to  repair  or  restore  the  Hotel.  In the  event of  damage  to or
destruction  of any Hotel which is not covered by insurance,  the Lessee will be
obligated to either repair,  rebuild,  or restore the Hotel or offer to purchase
the Hotel on the terms and  conditions set forth in the  Percentage  Lease.  The
Percentage  Lease  shall  remain in full  force and  effect  during  the  period
required for repair or restoration of any damaged or destroyed  Hotel,  with the
Lessee to  receive a credit  against  rental  payments  and other  charges in an
amount equal to any  loss-of-income  insurance proceeds actually received by the
Partnership.

Condemnation  of Hotel.  In the event of a total  condemnation  of a Hotel,  the
relevant  Percentage  Lease will  terminate with respect to such Hotel as of the
date of taking,  and the  Partnership  and the Lessee  will be entitled to their
shares  of the  condemnation  award in  accordance  with the  provisions  of the
Percentage  Lease.  In the event of a partial  taking  which does not render the
Hotel  unsuitable  for the Lessee's  use,  the Lessee shall  restore the untaken
portion of the Hotel to a complete  architectural unit and the Partnership shall
contribute to the cost of such restoration  that part of the condemnation  award
specified  for  restoration,  provided  that  if  the  condemnation  awards  are
inadequate  to restore  the  affected  Hotel to a complete  architectural  unit,
either the  Partnership  or the Lessee  shall  have the right to  terminate  the
applicable Percentage Lease.

Events of Default.  Events of Default under the existing Percentage Leases
include the following:

         (i) the occurrence of an Event of Default under any other lease between
the Partnership and a Lessee or any Affiliate of a Lessee;

         (ii) the failure by a Lessee to pay Base Rent,  Percentage  Rent or any
additional charges within 10 days after written notice from the Partnership that
such has become due and payable;

         (iii) the failure by a Lessee to observe or perform any other term of a
Percentage  Lease and the  continuation  of such failure for a period of 30 days
after receipt by the Lessee of notice from the Partnership thereof,  unless such
failure cannot be cured within such period and the Lessee commences  appropriate
action  to cure such  failure  within  said 30 days and  thereafter  acts,  with
diligence, to correct such failure within such time as is necessary;



                                       16

<PAGE>



         (iv) if a Lessee or a guarantor of the  Percentage  Leases shall file a
petition  in  bankruptcy  or  reorganization  pursuant  to any  federal or state
bankruptcy  law or any similar  federal or state law, or shall be  adjudicated a
bankrupt or shall make an assignment for the benefit of creditors or shall admit
in writing its inability to pay its debts  generally as they become due, or if a
petition or answer  proposing the  adjudication  of the Lessee or a guarantor of
the Percentage Leases as bankrupt or its reorganization  pursuant to any federal
or state  bankruptcy  law or any similar  federal or state law shall be filed in
any court and the  Lessee  or a  guarantor  of the  Percentage  Leases  shall be
adjudicated a bankrupt and such  adjudication  shall not be vacated or set aside
or stayed within 60 days after the entry of an order in respect thereof, or if a
receiver of the Lessee or a guarantor of the  Percentage  Leases or of the whole
or  substantially  all of the assets of the  Lessee  shall be  appointed  in any
proceeding  brought by the Lessee or a guarantor of the Percentage  Leases or if
any such  receiver,  trustee or liquidator  shall be appointed in any proceeding
brought  against the Lessee or any guarantor of the Percentage  Leases and shall
not be vacated or set aside or stayed within 60 days after such appointment;

         (v) if the Lessee  voluntarily  discontinues  operations of a Hotel for
more than 30 days, except as a result of damage, destruction, or condemnation;

         (vi) if the franchise  agreement  with respect to a Hotel is terminated
as a result of any action or  failure to act by the Lessee or its agents  (other
than a failure to  complete a capital  improvement  required  by the  franchisor
resulting from the Partnership's failure to fund such capital improvements); or

         (vii) the occurrence of an event of default under the Lease  Guaranties
with respect to the hotels leased to the Patriot Lessee.

If an Event of Default  occurs and  continues  beyond any curative  period,  the
Partnership  will have the option of terminating the Percentage  Lease or any or
all other  Percentage  Leases  between  the  Partnership  and the Lessee and the
Consolidated  Lease Amendment and the Percentage  Leases shall terminate and the
Lessee will be required to surrender possession of the affected Hotels.

Right of First  Offer.  In the event  that the  Partnership  desires to sell its
interest in a Hotel, the Partnership  shall first offer to the Lessee by written
notice  the  opportunity  to  acquire  the  Hotel  at the  price  at  which  the
Partnership  intends to offer the Hotel (the "Offer  Price").  In the event that
the Lessee  elects  within 15 days after  receipt of such  notice to acquire the
Hotel at the Offer Price, the Partnership will be obligated to sell the Hotel to
the Lessee or its nominee at the Offer Price, and upon such sale, the applicable
Percentage  Lease shall  terminate  with respect to the Hotel.  Such  provisions
shall not apply to any sale,  transfer or conveyance by the  Partnership  of any
interest in the Hotels to any affiliate of the Partnership.

Termination of Percentage  Leases on Disposition of the Hotels. In the event the
Partnership  enters into an agreement to sell or otherwise  transfer a Hotel and
the Lessee does not elect to acquire the Hotel in  accordance  with the right of
first offer  described  above,  the  Partnership  shall be permitted to sell the
Hotel to a third  party at a price  equal to or  greater  than 95% of the  Offer
Price.  As  compensation  for the early  termination  of the Lessee's  leasehold
estate,  the Partnership  will have the right to terminate the Percentage  Lease
with  respect to such Hotel  upon  either (i) paying the Lessee the net  present
value of the Lessee's leasehold interest in the remaining term of the Percentage
Lease to be terminated  as set forth in the lease  agreement or (ii) offering to
lease to the Lessee one or more  substitute  hotels on terms that would create a
leasehold interest in such hotels with a fair market value equal to or exceeding
the fair market value of the Lessee's  remaining  leasehold  interest  under the
Percentage Lease to be terminated.



                                       17

<PAGE>



Termination of Percentage Leases on Company's Termination of REIT Status. In the
event that the Company  terminates  its REIT status or the Code  provisions  are
amended so that REITs are permitted to operate hotels, the Partnership may elect
to terminate the Percentage  Leases.  In such event,  the  Partnership  shall be
obligated  to  pay to the  Lessees  the  termination  payment  described  in the
preceding paragraph.


ITEM 3.        LEGAL PROCEEDINGS

Neither the Company nor the  Partnership  currently  is involved in any material
litigation nor, to the Company's knowledge, is any material litigation currently
threatened against the Company or the Partnership.


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

No matters were  submitted to a vote of the  Company's  shareholders  during the
fourth quarter of 1998, through the solicitation of proxies or otherwise.


ITEM 5.        MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
               STOCKHOLDER MATTERS

(a)      Market Information

The Company's common stock, $.01 par value (the "Common Stock") is traded on the
New York Stock Exchange (the "NYSE") under the symbol "ENN." The following table
sets forth for the  indicated  periods the high and low  closing  prices for the
Common  Stock  as  traded  through  the  facilities  of the  NYSE  and the  cash
distributions declared per share:
<TABLE>
<CAPTION>
                                                        Distributions
                                                          Declared
                                      Price Range         Per Share            Record
                                    High        Low       and Unit              Date           
                                    ----        ---     --------------    -------------------
<S>                                 <C>         <C>     <C>                <C>
Year Ended December 31, 1997:
     First Quarter                $14-1/2     $12-1/2       $0.28         March 31, 1997
     Second Quarter               $14-1/8     $12-7/8       $0.28         June 30, 1997
     Third Quarter                $15-13/16   $13-1/4       $0.29         September 30, 1997
     Fourth Quarter               $16-9/16    $14-1/8       $0.29         December 30, 1997

Year Ended December 31, 1998:
     First Quarter                $16         $14-1/4       $0.31         March 27, 1998
     Second Quarter               $16-1/16    $13-3/16      $0.31         June 30, 1998
     Third Quarter                $14-1/8     $9-7/8        $0.31         September 30, 1998
     Fourth Quarter               $11-13/16   $8-3/4        $0.31         December 31, 1998
</TABLE>

(b)      Stockholder Information

On March 10,  1999,  there were 1,134  record  holders of the  Company's  Common
Stock,  including  shares  held in  "street  name" by  nominees  who are  record
holders, and approximately 28,100 beneficial owners.



                                       18

<PAGE>



(c)      Distributions

The Company intends to make regular quarterly distributions to its shareholders.
The  Company's  ability to make  distributions  is  dependent  on the receipt of
distributions  from the  Partnership.  In order to qualify as a REIT for federal
income tax purposes,  the Company must  distribute to  shareholders  annually at
least  95% of its  taxable  income.  The  Company,  as  general  partner  of the
Partnership through the Trust, intends to cause the Partnership to distribute to
its partners  sufficient amounts to permit the Company to make regular quarterly
distributions to its shareholders.  The Partnership's  primary source of revenue
consists of rent payments from the Lessees under the Percentage Leases.

A portion of the  distribution to shareholders is expected to represent a return
of capital for federal income tax purposes  which  generally will not be subject
to federal  income tax under  current law. The Company's  distributions  made in
1998 and 1997 are considered to be approximately  26% and 10% return of capital,
respectively, for federal income tax purposes.

Future  distributions paid by the Company will be at the discretion of the Board
of  Directors  of the  Company  and will  depend on the actual  cash flow of the
Company, its financial condition, capital requirements,  the annual distribution
requirements under the REIT provisions of the Code and such other factors as the
directors of the Company deem relevant.


ITEM 6.  SELECTED FINANCIAL DATA

The  following  table sets forth (i)  selected  historical  operating  and other
financial information for the years ended December 31, 1998, 1997, 1996 and 1995
and the period from March 1, 1994 (inception of operations) through December 31,
1994, and (ii) selected  historical  balance sheet data as of December 31, 1998,
1997,  1996, 1995 and 1994. The selected  historical  financial  information has
been derived from the historical  financial statements of the Company audited by
PricewaterhouseCoopers LLP, independent accountants.

The following selected financial  information should be read in conjunction with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and all of the  financial  statements  and notes  thereto  included
elsewhere in this report.



                                       19

<PAGE>



                                EQUITY INNS, INC
                             SELECTED FINANCIAL DATA
                      (in thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                                                          March 1, 1994
                                                                                          (inception of
                                                                                           operations)
                                                        Year Ended December 31,              through
                                            1998        1997        1996        1995     December 31, 1994
                                          --------    --------   ---------    --------   -----------------
<S>                                       <C>         <C>        <C>          <C>        <C>
Operating Data:

     Revenue                              $106,731     $71,761     $38,430     $24,145        $9,798
     Net income                             31,595      23,543      14,473       8,511         4,620
     Preferred stock dividends               3,374
     Net income applicable to common
         shareholders                       28,221      23,543      14,473       8,511         4,620
     Income before extraordinary
         item per common share                 .78         .88         .69         .70           .60

     Net income per common share,
         basic and diluted                     .78         .82         .69         .70           .60

     Distributions declared per
         common share and Unit                1.24        1.14        1.12        1.00           .70

     Funds from operations (1)              64,985      45,748      26,397      15,804         7,611

     Funds from operations per
         common share and Unit                1.71        1.53        1.22        1.22           .89

     Weighted average number of
         common shares and Units
         outstanding-diluted                38,001      29,963      21,681      12,920         8,551

Balance Sheet Data:

     Investments in hotel properties,
         net                              $790,132    $617,072    $309,202    $218,429      $140,970

     Total assets                          807,023     635,525     317,880     225,067       145,555

     Debt                                  331,394     233,206      77,399      74,939        45,838

     Minority interest in Partnership       19,070      19,035       7,728       6,073         6,081

     Shareholders' Equity                  431,264     360,172     222,951     137,493        89,802
</TABLE>


(1)    Represents Funds from Operations of the Company on a consolidated basis.
       Industry analysts generally consider Funds from Operations to be an
       appropriate measure of the performance of an equity REIT.  In accordance
       with the resolution adopted by the Board of Governors of the National
       Association of Real Estate Investment Trusts ("NAREIT"), Funds from
       Operations represents net income (loss) (computed in accordance with
       generally accepted accounting principles), excluding gains (or losses)
       from debt restructuring or sales of property, plus depreciation, and
       after adjustments for unconsolidated partnerships and joint ventures. For
       the periods presented, depreciation, gain (loss) on the sale of hotel
       properties, non-recurring merger expenses, minority interest and the 1997
       extraordinary charge from write-off of deferred financing fees were the
       only adjustments.  Funds from Operations should not be considered an
       alternative to net income or other measurements under generally accepted
       accounting principles as an indicator of operating performance or to cash
       flows from operating, investing or financing activities as a measure of
       liquidity.  Funds from Operations does not reflect working capital
       changes, cash expenditures for capital improvements or principal payments
       with respect to indebtedness on the hotels.


                                       20

<PAGE>



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

The Company

Equity Inns, Inc. (the "Company") is a self-advised real estate investment trust
("REIT") which commenced  operations on March 1, 1994. The Company,  through its
wholly-owned  subsidiary,  Equity Inns Trust (the "Trust"),  is the sole general
partner of Equity Inns Partnership, L.P. (the "Partnership") and at December 31,
1998 owned an approximate 95.0% interest in the Partnership.

In order to qualify as a REIT,  neither  the  Company  nor the  Partnership  can
operate  hotels.  Therefore,  the Partnership  leases 80 hotels  collectively to
subsidiaries or affiliates of Patriot American  Hospitality,  Inc.(collectively,
the  "Patriot  Lessee"),  successor  by  merger  to  Interstate  Hotels  Company
("Patriot"). Patriot has managed hotel properties since 1961, and as of December
31, 1998,  owned,  managed,  leased or performed related services for 474 hotels
with  approximately  101,000  rooms.  The  Partnership  leases  19  hotels  to a
wholly-owned  subsidiary of Prime Hospitality  Corporation (the "Prime Lessee").
Prime has managed  hotel  properties  since 1992,  and as of December  31, 1998,
managed 180 hotels with 24,516  rooms in 31 states,  including 19 of the Hotels.
The lessees are required to perform all  operational  and  management  functions
necessary to operate the Hotels. Ninety-nine hotels owned by the Partnership are
leased to the Patriot Lessee and the Prime Lessee, collectively,  as the lessees
(the  "Lessees"),  and  individually as the lessee (a "Lessee")  pursuant to the
Percentage Leases (the "Percentage Leases") which provide for the greater of (i)
fixed annual Base Rent ("Base Rent") or (ii) rent based, in part, on the revenue
of the hotels  ("Percentage  Rent").  The  remaining  three  hotels are operated
pursuant to management agreements,  two of which are operated by an affiliate of
Patriot,  and one of which is operated by MeriStar Management Company,  L.L.C, a
wholly-owned  subsidiary of MeriStar Hotels & Resorts,  Inc. The  Partnership's,
and therefore the  Company's,  principal  sources of revenue are lease  payments
made by the  Lessees  under  the  Percentage  Leases.  Percentage  Rent is based
primarily  upon the hotels'  room  revenues  and, to a lesser  extent,  food and
beverage revenues.

Recent Highlights

Since its inception, the Company has taken steps to position itself for growth
and stability.  Several changes have occurred since December 31, 1997 which add
significantly to these efforts.  These events are as follows:

         Acquisitions and Disposition of Hotels

         Since the IPO, the Company has  actively  implemented  its  acquisition
         strategy.  During 1998 and 1997,  the Company  acquired  the  following
         types  of  hotels  at   advantageous   capitalization   rates  for  the
         approximate amounts indicated:
<TABLE>
<CAPTION>
                                              1998                    1997              
                                      ----------------------   ----------------------
                                      No. of     Purchase      No. of     Purchase
                                      Hotels      Price        Hotels      Price   
                                      ------     --------      ------     --------
                                              (in thousands)           (in thousands)
         <S>                          <C>        <C>           <C>         <C>
         Premium Limited Service         2      $ 20,100         34      $198,574
         Premium Extended Stay           5        68,350          6        61,650
         All-Suite                       9        96,996         10        86,966
                                        --      --------         --      --------

                                        16      $185,446         50      $347,190
                                        ==      ========         ==      ========
</TABLE>



                                       21

<PAGE>



         During 1998, the  Partnership  sold three hotels which did not meet its
         growth  strategy  (Hampton  Inn,  Little Rock,  Arkansas;  Hampton Inn,
         Shelby,  North Carolina;  Hampton Inn,  Cleveland,  Tennessee) to third
         parties for an aggregate sales price of approximately $8.0 million. The
         sales price was paid with cash.

         Formation of Strategic Alliance US Franchise Systems, Inc.

         On January 20, 1998, the Company entered into a strategic alliance with
         US Franchise  Systems,  Inc.,  ("USFS"),  the  exclusive  franchisor of
         Hawthorn Suites.  Under the agreement,  the Company will have the right
         of first offer to purchase from USFS up to twelve  Hawthorn  Suites per
         year for three years in certain parts of the Eastern United States.  No
         hotels were purchased during 1998 under this alliance.

         Equity Offerings

         On February 18, 1998,  the Company sold 641,556 shares of common stock,
         $.01 par value ("Common Stock") to Prudential Securities  Incorporated.
         The offering price was $15.81 per share, resulting in gross proceeds of
         approximately  $10.1  million.  On March 30,  1998,  the  Company  sold
         645,162  shares of Common  Stock to J.C.  Bradford & Co.  The  offering
         price  was  $15.50  per  share,   resulting   in  gross   proceeds   of
         approximately  $10 million.  The Company received  approximately  $19.1
         million after  underwriters'  discounts and offering  expenses from the
         combined offerings.

         On June 25, 1998, the Company completed its first offering of preferred
         stock  ("Preferred  Stock"),  selling  2,750,000  shares  of its 9 1/2%
         Series  A  Cumulative  Preferred  Stock,  $.01  par  value  ("Series  A
         Preferred Stock").  The offering price was $25 per share,  resulting in
         gross proceeds of $68.8  million.  The Company  received  approximately
         $66.3 million after underwriters'  discounts and offering expenses from
         the offering.

         Development

         In May 1998, the Company  completed its first development  property,  a
         125-room Hampton Inn & Suites located in Bartlett (Memphis), Tennessee,
         at a cost of approximately $7.5 million.

         In July 1998, the Company  purchased land in Salt Lake City,  Utah at a
         cost  of   approximately   $2.4  million,   to  be  held  for  possible
         construction of a hotel at a later date.









                                       22

<PAGE>



Results of Operations

Comparison of the Company's  operating  results for the year ended  December 31,
1998 with the year ended December 31, 1997.

For the year ended  December 31, 1998,  the Company had total revenues of $106.7
million,  consisting  substantially of Percentage  Lease revenue.  This compares
with total revenue of $71.8 million for the year ended December 31, 1997.

Increases in revenue from hotel  operations for the year ended December 31, 1998
as compared to 1997 are due to (i) an increased number of hotels being owned and
leased  by the  Partnership  throughout  1998,  (ii)  increases  in  ADR  and/or
occupancy at many of the hotels leased during both years,  and (iii) a full year
of operation in 1998 of hotels acquired in 1997.  Assuming all hotels which were
in  operation  a full year in both 1998 and 1997 had been owned and leased as of
January 1, 1997,  revenue per  available  room  ("REVPAR")  on a pro forma basis
would have increased .7% over 1997.

Real estate and personal property taxes and general and administration  expenses
in the  aggregate  remained  fairly  constant  in 1998 as  compared to 1997 as a
percentage of total revenue.  Interest  expense  increased to $21.6 million from
$12.6 in 1997 due  primarily  to  borrowings  incurred to finance the  Company's
acquisitions.  The Company's  weighted  average  interest  rates on  outstanding
borrowings  during the years ended  December  31, 1998 and 1997,  were 7.46% and
7.53%,  respectively.  Net income applicable to common shareholders for 1998 was
$28.2  million or $0.78 per share,  compared to $23.5 million or $0.82 per share
for 1997.  Funds from Operations  ("FFO"),  as defined below, for 1998 was $65.0
million  or $1.71 per share and Unit,  compared  to $45.7  million  or $1.53 per
share and Unit for 1997, an increase of 12%.

Comparison of the Company's  operating  results for the year ended  December 31,
1997 with the year ended December 31, 1996.

For the year ended  December 31, 1997,  the Company had total  revenues of $71.8
million,  consisting  substantially of Percentage  Lease revenue.  This compares
with total revenues of $38.4 million for the year ended December 31, 1996.

Increases in revenue from hotel  operations for the year ended December 31, 1997
as compared to 1996 are due to (i) an increased number of hotels being owned and
leased  by the  Partnership  throughout  1997,  (ii)  increases  in  ADR  and/or
occupancy at many of the hotels leased during both years,  and (iii) a full year
of operation in 1997 of hotels acquired in 1996.  Assuming all hotels which were
in  operation  a full year in both 1997 and 1996 had been owned and leased as of
January 1, 1996,  REVPAR on a pro forma  basis  would have  increased  5.7% over
1996.

Real estate and personal property taxes and general and administrative  expenses
in the  aggregate  remained  fairly  constant  in 1997 as  compared to 1996 as a
percentage of total revenue.  Interest  expense  increased to $12.6 million from
$4.4  million in 1996 due  primarily  to  borrowings  incurred  to  finance  the
Company's  acquisitions.   The  Company's  weighted  average  interest  rate  on
outstanding  borrowings  during the years ended  December 31, 1997 and 1996, was
7.53% for both years. Net income applicable to common  shareholders for 1997 was
$23.5  million or $0.82 per share,  compared to $14.5 million or $0.69 per share
for 1996.  FFO, as defined below,  for 1997 was $45.7 million or $1.53 per share
and Unit,  compared  to $26.4  million or $1.22 per share and Unit for 1996,  an
increase of 25%. The increase in FFO/share is attributable to (i) an increase in
REVPAR and (ii)  acquisition  of fifty  hotels in 1997,  acquired  at  accretive
capitalization rates.




                                       23

<PAGE>



Funds from Operations

Industry  analysts  generally  consider Funds from  Operations  ("FFO") to be an
appropriate measure of the performance of an equity REIT. In accordance with the
resolution adopted by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"),  FFO represents net income (loss) (computed
in accordance with generally accepted  accounting  principles),  excluding gains
(or losses) from debt restructuring or sales of property, plus depreciation, and
after adjustments for  unconsolidated  partnerships and joint ventures.  For the
periods  presented,  depreciation,  gain (loss) on the sale of hotel properties,
non-recurring  merger  expenses,  minority  interest and the 1997  extraordinary
charge from write-off of deferred financing fees were the only adjustments.  FFO
should not be  considered  an  alternative  to net income or other  measurements
under  generally  accepted  accounting  principles  as an indicator of operating
performance or to cash flows from operating,  investing or financing  activities
as a measure of liquidity.  FFO does not reflect working capital  changes,  cash
expenditures  for capital  improvements  or principal  payments  with respect to
indebtedness on the hotels.

The  following   reconciliation  of  income  before  minority  interest  to  FFO
illustrates the difference in the two measures of operating performance:
<TABLE>
<CAPTION>
                                                For the Years Ended December 31,
                                                 1998                    1997   
                                               -------                  -------
                                        (in thousands, except per share and Unit data)
<S>                                            <C>                       <C>
Income before extraordinary item
    and minority interest                      $33,087                  $26,445

Less:
    Gain on sale of hotel properties                                       (666)
    Preferred stock dividends                   (3,374)

Add:
    Depreciation of buildings,
        furniture and fixtures                  32,370                   19,969
    Loss on sale of hotel properties               705
    Non-recurring merger expenses                2,197                         
                                               -------                  -------

Funds from Operations                          $64,985                  $45,748
                                               =======                  =======

Weighted average number of
    common shares and Units
    outstanding                                 38,001                   29,963
                                               =======                  =======

Funds from Operations per common share
    and Unit                                   $  1.71                  $  1.53
                                               =======                  =======
</TABLE>


Liquidity and Capital Resources

The Company's principal source of cash to meet its cash requirements,  including
distributions  to  its  shareholders,   is  its  cash   distributions  from  the
Partnership. The Partnership receives cash payments from the Lessees pursuant to
the Percentage  Leases. The Company's  liquidity,  including its ability to make
distributions  to  shareholders,  is dependent upon the Lessees' ability to make
payments  under  the  Percentage  Leases.  All of  the  Patriot  Lessee's  lease
obligations  are  guaranteed by Patriot and by  Interstate.  The Prime Lessee is
required,  under the terms of its master lease agreement, to maintain 20% of its
expected annual percentage rents generated from the Percentage Leases in cash or
marketable securities.


                                       24

<PAGE>



Cash and cash  equivalents  were  $400,000 at  December  31,  1998,  compared to
$190,000 at December  31,  1997.  Excess  cash  balances  are used to reduce the
Company's  outstanding  debt.  For the year ended  December 31, 1998,  cash flow
provided by  operating  activities,  consisting  primarily of  Percentage  Lease
revenue, was $67.1 million.

The Company intends to make additional  investments in hotel  properties and may
incur, or cause the Partnership to incur,  indebtedness to make such investments
or to meet  distribution  requirements  imposed  on a REIT under the Code to the
extent that working  capital and cash flow from the  Company's  investments  are
insufficient to make such distributions. Prior to its latest annual meeting, the
Company's  Charter  limited  aggregate  indebtedness  to 45%  of  the  Company's
investment in hotel  properties,  at cost,  after giving effect to the Company's
use  of  proceeds  from  any  indebtedness.   This  limitation  was  deleted  by
shareholder vote on May 14, 1998. The Company's Board of Directors  subsequently
adopted  a debt  limitation  policy  currently  imposing  the  same  limitations
previously imposed by the Charter.

At December 31, 1998, the Company had outstanding debt of  approximately  $331.4
million,  including  $235.4  million  under the $250 million  Unsecured  Line of
Credit,  $84.1 million under the Commercial  Mortgage  Bonds (the "Bonds"),  and
$1.2 million under an additional line of credit (the "NBC Credit Line"), leaving
approximately  $4.0 million  available  under the Unsecured Line of Credit after
consideration of outstanding  letters of credit and $8.8 million available under
the NBC Credit  Line.  Additionally,  the Company had $10.6  million of mortgage
notes payable assumed in connection with the purchase of two hotels in 1998. The
Company's  consolidated  indebtedness was 38.6% of its investments in hotels, at
cost, at December 31, 1998.

In  December  1997,  the Company  arranged  an interest  rate swap on a notional
amount of $75 million with The First National Bank of Chicago as a hedge against
the floating  rate. At December 31, 1998,  the swap resulted in a fixed interest
rate of 7.65% on the notional amount.  The swap agreement will expire in October
2000.

During the first  quarter of 1999,  the Company is planning  to  refinance  $100
million of borrowings  outstanding under the Unsecured Line of Credit with a new
10-year term loan (the "Term Loan"). In addition,  the Company plans to complete
a $25 million unsecured line of credit, expiring in October 2000.

During  1998,  the Company  invested $26 million,  including  $11.4  million for
renovations required by franchisors, to fund capital improvements to its hotels,
including  replacement  of  carpets,  drapes,  renovation  of  common  areas and
improvements of hotel exteriors.  In addition, the Company has committed to fund
approximately  $19 million in 1999 for  capital  improvements,  $5.7  million of
which is renovations required by franchisors.

The  Company  intends  to  fund  such  improvements  out  of  future  cash  from
operations,  present cash balances and  borrowings  under its Unsecured  Line of
Credit and the NBC Credit  Line.  Under the  Unsecured  Line of Credit,  and the
Bonds, the Partnership is obligated to fund 4% of room revenues per quarter on a
cumulative  basis,  to a  separate  room  renovation  account  for  the  ongoing
replacement or refurbishment of furniture, fixtures and equipment at the hotels.
During  1998 and  1997,  non-recurring  enhancements  for  capital  expenditures
exceeded this threshold,  which based upon 4% of room revenue, were $8.6 million
and $6.1 million, respectively.



                                       25

<PAGE>



The Company has entered into agreements to purchase three hotels at a total cost
of  approximately  $86 million.  The hotels are  currently in various  stages of
development,  with  projected  openings  between  May 1999 and  September  1999.
Additionally,  the Company is  currently  holding  land for  possible use in the
development of an Embassy Suites hotel in Salt Lake City,  Utah. Funds needed to
complete  these  projects will be obtained from  borrowings  under the Unsecured
Line of Credit and other sources of debt or equity financing.

The Company elected to be taxed as a REIT commencing with its taxable year ended
December 31, 1994,  and expects to continue to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986. Accordingly,  no provision
for federal income taxes has been reflected in the financial statements.

REITs are subject to a number of  organizational  and operational  requirements.
For example, for federal income tax purposes, a REIT, and therefore the Company,
is required to pay  distributions  of at least 95% of its taxable  income to its
shareholders. The Company intends to pay these distributions from operating cash
flows. During 1998, the Partnership distributed an aggregate of $47.2 million to
its partners, or $1.24 per Unit (including $44.9 million of distributions to the
Company  to fund  distributions  to  shareholders  of $1.24  per share in 1998).
During 1997,  the  Partnership  distributed an aggregate of $36.4 million to its
partners,  or $1.14 per Unit (including  $34.9 million of  distributions  to the
Company to fund  distributions  to shareholders of $1.14 per share in 1997). For
federal income tax purposes,  26% of 1998 distributions  represented a return of
capital, compared with 10% for 1997.

The Company  expects to meet its  short-term  liquidity  requirements  generally
through  net cash  provided  by  operations,  existing  cash  balances  and,  if
necessary,  short-term borrowings under the Unsecured Line of Credit and the NBC
Credit Line. The Company  believes that its net cash provided by operations will
be adequate to fund both operating  requirements and payment of distributions by
the Company in accordance with REIT requirements.

The  Company  expects  to meet its  long-term  liquidity  requirements,  such as
scheduled debt maturities and property  acquisitions,  through long-term secured
and unsecured  borrowings,  the issuance of additional  equity securities of the
Company or, in connection with acquisitions of hotel properties, the issuance of
Partnership  Units.  Pursuant to the Partnership  Agreement for the Partnership,
subject to certain holding period requirements,  holders of Units have the right
to require the Partnership to redeem their Units. During the year ended December
31, 1998, 49,074 Units were tendered for redemption. Pursuant to the Partnership
agreement, the Company has the option to redeem Units tendered for redemption on
a one-for-one  basis for shares of Common Stock or for an  equivalent  amount of
cash.  The  Company  anticipates  that it will  acquire any Units  tendered  for
redemption in the foreseeable  future in exchange for shares of Common Stock and
has  agreed  to  register  such  shares  so as to be  freely  tradeable  by  the
recipient.

Inflation

Operators  of hotels in general  have the ability to adjust room rates  quickly.
However,  competitive  pressures  may limit the  Lessees'  ability to raise room
rates in the face of inflation.

Seasonality

Hotel  operations  historically  are  seasonal in nature,  generally  reflecting
higher  occupancy rates during the second and third quarters.  This  seasonality
can be expected to cause fluctuations in the Company's  quarterly lease revenues
to the extent that it receives Percentage Rent.



                                       26

<PAGE>



Forward Looking Statements

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Act
of 1934, as amended,  including,  without limitation,  statements containing the
words  "believes,"  "anticipates,"  "expects" and words of similar import.  Such
forward-looking  statements  relate to future  events and the  future  financial
performance of the Company,  and involve known and unknown risks,  uncertainties
and  other  factors  which  may  cause  the  actual   results,   performance  or
achievements  of the  Company to be  materially  different  from the  results or
achievement expressed or implied by such forward-looking statements. The Company
is not obligated to update any such factors.

Year 2000 Compliance

Many  existing  computer  programs  have been designed to use only two digits to
identify  a year in the  date  field,  without  considering  the  impact  of the
upcoming  change in the century.  If not corrected,  many computer  applications
could fail or create  erroneous  results by or at the Year 2000.  The  Company's
assessment of its Year 2000 compliance is not complete. The Company has used its
hardware and software  contractors to implement a compliance  program to address
the  challenges  the  Year  2000  may  present  to  the  Company's  systems  and
applications.  This  program  includes  an  analysis  of  computer  systems  and
applications  operated by the Company and computer systems of third parties upon
whose data or services the Company relies (including the Lessees).

The  Company's  management,  as a result of  discussions  with its  hardware and
software  contractors,  has modified  its systems,  and is scheduled to complete
remaining software  conversions by mid- 1999. As part of its compliance program,
the Company has also  surveyed  its  customers,  franchisors,  vendors,  and the
Lessees,  whose failure to timely  convert their systems could have an impact on
the  Company's  operations.  Although the Company does not believe the Year 2000
issue will materially affect its business,  financial  conditions and results of
operations,  there can be no assurance  that its Year 2000  remediation  efforts
will be fully  effective to prevent  problems  that could  affect the  Company's
business.  In  addition,  although the Company has no reason to believe that the
Lessees  will not be in  compliance  by the Year 2000,  the Company is unable to
determine the extent to which the Year 2000 issue will affect the  operations of
the  hotels.  The  Company  continues  to discuss  with the Lessees the need for
implementing  adequate procedures,  including contingency plans, to address this
issue and has been  assured  that each Lessee is on  schedule to complete  these
compliance issues by mid-1999.

Management  does not consider the incurred or estimated  costs of the  Company's
compliance program to be material.


ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to the general  instructions  to Rule 305 of SEC  Regulation  S-K,  the
quantitative and qualitative  disclosures called for by this Item 7a and by Rule
305 of SEC Regulation S-K are inapplicable to the Company at this time.




                                       27

<PAGE>



ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a)    Financial Statements:

The  following  financial  statements  are  located in this  report on the pages
indicated.

Equity Inns, Inc.                                                           Page
        Report of Independent Accountants                                     29
        Consolidated Balance Sheets as of December 31, 1998
            and 1997                                                          30
        Consolidated Statements of Operations for the years ended
            December 31, 1998, 1997 and 1996                                  31
        Consolidated Statements of Shareholders' Equity for the
            years ended December 31, 1998, 1997 and 1996                      32
        Consolidated Statements of Cash Flows for the years ended
            December 31, 1998, 1997 and 1996                                  34
        Notes to Consolidated Financial Statements                            35

(b)     Supplementary Data:

Quarterly Financial Information

        Unaudited quarterly results for 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
                                                      First          Second              Third           Fourth
                                                   Quarter (1)     Quarter (1)        Quarter  (1)     Quarter (1)
                                                   -----------     -----------       -------------     -----------
                  1998                                        (in thousands, except per share data)
                  ----
         <S>                                       <C>             <C>                <C>              <C>
         Revenue                                     $21,577           $28,237           $32,481          $24,436
         Net income applicable to
             common shareholders                       6,004            10,491             8,590            3,136
         Net income per common
             share, basic and diluted                    .17               .29               .24              .09

                  1997
                  ----
         Revenue                                     $11,795           $16,039           $24,745          $19,182
         Net income applicable to
             common shareholders                       3,167             5,746            11,235            3,395
         Income before extraordinary
             item per common share                       .13               .22               .35              .16

         Net income per common share,
             basic and diluted                           .13               .22               .35              .10
</TABLE>

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

(1)  Acquisitions of hotel  properties  throughout both years,  coupled with the
seasonality of the hotels,  have impacted the trend of quarterly results for the
periods shown.

                                       28

<PAGE>



Report of Independent Accountants



To the Board of Directors
   and Shareholders of Equity Inns, Inc.


In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing  under  Item 14(a)  present  fairly,  in all  material  respects,  the
financial  position of Equity Inns,  Inc. at December 31, 1998 and 1997, and the
results of its  operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule listed
in the  index  appearing  under  Item  14(a)  presents  fairly  in all  material
respects,  the information  set forth therein when read in conjunction  with the
related  consolidated  financial  statements.  These  financial  statements  and
financial statement schedule are the responsibility of the Company's management;
our  responsibility  is to express an opinion on these financial  statements and
financial  statement  schedule  based on our audits.  We conducted our audits of
these statements in accordance with generally  accepted auditing standards which
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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.


PRICEWATERHOUSECOOPERS LLP




Memphis, Tennessee
January 22, 1999


                                       29

<PAGE>



                                EQUITY INNS, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                    December 31,    December 31,
                                                       1998            1997
                                                    ------------    ------------
<S>                                                 <C>              <C>
Assets:
Investment in hotel properties, net                   $790,132         $617,072
Cash and cash equivalents                                  400              190
Due from Lessees                                         6,288            5,925
Note receivable                                          2,884            3,884
Deferred expenses, net                                   6,313            7,276
Deposits and other assets                                1,006            1,178
                                                      --------         --------

    Total Assets                                      $807,023         $635,525
                                                      ========         ========

Liabilities and Shareholders' Equity:
Debt                                                  $331,394         $233,206
Accounts payable and accrued expenses                   12,316           12,467
Distributions payable                                   12,979           10,645
Minority interest in Partnership                        19,070           19,035
                                                      --------         --------

    Total Liabilities                                  375,759          275,353
                                                      --------         --------

Commitments and contingencies (Note 5)

Shareholders' Equity:
Preferred stock, $.01 par value,
    10,000,000 shares authorized,
    2,750,000 and -0- shares issued
    and outstanding at December 31,
    1998 and 1997, respectively                         68,750
Common stock, $.01 par value,
    50,000,000 shares authorized,
    36,438,535 and 34,865,578 shares
    issued and outstanding at December
    31, 1998 and 1997, respectively                        364              349

Additional paid-in capital                             407,833          387,134
Unearned directors' and officers'
    compensation                                        (2,006)            (274)
Predecessor basis assumed                               (1,264)          (1,264)
Distributions in excess of net earnings                (42,413)         (25,773)
                                                      --------         --------
    Total Shareholders' Equity                         431,264          360,172
                                                      --------         --------

    Total Liabilities and Shareholders' Equity        $807,023         $635,525
                                                      ========         ========
</TABLE>






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

                                       30

<PAGE>



                                EQUITY INNS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
<TABLE>
<CAPTION>

                                                    For the Years Ended December 31,
                                                     1998          1997        1996   
                                                   --------      -------     -------
<S>                                                <C>           <C>         <C>
Revenue:
Percentage lease revenues                          $106,661      $70,478     $38,314
Gain (loss) on sale of hotel properties                (705)         666
Other income                                            775          617         116
                                                   --------      -------     -------
    Total Revenue                                   106,731       71,761      38,430
                                                   --------      --------    -------

Expenses:
Real estate and personal property taxes              10,411        6,688       3,693
Depreciation and amortization                        32,665       20,214      11,631
Interest                                             21,587       12,601       4,382
Amortization of loan costs                              834        1,013       1,565
General and administrative                            4,650        4,142       1,975
Amortization of unearned directors' and
    officers' compensation                              331           92          33
Rental expense                                          969          566         218
Merger expense                                        2,197
                                                   --------      -------     -------
    Total Expenses                                   73,644       45,316      23,497
                                                   --------      -------     -------

Income before extraordinary item
    and minority interest                            33,087       26,445      14,933

Extraordinary charge from write-off of
    deferred financing fees                                        1,984
                                                   --------      -------     -------

Income before minority interest                      33,087       24,461      14,933

Minority interest                                     1,492          918         460
                                                   --------      -------     -------

Net income                                           31,595       23,543      14,473

Preferred stock dividends                             3,374
                                                   --------      -------     -------

Net income applicable to common
    shareholders                                   $ 28,221      $23,543     $14,473
                                                   ========      =======     =======

Net income per common share, basic and diluted:
        Income before extraordinary item           $    .78      $   .88     $   .69
        Extraordinary charge                                         .06
                                                   --------      -------     -------

        Net income                                 $    .78      $   .82     $   .69
                                                   ========      =======     =======

Weighted average number of common
    shares and units outstanding - diluted           38,001       29,963      21,681
                                                   ========      =======     =======
</TABLE>


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

                                       31

<PAGE>



                                EQUITY INNS, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 (in thousands, except share and per share data)
<TABLE>
<CAPTION>


                                                                                Unearned
                                                                    Additional  Directors'   Predecessor  Distributions
                            Preferred Stock       Common Stock       Paid-In   and Officers'    Basis     In Excess of
                          Shares     Dollars     Shares    Dollars   Capital   Compensation    Assumed    Net Earnings      Total
                          ------     -------     ------    -------   -------   ------------    -------    ------------    --------
<S>                       <C>         <C>         <C>      <C>       <C>       <C>             <C>        <C>               <C>
Balance at
  December 31, 1995                            14,907,231   $149     $143,576    $ (93)        $(1,264)    $(4,875)       $137,493

Issuance of common
  shares, net of
  offering expenses
  and allocation to
  minority interest                             7,947,000     80       85,787                                               85,867

Issuance of common
  shares to officers
  in lieu of cash
  bonus                                            25,000                 294                                                  294

Issuance of restricted
  common shares
  to officers                                      25,000                 306     (306)

Issuance of common
  shares in private
  placements                                      606,232      6        7,082                                                7,088

Issuance of common
  shares upon
  redemption of Units                             182,815      2        1,703                                                1,705

Amortization of
  unearned officers'
  and directors'
  compensation                                                                      33                                          33

Net income
  applicable to
  common shareholders                                                                                       14,473          14,473

Distributions ($1.12
  per share)                                                                                               (24,002)        (24,002)
                          -----      -------   ----------    ---      -------    -----         -------     -------         -------

Balance at
  December 31, 1996                            23,693,278    237      238,748     (366)         (1,264)    (14,404)        222,951
                          ------     -------   ----------    ---      -------    -----         -------     -------         -------

Issuance of common
  shares, net of
  offering expenses                            11,082,300    111      144,428                                              144,539 

Issuance of common
  shares to officers
  and directors
  through exercise
  of stock options                                 90,000      1        1,124                                                1,125

Amortization of
  unearned officers'
  and directors'
  compensation                                                                      92                                          92

Net income
  applicable to
  common shareholders                                                                                       23,543          23,543

Distributions ($1.14
  per share)                                                                                               (34,912)        (34,912)

Adjustments to
  minority interest
  from issuance of
  common shares and
  partnership units                                                     2,834                                                2,834
                          ------     -------   ----------    ---      -------    -----         -------     -------         -------

Balance at
  December 31, 1997                            34,865,578    349      387,134     (274)        (1,264)     (25,773)        360,172
</TABLE>



                                       32

<PAGE>



                                EQUITY INNS, INC.
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, CONTINUED
                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>


                                                                                Unearned
                                                                    Additional  Directors'   Predecessor  Distributions
                           Preferred Stock          Common Stock     Paid-In   and Officers'    Basis     In Excess of
                          Shares     Dollars     Shares    Dollars   Capital   Compensation    Assumed    Net Earnings      Total
                          ------     -------     ------    -------  ---------- ------------  -----------  ------------    --------
<S>                       <C>        <C>         <C>       <C>       <C>       <C>             <C>        <C>              <C>
Issuance of common
  shares, net of
  offering expenses                             1,286,718     13       18,795                                               18,808

Issuance of preferred
  shares, net of
  offering expenses      2,750,000   $68,750                           (2,408)                                              66,342

Issuance of common
  shares to officers
  in lieu of cash
  bonus                                            69,123      1        1,062                                                1,063

Issuance of common
  shares to directors
  in lieu of cash
  compensation                                      4,042                  55                                                   55

Issuance of
  restricted common
  shares to officers
  and directors                                   161,000      1        2,135   (2,136)                                          0

Issuance of common
  shares to officers
  through exercise
  of stock options                                  9,000                 112                                                  112

Forfeitures of
  unvested shares
  by an officer,
  upon resignation                                 (6,000)                (73)      73                                           0

Amortization of
  unearned officers'
  and directors'
  compensation                                                                     331                                         331

Issuance of common
  shares upon
  redemption of Units                              49,074                  525                                                 525

Net income
  applicable to
  common shareholders                                                                                       28,221          28,221

Distributions ($1.24
  per share)                                                                                               (44,861)        (44,861)

Adjustments to
  minority interest
  from issuance of
  common shares and
  partnership units                                                       496                                                 496
                         ---------   -------   ----------   ----      -------     -------      -------    --------         -------

Balance at
  December 31, 1998      2,750,000   $68,750   36,438,535   $364      $407,833    $(2,006)     $(1,264)   $(42,413)       $431,264
                         =========   =======   ==========   ====      ========    =======      =======    ========        ========
</TABLE>








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

                                       33

<PAGE>



                                EQUITY INNS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                             1998         1997         1996 
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
Cash flows from operating activities:
Net income applicable to common shareholders                $28,221      $23,543      $14,473
Adjustment to reconcile net income to net cash
   provided by operating activities:
      (Gain) loss on sale of hotel properties                   705         (666)
      Depreciation and amortization                          32,665       20,214       11,631
      Amortization of loan costs                                834        1,013        1,565
      Write-off of debt costs                                              1,984
      Amortization of unearned directors' and
         officers' compensation                                 331           92           33
      Directors' compensation                                    55
      Minority interest                                       1,492          918          460
      Changes in assets and liabilities:
         Due from Lessees                                      (363)      (2,548)      (1,078)
         Note receivable                                      1,000       (3,884)
         Deferred expenses                                      (11)          (8)        (225)
         Deposits and other assets                              172          215       (1,376)
         Accounts payable and accrued expenses                  911        9,529          717
         Preferred dividends payable                          1,088
                                                          ---------    ---------    ---------
             Net cash flow provided by operating
                activities                                   67,100       50,402       26,200
                                                          ---------    ---------    ---------

Cash flows from investing activities:
Acquisitions of hotel properties                           (175,576)    (337,069)     (81,395)
Improvements and additions to hotel properties              (25,998)     (18,083)     (19,440)
Cash paid for franchise applications                           (215)      (2,144)        (340)
Proceeds from sale of hotel properties                        8,250       43,207
                                                          ---------    ---------    ---------
             Net cash flow used in investing activities    (193,539)    (314,089)    (101,175)
                                                          ---------    ---------    ---------

Cash flows from financing activities:
Gross proceeds from public offering of common stock          20,145      153,388       91,390
Gross proceeds from public offering of preferred stock       68,750
Payment of offering expenses                                 (3,745)      (8,849)      (5,653)
Proceeds from exercise of stock options                         112        1,125
Distributions paid                                          (45,976)     (32,656)     (21,962)
Borrowings under revolving credit facility                  179,475      326,411      102,890
Payments on revolving credit facility                       (89,725)    (256,885)    (100,724)
Borrowings under CMBS credit facility                                     88,000
Payments under CMBS credit facility                          (2,195)      (1,717)
Payments on debt assumed                                       (160)
Proceeds from issuance of common stock                                                  7,087
Proceeds from sale of Units                                                             2,875
Cash paid for loan costs                                        (28)      (5,067)        (926)
Payments on capital lease obligations                            (4)          (2)          (6)
                                                          ---------    ---------    ---------
             Net cash flow provided by financing
                activities                                  126,649      263,748       74,971
                                                          ---------    ---------    ---------

Net increase (decrease) in cash and cash
   equivalents                                                  210           61           (4)

Cash and cash equivalents at beginning of year                  190          129          133
                                                          ---------    ---------    ---------

Cash and cash equivalents at end of year                  $     400    $     190    $     129
                                                          =========    =========    =========

Supplemental disclosure of cash flow information --
   Interest paid                                          $  20,947    $  12,226    $   4,399
                                                          =========    =========    =========
</TABLE>





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

                                       34

<PAGE>



                                EQUITY INNS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     Organization

Equity  Inns,  Inc.  (the  "Company")  is in the  business of  acquiring  equity
interests in hotel  properties.  The Company is a real estate  investment  trust
("REIT") for federal income tax purposes. The Company,  through its wholly owned
subsidiary,  Equity Inns Trust (the  "Trust"),  is the sole  general  partner of
Equity Inns Partnership, L.P. (the "Partnership") and at December 31, 1998 owned
an approximate 95.0% interest in the Partnership.

As of December 31, 1998,  the  Partnership  owned 102 hotel  properties,  with a
total of 12,640 rooms in 36 states.  The  Partnership,  under  operating  leases
providing for the payment of percentage rent (the "Percentage  Leases"),  leased
80 of the current  hotels to affiliates of Patriot  American  Hospitality,  Inc.
(collectively,  the "Patriot Lessee"),  successor by merger to Interstate Hotels
Company  ("Patriot").  All  payments  due  under  these  Percentage  Leases  are
guaranteed by Patriot and by Interstate Hotels, LLC ("Interstate"), successor by
merger to Interstate Hotels  Corporation and an indirect  subsidiary of Patriot.
The  Partnership  leased  19  hotels  to  a  wholly-owned  subsidiary  of  Prime
Hospitality  Corporation  (the "Prime  Lessee").  The Prime  Lessee is required,
under the terms of its master lease agreement, to maintain capitalization of 20%
of the expected annual percentage rents. The Patriot Lessee and the Prime Lessee
are referred to herein  collectively  as the  "Lessees" and  individually,  as a
"Lessee". The Lessees operate and lease hotels owned by the Partnership pursuant
to separate  Percentage  Leases  which  provide for rent  payments  equal to the
greater of (i) a fixed base rent ("Base Rent") or (ii)  percentage rent based on
the revenues of the hotels  ("Percentage  Rent"). The remaining three hotels are
operated  pursuant  to  management  agreements,  two of which are  operated by a
subsidiary of Interstate, and one of which is operated by MeriStar Hotel Company
L.L.C., a wholly owned subsidiary of MeriStar Hotels & Resorts, Inc.

2.     Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements include the accounts of the Company, the
Trust  and  the   Partnership.   All  significant   intercompany   balances  and
transactions have been eliminated.

Investment in Hotel Properties

The hotel  properties are recorded at cost.  Depreciation  is computed using the
straight-line  method over estimated useful lives of the assets which range from
31 to 40 years for buildings and 5 to 7 years for furniture and equipment.

Maintenance and repairs are the  responsibility  of the Lessees;  major renewals
and  improvements  are  capitalized.   Upon  disposition,  both  the  asset  and
accumulated  depreciation accounts are relieved, and the related gain or loss is
credited or charged to the income statement.

The Company  reviews the carrying  value of each hotel  property to determine if
circumstances  exist  indicating  an  impairment  in the  carrying  value of the
investment  in the  hotel  property  or  that  depreciation  periods  should  be
modified. If impairment is indicated, the carrying value of the hotel



                                       35

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



2.     Summary of Significant Accounting Policies, Continued

property is adjusted based on the discounted future cash flows. The Company does
not  believe  that  there  are any  current  facts or  circumstances  indicating
impairment of any of its investment in hotel properties.

Cash and Cash Equivalents

All highly  liquid  investments  with  maturities  of three  months or less when
purchased are considered to be cash equivalents.

Deferred Expenses

Deferred  expenses are recorded at cost and consist of the following at December
31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                  1998                 1997
                                                 ------               ------
                                                        (in thousands)
         <S>                                     <C>                  <C>
         Initial franchise fees                  $3,712               $3,615
         Loan costs                               4,413                4,380
         Other                                      260                  254
                                                 ------               ------
                                                  8,385                8,249
         Accumulated amortization                (2,072)                (973)
                                                 ------               ------

                                                 $6,313               $7,276
                                                 ======               ======
</TABLE>

Amortization of franchise fees is computed using the  straight-line  method over
the remaining lives of the franchise  agreements  which range up to 20 years and
is included in depreciation and amortization expense. Amortization of loan costs
is computed using the straight-line method over the term of the related debt. In
1997, the Company expensed  approximately $2.0 million of unamortized loan costs
relating to debt that was replaced in 1997.

Deposits and Other Assets

Deposits include escrow deposits and other prepayments relating to the potential
acquisitions of hotel properties.

Interest Rate Swap Agreements

The Company  enters into interest  rate swap  agreements to reduce the impact of
changes  in  interest  rates on its  floating  rate  debt.  The  agreements  are
contracts to exchange  floating rate  interest  payments for fixed rate interest
payments  periodically  over the life of the agreements  without the exchange of
the  underlying  notional  amounts.   The  notional  amounts  of  interest  rate
agreements  are used to measure  the  interest to be received or paid and do not
represent  the amount of  exposure  to credit  loss.  The  differential  paid or
received on interest rate  agreements is recognized as an adjustment to interest
expense.


                                       36

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



2.       Summary of Significant Accounting Policies, Continued

Revenue Recognition

Percentage  Lease revenue is  recognized  when earned from the Lessees under the
Percentage Leases from the date of acquisition of each hotel property (Note 5).

Net Income Per Common Share

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128, "Earnings per Share" (SFAS 128), which
changed  the  computation  and  presentation  of  earnings  per share.  SFAS 128
requires the  presentation  of basic and diluted  earnings per share,  replacing
primary and fully diluted earnings per share previously  required.  Earnings per
share for all prior years  presented have been presented in accordance with SFAS
128.

A reconciliation of the numerator and denominator used in the basic earnings per
share  computation to the numerator and denominator used in the diluted earnings
per share  computation is presented below for the years ended December 31, 1998,
1997 and 1996, respectively.
<TABLE>
<CAPTION>

                                                              For the Years Ended December 31,
                        -----------------------------------------------------------------------------------------------------------
                                       1998                                 1997                               1996
                        ----------------------------------- ----------------------------------- -----------------------------------
                          Income       Shares     Per Share    Income       Shares    Per Share   Income       Shares     Per Share
                        (Numerator) (Denominator)  Amount   (Numerator) (Denominator)  Amount   (Numerator) (Denominator)  Amount  
                        ----------- ------------- --------- ----------- ------------- --------- ----------- ------------- ---------
                                                                  (in thousands except per share data)
<S>                     <C>         <C>            <C>       <C>         <C>           <C>      <C>         <C>            <C>
Net income applicable to
  common shareholders-
  basic                    $28,221     36,073      $.78       $23,543       28,773     $.82       $14,473      20,957      $.69
Diliutive effect of
  potential conversion
  of partnership units
  and elimination of
  minority interest          1,492      1,907                     918        1,129                    460         700
Dilutive effect of stock
  options outstanding
  using the treasury
  stock method                             21                                   61                                 24
                           -------     ------      ----       -------       ------     ----       -------      ------      ----

Net income applicable to
  common shareholders-
  diluted                  $29,713     38,001      $.78       $24,461       29,963     $.82       $14,933      21,681      $.69
                           =======    =======      ==== ===   =======       ======     ====       =======      ======      ====
</TABLE>

Distributions

The Company pays regular quarterly cash  distributions to shareholders which are
dependent upon receipt of distributions from the Partnership.

Minority Interest

Minority   interest  in  the  Partnership   represents  the  limited   partners'
proportionate  share of the equity of the  Partnership.  Income is  allocated to
minority interest based on weighted average percentage  ownership throughout the
year.



                                       37

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



2.   Summary of Significant Accounting Policies, Continued

Stock-Based Compensation Plans

The Company applies APB Opinion No. 25 and related interpretations in its
accounting for Stock Based Compensation Plans.  Accordingly, the Company has
adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation."

Income Taxes

The  Company  has  qualified  as a REIT under  Sections  856  through 860 of the
Internal Revenue Code, as amended.  Accordingly, no provision for federal income
taxes has been reflected in the financial statements.

Earnings and profits,  which will determine the taxability of  distributions  to
shareholders,  will  differ from net income  reported  for  financial  reporting
purposes  primarily  due to the  differences  for  federal  tax  purposes in the
estimated useful lives and methods used to compute  depreciation.  Distributions
made to shareholders in 1998 and 1997 are considered to be approximately 26% and
10% return of capital, respectively, for federal income tax purposes.

Concentration of Credit Risk

The Company  maintains  cash  balances  with  financial  institutions  with high
ratings.  The  Company  has not  experienced  any  losses  with  respect to bank
balances in excess of government-provided insurance.

Use of Estimates

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

3.     Investment in Hotel Properties

Hotel properties consist of the following at December 31:
<TABLE>
<CAPTION>
                                                  1998                1997    
                                                --------            --------
                                                       (in thousands)
         <S>                                    <C>                 <C>
         Land                                   $102,897            $ 76,730
         Buildings and improvements              655,300             505,715
         Furniture and equipment                  97,556              72,878
         Construction in progress                  2,854               5,568
                                                --------            --------
                                                 858,607             660,891
         Less accumulated depreciation           (68,475)            (43,819)
                                                --------            --------

                                                $790,132            $617,072
                                                ========            ========
</TABLE>


                                       38

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



3.     Investment in Hotel Properties, Continued

Fifty-nine of the hotel properties are premium limited service hotels,  five are
full service hotels, nineteen are premium extended stay hotels, and nineteen are
all-suite hotels.

During 1998 and 1997, the Company acquired the following types of hotels for the
approximate amounts indicated:
<TABLE>
<CAPTION>
                                             1998                           1997                     
                                 -----------------------------  -----------------------------
                                 No. of Hotels  Purchase Price  No. of Hotels  Purchase Price
                                 -------------  --------------  -------------  --------------
                                                (in thousands)                 (in thousands)
    <S>                           <C>           <C>              <C>           <C>

    Mid-scale Limited Service         2            $ 20,100         34            $198,574
    Upscale Extended Stay             5              68,350          6              61,650
    Upscale All-Suite                 9              96,996         10              86,966
                                     --            --------         --            --------

                                     16            $185,446         50            $347,190
                                     ==            ========         ==            ========
</TABLE>

The above acquisitions were accounted for as purchases,  and the results of such
acquisitions are included in the Company's consolidated statements of operations
from the dates of acquisition.

During 1998,  the  Partnership  sold three  hotels  (Hampton  Inn,  Little Rock,
Arkansas;   Hampton  Inn,  Shelby,  North  Carolina;   Hampton  Inn,  Cleveland,
Tennessee) to third parties for an aggregate sales price of  approximately  $8.0
million.  The Company realized a loss of  approximately  $705,000 as a result of
these sales. The sales price was paid in cash.

4.  Debt

Debt is comprised of the following at December 31:
<TABLE>
<CAPTION>
                                                   1998                 1997    
                                                 --------             --------
                                                         (in thousands)
         <S>                                     <C>                  <C>
         Revolving credit facilities             $236,600             $146,850
         Commercial Mortgage Bonds                 84,088               86,283
         Mortgage notes payable                    10,637
         Other                                         69                   73
                                                 --------             --------

                                                 $331,394             $233,206
                                                 ========             ========
</TABLE>



                                       39

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



4.       Debt, Continued

In February 1997, the Company, through a subsidiary, issued $88 million of rated
Commercial  Mortgage Bonds (the "Bonds") in a private  placement  transaction as
follows:
<TABLE>
<CAPTION>
                       Initial
                      Principal          Interest               Stated
   Class               Amount              Rate                Maturity                 Rating
   -----            -------------        --------           -----------------
   <S>              <C>                  <C>                <C>
     A              $27.4 million         6.825%            November 20, 2006                   AA
     B              $50.6 million         7.370%            December 20, 2015                   A
     C              $10.0 million         7.580%            February 20, 2017                   BBB
</TABLE>

The initial  combined  interest  rate for all three issues of Bonds was fixed at
7.22%.  The  combined  interest  rate on the  outstanding  balances on all three
issues of Bonds at December  31,  1998 is 7.24%.  Principal  payments  are to be
applied to each class of Bonds in order of their  respective  maturities with no
principal  payment  on any Bond  until all Bonds in a bond class with an earlier
stated maturity have been paid in full. The Company expects to repay these Bonds
in full within 10 years.  Twenty-three hotel properties with a carrying value of
approximately  $129.9 million at December 31, 1998 and their  respective  leases
collateralize the Bonds.

Aggregate annual principal payments for the next five years at December 31, 1998
for the Bonds are as follows (in thousands):

<TABLE>
<CAPTION>
                     Year                   Amount
                     ----                   ------
                     <S>                    <C>
                     1999                   2,351
                     2000                   2,518
                     2001                   2,698
                     2002                   2,890
                     2003                   3,096
</TABLE>

The Company's  $250 million  unsecured  line of credit (the  "Unsecured  Line of
Credit") bears interest at a variable rate of LIBOR plus 1.4%, 1.5%,  1.625%, or
1.75% as determined by the Company's percentage of total debt to the total value
of the  Company's  investment  in  hotel  properties,  as  defined  in the  loan
agreement  (the  "Percentage").  The Percentage is reviewed  quarterly,  and the
interest rate is adjusted as necessary.  At December 31, 1998, the interest rate
on the  Unsecured  Line of Credit was LIBOR  (5.28% at December  31,  1998) plus
1.75%. The Unsecured Line of Credit has a three-year  term,  expiring in October
2000, plus a one-year renewal option.

In December 1997, the Company  entered into an interest rate swap agreement with
a financial  institution.  The agreement  effectively fixes the interest rate on
floating  rate  debt at a rate of  5.90%  plus  the  Percentage  for a  notional
principal amount of $75 million. The swap agreement will expire in October 2000.

The Company's $10,000,000 line of credit with the National Bank of Commerce (the
"NBC Credit Line") bears interest at the bank's prime rate (7.75% at December
31, 1998) and is unsecured.  The NBC Credit Line has a three-year term, expiring
in September 2000.



                                       40

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



4.       Debt, Continued

In connection with the purchase of a Hampton Inn hotel in San Antonio,  Texas in
April 1998,  the  Partnership  assumed a mortgage  note payable with a principal
balance of approximately $6.5 million. The note bears interest at 10% and is due
in monthly  principal and interest  installments of approximately  $66,000.  The
note is due September 1, 2015. The hotel securing this note has a carrying value
of $12.5 million at December 31, 1998.

In  connection  with the  purchase of a Residence  Inn hotel in Boise,  Idaho in
April 1998,  the  Partnership  assumed a mortgage  note payable with a principal
balance of  approximately  $4.3 million.  The note bears  interest at a variable
rate which,  as of  December  31,  1998,  was  approximately  8.6% and is due in
monthly principal and interest  installments of approximately  $39,000. The note
is due December 1, 2016 and contains a prepayment  penalty.  The hotel  securing
this note has a carrying  value of  approximately  $7.6  million at December 31,
1998.

Aggregate  principal  payments at December  31, 1998 for the next five years for
the mortgage notes payable described above are as follows (in thousands):
<TABLE>
<CAPTION>
                        Year               Amount
                        ----               ------
                        <S>                <C>
                        1999                $260
                        2000                 286
                        2001                 314
                        2002                 345
                        2003                 379
</TABLE>

The weighted  average  interest  rate on the  Company's  outstanding  borrowings
during  1998 and 1997 was 7.46% and 7.53%,  respectively.  Fees of .30% and .20%
are paid quarterly on the unused portion of the Unsecured Line of Credit and the
NBC Credit Line,  respectively.  The carrying amount of the Company's borrowings
on its revolving credit facilities  approximates fair value due to the Company's
ability to obtain such borrowings at comparable interest rates.

Prior to its 1998 annual  shareholders  meeting,  the Company's  Charter limited
aggregate  indebtedness to 45% of the Company's  investment in hotel properties,
at  cost,  after  giving  effect  to the  Company's  use of  proceeds  from  any
indebtedness.  This limitation was deleted by shareholder  vote on May 14, 1998.
The Company's  Board of Directors has  subsequently  adopted a policy  currently
imposing the same limitations previously imposed by the Charter.

The Unsecured Line of Credit agreement  requires the Company to maintain certain
debt coverage ratios and certain levels of cash flow, with which the Company was
in  compliance  at December 31, 1998.  Additionally,  the  agreement  requires a
quarterly  deposit  into a separate  room  renovation  account for the amount by
which 4% of room revenues at the Company's hotels exceeds the amount expended by
the Company  during the quarter  for  replacement  of  furniture,  fixtures  and
equipment and capital  improvements for the hotels. For the years ended December
31, 1998 and 1997, actual expenditures exceeded the amounts required.



                                       41

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



5.     Commitments and Related Party Transactions

One  hundred of the hotels  are  operated  under  franchise  agreements  and are
licensed as Hampton Inn hotels  (55),  AmeriSuites  hotels (19),  Residence  Inn
hotels (12),  Homewood  Suites hotels (7),  Holiday Inn hotels (3),  Comfort Inn
hotels (3), and Hampton Inn & Suites  hotels (1). Two of the hotels are operated
as independent  hotels.  The  franchisors  approve the transfer of the franchise
licenses to the Lessee when the Partnership  acquires each hotel  property.  The
franchise  agreements require the payment of fees based on a percentage of hotel
room revenue which are paid by the Lessee.

The Lessees have future lease  commitments  to the Company under the  Percentage
Leases for various terms  extending  through 2013.  Minimum future rental income
(Base Rents) under these non-cancelable operating leases is as follows:
<TABLE>
<CAPTION>
                     Year                               Amount
                     ----                               ------
                                                    (in thousands)
                     <S>                               <C>
                     1999                              $ 70,282
                     2000                                69,741
                     2001                                69,741
                     2002                                69,741
                     2003                                69,741
                     2004 and thereafter                502,020
                                                       --------

                                                       $851,266
                                                       ========
</TABLE>

The Company earned Base Rents of $65.9 million,  $38.3 million and $20.1 million
and Percentage Rents in excess of Base Rents of $40.8 million, $32.2 million and
$18.2 million,  respectively,  for the years ended  December 31, 1998,  1997 and
1996.  The  Percentage  Lease  revenue  is based on a  percentage  of gross room
revenue,  and food and  beverage  revenue,  if  applicable,  of the hotels.  The
Percentage Leases range in terms from ten to fifteen years.  Rental rates on all
fifteen-year  leases are required to be re-negotiated  after ten years. Both the
Base Rent and the threshold room revenue amount in each  Percentage Rent formula
are adjusted annually for changes in the U.S. Consumer Price Index ("CPI").  The
adjustment is calculated on January 1 of each year,  provided the lease has been
in effect for a complete  calendar year and is based upon the average  change in
the CPI  during the prior 24 months.  The  adjustment  in any lease year may not
exceed 7%. Effective  January 1, 1999,  eighty-six of the Percentage Leases were
adjusted,  resulting in a 1.63%  increase in both Base Rent and  threshold  room
revenue.

At December  31,  1998,  the Lessees  owed the Company  $6,288,000  representing
fourth quarter  Percentage  Rent. All of the amounts due were collected prior to
January 31, 1999.

Under the Percentage  Leases,  the  Partnership is obligated to pay the costs of
real estate and personal  property taxes and to maintain  underground  utilities
and  structural  elements of the Hotels.  In  addition,  the  Percentage  Leases
obligate the  Partnership to fund the cost of periodic  repair,  replacement and
refurbishment of furniture, fixtures and equipment in the Hotels.



                                       42

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



5.     Commitments and Related Party Transactions, Continued

The  Company  also  may be  required  by  franchisors  to fund  certain  capital
improvements  to hotel  properties,  which are funded from  borrowings,  working
capital, or the room renovation account (Note 4). Capital  improvements of $26.0
million, $18.1 million, and $19.4 million in 1998, 1997, and 1996, respectively,
were made to the hotel  properties,  including those required by the franchisors
at the  acquisition  of the  property.  In 1999,  the  Company  expects  to fund
approximately $19 million of capital improvements for the hotel properties owned
at December 31, 1998, of which $5.7 million is required by the franchisors.

The Company has  commitments  under  operating land leases through  December 31,
2062, at nine hotel properties for payments as follows:  1999 -- $736,429;  2000
-- $766,138; 2001 -- $777,861; 2002 -- $804,288; 2003 -- $806,788; thereafter --
$11.9 million.

The Company has commitments under a lease to an affiliate of Phillip H. McNeill,
Sr., the Company's  Chairman of the Board, for its office space through December
2008 at monthly payments of $13,238.

In February  1998,  the Company  advanced loans to its officers in the amount of
$330,508 for taxes  withheld from 1997 bonuses taken in Company stock in lieu of
cash. In February 1999, $100,764 of these loans were repaid. The remaining loans
were  extended  for one year.  In  February  1999,  the  Company  also  advanced
additional  loans to its officers in the amount of $308,803  for taxes  withheld
from 1998 bonuses taken in Company  stock in lieu of cash.  All loans are due in
January 2000 and bear no interest.

In 1998, the Company agreed to purchase,  upon completion,  a 252-room  Homewood
Suites hotel in Orlando,  Florida for $22.8 million,  a 235-room Homewood Suites
hotel in Downtown Chicago for $30.4 million and a 300-room Hawthorn Suites hotel
in  Chicago-Rosemont  for  $33.0  million.  These  hotels  are  currently  under
construction with completion dates expected in May 1999, June 1999 and September
1999,  respectively.  In  connection  with these  acquisitions,  the Company has
issued letters of credit in the amount of $10.6 million under the Unsecured Line
of Credit.  The Company also purchased land in Salt Lake City, Utah at a cost of
$2.4 million, to be held for possible construction of an Embassy Suites hotel at
a later date.  Total costs incurred  relating to these  developments at December
31, 1998 were  approximately  $2.9 million,  of which $78,000 represents related
interest costs.

6.     Supplemental Disclosure of Noncash Investing and Financing Activities

In 1998,  the Company  issued 69,123 shares of common stock valued at $15.38 per
share to its officers in lieu of cash to satisfy bonus  compensation  accrued at
December 31, 1997;  49,074  Units were  exchanged  for shares of common stock by
certain limited partners; 123,457 Units valued at $1.9 million and an assumption
of a $6.5 million note payable were issued as part of the total acquisition cost
of a hotel  property;  a $4.3  million  note  payable was assumed as part of the
acquisition cost of a hotel property;  141,000 shares of restricted common stock
valued from $13.50 to $13.56 per share were  issued to the  Company's  officers;
20,000 shares of  restricted  common stock valued from $9.63 to $12.31 per share
were issued to the Company's independent directors; 4,042 shares of common stock
at prices ranging from $9.63 to $15.50 were issued to  independent  directors of
the Company in lieu of cash as  directors  compensation;  9,000 shares of common
stock were issued to an officer upon  exercise of options;  and $11.9 million in
distributions to common  shareholders and limited partners had been declared but
not paid at December 31, 1998.


                                       43

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



6.     Supplemental Disclosure of Noncash Investing and Financing Activities,
       Continued

In 1997,  the Company  issued  90,000  shares of common stock to an officer upon
exercise of options; 1,021,062 Units valued at $14.7 million were issued as part
of the total  acquisition  cost of six hotel  properties;  and $10.6  million in
distributions to common  shareholders and limited partners had been declared but
not paid at December 31, 1997.

In 1996,  the Company  issued 25,000 shares of common stock valued at $11.75 per
share to its officers in lieu of cash to satisfy bonus  compensation  accrued at
December 31, 1995;  182,815  Units were  exchanged for shares of common stock by
certain limited partners;  96,303 Units valued at $1.1 million and an assumption
of a $300,000 note payable were issued as part of the total  acquisition cost of
a hotel property;  25,000 shares of restricted common stock valued at $12.25 per
share were issued to the Company's officers; $297,000 of the net proceeds of the
Company's public offering was allocated to minority  interest with the remainder
of the net proceeds increasing common stock and additional paid-in capital;  and
$6.9 million in  distributions  to common  shareholders and limited partners had
been declared but not paid at December 31, 1996.

7.     Capital Stock

The Board of Directors is  authorized to provide for the issuance of ten million
shares of  preferred  stock in one or more series,  to  establish  the number of
shares in each  series  and to fix the  designation,  powers,  preferences,  and
rights of each such series and the  qualifications,  limitations  or restriction
thereof.  On June 25, 1998,  the Company issued  2,750,000  shares of its 9 1/2%
Series A  Cumulative  Preferred  Stock,  $.01 par  value  ("Series  A  Preferred
Stock").  The offering  price was $25 per share,  resulting in gross proceeds of
$68.8  million.   The  Company  received   approximately   $66.3  million  after
underwriters' discounts and offering expenses.

The  outstanding  Units in the  Partnership  are redeemable at the option of the
holder  for a like  number of shares of common  stock,  or at the  option of the
Company,  the cash equivalent  thereof.  Total Units outstanding at December 31,
1998 and 1997 were 1,916,903 and 1,842,520, respectively. The total market value
of these Units at December 31, 1998,  based on the last reported  sales price of
the common stock on the NYSE of $9.63, was approximately $18.5 million.

8.     Stock Based Compensation Plans

The Company is authorized, under the 1994 Stock Incentive Plan (the "1994 Plan")
and the  Company's  Non-Employee  Directors  Stock  Option Plan (the  "Directors
Plan"),  collectively  ("the  Plans"),  to issue a total of 2,350,000  shares of
common stock to directors, officers and key employees of the Company in the form
of stock options,  restricted stock, or performance  stock. Under the 1994 Plan,
the  total  shares  available  for  grant is  2,300,000,  of which not more than
350,000 shares may be grants of restricted stock or performance stock. Under the
Directors Plan, the total shares  available for grant is 50,000,  which may only
be awarded in the form of stock  options.  An amendment to the Directors Plan to
authorize  grants  of  restricted  stock  will  be  submitted  to the  Company's
shareholders at the annual shareholders meeting in May 1999.



                                       44

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



8.     Stock Based Compensation Plans, Continued

Stock Options

All options have 8 to 10 year  contractual  terms and vest ratably over 5 years,
with the  exception of 100,000  stock  options  granted in 1998, of which 20,000
vested immediately with the remainder to vest ratably over 4 years. A summary of
the  Company's  stock  options as of December  31,  1998,  1997 and 1996 and the
changes during the years are presented below:
<TABLE>
<CAPTION>
                                       1998                     1997                     1996                  
                              -----------------------  -----------------------  -----------------------

                                             Weighted                 Weighted                 Weighted
                               # of shares   average    # of shares   average    # of shares   average
                              of underlying  exercise  of underlying  exercise  of underlying  exercise
                                 options      price      options       price       options      price   
                              -------------  --------  -------------  --------  -------------  --------   
<S>                           <C>            <C>       <C>            <C>       <C>            <C>

Outstanding at beginning
  of year                       519,000       $12.49       606,000     $12.49        603,000    $12.49
Granted                         118,000       $13.40         3,000     $13.50          3,000    $11.75
Exercised                        (9,000)      $12.50       (90,000)    $12.50
Forfeited                       (60,000)      $12.50                                                          
                                -------       ------       -------     ------        -------    ------

Outstanding at end of year      568,000       $12.68       519,000     $12.49        606,000    $12.49

Exercisable at end of year      383,000       $12.56       279,000     $12.49        246,000    $12.49
</TABLE>

<TABLE>
<CAPTION>
                                     Options Outstanding                 Options Exercisable
                              ----------------------------------  ----------------------------------
                                             Weighted   Weighted                 Weighted   Weighted
                                              Average    Average                  Average   Average
                              # Outstanding  Remaining  Exercise  # Exercisable  Remaining  Exercise
Range of Exercise Prices       at 12/31/98     Life      Price     at 12/31/98     Life      Price   
------------------------      -------------  ---------  --------  -------------  ---------  --------
<S>                           <C>            <C>        <C>       <C>            <C>         <C>
$11.25 -- $13.69                 568,000        4.46     $12.68      383,000        3.84     $12.56
</TABLE>



Restricted Stock

In 1998, the Company issued 20,000 shares of restricted stock to the independent
directors  of  the  Company  subject  to the  approval  of an  amendment  to the
Directors'  Plan  by the  Company's  shareholders  at the  annual  shareholder's
meeting in May 1999.  Unvested  shares are subject to  forfeiture if the grantee
does not remain an officer or director of the Company for the specified  vesting
period.  A summary of the status of the  Company's  restricted  stock  grants to
officers and  directors  as of December 31, 1998,  1997 and 1996 and the changes
during the years are presented below:


                                       45

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



8.     Stock Based Compensation Plans, Continued
<TABLE>
<CAPTION>
                                           1998                      1997                      1996                   
                                  ------------------------  ------------------------  ------------------------
                                                Weighted                  Weighted                  Weighted
                                                 Average                   Average                   Average
                                               Fair Market               Fair Market               Fair Market
                                                Value at                  Value at                  Value at
                                  # of Shares     Grant     # of Shares     Grant     # of Shares     Grant     
                                  -----------  -----------  -----------  -----------  -----------  -----------
<S>                               <C>           <C>         <C>          <C>          <C>          <C>

Outstanding at beginning of year    40,000        $11.41      40,000        $11.41      15,000        $10.00
Granted:
    With 5 year pro rata vesting    99,000        $13.12                                25,000        $12.25
    With 4 year pro rata vesting    16,000        $13.56
    With 3 year pro rata vesting    42,000        $13.50
    Vest 100% at grant date          4,000        $13.56                                                            
                                   -------                    ------        ------      ------        ------

Total granted                      161,000        $13.27                                25,000        $12.25

Forfeited                           (6,000)       $12.25                                                            
                                   -------        ------      -----         ------      ------        ------

Outstanding at end of year         195,000        $12.92      40,000        $11.41      40,000        $11.41

Vested at end of year               29,000        $11.27      17,000        $10.67       9,000        $10.00
</TABLE>

In January 1999,  124,800 shares of restricted  stock were issued to officers of
the Company at a price of $9.75 per share, to vest ratably over 3 to 5 years.


9.     Pro Forma Financial Information (Unaudited)

The following unaudited pro forma consolidated  statements of operations for the
year ended December 31, 1998 and 1997 are presented as if the acquisition of all
102 hotels owned at December 31, 1998, and the consummation of the offerings and
the  application of the net proceeds  therefrom had occurred on January 1, 1997,
and all of the hotels had been leased to the Lessees  pursuant to the Percentage
Leases. Additionally, the pro forma consolidated statement of operations for the
year ended  December  31, 1998  includes  approximately  $2.2  million of merger
expenses relating to the terminated merger agreement between the Company and RFS
Hotel  Investors  and  approximately  $705,000  in losses from the sale of hotel
properties,  both of which collectively  reduced pro forma net income applicable
to  common  shareholders  by  $.07.  The pro  forma  consolidated  statement  of
operations for the year ended December 31, 1997 includes  approximately $666,000
in gains from the sale of hotel  properties  and does not include  approximately
$2.0  million  for the  extraordinary  charge  from the  write-off  of  deferred
financing  fees,  both of which  collectively  increased  pro forma  net  income
applicable to common shareholders by $.07.


                                       46

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



9.     Pro Forma Financial Information (Unaudited), Continued

The pro forma  consolidated  statements  of operations do not purport to present
what actual results of operations  would have been if the  acquisitions  and the
consummation  of the offerings  had occurred on such date or to project  results
for any future period.
<TABLE>
<CAPTION>
                                                   For the Years Ended
                                                       December 31,
                                                    1998         1997    
                                                  --------     --------    
                                          (in thousands, except per share data)
<S>                                               <C>           <C>
Revenue:
Percentage lease revenues                         $116,471     $118,276
Gain (loss) on sale of hotel properties               (705)         666
Other income                                           774          617
                                                  --------     --------
    Total Revenue                                  116,540      119,559

Expenses:
Real estate and personal property taxes             11,359       11,381
Depreciation and amortization                       35,691       33,671
Compensation                                         2,564        2,099
Interest                                            24,960       26,310
Amortization of loan costs                             834        1,040
General and administration                           2,086        2,086
Amortization of unearned directors' and
    officers' compensation                             331           92
Rental expense                                         969          814
Merger expense                                       2,197
                                                  --------     --------
    Total Expenses                                  80,991       77,493
                                                  --------     --------

Income before minority interest                     35,549       42,066

Minority interest                                    1,457        1,784
                                                  --------     --------

Net income                                          34,092       40,282

Preferred stock dividends                            6,531        6,531
                                                  --------     --------

Net income applicable to common shareholders      $ 27,561     $ 33,751
                                                  ========     ========

Net income per common share, basic and diluted    $    .76     $    .93
                                                  ========     ========

Weighted average number of common shares
    outstanding - basic                             36,439       36,439
                                                  ========     ========

Weighted average number of common shares
    and units outstanding - diluted                 38,377       38,415
                                                  ========     ========
</TABLE>


                                       47

<PAGE>


                                EQUITY INNS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



10.    Significant Lessee Information

As discussed in Note 1, the Percentage  Leases relating to hotels accounting for
more  than  20% of the  Company's  assets  are  guaranteed  by  Patriot  and its
wholly-owned  subsidiary,  Interstate.  At December  31,  1998,  Patriot  owned,
managed,  leased or  performed  related  services  for a portfolio of 474 hotels
totaling approximately 101,000 rooms.

Summarized  unaudited  financial  information  for  Patriot  is as  follows  (in
thousands):
<TABLE>
<CAPTION>

                 Balance Sheet Data - As of September 30, 1998
                     (December 31, 1998 data not available)
        <S>                                             <C>
        Investment in hotel real estate                 $5,661,769
        Cash and short-term investments                    147,397
        Total assets                                     7,499,989
        Total debt                                       3,803,808
        Shareholders' equity                             2,680,458
<CAPTION>
       Income Statement Data - For the year ended December 31, 1998
        <S>                                             <C>
        Total revenue                                   $2,056,341
        Net loss                                          (158,223)
</TABLE>




                                       48

<PAGE>



                                EQUITY INNS, INC.
            SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
                             AS OF DECEMBER 31, 1998
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                                                                                    
                                                                Cost Capitalized Subsequent       Gross Amount at Which             
                                        Initial Cost                  to Acquisition            Carried at Close of Period          
                               ------------------------------- ----------------------------- --------------------------------
                                                     Furniture         Buildings   Furniture           Buildings   Furniture        
                                                        and               and        and                  and         and           
Description of Property          Land   Improvements Fixtures   Land  Improvements Fixtures    Land   Improvements Fixtures         
-----------------------        -------  ------------ --------- ------ ------------ --------- -------- ------------ ----------       
<S>                            <C>      <C>          <C>       <C>    <C>          <C>       <C>      <C>          <C>
Hampton Inn- Albany, New York  $   953   $ 9,897      $   802            $  262     $   432  $   953    $ 10,159    $ 1,234
Hampton Inn-Cleveland, Ohio        820     4,428          217               338         446      820       4,766        663
Hampton Inn-College Station,
  Texas                            656     4,655          671               221         524      656       4,876      1,195
Hampton Inn-Columbus, Georgia      603     2,591        1,073               486         (98)     603       3,077        975
Hampton Inn-Ft. Worth, Texas       385     1,754          896               353         385      385       2,107      1,281
Hampton Inn-Louisville, Kentucky   395     2,406          919               237         177      395       2,643      1,096
Hampton Inn-Sarasota, Florida      553     3,389          753               350         209      553       3,739        962
Hampton Inn-Ann Arbor, Michigan    565     4,499          506               428         603      565       4,927      1,109
Comfort Inn-Enterprise, Alabama    544     2,398          112               139         394      544       2,537        506
Hampton Inn-Gurnee, Illinois       630     3,397          277               527         981      630       3,924      1,258
Hampton Inn-Traverse City,
  Michigan                         526     6,153          335               188         613      526       6,341        948
Hampton Inn-Arlington, Texas       425     6,387          582               337         482      425       6,724      1,064
Residence Inn-Eagan, Minnesota     540     8,130          652               652         844      540       8,782      1,496
Residence Inn-Tinton Falls,
  New Jersey                     7,711       419          484               297       8,195      716       8,911      1,324
Hampton Inn-Milford, Connecticut   759     5,689          467               267         656      759       5,956      1,123
Hampton Inn-Meriden, Connecticut   648     3,226          435               191         423      648       3,417        858
Hampton Inn-Beckley, West
  Virginia                       1,876     5,557          402               227         237    1,876       5,784        639
Holiday Inn-Bluefield, West
 Virginia                        1,661     6,141          342               725         825    1,661       6,866      1,167
Hampton Inn-Gastonia, North
  Carolina                       1,835     4,741          358               172         444    1,835       4,913        802
Hampton Inn-Morgantown, West
  Virginia                       1,573     4,311          324       4       139         410    1,577       4,450        734
Holiday Inn-Oak Hill, West
  Virginia                         269     3,727           85             1,271         830      269       4,998        915
Holiday Inn Express-Wilkesboro,
  North Carolina                   269     2,778          177               344         412      269       3,122        589
Hampton Inn-Naperville, Illinois   678     6,455          396               366         794      678       6,821      1,190
Hampton Inn-State College,
  Pennsylvania                     718     7,310          525               223         309      718       7,533        834
Comfort Inn-Rutland, Vermont       359     3,683          354               311         289      359       3,994        643
Hampton Inn-Scranton,
  Pennsylvania                     403     7,017          720                99         169      403       7,116        889
Residence Inn-Omaha, Nebraska      953     2,650          162       6       869         394      959       3,519        556
Hampton Inn-Fayetteville, North
  Carolina                         403     5,043          148      18       531         756      421       5,574        904
Hampton Inn-Indianapolis,
  Indiana                        1,207     6,513          126               418       1,036    1,207       6,931      1,162
Hampton Inn-Jacksonville
  Florida                          403     4,793          126               332       1,176      403       5,125      1,302
Holiday Inn-Mt. Pleasant,
  South Carolina                 1,205     7,874          247               484         697    1,205       8,358        944
Comfort Inn-Jacksonville Beach,
  Florida                          849     7,307          371       2     1,739       1,096      851       9,046      1,467
Hampton Inn-Austin, Texa           500     6,659          375       6       310         609      506       6,969        984
Hampton Inn-Garland, Texas         375     4,959          450       3       195         519      378       5,154        969
Hampton Inn-Knoxville, Tennessee   617     3,871          232               264         507      617       4,135        739
Hampton Inn-Glen Burnie,
  Maryland                                 5,075          322               341         477                5,416        799
Hampton Inn-Detroit, Michigan    1,207     5,785          526               265         299    1,207       6,050        825
Homewood Suites-Hartford,
  Connecticut                    2,866     7,660          915               295         373    2,866       7,955      1,288
Residence Inn-Madison,
  Wisconsin                        700     2,879          356               206         363      700       3,085        719
Holiday Inn-Winston-Salem,
  North Carolina                 1,350     3,124          639               598         420    1,350       3,722      1,059
Hampton Inn-Scottsdale, Arizona  2,227     6,566          723               206          17    2,227       6,772        740
Hampton Inn-Chattanooga,
  Tennessee                      1,475     6,824          752               331         317    1,475       7,155      1,069
Homewood Suites-San Antonio,
  Texas                            907     6,661        1,029                54          24      907       6,715      1,053
Residence Inn-Burlington, Vermont  679     6,677          342               607         438      679       7,284        780
Homewood Suites-Phoenix, Arizona           7,086          902             1,633                            8,719        902
Residence Inn-Colorado Springs,
  Colorado                       1,350     7,638          740               312         385    1,350       7,950      1,125
Residence Inn-Oklahoma City,
  Oklahoma                       1,450     8,921          850               354         388    1,450       9,275      1,238
Residence Inn-Tucson, Arizona      832     7,078          705                72          65      832       7,150        770
Hampton Inn-Savannah, Georgia      705     4,186          334               197         619      705       4,383        953
Hampton Inn-Norfolk, Virginia              5,092          520               221         492                5,313      1,012
Hampton Inn-Pickwick, Tennessee    370     1,484          263                82          89      370       1,566        352
Hampton Inn-Southaven,
  Mississippi                      698     3,138          522                90          79      698       3,228        601
Hampton Inn-Overland Park,
  Kansas                           906     5,931          330               395         453      906       6,326        783
Hampton Inn-Addison, Texas       2,981     6,336          810               354         295    2,981       6,690      1,105
Hampton Inn-Atlanta-Northlake,
  Georgia                                  6,905          600               209         570                7,114      1,170
Hampton Inn-Birmingham (Mountain
  Brook), Alabama                          7,988          687               655         566                8,643      1,253
Hampton Inn-Birmingham
  (Vestavia), Alabama            1,057     5,162          541               315         605    1,057       5,477      1,146
Hampton Inn-Chapel Hill, North
  Carolina                       1,834     6,504          725               398         664    1,834       6,902      1,389
Hampton Inn-Charleston, South
  Carolina                         712     5,219          516               272         227      712       5,491        743
<CAPTION>

                                              Accumulated      Net Book
                                              Depreciation       Value                      Life Upon
                                              Buildings and  Buildings and                    Which
                                              Improvements;  Improvements;                 Depreciation
                                               Furniture &    Furniture &      Date of     In Statement
Description of Property              Total      Fixtures        Fixtures     Construction  Is Computed
-----------------------             -------   -------------  -------------   ------------  ------------
<S>                                 <C>       <C>            <C>             <C>            <C>

Hampton Inn- Albany, New York       $12,346       $ 2,252         $10,094        1986      5-40 Yrs.
Hampton Inn-Cleveland, Ohio           6,249         1,098           5,151        1987      5-40 Yrs.
Hampton Inn-College Station,
  Texas                               6,727         1,295           5,432        1986      5-40 Yrs.
Hampton Inn-Columbus, Georgia         4,655         1,310           3,345        1986      5-40 Yrs.
Hampton Inn-Ft. Worth, Texas          3,773           865           2,908        1987      5-40 Yrs.
Hampton Inn-Louisville, Kentucky      4,134         1,593           2,541        1986      5-40 Yrs.
Hampton Inn-Sarasota, Florida         5,254         1,141           4,113        1987      5-40 Yrs.
Hampton Inn-Ann Arbor, Michigan       6,601         1,251           5,350        1986      5-31 Yrs.
Comfort Inn-Enterprise, Alabama       3,587           568           3,019        1987      5-31 Yrs.
Hampton Inn-Gurnee, Illinois          5,812         1,043           4,769        1988      5-31 Yrs.
Hampton Inn-Traverse City,
  Michigan                            7,815         1,513           6,302        1987       5-31 Yrs.
Hampton Inn-Arlington, Texas          8,213         1,490           6,723        1985       7-31 Yrs.
Residence Inn-Eagan, Minnesota       10,818         1,742           9,076        1988       7-31 Yrs.
Residence Inn-Tinton Falls,
  New Jersey                          8,911         1,324           7,587        1988       7-31 Yrs.
Hampton Inn-Milford, Connecticut      7,838         1,329           6,509        1986       7-31 Yrs.
Hampton Inn-Meriden, Connecticut      4,923           839           4,084        1988       7-31 Yrs.
Hampton Inn-Beckley, West
  Virginia                            8,298         1,035           7,263        1992       7-31 Yrs.
Holiday Inn-Bluefield, West
 Virginia                             9,694         1,271           8,423        1980       7-31 Yrs.
Hampton Inn-Gastonia, North
  Carolina                            7,550           975           6,575        1989       7-31 Yrs.
Hampton Inn-Morgantown, West
  Virginia                            6,761           859           5,902        1991       7-31 Yrs.
Holiday Inn-Oak Hill, West
  Virginia                            6,182           902           5,280        1983       7-31 Yrs.
Holiday Inn Express-Wilkesboro,
  North Carolina                      3,980           639           3,341        1985       7-31 Yrs.
Hampton Inn-Naperville, Illinois      8,689         1,298           7,391        1987       7-31 Yrs.
Hampton Inn-State College,
  Pennsylvania                        9,085         1,280           7,805        1987       7-31 Yrs.
Comfort Inn-Rutland, Vermont          4,996           720           4,276        1985       7-31 Yrs.
Hampton Inn-Scranton,
  Pennsylvania                        8,408         1,118           7,290        1994       7-31 Yrs.
Residence Inn-Omaha, Nebraska         5,034           466           4,568        1985       7-31 Yrs.
Hampton Inn-Fayetteville, North
  Carolina                            6,899           921           5,978        1986       7-31 Yrs.
Hampton Inn-Indianapolis,
  Indiana                             9,300         1,150           8,150        1987       7-31 Yrs.
Hampton Inn-Jacksonville
  Florida                             6,830           919           5,911        1986       7-31 Yrs.
Holiday Inn-Mt. Pleasant,
  South Carolina                     10,507         1,213           9,294        1988       7-31 Yrs.
Comfort Inn-Jacksonville Beach,
  Florida                            11,364         1,155          10,209        1990       7-31 Yrs.
Hampton Inn-Austin, Texas             8,459         1,009           7,450        1987       7-31 Yrs.
Hampton Inn-Garland, Texas            6,501           850           5,651        1986       7-31 Yrs.
Hampton Inn-Knoxville, Tennessee      5,492           621           4,871        1988       7-31 Yrs.
Hampton Inn-Glen Burnie,
  Maryland                            6,215           707           5,508        1989       7-31 Yrs.
Hampton Inn-Detroit, Michigan         8,082           718           7,364        1989       7-31 Yrs.
Homewood Suites-Hartford,
  Connecticut                        12,109         1,023          11,087        1990       7-31 Yrs.
Residence Inn-Madison,
  Wisconsin                           4,504           420           4,084        1988       7-31 Yrs.
Holiday Inn-Winston-Salem,
  North Carolina                      6,131           520           5,611        1969       7-31 Yrs.
Hampton Inn-Scottsdale, Arizona       9,739           785           8,954        1996       7-31 Yrs.
Hampton Inn-Chattanooga,
  Tennessee                           9,699           896           8,803        1988       7-31 Yrs.
Homewood Suites-San Antonio,
  Texas                               8,675           823           7,852        1996       7-31 Yrs.
Residence Inn-Burlington, Vermont     8,743           679           8,064        1988       7-31 Yrs.
Homewood Suites-Phoenix, Arizona      9,621           886           8,735        1996       7-31 Yrs.
Residence Inn-Colorado Springs,
  Colorado                           10,425           750           9,675        1984       7-31 Yrs.
Residence Inn-Oklahoma City,
  Oklahoma                           11,963           858          11,105        1982       7-31 Yrs.
Residence Inn-Tucson, Arizona         8,752           667           8,085        1985       7-31 Yrs.
Hampton Inn-Savannah, Georgia         6,041           454           5,587        1968       7-31 Yrs.
Hampton Inn-Norfolk, Virginia         6,325           527           5,798        1990       7-31 Yrs.
Hampton Inn-Pickwick, Tennessee       2,288           167           2,121        1994       7-31 Yrs.
Hampton Inn-Southaven,
  Mississippi                         4,527           334           4,193        1995       7-31 Yrs.
Hampton Inn-Overland Park,
  Kansas                              8,015           467           7,548        1991       7-31 Yrs.
Hampton Inn-Addison, Texas           10,776           542          10,233        1985       7-31 yrs.
Hampton Inn-Atlanta-Northlake,
  Georgia                             8,284           517           7,767        1988       7-31 Yrs.
Hampton Inn-Birmingham (Mountain
  Brook), Alabama                     9,896           569           9,327        1987       7-31 Yrs.
Hampton Inn-Birmingham
  (Vestavia), Alabama                 7,680           428           7,252        1986       7-31 Yrs.
Hampton Inn-Chapel Hill, North
  Carolina                           10,125           562           9,563        1986       7-31 Yrs.
Hampton Inn-Charleston, South
  Carolina                            6,946           405           6,541        1985       7-31 Yrs.
</TABLE>


                                       49

<PAGE>



                                EQUITY INNS, INC.
      SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
                             AS OF DECEMBER 31, 1998
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                                               
                                                                Cost Capitalized Subsequent       Gross Amount at Which
                                        Initial Cost                  to Acquisition            Carried at Close of Period
                               ------------------------------- ----------------------------- --------------------------------
                                                     Furniture          Buildings  Furniture           Building    Furniture
                                                        and               and          and                 and         and
Description of Property          Land   Improvements Fixtures   Land  Improvements Fixtures    Land   Improvements Fixtures
-----------------------        -------  ------------ --------- ------ ------------ --------- -------- ------------ ----------
<S>                            <C>      <C>          <C>       <C>    <C>          <C>       <C>      <C>          <C>
Hampton Inn-Colorado Springs,
  Colorado                         803     3,925          411               207         143      803       4,132        554
Hampton Inn-Columbia, South
  Carolina                         650     6,572          628               365         262      650       6,937        890
Hampton Inn-Aurora, Colorado       784     3,344          359               345         176      784       3,689        535
Hampton Inn-Detroit (Madison
  Heights), Michigan               881     4,304          451               446         167      881       4,750        618
Hampton Inn-Dublin, Ohio           944     3,612          483               573         514      944       4,185        997
Hampton Inn-Kansas City, Kansas    585     4,294          425               304         226      585       4,598        651
Hampton Inn-Little Rock, Arkansas  898     5,520          558               273         473      898       5,793      1,031
Hampton Inn-Memphis (Poplar),
  Tennessee                      1,955     6,547          739               451         576    1,955       6,998      1,315
Hampton Inn-Memphis (Sycamore),
  Tennessee                      2,751       239          307               365       3,058      604       3,662        239
Hampton Inn-Nashville
  (Brentwood), Tennessee           928     5,705          577               305         246      928       6,010        823
Hampton Inn-Nashville (Briley),
  Tennessee                      6,550       569          270               302       6,820      871       7,691        472
Hampton Inn-Richardson, Texas    1,750     5,252          609               343         325    1,750       5,595        934
Hampton Inn-St. Louis, Missouri    665     3,775          386               647         554      665       4,422        940
Hampton Inn-Destin, Florida        952     5,166          680               140         104      952       5,306        784
Homewood Suites-Germantown,
  Tennessee                      1,011     5,760        1,011                56          73    1,011       5,816      1,084
Homewood Suites-Augusta, Georgia   330     4,164          516               101          24      330       4,265        540
Residence Inn-Princeton,
  New Jersey                     1,920    15,875        1,500               585         538    1,920      16,460      2,038
AmeriSuites-Cincinnati (Blue
  Ash), Ohio                       900     6,241          466               233         137      900       6,474        603
AmeriSuites-Cincinnati (Forest
  Park), Ohio                      800     5,616          569               144         143      800       5,760        712
AmeriSuites-Columbus, Ohio         903     6,774          856               136          60      903       6,910        916
AmeriSuites-Flagstaff, Arizona     600     3,832          737                81          53      600       3,913        790
AmeriSuites-Jacksonville,
  Florida                        1,168     5,734          436               211         229    1,168       5,945        665
AmeriSuites-Indianapolis,
  Indiana                          700     4,775          800               117          51      700       4,892        851
AmeriSuites-Miami, Florida       1,500     9,387          900               137          12    1,500       9,524        912
AmeriSuites-Overland Park,
  Kansas                         1,300     7,030          900               254          96    1,300       7,284        996
AmeriSuites-Richmond, Virginia   1,772     9,640          921               119          52    1,772       9,759        973
AmeriSuites-Tampa, Florida       1,400     9,786          523               119          29    1,400       9,905        552
Hampton Inn-San Antonio, Texas   3,749     7,539        1,317               132         109    3,749       7,671      1,426
Homewood Suites-Sharonville,
  Ohio                             863     6,194          746               505         199      863       6,699        945
Residence Inn-Boise, Idaho         950     5,758          350               294         367      950       6,052        717
Residence Inn-Portland, Oregon   2,400    20,735          500               244         413    2,400      20,979        913
Hampton Inn & Suites-Memphis
  (Bartlett), Tennessee            860     5,721        1,052                 7          22      860       5,728      1,074
Residence Inn-Somers Point,
  New Jersey                     1,094     6,372          729               333         344    1,094       6,705      1,073
AmeriSuites-Albuquerque, New
  Mexico                         1,776     6,871          918                32                1,776       6,903        918
AmeriSuites-Baltimore, Maryland    659     8,514          898                35                  659       8,549        898
AmeriSuites-Baton Rouge,
  Louisiana                        649     9,085        1,157                37                  649       9,122      1,157
AmeriSuites-Birmingham, Alabama  1,066     5,871          758                31                1,066       5,902        758
AmeriSuites-Las Vegas, Nevada    4,126    13,056        1,965                30                4,126      13,086      1,965
AmeriSuites-Memphis (Wolfchase),
  Tennessee                      1,108     6,433          900                43                1,108       6,476        900
AmeriSuites-Miami (Kendall),
  Florida                        2,426     7,394          802                35                2,426       7,429        802
AmeriSuites-Minneapolis,
  Minnesota                      1,312     7,421          873                22                1,312       7,443        873
AmeriSuites-Nashville,
  Tennessee                      1,622     8,452        1,198                25                1,622       8,476      1,198
Homewood Suites-Seattle,
  Washington                     2,639    17,769        1,760               149          84    2,639      17,919      1,844
Construction in Progress                                        2,854                          2,854
Corporate Office--Memphis, TN                                                 0         130                             130
                              --------  --------      -------  ------   -------     ------- --------    --------    -------

                              $102,859  $623,134      $62,857  $2,893   $32,164     $34,700 $105,752    $655,298    $97,557
                              ========  ========      =======  ======   =======     ======= ========    ========    =======
<CAPTION>
                                              Accumulated      Net Book
                                              Depreciation      Value                       Life Upon
                                              Buildings and  Buildings and                    Which
                                              Improvements;  Improvements;                 Depreciation
                                               Furniture &    Furniture &      Date of     In Statement
Description of Property              Total      Fixtures       Fixtures      Construction  Is Computed
-----------------------             -------   -------------  -------------   ------------  ------------
<S>                                 <C>       <C>            <C>             <C>            <C>
Hampton Inn-Colorado Springs,
  Colorado                            5,489           304           5,185        1985      7-31 Yrs.
Hampton Inn-Columbia, South
  Carolina                            8,477           496           7,981        1985      7-31 Yrs.
Hampton Inn-Aurora, Colorado          5,008           287           4,721        1985      7-31 Yrs.
Hampton Inn-Detroit (Madison
  Heights), Michigan                  6,249           334           5,915        1987      7-31 Yrs.
Hampton Inn-Dublin, Ohio              6,126           360           5,766        1988      7-31 Yrs.
Hampton Inn-Kansas City, Kansas       5,834           345           5,489        1987      7-31 Yrs.
Hampton Inn-Little Rock, Arkansas     7,722           469           7,253        1985      7-31 yrs.
Hampton Inn-Memphis (Poplar),
  Tennessee                          10,268           548           9,720        1985      7-31 Yrs.
Hampton Inn-Memphis (Sycamore),
  Tennessee                           3,662           239           3,423        1984      7-31 Yrs.
Hampton Inn-Nashville
  (Brentwood), Tennessee              7,761           446           7,315        1985      7-31 Yrs.
Hampton Inn-Nashville (Briley),
  Tennessee                           7,691           472           7,219        1987      7-31 Yrs.
Hampton Inn-Richardson, Tex           8,279           445           7,834        1987      7-31 Yrs.
Hampton Inn-St. Louis, Missouri       6,027           338           5,689        1987      7-31 Yrs.
Hampton Inn-Destin, Florida           7,042           418           6,624        1994      7-31 Yrs.
Homewood Suites-Germantown,
  Tennessee                           7,911           506           7,405        1986      7-31 Yrs.
Homewood Suites-Augusta, Georgia      5,135           309           4,825        1997      7-31 Yrs.
Residence Inn-Princeton,
  New Jersey                         20,418           966          19,452        1988      7-31 Yrs.
AmeriSuites-Cincinnati (Blue
  Ash), Ohio                          7,977           299           7,678        1990      7-31 Yrs.
AmeriSuites-Cincinnati (Forest
  Park), Ohio                         7,272           294           6,978        1992      7-31 Yrs.
AmeriSuites-Columbus, Ohio            8,729           371           8,358        1994      7-31 Yrs.
AmeriSuites-Flagstaff, Arizona        5,303           251           5,052        1993      7-31 Yrs.
AmeriSuites-Jacksonville,
  Florida                             7,778           283           7,495        1996      7-31 yrs.
AmeriSuites-Indianapolis,
  Indiana                             6,443           294           6,149        1992      7-31 Yrs.
AmeriSuites-Miami, Florida           11,936           465          11,471        1996      7-31 Yrs.
AmeriSuites-Overland Park,
  Kansas                              9,580           390           9,190        1994      7-31 Yrs.
AmeriSuites-Richmond, Virginia       12,504           485          12,019        1992      7-31 Yrs.
AmeriSuites-Tampa, Florida           11,857           427          11,430        1994      7-31 Yrs.
Hampton Inn-San Antonio, Texas       12,846           316          12,530        1995      7-31 Yrs.
Homewood Suites-Sharonville,
  Ohio                                8,507           226           8,281        1990      7-31 Yrs.
Residence Inn-Boise, Idaho            7,719           166           7,553        1986      7-31 Yrs.
Residence Inn-Portland, Oregon       24,292           503          23,789        1990      7-31 Yrs.
Hampton Inn & Suites-Memphis
  (Bartlett), Tennessee               7,662           224           7,438        1998      7-31 Yrs.
Residence Inn-Somers Point,
  New Jersey                          8,872           215           8,657        1998      7-31 Yrs.
AmeriSuites-Albuquerque, New
  Mexico                              9,957           177           9,421        1997      7-31 Yrs.
AmeriSuites-Baltimore, Maryland      10,106           202           9,904        1996      7-31 Yrs.
AmeriSuites-Baton Rouge,
  Louisiana                          10,928           229          10,699        1997      7-31 Yrs.
AmeriSuites-Birmingham, Alabama       7,726           149           7,577        1997      7-31 Yrs.
AmeriSuites-Las Vegas, Nevada        19,177           351          18,826        1998      7-31 Yrs.
AmeriSuites-Memphis (Wolfchase),
  Tennessee                           8,484           168           8,316        1996      7-31 Yrs.
AmeriSuites-Miami (Kendall),
  Florida                            10,657           177          10,480        1996      7-31 Yrs.
AmeriSuites-Minneapolis,
  Minnesota                           9,628           182           9,446        1997      7-31 Yrs.
AmeriSuites-Nashville,
  Tennessee                          11,296           222          11,074        1997      7-31 Yrs.
Homewood Suites-Seattle,
  Washington                         22,402           346          22,056        1998      7-31 Yrs.
Construction in Progress              2,854                         2,854                  7-31 Yrs.
Corporate Office--Memphis, TN           130            23             107                  7 Yrs
                                   --------       -------       ---------

                                   $858,607       $68,475       $ 790,132
                                   ========       =======       =========
</TABLE>


<TABLE>
<S>                                                    <C> 
(a) Reconciliation of Real Estate:
     Balance at December 31, 1996                      $333,561
       Additions during the period                      368,840
       Sales during the period                          (39,510)
     Balance at December 31, 1997                       660,891
       Additions during the period                      208,374
       Sales during the period                          (10,658)

     Balance at December 31, 1998                      $858,607
                                                       ========

(b) Reconciliation of Accumulated Depreciation:
      Balance At December 31, 1996                      $24,359
         Depreciation expense during the period          19,969
         Depreciation on sales during the period           (509)
       Balance at December 31, 1997                      43,819
         Depreciation expense during the period          26,447
         Depreciation on sales during the period         (1,791)
                                                            
       Balance at December 31, 1998                     $68,475             
                                                        =======             
</TABLE>



                                       50

<PAGE>



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

During the fiscal  year ended  December  31,  1998 and  through the date of this
report, there has been no change in the Company's independent  accountants,  nor
have any disagreements with such accountants or reportable events occurred.


                                    PART III


ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  required by this item is incorporated by reference from the section
entitled "Proposal One - Election of Directors" in the Proxy Statement as to the
Company's  directors.  See also Item 1 --  "Business-Executive  Officers  of the
Company."



ITEM 11.      EXECUTIVE COMPENSATION

Information  required by this item is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement.



ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is incorporated by reference from the sections
entitled  "Ownership of the Company's Common Stock" and "Proposal One - Election
of Directors" in the Proxy Statement.



ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  required by this item is incorporated by reference from the section
entitled  "Certain   Relationships  and  Related   Transactions"  in  the  Proxy
Statement.



                                       51

<PAGE>



                                     PART IV

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

The following documents are filed as part of this report:

(a)    Financial Statements:

The following financial statements and financial statement schedules are located
in this report on the pages indicated:
<TABLE>
<CAPTION>

Equity Inns, Inc.                                                           Page
<S>                                                                         <C>
  Report of Independent Accountants                                           29
  Consolidated  Balance Sheets at December 31, 1998 and 1997                  30
  Consolidated Statements of Operations for the years ended
    December 31, 1998, 1997 and 1996                                          31
  Consolidated Statements of Shareholders' Equity for the
    years ended December 31, 1998, 1997 and 1996                              32
  Consolidated Statements of Cash Flows for the years ended
    December 31, 1998, 1997 and 1996                                          34
  Notes to Consolidated Financial Statements                                  35
  Schedule III - Real Estate and Accumulated Depreciation
    as of December 31, 1998                                                   49
</TABLE>

All other schedules to the consolidated financial statements required by Article
7 of  Regulation  S-X are not  required  under the related  instructions  or are
inapplicable and therefore have been omitted.

(b)      Reports on Form 8-K:

No Current  Reports on Form 8-K were filed during the last quarter of the period
covered by this Annual Report on Form 10-K.


(c)     Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number            Description
------            -----------
<S>               <C> 
3.1(a)       --   Charter of the Registrant (incorporated by reference to
                  Exhibit 3.1 to the Company's Registration Statement on Form
                  S-11 (Registration No. 33-73304)

3.1(b)       --   Articles of Amendment to the Charter of the Registrant
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Current Report on Form 8-K (Registration No. 0-23290) filed
                  with the Securities and Exchange Commission on April 27, 1995)

3.1(c)       --   Articles of Amendment to the Charter of the Registrant
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Current Report on Form 8-K (Registration No. 0-23290) filed
                  with the Securities and Exchange Commission on May 31, 1996)

3.1(d)       --   Second Amended and Restated Charter of the Registrant
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on October 23,
                  1997)
</TABLE>

                                       52

<PAGE>

<TABLE>
<S>               <C> 
3.1(e)       --   Articles of Amendment to the Second Amended and Restated
                  Charter of the Registrant (incorporated by reference to
                  Exhibit 3.1 to the Company's Current Report on Form 8-K
                  (Registration No. 01-12-73) filed with the Securities and
                  Exchange Commission on May 28, 1998)

3.1(f)       --   Articles of Amendment to the Second Amended and Restated
                  Charter of the Registrant (incorporated by reference to
                  Exhibit 4.2 to the Company's Current Report on Form 8-K
                  (Registration No. 01-12073) filed with the Securities and
                  Exchange Commission on June 24, 1998)

3.2          --   By-Laws of the Registrant (incorporated by reference to
                  Exhibit 3.2 to the Company's Registration Statement on Form
                  S-11 (Registration No. 33-73304)

4.1(a)       --   Form of Share Certificate for the Company's Common Stock, $.01
                  par value (incorporated by reference to Exhibit 4.1 to the
                  Company's Registration Statement on Form S-11 (Registration
                  No. 33-73304))

4.1(b)       --   Form of Share Certificate for the Company's 9 1/2% Series A
                  Cumulative Preferred Stock, $.01 par value (incorporated by
                  reference to Exhibit 4.1 to the Company's Registration
                  Statement on Form S-11 (Registration No. 33-73304))

4.2(a)       --   Second Amended and Restated Agreement of Limited Partnership
                  of Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 4.1 to the Company's Registration Statement on Form
                  S-3 (Registration No. 33-90364))

4.2(b)       --   Third Amended and Restated Agreement of Limited Partnership of
                  Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 4.1 to the Company's Current Report on Form 8-K dated
                  June 24, 1997 (Registration No. 01-12073) filed with the
                  Securities and Exchange Commission on July 10, 1997)

4.2(c)       --   Amendment No. 1 to Third Amended and Restated Agreement of
                  Limited Partnership of Equity Inns Partnership, L.P.
                  (incorporated by reference to Exhibit 99.1 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on June 24, 1998)

4.3, 10.1    --   Indenture  dated as of  February  6,  1997  among  EQI
                  Financing  Partnership  I, L.P., as Issuer,  LaSalle  National
                  Bank,  as Trustee,  and ABN AMBRO Bank N.V.,  as Fiscal  Agent
                  (incorporated  by reference  to Exhibit 10.1 to the  Company's
                  Quarterly Report on Form 10-Q  (Registration No. 01-12073) for
                  the quarter ended March 31, 1997 and filed with the Securities
                  and Exchange Commission on April 30, 1997)

10.2(a)      --   Form of Percentage Lease Agreement (incorporated by reference
                  to Exhibit 10.3 to the Company's Registration Statement on
                  Form S-11 (Registration No. 33-73304))

10.2(b)      --   Consolidated Lease Amendment dated as of November 15, 1996
                  between Equity Inns Partnership, L.P. and Crossroads/Memphis
                  Partnership, L.P. (incorporated by reference to Exhibit
                  10.1(a) to the Company's Current Report on Form 8-K
                  (Registration No. 01-12073) filed with the Securities and
                  Exchange Commission on December 13, 1996)
</TABLE>



                                       53

<PAGE>


<TABLE>
<S>               <C>
10.2(c)      --   Form of Percentage Lease Amendment between Equity Inns
                  Partnership, L.P. and Crossroads/Future Company, L.L.C.
                  (incorporated by reference to Exhibit 10.1(b) to the Company's
                  Amended Current Report on Form 8-K (Registration No. 01-12073)
                  filed with the Securities and Exchange Commission on July 22,
                  1997)

10.2(d)      --   Form of Percentage Lease Amendment between Equity Inns
                  Partnership, L.P. and Caldwell Holding Corp. (incorporated by
                  reference to Exhibit 10.5 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on December 24, 1997)

10.3(a)      --   Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
                  reference to Exhibit 10.29(a) to the Company's Registration
                  Statement on Form S-11 (Registration No. 33-80318))

10.3(b)      --   Equity Inns, Inc. Non-Employee Directors' Stock Option Plan
                  (incorporated by reference to Exhibit 10.29(b) to the
                  Company's Registration Statement on Form S-11 (Registration
                  No. 33-80318))

10.4         --   Right of First Refusal Agreement between Wolf River Hotel,
                  L.P. and Equity Inns Partnership, L.P. (incorporated by
                  reference to Exhibit 10.5 to the Company's Registration
                  Statement on Form S-3 (Registration No. 33-93158))

10.5         --   Right of First Refusal Agreement between SAHI I L.P. and
                  Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 10.6 to the Company's Registration Statement on Form
                  S-3 (Registration No. 33-93158))

10.6         --   Credit Agreement between Equity Inns, Inc., Equity Inns Trust,
                  Equity Inns Partnership, L.P., Smith Barney Mortgage Capital
                  Group, Inc., National Bank of Commerce, First National Bank of
                  Chicago, Leader Federal Bank for Savings, AmSouth Bank, First
                  National Bank of Commerce, Bank of Mississippi, Mercantile
                  Bank of St. Louis, First National Bank of Chicago and Smith
                  Barney Mortgage Capital Group, Inc. as collateral agent
                  (incorporated by reference to Exhibit 10.7 to the Company's
                  Annual Report on Form 10-K/A for the year ended December 31,
                  1995 (Registration No. 0-23290) filed with the Securities and
                  Exchange Commission on March 20, 1996)

10.6(a)*     --   1st Amendment to Revolving Credit Agreement, dated August 10,
                  1998, between Equity Inns Partnership, L.P., Equity Inns/West
                  Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
                  Trust and National Bank of Commerce

10.6(b)*     --   2nd Amendment to Revolving Credit Agreement, dated December
                  18, 1998, between Equity Inns Partnership, L.P., Equity Inns/
                  West Virginia Partnership, L.P., Equity Inns, Inc., Equity
                  Inns Trust and National Bank of Commerce

10.7         --   Unsecured Revolving Credit Agreement dated as of October 10,
                  1997, by and among Equity Inns Partnership, L.P. and Equity
                  Inns/West Virginia Partnership, L.P. as Borrower and The First
                  National Bank of Chicago, Credit Lyonnais New York Branch, and
                  AmSouth Bank as Lenders, Credit Lyonnais New York Branch, as
                  Syndication Agent and The First National Bank of Chicago as
                  Administrative Agent (incorporated by reference to Exhibit
                  10.3 to the Company's Current Report on Form 8-K (Registration
                  No. 0-23290) filed with the Securities and Exchange Commission
                  on November 24, 1997)
</TABLE>


                                       54

<PAGE>


<TABLE>
<S>               <C>
10.7(a)*     --   First Amendment to Unsecured Revolving Credit Agreement dated
                  as of November 24, 1997, by and among Equity Inns Partnership,
                  L.P., Equity Inns/West Virginia Partnership, L.P., The First
                  National Bank of Chicago and Credit Lyonnais New York Branch.

10.7(b)*     --   Second Amendment to Unsecured Revolving Credit Agreement dated
                  as of September 28, 1998, by and among Equity Inns
                  Partnership, L.P., Equity Inns/West Virginia Partnership,
                  L.P., The First National Bank of Chicago and Credit Lyonnais
                  New York Branch.

10.8         --   Memorandum of Understanding between Promus Hotels, Inc.,
                  Equity Inns, Inc. and McNeill Hotel Co., Inc. (incorporated by
                  reference to Exhibit 10.1 to the Company's Current Report on
                  Form 8-K (Registration No. 0-23290) filed with the Securities
                  and Exchange Commission on March 20, 1996)

10.9         --   Agreement of Phillip H. McNeill, Sr. concerning investments of
                  the income of McNeill Hotel Co., Inc. (incorporated by
                  reference to Exhibit 10.2 to the Company's Current Report on
                  Form 8-K (Registration No. 0-23290) filed with the Securities
                  and Exchange Commission on March 20, 1996)

10.10        --   Agreement of Phillip H. McNeill, Sr. concerning purchase of
                  250,000 units of limited partnership interest in Equity Inns
                  Partnership, L.P. (incorporated by reference to Exhibit 10.3
                  to the Company's Current Report on Form 8-K (Registration No.
                  0-23290) filed with the Securities and Exchange Commission on
                  March 20, 1996)

10.11        --   Agreement of Phillip H. McNeill, Sr. concerning development
                  activities (incorporated by reference to Exhibit 10.4 to the
                  Company's Current Report on Form 8-K (Registration No.
                  0-23290) filed with the Securities and Exchange Commission on
                  March 20, 1996)

10.12        --   Amendment to Agreement of Phillip H. McNeill, Sr. concerning
                  the purchase of 250,000 units of limited partnership interest
                  in Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 10.2 to the Company's Current Report on Form 8-K
                  (Registration No. 0-23290) filed with the Securities and
                  Exchange Commission on March 22, 1996)

10.13        --   Stock Purchase Agreement dated as of May 31, 1996 by and among
                  Equity Inns, Inc., Equity Inns Partnership, L.P. and Promus
                  Hotels, Inc. (incorporated by reference to Exhibit 10.1 to the
                  Company's Current Report on Form 8-K (Registration No. 
                  0-23290) filed with the Securities and Exchange Commission on
                  June 13, 1996)

10.14        --   Development Agreement dated as of May 31, 1996 between Equity
                  Inns Partnership, L.P., Trust Leasing, Inc. and Promus Hotels,
                  Inc. (incorporated by reference to Exhibit 10.2 to the
                  Company's Current Report on Form 8-K (Registration No. 0-
                  23290) filed with the Securities and Exchange Commission on
                  June 13, 1996)

10.15        --   Form of Management Agreement between Equity Inns Partnership,
                  L.P., Trust Leasing, Inc. and Promus Hotels, Inc.
                  (incorporated by reference to Exhibit 10.3 to the Company's
                  Current Report on Form 8-K (Registration No. 0-23290) filed
                  with the Securities and Exchange Commission on June 13, 1996)
</TABLE>



                                       55

<PAGE>


<TABLE>
<S>                <C>
10.16        --   Guaranty of Leases dated November 15, 1996 by Interstate
                  Hotels Company (incorporated by reference to Exhibit 10.2 to
                  the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  December 13, 1996)

10.17        --   Guaranty of Leases dated November 15, 1996 by Interstate
                  Hotels Corporation (incorporated by reference to Exhibit 10.3
                  to the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  December 13, 1996)

10.18        --   Master Agreement dated as of November 4, 1996 among Equity
                  Inns, Inc., Equity Inns Partnership, L.P., Interstate Hotels
                  Corporation, Crossroads/Memphis Partnership, L.P. and
                  Crossroads Future Company, L.L.C. (incorporated by reference
                  to Exhibit 10.4 to the Company's Current Report on Form 8-K
                  (Registration No. 01-12073) filed with the Securities and
                  Exchange Commission on December 13, 1996)

10.19        --   First Amendment to Master Agreement dated as of November 15,
                  1996 among Equity Inns, Inc., Equity Inns Partnership, L.P.,
                  Interstate Hotels Corporation, Crossroads/Memphis Partnership,
                  L.P. and Crossroads Future Company, L.L.C. (incorporated by
                  reference to Exhibit 10.5 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on December 13, 1996)

10.20        --   Second Amendment to Master Agreement dated as of February 6,
                  1997 by Equity Inns, Inc., Equity Inns Partnership, L.P., EQI
                  Financing Partnership 1, L.P., Interstate Hotels Corporation,
                  Crossroads/Memphis Partnership, L.P., Crossroads/Memphis
                  Financing Company, L.L.C., and Crossroads Future Company,
                  L.L.C. (incorporated by reference to Exhibit 10.3 to the
                  Company's Quarterly Report on Form 10-Q (Registration No.
                  01-12073) for the quarter ended March 31, 1997 and filed with
                  the Securities and Exchange Commission on April 30, 1997)

10.21        --   Form of Deed of Trust dated as of February 6, 1997 by EQI
                  Financing Partnership 1, L.P. in favor of LaSalle National
                  Bank, as Trustee (incorporated by reference to Exhibit 10.2 to
                  the Company's Quarterly Report on Form 10-Q (Registration No.
                  01-12073) for the quarter ended March 31, 1997 and filed with
                  the Securities and Exchange Commission on April 30, 1997)

10.22        --   Credit Agreement dated June 25, 1997, by and among Equity Inns
                  Partnership, L.P. and Equity Inns Trust, The First National
                  Bank of Chicago, Credit Lyonnais, New York Branch and AmSouth
                  Bank of Alabama, as Lenders, Credit Lyonnais, New York Branch,
                  as Documentation Agent and The First National Bank of Chicago,
                  as Administrative Agent and Syndication Agent (incorporated by
                  reference to Exhibit 10.1 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on July 10, 1997)

10.23        --   Hotel Asset Purchase Agreement by and between Hudson Hotels
                  Corporation, Hudson Hotels Properties Corp. and Equity Inns
                  Partnership, L.P. (incorporated by reference to Exhibit 10.1
                  to the Company's Current Report on Form 8-K (Registration  No.
                  01-12073) filed with the Securities and Exchange Commission on
                  November 24, 1997)
</TABLE>



                                       56

<PAGE>


<TABLE>
<S>                <C>
10.24        --   Amendment No. 1 to Hotel Asset Purchase Agreement by and
                  between Hudson Hotels Corporation, Hudson Hotels Properties
                  Corp. and Equity Inns Partnership, L.P. (incorporated by
                  reference to Exhibit 10.2 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on November 24, 1997)

10.25        --   Amended and Restated Purchase and Sale Agreement between Prime
                  Hospitality Corp. and Equity Inns Partnership, L.P. dated
                  December 2, 1997 (incorporated by reference to Exhibit 10.1 to
                  the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  December 24, 1997)

10.26        --   Second Purchase and Sale Agreement between Prime Hospitality
                  Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
                  (incorporated by reference to Exhibit 10.2 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on December 24,
                  1997)

10.27        --   Third Purchase and Sale Agreement between Prime Hospitality
                  Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
                  (incorporated by reference to Exhibit 10.3 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on December 24,
                  1997)

10.28        --   Fourth Purchase and Sale Agreement between Prime Hospitality
                  Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
                  (incorporated by reference to Exhibit 10.4 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on December 24,
                  1997)

10.29        --   Revolving Credit Loan Agreement dated as of November 14, 1997
                  by and among Equity Inns Partnership, L.P., Equity Inns/West
                  Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
                  Trust and National Bank of Commerce

10.30        --   Alliance Agreement dated as of January 20, 1998 between U. S.
                  Franchise Systems, Inc. and Equity Inns Partnership, L.P.
                  (incorporated by reference to Exhibit 10.0 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on February 6,
                  1998)

10.31(a)     --   Asset Sale Agreement and Plans of Mergers among RFS Hotel
                  Investors, Inc., RHI Acquisition, Inc., Equity Inns, Inc., RFS
                  Partnership, L.P. and Equity Inns Partnership, L.P. dated
                  April 21, 1998 (incorporated by reference to Exhibit 10.1 to
                  the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  May 21, 1998)

10.31(b)     --   Termination Agreement, dated as of September 8, 1998, as to
                  Asset Sale Agreement and Plans of Mergers, by and among RFS
                  Hotel Investors, Inc., Equity Inns, Inc., RHI Acquisition,
                  Inc., Equity Inns Partnership, L.P. and RFS Partnership, L.P.
                  (incorporated by reference to Exhibit 99.2 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on September 14,
                  1998)

10.32*       --   Commercial Lease dated as of December 17, 1998 between 64 LTD,
                  LLC and Equity Inns Services, Inc.
</TABLE>



                                       57

<PAGE>


<TABLE>
<S>                <C> 
10.33*       --   Change in Control and Termination Agreement between Equity
                  Inns, Inc. and Phillip H. McNeill, Sr.

10.34*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Howard A. Silver

10.35*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Donald H. Dempsey

10.36*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Phillip H. McNeill,
                  Jr.

10.37*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and J. Ronald Cooper

10.38*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Richard F. Mitchell

10.39*       --   Employment Agreement between Equity Inns Services, Inc.,
                  Equity Inns, Inc. and Donald H. Dempsey

21.1*        --   List of subsidiaries of Equity Inns, Inc.

23.1*        --   Consent of PricewaterhouseCoopers LLP

27.1*        --   Financial Data Schedule (filed electronically with the
                  Securities and Exchange Commission)
</TABLE>

--------------
*  Filed herewith.

(d)  Financial Statement Schedules

             The  response to this portion of Item 14 is submitted as a separate
             section of this Annual Report on Form 10-K. See Item 14 (a).


                                                        58

<PAGE>



                                                    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 on the 23rd day of March,
1999.

                                        EQUITY INNS, INC.



                                        By:  /s/Phillip H. McNeill, Sr.
                                             --------------------------
                                             Phillip H. McNeill, Sr.
                                             Chairman of the Board and
                                             Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on the 23rd day of March, 1999.
<TABLE>
<CAPTION>

      Signature                           Title                       Date
      ---------                           -----                       ----
<S>                              <C>                              <C>
/s/ Phillip H. McNeill, Sr.      Chairman of the Board and        March 23, 1999
---------------------------
Phillip H. McNeill, Sr.          Chief Executive Officer
                                 (Principal Executive Officer)
                                 and Director

/s/ Howard A. Silver             President, Chief Operating       March 23, 1999
--------------------
Howard A. Silver                 Officer and Director


/s/ Donald H. Dempsey            Executive Vice President,        March 23, 1999
---------------------
Donald H. Dempsey                Secretary, Treasurer,
                                 Financial Officer (Principal
                                 Financial and Accounting
                                 Officer) and Director


/s/ William A. Deupree, Jr.      Director                         March 23, 1999
---------------------------
William A. Deupree, Jr.


/s/ James A. Thomas III          Director                         March 23, 1999
----------------------
James A. Thomas III


/s/ Joseph W. McLeary            Director                         March 23, 1999
---------------------
Joseph W. McLeary

/s/ Raymond E. Schultz           Director                         March 23, 1999
----------------------
Raymond E. Schultz
</TABLE>


                                       59

<PAGE>



                                INDEX OF EXHIBITS
<TABLE>
<CAPTION>

Exhibit
Number            Description
------            -----------
<S>               <C>
3.1(a)       --   Charter of the Registrant (incorporated by reference to
                  Exhibit 3.1 to the Company's Registration Statement on Form
                  S-11 (Registration No. 33-73304)

3.1(b)       --   Articles of Amendment to the Charter of the Registrant
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Current Report on Form 8-K (Registration No. 0-23290) filed
                  with the Securities and Exchange Commission on April 27, 1995)

3.1(c)       --   Articles of Amendment to the Charter of the Registrant
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Current Report on Form 8-K (Registration No. 0-23290) filed
                  with the Securities and Exchange Commission on May 31, 1996)

3.1(d)       --   Second Amended and Restated Charter of the Registrant
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on October 23,
                  1997)

3.1(e)       --   Articles of Amendment to the Second Amended and Restated
                  Charter of the Registrant (incorporated by reference to
                  Exhibit 3.1 to the Company's Current Report on Form 8-K
                  (Registration No. 01-12-73) filed with the Securities and
                  Exchange Commission on May 28, 1998)

3.1(f)       --   Articles of Amendment to the Second Amended and Restated
                  Charter of the Registrant (incorporated by reference to
                  Exhibit 4.2 to the Company's Current Report on Form 8-K
                  (Registration No. 01-12073) filed with the Securities and
                  Exchange Commission on June 24, 1998)

3.2          --   By-Laws of the Registrant (incorporated by reference to
                  Exhibit 3.2 to the Company's Registration Statement on Form
                  S-11 (Registration No. 33-73304)

4.1(a)       --   Form of Share Certificate for the Company's Common Stock, $.01
                  par value (incorporated by reference to Exhibit 4.1 to the
                  Company's Registration Statement on Form S-11 (Registration
                  No. 33-73304))

4.1(b)       --   Form of Share Certificate for the Company's 9 1/2% Series A
                  Cumulative Preferred Stock, $.01 par value (incorporated by
                  reference to Exhibit 4.1 to the Company's Registration
                  Statement on Form S-11 (Registration No. 33-73304))

4.2(a)       --   Second Amended and Restated Agreement of Limited Partnership
                  of Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 4.1 to the Company's Registration Statement on Form
                  S-3 (Registration No. 33-90364))

4.2(b)       --   Third Amended and Restated Agreement of Limited Partnership of
                  Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 4.1 to the Company's Current Report on Form 8-K dated
                  June 24, 1997 (Registration No. 01-12073) filed with the
                  Securities and Exchange Commission on July 10, 1997)

4.2(c)       --   Amendment No. 1 to Third Amended and Restated Agreement of
                  Limited Partnership of Equity Inns Partnership, L.P.
                  (incorporated by reference to Exhibit 99.1 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on June 24, 1998)
</TABLE>

                                       60

<PAGE>


<TABLE>
<S>                <C>
4.3, 10.1    --   Indenture  dated as of  February  6,  1997  among  EQI
                  Financing  Partnership  I, L.P., as Issuer,  LaSalle  National
                  Bank,  as Trustee,  and ABN AMBRO Bank N.V.,  as Fiscal  Agent
                  (incorporated  by reference  to Exhibit 10.1 to the  Company's
                  Quarterly Report on Form 10-Q  (Registration No. 01-12073) for
                  the quarter ended March 31, 1997 and filed with the Securities
                  and Exchange Commission on April 30, 1997)

10.2(a)      --   Form of Percentage Lease Agreement (incorporated by reference
                  to Exhibit 10.3 to the Company's Registration Statement on
                  Form S-11 (Registration No. 33-73304))

10.2(b)      --   Consolidated Lease Amendment dated as of November 15, 1996
                  between Equity Inns Partnership, L.P. and Crossroads/Memphis
                  Partnership, L.P. (incorporated by reference to Exhibit
                  10.1(a) to the Company's Current Report on Form 8-K 
                  (Registration No. 01-12073) filed with the Securities and
                  Exchange Commission on December 13, 1996)

10.2(c)      --   Form of Percentage Lease Amendment between Equity Inns
                  Partnership, L.P. and Crossroads/Future Company, L.L.C.
                  (incorporated by reference to Exhibit 10.1(b) to the Company's
                  Amended Current Report on Form 8-K (Registration No. 01-12073)
                  filed with the Securities and Exchange Commission on July 22,
                  1997)

10.2(d)      --   Form of Percentage Lease Amendment between Equity Inns
                  Partnership, L.P. and Caldwell Holding Corp. (incorporated by
                  reference to Exhibit 10.5 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on December 24, 1997)

10.3(a)      --   Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
                  reference to Exhibit 10.29(a) to the Company's Registration
                  Statement on Form S-11 (Registration No. 33-80318))

10.3(b)      --   Equity Inns, Inc. Non-Employee Directors' Stock Option Plan
                  (incorporated by reference to Exhibit 10.29(b) to the
                  Company's Registration Statement on Form S-11 (Registration
                  No. 33-80318))

10.4         --   Right of First Refusal Agreement between Wolf River Hotel,
                  L.P. and Equity Inns Partnership, L.P. (incorporated by
                  reference to Exhibit 10.5 to the Company's Registration
                  Statement on Form S-3 (Registration No. 33-93158))

10.5         --   Right of First Refusal Agreement between SAHI I L.P. and
                  Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 10.6 to the Company's Registration Statement on Form
                  S-3 (Registration No. 33-93158))

10.6         --   Credit Agreement between Equity Inns, Inc., Equity Inns Trust,
                  Equity Inns Partnership, L.P., Smith Barney Mortgage Capital
                  Group, Inc., National Bank of Commerce, First National Bank of
                  Chicago, Leader Federal Bank for Savings, AmSouth Bank, First
                  National Bank of Commerce, Bank of Mississippi, Mercantile
                  Bank of St. Louis, First National Bank of Chicago and Smith
                  Barney Mortgage Capital Group, Inc. as collateral agent
                  (incorporated by reference to Exhibit 10.7 to the Company's
                  Annual Report on Form 10-K/A for the year ended December 31,
                  1995 (Registration No. 0-23290) filed with the Securities and
                  Exchange Commission on March 20, 1996)
</TABLE>



                                       61

<PAGE>


<TABLE>
<S>               <C>
10.6(a)*     --   1st Amendment to Revolving Credit Agreement, dated August 10,
                  1998, between Equity Inns Partnership, L.P., Equity Inns/West 
                  Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
                  Trust and National Bank of Commerce

10.6(b)*     --   2nd Amendment to Revolving Credit Agreement, dated December
                  18, 1998, between Equity Inns Partnership, L.P., Equity Inns/
                  West Virginia Partnership, L.P., Equity Inns, Inc., Equity
                  Inns Trust and National Bank of Commerce

10.7         --   Unsecured Revolving Credit Agreement dated as of October 10,
                  1997, by and among Equity Inns Partnership, L.P. and Equity
                  Inns/West Virginia Partnership, L.P. as Borrower and The First
                  National Bank of Chicago, Credit Lyonnais New York Branch, and
                  AmSouth Bank as Lenders, Credit Lyonnais New York Branch, as
                  Syndication Agent and The First National Bank of Chicago as
                  Administrative Agent (incorporated by reference to Exhibit
                  10.3 to the Company's Current Report on Form 8-K (Registration
                  No. 0-23290) filed with the Securities and Exchange Commission
                  on November 24, 1997)

10.7(a)*     --   First Amendment to Unsecured Revolving Credit Agreement dated
                  as of November 24, 1997, by and among Equity Inns Partnership,
                  L.P., Equity Inns/West Virginia Partnership, L.P., The First
                  National Bank of Chicago and Credit Lyonnais New York Branch.

10.7(b)*     --   Second Amendment to Unsecured Revolving Credit Agreement dated
                  as of September 28, 1998, by and among Equity Inns
                  Partnership, L.P., Equity Inns/West Virginia Partnership,
                  L.P., The First National Bank of Chicago and Credit Lyonnais
                  New York Branch.

10.8         --   Memorandum of Understanding between Promus Hotels, Inc.,
                  Equity Inns, Inc. and McNeill Hotel Co., Inc. (incorporated
                  by reference to Exhibit 10.1 to the Company's Current Report
                  on Form 8-K (Registration No. 0-23290) filed with the
                  Securities and Exchange Commission on March 20, 1996)

10.9         --   Agreement of Phillip H. McNeill, Sr. concerning investments of
                  the income of McNeill Hotel Co., Inc. (incorporated by
                  reference to Exhibit 10.2 to the Company's Current Report on
                  Form 8-K (Registration No. 0-23290) filed with the Securities
                  and Exchange Commission on March 20, 1996)

10.10        --   Agreement of Phillip H. McNeill, Sr. concerning purchase of
                  250,000 units of limited partnership interest in Equity Inns
                  Partnership, L.P. (incorporated by reference to Exhibit 10.3
                  to the Company's Current Report on Form 8-K (Registration No.
                  0-23290) filed with the Securities and Exchange Commission on
                  March 20, 1996)

10.11        --   Agreement of Phillip H. McNeill, Sr. concerning development
                  activities (incorporated by reference to Exhibit 10.4 to the
                  Company's Current Report on Form 8-K (Registration No.
                  0-23290) filed with the Securities and Exchange Commission on
                  March 20, 1996)

10.12        --   Amendment to Agreement of Phillip H. McNeill, Sr. concerning
                  the purchase of 250,000 units of limited partnership interest
                  in Equity Inns Partnership, L.P. (incorporated by reference to
                  Exhibit 10.2 to the Company's Current Report on Form 8-K
                  (Registration No. 0-23290) filed with the Securities and
                  Exchange Commission on March 22, 1996)
</TABLE>


                                       62

<PAGE>


<TABLE>
<S>               <C>
10.13        --   Stock Purchase Agreement dated as of May 31, 1996 by and among
                  Equity Inns, Inc., Equity Inns Partnership, L.P. and Promus
                  Hotels, Inc. (incorporated by reference to Exhibit 10.1 to the
                  Company's Current Report on Form 8-K (Registration No.
                  0-23290) filed with the Securities and Exchange Commission on
                  June 13, 1996)

10.14        --   Development Agreement dated as of May 31, 1996 between Equity
                  Inns Partnership, L.P., Trust Leasing, Inc. and Promus Hotels,
                  Inc. (incorporated by reference to Exhibit 10.2 to the
                  Company's Current Report on Form 8-K (Registration No.
                  0-23290) filed with the Securities and Exchange Commission on
                  June 13, 1996)

10.15        --   Form of Management Agreement between Equity Inns Partnership,
                  L.P., Trust Leasing, Inc. and Promus Hotels, Inc.
                  (incorporated by reference to Exhibit 10.3 to the Company's
                  Current Report on Form 8-K (Registration No. 0-23290) filed
                  with the Securities and Exchange Commission on June 13, 1996)

10.16        --   Guaranty of Leases dated November 15, 1996 by Interstate
                  Hotels Company (incorporated by reference to Exhibit 10.2 to
                  the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission
                  on December 13, 1996)

10.17        --   Guaranty of Leases dated November 15, 1996 by Interstate
                  Hotels Corporation (incorporated by reference to Exhibit 10.3
                  to the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission
                  on December 13, 1996)

10.18        --   Master Agreement dated as of November 4, 1996 among Equity
                  Inns, Inc., Equity Inns Partnership, L.P., Interstate Hotels
                  Corporation, Crossroads/Memphis Partnership, L.P. and
                  Crossroads Future Company, L.L.C. (incorporated by reference
                  to Exhibit 10.4 to the Company's Current Report on Form 8-K
                  (Registration No. 01-12073) filed with the Securities and
                  Exchange Commission on December 13, 1996)

10.19        --   First Amendment to Master Agreement dated as of November 15,
                  1996 among Equity Inns, Inc., Equity Inns Partnership, L.P.,
                  Interstate Hotels Corporation, Crossroads/Memphis Partnership,
                  L.P. and Crossroads Future Company, L.L.C. (incorporated by
                  reference to Exhibit 10.5 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on December 13, 1996)

10.20        --   Second Amendment to Master Agreement dated as of February 6,
                  1997 by Equity Inns, Inc., Equity Inns Partnership, L.P., EQI
                  Financing Partnership 1, L.P., Interstate Hotels Corporation,
                  Crossroads/Memphis Partnership, L.P., Crossroads/Memphis
                  Financing Company, L.L.C., and Crossroads Future Company,
                  L.L.C. (incorporated by reference to Exhibit 10.3 to the
                  Company's Quarterly Report on Form 10-Q (Registration No.
                  01-12073) for the quarter ended March 31, 1997 and filed with
                  the Securities and Exchange Commission on April 30, 1997)

10.21        --   Form of Deed of Trust dated as of February 6, 1997 by EQI
                  Financing Partnership 1, L.P. in favor of LaSalle National
                  Bank, as Trustee (incorporated by reference to Exhibit 10.2 to
                  the Company's Quarterly Report on Form 10-Q (Registration No.
                  01-12073) for the quarter ended March 31, 1997 and filed with
                  the Securities and Exchange Commission on April 30, 1997)
</TABLE>



                                       63

<PAGE>


<TABLE>
<S>               <C>
10.22        --   Credit Agreement dated June 25, 1997, by and among Equity Inns
                  Partnership, L.P. and Equity Inns Trust, The First National
                  Bank of Chicago, Credit Lyonnais, New York Branch and AmSouth
                  Bank of Alabama, as Lenders, Credit Lyonnais, New York Branch,
                  as Documentation Agent and The First National Bank of Chicago,
                  as Administrative Agent and Syndication Agent (incorporated by
                  reference to Exhibit 10.1 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on July 10, 1997)

10.23        --   Hotel Asset Purchase Agreement by and between Hudson Hotels
                  Corporation, Hudson Hotels Properties Corp. and Equity Inns
                  Partnership, L.P. (incorporated by reference to Exhibit 10.1
                  to the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  November 24, 1997)

10.24        --   Amendment No. 1 to Hotel Asset Purchase Agreement by and
                  between Hudson Hotels Corporation, Hudson Hotels Properties
                  Corp. and Equity Inns Partnership, L.P. (incorporated by
                  reference to Exhibit 10.2 to the Company's Current Report on
                  Form 8-K (Registration No. 01-12073) filed with the Securities
                  and Exchange Commission on November 24, 1997)

10.25        --   Amended and Restated Purchase and Sale Agreement between Prime
                  Hospitality Corp. and Equity Inns Partnership, L.P. dated
                  December 2, 1997 (incorporated by reference to Exhibit 10.1 to
                  the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  December 24, 1997)

10.26        --   Second Purchase and Sale Agreement between Prime Hospitality
                  Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
                  (incorporated by reference to Exhibit 10.2 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on December 24,
                  1997)

10.27        --   Third Purchase and Sale Agreement between Prime Hospitality
                  Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
                  (incorporated by reference to Exhibit 10.3 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on December 24,
                  1997)

10.28        --   Fourth Purchase and Sale Agreement between Prime Hospitality
                  Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
                  (incorporated by reference to Exhibit 10.4 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on December 24,
                  1997)

10.29        --   Revolving Credit Loan Agreement dated as of November 14, 1997
                  by and among Equity Inns Partnership, L.P., Equity Inns/West
                  Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
                  Trust and National Bank of Commerce

10.30        --   Alliance Agreement dated as of January 20, 1998 between U. S.
                  Franchise Systems, Inc. and Equity Inns Partnership, L.P.
                  (incorporated by reference to Exhibit 10.0 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on February 6,
                  1998)
</TABLE>



                                       64

<PAGE>

<TABLE>
<S>               <C>
10.31(a)     --   Asset Sale Agreement and Plans of Mergers among RFS Hotel
                  Investors, Inc., RHI Acquisition, Inc., Equity Inns, Inc., RFS
                  Partnership, L.P. and Equity Inns Partnership, L.P. dated
                  April 21, 1998 (incorporated by reference to Exhibit 10.1 to
                  the Company's Current Report on Form 8-K (Registration No.
                  01-12073) filed with the Securities and Exchange Commission on
                  May 21, 1998)

10.31(b)     --   Termination Agreement, dated as of September 8, 1998, as to
                  Asset Sale Agreement and Plans of Mergers, by and among RFS
                  Hotel Investors, Inc., Equity Inns, Inc., RHI Acquisition,
                  Inc., Equity Inns Partnership, L.P. and RFS Partnership, L.P.
                  (incorporated by reference to Exhibit 99.2 to the Company's
                  Current Report on Form 8-K (Registration No. 01-12073) filed
                  with the Securities and Exchange Commission on September 14,
                  1998)

10.32*       --   Commercial Lease dated as of December 17, 1998 between 64 LTD,
                  LLC and Equity Inns Services, Inc.

10.33*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Phillip H. McNeill,
                  Sr.

10.34*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Howard A. Silver

10.35*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Donald H. Dempsey

10.36*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Phillip H. McNeill,
                  Jr.

10.37*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and J. Ronald Cooper

10.38*       --   Change in Control and Termination Agreement between Equity
                  Inns Services, Inc., Equity Inns, Inc. and Richard F. Mitchell

10.39*       --   Employment Agreement between Equity Inns Services, Inc.,
                  Equity Inns, Inc. and Donald H. Dempsey

21.1*        --   List of subsidiaries of Equity Inns, Inc.

23.1*        --   Consent of PricewaterhouseCoopers LLP

27.1*        --   Financial Data Schedule (filed electronically with the
                  Securities and Exchange Commission)
</TABLE>

--------------
*  Filed herewith.


                                       65