HOST MARRIOTT CORP, 424B1, 1994-01-24

HOST MARRIOTT CORP
424B1, 1994-01-24
EATING PLACES

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<PAGE>

RULE NO. 424(B)(1)
REGISTRATION NO. 33-51707

PROSPECTUS JANUARY 20, 1994

17,500,000 SHARES

[LOGO OF HOST MARRIOT APPEARS HERE]

COMMON STOCK

Of the 17,500,000 shares of Common Stock offered by the Company, 14,000,000
shares are being offered for sale in the United States and Canada by the U.S.
Underwriters (the "U.S. Offering") and 3,500,000 shares are being offered for
sale outside the United States and Canada in a concurrent offering by the
International Managers (the "International Offering" and, together with the
U.S. Offering, the "Offerings"), subject to transfers between the U.S.
Underwriters and the International Managers. See "Underwriting."

The Common Stock of the Company is traded on the New York Stock Exchange and
on the Chicago Stock Exchange, the Pacific Stock Exchange and the Philadelphia
Stock Exchange under the symbol "HMT". On January 20, 1994, the last reported
sale price of the Common Stock, as reported on the New York Stock Exchange
Composite Tape, was $12 per share. See "Price Range of the Common Stock and
Dividends."

SEE "RISK FACTORS" FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $12.00 $0.54 $11.46
Total (3).............................. $210,000,000 $9,450,000 $200,550,000
- --------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $850,000.
(3) The Company has granted to the Underwriters an option to purchase up to
2,625,000 additional shares of Common Stock, on the same terms and
conditions as set forth above, at the Price to the Public, less the
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
the Public, Underwriting Discounts and Commissions, and Proceeds to the
Company will be $241,500,000, $10,867,500 and $230,632,500, respectively.
See "Underwriting."

The shares are offered by the several Underwriters when, as and if delivered
to and accepted by the Underwriters and subject to various prior conditions,
including the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the shares will be made in New York, New
York on or about January 27, 1994.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
SMITH BARNEY SHEARSON INC.
BT SECURITIES CORPORATION
<PAGE>

Residence Inns have approximately
120 suites and resemble garden
apartments. They are designed for
the extended stay market.

Courtyard by Marriott hotels
are moderately priced for
the business transient
market. Each Courtyard has
approximately 150
guestrooms.

The Fort Lauderdale Marina Marriott has 580 guestrooms. The
Company recently acquired this property.

The New York Marriott
Marquis has 1,871
guestrooms and over
80,000 square feet of
meeting space.

The San Francisco Marriott has 1,500 guestrooms
and is directly adjacent to the Moscone
Convention Center.

Fairfield Inns are designed for the
economy minded traveler and have
approximately 120 guestrooms.

<PAGE>

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
PACIFIC STOCK EXCHANGE, THE CHICAGO STOCK EXCHANGE, THE PHILADELPHIA STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.

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

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained by mail from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy
statements and other information regarding the Company may also be inspected at
the offices of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New
York, New York 10005, the Pacific Stock Exchange, 301 Pine Street, San
Francisco, California 94104, the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois 60605 or the Philadelphia Stock Exchange 1900 Market
Street, Philadelphia, Pennsylvania 19103.

The Company has filed with the Commission a Registration Statement on Form S-
1 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and exhibits thereto. The Registration Statement,
together with the exhibits thereto, may be inspected at the Commission's public
reference facilities in Washington, D.C. and copies of all or any part thereof
may be obtained from the Commission upon payment of the prescribed fees.

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

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context otherwise requires, the term "Company" refers to Host
Marriott Corporation and its subsidiaries and their respective operations.
Unless otherwise indicated, the information in this Prospectus does not give
effect to the exercise of the over-allotment option described in
"Underwriting."

THE COMPANY

The Company is one of the largest owners of lodging properties in the world.
The Company's 130 owned lodging properties are operated under Marriott brand
names and managed by Marriott International, Inc. ("Marriott International"),
formerly a wholly-owned subsidiary of the Company. The Company is the largest
owner of hotels operated under Marriott brands and owns approximately 23% of
the lodging properties operated by Marriott International. The Company also
holds minority interests in various partnerships that own an additional 272
properties operated by Marriott International. The Company's properties span
several market segments, including full service (Marriott Hotels, Resorts and
Suites), moderately-priced (Courtyard by Marriott), extended-stay (Residence
Inn by Marriott) and economy (Fairfield Inn by Marriott). These Marriott brands
are among the most respected and widely recognized in the lodging industry. In
1992, each brand was ranked either first or second overall in its segment by
Business Travel News. The Company's hotels consistently outperform the
industry's average occupancy rate by a significant margin, and averaged
approximately 78.9% for the first eight months of 1993 compared to 65.3% for
the lodging industry.

The Company seeks to grow through opportunistic acquisitions of full service
hotels in the U.S. and abroad. The Company believes that the full service
segment of the market offers numerous opportunities to acquire assets at
attractive multiples of cash flow and at discounts to replacement value,
including under-performing hotels which can be improved under new management.
The Company believes that the full service segment, in particular, has
potential for improved performance as the economy continues to improve and as
business travel continues to increase. The Company has recently acquired the
580-room Ft. Lauderdale Marina Marriott and is pursuing discussions with
respect to other acquisition opportunities.

The Company believes it is well qualified to pursue its acquisition strategy.
Management has extensive experience in acquiring and financing lodging
properties and believes its industry knowledge, relationships and access to
information provide a competitive advantage with respect to evaluating and
acquiring hotel assets. In addition, the Company is well positioned to convert
acquired properties to high quality lodging brand names due to its strategic
alliance with Marriott International.

The Company is also the leading operator of airport and tollroad food and
merchandise concessions, with facilities in virtually every major commercial
airport in the U.S. The Company operates restaurants, gift shops and related
facilities at 73 airports, on 14 tollroads (including 93 travel plazas) and at
42 tourist attractions, stadiums and arenas. Many of the Company's concessions
operate under branded names, including Pizza Hut, Burger King, Taco Bell,
Sbarro's, Dunkin' Donuts, TCBY yogurt, Mrs. Fields cookies, Nathan's Famous hot
dogs and Cheers. In addition, the Company owns 14 senior living facilities
which are leased to Marriott International under long-term leases.

4
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THE DISTRIBUTION AND RELATED TRANSACTIONS

Prior to October 8, 1993, the Company was named "Marriott Corporation." In
addition to conducting the Company's existing businesses of owning lodging
properties and senior living facilities (the "Ownership Business") and
operating restaurants, cafeterias, gift shops and related facilities at
airports, stadiums, arenas and tourist attractions and on highway systems (the
"Host/Travel Plazas Business"), Marriott Corporation engaged in lodging and
senior living services management, timeshare resort development and operation,
food service and facilities management and other contract services businesses
(the "Management Business"). On October 8, 1993, Marriott Corporation made a
special dividend consisting of the distribution (the "Distribution") to holders
of outstanding shares of Common Stock, on a share-for-share basis, of all
outstanding shares of its wholly-owned subsidiary, Marriott International,
which at the time of the Distribution held all of the assets relating to the
Management Business. Marriott International now conducts the Management
Business as a separate publicly-traded company. The Distribution was designed
to separate two types of businesses with distinct financial, investment and
operating characteristics so that each could adopt strategies and pursue
objectives appropriate to its specific needs. See "The Distribution." As a
result of the Distribution, the Company believes it is better able to
concentrate its attention and financial resources on its core businesses and to
manage its real estate holdings and Host/Travel Plazas Business for cash flow.
The Company and Marriott International are parties to several important ongoing
arrangements, including (i) agreements pursuant to which Marriott International
manages or leases the Company's lodging properties and senior living facilities
and (ii) a $630 million line of credit (the "Credit Agreement") provided by
Marriott International to the Company's wholly-owned subsidiary, HMH Holdings,
Inc. ("Holdings"). See "Financing--Credit Agreement." In connection with the
Distribution, the Company consummated an exchange offer (the "Exchange Offer")
pursuant to which holders of approximately $1.2 billion of its senior notes
("Old Notes") exchanged Old Notes for a combination of (i) cash, (ii) Common
Stock and (iii) new notes ("New Notes") issued by Host Marriott Hospitality,
Inc. ("Hospitality"), an indirect wholly-owned subsidiary of the Company. See
"The Exchange Offer and Restructuring." References herein to "the Distribution
and related transactions" include the Exchange Offer.

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock Offered
U.S. Offering................................... 14.0 million shares
International Offering.......................... 3.5 million shares
Total......................................... 17.5 million shares
Common Stock to be Outstanding after the Offer-
ings............................................. 137.1 million shares(1)
Use of Proceeds................................... For the funding of future
acquisitions and for general
corporate purposes
NYSE Trading Symbol............................... HMT
</TABLE>
- --------
(1) Based on the shares outstanding on December 10, 1993. Does not include (i)
up to 13.7 million shares of Common Stock subject to options granted to
executive officers and certain employees of the Company, with a weighted
average exercise price of $3.97 per share (certain of which options are
subject to vesting requirements), (ii) up to 5.9 million shares of Common
Stock issued to executive officers and certain employees under deferred
stock incentive plans and restricted stock plans (certain of which shares
are subject to vesting requirements), (iii) 7.1 million shares of Common
Stock issuable upon the exercise of conversion rights by holders of the
Company's Liquid Yield Option Notes due June 12, 2006 (the "LYONs"), (iv)
up to 7.7 million shares of Common Stock issuable upon exercise of warrants
to be issued by the Company to certain plaintiffs as part of a class action
settlement, with a current exercise price of $8 per share, and (v) 5.6
million shares of Common Stock issuable upon exercise of conversion rights
by holders of the Company's Series A Cumulative Convertible Preferred Stock
(the "Convertible Preferred Stock"). See "Recent Developments--LYONs
Redemption," "Description of Capital Stock--Convertible Preferred Stock;--
Warrants," "Management--Executive Officer Compensation," and "Financing."

5
<PAGE>

SUMMARY PRO FORMA FINANCIAL INFORMATION

The following table presents summary unaudited pro forma financial
information of the Company for the thirty-six weeks ended September 10, 1993
and September 11, 1992 and for the fiscal year ended January 1, 1993. This
information is derived from the unaudited pro forma financial statements
included in this Prospectus under "Pro Forma Financial Data" and reflects
consummation of the Distribution and related transactions. During the fourth
quarter of 1993, the Company effected the Distribution, which caused a
substantial change in the composition of the Company's assets, liabilities and
operations. Accordingly, the Company's historical financial data (see "Selected
Historical Financial Data") does not reflect the financial condition and
results of operations of the Company as it exists subsequent to the
Distribution. The pro forma financial information set forth below is not
necessarily indicative of the results that would have been achieved had such
transactions been consummated as of the dates indicated, or that may be
achieved in the future. The information presented below should be read in
conjunction with the Host Marriott Corporation Pro Forma Consolidated
Statements of Income for the thirty-six weeks ended September 10, 1993 and
September 11, 1992 and the year ended January 1, 1993 ("fiscal year 1992"), the
Host Marriott Corporation Pro Forma Consolidated Balance Sheet at September 10,
1993, the Host Marriott Corporation Consolidated and Condensed Consolidated
Financial Statements and Notes thereto, Management's Discussion and Analysis of
Results of Operations and Financial Condition and Management's Discussion and
Analysis of Pro Forma Financial Data included in this Prospectus.
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
--------------------------- FISCAL
SEPTEMBER 10, SEPTEMBER 11, YEAR
1993 1992 1992
------------- ------------- -----------
(UNAUDITED, IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.................................. $ 963 $832 $1,209
Operating profit before corporate ex-
penses and interest................... 133 126 160
Interest expense....................... 131 135 198
Loss before cumulative effect of
changes in accounting principles(1)... (25) (20) (37)
BALANCE SHEET DATA:
Total assets........................... $3,742
Long-term debt......................... 2,156
Convertible subordinated debt
("LYONs")(2).......................... 241
OTHER DATA:
EBITDA(3).............................. $ 251 $235 $ 329
</TABLE>
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(1) Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," was adopted in the first fiscal quarter of 1993. In the second
fiscal quarter of 1993, the Company changed its accounting method for
assets held for sale. See "Notes to Condensed Consolidated Financial
Statements."
(2) Pursuant to the LYONs Allocation Agreement (as defined), Marriott
International has assumed responsibility for 90% of the LYONs obligation or
$217 million of the outstanding balance of $241 million of the LYONs as of
September 10, 1993. In December 1993, the Company gave notice of redemption
of the LYONs and set a redemption date of January 25, 1994. Based on the
aggregate principal amount of LYONs outstanding on December 13, 1993, the
aggregate redemption price will be $197 million, of which $177 million is
payable by Marriott International. However, the Company believes that most
of the LYONs will be converted into Common Stock and Marriott International
common stock, given the current market prices of such stocks relative to
the redemption price. If all of the LYONs are converted, the Company will
issue an additional 7,108,000 shares of its Common Stock. See "Recent
Developments--LYONs Redemption."
(3) EBITDA consists of the sum of consolidated net income (loss), interest
expense, income taxes, depreciation and amortization and certain other non-
cash charges, subject to certain other adjustments. EBITDA is not intended
to represent cash flow from operations as defined by generally accepted
accounting principles, and such information should not be considered as an
alternative to net income, cash flow from operations or any other
performance measures prescribed by generally accepted accounting
principles. The Company's pro forma EBITDA in fiscal 1992 includes $12
million from the operation of certain hotels and other operations which
were sold during the year.

6
<PAGE>

RECENT DEVELOPMENTS

ACQUISITIONS

The Company recently acquired the 580-room Ft. Lauderdale Marina Marriott for
a purchase price of approximately $40 million.

The Company has participated in discussions with respect to a potential
acquisition of the CIGA hotel chain. The CIGA hotel acquisition, if
consummated, would consist of up to 35 full service lodging properties located
throughout Western Europe. Other competitive bidders are also pursuing a
potential acquisition of CIGA. The Company has not yet determined to what
extent it will continue to pursue the CIGA acquisition, which decision will
depend in part on the activities of competing bidders. If the Company elects to
pursue such acquisition, there can be no assurance that the Company would be
able to reach an agreement to acquire these hotels.
DISPOSITIONS

The Company has executed a letter of intent to sell 26 of its Fairfield Inn
by Marriott hotels. The net proceeds from the sale of such hotels is expected
to be approximately $115 million, of which approximately $27 million will be
payable in the form of a note from the purchaser. The letter of intent is non-
binding, and consummation of the transaction is subject to certain conditions,
including the completion of due diligence review by the purchaser and the
execution of a definitive agreement with respect to the sale. While these
hotels were previously considered as long-term investments, the attractiveness
of the proposed transaction caused the Company to reconsider its position
relating to the sale of these hotels and to execute the letter of intent with
respect to the sale of these hotels. Therefore, because of the proposed
transaction, the Company is now considering these hotels as available for sale
and is evaluating the carrying value of such hotels based on the current net
realizable value (on the basis of expected sales price less the estimated costs
of disposal) of individual hotels. While the transaction referred to above
would result in an aggregate sales price in excess of the aggregate carrying
value of the hotels, certain individual hotels have an indicated net realizable
value below their carrying value. Therefore, the Company will record a charge
to earnings in the fourth quarter of fiscal 1993 of approximately $11 million
to write down 15 such properties to their individual estimated net realizable
value.

In December 1993, the Company sold its 15% interest in the partnership owning
the Boston Copley Marriott hotel for $11.4 million (which exceeds the carrying
value of the interest). During the fourth quarter of fiscal 1993, the Company
realized $30 million on the disposition of its preferred stock investment in
the American Restaurant Group and realized $11.7 million on the disposition of
its preferred stock investment in the Restaurant Enterprises Group.
RESIDENCE INNS

In the fourth quarter of fiscal 1993, the Company sold certain of its equity
interests in a partnership owning eleven Residence Inn by Marriott hotels for
approximately $15 million. These sales reduced the Company's ownership to 16.6%
and allowed the Company to be released from certain debt guarantee obligations.
Accordingly, the Company will no longer be consolidating the partnership and
will remove the $64 million of debt and $96 million of property, plant and
equipment from its balance sheet. A gain will be recorded in installments as
certain guarantee obligations expire.
NEW YORK MARRIOTT MARQUIS

The Company owns a 50% interest in Times Square Hotel Company ("TSHCO"), the
owner of the New York Marriott Marquis, and also holds security interests in an
additional 39% of the partnership interests as collateral for loans made to
certain partners. The partners are in default on the loans and the Company has,
for accounting purposes, realized an in-substance foreclosure of their
partnership interests. The Company is in the process of legal foreclosure on
these interests, which should be completed in early 1994.

Effective in the fourth quarter of fiscal 1993, the Company consolidated
TSHCO. The Company's balance sheet will be impacted by an increase in debt and
other liabilities of approximately $445 million, and

7
<PAGE>

a corresponding increase in assets (principally, property and equipment). Since
the Company began reporting substantially all of the losses of TSHCO in 1993,
the consolidation will have no material impact on consolidated net income or
earnings per share.

Of the $445 million of liabilities of TSHCO, $375 million represents a non-
recourse first mortgage loan which matured December 7, 1993. A preliminary
agreement has been reached for the extension of the loan for a term of five
years, which is subject to final approval by the lenders and completion of
definitive documentation. The preliminary agreement calls for a paydown of the
loan by $37 million at, or before, closing. However, there can be no assurance
that a final agreement will be reached. See "Certain Transactions."

HOST/TRAVEL PLAZAS RESTRUCTURING

In November 1993, the Company's Host/Travel Plazas business announced a plan
to redesign its operations structure to improve the effectiveness and
competitiveness of the business. Implementation of the new structure is
currently underway and is expected to be completed in the first quarter of
fiscal 1994. The Company will incur costs of approximately $7 million,
principally for severance, relocation, and the closing of certain offices. The
Company will take a restructuring charge in the fourth quarter of fiscal 1993
to reflect these costs.

LYONS REDEMPTION

In December 1993, the Company gave notice of redemption of the LYONs. The
LYONs will be redeemed on January 25, 1994, unless prior to such time holders
exercise their conversion rights. To the extent LYONs are redeemed for cash,
Marriott International will fund 90% of the redemption price pursuant to the
terms of the LYONs Allocation Agreement. Based on the aggregate principal
amount of LYONs outstanding on December 13, 1993, the aggregate redemption
price will be approximately $197 million, of which approximately $177 million
is payable by Marriott International. The LYONs are redeemable at $367.60 per
$1,000 principal amount and are convertible into 13.277 shares of Common Stock
and 13.277 shares of Marriott International common stock per $1,000 principal
amount. Based on the current market prices of the Common Stock and the Marriott
International common stock, the Company expects that most holders will elect to
convert LYONs into Common Stock and Marriott International common stock prior
to redemption. If all of the LYONs holders elected to convert prior to
redemption, LYONs holders would receive approximately 7.1 million shares of
Common Stock upon conversion. See "Relationships Between the Company and
Marriott International--LYONs Allocation Agreement."

8
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors before
purchasing the shares of Common Stock offered hereby.

SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS

The Company has substantial indebtedness. After giving effect to the
Distribution and related transactions, on a pro forma basis, the Company had
consolidated long-term debt of $2.2 billion and total shareholders' equity of
$439 million as of September 10, 1993. The Ownership Business and the
Host/Travel Plazas Business are capital intensive, and the Company will have
significant capital requirements in the future. The Company's leverage could
affect its ability to obtain financing in the future or to undertake
refinancings on terms and subject to conditions deemed acceptable by the
Company. However, of the Company's pro forma long term debt of $2.2 billion as
of September 10, 1993, debt maturities prior to the year 2000 aggregate $305
million.

Most of the Ownership Business and the Host/Travel Plazas Business is
conducted by subsidiaries of Hospitality (a second-tier subsidiary of the
Company). Hospitality has issued $1.2 billion in aggregate principal amount of
New Notes, which are secured by a pledge of the stock of, and guaranteed by,
Hospitality and certain of its subsidiaries. The indenture governing these
notes contains covenants that, among other things, (i) limit the ability of
Hospitality to pay dividends and make other distributions and restricted
payments, (ii) limit the ability of Hospitality and its subsidiaries to incur
additional debt, (iii) limit the ability of Hospitality and its subsidiaries to
create additional liens on their respective assets, (iv) limit the ability of
the subsidiaries of Hospitality to incur debt and issue preferred stock, (v)
limit the ability of Hospitality and its subsidiaries to engage in certain
transactions with related parties, (vi) limit the ability of each subsidiary of
Hospitality to enter into agreements which restrict such subsidiary in paying
dividends or making certain other payments and (vii) limit the activities and
businesses of Holdings. See "Financing--New Notes" and "The Exchange Offer and
Restructuring." In addition, the Credit Agreement with Marriott International
imposes certain restrictions on the ability of the Company and certain other
subsidiaries to incur additional debt, impose liens or mortgages on their
properties (other than various types of liens arising in the ordinary course of
business), extend new guarantees (other than replacement guarantees), pay
dividends, repurchase their common stock, make investments and incur capital
expenditures. The above restrictions may limit the Company's ability to secure
additional financing, and may prevent the Company from engaging in transactions
that might otherwise be beneficial to the Company. See "Financing--Credit
Agreement."

PENDING LITIGATION

Between October 9, 1992 and December 29, 1992, following the announcement of
the Distribution, ten plaintiffs (United Apple Sales Incorporated Profit
Sharing Trust U/A DTD 8/1/71; Bernard Fintz, Administrator of the Fintz Pension
Plan; John D. Halford, Trustee of the John D. Halford Trust; Harvey Levy, as
Trustee for the National Rubber Footwear, Inc. Profit Sharing Plan; Moges
Gebremariam, as Trustee for the Moges Gebremariam Profit Sharing Plan; Howard
W. Bleiman; Edmond Tomlinson; Robert Seigle; Matthew Harlib; and Paul L. Stone,
collectively the "Class Action Plaintiffs") filed lawsuits against the Company
purportedly brought on behalf of classes of holders and purchasers of Old Notes
and other senior notes and debentures of the Company (the "Class Action
Lawsuits"). The Class Action Plaintiffs were all holders, or former holders, of
Old Notes. The foregoing Class Action Lawsuits were consolidated under the
caption United Apple Sales Incorporated Profit Sharing Trust U/A DTD 8/l/71, et
al. v. Marriott Corp., et al. in the United States District Court for the
District of Maryland. A similar lawsuit filed by one of the Class Action
Plaintiffs in Maryland state court was stayed pending resolution of the cases
in the United States District Court for the District of Maryland (the "District
Court").

On October 29, 1992, a second group of plaintiffs (the "PPM Group")
purporting to hold approximately $120 million of principal amount of Old Notes
filed lawsuits against the Company (the "PPM Lawsuit"). The PPM Group consists
of PPM America, Inc.; London Pacific Life & Annuity Company; Transamerica

9
<PAGE>

Life Insurance & Annuity Company, Transamerica Income Shares. Inc.; National
Home Life Assurance Company; Commonwealth Life Insurance Company; Provident
Mutual Life Insurance Company of Philadelphia; Vanguard Fixed Income Securities
Fund. Inc.; Wellington Fund, Inc.; Anchor Series Trust; High Yield Plus Fund,
Inc.; New America High Income Fund, Inc.; Security Mutual Life Insurance
Company of New York, Security Equity Life Insurance Company; and Utica National
Life Insurance Company. People's Security Life Insurance Company, which
purportedly purchased approximately $16 million in Old Notes, was later added
as an additional plaintiff in the PPM Lawsuit.

On March 25, 1993, the State Board of Administration of Florida (the "Florida
Plaintiff"), purporting to hold approximately $7.5 million principal amount of
Old Notes, filed an additional class action lawsuit purportedly brought on
behalf of certain classes of holders of Old Notes and other senior notes and
debentures of the Company (the "Florida Lawsuit"). The Florida Lawsuit has been
consolidated with the PPM Lawsuit.

The Class Action Lawsuits and the Florida Lawsuit alleged, among other
things, that (i) the Distribution, if effected, would violate the terms of the
Old Notes, (ii) federal securities laws (and similar state laws) had been
violated in connection with the sale by the Company of certain series of its
Old Notes (the "Disclosure Claims"), (iii) the Distribution, if effected, would
be a fraudulent conveyance as to creditors of the Company and (iv) the
Distribution, if effected, would constitute a breach of fiduciary duty and a
breach of implied covenants of good faith and fair dealing allegedly owed by
the Company to holders of Old Notes. The PPM Lawsuit is limited to the
Disclosure Claims. The Company has counterclaimed against certain members of
the PPM Group, asserting tortious interference with business relationships.

The Company reached an agreement to settle the Class Action Lawsuits (the
"Class Action Settlement"), which settlement was approved by the District Court
on August 30, 1993. The Class Action Settlement disposes of all legal claims
challenging the Distribution, other than Disclosure Claims by certain holders
and former holders of Old Notes (principally members of the PPM Group and the
Florida Plaintiff) who have "opted out" of the Class Action Settlement with
respect to the Disclosure Claims. On October 18, 1993, the District Court also
dismissed all claims in the Florida Lawsuit other than those relating to the
Disclosure Claims. The Florida Plaintiff has filed an appeal with the United
States Court of Appeals for the Fourth Circuit, challenging the District
Court's approval of the Class Action Settlement.

As part of the Class Action Settlement, the Company effected the Exchange
Offer, paid certain legal fees and expenses of the Class Action Plaintiffs and
agreed to issue warrants to purchase up to 7.7 million shares of Common Stock,
exercisable for five years after the Distribution, at $8.00 per share during
the first three years and $10.00 per share during the last two years. The
warrants are not expected to be issued until the appeal of the Class Action
Settlement is resolved. See "Description of Capital Stock."

The PPM Group and the Florida Plaintiff continue to litigate their Disclosure
Claims. On December 17, 1993, the Company filed a motion for summary judgment
asking the District Court to enter judgment in favor of the Company and other
individual defendants on all the claims. The PPM Group also filed a motion for
summary judgment with respect to the Company's counterclaim. The Company
believes the Disclosure Claims are without merit and that the litigation
pursued by those who have opted out of the Class Action Settlement will not
have a material effect on the financial condition of the Company. Nevertheless,
there can be no certainty as to the ultimate outcome of such litigation.

POTENTIAL CONFLICTS WITH MARRIOTT INTERNATIONAL

The interests of the Company and Marriott International may potentially
conflict due to the ongoing relationships between the companies. In addition,
the Company and Marriott International share two common directors--J.W.
Marriott, Jr. serves as Chairman of the Board of Directors and President of
Marriott International and also serves as a director of the Company, and
Richard E. Marriott serves as Chairman of the Board of Directors of the Company
and also serves as a director of Marriott International. Messrs. J.W. Marriott,
Jr. and Richard E. Marriott, as well as certain other officers and directors of
Marriott

10
<PAGE>

International and the Company, also own shares (and/or options or other rights
to acquire shares) in both companies. With respect to the various contractual
arrangements between the two companies, the potential exists for disagreement
as to the quality of services provided by Marriott International and as to
contract compliance. Additionally, the possible desire of the Company, from
time-to-time, to finance, refinance or effect a sale of any of the properties
managed by Marriott International may, depending upon the structure of such
transactions, result in a need to modify the management agreement with Marriott
International with respect to such property. Any such modification proposed by
the Company may not be acceptable to Marriott International, and the lack of
consent from Marriott International could adversely affect the Company's
ability to consummate such financing or sale. In addition, certain situations
could arise where actions taken by Marriott International in its capacity as
manager of competing lodging properties would not necessarily be in the best
interests of the Company. The Company and Marriott International are also
parties to a noncompetition agreement that imposes certain limitations on the
companies' ability to compete with each other in certain businesses.
Nevertheless, the Company believes that there is sufficient mutuality of
interest between the Company and Marriott International to result in a mutually
productive relationship. Moreover, appropriate policies and procedures are
followed by the Board of Directors of each of the companies to limit the
involvement of Messrs. J.W. Marriott, Jr. and Richard E. Marriott (and, if
appropriate, other officers and directors of such companies) in conflict
situations, including requiring them to abstain from voting as directors of
either the Company or Marriott International (or as directors of any of their
subsidiaries) on certain matters which present a conflict between the
companies. See "Relationship Between the Company and Marriott International."

DIVIDEND POLICY

The Company intends to retain future earnings for use in its business and
does not currently anticipate paying dividends on the Common Stock. In
addition, the Credit Agreement contains restrictions on the payment of
dividends on the Common Stock. See "Dividend Policy" and "Financing." The
Company has also stated its intention to pay dividends on its outstanding
Convertible Preferred Stock only to the extent of earnings, and the Company did
not declare a dividend on the Convertible Preferred Stock for the last
quarterly dividend period. If six quarterly dividend payments are in arrears,
the holders of the Convertible Preferred Stock will become entitled to elect
two directors of the Company. There are approximately 292,000 depositary
shares, each representing 1/1000th of a share of Convertible Preferred Stock,
that remain outstanding as of December 23, 1993, and the stated quarterly
dividend on these shares is approximately $300,000. The Company could
recommence payment of quarterly dividends in order to avoid the election of
additional directors. In addition, commencing January 15, 1996, the outstanding
Convertible Preferred Stock may be redeemed at an aggregate redemption price of
approximately $15 million plus accrued and unpaid dividends.

EFFECTS OF ECONOMIC CONDITIONS AND CYCLICALITY

The Company's ownership of real property, including hotels, senior living
facilities and undeveloped land parcels, is substantial. Real estate values are
sensitive to changes in local market and economic conditions and to
fluctuations in the economy as a whole. There can be no assurance that
downturns or prolonged adverse conditions in real estate or capital markets or
the economy as a whole will not have a material adverse impact on the Company.

ANTITAKEOVER PROVISIONS

The Company's Restated Certificate of Incorporation and Bylaws each contain
provisions that will make difficult an acquisition of control of the Company by
means of a tender offer, open market purchases, proxy fight, or otherwise, that
is not approved by the Board of Directors. Provisions that may have an
antitakeover effect include (i) a staggered board of directors with three
separate classes, (ii) a super-majority vote requirement for removal or filling
of vacancies on the Board of Directors and for amendment to the Restated
Certificate of Incorporation and Bylaws, (iii) limitations on shareholder
action by written consent and

11
<PAGE>

(iv) super-majority voting requirements for approval of mergers and other
business combinations involving the Company and interested shareholders. In
addition, the Company is subject to Section 203 of the Delaware General
Corporation Law requiring super-majority approval for certain business
combinations. The Company has also adopted a shareholder rights plan which may
discourage or delay a change in control of the Company. Finally, the Company
has granted Marriott International, for a period of ten years following the
Distribution, the right to purchase up to 20% of each class of the then
outstanding voting stock of the Company at the fair market value thereof upon
the occurrence of certain specified events, generally involving changes in
control of the Company (the "Marriott International Purchase Right"). The
Marriott International Purchase Right may have certain antitakeover effects
with respect to the Company. See "Purposes and Antitakeover Effects of Certain
Provisions of the Company Certificate and Bylaws and the Marriott International
Purchase Right" and "Description of Capital Stock--Rights and Junior Preferred
Stock."

THE COMPANY

The Company is one of the largest owners of lodging properties in the world.
The Company's 130 owned lodging properties are operated under Marriott brand
names and managed by Marriott International, formerly a wholly-owned subsidiary
of the Company. The Company is the largest owner of hotels operated under
Marriott brands and owns approximately 23% of the lodging properties operated
by Marriott International. The Company also holds minority interests in various
partnerships that own an additional 272 properties operated by Marriott
International. The Company's properties span several market segments, including
full service (Marriott Hotels, Resorts and Suites), moderately-priced
(Courtyard by Marriott), extended-stay (Residence Inn by Marriott) and economy
(Fairfield Inn by Marriott). These Marriott brands are among the most respected
and widely recognized in the lodging industry. In 1992, each brand was ranked
either first or second overall in its segment by Business Travel News. The
Company's hotels consistently outperform the industry's average occupancy rate
by a significant margin, and averaged approximately 78.9% for the first eight
months of 1993 compared to 65.3% for the lodging industry.

The principal executive offices of the Company are located at 10400 Fernwood
Road, Bethesda, Maryland, 20817, and its telephone number is (301) 380-9000.
The Company was incorporated under the laws of the State of Delaware in 1929.

12
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby, after deducting underwriting discounts and commissions and estimated
expenses of the Offerings, are estimated to be approximately $199.7 million
(approximately $229.8 million if the Underwriters' over-allotment option is
exercised in full). The Company expects to use the net proceeds from the
Offerings for future acquisitions of lodging properties or related assets. To
the extent not so expended, the net proceeds will be used for general corporate
purposes.

DIVIDEND POLICY

The Company intends to retain future earnings for use in its business and
does not currently anticipate paying any dividends on the Common Stock. In
addition, the Credit Agreement contains restrictions on the payment of
dividends on the Common Stock and the Company's subsidiaries are subject to
certain agreements that limit their ability to pay dividends to the Company.
See "Financing." The Company has also stated its intention to pay dividends on
its outstanding Convertible Preferred Stock only to the extent of earnings, and
the Company did not declare a dividend on the Convertible Preferred Stock for
the last quarterly dividend period. If six quarterly dividend payments are in
arrears, the holders of the Convertible Preferred Stock will become entitled to
elect two directors of the Company. There are approximately 292,000 depositary
shares, each representing 1/1000th of a share of Convertible Preferred Stock,
that remain outstanding as of December 23, 1993, and the stated quarterly
dividend on these shares is approximately $300,000. The Company could
recommence payment of quarterly dividends in order to avoid the election of
additional directors. In addition, commencing January 15, 1996, the outstanding
Convertible Preferred Stock may be redeemed at an aggregate redemption price of
approximately $15 million plus accrued and unpaid dividends.

13
<PAGE>

PRO FORMA CAPITALIZATION

The following table sets forth, as of September 10, 1993, the pro forma
capitalization of the Company after giving effect to the Distribution and
related transactions and as adjusted to give effect to the sale of the shares
of Common Stock offered hereby as if the Offerings had occurred on September
10, 1993. The Pro Forma Capitalization of the Company should be read in
conjunction with Host Marriott Corporation's Consolidated and Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AT SEPTEMBER 10, 1993
(UNAUDITED, IN MILLIONS)
------------------------
PRO FORMA
PRO FORMA AS ADJUSTED(1)
--------- --------------
<S> <C> <C>
Cash and equivalents................................... $ 27 $ 227
====== ======
Long-term debt, including current portion.............. $2,164 $2,164
Convertible subordinated debt (LYONs)(2)............... 241 241
Shareholders' equity................................... 439 639
------ ------
Total Capitalization................................... $2,844 $3,044
====== ======
</TABLE>
- --------
(1) Reflects receipt of proceeds of the Offerings after deducting underwriting
discounts and commissions and estimated expenses of the Offerings. See "Use
of Proceeds."
(2) Pursuant to the LYONs Allocation Agreement, Marriott International assumed
responsibility for 90% of the LYONs obligation or $217 million of the
outstanding balance of $241 million of the LYONs as of September 10, 1993.
The LYONs have been called for redemption on January 25, 1994. Based on the
current market prices of the Common Stock and the Marriott International
common stock, the Company expects that most holders will elect to convert
LYONs into Common Stock and Marriott International common stock prior to
redemption. See "Prospectus Summary--Recent Developments--LYONs
Redemption."

14
<PAGE>

PRO FORMA FINANCIAL DATA

The unaudited Pro Forma Consolidated Balance Sheet of the Company as of
September 10, 1993 presents, in the "Host Marriott Corporation Pro Forma"
column, the financial position of the Company as if the Distribution and
related transactions had been completed as of such date. The unaudited Pro
Forma Consolidated Statement of Income of the Company for the thirty-six weeks
ended September 10, 1993 and September 11, 1992 and for the fiscal year ended
January 1, 1993 present, in the "Host Marriott Corporation Pro Forma" column,
the results of operations of the Company as if the Distribution and related
transactions had been completed at the beginning of the applicable period. The
adjustments required to reflect the Distribution and related transactions are
set forth in the "Distribution Pro Forma Adjustments" column and discussed in
the accompanying notes. The unaudited Pro Forma Financial Data of the Company
are presented for informational purposes only and may not reflect the Company's
future results of operations and financial position or what the results of
operations and financial position of the Company would have been had such
transactions occurred as of the dates indicated.

The unaudited Pro Forma Financial Data and Notes thereto of the Company
should be read in conjunction with the Host Marriott Corporation Consolidated
and Condensed Consolidated Financial Statements and Notes thereto contained
elsewhere in this Prospectus.

15
<PAGE>

HOST MARRIOTT CORPORATION

PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
AT SEPTEMBER 10, 1993 (IN MILLIONS)
--------------------------------------------------------------------
ADJUSTMENT TO
REFLECT MARRIOTT HOST
MARRIOTT INTERNATIONAL, ADJUSTED DISTRIBUTION MARRIOTT
CORPORATION INC. ON THE MARRIOTT PRO FORMA CORPORATION
HISTORICAL(1) EQUITY METHOD CORPORATION ADJUSTMENTS PRO FORMA
------------- ---------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents... $ 322 $ (141) $ 181 $ (25)(A) $ 27
(172)(N)
43 (O)
Accounts receivable,
net................... 612 (524) 88 (9)(A) 79
Inventories............ 298 (223) 75 (14)(A) 61
Other current assets... 201 (151) 50 (10)(A) 40
------ ------- ------ ----- ------
1,433 (1,039) 394 (187) 207
------ ------- ------ ----- ------
Property and equipment,
net.................... 3,399 (743) 2,656 (42)(J) 2,614
Investments in affili-
ates................... 451 (93) 358 358
Investment and advances
to Marriott
International, Inc..... -- 718 718 (718)(B) --
Intangibles............. 442 (415) 27 27
Notes receivable and
other.................. 629 (310) 319 217 (C) 536
------ ------- ------ ----- ------
$6,354 $(1,882) $4,472 $(730) $3,742
====== ======= ====== ===== ======
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable....... $ 754 $ (541) $ 213 $ (99)(N) $ 77
(37)(A)
Other current liabili-
ties.................. 759 (565) 194 (46)(A) 148
------ ------- ------ ----- ------
1,513 (1,106) 407 (182) 225
------ ------- ------ ----- ------
Long-term debt.......... 2,623 (382) 2,241 (8)(A) 2,156
43 (O)
(42)(J)
(44)(L)
200 (K)
(60)(M)
(200)(K)
26 (N)
Other long-term liabili-
ties................... 467 (333) 134 (2)(A) 132
Deferred income......... 161 (78) 83 83
Deferred income taxes... 473 17 490 (14)(J) 466
(10)(N)
Convertible subordinated
debt................... 241 241 241
Shareholders' Equity
Convertible preferred
stock................. 200 200 (184)(P) 16
Common stock........... 105 105 11 (P) 118
2 (M)
Additional paid-in cap-
ital.................. 41 41 173 (P) 272
58 (M)
Retained earnings...... 581 581 (718)(B) 84
217 (C)
35 (A)
(89)(N)
14 (J)
44 (L)
Treasury stock, at
cost.................. (51) (51) (51)
------ ------- ------ ----- ------
876 876 (437) 439
------ ------- ------ ----- ------
$6,354 $(1,882) $4,472 $(730) $3,742
====== ======= ====== ===== ======
</TABLE>
- --------
(1) Certain amounts have been reclassified to facilitate separate company
presentation.

16
<PAGE>

HOST MARRIOTT CORPORATION

PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED SEPTEMBER 10, 1993
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------
ADJUSTMENT TO
REFLECT MARRIOTT HOST
MARRIOTT INTERNATIONAL, ADJUSTED DISTRIBUTION MARRIOTT
CORPORATION INC. ON THE MARRIOTT PRO FORMA CORPORATION
HISTORICAL(1) EQUITY METHOD CORPORATION ADJUSTMENTS PRO FORMA
------------- ---------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Sales
Lodging
Rooms.................. $2,037 $(1,671) $ 366 $(366)(E) $ --
Food and beverage...... 802 (694) 108 (108)(E) --
Other.................. 413 (385) 28 140 (E) 168
------ ------- ------ ----- -------
3,252 (2,750) 502 (334) 168
Contract services...... 3,011 (2,176) 835 (40)(D) 795
------ ------- ------ ----- -------
6,263 (4,926) 1,337 (374) 963
------ ------- ------ ----- -------
Operating costs and ex-
penses
Lodging
Departmental direct
costs
Rooms................. 492 (403) 89 (89)(E) --
Food and beverage..... 625 (539) 86 (86)(E) --
Other operating ex-
penses, including pay-
ments to hotel owners. 1,872 (1,633) 239 (147)(E) 93
1 (J)
------ ------- ------ ----- -------
2,989 (2,575) 414 (321) 93
Contract services...... 2,901 (2,121) 780 (43)(D) 737
------ ------- ------ ----- -------
5,890 (4,696) 1,194 (364) 830
------ ------- ------ ----- -------
Operating profit
Lodging................ 263 (175) 88 (12)(E) 75
(1)(J)
Contract services...... 110 (55) 55 3 (D) 58
------ ------- ------ ----- -------
Operating profit before
corporate expenses and
interest............... 373 (230) 143 (10) 133
Corporate expenses...... (80) 39 (41) (41)
Interest expense........ (156) 16 (140) 12 (C) (131)
(4)(G)
2 (K)
2 (J)
4 (M)
(1)(N)
(1)(O)
(5)(L)
Interest income......... 21 (2) 19 19
------ ------- ------ ----- -------
Income (loss) before in-
come taxes, equity
earnings of subsidiary
and cumulative effect
of changes in account-
ing principles(2)...... 158 (177) (19) (1) (20)
Provision (benefit) for
income taxes........... 76 (74) 2 3 (H) 5
------ ------- ------ ----- -------
Income (loss) before eq-
uity in earnings of
subsidiary and cumula-
tive effect of changes
in accounting princi-
ples(2)................ 82 (103) (21) (4) (25)
Equity in earnings of
subsidiary, net of tax. 103 103 (103)(B) --
------ ------- ------ ----- -------
Income (loss) before a
cumulative effect of
changes in accounting
principles(2).......... 82 -- 82 (107) (25)
Dividends on preferred
stock.................. 12 -- 12 (11)(P) 1
------ ------- ------ ----- -------
Income (loss) available
for common stock before
cumulative effect of
changes in accounting
principles(2).......... $ 70 $ -- $ 70 $ (96) $ (26)
====== ======= ====== ===== =======
Fully diluted earnings
(loss) per share before
cumulative effect of
changes in accounting
principle(2)........... $ 0.64 $ 0.64 $ (0.23)
====== ====== =======
(7.6) (I)
10.6 (P)
Fully diluted common
shares................. 109.8 109.8 1.8 (M) 114.6
====== ====== ===== =======
</TABLE>
- -------
(1) Certain costs have been reclassified to facilitate separate Company
presentation.
(2) Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," was adopted in the first fiscal quarter of 1993. In the second
fiscal quarter of 1993, the Company changed its accounting method for
assets held for sale. See "Notes to Condensed Consolidated Financial
Statements."

17
<PAGE>

HOST MARRIOTT CORPORATION

PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED SEPTEMBER 11, 1992
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------------------------------------
ADJUSTMENT TO
REFLECT MARRIOTT
MARRIOTT INTERNATIONAL, ADJUSTED DISTRIBUTION HOST MARRIOTT
CORPORATION INC. ON THE MARRIOTT PRO FORMA CORPORATION
HISTORICAL(1) EQUITY METHOD CORPORATION ADJUSTMENTS PRO FORMA
------------- ---------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Sales
Lodging
Rooms.................. $2,004 $(1,618) $ 386 $(386)(E) $ --
Food and beverage...... 809 (688) 121 (121)(E) --
Other.................. 353 (325) 28 146 (E) 174
------ ------- ----- ----- -------
3,166 (2,631) 535 (361) 174
Contract services...... 2,771 (2,088) 683 (25)(D) 658
------ ------- ----- ----- -------
5,937 (4,719) 1,218 (386) 832
------ ------- ----- ----- -------
Operating costs and ex-
penses
Lodging
Departmental direct
costs
Rooms................. 474 (386) 88 (88)(E) --
Food and beverage..... 629 (531) 98 (98)(E) --
Other operating
expenses, including
payments to hotel
owners................ 1,824 (1,556) 268 (162)(E) 107
1 (J)
------ ------- ----- ----- -------
2,927 (2,473) 454 (347) 107
Contract services...... 2,676 (2,043) 633 (34)(D) 599
------ ------- ----- ----- -------
5,603 (4,516) 1,087 (381) 706
------ ------- ----- ----- -------
Operating profit
Lodging................ 239 (158) 81 (13)(E) 67
(1)(J)
Contract services...... 95 (45) 50 9 (D) 59
------ ------- ----- ----- -------
Operating profit before
corporate expenses and
interest............... 334 (203) 131 (5) 126
Corporate expenses...... (74) 40 (34) (34)
Interest expense........ (161) 17 (144) 11 (C) (135)
(4)(G)
1 (K)
2 (J)
4 (M)
(5)(L)
Interest income......... 20 (2) 18 -- 18
------ ------- ----- ----- -------
Income (loss) before
income taxes and equity
earnings of subsidiary. 119 (148) (29) 4 (25)
Provision (benefit) for
income taxes........... 53 (64) (11) 6 (H) (5)
------ ------- ----- ----- -------
Income (loss) before eq-
uity in earnings of
subsidiary............. 66 (84) (18) (2) (20)
Equity in earnings of
subsidiary, net of tax. -- 84 84 (84)(B) --
------ ------- ----- ----- -------
Income (loss)........... 66 -- 66 (86) (20)
Dividends on preferred
stock.................. 12 -- 12 (11)(P) 1
------ ------- ----- ----- -------
Income (loss) available
for common stock....... $ 54 $ -- $ 54 $ (75) $ (21)
====== ======= ===== ===== =======
Fully diluted earnings
(loss) per share....... $ 0.51 $0.51 $ (0.19)
====== ===== =======
(5.8)(I)
10.6 (P)
Fully diluted common
shares................. 105.3 105.3 1.8 (M) 111.9
====== ===== ===== =======
</TABLE>
- --------
(1) Certain costs have been reclassified to facilitate separate Company
presentation.

18
<PAGE>

HOST MARRIOTT CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 1, 1993
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------------------
ADJUSTMENT TO
REFLECT MARRIOTT
MARRIOTT INTERNATIONAL, ADJUSTED DISTRIBUTION HOST MARRIOTT
CORPORATION INC. ON THE MARRIOTT PRO FORMA CORPORATION
HISTORICAL(1) EQUITY METHOD CORPORATION ADJUSTMENTS PRO FORMA
------------- ---------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Sales
Lodging
Rooms.................. $2,843 $(2,315) $ 528 $ (528)(E) $ --
Food and beverage...... 1,190 (1,023) 167 (167)(E) --
Other.................. 518 (479) 39 194 (E) 233
------ ------- ------ ------ -------
4,551 (3,817) 734 (501) 233
Contract services...... 4,171 (3,154) 1,017 (41)(D) 976
------ ------- ------ ------ -------
8,722 (6,971) 1,751 (542) 1,209
------ ------- ------ ------ -------
Operating costs and ex-
penses
Lodging
Departmental direct
costs
Rooms................. 676 (546) 130 (130)(E) --
Food and beverage..... 917 (782) 135 (135)(E)
Other operating
expenses, including
payments to hotel
owners................ 2,625 (2,253) 372 (228)(E) 145
1 (J)
------ ------- ------ ------ -------
4,218 (3,581) 637 (492) 145
Contract services...... 4,021 (3,064) 957 (53)(D) 904
------ ------- ------ ------ -------
8,239 (6,645) 1,594 (545) 1,049
------ ------- ------ ------ -------
Operating profit
Lodging................ 333 (236) 97 (8)(E) 88
(1)(J)
Contract services...... 150 (90) 60 12 (D) 72
------ ------- ------ ------ -------
Operating profit before
corporate expenses and
interest............... 483 (326) 157 3 160
Corporate expenses...... (129) 67 (62) 16 (F) (46)
Interest expense........ (235) 25 (210) 16 (C) (198)
(6)(G)
(8)(L)
6 (M)
2 (K)
2 (J)
Interest income......... 31 (3) 28 -- 28
------ ------- ------ ------ -------
Income (loss) before
income taxes and equity
in earnings of
Subsidiary............. 150 (237) (87) 31 (56)
Provision (benefit) for
income taxes........... 65 (103) (38) 19 (H) (19)
------ ------- ------ ------ -------
Income (loss) before eq-
uity in earnings of
subsidiary............. 85 (134) (49) 12 (37)
Equity in earnings of
subsidiary, net of tax. -- 134 134 (134)(B) --
------ ------- ------ ------ -------
Net Income (loss)....... 85 -- 85 (122) (37)
Dividends on preferred
stock.................. 17 -- 17 (16)(P) 1
------ ------- ------ ------ -------
Net Income (loss) avail-
able for common stock.. $ 68 $ -- $ 68 $ (106) $ (38)
====== ======= ====== ====== =======
Earnings (loss) per
share.................. $ 0.64 $ 0.64 $ (0.34)
====== ====== =======
10.6 (P)
(6.7)(I)
Fully diluted common
shares................. 106.5 106.5 1.8 (M) 112.2
====== ====== ====== =======
</TABLE>
- --------
(1) Certain costs have been reclassified to facilitate separate Company
presentation.

19
<PAGE>

NOTES TO PRO FORMA FINANCIAL STATEMENTS

A. Represents the elimination of working capital for lodging properties and
working capital and certain noncurrent liabilities for retirement
communities owned by the Company and operated by Marriott International.

B. Represents distribution of 100% of Marriott International common stock to
the Company's common shareholders.

C. Represents assumption by Marriott International of 90% of the LYONs. (See
"Relationship Between the Company and Marriott International--LYONs
Allocation Agreement.")

D. Represents sales and operating expenses, other than depreciation, offset by
rental income, for retirement communities owned by the Company and leased
to Marriott International.

E. Represents adjustment to reduce lodging sales of properties owned by the
Company and operated by Marriott International to amounts to be remitted by
Marriott International to the Company.

F. Represents the elimination of nonrecurring costs directly related to the
Distribution.

G. Represents 1% commitment fee to Marriott International on the unborrowed
portion of the revolving line of credit.

H. Represents income tax impact of pro forma adjustments, at statutory rates,
adjusted to reflect the loss of certain state income tax benefits.

I. Represents elimination of shares that are antidilutive on a pro forma
basis.

J. Represents the transfer of land owned by the Company and leased to a
partnership owning a Marriott hotel, along with related deferred taxes, and
assumption of debt by Marriott International equal to the book value of the
land and related impact on interest expense.

K. Represents initial draw by the Company under the Marriott International
line of credit (and corresponding paydown of other Company debt), the
related impact on interest expense, and the reduction in commitment fee to
Marriott International.

L. Represents the impact of additional debt assumed by Marriott International,
and the 100 basis point increase in interest rate applicable to the New
Notes.

M. Represents the Common Stock issued concurrently with the Distribution as
part of the Exchange Offer, and the corresponding impact on interest
expense.

N. Represents adjustment to allocate outstanding drafts, cash and certain
other assets and liabilities between the Company and Marriott International
in accordance with the Distribution Agreement (as defined).

O. Represents adjustment to reflect draws and related interest expense under a
mortgage with Marriott International related to the funding of capital
expenditures for the Philadelphia Convention Center Hotel.

P. Represents adjustment to reflect conversion of Convertible Preferred Stock
prior to the Distribution.

Q. Excludes adjustment to reflect the loss on extinguishment of the Old Notes
of approximately $9 million and transaction costs with respect to the
Distribution and related transactions of approximately $13 million, because
the amounts are non-recurring.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL DATA

The Company's Management's Discussion and Analysis of Pro Forma Financial
Data should be read in conjunction with the Management's Discussion and
Analysis of Results of Operations and Financial Condition for the thirty-six
week periods ended September 10, 1993 and September 11, 1992 and the three
fiscal years in the period ended January 1, 1993, which is attached as Annex A
hereto.

On October 8, 1993, the Company completed the Distribution and the Exchange
Offer. As a result, the assets, liabilities, and businesses of the Company have
changed substantially. Accordingly, the following pro forma analysis of
financial position and results of operations is considered by management of the
Company to be more reflective of the financial resources and operations of the
Company as they now exist than Management's Discussion and Analysis of Results
of Operations and Financial Condition which is included as part of this
Prospectus. The following analysis should be read in conjunction with the
Company's Consolidated and Condensed Consolidated financial statements and
notes thereto, as well as the Pro Forma Financial Data, all of which are
included as part of this Prospectus.

PRO FORMA RESULTS OF OPERATIONS

Thirty-six weeks ended September 10, 1993 compared to thirty-six weeks ended
September 11, 1992. Pro forma sales increased approximately 16% to $963 million
for the thirty-six weeks ended September 10, 1993 over the comparable 1992
amount. Total pro forma lodging sales declined by approximately 3% in the
thirty-six weeks ended September 10, 1993 from the thirty-six weeks ended
September 11, 1992 due primarily to the sale of seven full service hotels in
1992. However, on a comparable basis, excluding results for the seven full
service hotels sold, pro forma lodging sales increased 8% in 1993, primarily
due to a 7.7% increase in revenue per available room (weighted average room
rate multiplied by the weighted average occupancy rate) for the Company's
combined lodging operations. This increase represents a contribution from each
of the Company's four lodging products with particularly strong improvement by
the Residence Inn and Courtyard products. The Company's hotels consistently
outperform the industry's average occupancy rate by a significant margin, and
averaged approximately 78.9% for the first eight months of 1993 compared to
65.3% for the lodging industry.

Pro forma lodging operating profit increased 12% in the 1993 thirty-six week
period compared with the comparable period in 1992, principally due to the
increase in revenues. Because the lodging property operations have a relatively
fixed cost structure, increases in room rate generally yield greater percentage
increases in operating profit.

The Host/Travel Plazas Business experienced a sales increase in the 1993
period of 20% which is primarily attributable to the Company's acquisition of
the Dobb's Houses, Inc. concessions in late 1992. See "Business and
Properties--Host/Travel Plazas Business." Pro forma operating profit for the
Host/Travel Plazas Business was relatively unchanged due principally to a
general decline in U.S. enplanements, reduced traffic on several major tollroad
systems, higher rent at one airport and unit remodeling on one tollroad system.

The Host/Travel Plazas Business has led the industry in introducing branded
products at its locations, including brands such as Pizza Hut, Burger King,
Taco Bell, Sbarro's, Dunkin' Donuts, TCBY yogurt, Mrs. Fields cookies, Nathan's
Famous hot dogs and Cheers. This strategy has resulted in enhanced customer
capture rate but has caused a narrowing of profit margins. Management of the
Company believes that the restructuring of the Host/Travel Plazas Business
currently being implemented will better position it to increase operating
efficiency and build synergies between its product offerings. See "Summary--
Recent Developments--Host/Travel Plazas Restructuring."

Pro forma corporate expenses increased 20% in 1993 due to an increase in
losses on the Company's equity investments, primarily due to the Company
reporting substantially all of the losses of TSHCO beginning in fiscal 1993.
Pro forma interest expense decreased slightly in the thirty-six weeks ended
September 11, 1993 due to lower interest rates.

Pro forma income tax expense increased $10 million principally as a result of
the impact of a Federal tax rate increase enacted during the year.

SOURCES AND USES OF CAPITAL

Operating cash flow is generated principally by the Company's Ownership
Business (approximately two-thirds of 1992 pro forma operating cash flow) and
by the Host/Travel Plazas Business. As a result of the

21
<PAGE>

Distribution, the Company is substantially more leveraged than it was prior to
the Distribution. However, the Company believes that financial resources from
ongoing operations as well as funds available under its $630 million line of
credit will be sufficient to enable it to meet its debt service needs and
finance its capital expenditures for the forseeable future.

Financing Activities. On a pro forma basis, the Company had consolidated
long-term debt of $2.2 billion at September 10, 1993. Substantially all of this
debt carries fixed interest rates and the weighted average rate approximates
9.5%. The Company is also party to $527 million aggregate notional amount of
interest exchange agreements. The principal agreement (covering $500 million)
requires payment by the Company of interest based on specified floating rates
(average rate 3.4% at September 10, 1993) and collects interest at fixed rates
(average rate of 7.6% at September 10, 1993) through 1997.

The Company owns a portfolio of real estate which can be sold or used to
secure new financings. Pro forma net property and equipment, including property
and equipment of the Host/Travel Plazas Business, totaled $2.6 billion at
September 10, 1993, including approximately $1.8 billion which had not been
pledged or mortgaged. The Company has initiated discussions with several
financial institutions and investment banks which have expressed an interest in
assisting it in obtaining long-term financing and (subject, among other things,
to compliance with its existing debt agreements, including requirements to use
the proceeds of certain refinancings to repay indebtedness) may use
unencumbered assets as security for future financings, if such financings are
determined to be advantageous. Such financings could take the form of
traditional secured real estate financings or could be effected through
vehicles such as formation of a real estate investment trust (REIT), assignment
of senior living services lease payments or collateralized mortgage financings.

In addition, the Company may, from time to time, consider opportunities to
sell certain of its real estate properties if price targets can be achieved.
Management does not believe that sales of property will be required for the
Company to meet its debt service and capital expenditure requirements. In cases
where there is an intent to sell particular properties, the Company assesses
net realizable value of each individual property to be sold, on the basis of
expected sales price less estimated costs of disposal. Otherwise, the Company
assesses impairment of its real estate properties based on whether it is
probable that undiscounted future cash flows from such properties will be less
than their net book value.

Capital expenditure program. Management estimates that capital spending for
renovation and refurbishment of the Company's existing real estate properties
will approximate $45 million annually. The majority of this amount is expected
to be reserved in accordance with the terms of the management agreements for
the lodging properties. Additionally management anticipates that an additional
$50 million will be spent annually to maintain and expand the Host/Travel
Plazas Business.

In addition, the Company is committed to completing construction of two hotel
properties and one retirement community. Capital expenditures for these
projects are estimated to be $100 million in 1993 (including amounts incurred
before the Distribution), $125 million in 1994 and $50 million in 1995. The
Company has obtained a $40 million industrial development bond to finance a
portion of the construction costs for the Philadelphia Airport Hotel and will
also receive mortgage financing from Marriott International of up to $125
million to finance a portion of the construction costs for the Philadelphia
Convention Center Hotel, of which approximately $43 million was borrowed as of
December 31, 1993. The remaining portion of capital expenditures will be funded
from cash from operations or borrowings under the Credit Agreement.

Acquisitions. The Company expects to use the net proceeds of the Offerings
for acquisitions of lodging properties or related assets, to the extent that
attractive acquisition opportunities become available. The Company may seek
additional debt or equity financing in connection with such acquisitions,
including debt secured by properties acquired. The Company believes it will
have adequate sources of funding to permit it to pursue its acquisition
strategy.

Debt service guarantees. In addition to servicing its own debt, the Company
will continue to be contingently liable under various guarantees of obligations
of certain affiliates. Such commitments are limited, in the aggregate, to $296
million at October 8, 1993. Management believes fundings under these guarantees
in 1993 will be approximately $22 million and will decline significantly in
1994 as the Company's obligations expire or maturities of partnership debt are
extended.

Credit Facility from Marriott International. An additional source of
liquidity for the Company is the $630 million revolving credit facility from
Marriott International available through 2007. See "Financing--Credit
Agreement." The Company estimates that, as of December 31, 1993, approximately
$175 million (net of cash on hand) was outstanding under the credit facility.

22
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

The following table presents certain selected historical financial data of
the Company which has been derived from the Host Marriott Corporation
Consolidated Financial Statements as of and for the thirty-six weeks ended
September 10, 1993 and September 11, 1992 and the five most recent fiscal years
ended January 1, 1993. The information in the table does not reflect the
Distribution and related transactions and, accordingly, the table presents data
for the Company that include amounts attributable to Marriott International. As
a result of the Distribution and related transactions, the assets, liabilities
and businesses of the Company have changed substantially. Accordingly, the
financial disclosures set forth in the table below do not reflect the financial
condition and results of operations of the Company as it now exists. See "Pro
Forma Financial Data" included elsewhere in this Prospectus. The information
set forth below should be read in conjunction with the Host Marriott
Corporation Consolidated and Condensed Consolidated Financial Statements and
Notes thereto and the Management's Discussion and Analysis of Results of
Operations and Financial Condition attached hereto as Annex A.

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
--------------------------- FISCAL YEAR
SEPTEMBER 10, SEPTEMBER 11, -------------------------------------
1993 1992 1992(1) 1991 1990(2) 1989(3) 1988
------------- ------------- ------- ------ ------- ------- ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED) (53 WEEKS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $6,263 $5,937 $8,722 $8,331 $7,646 $7,536 $6,624
Operating profit before
corporate expenses and
interest............... 383 344 496 478 353 535 501
Interest expense........ 166 171 248 265 183 185 136
Income from continuing
operations before
cumulative effect of a
change in accounting
principle (4)(5)....... 82 66 85 82 47 181 189
Net income.............. 80 66 85 82 47 177 232
Per share:(6)
Income from continuing
operations before
cumulative effect of a
change in accounting
principle............. $0.65 $0.51 $0.64 $0.80 $0.46 $1.62 $1.59
Net income............. 0.63 0.51 0.64 0.80 0.46 1.58 1.95
Cash dividends declared
per share.............. 0.14 0.21 0.28 0.28 0.28 0.25 0.21
BALANCE SHEET DATA:
Total assets............ $6,341 $6,425 $6,410 $6,509 $7,034 $6,600 $6,079
Long-term debt.......... 2,614 2,848 2,732 2,979 3,598 3,050 2,857
Convertible subordinated
debt ("LYONs")(7)...... 241 222 228 210 -- -- --
</TABLE>
- --------
(1) Operating results in 1992 included pretax costs of $21 million related to
the Distribution.
(2) Operating results in 1990 reflect pretax restructuring charges and
writeoffs, net of certain nonrecurring gains, of $153 million related to
continuing operations.
(3) Operating profit in 1989 reflects pretax restructuring charges and
writeoffs of $256 million related to continuing operations and a $231
million pretax gain on the transfer of the airline catering division. Net
income also reflects a $39 million after-tax charge recorded in conjunction
with the planned disposal of restaurant operations.
(4) Restaurant operations were discontinued in 1989.
(5) Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," was adopted in the first fiscal quarter of 1993. In the second
fiscal quarter of 1993, the Company changed its accounting method for
assets held for sale. See "Notes to Condensed Consolidated Financial
Statements."
(6) Earnings per share is computed on a fully diluted basis using weighted
average number of outstanding common and common equivalent shares, plus
other potentially dilutive securities.
(7) Pursuant to the LYONs Allocation Agreement, Marriott International assumed
responsibility for 90% of the LYONs obligation or $217 million of the
outstanding balance of $241 million of the LYONs as of September 11, 1993.
The LYONs have been called for redemption on January 25, 1994. Based on the
current market prices of the Common Stock and the Marriott International
common stock, the Company expects that most holders will elect to convert
LYONs into Common Stock and Marriott International common stock prior to
redemption. See "Prospectus Summary--Recent Developments--LYONs
Redemption."

23
<PAGE>

BUSINESS AND PROPERTIES

OWNERSHIP BUSINESS
The Company is one of the largest owners of lodging properties in the world.
The Company's lodging properties are operated under Marriott brand names and
managed by Marriott International. The Company is the largest owner of hotels
operated under Marriott brand names and owns approximately 23% of the lodging
properties operated by Marriott International.

The following table sets forth information regarding the lodging properties
and senior living facilities that comprise the Company's Ownership Business.
Each of these properties are operated by Marriott International pursuant to
Lodging Management Agreements, in the case of lodging properties, or a Senior
Living Services Lease Agreement, in the case of senior living facilities.

<TABLE>
<CAPTION>
NUMBER NUMBER
OF PROPERTIES OF ROOMS
------------- --------
<S> <C> <C>
Marriott Hotels, Resorts and Suites.................... 28(1) 14,774
Courtyard Hotels....................................... 54 7,940
Residence Inns......................................... 18(2) 2,178
Fairfield Inns......................................... 30(3) 3,632
Senior Living Communities.............................. 14(4) 3,942(5)
--- ------
Total.............................................. 144 32,466
=== ======
</TABLE>
- --------
(1) Includes (i) two hotels currently under development, with one scheduled
for completion in the first quarter of 1995 and one scheduled for
completion in the first quarter of 1996, (ii) the New York Marriott
Marquis, which was recently consolidated on the Company's balance sheet
and (iii) the Ft. Lauderdale Marina Marriott hotel which was recently
acquired by the Company.
(2) Excludes 11 Residence Inns included in a partnership no longer
consolidated with the Company.
(3) The Company has executed a non-binding letter of intent to sell 26 of
these Fairfield Inns. See "Prospectus Summary--Recent Developments--
Dispositions."
(4) Includes a senior living facility currently under development and
scheduled for completion in January 1994.
(5) Represents total number of beds.

Management believes that the lodging industry as a whole is benefitting from
an improved supply/demand dynamic. Based on industry data, demand for hotel
rooms increased 4.0% in 1992 and 3.9% in the first eight months of 1993.
Management believes that recent demand increases have occurred due to an
improved economic environment and a corresponding increase in business travel.

In recent years, room supply growth in the lodging industry overall has
slowed dramatically. From 1987 to 1990, room supply increased an average of
approximately 4% annually and resulted in an oversupply of rooms. This growth
slowed to 2.3% in 1991 and 1.3% in 1992. Management believes the decrease in
growth is attributable to many factors, including the limited availability of
financing for new hotel construction, availability of existing properties for
sale at attractive prices and the recent recession in the U.S.

While the lodging industry in general has recently improved, the full
service hotel segment has lagged this recovery. Management believes that
significant opportunities exist within the full service segment to acquire
hotels at attractive multiples of cash flow or at significant discounts to
replacement value. In addition, the Company believes that this segment offers
many opportunities to acquire underperforming hotels, which can be improved
under new management. The Company believes that the full service segment, in
particular, has significant potential for improved occupancy and average room
rates as the economy continues to improve and as business travel continues to
increase.

The Company's lodging properties consistently outperform the industry's
average occupancy rate by a significant margin, and averaged approximately
78.9% for the first eight months of 1993 compared to 65.3% for the lodging
industry. Management anticipates that, due to these superior occupancy rates,
the limited supply of new rooms and the recent increase in business travel,
there may be an opportunity to increase room rates at the Company's
properties. Because the lodging property operations have a relatively fixed
cost structure, increases in room rate generally yield greater percentage
increases in operating cash flow.

24
<PAGE>

Marriott Hotels, Resorts and Suites. The full service Marriott hotels owned
by the Company are part of the full service Marriott hotel system, which was
ranked first overall for 1992 in the full service hotel segment by Business
Travel News in its February 8, 1993 issue. These hotels achieved an occupancy
rate of 72.2 percent for 1992, compared to the 62 percent average occupancy
rate for the entire hotel industry. The chart below sets forth performance
information for such hotels for the first three fiscal quarters of 1992 and
1993 and for fiscal years 1990 through 1992.

<TABLE>
<CAPTION>
3Q 3Q
1990 1991 1992 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of Properties...................... 23 23 23 23 24
Number of Rooms........................... 9,741 10,276 10,276 10,276 10,560
Average Daily Rate........................ $88.77 $85.35 $89.27 $87.28 $89.24
Occupancy Percentage...................... 68.2% 69.4% 72.2% 73.1% 75.6%
</TABLE>

In addition to the properties set forth above, the Company is developing two
other full service Marriott Hotels, the Philadelphia Convention Center Hotel
(1,200 rooms, completion scheduled for first quarter, 1995) and the
Philadelphia Airport Hotel (419 rooms, completion scheduled for first quarter,
1996), that, when completed, will be operated by Marriott International under
Lodging Management Agreements. The Philadelphia Airport Hotel has been largely
pre-financed through the issuance of $40 million of industrial revenue bonds.
The Philadelphia Convention Center Hotel will be financed, in part, by the
Philadelphia Mortgage (as defined). See "Relationship Between the Company and
Marriott International--Philadelphia Mortgage." In addition, the Company
recently acquired the 580-room Ft. Lauderdale Marina Marriott and the Company
owns a 50% interest in TSHCO, the owner of the New York Marriott Marquis.
Effective in the fourth fiscal quarter of 1993, the Company consolidated TSHCO.
See "Prospectus Summary--Recent Developments--Acquisitions;--New York Marriott
Marquis."

Courtyard Hotels. The 54 Courtyard hotels owned by the Company are among the
newest in the Courtyard hotel system, which was ranked first in price value,
and second overall, for 1992 in the mid-priced hotel segment by Business Travel
News in its February 8, 1993 issue. These hotels achieved an occupancy rate of
76.3 percent for 1992 compared to the 62 percent average occupancy rate for the
entire hotel industry. The chart below sets forth performance information for
such hotels for the first three fiscal quarters of 1992 and 1993 and for fiscal
years 1990 through 1992.

<TABLE>
<CAPTION>
3Q 3Q
1990 1991 1992 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of Properties...................... 37 52 54 55 54
Number of Rooms........................... 5,283 7,395 7,896 8,045 7,940
Average Daily Rate........................ $63.57 $61.12 $61.54 $60.98 $64.64
Occupancy Percentage...................... 57.6% 63.7% 76.3% 77.8% 80.5%
</TABLE>

Residence Inns. The 18 Residence Inns owned by the Company are among the
newest in the Residence Inn system, which was ranked first overall for 1992
among extended stay operators in the all suites segment by Business Travel News
in its February 8, 1993 issue. These Residence Inns achieved an occupancy rate
of 77.4 percent for 1992, compared to the 62 percent average occupancy rate for
the hotel industry. The chart below sets forth performance information for such
Inns for the first three fiscal quarters of 1992 and 1993 and for fiscal years
1990 through 1992. In the fourth fiscal quarter of 1993, the Company sold
certain of its equity interests in a partnership owning eleven Residence Inn by
Marriott hotels. The following table excludes information with respect to these
eleven Residence Inns. See "Prospectus Summary--Recent Developments--Residence
Inns."

<TABLE>
<CAPTION>
3Q 3Q
1990 1991 1992 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of Properties...................... 6 17 18 18 18
Number of Rooms........................... 637 2,072 2,178 2,178 2,178
Average Daily Rate........................ $72.32 $73.69 $73.38 $73.59 $74.39
Occupancy Percentage...................... 67.2% 68.7% 77.4% 77.3% 85.4%
</TABLE>

25
<PAGE>

Fairfield Inns. The 30 Fairfield Inns owned by the Company are among the
newest in the Fairfield Inn system, which was ranked first overall for 1992 in
the economy hotel segment by Business Travel News in its February 8, 1993
issue. These Fairfield Inns achieved an occupancy rate of 77.2 percent for
1992, compared to the 62 percent average occupancy rate for the entire hotel
industry. The chart below sets forth performance information for such Inns for
the first three fiscal quarters of 1992 and 1993 and for fiscal years 1990
through 1992. The Company has executed a non-binding letter of intent to sell
26 of these Fairfield Inn by Marriott hotels. See "Prospectus Summary--Recent
Developments--Dispositions."

<TABLE>
<CAPTION>
3Q 3Q
1990 1991 1992 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of Properties...................... 23 30 30 30 30
Number of Rooms........................... 2,841 3,633 3,632 3,632 3,632
Average Daily Rate........................ $37.94 $36.46 $38.07 $38.38 $40.05
Occupancy Percentage...................... 50.9% 71.2% 77.2% 79.5% 81.0%
</TABLE>

Senior Living Facilities. The Company also owns 13 operating senior living
facilities, located in seven states, which offer independent living apartments,
assisted living services and skilled nursing care. Certain of these senior
living facilities are operated under the trade names Brighton Gardens and
Stratford Court. The chart below sets forth performance information for such
senior living facilities for the first three fiscal quarters of 1992 and 1993
and for fiscal years 1990 through 1992. Units open more than one year at the
beginning of 1992 achieved an average occupancy rate in excess of 90 percent as
of the end of 1992.

<TABLE>
<CAPTION>
3Q 3Q
1990 1991 1992 1992 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Number of Units................................ 7 9 12 12 13
Number of Beds................................. 1,881 2,359 3,437 3,345 3,589
Occupancy Percentage........................... 74.5% 72.2% 72.1% 69.7% 81.4%
</TABLE>

In addition, the Company is scheduled to complete a Stratford Court Facility
in Boca Raton (Boca Point), Florida (353 beds) in January 1994. The Company's,
Jefferson Senior Living facility in Arlington, Virginia (included in the above
chart) is being sold as condominium units. Approximately 118 of these units
remain unsold as of December 20, 1993. The average price per unit sold in 1993
through December 20 was approximately $212,000.

HOST/TRAVEL PLAZAS BUSINESS

The Company is the leading operator of airport concessions in the United
States with restaurants, gift shops and related facilities at 70 domestic
airports and three foreign airports. The Company's foreign airport operations
include concessions at two airports in New Zealand and one airport in
Australia. The Company's airport concessions operate primarily under the trade
name "Host" and include restaurants, cafeterias, snack bars and gift shops.
Payments by the Company under operating contracts with airport authorities are
typically based on percentages of sales subject to an annual minimum. The terms
of such agreements vary but many have initial terms of ten or more years for
food and beverage concessions, and five or more years for merchandise
facilities. Additionally, the Company operates restaurants, gift shops and
related facilities at 42 major tourist attractions, stadiums and arenas.

During the fourth quarter of 1992, the Company acquired the 19 airport
concessions of Dobbs Houses, Inc. for approximately $47 million.

The Company is also the leading operator of travel plazas in the United
States, with 93 travel plazas on 14 tollroads. The Company currently operates
such facilities under contracts with the highway authorities which typically
extend 15 years. The highway systems are located primarily in the Mid-Atlantic,
Midwest and New England states as well as in Florida. Travel plazas typically
include restaurants, snack bars, vending areas and merchandise facilities.

26
<PAGE>

The Host/Travel Plazas Business includes branded food, beverage and
merchandise concepts at many of its airports and tollroads, including Pizza
Hut, Burger King, Taco Bell, Sbarro's, Dunkin' Donuts, TCBY yogurt, Mrs. Fields
cookies, Nathan's Famous hot dogs, and Cheers. As a licensee of these brands,
the Company typically pays royalties based on a percentage of sales.

Three major Host airport contracts will expire in 1994. These contracts
represent approximately 18% of total airport concessions business annual
revenue. The Company has detailed development strategies in place with respect
to each of these airports in order to maintain significant presence on a
profitable basis. Based on the Company's successful track record in achieving
lease extensions of existing contracts and gaining new contracts, management
expects that these strategies will be successful.

In November 1993, the Company's Host/Travel Plazas Division announced a plan
to redesign its operations structure to improve the effectiveness and
competitiveness of the business. Implementation of the new structure is
currently underway and is expected to be completed in the first quarter of
1994. The Company will incur costs of approximately $7 million, principally for
severance, relocation, and the closing of certain offices. The Company will
take a restructuring charge in the fourth quarter of fiscal 1993 to reflect
these costs. See "Prospectus Summary--Recent Developments--Host/Travel Plazas
Restructuring."

PARTNERSHIP INVESTMENTS

The Company and certain of its subsidiaries also conduct the Company's
partnership investments and partnership services business. The Company and/or
its subsidiaries own an equity investment in, and serve as the managing general
partner for, various partnerships which collectively own 52 Marriott full
service hotels, 120 Courtyard hotels, 50 Residence Inns and 50 Fairfield Inns.
Of these, 117 lodging properties are located on land leased from Marriott
International or one of its subsidiaries. In addition, the Company holds notes
receivable from partnerships in the aggregate amount of approximately $265
million.

As a managing general partner, the Company or its subsidiary is responsible
for the day-to-day management of partnership operations, which includes payment
of partnership obligations from partnership funds, preparation of financial
reports and tax returns and communications with lenders, limited partners and
regulatory bodies. As managing general partner, the Company or its subsidiary
is usually reimbursed for the cost of providing these services.

Hotel properties owned by the partnerships generally were acquired from the
Company in connection with limited partnership offerings. These hotel
properties are currently operated under agreements with Marriott International.
As the general partner of such partnerships, the Company and its subsidiaries
oversee and monitor Marriott International's performance pursuant to these
agreements.

The Company's interests in these partnerships range from 1% to 50%. Cash
distributions provided from these partnerships are tied to the overall
performance of the underlying properties and the overall level of debt owed by
the partnership. Partnership distributions to the Company approximated $6
million in 1993. All partnership debt is non-recourse to the Company except to
the extent of limited debt service guarantees discussed below. In most
circumstances, the Company has the ability to sell all or a portion of its
investments in each partnership to other partners or outside third parties.

The Company is contingently liable under various guarantees of obligations of
certain of these partnerships. Such commitments are limited in the aggregate to
$296 million at October 8, 1993. Management believes fundings under these
guarantees in 1993 will be approximately $22 million and will decline
significantly in 1994 as the Company's obligations expire or maturities of
partnership debts are extended. In all cases, fundings of such guarantees
represent loans to the respective partnerships.

OTHER ASSETS AND OPERATIONS

In connection with the aforementioned businesses, the Company conducts
certain property and lease management activities including (i) real estate
sales, (ii) office leasing and (iii) facilities and property management.

27
<PAGE>

The Company owns approximately 65 undeveloped parcels of vacant land
totalling approximately 315 acres originally purchased for the development of
hotels or senior living facilities. In addition, the Company owns a 210-acre
parcel of undeveloped land in Germantown, Maryland, suitable for commercial
use. The Company may sell these properties from time to time when market
conditions are favorable.

The Company has disposed of most of its restaurant business, but continues to
own certain free-standing restaurants. The Company also holds notes receivable
arising from disposition of properties and businesses, including its airline
catering business and restaurant business.

COMPETITION

Competition in the U.S. lodging industry is strong and is generally based on
quality of service, attractiveness of facilities and locations, consistency of
product offerings, price and other factors. Room revenues, which are determined
by occupancy levels and room rates, have continued to be constrained in 1993 as
a result of a slow growth economy, overbuilt markets, price sensitive customers
and the effect of corporate restructurings. However, the Company has
experienced increases in occupancy and room rates in each of its lodging
product lines through the third quarter of 1993 over a comparable period for
1992. Room supply growth is expected to be minimal over the next few years due
principally to a scarcity of financing for new construction.

The cyclical nature of the U.S. lodging industry has been demonstrated over
the past two decades--low hotel profitability during the 1974-75 recession led
to a prolonged slump in new construction and, over time, high occupancy rates
and real price increases in the late 1970s and early 1980s. Changes in tax and
banking laws during the early 1980s precipitated a construction boom that
peaked in 1986 but created an oversupply of hotel rooms that has not yet been
absorbed by increased demand. The Company expects the U.S. hotel supply/demand
imbalance to continue to improve.

The Company believes that its lodging properties enjoy competitive advantages
arising from their participation in the Marriott hotel systems. Repeat guest
business is enhanced by the Marriott Honored Guest Awards program, which awards
frequent travelers with free stays of varying lengths at Marriott Hotels,
Resorts and Suites, and by frequent stay programs established by Courtyard by
Marriott (Courtyard Club) and Fairfield Inn by Marriott (INNsiders Club).
Marriott International's nationwide marketing programs and reservation systems
as well as the advantage of increasing customer preference for Marriott brands
should also help these properties to maintain or increase their premium over
competitors in both occupancy and room rates.

In connection with the Host/Travel Plazas Business, the Company competes with
several national and regional companies to obtain the rights from airport and
highway authorities to operate food, beverage and merchandise concessions. To
compete effectively, the Company regularly updates and refines its product
offerings (including the addition of branded products) and facilities to
generate higher sales and thereby increase returns both to the airport and
highway authorities and the Company.

EMPLOYEES

The Company and its subsidiaries collectively have approximately 23,000
employees. Approximately 5,900 of such employees are covered by collective
bargaining agreements.

LEGAL PROCEEDINGS

A number of holders of the Company's Old Notes instituted legal proceedings
against the Company. For a discussion of the allegations raised and agreements
to settle certain of such claims, see "Risk Factors--Pending Litigation."

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THE DISTRIBUTION

Prior to October 8, 1993, the Company was named "Marriott Corporation." In
addition to conducting its existing Ownership Business and the Host/Travel
Plazas Business, Marriott Corporation engaged in lodging and senior living
services management, timeshare resort development and operation, food service
and facilities management and other contract services businesses (the
"Management Business"). On October 8, 1993, Marriott Corporation made a
special dividend consisting of the distribution (the "Distribution") to
holders of outstanding shares of Common Stock, on a share-for-share basis, of
all outstanding shares of its wholly-owned subsidiary, Marriott International,
which at the time of the Distribution held all of the assets relating to the
Management Business. Marriott International now conducts the Management
Business as a separate publicly-traded company. The Distribution was designed
to separate two types of businesses with distinct financial, investment and
operating characteristics so that each could adopt strategies and pursue
objectives appropriate to its specific needs. As a result of the Distribution,
the Company believes it is better able to concentrate its attention and
financial resources on its core businesses and to manage its real estate and
Host/Travel Plazas Business for cash flow. The Company and Marriott
International are parties to several important ongoing arrangements, including
(i) agreements pursuant to which Marriott International manages or leases the
Company's portfolio of lodging properties and senior living facilities and
(ii) the Credit Agreement pursuant to which Marriott International provides a
$630 million line of credit to Holdings. See "Relationship Between the Company
and Marriott International" and "Financing--Credit Agreement."

THE EXCHANGE OFFER AND RESTRUCTURING

THE EXCHANGE OFFER

In connection with the Distribution, the Company also completed the Exchange
Offer pursuant to which holders of Old Notes in aggregate principal amount of
approximately $1.2 billion exchanged such Old Notes for a combination of (i)
cash, (ii) Common Stock and (iii) New Notes issued by Hospitality. The coupon
and maturity date for each series of New Notes was 100 basis points higher and
four years later, respectively, than the series of Old Notes for which it was
exchanged (except that the maturity of the New Notes issued in exchange for
the Series L Senior Notes due 2012 was shortened by five years). The Company
also conducted a consent solicitation pursuant to which, as a condition to
participation in the Exchange Offer, holders of Old Notes were required to
deliver (i) a consent to the Distribution and a waiver of any defaults, claims
or rights under the Old Note Indenture relating thereto, (ii) a release and
discharge of legal or equitable claims relating to the Distribution and (iii)
a consent to the deletion of a negative pledge covenant in the Old Note
Indenture to permit the Restructuring and grant of a stock pledge under the
New Note Indenture (collectively, the "Consents and Releases").

The Company received tenders of approximately $1.2 billion of Old Notes.
Excluding the Series F Notes due 1995 (the "Old Series F Notes") and the
Series I Senior Notes due 1995 (the "Old Series I Notes"), the Company
received tenders for 82% of the aggregate amount of Old Notes subject to the
Exchange Offer. The Company has redeemed all of the Old Series F Notes that
did not tender in the Exchange Offer, and has secured the Old Series I Notes
equally and ratably with the New Notes issued in the Exchange Offer. The
Company expects to recognize an extraordinary pre-tax loss of approximately $9
million in the fourth quarter of fiscal 1993 in connection with extinguishment
of debt in the Exchange Offer.

THE RESTRUCTURING

In connection with the Exchange Offer, the Company effected the
restructuring of its assets (the "Restructuring"). As a result of the
Restructuring, the Company's primary asset is the capital stock of Holdings,
although the Company conducts certain operations directly and holds interests
in various other subsidiaries. Holdings is a holding company, the primary
asset of which is the capital stock of Hospitality, and is the borrower under
the Credit Agreement. Hospitality is also a holding company which owns the
capital stock of HMH Properties, Inc. ("HMH Properties") and Host Marriott
Travel Plazas, Inc. ("HMTP"). In the Restructuring, most of the assets
relating to the Ownership Business were transferred to HMH Properties and its
subsidiaries, and most of the assets relating to the Host/Travel Plazas
Business were transferred to HMTP and its subsidiaries. Certain assets
relating to such businesses (the "Retained Business") were retained directly
by the Company and certain of its other subsidiaries (the "Retained Business
Subsidiaries").

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The Company also has two subsidiaries used to fund new acquisitions. HMC
Ventures, Inc. ("HMC Ventures") is an unrestricted subsidiary under the Credit
Agreement that will be capitalized with approximately $50 million from recent
asset sales. HMC Acquisitions, Inc. ("HMC Acquisitions") is a newly-formed
subsidiary that, pursuant to amendments to the Credit Agreement, will be
permitted to use the net proceeds of the Offering to fund acquisitions. HMC
Acquisitions will be a guarantor under the Credit Agreement. See "Financing--
Credit Agreement."

The following chart shows the structure of the Company and its subsidiaries.
The businesses that are owned by the Company through HMH Properties and HMTP
are described below next to the boxes designated "HMH Properties, Inc. and
Subsidiaries" and "Host Marriott Travel Plazas, Inc. and Subsidiaries." The
"Retained Business," which is owned by the Company either directly or through
one or more of the Retained Business Subsidiaries and HMC Ventures, Inc., is
described next to the box designated "Host Marriott Corporation." The following
chart should be read in conjunction with the narrative description set forth in
"Business and Properties." References to airports, tollroads, stadiums, arenas
and tourist attractions indicate Host/Travel Plazas concessions at such
facilities. All unit counts listed below are as of January 19, 1994. See
"Prospectus Summary--Recent Developments--Acquisitions."

The Retained Business (a)
14 Full Service Hotels(b)(c)
9 Airports
Host Marriott Corporation 6 Tollroads
(Old Notes Issuer) 3 Stadiums and arenas
30 Restaurants
33 Partnership Investments
1 Undeveloped Land Parcel

HMC HMC HMH Holdings, Inc. Retained
Acquisitions, Ventures, (New Notes Guarantor) Business
Inc. Inc. (Credit Agreement Borrower) Subsidiaries

Host Marriott Hospitality, Inc.
(New Notes Issuer) (d)

11 Full Service Hotels HMH Properties, Host Marriott 64 Airports
54 Courtyard Hotels Inc. and Travel Plazas, Inc. 8 Tollroads
18 Residence Inns Subsidiaries (g) and Subsidiaries (h) 39 Major
30 Fairfield Inns (e) (New Notes (New Notes tourist
14 Senior Living Guarantors) Guarantors) attractions,
Facilities (f) stadiums
65 Undeveloped Land Parcels and arenas
3 Full Service
Hotels
24 Restaurants

- ----------------
(a) The Retained Business is owned by either the Company or one of the Retained
Business Subsidiaries, and excludes 11 Residence Inns that were
deconsolidated from the Company's balance sheet in the fourth quarter.
(b) Includes (i) two hotels under development, with one scheduled for
completion in the first quarter of 1995 and one scheduled for completion in
the first quarter of 1996 and (ii) the New York Marriott Marquis which was
consolidated by the Company in the fourth quarter of fiscal 1993.
(c) Includes the Ft. Lauderdale Marina Marriott hotel which was recently
acquired by HMC Ventures, Inc.
(d) The New Notes are guaranteed by Holdings and all material subsidiaries of
Hospitality, and are secured by a pledge of the stock of Hospitality and
its material subsidiaries other than Marriott Financial Services, Inc.
(e) The Company has executed a non-binding letter of intent to sell 26 of these
Fairfield Inns. See "Prospectus Summary--Recent Developments--
Dispositions."
(f) Includes a senior living facility under development and scheduled for
completion in January 1994.
(g) Includes HMH Courtyard Properties, Inc., Marriott Financial Services, Inc.
and HMC Retirement Properties, Inc.
(h) Includes Host International, Inc., Gladieux Corporation and Marriott Family
Restaurants, Inc.

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FINANCING

The following is a summary of important terms of certain indebtedness and
financing arrangements of the Company and its subsidiaries. For more complete
information regarding such documents, reference is made to the definitive
agreements and instruments governing such indebtedness and financing
arrangements, copies of which have been filed as exhibits to, or incorporated
by reference in, the Registration Statement of which this Prospectus is a part,
and which are incorporated by reference herein.

NEW NOTES

Hospitality issued $1.2 billion in aggregate principal amount of New Notes in
the Exchange Offer. Each series of New Notes is secured by a pledge of all of
the capital stock of Hospitality, HMH Properties, HMTP and certain of their
subsidiaries, and is guaranteed (the "Guarantees") by Holdings, HMH Properties,
HMTP and their material subsidiaries (the "Guarantors"). The New Notes were
issued in series with an average maturity of 11.3 years. The weighted average
interest rate on the New Notes is 10.5%. The New Notes are senior obligations
of Hospitality and the Guarantees are senior obligations of the Guarantors. The
New Note Indenture contains covenants that, among other things, (i) limit the
ability of Hospitality to pay dividends and make other distributions and
restricted payments, (ii) limit the ability of Hospitality and its subsidiaries
to incur additional debt, (iii) limit the ability of Hospitality and its
subsidiaries to create additional liens on their respective assets, (iv) limit
the ability of the subsidiaries of Hospitality to incur debt and issue
preferred stock, (v) limit the ability of Hospitality and its subsidiaries to
engage in certain transactions with related parties, (vi) limit the ability of
each subsidiary of Hospitality to enter into agreements restricting such
subsidiary in paying dividends or making certain other payments and (vii) limit
the activities and businesses of Holdings.

Under certain circumstances, Hospitality is required to redeem all or a
portion of the New Notes with the proceeds of Refinancing Indebtedness (as
defined in the New Note Indenture) incurred by Hospitality or its subsidiaries,
and with certain proceeds of the sale of equity interests of HMTP and/or its
subsidiaries, at a redemption price of (i) 100% of the aggregate principal
amount of such notes plus accrued and unpaid interest thereon, if the
Comparable Interest Rate (as defined in the New Note Indenture) of this
Refinancing Indebtedness (or, in the case of the sale of equity interests,
certain Refinancing Indebtedness incurred substantially contemporaneously
therewith) is not less than the interest rate of the notes redeemed or if the
notes redeemed mature within 18 months, or (ii) otherwise, 103% of the
aggregate principal amount of such notes plus accrued and unpaid interest
thereon. Hospitality is also required, under certain circumstances, to redeem
and offer to repurchase New Notes upon the sale of certain assets of
Hospitality or its subsidiaries, with up to 75% of the net proceeds of such
asset sales, at a redemption/repurchase price of 100% of the aggregate
principal amount of such notes plus accrued and unpaid interest thereon. In
addition, each holder of the New Notes has the right to require Hospitality to
repurchase the New Notes of such holder, at 101% of their aggregate principal
amount plus accrued and unpaid interest thereon, upon the occurrence of certain
events constituting a Change of Control as defined under the New Note
Indenture.

OLD NOTES

The Company has $231 million in aggregate principal amount outstanding of Old
Notes. The Old Notes are senior obligations of the Company. The Old Notes were
issued in series and have an average maturity of 4.2 years. The weighted
average interest rate on the Old Notes is 9.0%, exclusive of the impact of
interest rate swaps. The Old Note Indenture contains certain covenants that,
among other things, limit the ability of the Company to (i) create liens on its
assets and (ii) enter into certain sale and leaseback transactions.

CREDIT AGREEMENT

Marriott International and Holdings have entered into a Credit Agreement
pursuant to which Holdings has the right to borrow from Marriott International
up to $630 million to fund (i) obligations under certain

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guarantees made by the Company, (ii) specified recourse debt of the Company and
its subsidiaries (including the New Notes at maturity), (iii) repayment of
interest on amounts borrowed under the Credit Agreement and on specified
recourse debt of the Company and its subsidiaries (including the New Notes),
(iv) the Company's allocable portion (maximum of approximately $20 million as
of the date of the notice of redemption) of the amounts payable on the LYONs
due to a Marriott International initiated call of LYONs (see "Relationship
Between the Company and Marriott International--LYONs Allocation Agreement"),
(v) certain capital expenditures under commitments to construct the
Philadelphia Airport hotel (to the extent not funded by an existing $40 million
credit facility) and Philadelphia Marriott hotel (the "Philadelphia Convention
Center hotel") (to the extent not funded under the Philadelphia Mortgage
(defined below)) and Port St. Lucie and Boca Point, Florida senior living
service facilities, and (vi) other Marriott International approved capital
expenditures or guarantees of the Company. The line of credit established by
the Credit Agreement will be available through August 2007 (or, if earlier, the
date when no New Notes are outstanding), with final maturity one year
thereafter. Holdings will pay Marriott International a commitment fee equal to
one percent per year on any unborrowed amounts. Additionally, any such
borrowings are guaranteed by, or secured by the pledge of the stock of, certain
subsidiaries of the Company, other than Hospitality or any of Hospitality's
subsidiaries.

Borrowings under the Credit Agreement bear interest at a floating rate equal
to the London Interbank Borrowing Rate ("LIBOR") (as defined in the Credit
Agreement) plus 400 basis points (provided that any interest in excess of 10.5
percent per annum will be deferred until maturity and will not reduce
availability under the Credit Agreement). Outstanding borrowings must be
reduced or repaid out of Net Cash Flow (as defined in the Credit Agreement), on
an annual basis, with respect to fiscal year 1994, and on a quarterly basis
thereafter. Amounts repaid may be reborrowed for the purposes specified in the
Credit Agreement during the commitment term, subject to availability under the
commitment (which is $630 million, subject to reduction to the extent that the
sum of outstanding borrowings plus the principal amount of New Notes
outstanding is less than $630 million).

The Credit Agreement imposes certain restrictions on the ability of the
Company and the Retained Business Subsidiaries to incur additional debt, impose
liens or mortgages on their properties (other than various types of liens
arising in the ordinary course of business), extend new guarantees (other than
replacement guarantees), pay dividends, repurchase their common stock, make
investments and incur capital expenditures. New debt is generally restricted to
refinancing debt, non-recourse secured debt with a loan to value ratio of not
less than 50% and certain types of subordinated debt. Liens and mortgages
securing debt, other than existing liens and replacements of existing liens in
connection with a debt refinancing, are generally limited to liens securing the
new non-recourse secured debt described above. New guarantees of the Company's
and its subsidiaries' debt, with an aggregate guarantee liability of not more
than $150 million, are permitted, to the extent that each such guarantee
supports no more than 20% of the principal amount of new non-recourse secured
debt to which it relates and the principal amount of such debt is not greater
than 70% of the value of the property which secures it. Dividends and
distributions on stock (other than dividends on the Company's existing
preferred stock, which are permitted), repurchases of stock, capital
expenditures (other than expenditures to maintain existing assets and business
operations), investments in persons other than subsidiaries and certain other
restricted payments by the Company and the Retained Business Subsidiaries are
generally prohibited (subject to specified exceptions), so long as there are
any outstanding advances under the Credit Agreement. When no advances are
outstanding under the Credit Agreement and the Company and the Retained
Business Subsidiaries have adequately reserved for debt maturities over a 6-
month term, (i) capital expenditures and additional investments to acquire
entities engaged in the Ownership Business and the Host/Travel Plazas Business
are generally permitted and (ii) such restricted payments as would otherwise be
prohibited are permitted in the amount by which aggregate EBITDA of the Company
and the Retained Business Subsidiaries (unconsolidated with Hospitality) and
the proceeds of specified stock issuances exceed 170% of the aggregate of
certain specified charges. Other covenants under the Credit Agreement restrict
the ability of the Company and the Retained Business Subsidiaries to enter into
new leases (other than in the ordinary course of business), sell assets (except
for fair market value and, subject to certain

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<PAGE>

exceptions, for at least 75% cash consideration), issue new preferred stock,
prepay indebtedness (other than in connection with refinancings, prepayments of
LYONs and other specified exceptions), merge or consolidate with other entities
or change the nature of their business.

If an event of default (as defined in the Credit Agreement) occurs and is
continuing, Marriott International is entitled to certain specified remedies,
including the right to foreclose on its security interest in the stock of
certain of the Retained Business Subsidiaries and the right to require Net Cash
Flow (which includes proceeds of stock issuances) of the Company and the
Retained Business Subsidiaries to be turned over on a quarterly basis to
Marriott International, to be used to repay all advances under the Credit
Agreement with the remainder to be held by Marriott International in trust as
security for future such advances until all events of default cease to exist.
However, prior to August 2007 (or such earlier date as no New Notes are
outstanding) Marriott International will not be entitled to (i) accelerate the
maturity of amounts due under the Credit Agreement (other than upon the
occurrence of certain bankruptcy events, or the acceleration of the maturity of
the New Notes as a result of an event of default under the New Note Indenture)
or (ii) foreclose on its security interest in the stock of Holdings.

In connection with the Offerings, Marriott International and the Company have
entered into an amendment to the Credit Agreement, that will (i) permit the
Company to use the proceeds of the Offerings to capitalize HMC Acquisitions,
Inc. ("HMC Acquisitions"), a new subsidiary formed to make acquisitions, and
(ii) exempt such proceeds from the mandatory repayment provisions of the Credit
Agreement. HMC Acquisitions will be permitted to incur indebtedness and to
reinvest its Net Cash Flow (including proceeds from asset sales) in its ongoing
businesses and/or new acquisitions, except that, when the outstanding balance
under the Credit Agreement exceeds $450 million, then HMC Acquisitions will be
required to use Net Cash Flow (plus any unused portion of the net proceeds from
the Offerings) to repay balances under the Credit Agreement and will be
restricted in developing or acquiring new assets.

RELATIONSHIP BETWEEN THE COMPANY AND
MARRIOTT INTERNATIONAL

For the purpose of governing certain of the ongoing relationships between the
Company and Marriott International after the Distribution and to provide
mechanisms for an orderly transition, the Company and Marriott International
have entered into various agreements and have adopted policies, as described in
this section. The Company believes that the agreements are fair to both parties
and contain terms which generally are comparable to those which would have been
reached in arms-length negotiations with unaffiliated parties (although
comparisons are difficult with respect to certain agreements, such as the LYONs
Allocation Agreement, which relate to the specific circumstances of the
Distribution). In many cases (such as with the Lodging Management Agreements,
the Senior Living Services Lease Agreements and the Transitional Services
Agreements), the agreements were based on agreements that the Company has in
fact negotiated with third parties. In other cases (such as the Distribution
Agreement and the Tax Sharing Agreement), the agreements are comparable to
those used by others in similar situations. In each case the terms of these
agreements were reviewed by individuals who are at a senior management level in
the Company and by individuals who are at a senior management level in Marriott
International.

The following are summaries of the principal terms of most such agreements
and do not purport to be complete. The following summaries are qualified in
their entirety by reference to the actual agreements which have been previously
filed by the Company with the Securities and Exchange Commission.

DISTRIBUTION AGREEMENT

Prior to the Distribution, the Company and Marriott International entered
into the Distribution Agreement, which provided for, among other things, (i)
certain asset transfers to occur prior to the

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Distribution (the "Assets Transfers"), (ii) the Distribution, (iii) the
division between the Company and Marriott International of certain liabilities
and (iv) certain other agreements governing the relationship between the
Company and Marriott International following the Distribution.

Subject to certain exceptions, the Distribution Agreement provides for, among
other things, assumptions of liabilities and cross-indemnities designed to
allocate, effective as of the Distribution, financial responsibility for the
liabilities arising out of or in connection with the Management Business to
Marriott International and its subsidiaries, and financial responsibility for
the liabilities arising out of or in connection with the Ownership Business and
Host/Travel Plazas Business, along with the Company's liabilities under a
substantial portion of its pre-existing financing and long-term debt
obligations, to the Company and its retained subsidiaries. The agreements
executed in connection with the Distribution Agreement also set forth certain
specific allocations of liabilities between the Company and Marriott
International.

To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides
that, until the second anniversary of the Distribution, Marriott International
must obtain an opinion of counsel reasonably satisfactory to the Company or a
supplemental tax ruling before Marriott International may make certain material
dispositions of its assets, engage in certain repurchases of Marriott
International capital stock or cease the active conduct of its business
independently, with its own employees and without material changes. The Company
must also obtain an opinion of counsel reasonably satisfactory to Marriott
International or a supplemental tax ruling before the Company may engage in
similar transactions during such period. The Company does not expect these
limitations to inhibit significantly its operations, growth opportunities or
its ability to respond to unanticipated developments.

Under the Distribution Agreement, Marriott International has a right (the
"Marriott International Purchase Right") to purchase up to 20% of each class of
the Company's voting stock (determined after assuming full exercise of the
right) at its then fair market value (based on an average of trading prices
during a specified period), upon the occurrence of certain specified events
generally involving a change in control of the Company. The Marriott
International Purchase Right terminates on the tenth anniversary of the
Distribution. The Marriott International Purchase Right may have certain
antitakeover effects as described in "Antitakeover Effects of Certain
Provisions of the Company's Certificate and Bylaws and the Marriott
International Purchase Right."

In addition, under the Distribution Agreement, Marriott International has a
right of first offer if the Company decides to sell all or any substantial
portion of the Host/Travel Plazas Business. Pursuant to such right, prior to
selling all or a substantial portion of the Host/Travel Plazas Business to any
third-party, the Company must first offer to sell the Host/Travel Plazas
Business (or applicable portion thereof) to Marriott International. If Marriott
International declines to purchase the Host/Travel Plazas Business at a price
established by the Company, the Company will be free to sell such business for
a specified period of time to an unrelated third-party at a price at least
equal to 95% of the price offered to Marriott International and on terms and
conditions substantially consistent with those offered to Marriott
International. The right of first offer with respect to the Host/Travel Plazas
Business will terminate on the tenth anniversary of the Distribution.
Notwithstanding the foregoing, the Company has no plan or intention to sell or
dispose of all or any significant portion of the Host/Travel Plazas Business.

LODGING MANAGEMENT AGREEMENTS

Marriott International and certain of its subsidiaries entered into
management agreements with the Company and certain of its subsidiaries (the
"Lodging Management Agreements") to manage the Marriott Hotels, Resorts and
Suites, Courtyard hotels, Residence Inns and Fairfield Inns owned by the
Company and its subsidiaries. There are four types of Lodging Management
Agreements corresponding to each line of Marriott lodging facilities. The terms
of each type of Lodging Management Agreement reflect market terms and
conditions and are substantially similar to the terms of recently negotiated
management agreements with

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third-party owners regarding lodging facilities of the same type. A separate
agreement was entered into with respect to each individual lodging facility, or
in certain cases a group of lodging facilities, based on the appropriate form
of Lodging Management Agreement for lodging facilities of such type, with
appropriate adjustments made for properties subject to ground leases, existing
mortgages or covenants, conditions and other special factors relating to a
particular lodging facility. Each Lodging Management Agreement has an initial
term of 20 years and, at the option of Marriott International, may be renewed
for up to three additional terms of ten years each, aggregating 30 years, for a
total term of up to 50 years. Each Lodging Management Agreement for the
Courtyard hotels, Fairfield Inns and Residence Inns (but not full service
hotels) is also subject to the terms of a Consolidation Agreement (the
"Consolidation Agreement") entered into between Marriott International and the
Company, pursuant to which (i) certain fees payable under the Lodging
Management Agreement with respect to a particular lodging facility will be
determined on a consolidated basis with certain fees payable under the Lodging
Management Agreements for all lodging facilities of the same type, and (ii)
certain base fees payable under Lodging Management Agreements with respect to a
particular lodging facility will be waived in return for payment of an
incentive fee upon the sale of such facility. In general, properties remain
subject to the Lodging Management Agreement upon the sale of such property to
third parties. The principal terms of the four types of Lodging Management
Agreements, along with the Consolidation Agreement, are summarized below.

Marriott Hotels, Resorts and Suites. The form of Lodging Management Agreement
for full service hotels in the Marriott Hotels, Resorts and Suites line
provides for a base management fee equal to three percent of annual gross
revenues plus an incentive management fee equal to 50 percent of "Available
Cash Flow" for each fiscal year (provided that the cumulative incentive
management fee may not on any date exceed 20 percent of the cumulative
operating profit of the hotel from the Distribution through such date).
"Available Cash Flow" is defined to be the excess of "Operating Profit" over
the "Owner's Priority." "Operating Profit" is defined generally in all forms of
Lodging Management Agreements as gross revenues, less all ordinary and
necessary operating expenses, including all base and system fees and
reimbursement for certain system-wide operating costs ("Chain Services"), as
well as a deduction to fund a required reserve for furniture, fixtures and
equipment, before any depreciation or amortization or similar fixed charges.
"Owner's Priority" in all forms of Lodging Management Agreements is derived
from an agreed upon base amount assigned to each lodging facility. Marriott
International is also entitled to reimbursement for certain costs attributable
to Chain Services of Marriott International. The Company has the option to
terminate the agreement if specified performance thresholds regarding Operating
Profit are not satisfied and if specified revenue market share tests are not
met (provided that Marriott International can elect to avoid such termination
by making cure payments to the extent necessary to allow the specified
Operating Profit thresholds to be satisfied).

Limited Service Hotels. The forms of Lodging Management Agreements for
Courtyard hotels, Residence Inns and Fairfield Inns provide for a system fee
equal to three percent (in the case of Courtyard hotels and Fairfield Inns) or
four percent (in the case of Residence Inns) of annual gross revenue, and a
base fee equal to two percent of annual gross revenues. The base fee is
deferred in favor of the Owner's Priority, and in any fiscal year in which the
base fee is greater than Operating Profit (prior to deduction of the base fee)
less Owner's Priority, the excess base fee is deferred, to be paid in a
subsequent fiscal year out of excess Operating Profit. Owner's Priority and
Operating Profit are determined in substantially the same manner as described
above for Marriott Hotels, Resorts and Suites. In addition, the agreements
provide for an incentive management fee equal to 50 percent of "Available Cash
Flow" for each fiscal year (provided that the cumulative incentive management
fee may not on any date exceed 20 percent of the cumulative Operating Profit of
the hotel through such date). "Available Cash Flow" is defined to be the excess
of Operating Profit (after deduction of the base fee, including any portion of
the base fee that is deferred or waived) over the Owner's Priority. Under such
forms of agreement, Marriott International is also entitled to reimbursement
for certain costs attributable to Chain Services of Marriott International. The
Company or its subsidiaries have the option to terminate the agreement if
specified performance thresholds regarding Operating Profit are not satisfied
and if specified revenue market share tests are not met (provided that Marriott
International

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can elect to avoid such termination by making cure payments to the extent
necessary to allow the specified Operating Profit thresholds to be satisfied).

Consolidation Agreement. Each Lodging Management Agreement for the Courtyard
hotels, Fairfield Inns and Residence Inns (but not full service hotels) is
subject to the terms of the Consolidation Agreement. Pursuant to the
Consolidation Agreement, certain revenues, expenses and fees payable under the
Lodging Management Agreements for Courtyard hotels, Residence Inns and
Fairfield Inns are consolidated by product line as set forth below. With
respect to any Courtyard hotels, Residence Inns or Fairfield Inns managed by
Marriott International under a Lodging Management Agreement, for so long as the
Company has not sold or financed any such lodging facility, then the
calculations, distributions and dispositions of gross revenues, reserves, base
fees, Owner's Priority, incentive management fees and system fees under the
Lodging Management Agreement with respect to such lodging facility will be
determined and reported on an aggregate basis, together with all such
facilities governed by a Lodging Management Agreement in the same product line.
After any such lodging facility is sold or financed, the Consolidation
Agreement will no longer be applicable to such facility, and the gross
revenues, reserves, base fee, Owner's Priority, incentive management fee and
system fee for such facility will be determined solely in accordance with the
Lodging Management Agreement applicable to such facility.

In addition, pursuant to the terms of the Consolidation Agreement, the base
fee payable under the Lodging Management Agreements (other than Lodging
Management Agreements for full service hotels) is modified as set forth below.
Until December 31, 2000, in lieu of the base fees payable to Marriott
International with respect to the Courtyard hotels, Residence Inns and
Fairfield Inns managed by Marriott International under a Lodging Management
Agreement, Marriott International will receive a "Bonus Incentive Fee" upon the
sale of any of such facilities by the Company. The "Bonus Incentive Fee" is
defined to be 50 percent of the "Net Excess Sale Proceeds" resulting from the
sale of such facility (provided that the Bonus Incentive Fee shall not exceed
two percent of the cumulative gross revenues of such facility, from the date of
inception of the Lodging Management Agreement for such facility through the
earlier of December 31, 2000 or the date of sale). "Net Excess Sale Proceeds"
is defined to be the gross property sales price for the facility less (i) the
reasonable costs incurred by the Company in connection with the sale and (ii) a
base amount assigned to each lodging facility. Any future owners of such
facility, and the Company to the extent that it retains ownership of such
facility after December 31, 2000, will not be subject to the foregoing terms
and will be required to pay to Marriott International the base fee as set forth
in the Lodging Management Agreement applicable to such facility.

SENIOR LIVING SERVICES LEASE AGREEMENTS

Marriott International has entered into lease agreements with the Company
(the "Senior Living Services Lease Agreements") to operate the 14 senior living
facilities (including one under development) owned by the Company and its
subsidiaries. Under the terms of the Senior Living Services Lease Agreements,
Marriott International will pay or reimburse the Company for all costs and
expenses (including property taxes) associated with the facilities, and in
addition will pay the Company (i) fixed rentals, aggregating $28 million a year
for all 14 facilities and (ii) additional rentals equal to 4.5 percent of
annual revenues from operation of the facilities in excess of $72 million per
annum beginning in 1994. The Senior Living Services Lease Agreements have
initial terms of 20 years with renewal options aggregating 20 years and contain
other terms and conditions customary for "triple net" leases.

CREDIT AGREEMENT

Marriott International and Holdings have entered into a Credit Agreement
pursuant to which Holdings has the right to borrow from Marriott International
up to $630 million. For a description of the Credit Agreement, see "Financing--
Credit Agreement."

PHILADELPHIA MORTGAGE

Marriott International is providing first mortgage financing for the
Philadelphia Marriott hotel (the "Philadelphia Convention Center Hotel") to be
constructed by the Company pursuant to a mortgage

36
<PAGE>

financing agreement (the "Philadelphia Mortgage") entered into between the
Company and Marriott International. The Philadelphia Mortgage will provide for
the funding of a portion (approximately 60 percent) of the construction and
development costs of such hotel, as and when such costs are incurred, up to a
maximum of $125 million of fundings. The Philadelphia Mortgage (i) is a two-
year construction loan, convertible into a two-year "mini-perm" facility upon
completion of construction, carrying a floating interest rate of LIBOR plus 300
basis points, and (ii) will, upon maturity of the two-year mini-perm, fund into
a ten-year term loan, bearing cash-pay interest at the rate of ten percent per
annum, plus deferred interest of two percent per annum. The Philadelphia
Mortgage is due on sale of the property (or any majority interest therein) and
is subject to other terms and conditions customary for mortgage financings.

LYONS ALLOCATION AGREEMENT

Marriott Corporation issued $675,000,000 principal amount of LYONs, with an
accreted value as of September 10, 1993 of approximately $241,000,000. Pursuant
to the LYONs Allocation Agreement, Marriott International assumed 90 percent of
the debt obligations evidenced by the LYONs ("Marriott International's
Allocable Portion"). The Company retained responsibility for the remainder of
the debt obligations evidenced by the LYONs ("Host Marriott's Allocable
Portion"). LYONs holders exercising their conversion rights are entitled to
receive 13.277 shares of Common Stock plus 13.277 shares of Marriott
International common stock in exchange for each $1,000 principal amount of
LYONs. Accordingly, Marriott International and the Company share, in accordance
with the foregoing percentages, responsibility for all increases in the
accreted value of the LYONs and all payment obligations at maturity or pursuant
to an exercise of issuer call rights or holder put rights, and each of the
Company and Marriott International will issue shares of its own stock in
satisfaction of any exercise by the LYONs holders of their conversion rights.
Notwithstanding Marriott International's assumption of such obligations,
however, all payments made by Marriott International on the LYONs will be
deemed to have been made on account of the Company's obligations to the holders
of the LYONs and will be subject to the subordination provisions of the LYONs
Indenture with respect to the relative rights of the holders of the LYONs and
the holders of the Company's Senior Indebtedness (as defined in the LYONs
Indenture). The LYONs Allocation Agreement further provides that (i) the
Company will not initiate a call of LYONs for redemption without the prior
approval of Marriott International and (ii) the Company will call the LYONs for
redemption at the request of Marriott International provided that, at the
Company's request, Marriott International will supply the funds required to
satisfy the Company's Allocable Portion of the amounts payable on the LYONs
called for redemption, in the form of an advance under the Credit Agreement.

In December 1993, Marriott International exercised its rights under the LYONs
Allocation Agreement to require the Company to call the LYONs for redemption.
The Company has initiated a call of the LYONs and the LYONs will be redeemed on
January 25, 1994, unless prior to such time holders exercise their conversion
rights. The aggregate redemption price for all LYONs as of the redemption date
will be approximately $197 million of which approximately $177 million is
payable by Marriott International. The LYONs are redeemable at $367.60 per
$1,000 principal amount and are convertible into 13.277 shares of Common Stock
and 13.277 shares of Marriott International common stock per $1,000 principal
amount. Based on current market prices of the Common Stock and the Marriott
International common stock, the Company expects that most holders will elect to
convert LYONs into Common Stock and Marriott International common stock prior
to redemption. If all of the LYONs holders elected to convert prior to
redemption, LYONs holders would receive approximately 7.1 million shares of
Common Stock upon conversion. To the extent LYONs are redeemed for cash,
Marriott International will fund 90% of the redemption price pursuant to the
terms of the LYONs Allocation Agreement.

TAX SHARING AGREEMENT

The Company and Marriott International have entered into a tax sharing
agreement (the "Tax Sharing Agreement") that defines the parties' rights and
obligations with respect to deficiencies and refunds of federal,

37
<PAGE>

state and other income or franchise taxes relating to the Company's businesses
for tax years prior to the Distribution and with respect to certain tax
attributes of the Company after the Distribution. In general, with respect to
periods ending on or before the last day of 1993, the Company is responsible
for (i) filing both consolidated federal tax returns for the Company affiliated
group and combined or consolidated state tax returns for any group that
includes a member of the Company affiliated group, including in each case
Marriott International and its subsidiaries for the relevant periods of time
that such companies were members of the applicable group, and (ii) paying the
taxes relating to such returns (including any subsequent adjustments resulting
from the redetermination of such tax liabilities by the applicable taxing
authorities). Marriott International will reimburse the Company for the portion
of such taxes relating to the Management Business. Marriott International is
responsible for filing returns and paying taxes related to the Management
Business for subsequent periods. The Company and Marriott International have
agreed to cooperate with each other and to share information in preparing such
tax returns and in dealing with other tax matters.

HOST CONSULTING AGREEMENT

Pursuant to the Host Consulting Agreement, Marriott International has agreed
to provide certain consulting and advisory services to the Company and its
subsidiaries with respect to certain operational matters involving the
Host/Travel Plazas Business. The Host Consulting Agreement has an annual base
fee of $500,000 and runs for an initial three-year term and thereafter will
automatically renew for additional one-year terms unless cancelled by either
party. If services under the Host Consulting Agreement require more than 500
employee-hours, Marriott International will be paid an additional amount equal
to 200 percent of the hourly compensation payable to the employee providing
such consulting services. The Host Consulting Agreement reflects the fact that
the Host/Travel Plazas Business has in the past been included within the
Company's contract services segment, most of which was transferred to Marriott
International. Accordingly, certain of the key executive employees of the
contract services group who were transferred to Marriott International will
continue to provide certain advisory services to the management of the Company
with respect to operating and personnel matters.

ASSIGNMENT AND LICENSE AGREEMENT

Pursuant to the terms of an Assignment and License Agreement, all of the
Company's right, title and interest in certain trademarks, including the
trademarks "Marriott," "Courtyard," "Residence Inns by Marriott" and "Fairfield
Inns by Marriott," were conveyed to Marriott International. The Company and its
subsidiaries have been granted a license to use such trademarks in their
corporate names and in connection with the Host/Travel Plazas Business, subject
to specified terms and conditions.

NONCOMPETITION AGREEMENT

The Company and Marriott International entered into a noncompetition
agreement (the "Noncompetition Agreement") that defines the parties' rights and
obligations with respect to certain businesses operated by Marriott
International and the Company. Under the Noncompetition Agreement, the Company
and its subsidiaries are prohibited from entering into, or acquiring an
ownership interest in any entity that operates, any business that (i) competes
with the food and facilities management business as conducted by a former
subsidiary of the Company, Marriott Management Services, Inc. ("MMS," with such
business being referred to as the "MMS Business"), provided that such
restrictions do not apply to businesses that constitute part of the Host/Travel
Plazas Business as of the Distribution or (ii) competes with the hotel
management business as conducted by Marriott International with, however,
certain exceptions as to acquired hotel properties or systems having existing
management. Marriott International is prohibited from entering into, or
acquiring an ownership interest in any entity that operates any business that
competes with the Host/Travel Plazas Business, provided that such restrictions
do not apply to businesses that constitute part of the MMS Business as of the
Distribution. The Noncompetition Agreement has a seven-year term that commenced
on the Distribution.

38
<PAGE>

TRANSITIONAL SERVICES AGREEMENTS

Marriott International and the Company entered into a number of agreements
pursuant to which Marriott International has agreed to provide certain
continuing services to the Company and its subsidiaries for a transitional
period. Such services are to be provided on market terms and conditions.
Subject to the termination provisions of the specific agreements, the Company
and its subsidiaries are free to procure such services from outside vendors or
may develop an in-house capability in order to provide such services
internally. The Company believes that these agreements are based on
commercially reasonable terms including pricing and payment terms. In general,
the transitional services agreements can be kept in place at least through
1997. The Company has the right to terminate such agreements upon giving 180
day (or less) notice.

POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS

The on-going relationships between Marriott International and the Company may
present certain conflict situations for Messrs. J.W. Marriott, Jr. and Richard
E. Marriott, as J.W. Marriott, Jr. serves as Chairman of the Board of Directors
and President of Marriott International and also serves as a director of the
Company and Richard E. Marriott serves as Chairman of the Board of Directors of
the Company and also serves as a director of Marriott International. Messrs.
J.W. Marriott, Jr. and Richard E. Marriott, as well as other executive officers
and directors of the Company and Marriott International, also own (or have
options or other rights to acquire) a significant number of shares of common
stock in both the Company and Marriott International. The Company and Marriott
International have adopted appropriate policies and procedures to be followed
by the Board of Directors of each company to limit the involvement of Messrs.
J.W. Marriott, Jr. and Richard E. Marriott (or such other executive officers
and directors having a significant ownership interest in both companies) in
conflict situations, including matters relating to contractual relationships or
litigation between the companies. Such procedures include requiring Messrs.
J.W. Marriott, Jr. and Richard E. Marriott (or such other executive officers or
directors having a significant ownership interest in both companies) to abstain
from making management decisions in their capacities as officers of Marriott
International and the Company, respectively, and to abstain from voting as
directors of either company, with respect to matters that present a significant
conflict of interest between the companies. Whether or not a significant
conflict of interest situation exists is determined on a case-by-case basis
depending on such factors as the dollar value of the matter, the degree of
personal interest of Messrs. J.W. Marriott, Jr. or Richard E. Marriott (or such
other executive officers and directors having a significant ownership interest
in both companies) in the matter, the interests of the shareholders of the
Company and the likelihood that resolution of the matter has significant
strategic, operational or financial implications for the business of the
Company. It is a principal responsibility of the general counsel of the Company
to monitor this issue in consultation with the Audit Committee of the Board of
Directors. See "Risk Factors--Potential Conflicts with Marriott International."

39
<PAGE>

MANAGEMENT

BOARD OF DIRECTORS

Current Board of Directors. The Company's Board of Directors consists of
seven directors divided into three classes, one class consisting of three
directors and two classes consisting of two directors. Each director serves for
a three-year term. Set forth below is information with respect to those
individuals serving as directors of the Company.

Recent Changes in the Board of Directors. The Company's Board of Directors
formerly consisted of nine members: J. W. Marriott, Jr. (Chairman), Richard E.
Marriott, Alice S. Marriott, Harry L. Vincent, Jr., Sterling D. Colton, Gilbert
M. Grosvenor, Floretta Dukes McKenzie, R. Theodore Ammon and W. Mitt Romney. In
connection with the consummation of the Distribution, Mr. J. W. Marriott, Jr.
resigned as Chairman of the Board of Directors (although he remains a director)
and was replaced as Chairman by Mr. R. E. Marriott. Additionally, in connection
with the consummation of the Distribution, Mr. Colton, Mr. Grosvenor, Mrs.
Marriott, Ms. McKenzie and Mr. Romney each resigned as a director. Mrs.
Marriott, co-founder of the Company, was appointed Director Emeritus by the
Board of Directors.

On October 15, 1993 the Board of Directors, acting on the recommendation of
its Nominating and Corporate Governance Committee, appointed the Honorable
Andrew J. Young as a director of the Company. On December 2, 1993 the Board of
Directors, acting on the recommendation of its Nominating and Corporate
Governance Committee, appointed each of Anne Dore McLaughlin and Stephen F.
Bollenbach as a director of the Company. Messrs. Young and Bollenbach and Ms.
McLaughlin will each serve an initial term as director expiring at the 1994
Annual Meeting of Shareholders.

<TABLE>
<CAPTION>
TERM
DIRECTOR EXPIRES OTHER POSITIONS
- -------- ------- ---------------
<S> <C> <C>
Richard E. Marriott* 1995 Mr. Marriott is a director of Host Marriott
Chairman of the Board Hospitality, Inc. and certain other subsidiaries
Director since 1979 of the Company. He also serves as a director of
Age: 54 Marriott International, Inc. and of Potomac
Electric Power Company. He also is President of
the National Restaurant Association. For
additional information on Mr. Marriott, see
"Executive Officers" below.
R. Theodore Ammon 1995 Mr. Ammon is a director of Host Marriott Hospital-
Director since 1992 ity, Inc. Mr. Ammon was formerly a general partner
Age: 44 of Kohlberg Kravis Roberts & Co. (a New York and
San Francisco-based investment firm). He also
serves on the boards of Astrum International, Big
Flower Press, Inc., Doskocil Incorporated, the New
York YMCA, the Coro Foundation and Bucknell Uni-
versity.
Stephen F. Bollenbach 1994 Mr. Bollenbach is President and Chief Executive
President and Chief Officer of the Company. He serves as a director of
Executive Officer certain subsidiaries of the Company, Carr Realty
Director since 1993 Corporation and Mid-America Apartment Communities,
Age: 51 Inc. He also serves on the CEO Magazine Advisory
Board. On December 2, 1993, Mr. Bollenbach was ap-
pointed by the Board of Directors to fill a va-
cancy on the Board. For additional information on
Mr. Bollenbach, see "Executive Officers" below.
</TABLE>

40
<PAGE>

<TABLE>
<CAPTION>
TERM
DIRECTOR EXPIRES OTHER POSITIONS
- -------- ------- ---------------
<S> <C> <C>
J.W. Marriott, Jr.* 1996 Mr. Marriott is a director of Host Marriott Hospi-
Director since 1964 tality, Inc. He is also Chairman of the Board and
Age: 61 President of Marriott International, Inc. and di-
rector of General Motors Corporation and Outboard
Marine Corporation. He is a member of the Confer-
ence Board, the Business Council and the Business
Roundtable and serves on the boards of trustees of
The Mayo Foundation, the National Geographic Soci-
ety and the Executive Council on Foreign
Diplomats.
Ann Dore McLaughlin 1994 Ms. McLaughlin is President of the Federal City
Director since 1993 Council and Vice Chairman of the Aspen Institute.
Age: 52 She was formerly President and Chief Executive Of-
ficer of New American Schools Development Corpora-
tion. Ms. McLaughlin has served with distinction
in several U.S. Administrations in such positions
as Secretary of Labor and Under Secretary of the
Department of the Interior. Ms. McLaughlin also
serves as a director of AMR Corporation, General
Motors Corporation, Kellogg Company, Nordstrom,
Potomac Electric Power Company, The Traveler Cor-
poration, Union Camp Corporation and Vulcan Mate-
rials Company. Additionally, Ms. McLaughlin serves
as a member of the governing boards of a number of
civic, non-profit organizations, including The
Public Agenda Foundation and the Conservation
Fund. Ms. McLaughlin is on the Board of Overseers
for the Wharton School of the University of Penn-
sylvania and is a Trustee of the Center for Stra-
tegic and International Studies. On December 2,
1993 Ms. McLaughlin was appointed by the Board of
Directors to fill a vacancy on the Board.
Harry L. Vincent, Jr. 1996 Mr. Vincent is a director of Host Marriott Hospi-
Director since 1969 tality, Inc. Mr. Vincent is a retired Vice Chair-
Age: 74 man of Booz-Allen & Hamilton, Inc.
Andrew J. Young 1994 Mr. Young is Vice Chairman of the Law Companies
Director since 1993 Group, Inc., an engineering and environmental con-
Age: 61 sulting group, and Co-Chairman of the Atlanta Com-
mittee for the Olympic Games. Mr. Young has spent
more than 35 years in public service. He was
elected to three terms in the U.S. Congress, rep-
resenting the Fifth Congressional District of
Georgia. In 1977 he was appointed U.S. Ambassador
to the United Nations. He was elected mayor of At-
lanta, Georgia in 1981, and reelected in 1985. Mr.
Young is a member of several additional boards in-
cluding those of Howard University, The Martin Lu-
ther King, Jr. Center, the Global Infrastructure
Fund and the Center for Global Partnership. He is
also a member of the Georgia Institute of Technol-
ogy advisory board. On October 15, 1993, Mr. Young was
appointed by the Board of Directors to fill a
vacancy on the Board.
</TABLE>
- --------
* J.W. Marriott, Jr. and Richard E. Marriott are brothers.

41
<PAGE>

COMPENSATION POLICY COMMITTEE

The Compensation Policy Committee comprises two directors who are not
employees of the Company or any of its subsidiaries. Prior to the Distribution,
the members of the Compensation Policy Committee were former director Floretta
Dukes McKenzie (Chairperson), Harry L. Vincent, Jr. and former director W. Mitt
Romney. As a result of the resignation of Ms. McKenzie and Mr. Romney in
connection with the Distribution, the current members of the Compensation
Policy Committee are Mr. Vincent (Chairperson) and R. Theodore Ammon. The
committee's functions include recommendations on policies and procedures
relating to senior officers' compensation and various employee stock plans and
approvals of individual salary adjustments and stock awards in those areas.

COMPENSATION OF DIRECTORS

Company directors who are also officers of the Company receive no additional
compensation for their services as directors. Directors who are not officers of
the Company receive an annual retainer fee of $25,000 as well as an attendance
fee of $1,000 for each shareholders meeting, meeting of the Board of Directors
and meeting of a committee thereof, regardless of the number of meetings held
on a given day. The chairperson of each committee of the board of directors
receives an additional annual retainer fee of $1,000. Directors are also
reimbursed for travel expenses and other out-of-pocket costs incurred in
attending meetings.

EXECUTIVE OFFICERS

Set forth below is certain information with respect to the persons who are
executive officers of the Company.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE PRIOR TO BECOMING
NAME AND TITLE AGE AN EXECUTIVE OFFICER OF THE COMPANY
- -------------- --- -------------------------------------
<S> <C> <C>
Richard E. Marriott 54 Richard E. Marriott joined the Company in 1965 and
Chairman of the Board has served in various executive capacities. In
1979, Mr. Marriott was elected to the Board of Di-
rectors. In 1984, he was elected Executive Vice
President and in 1986 he was elected Vice Chairman
of the Board of Directors. In 1993, Mr. Marriott
was elected Chairman of the Board. Mr. Marriott
also has been responsible for management of the
Company's government affairs functions.
Stephen F. Bollenbach 51 Stephen F. Bollenbach rejoined the Company in 1992
Chief Executive Officer as Executive Vice President and Chief Financial
and President Officer. He was named President and Chief Execu-
tive Officer of the Company in 1993. During the
period from 1982 to 1986, Mr. Bollenbach was Se-
nior Vice President--Finance and Treasurer of the
Company. He subsequently served as Chief Financial
Officer of Promus Companies from 1986 to 1990 and
served as Chief Financial Officer with the Trump
Organization from 1990 until he rejoined the Com-
pany.
William W. McCarten 45 William W. McCarten joined the Company in 1979 as
Executive Vice President Vice President and Controller--Corporate Account-
and President-- ing. He was promoted to Vice President and Con-
Host/Travel Plazas troller of the Roy Rogers Division in 1982 and be-
came Vice President--Group Finance in 1984. He was
named Vice President and Corporate Controller in
1985. Mr. McCarten was elected Senior Vice Presi-
dent--Finance and Corporate Controller in 1986. In
1991, he was elected Executive Vice President and
in 1992 was elected President--Host/Travel Plazas.
</TABLE>

42
<PAGE>

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE PRIOR TO BECOMING
NAME AND TITLE AGE AN EXECUTIVE OFFICER OF THE COMPANY
- -------------- --- -------------------------------------
<S> <C> <C>
Matthew J. Hart 41 Matthew J. Hart joined the Company in 1981 as Man-
Executive Vice President ager of Project Finance and was named Vice Presi-
and Chief Financial dent of Project Finance in 1984. He was appointed
Officer Assistant Treasurer in 1987 and was appointed Se-
nior Vice President--Finance and Treasurer in
1991. Mr. Hart was named Executive Vice President
and Chief Financial Officer in 1993. Prior to
joining the Company, Mr. Hart spent five years
with Bankers Trust Company in the corporate lend-
ing division.
Stephen J. McKenna 53 Stephen J. McKenna joined the Company in 1973 as
Senior Vice President an attorney. He was appointed Assistant General
and General Counsel Counsel in 1976, and was promoted to Vice Presi-
dent and Assistant General Counsel in 1986. He be-
came Vice President and Associate General Counsel
in 1990 and became Senior Vice President and Gen-
eral Counsel in 1993. Prior to joining the Compa-
ny, Mr. McKenna was employed as an attorney in the
airline and aircraft manufacturing industries.
Jeffrey P. Mayer 37 Jeffrey P. Mayer joined the Company in 1986 as Di-
Senior Vice President-- rector--Corporate Accounting. He was promoted to
Finance and Corporate Assistant Controller--Corporate Accounting in 1987
Controller and Vice President--Corporate Accounting in 1989.
He was appointed Vice President--Project Finance
in the Company's Treasury Department in 1991 and
Senior Vice President--Finance and Corporate Con-
troller in 1993. Prior to joining the Company, Mr.
Mayer spent eight years with Arthur Andersen & Co.
</TABLE>

EXECUTIVE OFFICER COMPENSATION

Summary of Compensation. Table I below sets forth a summary of the
compensation paid by the Company for the last three fiscal years to its Chief
Executive Officer and four additional most highly compensated executive
officers. With the exception of Mr. McCarten, all such executive officers
assumed their current position effective October 8, 1993. Such information is
also provided for three additional persons for whom disclosure would have been
provided but for the fact that such persons were not serving as executive
officers of the Company at the end of the last fiscal year.

43
<PAGE>

TABLE I

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------- ---------------------------- -------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL FISCAL SALARY(2)(3) BONUS(4) SATION AWARDS(5)(6) OPTIONS PAYOUTS SATION(7)
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------ ------ ------------ -------- ------- ------------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard E. Marriott 1993 227,942 125,369 -- 1,150,080(8) 0 0 8,408
Chairman of the Board 1992 210,000 100,800 -- 21,915 14,500 0 10,078
1991 214,039 101,026 -- 0 16,200 0 7,196
Stephen F. Bollenbach(1) 1993 468,750 328,125 -- 6,469,200(8)(9) 0 0 8,888
Chief Executive Offi- 1992 380,769 255,115 -- 253,200 193,000 0 150,000(10)
cer and President
William W. McCarten 1993 277,348 180,276 -- 1,088,640(8) 0 14,031 10,569
Executive Vice 1992 245,024 115,896 -- 0 23,000 12,102 13,073
President 1991 249,736 157,334 -- 0 25,000 5,544 12,081
Matthew J. Hart 1993 218,977 142,335 -- 1,088,640(8) 0 7,433 9,077
Executive Vice 1992 189,921 123,448 -- 0 16,500 3,996 9,083
President 1991 165,273 63,835 -- 0 13,200 1,344 7,421
Stephen J. McKenna 1993 195,178 126,866 -- 544,500(8) 0 0 6,272
Senior Vice President 1992 178,792 98,336 -- 0 10,000 0 8,829
and General Counsel 1991 171,916 93,694 -- 0 10,800 0 8,034
J.W. Marriott, Jr.(11) 1993 554,904 499,914 -- 0 0 13,697 38,069
Former Chairman of 1992 725,000 617,288 -- 75,799 114,000 0 40,967
the Board and Presi- 1991 738,942 539,428 -- 0 125,000 0 21,151
dent
William J. Shaw(12) 1993 363,558 254,490 -- 0 0 27,958 14,971
Former Executive Vice 1992 471,154 304,837 -- 47,009 68,000 17,174 4,943
President 1991 458,654 309,591 -- 300,000 85,000 7,046 4,800
William R. Tiefel(13) 1993 346,154 242,308 -- 0 0 5,178 10,571
Former Executive Vice 1992 444,231 288,750 -- 44,431 68,000 4,061 21,262
President 1991 331,250 212,000 -- 300,000 60,000 0 14,155
</TABLE>
- --------
(1) Mr. Bollenbach joined the Company as Executive Vice President and Chief
Financial Officer on March 2, 1992.
(2) Fiscal year 1991 base salary earnings were for 53 weeks.
(3) Salary amounts include base salary earned and paid in cash during the
fiscal year and the amount of base salary deferred at the election of the
executive officer under the Company's Employees' Profit Sharing, Retirement
and Savings Plan and Trust (the "Profit Sharing Plan") and the Company's
Executive Deferred Compensation Plan (the "Deferred Compensation Plan').
(4) Bonus includes the amount of cash bonus earned and accrued during the
fiscal year and paid subsequent to the end of each fiscal year. The bonus
awards for fiscal year 1993 are reflected at the maximum possible bonus
award; actual bonus determinations for fiscal year 1993 have not yet been
made and may be in an amount lower than reflected herein.
(5) As part of its long-term compensation program for executive officers, the
Company awards shares of restricted stock pursuant to the Company's 1993
Comprehensive Stock Incentive Plan (the "Comprehensive Stock Plan") and
previously awarded such shares under the Company's Restricted Stock Plan
for Key Employees (the "Company Restricted Stock Plan"), a predecessor plan
to the Comprehensive Stock Plan. On March 10, 1992, eight executive
officers received, in lieu of a salary increase, awards of restricted
common stock totalling 17,000 shares. These shares, including 1,275

44
<PAGE>

shares held by Mr. R.E. Marriott, 4,410 shares held by Mr. J.W. Marriott,
Jr., 2,735 shares held by Mr. Shaw, and 2,585 shares held by Mr. Tiefel,
were distributable at the earlier of the attainment of certain company
financial performance objectives or January 3, 1994. In connection with the
consummation of the Distribution, these awards were distributed on October
8, 1993 without regard for whether the financial performance objectives
were attained.
(6) The aggregate number and value of shares of restricted stock, including
such shares of restricted stock designated as long term incentive awards as
indicated in footnote 8 below, held by each identified executive officer as
of December 31, 1993, were as follows: Mr. R.E. Marriott, 400,000 shares
valued at $3,675,200; Mr. Bollenbach, 1,512,000 shares valued at
$13,892,256; Mr. McCarten, 360,000 shares valued at $3,307,680; Mr. Hart,
360,000 shares valued at $3,307,680; Mr. McKenna, 180,000 shares valued at
$1,653,840; Mr. Shaw, 37,000 shares valued at $333,296 and Mr. Tiefel,
20,000 shares valued at $180,160. Mr. J.W. Marriott, Jr. does not hold
shares of restricted stock. Of the above noted shares, 37,000 shares vest
pro rata over a 10 year period, 952,000 vest pro rata over a five year
period, 500,000 shares vest at the end of a five year period and 1,380,000
shares vest pursuant to certain performance objectives established by the
Compensation Policy Committee. During the period in which any restrictions
apply, holders of restricted stock are entitled to receive all dividends or
other distributions paid with respect to such stock.
(7) With the exception of Mr. Bollenbach's amount for 1992, amounts included as
"All Other Compensation" represent matching Company contribution amounts
received under one or both of the Profit Sharing Plan and the Deferred
Compensation Plan. The amounts of matching Company contributions for fiscal
year 1993 reflect such amounts contributed by the Company in respect of
employee contributions made through October 8, 1993, the date of the
Distribution. Contributions by the Company in respect of employee
contributions for the remainder of fiscal year 1993 have not yet been made.
(8) On October 17, 1993, the Compensation Policy Committee (the "Committee") of
the Board of Directors approved awards of restricted stock to 18 key
employees of the Company, including Mr. McCarten, Mr. Hart and Mr. McKenna.
On October 29, 1993, the Board of Directors approved an award of restricted
stock to Mr. Bollenbach, and on December 2, 1993, the Board of Directors
approved an award of restricted stock to Mr. R.E. Marriott. Each such grant
made in 1993 to the above named officers consists of two portions: shares
subject to restrictions relating primarily to continued employment
("General Restrictions") which vest ratably over a five year period or at
the end of a five-year period and awards subject to additional performance
objectives such as financial performance of the Company ("Performance
Restrictions"). Performance objectives are established by the Committee and
are subject to periodic review and revision. All restricted stock awards
subject only to General Restrictions are presented on Table I as
"Restricted Stock Awards." Restricted stock awards subject to additional
Performance Restrictions are presented as long term incentive ("LTIP")
awards on Table III.
(9) Includes 900,000 shares of restricted common stock awarded to Mr.
Bollenbach by the Board of Directors on October 29, 1993. See footnote 8
above. Pursuant to this award, 400,000 shares are subject to General
Restrictions and vest ratably over a five year period and 500,000 shares
are subject to General Restrictions and vest on the fifth anniversary of
the date of award.
(10) Mr. Bollenbach received a one-time payment of $150,000 pursuant to the
Company's relocation program.
(11) In connection with the Distribution, Mr. J.W. Marriott, Jr. resigned his
positions as Chairman of the Board and President of the Company effective
October 8, 1993. Mr. Marriott remains a director of the Company.
(12) In connection with the Distribution, Mr. Shaw resigned his position as
Executive Vice President and President of the Company's Contract Services
Group effective October 8, 1993. Mr. Shaw had assumed these duties on
February 10, 1992. Prior to such date, Mr. Shaw served as Executive Vice
President and Chief Financial Officer.
(13) In connection with the Distribution, Mr. Tiefel resigned his position as
Executive Vice President effective October 8, 1993.

Aggregated Stock Option Exercises and Year-End Value. Table II below sets
forth, on an aggregated basis, information regarding the exercise during the
1993 fiscal year of options to purchase Common Stock by each of the applicable
persons listed on Table I above and the value on December 31, 1993 of all
unexercised options held by such individuals. The Company did not grant any
stock options to the persons listed on Table I during fiscal year 1993.

45
<PAGE>

TABLE II

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

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS AT
(#)(1) FISCAL YEAR-END ($)(2)
-------------------------- -------------------------
SHARES
ACQUIRED ON VALUE REALIZED
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Marriott..... 0 0 60,475 30,225 301,521 174,720
Stephen F. Bollenbach... 0 0 48,250 144,750 284,142 852,426
William W. McCarten..... 8,000 103,920 127,657 46,250 698,973 254,357
Matthew J. Hart......... 0 0 36,763 22,100 194,741 133,614
Stephen J. McKenna...... 14,000 172,180 83,432 17,525 474,173 110,404
J.W. Marriott, Jr....... 0 0 487,250 236,750 2,389,744 1,365,619
William J. Shaw......... 19,125 231,846 351,125 139,750 1,834,321 834,474
William R. Tiefel....... 6,000 78,600 176,200 105,750 984,222 632,299
</TABLE>
- --------
(1) In connection with the Distribution, and pursuant to the Company's 1976
Employee Stock Option Plan, all Company stock options were adjusted to
reflect the effects of the Distribution. Each non-qualified stock option
held by a Company employee (or retiree) prior to the Distribution was
effectively converted into two separate options: a Company option and a
Marriott International Option, in both cases for a number of shares equal
to the underlying Company option. The exercise price of the underlying
Company option was allocated to the two options pursuant to a formula
designed to preserve the economic value of the underlying Company option
prior to the Distribution. Each incentive stock option held by an employee
remaining a Company employee after the Distribution was adjusted in number
and as to the exercise price in order to preserve the economic value of
each such incentive stock option immediately prior to the Distribution.
(2) Based on a per share price for Common Stock of $9.188. This price
represents the average of the high and low trading prices for a share on
December 31, 1993.

Long-Term Incentive Plan ("LTIP") Awards. Table III below sets forth
information regarding Deferred Stock Bonus Awards, Deferred Stock Agreements
and restricted stock awards subject to certain performance criteria granted by
the Company under the Comprehensive Stock Plan and previously awarded by the
Company under its Deferred Stock Incentive Plan or Restricted Stock Plan for
Key Employees, predecessor plans to the Comprehensive Stock Plan, to the person
listed on Table I above in respect of the 1993 fiscal year.

The number of shares underlying each Deferred Stock Bonus Award is derived by
dividing twenty percent of each individual's cash bonus award by the average of
the high and low trading prices for a share of Common Stock on the last trading
day of the fiscal year. No voting rights or cash dividends are attributed to
award shares until such award shares are distributed. Recipients of Deferred
Stock Bonus Awards listed on Table I may elect to denominate such awards as a
current award ("Current Award") or a deferred award ("Deferred Award").

A Current Award is distributed in ten annual installments commencing one year
after the award is granted. If an employee dies before distribution of all
shares to which the employee is entitled, the remaining shares are distributed
in one distribution to the employee's designated beneficiaries or, in the
absence of such beneficiaries, to the employee's estate.

Any undistributed shares subject to a Current Award will be forfeited and the
Deferred Stock Bonus Award terminated if the employee's employment with the
Company is terminated for any reason other than termination of employment at or
beyond age 55 with ten years of service, termination after 20 years of service
with retirement approval from the Compensation Policy Committee of the
Company's board of directors or its designee, permanent disability or death.
Any undistributed shares not subject to forfeiture shall continue to be paid to
the employee under the distribution schedule which would have applied to those
shares if the employee had not terminated employment, or over such shorter
period as the Chief Executive Officer of the Company may direct.

46
<PAGE>

A Deferred Award is distributed to the recipient, as elected, in a lump sum
or in up to ten installments following termination of employment. Deferred
Award shares contingently vest pro rata in annual installments commencing one
year after the Deferred Stock Bonus Award is granted to the employee, and
continuing on each January 2 thereafter until the expiration of a ten year
period from the commencement date. All shares subject to the Deferred Award
vest upon termination of employment after reaching age 55 with ten years of
service with the Company, termination of employment after 20 years of company
service with retirement approval from the Compensation Policy Committee of the
Company board of directors or its designee, permanent disability or death.
Vesting stops when employment terminates for any other reason.

On occasion, the Board of Directors, upon the recommendation of its
Compensation Policy Committee, awards to certain key employees shares of
restricted stock which vest upon satisfaction of specified performance
objectives. The award of such performance-restricted stock is maintained in the
name of the recipient in an account at the transfer agent and is restricted
from further transfer, sale, alienation or hypothecation, until such time as
the conditions restricting transfer have been satisfied. Such conditions
include continued employment, non-competition, proper conduct, and attainment
of specified Company business objectives. While such restricted shares are
maintained on account, the award recipient is entitled to vote such shares, and
receive any dividends if dividends on common shares are declared. Upon
satisfaction of the business objectives and all other conditions, the shares
are released from restrictions and may be sold or transferred by the employee.

47
<PAGE>

TABLE III

LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR OTHER PERIOD UNTIL
NAME SHARES MATURATION OR PAYOUT(1)
- ---- --------- ---------------------------------
<S> <C> <C>
Richard E. Marriott............... 2,800(2) 10 Years(3)
240,000 5 Years(4)
Stephen F. Bollenbach............. 7,500(2) 10 Years
600,000 5 Years(4)
William W. McCarten............... 4,120(2) 10 Years
216,000 5 Years(4)
Matthew J. Hart................... 3,253(2) 10 Years
216,000 5 Years(4)
Stephen J. McKenna................ 2,900(2) 10 Years(3)
108,000 5 Years(4)
J.W. Marriott, Jr................. 0 --
William J. Shaw................... 0 --
William R. Tiefel................. 0 --
</TABLE>
- --------
(1) The vesting procedures and rules governing forfeitability of these awards
are discussed in this section "Long-Term Incentive ("LTIP") Awards."
(2) Represents estimated Deferred Stock Bonus Awards or Deferred Stock
Agreements calculated based upon maximum bonus amounts presented in Table I
and an estimated trading price for Common Stock. Actual Deferred Stock
Bonus Awards and Deferred Stock Agreements have not yet been determined.
These awards are currently subject to forfeiture pursuant to the terms of
the Comprehensive Stock Plan, a successor plan to the Company's Deferred
Stock Incentive Plan. See footnote 1 above.
(3) Pursuant to the terms of the Company's Deferred Stock Incentive Plan, a
predecessor to the Comprehensive Stock Plan, Mr. Marriott's and Mr.
McKenna's awards are not subject to forfeiture as they each have over 20
years of service with the Company.
(4) Represents awards of shares of restricted stock that vest on a pro-rata
basis over a five year period subject to the satisfaction of certain
Performance Restrictions to be established by the Compensation Policy
Committee of the Board of Directors. See footnote 8 to Table I. The vesting
provisions governing these awards are subject to review and revision by the
Compensation Policy Committee.

CERTAIN TRANSACTIONS

In 1985, the Company sold for $10.03 million a 10.32 percent equity interest
in the Times Square Hotel Company partnership ("TSHCO"), owner of the New York
Marriott Marquis Hotel, to MM Times Square Hotel Investors ("MM Times Square"),
a limited partnership which includes J.W. Marriott, Jr. and Richard E. Marriott
as partners. The Company received cash at closing of $3.15 million and a $6.88
million nonrecourse promissory note due September 1, 2015 with interest at 12
percent per annum, collateralized by the ownership interest sold. At the same
time, the Company sold a 28.68 percent interest in TSHCO to an unrelated third-
party for approximately $26.3 million on essentially the same terms.

Preliminary agreements were reached in 1991 with the purchaser of the 28.68
percent interest, and in 1992 with MM Times Square, to restructure the
respective promissory notes payable to the Company. During the fourth quarter
of 1992, the purchaser of the 28.68 percent interest informed the Company that
he would not be making further payments on his promissory note. In view of this
action, the restructurings of the promissory notes with both TSHCO and MM Times
Square have been discontinued and the Company is seeking to foreclose on its
security interests. The Company expects to complete both foreclosures in early
1994. See "Prospectus Summary--Recent Developments--New York Marriott Marquis."

48
<PAGE>

The Company and its subsidiaries and Marriott International and its
subsidiaries have entered into certain relationships following the
Distribution. For a description of certain agreements entered into between the
Company and its subsidiaries and Marriott International and its subsidiaries,
see "Relationship Between the Company and Marriott International."

OWNERSHIP OF COMPANY SECURITIES

The Company has three outstanding classes of equity or equity-linked
securities: Common Stock, Convertible Preferred Stock and LYONs. None of the
directors, nominees or executive officers owns shares of Convertible Preferred
Stock or LYONs.

Set forth below is the ownership as of October 31, 1993 of Common Stock by
directors, nominees, the chief executive officer and the four additional most
highly compensated executive officers and certain former executive officers of
the Company, as well as by all directors and executive officers (including such
former executive officers) of the Company as a group, and to the best of the
Company's knowledge, beneficial holders of 5% or more of Common Stock. The
Company has no knowledge that any person is the beneficial holder of 5% or more
of the LYONs.

Based upon a Schedule 13D filed with the Securities and Exchange Commission
on September 27, 1993, the Company believes that a group including Gotham
Capital III, L.P., Alfred Partners, L.P., Joel M. Greenblatt and Daniel L. Nir
each with an address of 100 Jericho Quadrangle, Jericho, New York, 11753,
beneficially own 220,200 depositary shares representing 220.2 shares of the
Convertible Preferred Stock. As of December 21, 1993, such holdings represent
75.54% of the approximately 292,000 then outstanding depositary shares of
Convertible Preferred Stock.

<TABLE>
<CAPTION>
% OF SHARES
SHARES OF OUTSTANDING (NET
COMMON STOCK OF TREASURY
BENEFICIALLY OWNED SHARES) AS OF
NAME ON OCTOBER 31, 1993 OCTOBER 31, 1993
- ---- ------------------- ----------------
<S> <C> <C>
Directors
R. Theodore Ammon................... 0 0.00
Stephen F. Bollenbach............... 3,000(1) 0.00(2)
J.W. Marriott, Jr................... 4,913,174(1)(3)(4) 4.14
Richard E. Marriott................. 6,129,154(1)(3)(4) 5.16
Ann Dore McLaughlin................. 0 0.00
Harry L. Vincent, Jr................ 11,100 0.01
Andrew J. Young..................... 0 0.00
Non-Director Executive Officers
Matthew J. Hart..................... 1,628(1) 0.00(2)
William W. McCarten................. 13,152(1) 0.01
Stephen J. McKenna.................. 14,104(1) 0.01
Certain Former Executive Officers
William J. Shaw..................... 30,548 0.03
William R. Tiefel................... 54,323 0.05
All directors and executive officers
as a group........................... 11,171,261(5) 9.41(5)
Sanford C. Bernstein & Co., Inc....... 8,680,909(6) 7.31(6)
767 Fifth Avenue
New York, New York 10153
</TABLE>
- --------
(1) Does not include shares reserved, contingently vested or awarded under the
Company's 1993 Comprehensive Stock Incentive Plan or 1993 Employee Stock
Purchase Plan. For additional information, see Tables I through III above.
(2) Ownership of less than 1/100th of 1% is reflected as 0.00 in the table
above.

49
<PAGE>

(3) Does not include: (i) 1,612,915 shares held in trust for the children and
grandchildren of J.W. Marriott, Jr. or 1,089,949 shares held by his wife
and children; (ii) 1,783,042 shares held in trust for the children and
grandchildren of Richard E. Marriott or 447,562 shares held by his wife and
children; (iii) 2,280,287 shares held by The J. Willard Marriott
Foundation; (iv) 1,923,885 shares held by a charitable annuity trust,
created by the will of J. Willard Marriott, to which his descendants have a
remainder interest; (v) 2,707,590 shares held by J. Willard Family
Enterprises, L.P., (vi) 2,302,729 shares held by First Media, L.P., or
(vii) 1,126,441 shares owned directly or beneficially by certain other
members of the Marriott family. The shares referred to in this note
aggregated 12.86% of the common shares outstanding (net of treasury shares)
as of October 31, 1993.
(4) By virtue of their ownership of shares of common stock and their positions
as directors and officers of the Company, J.W. Marriott, Jr. and Richard E.
Marriott would be deemed in control of the Company within the meaning of
the federal securities laws. Other members of the Marriott family might
also be deemed control persons by reason of their ownership of shares
and/or their relationship to other family members. J.W. Marriott, Jr.,
Richard E. Marriott, their mother Alice S. Marriott and other members of
the Marriott family and various trusts established by members of the
Marriott family owned beneficially an aggregate of 26,364,799 shares or
22.21% of the total common shares outstanding (net of treasury shares) of
the Company as of October 31, 1993. All directors, nominees and current
executive officers as a group (other than members of the Marriott family)
owned beneficially an aggregate of 44,062 shares or .04% of the total
common shares outstanding (net of treasury shares) as of October 31, 1993.
In addition, the Company's Employees' Profit Sharing, Retirement and
Savings Plan and Trust owned 605,855 shares or .51% of the total common
shares outstanding (net of treasury shares) as of October 31, 1993.
(5) Includes shares of Common Stock beneficially owned by the former executive
officers listed on the table.
(6) Source of information: Schedule 13G as filed with the Securities and
Exchange Commission by Sanford C. Bernstein & Co., Inc. reporting ownership
as of December 31, 1992.

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's Capital Stock is only a summary,
and is qualified in its entirety by reference to the Company's Restated
Certificate of Incorporation and shareholder rights plan as previously filed by
the Company with the Securities and Exchange Commission.

GENERAL

The Company's Restated Certificate of Incorporation (the "Company
Certificate") authorizes the issuance of a total of 301,000,000 shares of all
classes of stock, of which 1,000,000 may be shares of preferred stock, without
par value, and 300,000,000 may be shares of Common Stock. At December 10, 1993,
approximately 119,600,000 shares of Common Stock were outstanding. The Company
Certificate provides that the Board is authorized to provide for the issuance
of shares of preferred stock, from time to time, in one or more series, and to
fix any voting powers, full or limited or none, and the designations,
preferences and relative, participating, optional or other special rights,
applicable to the shares to be included in any such series and any
qualifications, limitations or restrictions thereon.

COMMON STOCK

Voting Rights. Each holder of Common Stock is entitled to one vote for each
share registered in his name on the books of the Company on all matters
submitted to a vote of shareholders. Except as otherwise provided by law, the
holders of Common Stock vote as one class. The shares of Common Stock do not
have cumulative voting rights. As a result, subject to the voting rights, if
any, of the holders of any shares of the Company's preferred stock which may at
the time be outstanding, the holders of Common Stock entitled to exercise more
than 50% of the voting rights in an election of directors will be able to elect
100% of the directors to be elected if they choose to do so. In such event, the
holders of the remaining Common Stock voting for the election of directors will
not be able to elect any persons to the Board of Directors. The Company
Certificate provides that the Board of Directors is classified into three
classes, each serving a three year term, with one class to be elected in each
of three consecutive years.

50
<PAGE>

Dividend Rights. Subject to the rights of the holders of any shares of the
Company's preferred stock which may at the time be outstanding, holders of
Common Stock are entitled to such dividends as the Board of Directors may
declare out of funds legally available therefor. The Company intends to retain
future earnings for use in its business and does not currently intend to pay
dividends. In addition, the Credit Agreement contains restrictions on the
payment of dividends on the Common Stock. See "Dividend Policies."

Liquidation Rights and Other Provisions. Subject to the prior rights of
creditors and the holders of any of the Company's preferred stock which may be
outstanding from time to time, the holders of Common Stock are entitled in the
event of liquidation, dissolution or winding up to share pro rata in the
distribution of all remaining assets. The Common Stock is not liable for any
calls or assessments and is not convertible into any other securities. The
Company Certificate provides that the private property of the shareholders
shall not be subject to the payment of corporate debts. There are no redemption
or sinking fund provisions applicable to the Common Stock, and the Company
Certificate provides that there shall be no preemptive rights.

The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.

RIGHTS AND JUNIOR PREFERRED STOCK

The Company has adopted a shareholder rights plan as set forth in that
certain Rights Agreement dated February 3, 1989, as amended, between the
Company and the Bank of New York, as rights agent (the "Rights Agreement"). The
following is a summary of the terms of the Rights Agreement.

Rights. Following the occurrence of certain events (the "Occurrence Date")
and except as described below, each right (a "Right," and, collectively, the
"Rights") will entitle the registered holder thereof to purchase from the
Company one one-thousandth of a share (a "Unit") of the Company's Series A
Junior Participating Preferred Stock ("Junior Preferred Stock") at a price (the
"Purchase Price") of $150 per Unit, subject to adjustment. The Rights are not
exercisable until the Occurrence Date. The Rights expire on the tenth
anniversary of the adoption of the Rights Agreement, unless exercised in
connection with a transaction of the type described below or unless earlier
redeemed by the Company.

Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of the Company, including, without limitation, the right to
vote or to receive dividends.

Initially, ownership of the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate certificates
representing the Rights (the "Rights Certificates") will be distributed. Until
the Occurrence Date (or earlier redemption or expiration of the Rights), the
Rights will be transferable only with the Common Stock, and the surrender or
transfer of any certificate of Common Stock will also constitute the transfer
of the Rights associated with the Common Stock represented by such certificate.
The Rights will separate from the Common Stock and an Occurrence Date will
occur upon the earlier of (i) 10 days following the date (a "Stock Acquisition
Date") of a public announcement that a person or group of affiliates or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the outstanding Common Stock
or (ii) 10 business days following the commencement of or announcement of an
intention to make a tender offer or exchange offer, the consummation of which
would result in the Acquiring Person becoming the beneficial owner of 30% or
more of such outstanding Common Stock (such date being called the Occurrence
Date).

For purposes of the Rights Agreement, a person shall not be deemed to
beneficially own "Exempt Shares" which include (i) shares of Common Stock
acquired by such person by gift, bequest and certain other transfers, which
shares were Exempt Shares immediately prior to such transfer and were held by
such person continuously thereafter and (ii) shares acquired by such person in
connection with certain distributions of Common Stock with respect to Exempt
Shares which were held by such person continuously thereafter. In connection
with the Distribution, the Board amended the Rights Agreement to provide that
the shares of

51
<PAGE>

Common Stock acquired by Marriott International upon exercise of the Marriott
International Purchase Right will be deemed "Exempt Shares" under the Rights
Agreement, such that the exercise of such right by Marriott International will
not cause Marriott International to be deemed an "Acquiring Person" under the
Rights Agreement and thus trigger a distribution of the Rights. See
"Relationship Between the Company and Marriott International--Marriott
International Purchase Right."

As soon as practicable following an Occurrence Date, Rights Certificates will
be mailed to holders of record of Common Stock as of the close of business on
the Occurrence Date. After such time, such separate Rights Certificates alone
will evidence the Rights and could trade independently from the Common Stock.

In the event (i) the Company is the surviving corporation in a merger with an
Acquiring Person and the Common Stock is not changed or exchanged, or (ii) an
Acquiring Person becomes the beneficial owner of 30% or more of the then
outstanding shares of Common Stock (except pursuant to an offer for all
outstanding shares of Common Stock which the Board determines to be fair to and
otherwise in the best interests of the Company and its shareholders), each
holder of a Right will, in lieu of the right to receive one one-thousandth of a
share of Junior Preferred Stock, thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing, following the occurrence of
any of the events set forth in this paragraph, all Rights that are (or, under
certain circumstances specified in the Rights Agreement, were) beneficially
owned by any Acquiring Person will be null and void. However, the Rights are
not exercisable following the occurrence of either of the events set forth
above until such time as the Rights are no longer redeemable by the Company as
set forth below.

For example, at an exercise price of $150 per Right, each Right not owned by
an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $300
worth of Common Stock (or other consideration, as noted above) for $150.
Assuming that the Common Stock had a per share value of $30 at such time, the
holder of each valid Right would be entitled to purchase 10 shares of Common
Stock for $150.

In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger
described in the second preceding paragraph or a merger which follows an offer
described in the second preceding paragraph), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right.

In general, the Board may redeem the Rights in whole, but not in part, at any
time until 10 days following the Stock Acquisition Date, at a price of $.01 per
Right. After the redemption period has expired, the Company's right of
redemption may be reinstated if an Acquiring Person reduces its beneficial
ownership to 10% or less of the outstanding shares of Common Stock in a
transaction or series of transactions not involving the Company. Immediately
upon the action of the Board ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$.01 per Right redemption price.

The purchase price payable, and the number of shares of Junior Preferred
Stock or other securities or property issuable upon exercise of the Rights are
subject to adjustment upon the occurrence of certain events with respect to the
Company, including stock dividends, sub-divisions, combinations,
reclassifications, rights or warrants offerings of Junior Preferred Stock at
less than the then current market price and certain distributions of property
or evidences of indebtedness of the Company to holders of Junior Preferred
Stock, all as set forth in the Rights Agreement.

52
<PAGE>

The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors since the Rights may be redeemed by the Company as set forth
above. See "Purposes and Antitakeover Effects of Certain Provisions of the
Company Certificate and Bylaws and the Marriott International Purchase Right."

JUNIOR PREFERRED STOCK

In connection with the Rights Agreement, 300,000 shares of Junior Preferred
Stock are authorized and reserved for issuance by the Board. No shares of
Junior Preferred Stock are currently outstanding. The following statements with
respect to the Junior Preferred Stock are subject to the detailed provisions of
the Company Certificate and the certificate of designation relating to the
Junior Preferred Stock (the "Junior Preferred Stock Certificate of
Designation"). These statements do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the terms of the
Company Certificate and the Junior Preferred Stock Certificate of Designation.

Subject to the prior payment of cumulative dividends on any class of
preferred stock ranking senior to the Junior Preferred Stock, a holder of
Junior Preferred Stock will be entitled to cumulative dividends out of funds
legally available therefor, when, as and if declared by the Board, at a
quarterly rate per share of Junior Preferred Stock equal to the greater of (a)
$10.00 or (b) 1000 times (subject to adjustment upon certain dilutive events)
the aggregate per share amount of all cash dividends and 1000 times (subject to
adjustment upon certain dilutive events) the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions (other than
dividends payable in Common Stock or a sub-division of the outstanding shares
of Common Stock) declared on Common Stock, since the immediately preceding
quarterly dividend payment date for the Junior Preferred Stock (or since the
date of issuance of the Junior Preferred Stock if no such dividend payment date
has occurred).

A holder of Junior Preferred Stock will be entitled to 1000 votes (subject to
adjustment upon certain dilutive events) per share of Junior Preferred Stock on
all matters submitted to a vote of shareholders of the Company. Such holders
will vote together with the holders of the Common Stock as a single class on
all matters submitted to a vote of shareholders of the Company.

In the event of a merger or consolidation of the Company which results in
Common Stock being exchanged or changed for other stock, securities, cash
and/or other property, the shares of Junior Preferred Stock shall similarly be
exchanged or changed in an amount per share equal to 1000 times (subject to
adjustment upon certain dilutive events) the aggregate amount of stock,
securities, cash and/or other property, as the case may be, into which each
share of Common Stock has been exchanged or changed.

In the event of liquidation, dissolution or winding up of the Company, a
holder of Junior Preferred Stock will be entitled to receive $1000 per share,
plus accrued and unpaid dividends and distributions thereon, before any
distribution may be made to holders of shares of stock of the Company ranking
junior to the Junior Preferred Stock, and the holders of Junior Preferred Stock
are entitled to receive an aggregate amount per share equal to 1000 times
(subject to adjustment upon certain dilutive events) the aggregate amount to be
distributed per share to holders of Common Stock.

The Junior Preferred Stock is not subject to redemption. The terms of the
Junior Preferred Stock provide that the Company is subject to certain
restrictions with respect to dividends and distributions on and redemptions and
purchases of shares of stock of the Company ranking junior to or on a parity
with the Junior Preferred Stock in the event that payments of dividends or
other distributions payable on the Junior Preferred Stock are in arrears.

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CONVERTIBLE PREFERRED STOCK

The Company has outstanding 292,000 depositary shares of Convertible
Preferred Stock, each having a liquidation preference of $50 per depositary
share plus an amount equal to any accrued and unpaid dividends thereon. The
Distribution did not affect the terms of the Convertible Preferred Stock, which
are set forth in the Company's Certificate of Designation with respect to the
Convertible Preferred Stock (the "Convertible Preferred Stock Certificate of
Designation"). However, pursuant to Section 5(e)(iv) of the Convertible
Preferred Stock Certificate of Designation, the conversion price at which the
Convertible Preferred Stock is convertible into Common Stock after the
Distribution was adjusted from $17.40 per share to $2.61 per share. At the
current conversion price of $2.61 per share, the 292,000 outstanding depositary
shares of the Convertible Preferred Stock are convertible into approximately
5.6 million shares of Common Stock.

Pursuant to Section 6(c) of the Convertible Preferred Stock Certificate of
Designation, if the equivalent of six quarterly dividends payable on the
Convertible Preferred Stock are in arrears, the number of directors of the
Company will be increased by two and the holders of Convertible Preferred Stock
voting separately as a class with the holders of shares of any one or more
other series of preferred stock ranking on a parity with the Convertible
Preferred Stock whether as to payment of dividends or the distribution of
assets and upon which like voting rights have been conferred and are
exercisable, will be entitled to elect two directors for one year terms to fill
such vacancies at the Company's next annual meeting of shareholders. Such right
to elect two additional directors shall continue at each subsequent annual
meeting until all dividends in arrears have been paid or declared and set apart
for payment. Upon payment or declaration and reservation of funds for payment
of all such dividends in arrearage, the term of office of each director elected
shall immediately terminate and the number of directors constituting the entire
Board of Directors of the Company shall be reduced by the number of directors
elected by the holders of the Convertible Preferred Stock and any other series
of preferred stock ranking on a parity with the Convertible Preferred Stock as
discussed above. The Company has failed to pay dividends for one quarterly
period and presently intends to pay preferred stock dividends only to the
extent earnings equal or exceed the amount of such dividends. This policy may
result in an indefinite suspension of dividends on the Convertible Preferred
Stock. See "Dividend Policy." In such case, the holders of the Convertible
Preferred Stock may become entitled to elect two members of the Board of
Directors. The stated quarterly dividend on the outstanding shares of
Convertible Preferred Stock is approximately $300,000, and the Company could
recommence payment of quarterly dividends in order to avoid the election of
additional directors. In addition, commencing January 15, 1996, the outstanding
Convertible Preferred Stock may be redeemed at an aggregate redemption price of
$15 million plus accrued and unpaid dividends.

WARRANTS

As part of the Class Action Settlement, the Company agreed to issue warrants
to purchase up to 7.7 million shares of Common Stock, such warrants to be
exercisable for a period of five years after the Distribution, at $8.00 per
share during the first three years and $10.00 per share during the last two
years. The number of shares issuable under the warrants will be reduced to the
extent that the verified losses of eligible claimants (certain sellers of Old
Notes) are less than $8.7 million (such reduction to be one share for each
dollar by which $8.7 million exceeds the amount of such losses). As of the date
hereof, no such warrants have been issued, and no warrants are expected to be
issued until the appeal of the approval of the Class Action Settlement is
resolved. See "Risk Factors--Pending Litigation."

It is anticipated that the warrants will be evidenced by warrant agreements
that will provide for such matters as (i) the issuance, execution and delivery
of the warrant certificates, (ii) the warrant exercise price, duration and
exercise of warrant certificates, (iii) treatment of fractional shares, (iv)
the transfer and exchange of warrant certificates and (v) other provisions
relating to the rights of the registered holders of the warrants.

The holders of the warrants shall not be entitled to any of the rights of the
holders of Common Stock including, without limitation, the right to vote,
receive dividends and other distributions, to exercise any preemptive right or
to receive any notice of or to attend meetings of shareholders or any other
proceedings.

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PRICE RANGE OF THE COMMON STOCK AND DIVIDENDS

The Common Stock is listed on the New York Stock Exchange and on several
regional exchanges, and since consummation of the Distribution is traded under
the symbol "HMT." The following table sets forth, for the fiscal periods
indicated, the high and low sales prices per share of the Common Stock as
reported on the New York Stock Exchange Composite Tape and traded during such
periods under the symbol "MHS," and the cash dividends paid per share of Common
Stock. Except for the fourth quarter of fiscal 1993, all periods presented in
the table below were prior to the Distribution. Therefore the stock prices and
dividends paid are not indicative of the Company's current stock price or
dividend policies. See "Dividend Policy." As of October 31, 1993, there were
approximately 66,561 holders of record of Common Stock.

<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PAID
---- ---- ---------
<S> <C> <C> <C>
1992
1st Quarter......................................... $19 5/8 $15 3/4 $.07
2nd Quarter......................................... 18 13 3/8 .07
3rd Quarter......................................... 17 1/2 15 1/8 .07
4th Quarter......................................... 21 7/8 16 7/8 .07
1993
1st Quarter......................................... $27 3/8 $20 3/4 $.07
2nd Quarter......................................... 26 5/8 24 .07
3rd Quarter......................................... 29 24 3/8 .07
4th Quarter(1)...................................... 33 3/8 6 1/8 --
1994
1st Quarter (through January 20, 1994).............. 12 1/2 8 3/4 --
</TABLE>
- --------
(1) The high sales price per share of the Common Stock for the fourth quarter
of fiscal 1993 occurred on October 8, 1993, the date of the Distribution.
The low sales price per share of the Common Stock during such period
occurred on October 11, 1993, after the occurrence of the Distribution.

PURPOSES AND ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY
CERTIFICATE AND BYLAWS AND THE MARRIOTT INTERNATIONAL PURCHASE RIGHT

COMPANY CERTIFICATE AND BYLAWS

The Company Certificate contains several provisions that will make difficult
an acquisition of control of the Company, by means of a tender offer, open
market purchases, a proxy fight or otherwise, that is not approved by the
Board. The Company's Bylaws (the "Bylaws") also contain provisions that could
have an antitakeover effect.

The purposes of the relevant provisions of the Company Certificate and Bylaws
are to discourage certain types of transactions, described below, which may
involve an actual or threatened change of control of the Company and to
encourage persons seeking to acquire control of the Company to consult first
with the Board of Directors to negotiate the terms of any proposed business
combination or offer. The provisions are designed to reduce the vulnerability
of the Company to an unsolicited proposal for a takeover that does not
contemplate the acquisition of all outstanding shares or is otherwise unfair to
shareholders of the Company or an unsolicited proposal for the restructuring or
sale of all or part of the Company. The Company believes that, as a general
rule, such proposals would not be in the best interests of the Company and its
shareholders.

There has been a history of the accumulation of substantial stock positions
in public companies by third parties as a prelude to proposing a takeover or a
restructuring or sale of all or part of the company or another similar
extraordinary corporate action. Such actions are often undertaken by the third-
party without advance notice to, or consultation with, the management or board
of directors of the target company. In many cases, the purchaser seeks
representation on the company's board of directors in order to increase the
likelihood that its proposal will be implemented by the company. If the company
resists the efforts of the purchaser to obtain representation on the company's
board, the purchaser may commence a proxy contest to have its

55
<PAGE>

nominees elected to the board in place of certain directors or the entire
board. In some cases, the purchaser may not truly be interested in taking over
the company, but may use the threat of a proxy fight and/or a bid to take over
the company as a means of forcing the company to repurchase its equity position
at a substantial premium over market price.

The Company believes that the imminent threat of removal of the Company's
management or Board in such situations would severely curtail the ability of
management or the Board to negotiate effectively with such purchasers. The
management or the Board would be deprived of the time and information necessary
to evaluate the takeover proposal, to study alternative proposals and to help
ensure that the best price is obtained in any transaction involving the Company
which may ultimately be undertaken. If the real purpose of a takeover bid were
to force the Company to repurchase an accumulated stock interest at a premium
price, management or the Board would face the risk that, if it did not
repurchase the purchaser's stock interest, the Company's business and
management would be disrupted, perhaps irreparably.

Certain provisions of the Company Certificate and Bylaws, in the view of the
Company, will help ensure that the Board, if confronted by a surprise proposal
from a third-party which has acquired a block of stock, will have sufficient
time to review the proposal and appropriate alternatives to the proposal and to
act in what it believes to be the best interests of the shareholders. In
addition, certain other provisions of the Company Certificate are designed to
prevent a purchaser from utilizing two-tier pricing and similar inequitable
tactics in the event of an attempt to take over the Company.

These provisions, individually and collectively, will make difficult and may
discourage a merger, tender offer or proxy fight, even if such transaction or
occurrence may be favorable to the interests of the shareholders, and may delay
or frustrate the assumption of control by a holder of a large block of stock of
the Company and the removal of incumbent management, even if such removal might
be beneficial to the shareholders. Furthermore, these provisions may deter or
could be utilized to frustrate a future takeover attempt which is not approved
by the incumbent Board of Directors, but which the holders of a majority of the
shares may deem to be in their best interests or in which shareholders may
receive a substantial premium for their stock over prevailing market prices of
such stock. By discouraging takeover attempts, these provisions might have the
incidental effect of inhibiting certain changes in management (some or all of
the members of which might be replaced in the course of a change of control)
and also the temporary fluctuations in the market price of the stock which
often result from actual or rumored takeover attempts.

Set forth below is a description of such provisions in the Company
Certificate and Bylaws. Such description is intended as a summary only and is
qualified in its entirety by reference to the Company Certificate and Bylaws
which are exhibits to the Registration Statement on Form S-1 of which this
Prospectus is a part.

Classified Board of Directors. The Company Certificate provides for the Board
to be divided into three classes serving staggered terms so that directors'
current terms will expire either at the 1994, 1995 or 1996 annual meeting of
shareholders. See "Management--Board of Directors."

The classification of directors will have the effect of making it more
difficult for shareholders to change the composition of the Board in a
relatively short period of time. At least two annual meetings of shareholders,
instead of one, will generally be required to effect a change in a majority of
the Board. Such a delay may help ensure that the Board, if confronted by a
holder attempting to force a stock repurchase at a premium above market prices,
a proxy contest or an extraordinary corporate transaction, will have sufficient
time to review the proposal and appropriate alternatives to the proposal and to
act in what it believes are the best interests of the shareholders.

The classified board provision could have the effect of discouraging a third-
party from making a tender offer or otherwise attempting to obtain control of
the Company, even though such an attempt might be beneficial to the Company and
its shareholders. The classified board provision could thus increase the
likelihood that incumbent directors will retain their positions. In addition,
since the classified board provision

56
<PAGE>

is designed to discourage accumulations of large blocks of the Company's stock
by purchasers whose objective is to have such stock repurchased by the Company
at a premium, the classified board provision could tend to reduce the temporary
fluctuations in the market price of the Company's stock that could be caused by
accumulations of large blocks of such stock. Accordingly, shareholders could be
deprived of certain opportunities to sell their stock at a temporarily higher
market price.

The Company believes that a classified board of directors helps to assure the
continuity and stability of the Board and business strategies and policies as
determined by the Board, because generally a majority of the directors at any
given time will have had prior experience as directors of the Company. The
classified board provision also helps assure that the Board, if confronted with
an unsolicited proposal from a third-party that has acquired a block of the
voting stock of the Company, will have sufficient time to review the proposal
and appropriate alternatives and to seek the best available result for all
shareholders.

Removal; Filling Vacancies. The Company Certificate provides that, subject to
any rights of the holders of preferred stock, only a majority of the Board then
in office shall have the authority to fill any vacancies on the Board,
including vacancies created by an increase in the number of directors. In
addition, the Company Certificate provides that a new director elected to fill
a vacancy on the Board will serve for the remainder of the full term of his or
her class and that no decrease in the number of directors shall shorten the
term of an incumbent. Moreover, the Company Certificate provides that directors
may be removed with or without cause only by the affirmative vote of holders of
at least 66 2/3% of the voting power of the shares entitled to vote at the
election of directors, voting together as a single class. These provisions
relating to removal and filling of vacancies on the Board will preclude
shareholders from enlarging the Board or removing incumbent directors and
filling the vacancies with their own nominees.

Limitations on Shareholder Action By Written Consent; Special Meetings. The
Company Certificate and Bylaws provide that shareholder action can be taken
only at an annual or special meeting of shareholders and prohibit shareholder
action by written consent in lieu of a meeting. The Company Certificate and
Bylaws provide that, subject to the rights of holders of any series of
preferred stock, special meetings of shareholders can be called only by a
majority of the entire Board. Shareholders are not permitted to call a special
meeting or to require that the Board call a special meeting of shareholders.
Moreover, the business permitted to be conducted at any special meeting of
shareholders is limited to the business brought before the meeting by or at the
direction of the Board.

The provisions of the Company Certificate and Bylaws restricting shareholder
action by written consent may have the effect of delaying consideration of a
shareholder proposal until the next annual meeting unless a special meeting is
called by a majority of the entire Board. These provisions would also prevent
the holders of a majority of the voting power of the voting stock from using
the written consent procedure to take shareholder action and from taking action
by consent without giving all the shareholders of the Company entitled to vote
on a proposed action the opportunity to participate in determining such
proposed action. Moreover, a shareholder could not force shareholder
consideration of a proposal over the opposition of the Company Board by calling
a special meeting of shareholders prior to the time the Board believed such
consideration to be appropriate.

The Company believes that such limitations on shareholder action will help to
assure the continuity and stability of the Board and the Company's business
strategies and policies as determined by the Board, to the benefit of all of
the Company's shareholders. If confronted with an unsolicited proposal from
Company shareholders, the Board will have sufficient time to review such
proposal and to seek the best available result for all shareholders, before
such proposal is approved by such shareholders by written consent in lieu of a
meeting or through a special meeting of shareholders.

Nominations of Directors and Shareholder Proposals. The Bylaws establish an
advance notice procedure with regard to the nomination, other than by or at the
direction of the Board, of candidates for election as directors (the
"Nomination Procedure") and with regard to shareholder proposals to be brought
before an annual or special meeting of shareholders (the "Business Procedure").

57
<PAGE>

The Nomination Procedure provides that only persons who are nominated by or
at the direction of the Board of Directors, or by a shareholder who has given
timely prior written notice to the Secretary of the Company prior to the
meeting at which directors are to be elected, will be eligible for election as
directors. The Business Procedure provides that shareholder proposals must be
submitted in writing in a timely manner in order to be considered at any annual
or special meeting. To be timely, notice must be received by the Company (i) in
the case of an annual meeting, not less than 90 days prior to the annual
meeting for a director nomination, and not less than 120 days prior to the
annual meeting for a shareholder proposal or (ii) in the case of a special
meeting not later than the seventh day following the day on which notice of
such meeting is first given to shareholders for both a director nomination and
a shareholder proposal.

Under the Nomination Procedure, notice to the Company from a shareholder who
proposes to nominate a person at a meeting for election as a director must
contain certain information about that person, including age, business and
residence addresses, principal occupation, the class and number of shares of
Common Stock beneficially owned, the consent to be nominated and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, and certain information about
the shareholder proposing to nominate that person. Under the Business
Procedure, notice relating to a shareholder proposal must contain certain
information about such proposal and about the shareholder who proposes to bring
the proposal before the meeting, including the class and number of shares of
Common Stock beneficially owned by such shareholder. If the Chairman or other
officer presiding at a meeting determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director, or if he determines that the shareholder proposal was
not properly brought before such meeting, such proposal will not be introduced
at such meeting. Nothing in the Nomination Procedure or the Business Procedure
will preclude discussion by any shareholder of any nomination or proposal
properly made or brought before an annual or special meeting in accordance with
the above-mentioned procedures.

The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by shareholders, to afford the Board a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the Board, to inform shareholders about such
qualifications. The purpose of the Business Procedure is, by requiring advance
notice of shareholder proposals, to provide a more orderly procedure for
conducting annual meetings of shareholders and, to the extent deemed necessary
or desirable by the Board, to provide the Board with a meaningful opportunity
to inform shareholders, prior to such meetings, of any proposal to be
introduced at such meetings, together with any recommendation as to the Board's
position or belief as to action to be taken with respect to such proposal, so
as to enable shareholders better to determine whether they desire to attend
such meeting or grant a proxy to the Board as to the disposition of any such
proposal. Although the Bylaws do not give the Board any power to approve or
disapprove shareholder nominations for the election of directors or of any
other proposal submitted by shareholders, the Bylaws may have the effect of
precluding a nomination for the election of directors or precluding the
conducting of business at a particular shareholder meeting if the proper
procedures are not followed, and may discourage or deter a third-party from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of the Company, even if the conduct of
such solicitation or such attempt might be beneficial to the Company and its
shareholders.

Fair Price Provision. Article Fifteenth of the Company Certificate (the "Fair
Price Provision") requires the approval by the holders of 66 2/3% of the voting
power of the outstanding capital stock of the Company entitled to vote
generally in the election of directors (the "Voting Stock") as a condition for
mergers and certain other business combinations ("Business Combinations")
involving the Company and any holder of more than 25% of such voting power (an
"Interested Shareholder") unless the transaction is either (i) approved by a
majority of the members of the Board who are not affiliated with the Interested
Shareholder and who were directors before the Interested Shareholder became an
Interested Shareholder (the "Disinterested Directors") or (ii) certain minimum
price and procedural requirements are met.

58
<PAGE>

The Fair Price Provision is designed to prevent a third-party from utilizing
two-tier pricing and similar inequitable tactics in a takeover attempt. The
Fair Price Provision is not designed to prevent or discourage tender offers for
the Company. It does not impede an offer for at least 66 2/3% of the Voting
Stock in which each shareholder receives substantially the same price for his
or her shares as each other shareholder or which the Board has approved in the
manner described herein. Nor does the Fair Price Provision preclude a third-
party from making a tender offer for some of the shares of Voting Stock without
proposing a Business Combination in which the remaining shares of Voting Stock
are purchased. Except for the restrictions on Business Combinations, the Fair
Price Provision will not prevent an Interested Shareholder having a controlling
interest of the Voting Stock from exercising control over the Company or
increasing its interest in the Company. Moreover, an Interested Shareholder
could increase its ownership to 66 2/3% and avoid application of the Fair Price
Provision. However, the separate provisions contained in the Company
Certificate and the Bylaws relating to "Classified Boards of Directors"
discussed above will, as therein indicated, curtail an Interested Shareholder's
ability to exercise control in several respects, including such shareholder's
ability to change incumbent directors who may oppose a Business Combination or
to implement a Business Combination by written consent without a shareholder
meeting. The Fair Price Provision would, however, discourage some takeover
attempts by persons intending to acquire the Company in two steps and to
eliminate remaining shareholder interests by means of a business combination
involving less consideration per share than the acquiring person would propose
to pay for its initial interest in the Company. In addition, acquisitions of
stock by persons attempting to acquire control through market purchases may
cause the market price of the stock to reach levels which are higher than would
otherwise be the case. The Fair Price Provision may thereby deprive some
holders of the Common Stock of an opportunity to sell their shares at a
temporarily higher market price.

Although the Fair Price Provision is designed to help assure fair treatment
of all shareholders vis-a-vis other shareholders in the event of a takeover, it
is not the purpose of the Fair Price Provision to assure that shareholders will
receive a premium price for their shares in a takeover. Accordingly, the Board
is of the view that the adoption of the Fair Price Provision does not preclude
the Board's opposition to any future takeover proposal which it believes would
not be in the best interests of the Company and its shareholders, whether or
not such a proposal satisfies the minimum price criteria and procedural
requirements of the Fair Price Amendment.

In addition, under Section 203 of the Delaware General Corporation Law as
applicable to the Company, certain "business combinations" (defined generally
to include (i) mergers or consolidations between a Delaware corporation and an
interested shareholder (as defined below) and (ii) transactions between a
Delaware corporation and an interested shareholder involving the assets or
stock of such corporation or its majority-owned subsidiaries, including
transactions which increase the interested shareholder's percentage ownership
of stock) between a Delaware corporation, whose stock generally is publicly
traded or held of record by more than 2,000 shareholders, and an interested
shareholder (defined generally as those shareholders, who, on or after December
23, 1987, become beneficial owners of 15 percent or more of a Delaware
corporation's voting stock) are prohibited for a three-year period following
the date that such shareholder became an interested shareholder, unless (i)
prior to the date such shareholder became an interested shareholder, the board
of directors of the corporation approved either the business combination or the
transaction which resulted in the shareholder becoming an interested
shareholder, (ii) upon consummation of the transaction that made such
shareholder an interested shareholder, the interested shareholder owned at
least 85 percent of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding voting stock owned by officers who also
are directors and voting stock held in employee benefit plans in which the
employees do not have a confidential right to tender or vote stock held by the
plan), or (iii) the business combination was approved by the board of directors
of the corporation and ratified by two-thirds of the voting stock which the
interested shareholder did not own. The three-year prohibition also does not
apply to certain business combinations proposed by an interested shareholder
following the announcement or notification of certain extraordinary
transactions involving the corporation

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<PAGE>

and a person who had been an interested shareholder during the previous three
years or who became an interested shareholder with the approval of a majority
of the corporation's directors.

Shareholder Rights Plan. The Company has adopted a shareholder rights plan
which may have anti-takeover effects. See "Description of Capital Stock--Rights
and Junior Preferred Stock."

Amendment of the Company Certificate and Bylaws. The Company Certificate
contains provisions requiring the affirmative vote of the holders of at least
66 2/3 percent of the voting power of the stock entitled to vote generally in
the election of directors to amend certain provisions of the Company
Certificate and Bylaws (including the provisions discussed above). These
provisions make it more difficult for shareholders to make changes in the
Company Certificate or Bylaws, including changes designed to facilitate the
exercise of control over the Company. In addition, the requirement for approval
by at least a 66 2/3 percent shareholder vote will enable the holders of a
minority of the Company's capital stock to prevent holders of a less-than-66
2/3 percent majority from amending such provisions of the Company's Certificate
or Bylaws.

MARRIOTT INTERNATIONAL PURCHASE RIGHT

Pursuant to the terms of the Distribution Agreement, the Company granted to
Marriott International, for a period of ten years following the Distribution,
the right to purchase a number of shares equal in amount of up to 20% of each
class of the Company's outstanding voting stock at the then fair market value
upon the occurrence of certain change of control events involving the Company.
The Marriott International Purchase Right may be exercised for a 30-day period
following the date a person or group of affiliated persons has (i) become the
beneficial owner of 20% or more of the total voting power of the then
outstanding shares of the Company's voting stock or (ii) announced a tender
offer for 30% or more of the total voting power of the then outstanding shares
of the Company's voting stock. These change of control events upon which the
Marriott International Purchase Right becomes exercisable are substantially
identical to those events that cause a distribution of the Rights under the
Rights Agreement (see "Description of Capital Stock--Rights and Junior
Preferred Stock"). Accordingly, certain share ownership of the Company's voting
stock by specified persons that is exempt under the Rights Agreement, and
consequently will not result in a distribution of Rights, also will not cause
the Marriott International Purchase Right to become exercisable.

The Board amended the terms of the Rights Agreement to provide that the
exercise of the Marriott International Purchase Right will not result in a
distribution of the Rights. Accordingly, upon exercise of the Marriott
International Purchase Right, Marriott International will be entitled to
receive the Rights associated with the Common Stock and will not be deemed an
"Acquiring Person" under the Rights Agreement.

The purchase price for the Common Stock to be purchased upon the exercise of
the Marriott International Purchase Right is determined by taking the average
of the closing sale price of the Common Stock during the 30 consecutive trading
days preceding the date the Marriott International Purchase Right becomes
exercisable. The specific terms of the Marriott International Purchase Right
are set forth in the Distribution Agreement.

The Marriott International Purchase Right will have an antitakeover effect.
Any person considering acquiring a substantial or controlling block of Common
Stock would face the possibility that its ability to exercise control would be
impaired by Marriott International's 20% ownership resulting from exercise of
the Marriott International Purchase Right. So long as the Marriott family's
current percentage of ownership of Common Stock continues, the combined
Marriott family (including various trusts established by members of the
Marriott family) and Marriott International ownership following exercise of the
Marriott International Purchase Right would effectively block control by others
(see "Description of Capital Stock"). It is also possible that the exercise
price of the Marriott International Purchase Right would be lower than the
price at which a potential acquiror might be willing to purchase a 20% block of
shares of Common Stock because the purchase price for the Marriott
International Purchase Right is based on the average trading price during a 30-
day period which may be prior to the announcement of the takeover event. This
potential price differential may have a further antitakeover effect by
discouraging potential acquirors of the Company. The antitakeover effect of the
Marriott International Purchase Right will be in addition to the antitakeover
effects of the provisions contained in the Company Certificate and Bylaws.

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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS OF
COMMON STOCK

The following is a general summary of certain United States federal income
and estate tax consequences of the ownership, sale or other disposition of
Common Stock by a person (a "non-U.S. holder") that, for United States federal
income tax purposes, is a nonresident alien individual, a foreign corporation,
a foreign partnership or a foreign estate or trust, as such terms are defined
in the Internal Revenue Code of 1986, as amended (the "Code"). This summary
does not address all aspects of United States federal income and estate taxes
that may be relevant to non-U.S. holders in light of their particular facts and
circumstances or to certain types of non-U.S. holders that may be subject to
special treatment under United States federal income tax laws (for example,
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers). Furthermore, this summary does not discuss any aspects of
foreign, state or local taxation. This summary is based on current provisions
of the Code, existing and proposed regulations promulgated thereunder and
administrative and judicial interpretations thereof, all of which are subject
to change, possibly retroactively.

DIVIDENDS

Dividends paid to a non-U.S. holder of Common Stock will generally be subject
to withholding of United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business of
the non-U.S. holder within the United States. In order to claim the benefit of
an applicable tax treaty rate, a non-U.S. holder may have to file with the
Company or its dividend paying agent an exemption or reduced treaty rate
certificate or letter in accordance with the terms of such treaty.

Dividends that are effectively connected with such holder's conduct of a
trade or business in the United States are generally subject to tax on a net
income basis (that is, after allowance for applicable deductions) at rates
applicable to U.S. citizens, resident aliens and domestic U.S. corporations,
and are not generally subject to withholding. Any such effectively connected
dividends received by a non-U.S. corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty.

Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above (unless the payor has
knowledge to the contrary). Under the current interpretation of United States
Treasury regulations, the same presumption applies for purposes of determining
the applicability of a tax treaty rate; however, under proposed United States
Treasury regulations not currently in effect, a non-U.S. holder of Common Stock
who wishes to claim the benefit of an applicable treaty rate would be required
to satisfy applicable certification and other requirements. Certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption
discussed above.

A non-U.S. holder of Common Stock that is eligible for a reduced rate of
United States tax withholding pursuant to an income tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate claim
for refund with the United States Internal Revenue Service.

DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on the disposition of Common Stock
unless (i) the gain is effectively connected with the conduct of a trade or
business of a non-U.S. holder in the United States, (ii) in the case of a non-
U.S. holder who is a nonresident alien individual and holds Common Stock as a
capital asset, such holder is present in the United States for 183 or more days
in the taxable year of the sale and either (a) such individual's "tax home" for
United States federal income tax purposes is in the United States, or (b) the
gain is attributable to an office or

61
<PAGE>

other fixed place of business maintained in the United States by such
individual, or (iii) if the Company is or has been a "U.S. real property
holding corporation" for federal income tax purposes at any time during the
five-year period ending on the date of the disposition or, if shorter, the
period during which the non-U.S. holder held the Common Stock (the "applicable
period") and the non-U.S. holder holds, actually or constructively, at any time
during the applicable period, more than 5% of the Common Stock.

The Company expects to be treated as a U.S. real property holding company for
United States federal tax purposes because of its ownership of substantial real
estate assets in the United States. As a result, a non-U.S. holder who holds,
directly or indirectly, more than 5% of the Common Stock may be subject to
United States federal income taxation on any gain realized from the sale or
other disposition of such stock, unless an exemption is provided under an
applicable tax treaty.

FEDERAL ESTATE TAXES

Common Stock owned or treated as owned by a holder who is neither a United
States citizen nor a United States resident (as specially defined for United
States federal estate tax purposes) at the time of death will be included in
such holder's gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.

UNITED STATES INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

The Company must report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply regardless of whether withholding is required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the non-U.S. holder
resides under the provisions of an applicable income tax treaty.

United States backup withholding (which generally is imposed at a 31% rate)
generally will not apply to (a) the payment of dividends paid on Common Stock
to a non-U.S. holder at an address outside the United States or (b) the payment
of the proceeds of the sale of Common Stock to or through the foreign office of
a broker. In the case of the payment of proceeds from such a sale of Common
Stock through foreign offices of United States brokers, or foreign brokers with
certain types of relationships to the United States, however, information
reporting (but not backup withholding) is required with respect to the payment
unless the broker has documentary evidence in its files that the owner is a
non-U.S. holder (and has no actual knowledge to the contrary) and certain other
requirements are met or the holder otherwise establishes an exemption. The
payment of the proceeds of a sale of shares of Common Stock to or through a
U.S. office of a broker is subject to information reporting and possible backup
withholding at a rate of 31% unless the owner certifies its non-U.S. status
under penalties of perjury or otherwise establishes an exemption. Any amounts
withheld under the backup withholding rules from a payment to a non-U.S. holder
will be allowed as a refund or a credit against such non-U.S. holder's United
States federal income tax liability, provided that the required information is
furnished to the Internal Revenue Service.

These information reporting and backup withholding rules are under review by
the United States Treasury and could be changed by future regulations.

THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY,
INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION
OF COMMON STOCK, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE,
LOCAL, FOREIGN OR OTHER TAXING JURISDICTION.

62
<PAGE>

UNDERWRITING

Subject to certain conditions contained in the Underwriting Agreement, the
United States Underwriters named below (the "U.S. Underwriters"), for whom
Donaldson, Lufkin & Jenrette Securities Corporation, Montgomery Securities,
Smith Barney Shearson Inc. and BT Securities Corporation ("BT Securities") are
acting as representatives (the "U.S. Representatives"), and the international
managers named below (the "International Managers" and, together with the U.S.
Underwriters, the "Underwriters"), for whom Donaldson, Lufkin & Jenrette
Securities Corporation, Montgomery Securities, Smith Barney Shearson Inc. and
Bankers Trust International PLC are acting as representatives (the
"International Representatives" and, together with the U.S. Representatives,
the "Representatives"), have severally agreed to purchase from the Company an
aggregate of 17,500,000 shares of Common Stock. The number of shares of Common
Stock that each Underwriter has agreed to purchase is set forth opposite its
name below:

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
----------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................ 2,498,000
Montgomery Securities.............................................. 2,498,000
Smith Barney Shearson Inc. ........................................ 2,498,000
BT Securities Corporation.......................................... 2,498,000
Bear, Stearns & Co. Inc. .......................................... 105,000
CS First Boston Corporation........................................ 105,000
Alex. Brown & Sons Incorporated.................................... 105,000
Daiwa Securities America Inc. ..................................... 105,000
Dean Witter Reynolds Inc. ......................................... 105,000
Dillon, Read & Co. Inc. ........................................... 105,000
A.G. Edwards & Sons, Inc. ......................................... 105,000
Hambrecht & Quist Incorporated..................................... 105,000
Kidder, Peabody & Co. Incorporated................................. 105,000
Lazard Freres & Co. ............................................... 105,000
Lehman Brothers Inc. .............................................. 105,000
J. P. Morgan Securities Inc. ...................................... 105,000
Morgan Stanley & Co. Incorporated.................................. 105,000
Nomura Securities International, Inc. ............................. 105,000
Oppenheimer & Co., Inc. ........................................... 105,000
PaineWebber Incorporated........................................... 105,000
Paribas Corporation................................................ 105,000
Prudential Securities Incorporated................................. 105,000
Robertson, Stephens & Company, L.P. ............................... 105,000
Salomon Brothers Inc .............................................. 105,000
S.G. Warburg & Co. Inc. ........................................... 105,000
Wasserstein Perella Securities Inc. ............................... 105,000
Wertheim Schroder & Co. Incorporated............................... 105,000
Advest, Inc. ...................................................... 52,000
Allen & Company Incorporated....................................... 52,000
Arnhold and S. Bleichroeder, Inc. ................................. 52,000
J. C. Bradford & Co. .............................................. 52,000
Cowen & Company.................................................... 52,000
Fahnestock & Co. Inc. ............................................. 52,000
First Albany Corporation........................................... 52,000
Interstate/Johnson Lane Corporation................................ 52,000
Janney Montgomery Scott Inc. ...................................... 52,000
Johnston, Lemon & Co. Incorporated................................. 52,000
</TABLE>

63
<PAGE>

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
----------------- ----------
<S> <C>
Kemper Securities, Inc. .......................................... 52,000
Ladenburg, Thalmann & Co. Inc. ................................... 52,000
C.J. Lawrence/Deutsche Bank Securities Corporation................ 52,000
Legg Mason Wood Walker Incorporated............................... 52,000
McDonald & Company Securities, Inc. .............................. 52,000
Neuberger & Berman................................................ 52,000
The Ohio Company.................................................. 52,000
Raymond James & Associates, Inc. ................................. 52,000
The Robinson-Humphrey Company, Inc. .............................. 52,000
Roney & Co. ...................................................... 52,000
Scott & Stringfellow, Inc. ....................................... 52,000
The Seidler Companies Incorporated................................ 52,000
Stephens Inc. .................................................... 52,000
Tucker Anthony Incorporated....................................... 52,000
Van Kasper & Company.............................................. 52,000
Wedbush Morgan Securities......................................... 52,000
Wheat, First Securities, Inc. .................................... 52,000
The Chapman Company............................................... 27,000
J.W. Charles Securities, Inc. .................................... 27,000
Donald & Company Securities....................................... 27,000
Keane Securities Co., Inc. ....................................... 27,000
Luther, Smith & Small, Inc. ...................................... 27,000
Pennsylvania Merchant Group Ltd................................... 27,000
R.J. Walls & Co., Inc. ........................................... 27,000
----------
U.S. Offering Subtotal.......................................... 14,000,000
----------
INTERNATIONAL MANAGERS
----------------------
Donaldson, Lufkin & Jenrette Securities Corporation............... 575,000
Montgomery Securities............................................. 575,000
Smith Barney Shearson Inc. ....................................... 575,000
Bankers Trust International PLC................................... 575,000
ABN Amro Bank N.V................................................. 100,000
Banque Indosuez................................................... 100,000
Cazenove & Co..................................................... 100,000
Credit Lyonnais Securities........................................ 100,000
Daiwa Europe Limited.............................................. 100,000
Lazard Brothers & Co., Limited.................................... 100,000
Nomura International PLC.......................................... 100,000
N M Rothschild & Sons Limited..................................... 100,000
Paribas Capital Markets........................................... 100,000
Societe Generale.................................................. 100,000
Swiss Bank Corporation............................................ 100,000
S.G. Warburg Securities........................................... 100,000
----------
International Offering Subtotal................................. 3,500,000
----------
Total......................................................... 17,500,000
==========
</TABLE>

64
<PAGE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares of Common Stock (other than the shares
of Common Stock covered by the over-allotment option described below) must be
so purchased. The offering price and underwriting discounts and commissions per
share for the U.S. Offering and the International Offering are identical.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.

The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public initially at the price to the
public set forth on the cover page of this Prospectus and to certain dealers
(who may include the Underwriters) at such price less a concession not to
exceed $0.32 per share. The Underwriters may allow, and such dealers may
reallow, discounts not in excess of $0.10 per share to any other Underwriter
and certain other dealers.

The Company has granted to the U.S. Underwriters an option to purchase up to
an aggregate of 2,625,000 additional shares of Common Stock at the initial
public offering price less underwriting discounts and commissions, solely to
cover over-allotments. Such option may be exercised at any time until 30 days
after the date of this Prospectus. To the extent that the U.S. Representatives
exercise such option, each of the U.S. Underwriters will be committed, subject
to certain conditions, to purchase approximately the same percentage of the
option shares that the number of shares of Common Stock to be purchased
initially by the Underwriter bears to the total number of shares to be
purchased initially by such U.S. Underwriters.

The Company and its executive officers have agreed, and its directors are
each expected to agree, subject to certain exceptions, not to sell or otherwise
dispose of shares of Common Stock or sell or grant rights, options or warrants
with respect to Common Stock or securities convertible into Common Stock prior
to the expiration of 90 days from the date of this Prospectus, without prior
written consent of the Representatives.

Pursuant to the Agreement Among U.S. Underwriters and International Managers,
each U.S. Underwriter has represented and agreed that, with certain exceptions,
(a) it is not purchasing any shares of Common Stock for the account of anyone
other than a United States or Canadian Person (as defined below) and (b) it has
not offered or sold, and will not offer or sell, directly or indirectly, any
shares of Common Stock or distribute this Prospectus outside of the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement Among U.S. Underwriters and International Managers,
each International Manager has represented and agreed that, with certain
exceptions, (a) it is not purchasing any shares of Common Stock for the account
of any United States or Canadian Person and (b) it has not offered or sold, and
will not offer or sell, directly or indirectly, any shares of Common Stock or
distribute this Prospectus within the United States or Canada or to any United
States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions and to certain other transactions among the
International Managers and the U.S. Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States or Canada of any United States or Canadian Person) and includes any
United States or Canadian branch of a person who is not otherwise a United
States or Canadian Person, and "United States" means the United States of
America, its territories, its possessions and all areas subject to its
jurisidiction.

Pursuant to the Agreement Among U.S. Underwriters and International Managers,
sales may be made between the U.S. Underwriters and the International Managers
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price and
currency of settlement of any shares so sold shall be the public offering price
set forth on the cover page

65
<PAGE>

hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth above.

Pursuant to the Agreement Among U.S. Underwriters and International Managers,
each U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any shares of Common Stock, directly or
indirectly, in Canada in contravention of the securities laws of Canada or any
province or territory thereof and has represented that any offer of Common
Stock in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province or territory of Canada in which such offer
is made. Each U.S. Underwriter has further agreed to send any dealer who
purchases from it any shares of Common Stock a notice stating in substance
that, by purchasing such Common Stock, such dealer represents and agrees that
it has not offered or sold, and will not offer or sell, directly or indirectly,
any of such Common Stock in Canada in contravention of the securities laws of
Canada or any province or territory thereof and that any offer of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made, and that such dealer will deliver to any other dealer to whom it sells
any of such Common Stock a notice to the foregoing effect.

BT Securities, and its affiliates, from time to time provide financial
services for the Company and its affiliates and in connection therewith receive
customary fees. In 1993, BT Securities acted as financial advisor and dealer
manager to the Company in connection with the Exchange Offer and received from
the Company fees in connection therewith. Bankers Trust Company, an affiliate
of BT Securities, acted as exchange agent for the Exchange Offer and received
customary compensation for such services.

No document issued in connection with the Offering may be passed on to any
person in the United Kingdom unless that person is of a kind described in
Article 9(3) of the Financial Services Act 1986 (Investment Advertisement)
(Exemptions) Order 1988. In addition, each Underwriter has informed the Company
that: (i) it is not carrying on an investment business in the United Kingdom in
contravention of Section 3 of the Financial Services Act of 1986 (the "UKFSA");
(ii) it has not offered or sold, and it will not offer or sell, in the United
Kingdom, by means of this Prospectus, any amendment or supplement hereto or any
other document, any of the shares of Common Stock offered hereby other than to
persons whose ordinary business it is to buy or sell shares or debentures,
whether as principal or agent (except in circumstances that do not constitute
an offer to the public within the meaning of the Companies Act 1985); (iii)
subject to Part V of the UKFSA, it will not issue or cause to be issued in the
United Kingdom any advertisement offering the shares of Common Stock offered
hereby which is a primary or secondary offer within the meaning of the UKFSA
except in compliance with the provisions applicable under the UKFSA; (iv) it
has not issued or caused to be issued and it will not issue or cause to be
issued in the United Kingdom any investment advertisement within the meaning of
the UKFSA relating to the shares of Common Stock offered hereby except in
compliance with the provisions applicable under the UKFSA, and in particular,
it has not given and will not give copies of this Prospectus, any amendment or
supplement hereto or any other document relating to the offer and sale of the
shares of Common Stock offered hereby to any person in the United Kingdom who
does not fall within Article 9(3) of the Financial Services Act 1986
(Investment Advertisement) (Exemptions) Order 1988, and (v) it has complied and
will comply with all applicable provisions of the UKFSA with respect to
anything done by it in relation to the shares of Common Stock offered hereby
in, from or otherwise involving the United Kingdom.

No action has been taken in any jurisdiction by the Company or the
Underwriters that would permit a public offering of the Common Stock offered
pursuant to the Offering in any jurisdiction where action for that purpose is
required, other than the United States. The distribution of this Prospectus and
the offering or sale of the shares of Common Stock offered hereby in certain
jurisdictions may be restricted by law. Accordingly, the shares of Common Stock
offered hereby may not be offered or sold, directly or indirectly, and neither
this Prospectus nor any other offering material or advertisements in connection
with the Common Stock may be distributed or published, in or from any
jurisdiction, except under circumstances that will result

66
<PAGE>

in compliance with applicable rules and regulations of any such jurisdiction.
Such restrictions may be set out in applicable Prospectus Supplements. Persons
into whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any applicable
restrictions. This Prospectus does not constitute an offer of, or an invitation
to subscribe for purchase, any shares of Common Stock and may not be used for
the purpose of an offer to, or solicitation by, anyone in any jurisdiction or
in any circumstances in which such offer or solicitation is not authorized or
is unlawful.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Stephen J. McKenna, Esq., Senior Vice President and General Counsel
of the Company, and certain legal matters with respect to the Common Stock
offered hereby will be passed upon for the Company by Latham & Watkins,
Washington, D.C. and by Potter, Anderson & Corroon, Wilmington, Delaware and
for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, Los Angeles,
California.

Mr. McKenna owns Common Stock, and holds stock options, deferred stock and
restricted stock awards under the Comprehensive Stock Plan and may receive
additional awards under the plan in the future.

EXPERTS

The consolidated financial statements and schedules of the Company as
included in this Registration Statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their reports with respect
thereto and have been included herein in reliance upon the authority of said
firm as experts in giving said reports.

67
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Statement of Income for Fiscal Years Ended January 1, 1993,
January 3, 1992 and December 28, 1990.................................... F-3
Consolidated Balance Sheet at January 1, 1993 and January 3, 1992......... F-4
Consolidated Statement of Cash Flows for Fiscal Years Ended January 1,
1993, January 3, 1992 and December 28, 1990.............................. F-5
Consolidated Statement of Shareholders' Equity for Fiscal Years Ended Jan-
uary 1, 1993, January 3, 1992 and December 28, 1990...................... F-6
Notes to Consolidated Financial Statements................................ F-7
Condensed Consolidated Statement of Income for the Thirty-Six Weeks Ended
September 10, 1993 and September 11, 1992 (Unaudited).................... F-22
Condensed Consolidated Balance Sheet at September 10, 1993 (Unaudited).... F-24
Condensed Consolidated Statement of Cash Flows for the Thirty-Six Weeks
Ended September 10, 1993 and September 11, 1992 (Unaudited).............. F-25
Notes to Condensed Consolidated Financial Statements...................... F-26
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE SHAREHOLDERS OF HOST MARRIOTT CORPORATION:

We have audited the accompanying consolidated balance sheet of Host Marriott
Corporation and subsidiaries (formerly Marriott Corporation) as of January 1,
1993 and January 3, 1992, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 1, 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Host
Marriott Corporation and subsidiaries as of January 1, 1993 and January 3,
1992, and the results of their operations and their cash flows for each of the
three fiscal years in the period ended January 1, 1993 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN & CO.

Washington, D.C.
March 10, 1993 (except with respect to thematter discussed in the "Special
Dividend--Subsequent Event" note, as to which the date is December 23, 1993)

F-2
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

FISCAL YEARS ENDED JANUARY 1, 1993,
JANUARY 3, 1992 AND DECEMBER 28, 1990

<TABLE>
<CAPTION>
1992 1991 1990
-------- -------- --------
(IN MILLIONS, EXCEPT
PER COMMON SHARE AMOUNTS)
<S> <C> <C> <C>
SALES
Lodging
Rooms........................................ $ 2,843 $ 2,699 $ 2,374
Food and beverage............................ 1,190 1,194 1,146
Other......................................... 518 486 422
-------- -------- --------
4,551 4,379 3,942
Contract Services.............................. 4,171 3,952 3,704
-------- -------- --------
8,722 8,331 7,646
-------- -------- --------
OPERATING COSTS AND EXPENSES
Lodging
Departmental direct costs
Rooms........................................ 676 628 554
Food and beverage............................ 917 915 870
Other, including payments to hotel owners and,
in 1990, net restructuring charges of $65
million...................................... 2,620 2,511 2,279
Contract Services, including restructuring
charges of $57 million in 1990................ 4,013 3,799 3,590
-------- -------- --------
8,226 7,853 7,293
-------- -------- --------
OPERATING PROFIT
Lodging........................................ 338 325 239
Contract Services.............................. 158 153 114
-------- -------- --------
Operating profit before corporate expenses and
interest...................................... 496 478 353
Corporate expenses, including restructuring
charges of $21 million in 1992 and $31 million
in 1990....................................... (129) (111) (137)
Interest expense................................. (248) (265) (183)
Interest income.................................. 31 43 47
-------- -------- --------
INCOME BEFORE INCOME TAXES....................... 150 145 80
Provision for income taxes....................... 65 63 33
-------- -------- --------
NET INCOME....................................... 85 82 47
Dividends on preferred stock..................... (17) (1) --
-------- -------- --------
NET INCOME AVAILABLE FOR COMMON STOCK............ $ 68 $ 81 $ 47
======== ======== ========
EARNINGS PER COMMON SHARE........................ $ .64 $ .80 $ .46
======== ======== ========
</TABLE>

See "Notes to Consolidated Financial Statements."

F-3
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

JANUARY 1, 1993 AND JANUARY 3, 1992

<TABLE>
<CAPTION>
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents......................................... $ 325 $ 163
Accounts receivable.......................................... 606 527
Inventories, at lower of average cost or market.............. 316 244
Other........................................................ 249 221
------ ------
1,496 1,155
------ ------
Property and Equipment......................................... 3,461 3,847
Investments in Affiliates...................................... 445 457
Intangibles.................................................... 452 477
Notes Receivable and Other..................................... 556 573
------ ------
$6,410 $6,509
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable............................................. $ 710 $ 706
Accrued payroll and benefits................................. 331 313
Other payables and accruals.................................. 434 374
Notes payable and capital leases............................. 21 52
------ ------
1,496 1,445
------ ------
Long-Term Debt................................................. 2,732 2,979
Other Long-Term Liabilities.................................... 401 350
Deferred Income................................................ 183 232
Deferred Income Taxes.......................................... 585 614
Convertible Subordinated Debt.................................. 228 210
Shareholders' Equity
Convertible preferred stock.................................. 200 200
Common stock, 105 million shares issued...................... 105 105
Additional paid-in capital................................... 34 35
Retained earnings............................................ 555 583
Treasury stock, 4.2 million common shares and 9.5 million
common shares, respectively, at cost........................ (109) (244)
------ ------
Total Shareholders' Equity..................................... 785 679
------ ------
$6,410 $6,509
====== ======
</TABLE>

See "Notes to Consolidated Financial Statements."

F-4
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FISCAL YEARS ENDED JANUARY 1, 1993, JANUARY 3, 1992 AND DECEMBER 28, 1990

<TABLE>
<CAPTION>
1992 1991 1990
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 85 $ 82 $ 47
Adjustments to reconcile to cash from operations:
Depreciation and amortization................... 284 272 208
Income taxes.................................... (28) 27 18
Net restructuring charges....................... 21 -- 153
Proceeds from sales of timeshare notes receiv-
able........................................... 41 83 --
Amortization of deferred income................. (19) (38) (50)
Other........................................... 1 6 49
Working capital changes:
Accounts receivable........................... (40) 88 (76)
Inventories................................... (16) 63 (22)
Other current assets.......................... (14) 13 (5)
Accounts payable and accruals................. 106 (47) 63
------- ------- -------
Cash from continuing operations................... 421 549 385
Cash from (used in) discontinued operations....... (11) 3 (10)
------- ------- -------
Cash from operations.............................. 410 552 375
------- ------- -------
INVESTING ACTIVITIES
Proceeds from sales of assets..................... 484 84 990
Less noncash proceeds........................... (97) -- (15)
------- ------- -------
Cash received from sales of assets................ 387 84 975
Capital expenditures.............................. (210) (427) (1,094)
Acquisitions...................................... (47) -- (118)
Other............................................. (82) (126) (129)
------- ------- -------
Cash from (used in) investing activities.......... 48 (469) (366)
------- ------- -------
FINANCING ACTIVITIES
Issuances of long-term and convertible subordi-
nated debt....................................... 917 815 1,317
Issuance of convertible preferred stock........... -- 195 --
Issuances of common stock......................... 7 3 24
Repayment of long-term debt....................... (1,179) (1,316) (846)
Purchases of treasury stock....................... -- -- (294)
Dividends paid.................................... (41) (27) (27)
------- ------- -------
Cash from (used in) financing activities.......... (296) (330) 174
------- ------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS......... 162 (247) 183
CASH AND EQUIVALENTS, beginning of year............. 163 410 227
------- ------- -------
CASH AND EQUIVALENTS, end of year................... $ 325 $ 163 $ 410
======= ======= =======
</TABLE>

SEE "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS."

F-5
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

FISCAL YEARS ENDED JANUARY 1, 1993, JANUARY 3, 1992 AND DECEMBER 28, 1990

<TABLE>
<CAPTION>
COMMON CONVERTIBLE ADDITIONAL
SHARES PREFERRED COMMON PAID-IN RETAINED TREASURY
OUTSTANDING STOCK STOCK CAPITAL EARNINGS STOCK
- -----------------------------------------------------------------------------------------
(IN MILLIONS) (IN MILLIONS)
<C> <S> <C> <C> <C> <C> <C>
102.8 Balance, December 29,
1989................... $-- $125 $78 $1,059 $(634)
-- Net income.............. -- -- -- 47 --
1.2 Common stock issued for
employee stock purchase
and stock option plans. -- -- (3) -- 35
-- Cash dividends on common
stock ($.28 per share). -- -- -- (27) --
.3 Deferred stock
compensation........... -- -- (5) -- 8
-- Foreign currency
translation
adjustments............ -- -- 5 -- --
(10.7) Purchases of treasury
stock.................. -- -- -- -- (281)
-- Retirement of treasury
stock.................. -- (20) (6) (551) 577
- -----------------------------------------------------------------------------------------
93.6 Balance, December 28,
1990................... -- 105 69 528 (295)
-- Net income.............. -- -- -- 82 --
-- Issuance of convertible
preferred stock........ 200 -- (5) -- --
1.5 Common stock issued for
employee stock purchase
and stock option plans. -- -- (22) -- 40
-- Cash dividends ($.28 per
share)................. -- -- -- (27) --
.4 Deferred stock
compensation........... -- -- (2) -- 11
-- Foreign currency
translation
adjustments............ -- -- (5) -- --
- -----------------------------------------------------------------------------------------
95.5 Balance, January 3,
1992................... 200 105 35 583 (244)
-- Net income.............. -- -- -- 85 --
5.0 Common stock issued for
employee stock
purchase, stock option,
and profit sharing
plans.................. -- -- (1) (68) 127
-- Cash dividends on common
stock ($.28 per share). -- -- -- (28) --
-- Cash dividends on
convertible preferred
stock ($4.125 per
share)................. -- -- -- (17) --
.3 Deferred stock
compensation........... -- -- 2 -- 8
-- Foreign currency
translation
adjustments............ -- -- (2) -- --
- -----------------------------------------------------------------------------------------
100.8 Balance, January 1,
1993................... $200 $105 $34 $ 555 $(109)
=========================================================================================
</TABLE>

See "Notes to Consolidated Financial Statements."

F-6
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Host Marriott
Corporation (previously, Marriott Corporation) and its subsidiaries and
controlled affiliates (collectively, "the Company"). Investments in 50% or less
owned affiliates over which the Company has the ability to exercise significant
influence are accounted for using the equity method. The Company's equity in
net losses of these affiliates is included in corporate expenses. All material
intercompany transactions and balances have been eliminated. Certain prior year
amounts have been reclassified to conform with the 1992 presentation.

Fiscal Year

The Company's fiscal year ends on the Friday nearest to December 31 for U.S.
operations and on November 30 for most non-U.S. operations. Fiscal 1992 and
1990, which ended January 1, 1993 and December 28, 1990, respectively, include
52 weeks. Fiscal 1991, which ended January 3, 1992, includes 53 weeks.

Managed Hotel Operations

The Company operates 365 hotels under long-term management agreements whereby
payments to owners are based primarily on hotel profits. Working capital and
operating results of managed hotels operated with the Company's employees are
consolidated because the operating responsibilities associated with such hotels
are substantially the same as those for owned and leased hotels. The
consolidated financial statements include the following amounts related to
managed hotels: current assets and current liabilities of $246 million at
January 1, 1993, $269 million at January 3, 1992, and $282 million at December
28, 1990; sales of $2,896 million in 1992, $2,809 million in 1991, and $2,752
million in 1990; and operating expenses, including payments to owners, of
$2,721 million in 1992, $2,616 million in 1991, and $2,553 million in 1990.

International Operations

The consolidated statement of income includes the following amounts related
to non-U.S. subsidiaries and affiliates: sales of $355 million in 1992, $329
million in 1991, and $317 million in 1990; and income before income taxes of
$24 million in 1992, and $26 million in both 1991 and 1990.

Pre-Opening Costs

Costs of an operating nature incurred prior to opening of lodging and senior
living service properties are deferred and amortized over three years.

Profit Sharing Plans

The Company contributes to profit sharing and other defined contribution
plans for the benefit of employees meeting certain eligibility requirements and
electing participation in the plans. Company contributions are determined
annually by the Board of Directors, and totaled $25 million for 1992, $24
million for 1991, and $27 million for 1990.

Self-Insurance Programs

The Company is self-insured for certain levels of general liability, workers'
compensation and employee medical coverage. Estimated costs of these self-
insurance programs are accrued at present values of projected settlements for
known and anticipated claims.

F-7
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Earnings Per Common Share

Earnings per common share is computed on a fully diluted basis by dividing
net income available for common stock by the weighted average number of
outstanding common and common equivalent shares, plus other potentially
dilutive securities, aggregating 106.5 million in 1992, 101.5 million in 1991,
and 101.7 million in 1990.

Cash and Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents.

Postretirement and Postemployment Benefits

The Company provides medical benefits to a limited number of retired
employees meeting restrictive eligibility requirements. The Company's adoption
of Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" during 1992 did not have any
material effect.

The Company is also required to adopt Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," no
later than its fiscal year ending December 30, 1994. Application of this
statement will not have any material effect.

SPECIAL DIVIDEND

In October 1992, the Board of Directors of Marriott Corporation approved,
subject to approval of final terms and conditions and shareholder ratification,
the distribution to holders of Marriott Corporation common stock (on a share-
for-share basis) of all outstanding shares of common stock of an existing
wholly-owned subsidiary, Marriott International, Inc. ("Marriott
International") (the "Distribution"). Under the proposed plan (the "Plan"),
Marriott International will become a publicly traded company that will include
Marriott Corporation's lodging management, franchising and resort timesharing
operations, senior living service operations, and institutional food service
and facilities management businesses. The Company will retain Marriott
Corporation's airport and tollroad food, beverage and merchandise concession
operations, as well as most of its real estate properties. Additionally, the
Company or its subsidiaries will continue to act as general partner in Marriott
Corporation's lodging partnerships.

The Distribution is conditioned upon, among other things: declaration of the
special dividend by the Company's Board of Directors; ratification of the
Distribution by a majority of the Company shareholders; and receipt of an
affirmative ruling from the Internal Revenue Service that the Distribution will
be tax-free. It is expected that the Distribution will be made in the second
half of 1993, once these conditions are met.

The Company may borrow (i) up to $600 million from Marriott International
under a revolving line of credit available through December 1999, at which time
any outstanding balance will convert to a term loan due December 31, 2001
("Credit Agreement") and (ii) up to $125 million to finance approximately 60%
of the construction and development cost of the Philadelphia Marriott Hotel
under a first mortgage loan due 12 years after completion of construction. If
the proposed exchange offer is effected, the line of credit will be $630
million and final maturity will be 2008. In addition, Marriott International
will assume 90% of the LYONs debt obligations and will guarantee the Company's
performance to certain lenders and other third parties under certain Company
guarantees and other obligations. Fundings by Marriott International pursuant
to such guarantees will constitute loans to the Company.

F-8
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A number of holders of the Company's senior notes instituted legal
proceedings alleging, among other things, that (i) the Distribution, if
effected, would violate the terms of the Indenture under which senior notes
were issued, (ii) federal securities laws (and similar state laws) had been
violated in connection with the sale by the Company of certain series of its
senior notes, (iii) the Distribution, if effected, would be a fraudulent
conveyance as to creditors of the Company, and (iv) the Distribution, if
effected, would constitute a breach of fiduciary duty and a breach of implied
covenants of good faith and fair dealing allegedly owed by the Company to the
holders of the Company's senior notes. All but one of these cases has been
consolidated for all purposes in the United States District Court for the
District of Maryland. The other case has been stayed pending resolution of the
cases in that court. The Company believes these suits to be without merit and
that the ultimate outcome will not have a material effect on the Company's
financial position or results of operations.

The Company has reached agreements in principle--to modify certain terms of
its planned special dividend--with representatives of institutions holding
approximately $400 million of its senior notes, and with representatives of the
plaintiffs who have instituted class action litigation on behalf of
noteholders. Under the terms of the agreements, the Company will make an
exchange offer ("Exchange Offer") prior to the distribution under which holders
of certain series of the notes in the principal amount of approximately $1.5
billion will have the right to exchange their notes for a combination of (i)
cash and/or Marriott International obligations, (ii) Company stock and (iii)
new senior notes to be issued by a new subsidiary of the Company. Interest
rates on the exchange bonds would be 100 basis points higher and maturities on
most of the bonds would be extended by approximately four years, beyond 1998.
Participants in the exchange offer would be required to release any claims and
abandon any litigation related to the special dividend.

The agreement in principle with class action plaintiffs includes a settlement
for the benefit of certain persons who sold senior notes of the Company after
October 5, 1992, the date on which the planned Distribution was publicly
announced, and therefore are not in a position to participate in the Exchange
Offer. The Company has agreed to make available for distribution to this class
of plaintiffs warrants to purchase up to 7.7 million shares of the Company's
common stock, exercisable for five years, at $8.00 per share during the first
three years and $10.00 per share during the last two years.

Marriott has not reached an agreement with several other institutions that
have filed suit against the Company and are said to represent about $120
million of its senior notes.

The Distribution is not conditioned upon the consummation of the Exchange
Offer, and the Board of Directors' intention is to proceed with the
Distribution whether or not the Exchange Offer is consummated. If the Exchange
Offer is consummated, Marriott Corporation will make certain structural
modifications to the composition of the Company and Marriott International and
to the terms of certain arrangements relating to the Distribution. The Exchange
Offer will be made only by means of a prospectus contained in a registration
statement to be filed with the Securities and Exchange Commission (or under an
exemption from registration). Certain anticipated terms and conditions of the
Exchange Offer are described in further detail in the Exchange Offer and
Restructuring section of this Prospectus. The following condensed pro forma
financial information does not reflect the Exchange Offer.

The following condensed unaudited pro forma income statement data of Marriott
International and the Company is presented as if the Distribution had occurred
at the beginning of each period shown and the unaudited pro forma balance sheet
data is presented as if the Distribution had occurred at the end of the
applicable years shown. This pro forma data has been presented for
informational purposes only. It does not purport to be indicative of the
results which may occur in the future.

F-9
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
MARRIOTT INTERNATIONAL HOST MARRIOTT
----------------------- --------------
1992 1991 1992 1991
----------- ----------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Sales.................................. $7,787 $7,427 $1,209 $1,137
Operating profit before corporate ex-
penses and interest................... 330 328 153 136
Net income (loss)...................... 137 139 (43) (65)
Total assets........................... 2,787 2,597 3,922 4,153
Long-term debt (including LYONs)....... 583 570 2,590 2,811
Shareholders' equity................... 524 521 261 158
</TABLE>

Subsequent Event

On October 8, 1993, Marriott Corporation distributed, through a special
dividend, to holders of Marriott Corporation's common stock, 116,444,561
outstanding shares of common stock of Marriott International, Inc., and closed
on the Exchange Offer. The Internal Revenue Service has ruled the Distribution
tax free. Also on October 8, 1993, Marriott Corporation changed its name to
Host Marriott Corporation (the "Company"). The Company retained Marriott
Corporation's airport and tollroad food, beverage and merchandise concession
operations, as well as most of its real estate properties. Additionally, Host
Marriott or its subsidiaries continue as general partner in most of Marriott
Corporation's lodging partnerships. Marriott International became a publicly
traded company that includes Marriott Corporation's former lodging management,
franchising and resort timesharing operations, senior living service
operations, and institutional food service and facilities management
businesses. As a result, the assets, liabilities and businesses of the Company
have changed substantially. Accordingly, the accompanying financial statements
and related disclosures do not reflect the financial condition and results of
operations of the Company as it exists subsequent to the Distribution Date. See
"Pro Forma Financial Data" included elsewhere in this registration statement
for the adjustments required to reflect the effect of the Distribution and
Exchange Offer on the Company's financial statements and Notes 6 and 10 of
Notes to Condensed Consolidated Financial Statements for discussion of
conversion of Series A cumulative preferred stock into 10.6 million shares of
common stock and the Exchange Offer, respectively.

PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
Land and land improvements...................................... $ 776 $ 814
Buildings and leasehold improvements............................ 2,550 2,488
Furniture and equipment......................................... 899 901
Construction in progress........................................ 133 424
------ ------
4,358 4,627
Less accumulated depreciation and amortization.................. (897) (780)
------ ------
$3,461 $3,847
====== ======
</TABLE>

Property and equipment is recorded at cost, including interest, rent and real
estate taxes incurred during development and construction. Replacements and
improvements are capitalized.

Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the
shorter of the asset life or lease term.

Upon the sale of Courtyard hotels, Residence Inns or Fairfield Inns, the
gains and losses with respect to individual properties are aggregated, with the
net gain on the sale recognized as operating profit at the time of sale or
deferred to the extent required by generally accepted accounting principles.
Deferred gains are recognized as income in subsequent periods as conditions
requiring deferral are satisfied or expire without further cost to the Company.

F-10
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company assesses impairment of its property and equipment based on
whether it is probable that undiscounted future cash flows from such properties
will be less than their net book value.

Interest cost capitalized in connection with the Company's development and
construction activities totaled $14 million in 1992, $55 million in 1991, and
$141 million in 1990.

Most hotels developed by the Company since the early 1980s were reported as
Assets Held for Sale prior to 1992. In early 1992, the Company decided it was
no longer appropriate to view sales of lodging properties, subject to operating
agreements, as a primary means of long-term financing. Accordingly, the Company
discontinued classification of these properties (with an aggregate carrying
value of approximately $1,150 million at that time) as Assets Held for Sale.
The Company determined the net realizable value of the Assets Held for Sale on
a property-by-property basis in the case of full-service hotels, resorts and
suites, and on an aggregate basis, by hotel brand, in the case of Courtyard
hotels, Residence Inns and Fairfield Inns. On this basis, the carrying value of
these properties was not in excess of their net realizable value based on
estimated selling prices and, accordingly, no loss was recognized with respect
thereto.

With respect to the Courtyard hotels, Residence Inns and Fairfield Inns
formerly classified as Assets Held for Sale, the Company did not accumulate
data about estimated unrealized gains except to the extent necessary to
determine that they exceeded estimated unrealized losses on an aggregate basis
by hotel brand. The following table presents, for 1991, 1990 and 1989, the
estimated aggregate unrealized losses on those individual properties within
each such brand with a book value in excess of net realizable value (with
parenthetical indication, first, of the number of such properties and, second,
of the total number of properties within such brand classified as held for
sale).

<TABLE>
<CAPTION>
ESTIMATED UNREALIZED LOSSES
-------------------------------------------
1991 1990 1989
-------------- -------------- -------------
($ MILLIONS)
<S> <C> <C> <C>
Courtyard hotels.................... $23 (18 of 64) $19 (15 of 56) $12 (7 of 22)
Residence Inns...................... $17 (7 of 28) $ 8 (4 of 15) --
Fairfield Inns...................... $12 (10 of 30) $ 8 (7 of 23) --

--- --- ---
Total............................... $52 $35 $12
=== === ===
</TABLE>

INVESTMENTS IN AFFILIATES

<TABLE>
<CAPTION>
OWNERSHIP
INTERESTS 1992 1991
--------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Equity investments
Times Square Hotel Company, owner of the New York
Marriott Marquis hotel (foreclosure on 28.7%
additional interest in process)..................... 50% $ 62 $ 58
Other hotel partnerships which own 56 Marriott
hotels, 120 Courtyard hotels, 40 Residence Inns and
50 Fairfield Inns operated by the Company, including
117 properties located on land leased from the
Company as of January 1, 1993....................... 1%-50% 32 58
Other................................................ 20%-50% 57 52
Receivables, net of amounts due currently of $14
million in 1992 and $9 million in 1991................ 294 289
------ ------
$ 445 $ 457
====== ======
</TABLE>

Hotel properties owned by affiliates generally were acquired from the Company
in connection with limited partnership offerings. The Company or its
subsidiaries typically serve as a general partner of the

F-11
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
partnerships and operate the hotels under long-term agreements. Proceeds from
sales of hotels to affiliates totaled $498 million in 1990.

In the 1992 fourth quarter, as a consequence of a partner's default of
certain obligations, the Company recognized an in-substance foreclosure of the
partner's 28.7% interest in the Times Square Hotel Company ("TSHCO"). TSHCO has
not been consolidated because the Company expects its majority ownership to be
temporary. TSHCO total assets and total liabilities of $470 million and $459
million, respectively, and sales and operating expenses (including noncash
charges) of $131 million and $156 million, respectively, are included in the
1992 combined summarized affiliate financial data set forth below.

The Company's equity in four affiliates exceeded its proportionate share of
net assets by $51 million at January 1, 1993. This excess is being amortized
over the estimated useful lives of the related assets.

Receivables from affiliates are reported net of certain deferred income and
reserves for uncollectible amounts of $197 million at January 1, 1993 and $178
million at January 3, 1992. Receivables from affiliates at January 1, 1993
included a $155 million mortgage note at 9% which amortizes through 2003, and
net debt service and other advances totaling $19 million which are generally
secured by subordinated liens on the properties. The Company has committed to
advance additional amounts to affiliates, if necessary, to cover certain debt
service requirements and has accrued $21 million in connection therewith. Such
commitments are limited, in the aggregate, to an additional $328 million at
January 1, 1993. Amounts funded under these commitments totaled $22 million in
1992, $26 million in 1991 and $27 million in 1990.

The Company's pretax income from affiliates includes the following:

<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Management fees, net of direct costs....................... $ 82 $ 81 $ 76
Ground rental income....................................... 19 18 17
Interest income............................................ 16 19 21
Equity in net losses....................................... (24) (21) (16)
---- ---- ----
$ 93 $ 97 $ 98
==== ==== ====
</TABLE>

Combined summarized balance sheet information for the Company's affiliates
follows:

<TABLE>
<CAPTION>
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
Current assets................................................ $ 204 $ 158
Noncurrent assets............................................. 4,589 4,842
Current liabilities........................................... 1,464 445
Long-term debt, principally mortgages......................... 3,162 4,233
Other long-term liabilities................................... 694 565
</TABLE>

Combined summarized operating results reported by these affiliates follow:

<TABLE>
<CAPTION>
1992 1991 1990
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Sales............................................ $ 1,900 $ 1,855 $ 1,801
Operating expenses, including depreciation and
other noncash charges of $347 million in 1992
and 1991, and $344 million in 1990.............. (2,082) (2,076) (2,053)
------- ------- -------
$ (182) $ (221) $ (252)
======= ======= =======
</TABLE>

During 1990, the Company sold 50 Fairfield Inns and seven Marriott hotels to
affiliates in which it owns equity interests of up to 11%, for an aggregate
price of $461 million. Gains on the sales, aggregating $21 million, were
deferred. The Company continues to operate these properties under long-term
agreements.

F-12
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INTANGIBLE ASSETS

<TABLE>
<CAPTION>
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
Marriott Management Services contracts....................... $ 366 $ 366
Hotel management and franchise agreements.................... 107 107
Goodwill..................................................... 147 143
Other........................................................ 14 10
------ ------
634 626
Less accumulated amortization................................ (182) (149)
------ ------
$ 452 $ 477
====== ======
</TABLE>

Intangible assets primarily arose from purchase business combinations and are
being amortized on a straight-line basis over periods of 10 to 40 years.
Amortization expense totaled $33 million in 1992 and 1991, and $34 million in
1990.

DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

<TABLE>
<CAPTION>
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
Accounts receivable
Trade receivables........................................... $ 543 $ 478
Other....................................................... 63 49
------ ------
$ 606 $ 527
====== ======
Other current assets
Current deferred income taxes............................... $ 159 $ 157
Other....................................................... 90 64
------ ------
$ 249 $ 221
====== ======
Other payables and accruals
Casualty insurance.......................................... $ 89 $ 79
Other....................................................... 345 295
------ ------
$ 434 $ 374
====== ======
</TABLE>

INCOME TAXES

The provision for income taxes consists of:

<TABLE>
<CAPTION>
1992 1991 1990
---- ---- -----
(IN MILLIONS)
<S> <C> <C> <C>
Current--Federal.......................................... $ 39 $ (2) $ (18)
State................................................... 3 8 (28)
Foreign................................................. 20 10 16
---- ---- -----
62 16 (30)
---- ---- -----
Deferred--Federal......................................... (6) 38 33
State................................................... 10 4 36
Foreign................................................. (1) 5 (6)
---- ---- -----
3 47 63
---- ---- -----
$ 65 $ 63 $ 33
==== ==== =====
</TABLE>

No provision for U.S. income taxes has been made on the cumulative unremitted
earnings of non-U.S. subsidiaries ($61 million as of January 1, 1993) because
management considers these earnings to be permanently invested.

Deferred income taxes result from timing differences in the recognition of
income and expenses for financial and tax reporting purposes. Tax effects of
these differences consist of the following:

F-13
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Depreciation............................................... $(15) $ (3) $10
Capitalized interest....................................... 2 13 15
Partnership interests...................................... 41 45 26
Purchased tax lease benefits............................... (4) (2) 4
Asset dispositions......................................... (31) 38 10
Capitalized operations..................................... -- (3) (7)
Casualty claims............................................ (17) (33) (3)
Employee benefit plans..................................... (2) (8) (1)
Restructuring costs........................................ 1 16 (3)
Other, net................................................. 28 (16) 12
---- ---- ---
$ 3 $ 47 $63
==== ==== ===
</TABLE>

A reconciliation of the U.S. statutory tax rate to the Company's effective
income tax rate follows:

<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
U.S. statutory tax rate.................................... 34.0% 34.0% 34.0%
State income taxes, net of U.S. tax benefit................ 6.4 5.7 7.6
Goodwill amortization...................................... 1.8 1.9 3.5
Tax credits................................................ (2.3) (3.1) (5.7)
Additional tax on foreign source income.................... -- 2.2 --
Other, net................................................. 3.4 2.7 1.9
---- ---- ----
Effective income tax rate.................................. 43.3% 43.4% 41.3%
==== ==== ====
</TABLE>

Cash paid for income taxes, net of refunds received, was $93 million in 1992,
$36 million in 1991, and $49 million in 1990 (including $34 million applicable
to divested discontinued operations).

The Company will adopt Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in the first quarter of fiscal 1993. The
standard will be implemented on a prospective basis and management anticipates
that its application will increase shareholders' equity by approximately $30
million.

LEASES

<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
----------- ------- ---------
(IN MILLIONS)
<S> <C> <C>
1993..................................................... $ 11 $ 219
1994..................................................... 9 209
1995..................................................... 7 159
1996..................................................... 5 148
1997..................................................... 3 139
Thereafter............................................... 22 1,890
---- ------
Total minimum lease payments............................. 57 $2,764
======
Less amount representing interest........................ (20)
----
Present value of minimum lease payments.................. $ 37
====
</TABLE>

F-14
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Certain of the leases included above relate to facilities used in the
discontinued restaurant business. Most leases contain one or more renewal
options, generally for five or 10-year periods. Future rentals on leases have
not been reduced by aggregate minimum sublease rentals of $135 million payable
to the Company under noncancelable subleases.

The Company remains contingently liable on certain leases relating to
divested properties. Such contingent liabilities aggregated $235 million at
January 1, 1993. However, management considers the likelihood of any
substantial funding related to these leases to be remote.

Rent expense consists of:

<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Minimum rentals on operating leases.......................... $195 $166 $157
Additional rentals based on sales............................ 88 80 79
Payments to owners of managed and leased hotels based primar-
ily on profits.............................................. 607 596 583
---- ---- ----
$890 $842 $819
==== ==== ====
</TABLE>

LONG-TERM DEBT

<TABLE>
<CAPTION>
1992 1991
------ ------
(IN MILLIONS)
<S> <C> <C>
Secured notes, with an average rate of 8.3% at January 1,
1993, maturing through 2010................................ $ 485 $ 527
Unsecured debt
Senior notes, with an average rate of 9.3% at January 1,
1993, maturing through 2012
Debentures, 9.4%, due 2007................................ 1,618 1,323
Revolving loans, with an average rate of 4.3% at January
1, 1993, maturing through 1995........................... 250 250
Other notes, with an average rate of 7.2% at January 1,
1993, maturing through 2023.............................. 175 676
Capital lease obligations
188 193
37 62
------ ------
2,753 3,031
Less current portion........................................ (21) (52)
------ ------
$2,732 $2,979
====== ======
</TABLE>

At January 1, 1993, the Company had total revolving loan commitments of $682
million. Borrowings under these commitments bear interest at variable rates.

The Company's loan agreements require the maintenance of certain financial
ratios and minimum shareholders' equity, and also include, among others,
limitations on additional indebtedness and the pledging of assets. At January
1, 1993, retained earnings of $285 million were unrestricted, and assets with a
net book value of $827 million were pledged or mortgaged.

At January 1, 1993, the Company was party to $627 million aggregate notional
amount of interest rate exchange agreements. Under $600 million of these
agreements, the Company collects interest at fixed rates (average rate of 7.8%
at January 1, 1993), and pays interest based on specified floating interest
rates (average rate of 3.7% at January 1, 1993) through 1997. Under $27 million
of these agreements, the Company collects interest based on a specified
floating interest rate (5.6% at January 1, 1993) and pays interest at a fixed
rate (9.7%) through 1998.

F-15
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Aggregate debt maturities, excluding capital lease obligations, are: 1993--
$15 million; 1994--$213 million; 1995--$588 million; 1996--$368 million; 1997--
$258 million; and $1,274 million thereafter. Senior note maturities in 1993 are
classified as noncurrent based on availability of funds under the Company's
revolving loan agreements maturing beyond one year.

Cash paid for interest, net of amounts capitalized, was $209 million in 1992,
$224 million in 1991, and $171 million in 1990.

CONVERTIBLE SUBORDINATED DEBT

In June 1991, the Company issued $675 million (principal amount at maturity)
of zero coupon convertible subordinated debt in the form of Liquid Yield Option
Notes (LYONs) due 2006. Net proceeds from the LYONs issuance approximated $200
million. The LYONs are convertible into the Company's common stock at the rate
of 13.277 shares per $1,000 maturity amount. The issuance price of the LYONs
represents a yield to maturity of 8.25% per annum.

At the option of the holder the Company may be required to purchase the LYONs
in June 1996 and June 2001 for $445.56 (an aggregate of $301 million for all
LYONs) and $667.51 (an aggregate of $451 million for all LYONs) per LYON,
respectively. These redemption values represent the accreted values at those
dates. In such event, the Company may purchase the LYONs for cash, common stock
or any combination thereof. The LYONs are redeemable by the Company prior to
June 1993 only if the closing price of the Company's common stock equals or
exceeds $33.60 per share for at least 20 of 30 consecutive trading days ending
not more than five trading days prior to the date of notice of redemption.
Subject to the foregoing, the LYONs are redeemable for cash at any time at the
option of the Company, at the issue price plus accrued original issue discount
to the date of redemption.

SHAREHOLDERS' EQUITY

Three hundred million shares of common stock, with a par value of $1 per
share, are authorized, of which 105.0 million were issued as of January 1, 1993
and January 3, 1992. One million shares of preferred stock, without par value,
are authorized, of which four thousand (equivalent to four million depositary
shares) were issued as of January 1, 1993.

In December 1991, the Company issued four million non-voting depositary
shares, each representing 1/1,000th share of 8.25% Series A cumulative
convertible preferred stock (no par value) for net proceeds totaling $195
million. Each depositary share is convertible at any time at the option of the
holder into approximately 2.87 shares of common stock. Dividends, if declared,
are payable quarterly, commencing on April 15, 1992. Beginning on January 15,
1996, the Series A preferred stock is redeemable, in whole or in part, at the
Company's option, at $52.48 per depositary share, declining ratably to $50 per
depositary share in 2002, plus accrued and unpaid dividends to the redemption
date.

Additional paid-in capital at January 1, 1993 includes deferred compensation
credits of $48 million and cumulative foreign currency translation charges of
$5 million.

During 1990, the Company retired 20.0 million shares of treasury stock having
an average cost of $28.87 per share.

In February 1989, the Board of Directors adopted a shareholder rights plan
under which a dividend of one preferred stock purchase right was distributed
for each outstanding share of the Company's common stock to shareholders of
record on February 20, 1989. Each right entitles the holder to buy 1/1,000th of
a share of a newly issued series of junior participating preferred stock of the
Company at an exercise price of

F-16
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$150 per share. The rights will be exercisable 10 days after a person or group
acquires beneficial ownership of 20% or more of the Company's common stock, or
begins a tender or exchange offer for 30% or more of the Company's common
stock. Shares owned by a person or group on February 3, 1989 and held
continuously thereafter are exempt for purposes of determining beneficial
ownership under the rights plan. The rights are nonvoting and will expire on
February 2, 1999, unless exercised or previously redeemed by the Company for
$.01 each. If the Company is involved in a merger or certain other business
combinations not approved by the Board of Directors, each right entitles its
holder, other than the acquiring person or group, to purchase common stock of
either the Company or the acquirer having a value of twice the exercise price
of the right.

EMPLOYEE STOCK PLANS

Total shares of common stock reserved under employee stock plans at January
1, 1993 are (in millions):

<TABLE>
<S> <C>
Employee stock option plan............................................ 16.9
Deferred stock incentive plan......................................... 6.5
Restricted stock plan................................................. 1.5
Employee stock purchase plan.......................................... 2.1
----
27.0
====
</TABLE>

Under the terms of the employee stock option plan, options to purchase shares
of common stock may be granted to officers and key employees at not less than
fair market value on the date of grant. Options granted before May 11, 1990
expire 10 years after the date of grant and nonqualified options granted on or
after May 11, 1990 expire up to 15 years after the date of grant. Most options
are exercisable in cumulative installments of one-fourth at the end of each of
the first four years. No charges to income are made for options granted under
the employee stock option plan. Activity under the plan is summarized below:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
------------- ------------
(IN MILLIONS)
<S> <C> <C>
Balance at December 29, 1989...................... 9.5 $ 5-39
Granted......................................... 4.6 9-26
Exercised....................................... (.6) 5-32
Canceled........................................ (.6) 15-37
----
Balance at December 28, 1990...................... 12.9 7-39
Granted......................................... 3.3 16
Exercised....................................... (.5) 7-20
Canceled........................................ (1.2) 9-39
----
Balance at January 3, 1992........................ 14.5 7-39
Granted......................................... 3.2 15-19
Exercised....................................... (.8) 7-18
Canceled........................................ (1.2) 8-37
----
Balance at January 1, 1993........................ 15.7 8-39
====
Exercisable at January 1, 1993.................... 7.5
====
</TABLE>

Deferred stock incentive plan shares granted to officers and key employees
after 1990 generally vest over 10 years in annual installments commencing one
year after the date of grant. Certain employees may elect to defer payments
until termination or retirement. Deferred stock incentive plan shares granted
in 1990 and prior years generally vest in annual installments commencing one
year after the date of grant and continuing

F-17
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
until retirement. Employees also could elect to forfeit one-fourth of their
deferred stock incentive plan award in exchange for accelerated vesting over a
10-year period. The Company accrues compensation expense for the fair market
value of the shares on the date of grant, less estimated forfeitures. In 1992,
1991 and 1990, 671,000, 1,180,000 and 361,000 shares were granted,
respectively, under this plan. At January 1, 1993, 760,000 shares were
available for additional grants.

Restricted stock plan shares are issued to officers and key employees and
distributed over 10 years in annual installments, subject to certain prescribed
conditions including continued employment. The Company recognizes compensation
expense over the restriction period equal to the fair market value of the
shares on the date of issuance. The Company issued 32,000, and 40,000 shares
under this plan in 1992 and 1991, respectively, and canceled 59,000 shares in
1990.

Under the terms of the employee stock purchase plan, eligible employees may
purchase common stock through payroll deductions at the lower of market value
at the beginning or end of the plan year.

BUSINESS RESTRUCTURING AND WRITEOFFS

During 1992, the Company accrued pretax costs of $21 million related to the
Plan (see "Special Dividend"). During 1990, the Company incurred pretax
restructuring charges and writeoffs, net of $42 million of nonrecurring gains,
aggregating $153 million associated principally with the: delay or cancellation
of construction starts on most new lodging and senior living services projects;
reduction of 1991 capital expenditures to less than $500 million; and,
implementation of comprehensive reorganizations and downsizings within each
business unit and at the corporate staff level.

DISPOSITIONS

In February 1992, the Company sold 13 Courtyard hotels for $146 million in a
sale/leaseback transaction. The Company also sold seven full-service hotels in
1992, for total proceeds of $200 million. Pretax gains on these full-service
hotel sales of approximately $15 million were offset by adjustments to
previously established reserves, resulting in no net gain or loss.

In 1992 and 1991, the Company sold with recourse certain timeshare notes
receivable taken by its vacation resorts division in connection with the sale
of timesharing units. Net proceeds from these transactions totaled $34 million
in 1992 and $73 million in 1991. At January 1, 1993 the unpaid balance of all
timeshare notes sold with recourse was $93 million.

During 1991, the Company sold four Courtyard hotels to the Marriott
Corporation Employees' Profit Sharing, Retirement and Savings Plan and Trust
for total proceeds of $33 million. The Company continues to operate these
hotels under a long-term agreement.

In December 1989, the Company announced a decision to sell its fast food and
family restaurant operations. A pretax provision of $61 million was recorded at
that time to reduce restaurant assets to net realizable value, and to provide
for other costs related to the discontinuance of these businesses. In April
1990, the Company sold its Roy Rogers fast food restaurant division to Hardee's
Food Systems, Inc. for $365 million in cash, plus the assumption of certain
liabilities by the buyer. Sale proceeds were reported as a reduction of the
Company's remaining investment in restaurant properties held for sale. The
Company sold 203 family restaurants in 1992 and 138 in 1991 for total proceeds
of $84 million and $52 million, respectively. The Company expects to sell many
of the remaining 50 family restaurants in 1993.

F-18
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of noncurrent financial assets and liabilities and other
financial instruments are shown below. The fair values of current assets and
current liabilities are assumed to be equal to their reported carrying amounts.
<TABLE>
<CAPTION>
AS OF JANUARY 1, 1993
-------------------------
CARRYING FAIR
AMOUNT VALUE
-------------- ----------
(IN MILLIONS)
<S> <C> <C>
NONCURRENT FINANCIAL ASSETS
Long-term receivables from affiliates............. $ 263 $ 185
Notes receivable and other........................ 316 423
NONCURRENT FINANCIAL LIABILITIES
Long-term debt.................................... 2,701 2,628
Convertible subordinated debt..................... 228 226
OTHER FINANCIAL INSTRUMENTS
Affiliate debt service commitments................ 328 44
Interest rate swap agreements..................... 627 24
</TABLE>

Receivables from affiliates, notes and other financial assets are valued
based on the expected future cash flows discounted at risk adjusted rates.
Valuations for secured long-term debt are determined based on the expected
future payments discounted at risk adjusted rates. The fair value of revolving
loans and other notes are assumed to be equal to their carrying value. Long-
term senior notes and convertible subordinated debt are valued based on quoted
market prices.

The fair value of affiliate debt service commitments is based on the expected
future payments discounted at risk adjusted rates. A value was not assigned to
commitments with no expected fundings. The carrying amount represents the
Company's remaining unfunded commitments at January 1, 1993.

The fair value of interest rate swap agreements is based on the estimated
amount the Company would receive to terminate the swap agreements. The carrying
amount represents the aggregate notional amount of the agreements at January 1,
1993.

F-19
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

BUSINESS SEGMENTS

<TABLE>
<CAPTION>
1992 1991 1990
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Identifiable assets
Lodging........................................... $ 3,600 $ 3,952 $ 4,234
Contract Services................................. 1,886 1,839 1,819
Corporate......................................... 880 592 797
------- ------- -------
6,366 6,383 6,850
Discontinued operations........................... 44 126 184
------- ------- -------
$ 6,410 $ 6,509 $ 7,034
======= ======= =======
Capital expenditures
Lodging........................................... $ 86 $ 256 $ 804
Contract Services................................. 118 159 231
Corporate......................................... 4 7 45
------- ------- -------
208 422 1,080
Discontinued operations........................... 2 5 14
------- ------- -------
$ 210 $ 427 $ 1,094
Depreciation and amortization
Lodging........................................... 131 $ 130 $ 75
Contract Services................................. 139 125 119
Corporate......................................... 14 17 14
------- ------- -------
$ 284 $ 272 $ 208
======= ======= =======
</TABLE>

The Company is a diversified hospitality company with continuing operations
in two business segments. The Lodging segment includes Marriott hotels, resorts
and suites, Courtyard hotels, Residence Inns, Fairfield Inns and vacation
ownership resorts. The Contract Services segment consists of: food and
facilities management services for clients in business, healthcare and
education; food, beverage and merchandise operations at airports, on tollroads
and at stadiums, arenas and other attractions; development and operation of
retirement communities; and distribution of food and related products.

The results of operations of the Company's business segments are reported in
the consolidated statement of income. Segment operating expenses include
selling, general and administrative expenses directly related to the operations
of the businesses, aggregating $457 million in 1992 and 1991, and $394 million
in 1990. Gains and losses resulting from the disposition of assets identified
with each segment are included in segment operating profit.

F-20
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

QUARTERLY FINANCIAL DATA
(unaudited, in millions, except per common share amounts)

<TABLE>
<CAPTION>
1992
--------------------------------------
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Sales.................................. $1,953 $2,036 $1,948 $2,785 $8,722
Operating profit before corporate ex-
penses and interest................... 95 125 124 152 496
Net income............................. 11 29 26 19 85
Dividends on preferred stock........... (4) (4) (4) (5) (17)
Net income available for common stock.. 7 25 22 14 68
Fully diluted earnings per common
share................................. .07 .24 .21 .13 .64
</TABLE>

<TABLE>
<CAPTION>
1991
--------------------------------------
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Sales................................... $1,827 $1,940 $1,835 $2,729 $8,331
Operating profit before corporate ex-
penses and interest.................... 93 123 109 153 478
Net income.............................. 10 27 18 27 82
Fully diluted earnings per common share. .10 .27 .18 .25 .80
</TABLE>

The first three quarters consist of 12 weeks each. The fourth quarter
includes 16 weeks in 1992 and 17 weeks in 1991.

Fourth quarter 1992 results include pretax costs of $21 million related to
the Company's plan to divide its present operations into two separate companies
(see "Special Dividend" note to consolidated financial statements).

The sum of the earnings per common share for the four quarters in 1992
differs from the annual earnings per common share due to the required method of
computing the weighted average number of shares in the respective periods.

F-21
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
---------------------------
SEPTEMBER 10, SEPTEMBER 11,
1993 1992
------------- -------------
(IN MILLIONS, EXCEPT PER
COMMON SHARE AMOUNTS)
<S> <C> <C>
SALES
Lodging
Rooms........................................... $ 2,037 $ 2,004
Food and beverage............................... 802 809
Other........................................... 413 353
------- -------
3,252 3,166
Contract Services................................ 3,011 2,771
------- -------
6,263 5,937
------- -------
OPERATING COSTS AND EXPENSES
Lodging
Departmental direct costs
Rooms.......................................... 492 474
Food and beverage.............................. 625 629
Other operating expenses, including payments to
hotel owners................................... 1,868 1,820
------- -------
2,895 2,923
Contract Services................................ 2,985 2,670
------- -------
5,880 5,593
------- -------
OPERATING PROFIT
Lodging.......................................... 267 243
Contract Services................................ 116 101
------- -------
Operating profit before corporate expenses and
interest....................................... 383 344
Corporate expenses................................. (80) (74)
Interest expense................................... (166) (171)
Interest income.................................... 21 20
------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES.................. 158 119
Provision for income taxes......................... 76 53
------- -------
</TABLE>

See "Notes to Condensed Consolidated Financial Statements."

F-22
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONCLUDED)

(UNAUDITED)

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
---------------------------
SEPTEMBER 10, SEPTEMBER 11,
1993 1992
------------- -------------
(IN MILLIONS, EXCEPT PER
COMMON SHARE AMOUNTS)
<S> <C> <C>
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES............................. 82 66
Cumulative effect of a change in accounting for in-
come taxes........................................ 30 --
Cumulative effect of a change in accounting for as-
sets held for sale (net of income taxes of $22
million).......................................... (32) --
----- -----
NET INCOME......................................... 80 66
Dividends on preferred stock....................... 12 12
----- -----
NET INCOME AVAILABLE FOR COMMON STOCK.............. $ 68 $ 54
===== =====
EARNINGS PER COMMON SHARE
Income before cumulative effect of changes in ac-
counting principles............................. $ .65 $ .51
Cumulative effect of a change in accounting for
income taxes.................................... .27 --
Cumulative effect of a change in accounting for
assets held for sale (net of income taxes)...... (.29) --
----- -----
Net income....................................... $ .63 $ .51
===== =====
CASH DIVIDENDS PER COMMON SHARE.................... $ .21 $ .21
===== =====
</TABLE>

See "Notes to Condensed Consolidated Financial Statements."

F-23
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 10,
1993
-------------
(IN MILLIONS)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents........................................ $ 322
Accounts receivable......................................... 612
Other current assets........................................ 499
-------
1,433
-------
PROPERTY AND EQUIPMENT........................................ 4,412
Accumulated depreciation.................................... (1,013)
-------
3,399
-------
INVESTMENTS IN AFFILIATES..................................... 463
INTANGIBLES................................................... 442
NOTES RECEIVABLE AND OTHER.................................... 604
-------
$ 6,341
-------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................ $ 754
Other current liabilities................................... 755
-------
1,509
-------
LONG-TERM DEBT................................................ 2,614
OTHER LONG-TERM LIABILITIES................................... 467
DEFERRED INCOME............................................... 161
DEFERRED INCOME TAXES......................................... 473
CONVERTIBLE SUBORDINATED DEBT................................. 241
SHAREHOLDERS' EQUITY
Convertible preferred stock................................. 200
Common stock................................................ 105
Additional paid-in capital.................................. 41
Retained earnings........................................... 581
Treasury stock, 1.9 million common shares and 4.2 million
common shares, respectively, at cost....................... (51)
-------
Total Shareholders' Equity................................ 876
-------
$ 6,341
=======
</TABLE>

See "Notes to Condensed Consolidated Financial Statements."

F-24
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
---------------------------
SEPTEMBER 10, SEPTEMBER 11,
1993 1992
------------- -------------
(IN MILLIONS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income......................................... $ 80 $ 66
Adjustments to reconcile to cash from operations:
Depreciation and amortization.................... 200 196
Proceeds from sale of timeshare notes receivable. -- 41
Cumulative effect of a change in accounting for
income taxes.................................... (30) --
Cumulative effect of a change in accounting for
assets held for sale............................ 32 --
Income taxes and other........................... 30 --
Working capital changes.......................... 77 72
----- -------
Cash from operations............................... 389 375
----- -------
INVESTING ACTIVITIES
Proceeds from sales of assets...................... 44 429
Less noncash proceeds............................ (3) (89)
Cash received from sales of assets................. 41 340
Capital expenditures............................... (184) (152)
Other.............................................. (103) (27)
----- -------
Cash (used in) from investing activities........... (246) 161
----- -------
FINANCING ACTIVITIES
Issuances of long-term debt........................ 159 885
Issuances of common stock.......................... 10 3
Repayment of long-term debt........................ (281) (1,016)
Dividends paid..................................... (34) (30)
----- -------
Cash used in financing activities.................. (146) (158)
----- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS........ $ (3) $ 378
===== =======
</TABLE>

See "Notes to Condensed Consolidated Financial Statements."

F-25
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Subsequent to the date of the accompanying condensed consolidated
financial statements, on October 8, 1993 (the "Distribution Date"), Marriott
Corporation distributed, through a special dividend (the "Distribution"), to
holders of Marriott Corporation's common stock (on a share-for-share basis),
116,444,561 outstanding shares of common stock of an existing wholly-owned
subsidiary, Marriott International, Inc. ("Marriott International"), resulting
in the division of Marriott Corporation's present operations into two separate
companies. The Internal Revenue Service has ruled the Distribution tax free.
Also on the Distribution Date, Marriott Corporation changed its name to Host
Marriott Corporation (the "Company"). The Company retained Marriott
Corporation's airport and tollroad food, beverage and merchandise concession
operations, as well as most of its real estate properties. Additionally, the
Company or its subsidiaries continue as general partner in most of Marriott
Corporation's lodging partnerships. Marriott International became a publicly
traded company that includes Marriott Corporation's former lodging management,
franchising and resort timesharing operations, senior living service
operations, and institutional food service and facilities management
businesses. As a result, the assets, liabilities and businesses of the Company
have changed substantially. Accordingly, the financial disclosures herein do
not reflect the financial condition and results of operations of the Company as
it now exists. See "Pro Forma Financial Data" for pro forma information of the
Company. As a result of the completion of the Distribution, the Company will
expense approximately $13 million in the fourth quarter of 1993 related to
costs of the transaction.

2. The accompanying condensed consolidated financial statements of the
Company have been prepared by the Company without audit. Certain information
and footnote disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been condensed or
omitted. The Company believes the disclosures made are adequate to make the
information presented not misleading. However, the condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in this Prospectus.

In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position of Host Marriott Corporation and subsidiaries as of September 10, 1993
and the results of operations for the thirty-six weeks ended September 10, 1993
and September 11, 1992, and cash flows for the thirty-six weeks ended September
10, 1993 and September 11, 1992. Interim results are not necessarily indicative
of fiscal year performance because of the impact of seasonal and short-term
variations. Additionally, the Distribution referred to in Note 1 has materially
altered the constitution of the Company. Therefore, operations occurring after
the Distribution Date will not be comparable to those prior to the Distribution
Date.

3. Earnings per common share is computed on a fully diluted basis by dividing
net income available for common stock by the weighted average number of
outstanding common and common equivalent shares, plus other potentially
dilutive securities, aggregating 109.8 million and 105.3 million for the
thirty-six weeks ended September 10, 1993 and September 11, 1992, respectively,
the Company issued 1.8 million common shares to former holders of certain
senior notes and debentures of the Company as part of the Exchange
Consideration (see note 10, below). Additionally, subsequent to September 10,
1993 the Company issued 10.6 million common shares to former holders of the
Company's preferred stock. Supplemental earnings per share, giving effect to
these transactions as if they had occurred as of the first day of the period
presented, was $0.67 and $0.57 for the thirty-six weeks ended September 10,
1993 and September 11, 1992, respectively. Weighted average shares outstanding
for supplemental earnings per share were 122.3 million and 117.6 million for
the thirty-six weeks ended September 10, 1993 and September 11, 1992,
respectively. Supplemental earnings per share, giving effect to the
transactions discussed above and the potential LYONs conversion (discussed in

F-26
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED)
Note 11) as if they had occurred as of the first day of the period presented,
was $0.68 and $0.59 for the thirty-six weeks ended September 10, 1993 and
September 11, 1992, respectively. Weighted average shares outstanding, giving
effect to the transactions discussed above and the potential LYONs conversions
(discussed in Note 11) as if they had occurred as of the first day of the
period presented, were 131.3 million and 126.6 million for the thirty-six weeks
ended September 10, 1993 and September 11, 1992, respectively.

4. The Company has minority interests in 37 affiliates, most of which own
hotels operated by Marriott International or its subsidiaries under long-term
agreements. The Company's equity in net losses of affiliates of $21 million and
$17 million for the thirty-six weeks then ended September 10, 1993 and
September 11, 1992 respectively, is included in corporate expenses.

Combined summarized operating results reported by affiliates follow:

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
---------------------------
SEPTEMBER 10, SEPTEMBER 11,
1993 1992
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Sales........................................... $ 1,377 $ 1,325
Operating expenses, including depreciation and
other noncash charges of $227 million and $240
million for the thirty-six week periods then
ended September 10, 1993 and September 11,
1992, respectively............................. (1,478) (1,473)
------- -------
$ (101) $ (148)
======= =======
</TABLE>

5. Beginning in the second fiscal quarter of 1993, under a new accounting
policy adopted by the Company, net realizable value of assets held for sale are
determined on a property-by-property basis as to all lodging properties,
whereas, formerly such determination was made on an aggregate basis, by hotel
brand, as to Courtyard hotels, Fairfield Inns and Residence Inns. The after-tax
cumulative effect of this change on years prior to 1993 of $32 million was
recorded in the quarter ended June 18, 1993 and is reflected in the
accompanying condensed consolidated statement of income for the thirty-six
weeks ended September 10, 1993. The reduction in the annual depreciation charge
as a result of this change has not had a material effect on 1993 results of
operations.

6. In September 1993, approximately 92% or 3,673,634 depositary shares
representing the Company's 8.25% Series A cumulative convertible preferred
stock (no par value) were converted into 10.6 million shares of Company common
stock. As a result, holders of the common shares issued upon conversion
participated in the Distribution. On October 1, 1993, the Company's Board of
Directors adjusted the conversion rate of the Company's remaining 326,366
depositary shares to reflect the special dividend. Each depositary share is
currently convertible at any time at the option of the holder into 19.16 shares
of common stock of the Company.

7. The Company adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("SFAS 109"), during the first quarter of 1993.
Prior to such adoption, the Company deferred the past tax effects of timing
differences between amounts recorded for financial reporting purposes and
taxable income. SFAS 109 requires the recognition of deferred tax assets and
liabilities equal to the expected future tax consequences of the temporary
differences. The $30 million cumulative credit resulting from this change in
accounting principle is included in the Company's condensed consolidated
statement of income for the thirty-six weeks ended September 10, 1993. In the
1993 third quarter, as a result of recent tax legislation which increased the
federal income tax rate retroactively to the beginning of fiscal year 1993, the
Company increased the provision for income taxes by approximately $6 million as
a result of non-cash income tax adjustments as required by SFAS 109.

F-27
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(UNAUDITED)
8. As described in "Risk Factors--Pending Litigation," the Company is
involved in legal proceedings related to the Distribution. The Company believes
that the ultimate outcome of these legal proceedings will not have a material
effect on the financial position or results of operations of the Company.

9. The Company is required to adopt Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," for
fiscal years beginning after December 15, 1994, and Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," for fiscal years beginning after December 15, 1993.
Management anticipates that application of these statements will not have a
material effect on the Company's financial statements.

10. The Company began exchange offers on July 19, 1993 for certain of its
senior notes and debentures (the "Exchange Offer") with an aggregate principal
amount of approximately $1.5 billion (the "Old Notes"). On October 8, 1993, the
Exchange Offer closed, leaving approximately $283 million principal amount of
the Old Notes outstanding, exclusive of (1) the Series F Senior Notes, (2) the
remaining amount of notes which have been called for redemption and (3) the
Series G Senior Notes which have been defeased.

Under the Exchange Offer, holders of the Company's Series B, C, D, E, K, L
and M senior notes and the Company's debentures received $950.74 principal
amount of new notes (the "New Notes") of a wholly-owned indirect subsidiary of
the Company, Host Marriott Hospitality, Inc. ("Hospitality") and $49.26 market
value of Company common stock for each $1,000 principal amount held
(collectively, the "Exchange Consideration").

The coupon and maturity date for each series of New Notes was 100 basis
points higher and four years later, respectively, than the series of existing
notes for which it was exchanged (except the maturity of the New Notes
exchanged for Series L Senior Notes, which was shortened by five years).

The New Notes contain various new covenants and are secured by the stock of
Hospitality and certain of its subsidiaries. All of Hospitality's material
subsidiaries guarantee the New Notes. Hospitality's parent, HMH Holdings, Inc.,
also guarantees the New Notes, and is the borrower under a $630 million line of
credit provided by Marriott International. See "Risk Factors--Substantial
Leverage; Restrictive Covenants" for a more detailed discussion of restrictive
covenants.

As part of the Exchange Offer, the Company solicited consents for certain
proposed amendments to the Indenture under which the Old Notes were issued, a
waiver of any claims, rights or defaults under such Indenture, and a release
and discharge of all legal or equitable claims or exchanging noteholders
relating to the Distribution (collectively the "Consents and Releases"). It was
a condition to participation of each holder in the Exchange Offer that such
holder have delivered the Consents and Releases.

Since the Company did not receive tenders representing more than 50 percent
of the aggregate principal amount of the Series F Senior Notes, the Company
elected to call for redemption on October 8, 1993, at par plus accrued
interest, all of the Series F Senior Notes which where not tendered
(approximately $51 million principal amount). Also, since the Company did not
receive tenders representing more than 50 percent of the aggregate principal
amount of the Series I Senior Notes as of October 8, 1993, the Company elected
to modify the provisions of the Indentures governing, respectively, the Series
I Senior Notes and the notes issued by Hospitality in connection with the
Exchange Offer. These modifications of the two indentures secured the Series I
Senior Notes equally and ratably with the New Notes issued in the Exchange. In
addition, the Company defeased the Series G Senior Notes due February 1, 1994
($100 million aggregate principal amount outstanding).

The exchange will be treated as an extinguishment of debt and the Company
will recognize an extraordinary pre-tax loss of approximately $9 million in the
1993 fourth quarter, equal to the difference between the carrying amount of the
Company's Old Notes and the market value of the Exchange Consideration.

F-28
<PAGE>

HOST MARRIOTT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

(UNAUDITED)

11. In connection with the Distribution, the Company entered into an
agreement with Marriott International pursuant to which Marriott International
assumed 90% of the debt obligations evidenced by the Company's convertible
subordinated Liquid Yield Option Notes due 2006 (the "LYONs") and caused the
LYONs indenture (the "Indenture") to be amended to reflect such assumptions by
Marriott International.

On December 13, 1993, the Company and Marriott International jointly
announced that they will redeem LYONs for $367.60 per $1,000 principal amount
on January 25, 1994. The aggregate redemption price as of the redemption date
of all LYONs outstanding on December 13, 1993 will be approximately $197
million, of which $177 million is payable by Marriott International. The
Company's share of this LYONs obligation is $20 million. If the LYONs
outstanding at September 10, 1993 are converted prior to January 25, 1994,
shares outstanding for the Company as of September 10, 1993 will increase by
approximately nine million.

F-29
<PAGE>

ANNEX A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION

As a result of the Distribution, the assets, liabilities and businesses of
the Company have changed substantially. Accordingly, the discussion and
analysis set forth below are not reflective of the Company as it now exists.
See "Management's Discussion and Analysis of Pro Forma Financial Data."

RESULTS OF OPERATIONS

Thirty-Six Weeks Ended September 10, 1993 Compared to Thirty-Six Weeks Ended
September 11, 1992

Total sales increased 5% in 1993, primarily due to lodging unit growth,
occupancy gains and increased timeshare sales, new food service and facilities
management accounts, and expansion of management services to existing clients,
the acquisition of the Dobbs airport concession operations in the 1992 fourth
quarter and sales at new senior living services properties. Income before the
cumulative effect of changes in accounting principles increased 24% in 1993.

Net income in 1993 reflects (i) an after-tax charge of $32 million (29 cents
per common share) resulting from a change in accounting for assets held for
sale, (ii) an increase in non-cash income tax expense of $6 million as required
by SFAS 109 to reflect the impact of recent tax legislation, partially offset
by (iii) $30 million (27 cents per common share) credit resulting from the
change in accounting for income taxes to comply with SFAS 109. Excluding these
accounting changes and the impact of the income tax adjustments as well as
lodging dispositions in both years, the Company posted 38% higher net income.

Lodging operations reported sales growth of 3% in 1993, as comparable unit
sales rose in all four of the Company's hotel brands. Operating profit rose
10%, including profit realized in connection with the disposition of the equity
interest in an international hotel. Lodging operations benefited from the net
addition of 70 hotels (9,300 rooms) since the beginning of 1992, including 22
hotels (3,500 rooms) during 1993, and higher occupancy for all four of the
Company's lodging brands. Room sales grew by 2%. Food and beverage sales
decreased 1%, primarily due to restaurant closings during non-peak hours at
certain limited service units. The Company had 768 hotels, totaling
approximately 171,000 rooms, at September 10, 1993, in the Marriott hotel
system.

Marriott Hotels, Resorts and Suites, the Company's full-service lodging
product, posted an increase in occupancy for comparable units of more than
three percentage points for 1993--to the upper 70s. Average room rates for 1993
were in line with year-earlier levels. Higher room sales and food and beverage
sales reflected increased demand in the transient and group meeting segments.

Courtyard, the Company's moderately priced lodging product, achieved
increases in occupancy for comparable units of over two percentage points for
1993--to the mid-80s, aided by strong weekend business. Growth in average room
rates exceeded inflation for 1993.

Residence Inn, the Company's extended stay product, posted over three
percentage points higher occupancy for comparable units for 1993--to the high
80s. Average room rates were up slightly while occupancy benefited from
continuing emphasis on promoting weekend business.

Fairfield Inn, the Company's economy lodging product, reported one percentage
point higher occupancy for comparable units for 1993--to the upper 80s while
average room rate growth exceeded inflation. Comparable unit sales were up
solidly, reflecting strong response to a complimentary continental breakfast
program rolled out across the system in the spring of 1993.

A-1
<PAGE>

Marriott Ownership Resorts, the Company's timeshare division, posted
substantial increases in sales and operating profits in the 1993 third quarter,
benefiting from strong sales at existing timesharing projects and the impact of
new national marketing programs.

Contract Services reported increases in operating profit of 15% for 1993
reflecting earnings growth for three of the four major businesses in the group.
Sales grew by 9% year-to-date.

Marriott Management Services posted slightly higher sales and strong overall
profit growth in 1993. Results benefited from a profit increase in the health
care product line due to growth in comparable units and new business. Results
for other key product lines, including corporate services, higher education and
school services, were slightly lower than the prior year.

The Host/Travel Plazas division reported higher sales in 1993, while
operating profits were down moderately. Sales benefited from the third quarter
1992 acquisition of the former Dobbs airport operations, but 1993 profit
comparisons for airport food, beverage and merchandise operations were hurt by
a decrease in U.S. enplanements and higher rent at one key airport. Airport
traffic, which had been boosted by airline "fare wars" in 1992, continued to be
affected by route cutbacks by major carriers in 1993. Increased sales for
travel plazas business reflected completion of several units on a major
tollroad, while operating profits were flat due to unit remodeling on one
tollroad and reduced traffic on two other key tollroad systems.

Marriott Senior Living Services reported substantially higher sales and
profits in 1993. Results benefited from the maturing of three properties opened
in 1992, including a condominium retirement community which continued to have
strong sales in the first three quarters of 1993. Comparable occupancy
increased nearly seven percentage points for the 1993 third quarter--to the low
90s.

Marriott Distribution Services, which supplies food and related products to
Company operations and external clients, posted increased sales and slightly
higher operating profits in 1993. Sales benefited from the opening of two
distribution centers since mid-1992 and the start of service to a large
regional restaurant chain during the 1993 third quarter.

Corporate expenses increased 8% over 1992, primarily due to reduced joint
venture results. Interest expense decreased 3% from 1992, reflecting lower
rates and lower average debt balances.

The Company's effective tax rate increased to 48.1% compared to 44.5% in the
comparable prior year period, primarily due to the 1993 third quarter income
tax adjustments cited above.

1992 Compared to 1991

Net income totaled $85 million in 1992, compared to $82 million in 1991, on a
5% increase in sales. The Company's earnings per common share were $.64, down
from $.80 in 1991. Comparisons of 1992 earnings to the preceding year were
affected by several noncomparable items, including operating results and
financing costs for recently opened lodging and senior living services
properties, reduced gain amortization from earlier asset sales, lodging
dispositions in both years, the issuance of preferred stock in late 1991, and
approximately $21 million of costs related to the Distribution.

Excluding the impact of these items, the Company's operating profit and net
income increased by 11% and 56%, respectively, principally due to strong
improvement in four of the Company's five lodging divisions and growth in its
senior living services operations.

A-2
<PAGE>

Lodging sales and operating profit both increased 4% in 1992. Excluding the
impact of the noncomparable items cited above, lodging profits were up 14%
compared to the preceding year. Lodging sales growth was generated primarily by
the net addition of 107 hotels (16,750 rooms) since the beginning of 1991, and
higher occupancy rates. Average room rates across the Marriott system increased
slightly. Food and beverage sales were flat with the prior year due to more
rapid expansion of product lines with limited food service facilities, and the
closing of certain low volume restaurants. At year-end 1992, the Company's
lodging business encompassed 746 hotels with over 167,000 rooms, including the
net addition of 48 hotels (5,800 rooms) during 1992.

Marriott Hotels, Resorts and Suites, the full-service lodging division,
posted increases in occupancy for comparable U.S. hotels of two percentage
points for the 1992--to the mid-70s--while the average room rate was unchanged.
Profits were flat excluding the impact of the aforementioned noncomparable
items.

Courtyard, the moderate price lodging product, posted strong increases in
sales and profits for 1992. Occupancy for comparable units advanced nearly
eight percentage points for 1992 to the upper 70s. Average room rates were
slightly lower, reflecting the division's strategy of increasing occupancy and
total revenues. Reduced administrative expenses also aided results.

Residence Inn, the extended stay lodging product, reported solid sales and
profit growth for 1992. Occupancy for comparable units increased nearly three
percentage points--to the low 80s--as business travel and weekend leisure
business improved from 1991 levels. Average room rates were slightly higher.

Fairfield Inn, the economy lodging product, generated higher sales and
profits for 1992 on occupancy growth of more than three percentage points--to
the upper 70s--for comparable units. Average room rate growth matched
inflation.

Marriott Ownership Resorts, the timeshare division, posted higher sales and
profits in 1992 due to increased sales at existing timesharing properties, the
addition of two new properties, and greater cost efficiencies in marketing and
product development.

Contract Services reported increases in sales and operating profit of 6% and
3% respectively, compared to 1991, largely due to significant growth for
Marriott Senior Living Services, although all four divisions in the group
reported higher sales.

Marriott Management Services, benefited from increased profits in its health
care, higher education and school services division. Overall results increased
only modestly due to the offsetting effect of losses at a west coast laundry
facility and lower profits for Canadian operations.

Host/Travel Plazas results were helped by operating efficiencies, and the
increased travel resulting from low summer airfares, the September 1992
acquisition of the Dobbs airport concessions, and improved performance in
stadiums and arenas. However, lower profits reflected reduced results on
several major tollroads served by the Company, and at merchandise operations in
Las Vegas and Atlantic City.

Marriott Senior Living Services reported strong sales and profit increases in
1992, aided by the sale of condominium units at a new retirement community in
the Washington, D.C. area, and the maturing of units opened in prior years.
Occupancy for comparable units increased by more than nine percentage points to
nearly 90 percent.

Marriott Distribution Services had higher sales in 1992. Profits were
slightly lower due to costs associated with new distribution center openings,
and reduced volume at certain distribution centers resulting from the Company's
disposition of its family restaurant division.

Corporate expenses increased 16% in 1992 due to $21 million of costs
associated with the planned special dividend. Corporate expenses decreased 3%
in 1992 excluding these costs, following a 19% decline in the preceding year.
After a major administrative downsizing program conducted in 1990-91, the
Company eliminated additional administrative staff positions in 1992.

A-3
<PAGE>

Interest expense declined 6% in 1992 due to lower average borrowings as well
as lower interest rates, which were partially offset by reduced interest
capitalization. Interest income was down 28% primarily as a result of lower
temporary cash investments. The Company's effective tax rate was 43.3% in 1992
compared to 43.4% in the preceding year.

During 1992, the Company sold thirteen Courtyard hotels for $146 million in a
sale/leaseback transaction. The Company also sold seven full service hotels in
1992 for total proceeds of $200 million. Pre-tax gains on these full-service
hotel sales of approximately $15 million were offset by adjustments to
previously established reserves, resulting in no net gain or loss. Most of the
reserve adjustment was a valuation allowance, related to the in-substance
foreclosure of a 28.7% interest in the Times Square Hotel Company, equal to the
difference between the estimated fair value of the in-substance foreclosed
ownership interest and carrying the amount of the receivable.

1991 Compared to 1990

Income from continuing operations increased 74% to $82 million in 1991
compared to $47 million in 1990. The Company's earnings per share from
continuing operations was $.80 in 1991, up from $.46 in 1990. Reported results
reflected the impact of several noncomparable items, including: operating
results and financing costs for recently opened hotels and other assets held
for sale in both years; lower deferred gain amortization in 1991; and writeoffs
and reserves in 1990 primarily related to overhead cost reductions and the
cancellation of new unit development. Excluding these noncomparable items in
both years, operating profit was down 3% in 1991 and net income decreased 10%.

Lodging operations reported an 11% sales gain and 36% higher operating profit
in fiscal 1991. Excluding the noncomparable items, sales increased 4% and
profits were flat. Rooms sales increased 14% from the prior year, benefiting
from the net addition of 159 hotels (27,000 rooms) since the beginning of 1990.
Food and beverage sales increased at the lower rate of 4% for 1991, primarily
due to more rapid expansion of product lines with limited food service
facilities. Despite industry overcapacity in many U.S. markets, and the impact
of the recession and the Gulf war, sales and occupancy for comparable units
increased in three of the Company's four major lodging product lines. Operating
margins declined slightly in 1991 primarily due to lower average room rates.
Overall, lodging room rates declined about 2%. At year-end 1991, the Company's
lodging business encompassed 698 properties with over 161,000 rooms, including
the net addition of 59 hotels during 1991.

Marriott Hotels, Resorts and Suites reported 1991 occupancy rates for
comparable units in the mid-70s, down one percentage point from 1990, while
room rates declined approximately 2%. Courtyard, the Company's moderate price
lodging product, posted occupancy rates for comparable units in the low 70s--
nearly one percentage point higher than 1990 levels--while room rates declined
less than 1%. Residence Inn, the extended stay product, reported a gain of more
than one percentage point in occupancy, remaining in the upper 70s--while room
rates declined nearly 2%. Fairfield Inn, Marriott's economy lodging product,
reported an operating profit in 1991, compared to a loss for the prior year.
Occupancy for comparable Fairfield Inns rose more than five percentage points--
to the upper 70s--while room rates declined approximately 3%.

Marriott Ownership Resorts posted a 44% increase in sales and a 32% increase
in profits due to the successful roll-out of several new timesharing resorts.

Contract Services reported 7% higher sales and 34% higher operating profit
for 1991. Excluding the impact of restructuring charges and writeoffs in 1990,
operating profit declined 8%. Operating margin percentages declined due to
start-up losses associated with the new stadiums and arenas operations and a
new centralized laundry facility on the West Coast.

Marriott Management Services' sales and profits increased, benefiting from
solid gains in its health care and school food service operations and reduced
administrative costs. Profits for higher education operations were slightly
below the 1990 levels, while corporate services profits were hurt by the
recession. Profits for facilities management declined primarily due to lower
results for laundry operations.

A-4
<PAGE>

Sales for Host/Travel Plazas were up slightly, but profits declined because
of lower U.S. airline enplanements and highway travel due to the recession and
the Gulf war. Results also were affected by start-up losses for the new
stadiums and arenas operations.

Marriott Senior Living Services reported a solid sales increase and posted
its first profitable year, helped by strong gains at several Company-developed
retirement communities. Comparable occupancy for the Company's retirement
communities rose by more than six percentage points, into the mid-80s.

Corporate expenses decreased 19% in 1991, reflecting savings from downsizing
most administrative functions during the past two years. Staffing has been
reduced by approximately 17% since the beginning of 1990. Interest expense
increased 45% in 1991 due to financing costs for recently opened lodging
properties and other assets held for sale, which exceeded the impact of lower
interest rates. Interest income declined 9%, largely due to collection of
affiliate notes receivable. The Company's effective income tax rate increased
to 43.4% in 1991, compared to 41.3% in 1990, primarily due to higher foreign
taxes.

1990 Compared to 1989

Income from continuing operations declined to $47 million in 1990 compared to
$181 million in 1989. The Company's earnings per share from continuing
operations was $.46 in 1990, down from $1.62 in 1989. Excluding noncomparable
items (primarily divestitures, restructuring write-offs and reserves in both
years, and 1990 start-up losses for new hotels) income from continuing
operations declined 7%. Comparisons of operating results between the two years
are affected by the following items:

. In 1990 the Company recorded pretax restructuring charges and writeoffs
of $153 million, net of $42 million of previously deferred hotel
disposition gains. The 1990 charges principally related to reductions in
new unit development for lodging and senior living services, and
implementation of overhead cost reduction programs throughout the
Company. Restructuring charges of $256 million (pretax) associated with
continuing operations were recognized in 1989.

. Delays in the Company's asset disposition program due to difficult market
conditions in 1990 resulted in the recognition of start-up losses for
many new hotels. By contrast, the Company generated pretax gains of $34
million on hotel development and related activities in 1989.

. The Company's airline catering business was divested in December 1989 and
its fast food division was sold in April 1990. Fiscal 1989 results of
continuing operations include an after-tax gain of $136 million related
to the airline catering divestiture, and discontinued operations include
an after-tax $39 million charge related to the Company's decision to exit
the fast food and family restaurant businesses.

Lodging operations reported a 9% sales gain and 4% higher operating profit in
fiscal 1990, excluding the noncomparable items discussed above. Room sales
increased 13% from the prior year, benefiting from the addition of over 16,000
rooms added during the year. Food and beverage sales for the Lodging segment
increased at the lower rate of 6% for 1990, primarily due to more rapid
expansion of product lines with limited food service facilities.

Lodging results reflected the addition of 100 properties during 1990. Despite
weak industry conditions, all four major product lines--Marriott Hotels,
Resorts and Suites; Courtyard hotels; Residence Inn; and Fairfield Inn--posted
sales gains for comparable units in 1990. Average room rates for comparable
units across the Marriott lodging system advanced nearly in line with
inflation, while occupancy was down less than 1%, remaining in the mid-70s. At
year-end 1990, the Company's lodging group encompassed 639 properties with over
150,000 rooms.

Marriott Hotels, Resorts and Suites reported 1990 occupancy rates for
comparable hotels in the mid-70s, down less than one percentage point from the
prior year. Increased group business was offset by a decline in transient
business due to the recession and the Middle East situation.

A-5
<PAGE>

Courtyard hotels, the Company's moderate price product line, posted a
comparable unit occupancy increase of over one percentage point, remaining in
the low 70s. Residence Inn, the extended stay product, experienced a decline of
about two percentage points in occupancy for comparable units, which remained
in the upper 70s.

Fairfield Inn, Marriott's economy lodging product line, posted a reduced
operating loss from the year-earlier level as it achieved greater national
distribution. Occupancy for comparable Fairfield Inn units was up slightly,
remaining in the mid-70s, and increases in average room rates were well ahead
of inflation.

Marriott Ownership Resorts reported higher sales, but profits declined due to
marketing and start-up costs for new timeshare developments.

Net lodging restructuring charges and writeoffs, totaling $65 million
(pretax) in 1990, reflected costs associated with management's decisions to
delay construction starts on most new lodging units and cancel certain
development projects, and to implement comprehensive reorganizations and
administrative staff downsizings within each business unit.

Contract Services reported a 19% sales gain and 15% higher operating profit
for fiscal 1990, excluding noncomparable items. Operating margins declined due
to 1990 restructuring charges in excess of those recorded in 1989 and lower
profits for Host/Travel Plaza operations as a result of declines in air and
highway travel.

Marriott Management Services sales increases reflected strong new account
growth, including acquisitions, and expansion of services to existing clients.
Excluding noncomparable items, solid sales and profit growth was experienced in
all five major segments of the division--business, healthcare, higher
education, schools, and facilities management.

Sales increased in airport and travel plaza operations, but profits were down
slightly due to reduced operating margins. Senior living services posted strong
sales gains, and start-up losses narrowed in 1990 as a result of profit
contributions from the initial retirement communities developed by the Company.

Contract Services restructuring charges and writeoffs, totaling $57 million
(pretax) in 1990, included costs related to management's decisions to delay or
cancel most new senior living service units and several Host development
projects, and to reorganize and downsize division organizations. Restructuring
charges and writeoffs also included a $14 million pretax, special charge
recorded in the third quarter by the Marriott Management Services division.

Corporate expenses rose 5% in 1990, excluding restructuring charges in both
years and the impact of the Corporate headquarters building sale/leaseback in
mid-1989. Corporate restructuring charges, totaling $31 million (pretax) in
1990, primarily related to decisions to reorganize and downsize various
corporate staff functions. Corporate staffing levels were trimmed by nearly
15%.

Interest expense was 1% lower in 1990 as financing costs associated with new
units placed in service and share repurchases were offset by the impact of
business divestitures, property sales and lower interest rates. The Company
sold nearly $1 billion of assets in 1990. Interest income declined 15% largely
due to tax refund interest earned in 1989 and interest income on cash balances
maintained in 1989 for tax purposes. The Company's effective income tax rate
increased to 41.3%, compared to 39.3% in 1989, due to the effect of goodwill
amortization and other nondeductible items on lower pretax income.

Special Dividend and Exchange Offer

In October 1992, the Board of Directors of the Company approved, subject to
approval of final terms and conditions and shareholder ratification, the
distribution to holders of Common Stock (on a share-for-share basis) of all
outstanding shares of common stock of an existing wholly-owned subsidiary,
Marriott

A-6
<PAGE>

International, Inc. ("Marriott International") (the "Distribution"). Subsequent
to the Distribution on October 8, 1993, the Company changed its name to Host
Marriott Corporation ("Host Marriott"). Host Marriott retained Marriott
Corporation's airport and tollroad food, beverage and merchandise concession
operations, as well as most of its real estate properties. Additionally, Host
Marriott retained a major portion of Marriott Corporation's long-term debt
obligations, and it or its subsidiaries continue to act as general partner in
Marriott Corporation's lodging partnerships. As part of the Distribution,
Marriott International became a publicly traded company that includes
substantially all of lodging management, franchising and resort timesharing
operations, senior living service operations, and institutional food service
and facilities management businesses.

The Company began exchange offers and consent solicitation (the "Exchange
Offer") on July 19, 1993, pursuant to which holders of its senior notes (the
"Old Notes") in aggregate principal amount of approximately $1.5 billion were
offered the right to exchange Old Notes for a combination of (i) cash, (ii)
Common Stock and (iii) new notes issued by Host Marriott Hospitality, Inc.
("Hospitality"), an indirect wholly-owned subsidiary of the Company. The
purpose of the Exchange Offer was to (i) extend the maturities of its
outstanding debt and (ii) resolve the objections of, and settle litigation and
potential litigation with, holders of Old Notes relating to the Distribution.

As described in the Notes to Condensed Consolidated Financial Statements, on
October 8, 1993, the Exchange Offers closed.

As a result of the Distribution, the Company is substantially more leveraged
than it was prior to the Distribution. However, the Company believes that
financial resources for ongoing operations as well as funds available under a
$630 million line of credit from Marriott International will be sufficient to
enable it to meet its debt service needs and finance its capital expenditures.

Since the transaction is completed, Marriott International will have
operations in 50 states and 19 foreign countries, and approximately 172,000
employees. Host Marriott will have operations or properties in 43 states and
six countries, with approximately 23,000 employees. The Special Dividend
footnote to the consolidated financial statements and the Notes to Condensed
Consolidated Financial Statements contain additional data related to the
Distribution.

Sources and Uses of Capital

The Company has funded its capital requirements with a combination of cash
flow from operations, proceeds from sales of hotels and other properties, and
debt and equity financing.

Cash from operations. Cash from operations is significantly greater than net
income due to depreciation, deferred taxes and other items. As expected, cash
from continuing operations decreased $128 million in 1992, primarily due to
higher income tax payments, lower sales of timeshare notes and reduced cash
flow from working capital. Income tax payments were higher in 1992 due to
settlement of certain prior year tax liabilities. The Company has provided
financing for qualified purchasers of timeshare intervals, and periodically
packaged and sold the buyers' notes to financial institutions. Lower operating
working capital was a significant source of cash for the Company in 1991, and
additional reductions were achieved in 1992.

Cash from operations increased to $389 million in the first three quarters of
1993 compared to $375 million in 1992, primarily due to higher pretax income in
1993 partially offset by proceeds from the sale of timeshare notes receivable
and lower cash taxes in 1992.

Lodging properties formerly held for sale. Historically, the Company
developed and sold lodging frequently to syndicated limited partnerships, while
continuing to operate the properties under long-term agreements. Those
agreements provided the Company with specified percentages of sales and
operating profits as compensation for operating the properties for the owners.

A-7
<PAGE>

Most lodging properties developed by the Company since the early 1980s were
reported as assets held for sale prior to 1992. The Company used this
classification because the sale of newly-developed lodging properties, subject
to long-term operating agreements, was a principal method of financing the
Company's lodging property development during this period. Sales of such
properties also enabled the Company to transfer the risks of real estate
ownership. Most of these properties were in the Company's Courtyard, Fairfield
Inn and Residence Inn brands, and were sold in large groups with a balanced
geographical mix of properties of the same brand.

In 1990, deterioration in the real estate and financing markets slowed the
Company's property disposition program. While the Company continued to explore
possibilities for sales of properties to syndicated partnerships, both
domestically and internationally, the scarcity of real property debt financing
made such sales difficult. Nevertheless, the Company completed $600 million of
lodging property sales, including the sale of six full service hotels and 50
Fairfield Inns to affiliated partnerships. In 1990, the Company also
discontinued virtually all of its lodging property development, thus limiting
its future financing needs and providing it with flexibility to hold its
lodging properties until market conditions improved. At the end of 1990, the
Company's assets held for sale included one full service hotel, 56 Courtyard
hotels, 15 Residence Inns and 23 Fairfield Inns, nearly all of which had opened
in 1989 and 1990.

In 1991, persistent weak conditions in the hotel industry and in the real
estate and capital markets continued to hamper the Company's efforts to sell
lodging properties. Because such properties generated solid cash flow for the
Company, the Company was unwilling to sacrifice value to expedite sales
transactions. For this reason, the Company increased its focus on other sources
of financing, including senior and subordinated debt and preferred stock, and
decreased its efforts to sell properties. The only sale of lodging properties
by the Company in 1991 was of four Courtyard hotels to the Company's profit
sharing plan. The Company also negotiated a sale/leaseback of an additional 13
Courtyard hotels (for $146 million), which closed in the first quarter of 1992.
At the end of 1991, the Company's assets held for sale included one full
service hotel, 64 Courtyard hotels, 28 Residence Inns and 30 Fairfield Inns,
consisting of unsold properties held since year-end 1990 and units which opened
during 1991.

In April 1992, as a result of continuing unfavorable conditions in the real
estate markets and the fact that during 1991 and 1992 the Company had completed
$925 million in long-term corporate debt and equity financings (thus
eliminating the need to raise capital through sales of properties), the Company
decided it was no longer appropriate to view sales of lodging properties,
subject to operating agreements, as a primary means of long-term financing.
Accordingly, the Company discontinued classification of these properties
(consisting of one full service hotel, 51 Courtyard hotels, 28 Residence Inns
and 30 Fairfield Inns, with an aggregate carrying value of approximately $1,150
million at that time) as assets held for sale. In addition to the Courtyard
sale/leaseback transaction noted above, the Company sold seven full-service
hotels to other chains in 1992, for total proceeds of $200 million, in two
separate transactions negotiated in the first quarter of 1992.

During the period the Company classified lodging properties as assets held
for sale, it determined the net realizable value of such assets on a property-
by-property basis in the case of full-service hotels, resorts and suites, and
on an aggregate basis, by brand, in the case of its limited service (i.e.,
Courtyard, Fairfield Inn and Residence Inn) lodging properties. On this basis,
carrying value of these properties was not in excess of their net realizable
value based on estimated selling prices, although, as a result of the
deteriorating market conditions referenced above, certain individual properties
within a limited service brand had carrying values in excess of their estimated
selling prices. The "Property and Equipment" note to the consolidated financial
statements included herein provides data as to the estimated unrealized losses
of certain properties within each brand which had a book value in excess of net
realizable value (determined based on estimated selling prices). In certain
cases, these unrealized losses related to properties constructed during 1990
and 1991 where total development and construction costs exceeded net realizable
value. Following the reclassification of these properties, the Company assesses
impairment of its owned real estate properties based on whether it is probable
that undiscounted future cash flows from such properties will be less than
their net book value.

A-8
<PAGE>

Beginning in the second fiscal quarter of 1993, under a new accounting policy
adopted by the Company, net realizable value of assets held for sale are
determined on a property-by-property basis as to all lodging properties,
whereas formerly such determination was made on an aggregate basis by hotel
brand as to Courtyard hotels, Fairfield Inns and Residence Inns. The after-tax
cumulative effect of this change on years prior to 1993 of $32 million was
recorded in the quarter ended June 18, 1993 and is reflected in the
accompanying condensed consolidated statement of income for the thirty-six
weeks ended September 10, 1993. The reduction in the annual depreciation charge
as a result of this change did not have a material effect on 1993 results of
operations.

Capital expenditures and acquisitions. The Company's 1992 capital
expenditures and acquisitions were reduced to $257 million, compared to $427
million in 1991 and over $1.2 billion in 1990. The 1992 outlays largely
represented refurbishments of existing properties and completion of
construction on new lodging and senior living services projects started prior
to 1991. Capital expenditures of approximately $350 million are planned for
1993, including construction costs for three hotels and two Senior Living
Services properties.

The Company acquired Dobbs House concessions at 19 airports in September 1992
for approximately $47 million. The acquired units are contributing to earnings
and cash flows in their first full year of operations.

Capital expenditures increased to $184 million in the first three quarters of
1993, compared to $152 million in 1992. The 1993 outlays were primarily for
refurbishment of existing properties, and construction of two full-service
hotels, two retirement communities and several units on two major tollroads.
Proceeds from sales of assets totaled $44 million in the first three quarters
of 1993, compared to $429 million in 1992. Asset dispositions during the first
three quarters of 1992 included the sale of 13 Courtyard hotels for $146
million in a sale/leaseback transaction, 149 family restaurants for total
proceeds of $74 million and seven full-service hotels for total proceeds of
$200 million.

The Company continues to renovate its properties to maintain their
competitive position. Such renovation outlays totaled $163 million in 1992,
including $123 million financed by hotel owners.

Partnership Activities. The Company serves as the managing general partner of
numerous limited partnerships which own hotels. Debt of the hotel limited
partnerships is typically secured by first mortgages on the properties and
generally is nonrecourse to the partners. However, the Company has committed to
advance amounts to affiliates, if necessary, to cover certain future debt
service requirements. Such commitments were limited, in the aggregate, to $296
million at October 8, 1993.

Other investing activities of $103 million for the first three quarters of
1993 included $20 million invested in a joint venture which acquired the 339-
room Duna Hotel in Budapest, Hungary, and $32 million in net advances for
certain hotel joint ventures. Other investing activities in the first three
quarters of 1992 also included $18 million in fundings for certain hotel joint
ventures.

Divestitures. The Company disposes of businesses that no longer meet its
financial return or growth objectives. In 1989, the Company divested its
airline catering business for over $500 million. In 1990, the Company sold its
fast food restaurant division for more than $365 million. In 1991, 138 family
restaurants were sold for total proceeds of approximately $52 million. The
Company sold an additional 203 family restaurants for total proceeds of $84
million in 1992 and expects to sell many of its remaining 50 family restaurants
by year-end 1993.

Debt financing. The Company utilizes both fixed and variable rate debt to
minimize interest costs and provide flexibility while protecting against the
impact of short-term interest rate fluctuations. During 1992 the Company issued
$200 million of Series L senior notes due in 2012 and $200 million of Series M
senior notes due in 2002. Proceeds from these transactions primarily were used
to repay other senior notes and revolving bank debt, which declined from $676
million at year-end 1991 to $175 million at January 1, 1993. Fixed rate debt
was 65% of total debt at January 1, 1993 (compared to 64% at January 3, 1992),
after consideration of interest rate exchange agreements.

A-9
<PAGE>

Cash flow coverage of interest (defined as operating cash flow before
interest expense, income taxes, proceeds from sales of timeshare notes and
changes in working capital; divided by total interest, including amounts
capitalized) was 2.6 times for 1992 and 2.0 times for 1991, and substantially
exceeded the requirements of the Company's lenders.

Liquidity

The Company believes it has adequate financial resources to support ongoing
operations, meet debt service requirements and finance its capital expenditure
program. In addition, the Company structured the Distribution to provide each
of the separate companies with sufficient financial resources to meet their
business objectives:

. Marriott International will have strong operating cash flows from its
lodging, food and facilities management operations. This cash flow is
expected to exceed the annual capital needed for its management and
franchise programs by a comfortable margin.

. Host Marriott Corporation will have substantial cash flows both from its
portfolio of recently-developed real estate, and its airport and
tollroads concession business. The real estate owned is largely
unencumbered, and can be sold or mortgaged to meet capital needs going
forward. In addition, Marriott International will provide Host Marriott
with a $630 million revolving line of credit to provide financial
flexibility and a $125 million mortgage loan to finance up to 60% of the
construction and development costs of the Philadelphia Convention Center
Marriott Hotel, scheduled for completion in January 1995.

Financial Position

Working Capital. The Company's ratio of current assets to current liabilities
increased to 1.0 at January 1, 1993, compared to .80 at year-end 1991,
primarily due to higher temporary cash investments, and new inventories of
retirement condominiums and resort timeshares pending sale at year end 1992.

In 1991, the Company generated over $117 million of cash through an
aggressive working capital reduction program which included tightened credit
policies, intensified receivable collection efforts and lower inventory levels.
The program was continued in 1992, however, as expected, accounts receivable,
inventories and other current assets increased due to business growth. The 1992
working capital cash flow of $36 million was primarily due to a low level of
payables at year end 1991, due in part, to the 53 week fiscal year.

Working capital and operating results of managed hotels operated with the
Company's employees are consolidated because the operating responsibilities
associated with such hotels are substantially the same as those for owned
hotels. The consolidated financial statements include the following amounts
related to managed hotels: current assets and current liabilities of $246
million at January 1, 1993, $269 million at January 3, 1992, and $282 million
at December 28, 1990; sales of $2,896 million in 1992, $2,809 million in 1991
and $2,752 million in 1990; and operating expenses, including payments to
owners, of $2,721 million in 1992, $2,616 million in 1991 and $2,553 million in
1990.

Property and Equipment. Property and equipment, net of depreciation, declined
by $386 million in 1992, reflecting the sale of 20 lodging properties during
the year, depreciation expense, and a lower level of new unit construction for
the Company's lodging and senior living services businesses.

Debt. Long-term debt, including convertible subordinated debt, decreased $229
million in 1992 primarily due to repayment of the Company's revolving bank debt
from cash generated from operations and asset sales, which significantly
exceeded capital expenditures, and from the issuance of $400 million of long-
term senior notes. The Company repaid $501 million of revolving bank debt and
also prepaid $100 million of senior notes during 1992.

A-10
<PAGE>

In the first three quarters of 1993, the Company repaid its 8 3/4% Series H
Senior Notes ($100 million) and its 9 1/8% Series J Senior Notes ($150
million). In 1992, the Company issued $200 million of 10% Series L Senior Notes
due May 2012 and $200 million of 9 1/2% Series M Senior Notes due May 2002.
Proceeds from the 1992 issuances were used primarily to repay other
indebtedness, including $100 million of 11 1/8% Series A Senior Notes.

In response to the Company's announcement of the Distribution, the Company's
senior notes have been downgraded below investment grade by two debt ratings
agencies, Moody's Investor Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P"). Moody's currently rates the Old Notes at B2 and the New
Notes at B1, while S&P currently rates the Old Notes at B and the New Notes at
BB-.

The Company's existing loan agreements contain certain restrictive covenants
including, among others, limitations on additional indebtedness and the
pledging of assets. At the present time, the Company expects it will remain in
compliance with all debt covenants.

Shareholders' Equity. Shareholders' equity increased by $106 million in 1992
primarily as a result of earnings reinvested in the business and the issuance
of common stock under various employee plans.

Shareholders' equity increased $91 million in the first three quarters of
1993, principally due to earnings retained in the business and common stock
issuances under employee plans.

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in the first quarter of fiscal 1993. The
standard was implemented on a prospective basis. Its application increased
shareholders' equity by approximately $30 million.

Deferred income taxes decreased $112 million in the first three quarters of
1993, primarily due to the impact of implementing SFAS 109 and certain
reclassifications.

Inflation

The rate of inflation has been moderate in recent years and, accordingly, has
not had a significant impact on the Company's businesses.

A-11
<PAGE>

--------------------------------------------
BRAND AFFILIATIONS*

* The Company's properties are operated under the brands "Marriott
Hotels, Resorts and Suites," "Courtyard by Marriott," "Residence Inn"
and "Fairfield Inn" pursuant to management agreements with Marriott
International, Inc. These brand names, and the logos reproduced above,
are registered trademarks of Marriott International, Inc.

<PAGE>

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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITA-
TION OF AN OFFER TO BUY, THE SHARES OFFERED HEREBY BY ANYONE IN ANY JURISDIC-
TION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE AN IMPLI-
CATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO ITS DATE.

----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 9
The Company............................................................... 12
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Pro Forma Capitalization.................................................. 14
Pro Forma Financial Data.................................................. 15
Management's Discussion and Analysis of Pro Forma Financial Data.......... 21
Selected Historical Financial Data........................................ 23
Business and Properties................................................... 24
Legal Proceedings......................................................... 28
The Distribution.......................................................... 29
The Exchange Offer and Restructuring...................................... 29
Financing................................................................. 31
Relationship Between the Company and Marriott International............... 33
Management................................................................ 40
Certain Transactions...................................................... 48
Ownership of Company Securities........................................... 49
Description of Capital Stock.............................................. 50
Price Range of the Common Stock and Dividends............................. 55
Purposes and Antitakeover Effects of
Certain Provisions of the Company
Certificate and Bylaws and the Marriott International Purchase Right..... 55
Certain United States Federal Tax Consequences to Non-United States Hold-
ers of Common Stock...................................................... 61
Underwriting.............................................................. 63
Legal Matters............................................................. 67
Experts................................................................... 67
Index to Financial Statements............................................. F-1
Management's Discussion and Analysis of Results of Operations and Finan-
cial Condition........................................................... A-1
</TABLE>

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17,500,000 SHARES

[LOGO OF HOST MARRIOT APPEARS HERE]

COMMON STOCK

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

PROSPECTUS

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

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MONTGOMERY SECURITIES

SMITH BARNEY SHEARSON INC.

BT SECURITIES CORPORATION

JANUARY 20, 1994

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<PAGE>

GRAPHICS APPENDIX LIST

EDGAR Version Typeset Version
- ------------- ---------------
Inside Front Cover - Photo of a Residence Inn with a
Six-photo layout with captions caption: "Residence Inns have
(clockwise from top left): approximately 120 suites and
resemble garden apartments. They
are designed for the extended
stay market."

Photo of a Courtyard by Marriott
hotel with a caption: "Courtyard
by Marriott hotels are moderately
priced for the business transient
market. Each Courtyard has approx-
imately 150 guestrooms."

Photo of the New York Marriott Mar-
quis with a caption: "The New York
Marriott Marquis has 1,871 guest-
rooms and over 80,000 square feet of
meeting space."

Photo of a Fairfield Inn with a
caption: "Fairfield Inns are
designed for the economy minded
traveler and have approximately 120
guestrooms."

Photo of the San Francisco Marriott
with a caption: "The San Francisco
Marriott has 1,500 guestrooms and
is directly adjacent to the Moscone
Convention Center."

Photo of the Fort Lauderdale Marina
Marriott with a caption: "The Fort
Lauderdale Marina Marriott has 580
guestrooms. The Company recently
acquired this property.

Inside back cover - Layout of the Host Marriott Cor-
poration logo with the caption
"Brand Affiliations" centered over
the following logos: starting from
top left: Marriott Hotels, Resorts
and Suites; Courtyard by Marriott;
Residence Inn and Fairfield Inn.
Underneath, a caption reads as
follows: "The Company's properties
are operated under the brands
"Marriott Hotels, Resorts and
Suites," "Courtyard by Marriott,"
"Residence Inn" and "Fairfield Inn"
pursuant to management agreements
with Marriott International, Inc.
These brand names, and the logos
reproduced above, are registered
trademarks of Marriott Internation-
al, Inc."