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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K

[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000

OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Commission File Number: 033-24935

MARRIOTT RESIDENCE INN II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)

Delaware 52-1605434
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 301-380-2070

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

Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No .
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Marriott Residence Inn II Limited Partnership
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TABLE OF CONTENTS
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PAGE NO.
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PART I

Items 1 & 2. Business and Properties...................................... 1

Item 3. Legal Proceedings............................................ 4

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

PART II

Item 5. Market For The Partnership's Limited Partnership Units
and Related Security Holder Matters........................ 5

Item 6. Selected Financial Data...................................... 6

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 6

Item 7A. Quantitative and Qualitative Disclosures About Market Risk... 9

Item 8. Financial Statements and Supplementary Data.................. 10

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 23

PART III

Item 10. Directors and Executive Officers............................. 23

Item 11. Management Remuneration and Transactions..................... 23

Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 23

Item 13. Certain Relationships and Related Transactions............... 4

PART IV

Item 14. Exhibits, Supplemental Financial Statement Schedules,
and Reports on Form 8-K.................................... 25

PART I

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K and the information incorporated by reference
herein include forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future events. We
identify forward-looking statements in this annual report and the information
incorporated by reference herein by using words or phrases such as
"anticipate", "believe", "estimate", "expect", "intend", "may be",
"objective", "plan", "predict", "project" and "will be" and similar
words or phrases, or the negative thereof.

These forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others, the following:

. national and local economic and business conditions that will affect, among
other things, demand for products and services at our properties and other
properties, the level of room rates and occupancy that can be achieved by
such properties and the availability and terms of financing;

. our ability to maintain the properties in a first-class manner, including
meeting capital expenditure requirements;

. our ability to compete effectively in areas such as access, location, quality
of accommodations and room rate structures;

. our degree of leverage which may affect our ability to obtain financing in
the future or compliance with current debt covenants;

. changes in travel patterns, taxes and government regulations which influence
or determine wages, prices, construction procedures and costs;

. government approvals, actions and initiatives including the need for
compliance with environmental and safety requirements, and change in laws and
regulations or the interpretation thereof; and

. other factors discussed in other filings with the Securities and Exchange
Commission.

Although we believe the expectations reflected in our forward-looking statements
are based upon reasonable assumptions, we can give no assurance that we will
attain these expectations or that any deviations will not be material. Except as
otherwise required by the federal securities laws, we disclaim any obligations
or undertaking to publicly release any updates or revisions to any forward-
looking statement contained in this annual report on Form 10-K and the
information incorporated by reference herein to reflect any change in our
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.

ITEMS 1 & 2. BUSINESS AND PROPERTIES

We are a Delaware limited partnership formed on November 23, 1988 to acquire,
own and operate 23 Marriott Residence Inn properties (the "Inns") and the land
on which the Inns are located. The Inns are located in 16 states and contain a
total of 2,487 suites as of December 31, 2000. We commenced operations on
December 28, 1988. The partnership was formed through a public offering of
70,000 limited partnership units (the "Units") in 1988. Host Marriott, L.P.
("Host LP"), through its subsidiaries, is the 1% general partner.

The Inns are operated as part of the Residence Inn by Marriott system and are
managed by Residence Inn by Marriott, Inc. (the "Manager"), a wholly-owned
subsidiary of Marriott International, Inc. ("Marriott International" or "MII"),
under two long-term management agreements (the "Management Agreements").
Additionally, the Partnership, Bossier LLC, and

the Manager entered into a coordination agreement to ensure that certain
calculations for items such as fees, payments of operating profit and escrow
contributions are made on a consolidated basis for all 23 Inns. The Management
Agreements expire in 2012 with renewals at the option of the Manager for one or
more of the Inns for up to 45 years thereafter.

Competition

The United States lodging industry generally is comprised of two broad segments:
full service hotels and limited service hotels. Full service hotels generally
offer restaurant and lounge facilities and meeting spaces, as well as a wide
range of services, typically including bell service and room service. Limited
service hotels generally offer accommodations with limited or no services and
amenities. As extended-stay hotels, the Inns compete effectively with both full
service and limited service hotels in their respective markets by providing
streamlined services and amenities exceeding those provided by typical limited
service hotels at prices that are significantly lower than those available at
full service hotels.

The lodging industry in general, and the extended-stay segment in particular, is
highly competitive, but the degree of competition varies from location to
location. The Inns compete with several other major lodging brands. Competition
in the industry is based primarily on the level of service, quality of
accommodations, convenience of locations and room rates. The following are key
participants in the extended stay segment of the lodging industry: Residence
Inn, Homewood Suites by Hilton, Hawthorne Suites, Summerfield Suites, Extended
Stay America and AmeriSuites.

Residence Inn by Marriott continues to be highly competitive in its segment. The
Manager has attempted to maintain the brand's competitive position through
focused marketing efforts and programs that demonstrate a continued guest
commitment. Year 2000 has been a challenge as extended-stay hotel competitors
continue to increase their presence in the market. In response, during 2000 the
Manager continued to heighten its efforts to maintain its position as a leader
in this hospitality category, focusing on customers that prefer a quality
residential experience. The Manager is continuing to monitor the introduction
and growth of new extended-stay brands including Homewood Suites by Hilton,
Hawthorne Suites, Summerfield Suites, Extended Stay America and AmeriSuites. In
addition, a renewed focus will be placed on strengthening each Inn's sales
efforts in order to solidify the existing relationships with current clients and
to establish new ones.

Lodging Properties

Our portfolio consists of 23 Residence Inn by Marriott Inns as of December 31,
2000. The Inns range in age between 12 and 18 years. The Inns are
geographically diversified among 16 states.

Our properties endeavor to provide consistently superior lodging at a fair price
with an appealing, friendly and contemporary residential character. Residence
Inn by Marriott Inns generally have fewer guest rooms than traditional full-
service hotels, in most cases containing approximately 120 guest suites, as
compared to full-service Marriott hotels which typically contain 350 or more
guest rooms.

The Inns are extended-stay hotels which cater primarily to business and family
travelers who stay more than five consecutive nights. The Inns typically have
88 to 144 studio, one bedroom, two bedroom and two-story penthouse suites. The
Inns generally are located in suburban settings throughout the United States and
feature a series of residential style buildings with landscaped walkways,
courtyards and recreational areas. Each suite contains a fully-equipped kitchen
and many suites have woodburning fireplaces.

To maintain the overall quality of our properties, each property undergoes
refurbishments and capital improvements on a regularly scheduled basis.
Typically, refurbishing at Marriott Residence Inn properties is provided at
intervals of five to seven years, based on an annual review of the condition of
each property.

The following table sets forth as of March 1, 2001, the location and number of
rooms for each of our properties.

Inn Number of Suites
--------------------------- ---------------------
Alabama
Birmingham 128
California
Arcadia 120
Irvine 112
Placentia 112
Florida
Boca Raton 120
Jacksonville 112
Pensacola 64
St. Petersburg 88
Illinois
Chicago-Deerfield 128
Louisiana
Shreveport-Bossier City 72
Massachusetts
Boston-Danvers 96
Michigan
Kalamazoo 83
Missouri
Jackson 120
Nevada
Las Vegas 192
New Mexico
Santa Fe 120
North Carolina
Charlotte North 91
Greensboro 128
Ohio
Akron 112
Pennsylvania
Valley Forge 88
South Carolina
Columbia 128
Spartanburg 88
Tennessee
Memphis 105
Texas
Lubbock 80
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TOTAL SUITES 2,487
=======================

Seasonality

Demand is affected by normally recurring seasonal patterns. For most of the
Inns, demand is higher in the spring and summer months (March through October)
than during the remainder of the year.

Management Agreement

The Inns are operated by the Manager pursuant to a long-term management
agreement. The terms of the Management Agreement provide for the establishment
of a property improvement fund to provide for capital requirements and
replacements of furniture, fixtures, and equipment at the Inns. The primary
provisions of the Management Agreement are discussed at Item 8, Note 7 to the
financial statements, "Management Agreement."

Employees

The Partnership has no employees. Host LP provides the services of certain
employees, including the general partner's executive officers, to the
Partnership and the general partner. The Partnership and the general partner
anticipate that each of the executive officers of the general partner will
generally devote a sufficient portion of his or her time to the business of the
Partnership. However, each of such executive officers also will devote a
significant portion of his or her time to the business of Host LP and its other
affiliates. To the extent that any officer, director or employee devotes time
to the Partnership, the general partner or Host LP, as applicable, is entitled
to reimbursement for the cost of providing such services.

Conflicts of Interest

Because Host LP, the managing member of the general partner, Marriott
International and their affiliates own and/or operate hotels other than the
Partnership's Inns and Marriott International and its affiliates license others
to operate hotels under the various brand names owned by Marriott International
and its affiliates, potential conflicts of interest exist. With respect to
these potential conflicts of interest, Host LP, Marriott International and their
affiliates retain a free right to compete with the Partnership's Inns, including
the right to develop, own, and operate competing hotels now and in the future in
markets in which the Inns are located, in addition to those existing hotels
which may currently compete directly or indirectly with the Inns.

Litigation Settlement

In September 2000, the general partner, Marriott International, Inc., and
related defendants closed on the settlement of a lawsuit filed by limited
partners from seven limited partnerships, including our limited partners
("Litigation Settlement"). In accordance with the terms of the settlement, the
defendants made cash payments of approximately $152 per Unit to our limited
partners, in exchange for dismissal of the litigation and a complete release of
all claims. In addition to these cash payments, the Manager agreed to forgive
$22.7 million of deferred incentive management fees payable by the Partnership,
which is reflected as an extraordinary gain in our statement of operations for
the year ended December 31, 2000.

ITEM 3. LEGAL PROCEEDINGS

The Partnership and the Inns are involved in routine litigation and
administrative proceedings arising in the ordinary course of business, some of
which are expected to be covered by liability insurance and which collectively
are not expected to have a material adverse effect on the business, financial
condition or results of operations of the Partnership. See "Items 1 &
2--Business and Properties" for a discussion of the litigation settlement.

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

None.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS

There is currently no established public trading market for the Units and it is
not anticipated that a public market for the Units will develop. Transfers of
Units are limited to the first date of each accounting quarter. All transfers
are subject to approval by the General Partner. As of December 31, 2000, there
were 3,579 holders of record of the Partnership's 70,000 Units.

The Partnership generally distributes cash available for distribution as
follows: (i) first, 99% to the limited partners and 1% to the General Partner,
until the partners have received, with respect to such year, an amount equal to
10% of their Net Capital Investment, defined as the excess of original capital
contributions over cumulative distributions of net refinancing and sales
proceeds ("Capital Receipts"); and (ii) second, remaining cash available for
distribution will be distributed as follows, depending on the amount of Capital
Receipts previously distributed:

(a) 99% to the limited partners and 1% to the General Partner, if the partners
have received aggregate cumulative distributions of Capital Receipts of less
than 50% of their original capital contributions; or

(b) 90% to the limited partners and 10% to the General Partner, if the partners
have received aggregate cumulative distributions of Capital Receipts equal
to or greater than 50% but less than 100% of their original capital
contributions; or

(c) 75% to the limited partners and 25% to the General Partner, if the partners
have received aggregate cumulative distributions of Capital Receipts equal
to 100% or more of their original capital contributions.

Cash available for distribution means, with respect to any fiscal period, the
cash revenues of the Partnership from all sources during the fiscal period,
other than Capital Receipts, less (i) all cash expenditures of the Partnership
during such fiscal period, including, without limitation, debt service,
repayment of advances made by the General Partner, any fees for management
services and administrative expenses, but excluding expenditures incurred by the
Partnership in connection with a transaction resulting in Capital Receipts, and
(ii) such reserves as may be determined by the General Partner, in its
reasonable discretion to be necessary to provide for the foreseeable cash needs
of the Partnership or for the maintenance, repair, or restoration of the Inns.

As of December 31, 2000, the Partnership has distributed a total of $46,101,000
to the partners ($652 per limited partner unit) since inception. There were no
distributions in 2000 or 1999. $3,536,000 ($50 per limited partner unit) was
distributed in 1998 from 1997 cash flow from operations. No distributions of
Capital Receipts have been made since inception.

For future cash distributions, see "Capital Resources and Liquidity" under Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected historical financial data which has been
derived from our audited financial statements for the five most recent fiscal
years ended December 31, 2000.

2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands, except per unit amounts)

Income Statement Data:

Revenues............................................ $ 73,088 $ 71,957 $ 71,658 $ 71,039 $ 69,644
Operating Profit.................................... 9,288 13,476 14,679 17,147 15,419
(Loss) income before extraordinary items............ (1,476) 1,946 2,822 4,894 2,663
Net income.......................................... 21,217(1) 1,946 2,822 4,894 2,663
Net income per limited partner unit (70,000 Units).. 300(1) 28 40 69 38

Balance Sheet Data:

Total assets........................................ $172,072 $172,669 $168,866 $167,883 $165,510
Total liabilities................................... 139,059(1) 160,873 159,016 157,319 156,305
Cash distributions
per limited partner unit (70,000 Units)............ -- -- 50 50 --

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(1) Fiscal year 2000 operations include an extraordinary gain of $22.7 million
representing the forgiveness of deferred incentive management fees by the
Manager in connection with the Litigation Settlement.

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

GENERAL

Marriott Residence Inn II Limited Partnership is the owner of 23 extended-stay
limited service hotels which are operated as part of the Residence Inn by
Marriott system and managed by Residence Inn by Marriott, Inc.

During the period from 1998 through 2000, our revenues grew from $71.7 million
to $73.1 million. Growth in revenue is primarily a function of growth in room
revenues generated per available room or REVPAR. During the period from 1998
through 2000, the Inns' combined REVPAR increased approximately 2% from $75.56
to $77.05.

Our operating costs and expenses are, to a great extent, fixed. Therefore, we
derive substantial operating leverage from increases in revenue. Operating
leverage is offset primarily by certain variable expenses, including base and
incentive management fees, which are calculated based on hotel sales.

The following table shows selected combined operating statistics for the Inns.
REVPAR represents the combination of average daily suite rate charged and the
average daily occupancy achieved, and is a commonly used indicator of hotel
performance.

Year Ended December 31,
-------------------------

2000 1999 1998
------ ------ ------
Combined average daily occupancy... 81.8% 82.5% 83.1%
Combined average daily suite rate.. $94.19 $91.37 $90.93
REVPAR............................. $77.05 $75.38 $75.56

RESULTS OF OPERATIONS

2000 Compared to 1999:

Revenues. Revenues increased $1.1 million, or 2%, to $73.1 million in 2000 from
$72.0 million in 1999 as a result of the growth in REVPAR of 2%. REVPAR does
not include other ancillary revenues generated by the Inns. The increase in
REVPAR was primarily the result of a 3% increase in the combined average daily
suite rate to $94.19, offset by a 1% decrease in the combined average daily
occupancy to 81.8%.

Operating Costs and Expenses. Operating costs and expenses increased to $63.8
million in 2000 from $58.5 million in 1999 primarily due to an increase in Inn
property-level costs and expenses and an impairment charge of $5.2 million
recorded during the fourth quarter of 2000, offset by a decrease in depreciation
expense. As a percentage of Inn revenues, operating costs and expenses
represented 87% of revenues for 2000 and 81% of revenues for 1999.

Inn property-level costs and expenses increased to $40.8 million in 2000 from
$39.5 million in 1999. The increase is primarily due to an increase in salary
and benefits as the Inns endeavor to maintain competitive wage scales.

Operating Profit. As a result of the changes in revenues and operating costs and
expenses discussed above, operating profit decreased $4.2 million, or 31%, to
$9.3 million, or 13% of revenues, in 2000 from $13.5 million, or 19% of
revenues in 1999.

Interest Expense. Interest expense decreased 1% to $12.6 million in 2000 from
$12.7 million in 1999 due to principal amortization on the mortgage debt.

Extraordinary Gain. In connection with the Litigation Settlement, we recognized
an extraordinary gain of $22.7 million on the forgiveness of deferred incentive
management fees by the Manager.

Net Income. Net income increased $19.3 million to $21.2 million, or 29% of
revenues, in 2000 from $1.9 million, or 3% of revenues, in 1999 primarily due to
the extraordinary gain and increased Inn revenues.

1999 Compared to 1998:

Revenues. Total 1999 Inn revenues of $72.0 million represented a $299,000, or
0.4%, increase over 1998 results. The flat results were primarily due to a
stable Inn REVPAR. REVPAR does not include other ancillary revenues generated
by the Inns. The slight increase in the average daily suite rate in 1999 from
1998 was offset by the 1% decrease in the average daily occupancy of 83.1% in
1998 to 82.5% in 1999. As a result, REVPAR approximated $75 for both 1999 and
1998. Combined average suite sales remained virtually unchanged at $68 million
in both 1999 and 1998.

Operating Costs and Expenses. Operating costs and expenses increased $1.5
million, or 2.6%, to $58.5 million in 1999 from $57.0 million in 1998 primarily
due to a $1.1 million, or 6.7%, increase in suite property-level costs and
expenses and a $329,000, or 1.6%, decrease in selling, administrative and other
expenses. The overall increase in Inn property-level costs and expenses is due
to an increase in salary and benefits as the Inns endeavor to maintain
competitive wage scales. As a percentage of Inn revenues, operating costs and
expenses represented 81% of revenues for 1999 and 80% in 1998.

Operating Profit. The small increase in revenues offset by the increase in
operating costs and expenses discussed above, resulted in a decrease in
operating profit. Operating profit decreased $1.2 million, or 8.2%, to $13.5
million, or 19% of revenues, in 1999 from $14.7 million, or 20% of revenues in
1998.

Interest Expense. Interest expense decreased $142,000, or 1.1%, to $12.7 million
primarily due to principal payments of $1.6 million on the Mortgage Debt.

Net Income. Net income decreased $875,000, or 31.0%, to $1.9 million, or 3% of
revenues, in 1999 from $2.8 million, or 4% of revenues, in 1998 due primarily to
increased hotel operating costs.

CAPITAL RESOURCES AND LIQUIDITY

Our financing needs have been historically funded through loan agreements with
independent financial institutions. Beginning in 1998, the property improvement
fund was insufficient to meet current needs. The shortfall is primarily due to
the need for total suite refurbishments at a majority of the Inns as part of
ongoing routine capital maintenance. To address the shortfall, we made
additional cash contributions of $1.6 million and $2.5 million to the property
improvement fund in the first quarters of 2000 and 1999, respectively, and
increased the contribution rate in 1999 to 7% of gross Inn revenues. The
contribution rate will remain 7% for 2001.

In light of the increased competition in the extended-stay market described
above, the Manager has also proposed additional improvements that are intended
to enhance the overall value and competitiveness of the Inns. These proposed
improvements include design, structural and technological improvements to
modernize and enhance the functionality and appeal of the Inns. Based upon
information provided by the Manager, approximately $58 million may be required
over the next five years for the routine renovations and all of the proposed
additional improvements. Based on the anticipated capital expenditure needs of
the Inns over the next few years, it appears unlikely that cash distributions
will be possible for the next several years.

The general partner believes that cash from Inn operations and Partnership
reserves will be sufficient to make the required debt service payments and to
fund a portion of the capital expenditures at the Inns. The general partner is
reviewing the Manager's proposed Inn renovations and improvements to identify
those projects that have the greatest value to the Partnership.

Principal Sources and Uses of Cash

Our principal source of cash is cash from operations. Our principal uses of
cash are debt service payments, funding the property improvement fund, and
distributions to the limited partners.

Cash provided by operating activities was $14.8 million, $14.4 million and $14.1
million in 2000, 1999 and 1998, respectively. The $373,000 increase in cash
from operations in 2000 from 1999 was primarily due to the increase in Inn
revenues. The $300,000 increase in cash from operations in 1999 from 1998 was
primarily due to a decrease in the amount paid for administrative charges during
1999 as a result of the deferral of some administrative payments until 2000.

Cash used in investing activities was $8.6 million, $7.8 million and $4.4
million in 2000, 1999 and 1998, respectively. Investing activities consist
primarily of contributions to the property improvement fund and capital
expenditures for improvements to the Inns. Capital expenditures in 2000, 1999
and 1998 include $1,763,000, $534,000 and $279,000, respectively, paid from the
Partnership's operating cash account for owner funded projects.

Contributions to the property improvement fund were $6.7 million, $7.5 million
and $4.3 million for the years ended December 31, 2000, 1999 and 1998,
respectively, while expenditures were $3.2 million, $7.5 million and $5.9
million, respectively, during the same time periods. The $3.2 million increase
in contributions in 1999 from 1998 is due to an increase in the contribution
rate to 7% in 1999 and an additional cash contribution of $2.5 million to the
property improvement fund.

Cash used in financing activities was $1.8 million, $1.6 million and $5.0
million in 2000, 1999 and 1998, respectively. Financing activities consist
primarily of the repayment of mortgage debt and capital distributions to
partners during 1998. There were no cash distributions to the partners in 1999
or 2000. In the first quarter of 1998, we distributed $3.5 million to the
partners, which was paid from 1997 cash from operations.

Our mortgage debt is comprised of a $140 million note which bears interest at a
fixed rate of 8.85% and matures on March 10, 2006. The mortgage is secured by
first mortgages on 22 of the 23 Inns, the land on which they are located, a
security interest in all personal property associated with those Inns including
furniture and equipment, inventory, contracts and other intangibles and our
rights under the Management Agreements. Additionally, as part of the
refinancing, we were required to deposit $500,000 into a reserve account and
fund $250,000 annually through 2006 into the account to provide for any claim,
investigation, or litigation that may arise from any environmental condition at
the Bossier City Residence Inn, which did not pass certain thresholds to enable
the property to collateralize the debt. The balance of this reserve was
$1,042,000 as of December 31, 2000. The initial $500,000 deposit was funded by
the lender. We are required to repay the initial reserve as promptly as
possible if we draw on the deposit or by the end of the 10-year term in March
2006. Any draws upon the account will accrue interest at the 30-day LIBOR plus
4.5 percentage points. If we do not need to draw on the reserve account, the
lender will hold the reserve until such time as the mortgage debt is either
repaid, or a governmental authority determines that the statute of limitations
on filing any claims has expired or that no further remedial activities are
required at the property. Based upon the results of the environmental studies
performed, we do not expect that it will be necessary to draw on the reserve.

AMOUNTS PAID TO THE MANAGER AND GENERAL PARTNER

The following table sets forth the amount paid to MII and affiliates under the
Management Agreements for the years ended December 31, 2000, 1999 and 1998 (in
thousands):

2000 1999 1998
------ ------ ------
Residence Inn system fee.............. $2,789 $2,734 $2,729
Chain services........................ 1,941 1,975 2,005
Marketing fund contribution........... 1,743 1,705 1,705
Base management fee................... 1,462 1,439 1,433
MRP costs............................. 277 249 143
Incentive management fee.............. -- 14 185
------ ------ ------
$8,212 $8,116 $8,200
====== ====== ======

The following sets forth amounts paid by the Partnership to Host Marriott and
its subsidiaries, including the General Partner, for the years ended December
31, 2000, 1999 and 1998 (in thousands):

2000 1999 1998
----- ------ ------
Administrative expenses reimbursed.... $ 374 $105 $ 278
Cash distributions.................... -- -- 36
----- ---- -----
$ 374 $105 $ 314
===== ==== =====

Inflation

The rate of inflation has been relatively low in the past three years. The
Manager is generally able to pass through increased costs to customers through
higher suite rates and prices. In 2000, the increase in average suite rates of
Residence Inns exceeded inflationary costs.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership does not have market risk with respect to interest rates,
foreign currency exchanges or other market rate or price risks, and the
Partnership does not hold any financial instruments for trading purposes. As of
December 31, 2000, all of the Partnership's debt has a fixed interest rate.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index Page
- ------- ----

Residence Inn by Marriott II Limited Partnership Consolidated Financial
Statements:
Report of Independent Public Accountants............................................ 11

Consolidated Balance Sheets as of December 31, 2000 and 1999........................ 12

Consolidated Statements of Operations for the Fiscal Years Ended
December 31, 2000, 1999 and 1998................................................... 13

Consolidated Statements of Changes in Partners' Capital for the Fiscal Years Ended
December 31, 2000, 1999 and 1998................................................... 14

Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 2000, 1999 and 1998................................................... 15

Notes to Consolidated Financial Statements.......................................... 16

Report of Independent Public Accountants

TO THE PARTNERS OF MARRIOTT RESIDENCE INN II LIMITED PARTNERSHIP:

We have audited the accompanying consolidated balance sheets of Marriott
Residence Inn II Limited Partnership (a Delaware limited partnership) and
subsidiary, as of December 31, 2000 and 1999, and the related consolidated
statements of operations, changes in partners' capital and cash flows for each
of the three fiscal years in the period ended December 31, 2000. These financial
statements and the schedule referred to below are the responsibility of the
General Partner's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the 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 Marriott Residence
Inn II Limited Partnership and subsidiary as of December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at Item
14(a)(2) is presented for purposes of complying with The Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Vienna, Virginia
March 23, 2001

Consolidated Balance Sheets
Marriott Residence Inn II Limited Partnership and Subsidiary
December 31, 2000 and 1999
(in thousands)

2000 1999
------- --------
ASSETS

Property and equipment, net....................................... $133,126 $140,524
Due from Residence Inn by Marriott, Inc........................... 2,040 2,650
Deferred financing costs, net of accumulated amortization......... 2,150 2,562
Property improvement fund......................................... 3,998 466
Restricted cash reserves.......................................... 8,467 8,588
Cash and cash equivalents......................................... 22,291 17,879
-------- --------
$172,072 $172,669
======== ========
LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
Mortgage debt.................................................... $134,166 $135,933
Incentive management fee due to Residence Inn by Marriott, Inc... 2,895 22,693
Accounts payable and accrued expenses............................ 1,998 2,247
-------- --------
Total Liabilities........................................... 139,059 160,873
-------- --------
PARTNERS' CAPITAL
General Partner
Capital contribution............................................ 707 707
Capital distributions........................................... (461) (461)
Cumulative net income (loss).................................... 162 (50)
-------- --------
408 196
-------- --------
Limited Partners
Capital contributions........................................... 62,155 62,155
Capital distributions........................................... (45,640) (45,640)
Cumulative net income (loss).................................... 16,090 (4,915)
-------- --------
32,605 11,600
-------- --------
Total Partners' Capital...................................... 33,013 11,796
-------- --------
$172,072 $172,669
======== ========

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

Consolidated Statements of Operations
Marriott Residence Inn II Limited Partnership and Subsidiary
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands, except per Unit amounts)

2000 1999 1998
-------- -------- --------

REVENUES
Inn revenues
Suites...................................................... $ 69,721 $ 68,360 $ 68,216
Other....................................................... 3,367 3,597 3,442
-------- -------- --------
Total Inn revenues......................................... 73,088 71,957 71,658
-------- -------- --------
OPERATING COSTS AND EXPENSES
Inn property-level costs and expenses
Suites...................................................... 17,752 17,213 16,135
Other department costs and expenses......................... 1,806 1,910 1,725
Selling, administrative and other........................... 21,254 20,380 20,709
-------- -------- --------
Total Inn property-level costs and expenses................ 40,812 39,503 38,569
Depreciation................................................. 7,163 8,120 7,650
Incentive management fee..................................... 2,895 3,090 3,257
Residence Inn system fee..................................... 2,789 2,734 2,729
Property taxes............................................... 2,307 2,270 2,243
Base management fee.......................................... 1,462 1,439 1,433
Equipment rent and other..................................... 1,202 1,325 1,098
Loss on impairment of long-lived assets...................... 5,170 -- --
-------- -------- --------
63,800 58,481 56,979
-------- -------- --------
OPERATING PROFIT.............................................. 9,288 13,476 14,679
Interest expense............................................. (12,562) (12,681) (12,823)
Interest income.............................................. 1,798 1,151 966
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS............................. (1,476) 1,946 2,822
Extraordinary gain on the forgiveness of deferred incentive
management fees............................................. 22,693 -- --
-------- -------- --------
NET INCOME.................................................... $ 21,217 $ 1,946 $ 2,822
======== ======== ========
ALLOCATION OF NET INCOME
General Partner.............................................. $ 212 $ 19 $ 28
Limited Partners............................................. 21,005 1,927 2,794
-------- -------- --------
$ 21,217 $ 1,946 $ 2,822
======== ======== ========
NET INCOME PER LIMITED PARTNER UNIT
(70,000 Units)............................................... $ 300 $ 28 $ 40
======== ======== ========

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

Consolidated Statements of Changes in Partners' Capital
Marriott Residence Inn II Limited Partnership and Subsidiary
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

General Limited
Partner Partners Total
-------- --------- --------

Balance, December 31, 1997.. $185 $10,379 $10,564

Capital distribution...... (36) (3,500) (3,536)

Net income................ 28 2,794 2,822
---- ------- -------

Balance, December 31, 1998.. 177 9,673 9,850

Net income................ 19 1,927 1,946
---- ------- -------

Balance, December 31, 1999.. 196 11,600 11,796

Net income................ 212 21,005 21,217
---- ------- -------

Balance, December 31, 2000.. $408 $32,605 $33,013
==== ======= =======

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

Consolidated Statements of Cash Flows
Marriott Residence Inn II Limited Partnership and Subsidiary
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands)

2000 1999 1998
-------- ------- -------
OPERATING ACTIVITIES
Net income................................................... $ 21,217 $ 1,946 $ 2,822
Extraordinary gain on the forgiveness of deferred incentive
management fees............................................. (22,693) -- --
Depreciation................................................. 7,163 8,120 7,650
Deferred incentive management fee............................ 2,895 3,076 3,072
Amortization of deferred financing costs as interest......... 412 411 412
Loss on dispositions of property and equipment............... 73 125 --
Loss on impairment of long-lived assets...................... 5,170 -- --
Change in operating accounts:
Due from Residence Inn by Marriott, Inc..................... 610 522 252
Accounts payable and accrued expenses....................... (249) 430 132
Restricted Cash Reserves.................................... 155 (251) (255)
-------- ------- -------

Cash provided by operating activities.................... 14,753 14,379 14,085
-------- ------- -------

INVESTING ACTIVITIES
Additions to property and equipment, net..................... (5,008) (7,387) (5,907)
Change in property improvement fund.......................... (3,532) (607) 1,543
Change in restricted cash reserves........................... (250) (250) (250)
-------- ------- -------

Cash used in investing activities........................ (8,790) (8,244) (4,614)
-------- ------- -------

FINANCING ACTIVITIES
Repayment of mortgage debt................................... (1,767) (1,649) (1,508)
Capital distributions to partners............................ -- -- (3,536)
Change in Restricted Cash Reserves........................... 216 452 193
-------- ------- -------

Cash used in financing activities........................ (1,551) (1,197) (4,851)
-------- ------- -------

INCREASE IN CASH AND CASH EQUIVALENTS......................... 4,412 4,938 4,620

CASH AND CASH EQUIVALENTS at beginning of year................ 17,879 12,941 8,321
-------- ------- -------

CASH AND CASH EQUIVALENTS at end of year...................... $ 22,291 $17,879 $12,941
======== ======= =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest.............................. $ 12,159 $12,278 $12,419
======== ======= =======

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marriott Residence Inn II Limited Partnership and Subsidiary

NOTE 1. THE PARTNERSHIP

Description of the Partnership

Marriott Residence Inn II Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed on November 23, 1988, to acquire, own and
operate 23 Residence Inn by Marriott hotels (the "Inns") and the land on which
the Inns are located. The Inns are located in 16 states in the United States:
four in Florida, three in California, two in both North Carolina and South
Carolina and one in each of Alabama, Illinois, Louisiana, Massachusetts,
Michigan, Mississippi, Nevada, New Mexico, Ohio, Pennsylvania, Tennessee and
Texas. As of December 31, 2000, the Inns have a total of 2,487 suites. The Inns
are managed by Residence Inn by Marriott, Inc. (the "Manager"), a wholly-owned
subsidiary of Marriott International, Inc. ("MII"), as part of the Residence Inn
by Marriott hotel system.

The Partnership was formed through a public offering of 70,000 limited
partnership interests (the "Units") in 1998. The sole general partner, with a 1%
interest, is RIBM Two LLC (the "General Partner"), a Delaware single member
limited liability company, with a Class A 1% managing economic interest owned by
Host LP and Class B 98% and Class C 1% non-managing economic interests owned by
Rockledge Hotel Properties, Inc. ("Rockledge"), a Delaware corporation, which is
owned 95% by Host LP (economic non-voting interest) and 5% by Host Marriott
Statutory/Charitable Employee Trust, a Delaware statutory business trust (100%
of voting interest).

To facilitate the refinancing of the Partnership's mortgage debt, on March 22,
1996, as permitted by the Partnership Agreement, the Partnership transferred
ownership of the Bossier City Residence Inn to a newly formed subsidiary,
Bossier RIBM Two LLC ("Bossier LLC"), a Delaware limited liability company.

Partnership Allocations and Distributions

Net profits for Federal income tax purposes are generally allocated to the
partners in proportion to the distributions of cash available for distribution.
The Partnership generally distributes cash available for distribution as
follows: (i) first, 99% to the limited partners and 1% to the General Partner,
until the partners have received, with respect to such year, an amount equal to
10% of their Net Capital Investment, defined as the excess of original capital
contributions over cumulative distributions of net refinancing and sales
proceeds ("Capital Receipts"); and (ii) second, remaining cash available for
distribution will be distributed as follows, depending on the amount of Capital
Receipts previously distributed:

For Federal income tax purposes, losses and net losses are allocated 99% to the
limited partners and 1% to the General Partner.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marriott Residence Inn II Limited Partnership and Subsidiary

Capital Receipts not retained by the Partnership will generally be distributed
(i) first, 99% to the limited partners and 1% to the General Partner until the
partners have received cumulative distributions from all sources equal to a
cumulative simple return of 12% per annum on their Net Capital Investment and an
amount equal to their contributed capital, payable only from Capital Receipts;
(ii) next, if the Capital Receipts are from a sale, 100% to the General Partner
until it has received 2% of the gross proceeds from the sale; and (iii)
thereafter, 75% to the limited partners and 25% to the General Partner.

Gains will generally be allocated (i) first, to those partners whose capital
accounts have negative balances until such negative balances are brought to
zero; (ii) second, to all partners in amounts necessary to bring their
respective capital account balances equal to their invested capital, as defined,
plus a 12% return on such invested capital; (iii) next, to the General Partner
in an amount necessary to bring the General Partner's capital account balance to
an amount which is equal to 2% of the gross proceeds from the sale, and (iv)
thereafter, 75% to the limited partners and 25% to the General Partner.

Proceeds from a sale of substantially all of the assets of the Partnership will
be distributed to the partners in accordance with their capital account balances
as adjusted to take into account gain or loss resulting from such sale.

For financial reporting purposes, profits and losses are allocated among the
partners based upon their stated interests in cash available for distribution.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership's records are maintained on the accrual basis of accounting and
its fiscal year coincides with the calendar year.

Use of Estimates in the Preparation of Financial Statements

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

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, as follows:

Land improvements 40 years
Building and improvements 40 years
Furniture and equipment 3 to 10 years

All property and equipment at 22 of the Partnership's 23 Inns (Bossier City
excluded) is pledged as security for the mortgage debt described in Note 6.

The Partnership assesses impairment of its real estate properties based on
whether estimated undiscounted future cash flows from such properties on an
individual hotel basis will be less than their net book value. If a property is
impaired, its basis is adjusted to fair market value. During 2000, the Inn
located in Memphis, Tennessee experienced declining cash flows, primarily due to
additional competition in its local market. As a result, the Partnership
concluded that the Inn was impaired, adjusted its basis to the estimated fair
market value, and recorded an impairment charge of $5,170,000 during the fourth
quarter of 2000.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marriott Residence Inn II Limited Partnership and Subsidiary

Income Taxes

Provision for Federal and state income taxes has not been made in the
consolidated financial statements since the Partnership does not pay income
taxes but rather allocates profits and losses to the individual partners.
Significant differences exist between the net income for financial reporting
purposes and the net income (loss) as reported in the Partnership's tax return.
These differences are due primarily to the use, for income tax purposes, of
accelerated depreciation methods and shorter depreciable lives of the assets and
the timing of the recognition of base and incentive management fee expense. As a
result of these differences, the Partnership's net assets reported in the
accompanying consolidated financial statements exceeds the tax basis of such net
assets by $13,892,000 as of December 31, 2000. As of December 31, 1999, the
Partnership's tax basis of net assets exceeded the net assets reported in the
accompanying consolidated financial statements by $9,719,000.

Deferred Financing Costs

Deferred financing costs represent the costs incurred in connection with
obtaining the debt financing and are amortized over the term of the debt. As of
December 31, 2000 and 1999, deferred financing costs, net of accumulated
amortization, totaled $2,150,000 and $2,562,000, respectively. Amortization of
deferred financing costs totaled $412,000, $411,000 and $412,000 in 2000, 1999,
and 1998, respectively.

Restricted Cash Reserves

On March 22, 1996, the Partnership was required to establish certain reserves in
conjunction with the refinancing of the Mortgage Debt as described in Note 6.
The balances in those reserves as of December 31 are as follows (in thousands):

2000 1999
------ ------

Capital Expenditure Reserve......... $2,291 $2,041
Debt Service Reserve................ 5,200 5,416
Real Estate Tax, Insurance Reserve.. 976 1,131
------ ------
$8,467 $8,588
====== ======
Cash and Cash Equivalents

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

Reclassifications

Certain reclassifications were made to the prior year financial statements to
conform to the 2000 presentation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marriott Residence Inn II Limited Partnership and Subsidiary

NOTE 3. LITIGATION SETTLEMENT

In September 2000, the general partner, Marriott International, Inc., and
related defendants closed on the settlement of a lawsuit filed by limited
partners from seven limited partnerships, including the Partnership's limited
partners ("Litigation Settlement"). In accordance with the terms of the
settlement, the defendants made cash payments of approximately $152 per Unit to
the limited partners, in exchange for dismissal of the litigation and a complete
release of all claims. In addition to these cash payments, the Manager agreed to
forgive $22.7 million of deferred incentive management fees payable by the
Partnership, which is reflected as an extraordinary gain in the statement of
operations for the year ended December 31, 2000.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31 (in
thousands):

2000 1999
-------- --------

Land..................................... $ 36,613 $ 38,009
Building and improvements................ 128,145 130,081
Furniture and equipment.................. 32,497 47,218
-------- --------
197,255 215,308
Accumulated depreciation................. (64,129) (74,784)
-------- --------
$133,126 $140,524
======== ========

NOTE 5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments are shown below (in
thousands). The fair values of financial instruments not included in this table
are estimated to be equal to their carrying amounts.

As of December 31, 2000 As of December 31, 1999
----------------------- -----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ----------- ---------- -----------

Mortgage debt.. $134,166 $137,427 $135,933 $132,578

The estimated fair value of the mortgage debt obligation is based on expected
future debt service payments discounted at estimated risk adjusted rates.

NOTE 6. MORTGAGE DEBT

The Partnership's mortgage debt (the "Mortgage Debt") is comprised of a $140
million note. The Mortgage Debt is nonrecourse to the Partnership, bears
interest at a fixed rate of 8.85% based upon actual number of days over a 360
day year for a 10-year term expiring March 10, 2006 and required payments of
interest only during the first loan year (April 1996 through March 1997) and
principal amortization based upon a 25-year amortization schedule beginning with
the second loan year.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marriott Residence Inn II Limited Partnership and Subsidiary

Principal amortization of the Mortgage Debt at December 31, 2000 is as follows
(in thousands):

2001........ $ 1,968
2002........ 2,152
2003........ 2,353
2004........ 2,540
2005........ 2,811
-------
Thereafter.. 122,342
--------
$134,166
========

The Mortgage Debt is secured by first mortgages on 22 of the Partnership's 23
Inns, the land on which they are located, a security interest in all personal
property associated with those Inns including furniture and equipment,
inventory, contracts, and other intangibles and the Partnership's rights under
the management agreement. The Bossier City Residence Inn did not pass certain
required thresholds to enable the property to collateralize the Mortgage Debt.
The Partnership was required to deposit $500,000 into a reserve account and fund
$250,000 annually into the account to provide for any claim, investigation, or
litigation that may arise from any environmental condition at the Bossier City
Residence Inn. The initial $500,000 deposit was funded by the lender. The
Partnership is required to repay the initial reserve as promptly as possible if
the Partnership draws on the deposit or by the end of the 10-year term in March
2006. Any draws upon the account will accrue interest at the 30-day London
Interbank Offered Rate ("LIBOR") plus 4.5 percentage points. If the Partnership
does not need to draw on the reserve account, the lender will hold the reserve
until such time as the Mortgage Debt is either repaid, or a governmental
authority determines that the statute of limitations on filing any claims has
expired or that no further remedial activities are required at the property.
Based upon the results of the environmental studies performed, the Partnership
believes that it is remote that it will be necessary to draw on the reserve. The
balance of this reserve, as of December 31, 2000, is $1,042,000 and is included
in the restricted cash reserves on the accompanying consolidated balance sheet.

Pursuant to the terms of the Mortgage Debt, the Partnership was required to
establish with the lender a separate escrow account for payments of insurance
premiums and real estate taxes (the "Real Estate Tax and Insurance Escrow
Reserves") for each mortgaged property due to a downgrade of the credit rating
of MII by Standard and Poor Rating Services in 1997. The Partnership funded the
Real Estate Tax and Insurance Escrow Reserve for $834,000 in 1997. As a result
of this downgrade, the Mortgage Debt also required the Partnership to fund an
additional month's debt service into the debt service reserve account over a six
month period and the Manager required the Partnership to fund an additional
working capital reserve. Additionally, the terms of the Mortgage Debt require
the Partnership to maintain a debt service reserve equal to three months of debt
service and a capital expenditure reserve for various renewals and replacements,
site improvements, Americans with Disabilities Act of 1990 modifications and
environmental remediation projects identified during the course of the
appraisals and environmental studies undertaken in conjunction with the
refinancing.

NOTE 7. MANAGEMENT AGREEMENT

The Manager operates the Inns pursuant to two long-term management agreements
("Management Agreements") with initial terms expiring December 31, 2012. The
Management Agreements expire in 2012 with renewal at the option of the Manager
for one or more of the Inns for up to 45 years thereafter. The Manager earns a
base management fee equal to 2% of the Inns' gross revenues. Base management
fees are paid currently.

In addition, the Manager is entitled to an incentive management fee equal to 15%
of Operating Profit, as defined (23.5% in any year in which operating profit is
equal to or greater than $25.3 million; however, cumulative incentive management
fees cannot exceed 20% of cumulative Operating Profit). The incentive
management fee is payable out of 50% of cash flow from operations remaining
after payment of debt service, provision for Partnership

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marriott Residence Inn II Limited Partnership and Subsidiary

administrative expenses, payment of the base management fee, payment of deferred
base management fees and retention by the Partnership of annual cash flow from
operations of $7,071,000. After the Partnership has retained an additional 5%
return, the incentive management fee is payable out of 75% of the remaining cash
flow from operations. Unpaid incentive management fees are deferred without
interest and are payable from future operating cash flow, as defined. Incentive
management fees of $2,895,000, $3,090,000 and $3,257,000 were earned during
2000, 1999 and 1998, respectively. Incentive management fees of $0, $14,000 and
$185,000 were paid during 2000, 1999 and 1998, respectively. Deferred incentive
management fees were $2,895,000 and $22,693,000 as of December 31, 2000 and
1999, respectively. In connection with the Litigation Settlement, the Manager
waived $22,693,000 of deferred incentive management fees, which was recognized
as an extraordinary gain during 2000.

The Management Agreements also provide for annual payments of the Residence Inn
system fee equal to 4% of suite revenues. In addition, the Manager is
reimbursed for each Inn's pro rata share of the actual costs and expenses
incurred in providing certain services ("Chain Services") on a central or
regional basis to all hotels operated by the Manager. As franchiser of the
Residence Inn by Marriott system, the Manager maintains a marketing fund to pay
the costs associated with certain system-wide advertising, promotional, and
public relations materials and programs, and operating a toll-free reservation
system. Each Inn contributes 2.5% of suite revenues to the marketing fund. The
Inns also participate in the Marriott Rewards Program ("MRP"). The cost of this
program is charged to all hotels in the Marriott hotel system. For the years
ended December 31, 2000, 1999 and 1998, respectively, the Partnership paid a
Residence Inn system fee of $2,789,000, $2,734,000 and $2,729,000, reimbursed
the Manager for $1,941,000, $1,975,000 and $2,005,000 of Chain Services,
contributed $1,743,000, $1,705,000 and $1,705,000 to the marketing fund, and
paid MRP costs of $277,000, $249,000 and $143,000. Chain Services,
contributions to the marketing fund and MRP costs are included in other
operating expenses in the accompanying consolidated statement of operations.

The Partnership is required to provide the Manager with working capital to meet
the operating needs of the Inns. The Manager converts cash advanced by the
Partnership into other forms of working capital consisting primarily of
operating cash, inventories, and trade receivables and payables which are
maintained and controlled by the Manager. Upon termination of the Management
Agreements, the working capital will be returned to the Partnership. The
individual components of working capital controlled by the Manager are not
reflected in the Partnership's consolidated balance sheet. For December 31, 2000
and 1999, $2,050,000 has been advanced to the Manager for working capital which
is included in Due from Residence Inn by Marriott, Inc. in the accompanying
consolidated balance sheet.

The Management Agreements provide for the establishment of a property
improvement fund for the Inns to cover the cost of certain non-routine repairs
and maintenance to the Inns which are normally capitalized and the cost of
replacements and renewals to the Inns' property and improvements. Total
contributions to the property improvement fund for the years ended December 31,
2000, 1999 and 1998 were $6,716,000, $7,535,000 and $4,282,000, respectively.
Based on capital budgets, it was determined that the property improvement fund
was insufficient to meet current needs beginning in 1998. The shortfall is
primarily due to the need to complete total suite refurbishments at the majority
of the Partnership's Inns. To address the 1998 shortfall, the Partnership
provided additional cash contributions of $1.6 million and $2.5 million to the
property improvement fund in the first quarters of 2000 and 1999, respectively,
and increased the contribution rate in 1998 and 1999 to 6% and 7%, respectively,
of gross Inn revenues.

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The Partnership has no directors or officers. The business and policy making
functions of the Partnership are carried out through the directors and executive
officers of RIBM Two LLC, the General Partner, who are listed below:

Age at
Name Current Position December 31, 2000
- ------------------------ --------------------- -----------------
Robert E. Parsons, Jr. President and Manager 45
W. Edward Walter Executive Vice President
and Treasurer 45

Business Experience

Robert E. Parsons, Jr. joined Host Marriott's Corporate Financial Planning staff
in 1981 and was made Assistant Treasurer in 1988. In 1993, Mr. Parsons was
elected Senior Vice President and Treasurer of Host Marriott, and in 1995, he
was elected Executive Vice President and Chief Financial Officer of Host
Marriott. He is also an Executive Vice President and Chief Financial Officer of
Host LP and serves as a director, manager and officer of numerous Host Marriott
subsidiaries.

W. Edward Walter joined Host Marriott in 1996 as Senior Vice President for
Acquisitions and was made Treasurer of Host Marriott in 1998 and Executive Vice
President in May 2000. He is also an Executive Vice President and Treasurer of
Host LP and serves as a director, manager and officer of numerous Host Marriott
subsidiaries. Prior to joining Host Marriott, Mr. Walter was a partner with
Trammell Crow Residential Company and President of Bailey Capital Corporation, a
real estate firm focusing on tax exempt real estate investments.

ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS

As noted in Item 10 above, the Partnership has no directors or officers nor does
it have any employees. Under the Partnership Agreement, however, the General
Partner has the exclusive right to conduct the business and affairs of the
Partnership subject only to the management agreements described in Items 1 and
13. The General Partner is required to devote to the Partnership such time as
may be necessary for the proper performance of its duties, but the officers and
directors of the General Partner are not required to devote their full time to
the performance of such duties. To the extent that any officer or director
devotes time to the Partnership, the General Partner or Host LP, as applicable,
is entitled to reimbursement for the cost of providing such services. For the
fiscal years ending December 31, 2000, 1999 and 1998, the Partnership reimbursed
Host Marriott or its subsidiaries in the amount of $374,000, $105,000 and
$278,000, respectively, for the cost of providing all administrative and other
services as General Partner.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 2000, Prescott Associates, LLC, an unrelated third party,
owned 6.5% of the total number of limited partnership Units. No other person
owned of record, or to the Partnership's knowledge owned beneficially, more than
5% of the total number of limited partnership Units. The General Partner does
not own any limited partnership interest in the Partnership.

The executive officers and managers of the General Partner, Host Marriott,
Marriott International, Inc. and their respective affiliates do not own any
Units as of December 31, 2000.

The Partnership is not aware of any arrangements which may, at a subsequent
date, result in a change in control of the Partnership.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Agreement

Incorporated by reference to the description of the management agreements in
Note 7 to the financial statements set forth in Part I, Item 8.

PART IV

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

(a) List of Documents Filed as Part of This Report

(1) Financial Statements
All financial statements of the registrant as set forth under
Item 8 of this Report on Form 10-K.

(2) Financial Statement Schedules
The following financial information is filed herewith on the
pages indicated.

Schedule III - Real Estate and Accumulated Depreciation, page 25.

All other schedules are omitted because they are not applicable or the required
information is included in the financial statements or notes thereto.

(3) Exhibits

Exhibit Number Description Page
- ------------------------- ------------------------------------------------------------- ----------

*3.1 Amended and Restated Agreement of Limited Partnership of N/A
Marriott Residence Inn II Limited Partnership dated November
23, 1988.

*3.2 First Amendment to Amended and Restated Agreement of Limited N/A
Partnership dated April 1, 1989.

*3.3 First Amendment to Amended and Restated Agreement of Limited N/A
Partnership of Marriott Residence Inn II Limited Partnership
dated December 28, 1998.

*10.1 Amended and Restated Management Agreement by and between N/A
Residence Inn by Marriott, Inc. and Marriott Residence Inn II
Limited Partnership dated as of March 22, 1996.

*10.2 Loan Agreement by and between Marriott Residence Inn II Limited N/A
Partnership and the Sanwa Bank Limited dated December 27, 1988.

*10.3 Loan Agreement between Marriott Residence Inn II Limited N/A
Partnership and Nomura Asset Capital Corporation dated as of
March 22, 1996.

__________________
* Incorporated by reference to the Partnership's previously filed documents.

(b) Reports on Form 8-K:

None.

SCHEDULE III

MARRIOTT RESIDENCE INN II LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(in thousands)

Initial Costs Gross Amount at December 31, 2000
-------------------------- ---------------------------------------------------
Land and Building and Costs Land and Building and Accumulated
Description Debt Improvements Improvements Capitalized Improvements Improvements Total Depreciation
- ------------------- -------------- ------------ ------------ ------------ ------------- ------------ -------- ------------

Las Vegas, NV $ 16,030 $ 4,967 $ 8,284 $ 973 $ 3,310 $ 10,914 $ 14,224 $ 3,397
Irvine, CA 6,958 3,503 5,843 295 2,334 7,307 9,641 2,121
Arcadia, CA 8,783 3,426 5,714 307 2,284 7,163 9,447 2,206
Greensboro, NC 8,160 2,937 4,926 851 1,965 6,749 8,714 2,107
Birmingham, AL 7,061 2,886 4,840 856 1,924 6,658 8,582 2,236
Memphis East, TN 3,565 2,629 4,409 1,753 357 3,264 3,621 2,387
Other properties,
each less than
5% of total 83,609 36,476 60,628 13,425 24,439 86,090 110,529 28,322
-------- ------- -------- -------- -------- -------- -------- -------

$134,166 $56,824 $ 94,644 $ 18,460 $ 36,613 $128,145 $164,758 $42,776
======== ======= ======== ======== ======== ======== ======== =======

Date of
Completion of Date Depreciation
Description Construction Acquired Life
- ----------------------- ------------ --------- ------------

Las Vegas, NV 1989 1989 40 years
Irvine, CA 1989 1989 40 years
Arcadia, CA 1989 1989 40 years
Greensboro, NC 1987 1988 40 years
Birmingham, AL 1986 1988 40 years
Memphis East, TN 1986 1988 40 years
Other properties,
each less than
5% of total 1983-1989 1988-1989 40 years

Notes:
- ------

1998 1999 2000
-------- -------- -------

(a) Reconciliation of Real Estate:
Balance at beginning of year........................... $162,480 $164,009 $168,090
Capital Expenditures................................... 1,529 4,092 1,840
Dispositions........................................... -- (11) (2)
Impairments of long-lived assets....................... _ _ (5,170)
------- ------- -------
Balance at end of year................................. $164,009 $168,090 $164,758
======== ======== ========
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year........................... $29,593 $33,834 $38,328
Depreciation........................................... 4,241 4,494 4,448
------- ------- -------
Balance at end of year................................. $33,834 $38,328 $42,776
======= ======= =======

(c) The aggregate cost of land, buildings and
improvements for Federal income tax purposes
is approximately $163.6 million at December 31, 2000.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized on this 23rd of March,
2001.

MARRIOTT RESIDENCE INN II
LIMITED PARTNERSHIP

By: RIBM TWO LLC
General Partner

/s/ Robert E. Parsons, Jr.
---------------------------------

President and Manager

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
the capacities and on the date indicated above.

Signature Title
- --------- -----
(RIBM TWO LLC)

/s/ Robert E. Parsons, Jr. President and Manager
- ----------------------------
Robert E. Parsons, Jr.

/s/ W. Edward Walter Executive Vice President
- ---------------------------- and Treasurer
W. Edward Walter

/s/ Donald D. Olinger Vice President (Principal
- ---------------------------- Accounting Officer)
Donald D. Olinger