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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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                                    FORM 10

                  GENERAL FORM FOR REGISTRATION OF SECURITIES

        Pursuant to Section 12(g) of the Securities Exchange Act of 1934

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                                FAIRFIELD INN BY
                          MARRIOTT LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

              Delaware                                  52-1638296
       (State of Organization)           (I.R.S. Employer Identification Number)

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

              Registrant's telephone number including area code:

                                (301) 380-9000

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

                                     None

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

                         LIMITED PARTNERSHIP INTERESTS
                                (Title of Class)

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                           FORWARD-LOOKING STATEMENTS

   In addition to historical information, this contains forward-looking
statements within the meaning of the federal securities law. Forward-looking
statements include information relating to our intent, belief or current
expectations, primarily, but not exclusively, with respect to:

  . economic outlook

  . capital expenditures

  . cost reductions

  . cash flow

  . operating performance

  . financing activities

  . our tax status or

  . related industry developments, including trends affecting our business,
    financial condition and results of operations.

   We intend to identify forward-looking statements in this registration
statement 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).

   The forward-looking information involves important risks and uncertainties
that could cause our actual results, performance or achievements to differ
materially from our anticipated results, performance or achievements expressed
or implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to:

  . our inability to meet our debt service obligations out of operating cash
    flow and the need to use our reserves (including our supplemental debt
    service reserve maintained in connection with our current mortgage debt)
    to fund seasonal shortfalls in funds available for debt service

  . we have exhausted our supplemental debt service reserve and are required
    to replenish it from future excess cash flow, if any

  . our limited cash reserves and inability to raise additional capital

  . the continued impact of new supply in the markets our Inns are located

  . the need for capital expenditures to make our properties competitive and
    satisfy standards for comparable lodging facilities and the possibility
    of termination of the management agreement for the properties if we are
    unable to make such capital expenditures

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

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

  . 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 changes in
    laws and regulations or the interpretation thereof, and

                                       1


  . other factors discussed under the headings "Declining Operations; Capital
    Shortfall" in Item 1 and "Liquidity and Capital Resources" in the section
    of Item 2 entitled "Management's Discussion and Analysis of Financial
    Condition and Results of Operations."

   Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we cannot assure you that
such expectations will be attained or that any deviations will not be material.
We disclaim any obligation or undertaking to disseminate to you any updates or
revisions to any forward-looking statement contained in this registration
statement to reflect any change in our expectations or any changes in events,
conditions or circumstances on which any statement is based.

                                       2


ITEM 1. BUSINESS

General

   Fairfield Inn by Marriott Limited Partnership, a Delaware limited
partnership, was formed on August 23, 1989 to acquire, own and operate 50
Fairfield Inn by Marriott properties, which compete in the economy segment of
the lodging industry. We lease the land underlying 32 of our Inns from Marriott
International, Inc. and some of its affiliates. Our 50 Inns are located in
sixteen states. The properties are managed by Fairfield FMC Corporation, a
wholly owned subsidiary of Marriott International, as part of the Fairfield Inn
by Marriott system under a long-term management agreement.

   Between November 17, 1989 and July 31, 1990, we sold 83,337 units of limited
partnership interests in a registered public offering for $1,000 per unit. Our
general partner, at that time, Marriott FIBM One Corporation, contributed $0.8
million for a 1% general partner interest and $1.1 million to assist in
establishing our initial working capital reserve at $1.5 million, as required
in the partnership agreement. In addition, our general partner purchased units
equal to a 10% limited partner interest at the closing of our offering. The
remaining 90% limited partnership interest is owned by unrelated parties.

Declining Operations; Capital Shortfall

   Our Inns have experienced a substantial decline in operating results over
the past several years. Since 1996, our annual revenues have declined each
year, from $97.4 million in 1996 to $91.5 million in 2000. Our operating profit
has declined over the same period from a $17.3 million operating profit in 1996
to a $2.8 million operating loss in 2000. The decline in Inn operations is
primarily due to increased competition, over-supply of limited service hotels
in the markets where our Inns operate, and increases in labor and other
operating costs at our Inns. Forecasts provided by the manager indicate that
our operating cash flow will be insufficient to cover debt service during 2001.
The current estimated shortfall before ground rent deferrals is approximately
$1 to $2 million for 2001, but due to seasonality, it may be as much as $2
million at the end of the first quarter. We expect to fund this shortfall from
partnership cash, amounts currently being held in various debt service reserve
accounts and, as permitted under the ground lease documents, deferral of a
portion of our ground rent. In 2000, we deferred $1.1 million in ground rent in
order to meet our debt service obligations. This deferred amount is a liability
of the partnership, as would be any ground rent that is deferred in 2001.
Through reserves held by our lender, partnership cash, deferral of ground rent
and property cash flow, we expect to meet our debt service requirements during
2001.

   In light of the age of our Inns, which range in age from 11 to 14 years,
major capital expenditures will be required over the next several years to
remain competitive in the markets where we operate and to satisfy brand
standards, as required by our management agreement. These capital expenditures
include room refurbishments planned for 22 of our Inns over the next several
years and the replacement of roofs and facades. The 2001 capital expenditure
needs for our Inns are estimated to total approximately $23 million and these
expenditures will exceed our available funds. Based upon information provided
by the manager, the estimated capital expenditure shortfall by the end of 2001
will be between $15 million and $17 million. We currently are pursuing various
alternatives in an effort to meet these capital needs. Until we reach a
resolution concerning funding of the capital expenditure shortfall, the capital
expenditures exceeding the amount available in our property improvement fund
will be deferred.

   Under the management agreement, if the manager determines that our Inns are
not satisfactorily maintained as Fairfield Inn by Marriott properties due to
insufficient capital improvements, the manager may terminate its management of
those Inns which fail to meet brand standards. We recently received a notice
from the manager stating that our failure to fund the shortfall in funds
available for replacements of furniture, fixtures and equipment constitutes a
default under the management agreement and asserting a right to terminate the
management agreement in the future if the alleged default is not cured. We have
notified the manager that, based on our review of the management agreement, the
failure to fund this shortfall does not constitute a

                                       3


default and that they do not have the right to terminate the management
agreement at this time because they did not send a notice within the time
period specified under the management agreement.

   Our general partner is working with the manager to address the capital
expenditure needs of our Inns but we cannot assure you that a satisfactory
resolution will be reached. If these issues are not resolved, the manager may
have termination rights under the management agreement in the future. If the
manager were to terminate the management agreement and we were unable to retain
another manager with a nationally recognized brand, the loss of brand
affiliation could significantly impair our revenues, our cash flow, and the
value of our Inns. Moreover, termination of the management agreement by the
manager may ultimately lead to a default under our loan agreement.

   For further discussion of our results of operations, shortfall of capital,
and liquidity situation, as well as efforts being undertaken to address these
problems, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 2 below.

Competition

   The United States lodging industry is segmented into full service and
limited service properties. Our Inns are included within the limited service
segment and directly compete in the sub-segment of mid-scale properties without
food and beverage facilities. This segment is highly competitive and includes
many name brands including Comfort Inn and Suites, Holiday Inn Express, Hampton
Inn and Suites, La Quinta Inn and Suites, Sleep Inn, Country Inn and Suites,
Candlewood Hotels and Wingate Inns. Competition is based primarily on the level
of service, quality of accommodations, convenience of locations and room rates.
Full service hotels generally offer restaurant and lounge facilities and
meeting space, as well as a wide range of services and amenities. Hotels within
our competitive set generally offer basic guest room accommodations with
limited or no services and amenities.

   Based on data by Smith Travel Research, supply in this sub-segment increased
significantly in the late 1990's, growing at rates in excess of 11% annually,
which exceeded demand growth for each year during the period from 1995 through
1999 by as much as 300 basis points. Additionally, the supply growth rate is
projected to continue to grow at 5-6% annually for the next three years, which
will increase the competitive pressure on our properties. These new products
frequently reflect updated designs and features, which increases the need to
make capital expenditures at our Inns in order for them to compete effectively.
In addition to competing brands, customers compare our Inns to other Fairfield
Inn by Marriott properties. The Fairfield by Marriott brand currently consists
of 450 hotels within the United States, and continues to grow, with 50 hotel
openings and construction of an additional 35 inns expected to commence in
2001. Our Inns, which are 11 to 14 years old, struggle to compete with newer
Fairfield Inn properties, which benefit from design enhancements and a more
contemporary feel.

   The inclusion of our inns within the nationwide Fairfield Inn by Marriott
hotel system provides advantages of name, recognition, and centralized
reservations and advertising, system-wide marketing and promotion, centralized
purchasing and training and support services. As economy hotels, our inns
compete effectively with 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.

Reorganization of Our General Partner

   In 1998, Host Marriott Corporation, the parent of our former general
partner, reorganized its business operations in order to qualify as a real
estate investment trust effective as of January 1, 1999. We refer to that
reorganization as the REIT conversion. In connection with the REIT conversion,
Host Marriott contributed substantially all of its hotel assets to a newly-
formed partnership, Host Marriott, L.P., or Host LP.

                                       4


   In connection with the REIT conversion. FIBM One LLC, a Delaware single
member limited liability company, was formed as a subsidiary of Host Marriott.
FIBM One LLC has three classes of member interests:

  . Class A, a managing 1% economic interest;

  . Class B, a non-managing 98% economic interest; and

  . Class C, a non-managing 1% economic interest.

   Marriott FIBM One Corporation merged with and into FIBM One LLC on December
24, 1998 and ceased to exist. As a result of the merger, FIBM One LLC, our new
general partner, succeeded to the 1% general partner interest and 10% limited
partner interest owned by our former general partner. On December 28, 1998,
Host Marriott contributed its entire interest in FIBM One LLC to Host LP, which
at that time was owned 78% by Host Marriott and 22% by outside partners.
Finally, on December 30, 1998, Host LP contributed its Class B and Class C
interests in FIBM One LLC to one of Host Marriott's non-controlled
subsidiaries, Rockledge Hotel Properties, Inc., 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 the voting interests). Rockledge contributed the Class C interest to a
wholly owned subsidiary.

   As a result, our sole general partner is FIBM One LLC, with a Class A 1%
managing economic interest owned by Host LP and a Class B 98% non-managing
economic interest and Class C 1% non-managing interest each owned by Rockledge
and its subsidiaries.

Management Agreement

   Our Inns are managed by Fairfield FMC Corporation, a wholly owned subsidiary
of Marriott International, as part of the Fairfield Inn by Marriott hotel
system under a long-term management agreement which has an initial term ending
December 31, 2019. The manager can renew the management agreement, at its
option, as to one or more of our Inns for up to four additional 10-year terms
plus one five-year term.

   The manager is paid a base management fee equal to 2% of gross Inn revenues
and a Fairfield Inn system fee equal to 3% of gross Inn revenues. In addition,
the manager is entitled to an incentive management fee equal to 15% of
"operating profit," as defined in the management agreement, increasing to 20%
after our Inns have achieved total operating profit during any 12 month period
equal to or greater than $33.9 million. For the year ended December 31, 2000,
operating profit was less than $33.9 million. The incentive management fee with
respect to each Inn is payable out of 50% of cash flow from operations
remaining after payment of ground rent, debt service, administrative expenses
and the owner's priority return, as defined in the management agreement.

   According to the terms of the management agreement, incentive management
fees earned through 1992 were waived by the manager, as cash flow available for
incentive management fees, as defined in the management agreement, was
insufficient to pay those fees. Incentive management fees earned after 1992
accrue and are payable as outlined above or from capital receipts, as defined
in the management agreement. To the extent there are insufficient funds
remaining after payment of debt service and other obligations, incentive
management fees earned by the manager are deferred. As of December 31, 1999,
cumulative deferred incentive management fees totaled $23.5 million. In
connection with the class action litigation settlement agreement, the manager
waived payment of all deferred fees as of December 31, 1999. See "--Litigation
Settlement" below. As of December 31, 2000, there were $2.8 million of deferred
incentive management fees.

   The manager is required to furnish specific chain services to our Inns,
which services are furnished generally on a central or regional basis to all
Inns in the Fairfield Inn by Marriott hotel system that are owned, leased, or
managed by Marriott International and its subsidiaries. Costs and expenses
incurred in providing such services are allocated among all domestic Fairfield
Inn by Marriott hotels managed, owned or leased by Marriott International or
its subsidiaries. The costs and expenses are allocated among all Inns based on
the gross revenues of each Inn.

                                       5


   Beginning in 1997, our Inns participate in Marriott International's Marriott
Rewards Program ("MRP"). The cost of this program is charged to all hotels in
the full-service, Residence Inn by Marriott, Courtyard by Marriott and
Fairfield Inn by Marriott systems based upon the MRP revenues at each hotel or
Inn. The total amounts of chain services and MRP costs allocated to us for the
years ended December 31, 2000, 1999 and 1998 were $1.7 million, $1.8 million
and $1.6 million, respectively.

   In addition, the manager maintains a marketing fund to pay the costs
associated with specified system-wide advertising, marketing, sales,
promotional and public relations materials and programs. Each Inn within the
system contributes approximately 2.4% of gross Inn revenues to the marketing
fund. For the years ended December 31, 2000, 1999 and 1998, we contributed $2.5
million, $2.3 million and, $2.4 million, respectively, to the marketing fund.

   Pursuant to the terms of the management agreement, we are required to
provide the manager with working capital to meet the operating needs of our
Inns. This working capital earns no interest and remains our property
throughout the term of the management agreement. We are required to furnish,
upon request of the manager, any additional funds necessary to satisfy the
needs of our Inns as their operations may require from time to time. Upon
termination of the management agreement, the manager will return to us any
remaining working capital. Working capital as of December 31, 2000 was $1.0
million. If the management agreement is terminated, we may have to pay costs
associated with such termination out of the remaining working capital we
receive from the manager.

   The management agreement provides for the establishment of a property
improvement fund for the Inns to cover the cost of:

  . specified non-routine repairs and maintenance to our Inns which are
    normally capitalized; and

  . replacements and renewals to our Inns' property and improvements.

   Contributions to the property improvement fund are based upon a percentage
of gross revenues of each Inn equal to 7%. If the manager determines that 7%
exceeds the amount needed for making capital expenditures, then the manager can
adjust the incentive management fee calculation to exclude as a deduction in
calculating incentive management fees up to one percentage point of
contributions to the property improvement fund. If the contributions to the
property improvement fund are inadequate to pay for capital improvements
required to maintain brand standards at our Inns, we are required to provide
additional funds. As described below, the manager has determined that there are
substantial capital improvements required over the next several years at our
Inns and we do not have sufficient funds to meet these needs. Furthermore, the
manager has notified us that our failure to contribute enough funds for
anticipated shortfalls constitutes a default under the management agreement. We
have notified the manager that we disagree with the manager's determination
that there is a default under the management agreement. We are continuing to
work with the manager to resolve our capital expenditure shortfall issues. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" under Item 2 below.

   The management agreement provides that we may terminate the management
agreement and remove the manager if, after December 1995, specified minimum
operating results are not achieved. The manager may, however, prevent
termination by paying to us an amount as is necessary to achieve the specified
minimum operating results.

Ground Leases

   The land on which 32 of our Inns are located is leased from Marriott
International or its affiliates. The leases expire on November 30, 2088 and
provide that we will pay annual rents equal to the greater of a specified
minimum rent for each property or a percentage rent based on gross revenues of
the Inn operated on the land. The minimum rents are adjusted annually based on
changes in the Consumer Price Index. The percentage rent, which also varies
from property to property, is fixed at predetermined percentages of gross
revenues that increase over time.

                                       6


   In connection with our 1997 refinancing, beginning in 1997 and continuing
until the mortgage debt is repaid, the payment of rental expense exceeding 3%
of gross revenues from our 32 leased Inns in the aggregate will be deferred in
any year that cash flow is less than the regularly scheduled principal and
interest payments on the mortgage debt. The deferred ground rent payment
remains our obligation and is payable thereafter to the extent that there is
cash available after the payment of debt service and other obligations as
required by agreements with the manager and the lender. At December 31, 2000,
an aggregate of $1.1 million of ground rent was deferred.

   Under the leases, we pay all costs, expenses, taxes and assessments relating
to our Inns and the underlying land, including real estate taxes. Each ground
lease provides that we have a first right of refusal in the event the
applicable ground lessor decides to sell the leased premises. Upon expiration
or termination of a land lease, title to the applicable Inn and all
improvements reverts to the ground lessor.

Mortgage Debt

   We have $153.6 million of mortgage debt. The mortgage debt is non-recourse,
bears interest at a fixed rate of 8.40% and requires monthly payments of
principal and interest based upon a 20-year amortization schedule for a 10-year
term expiring January 11, 2007. Thereafter, until the final maturity date of
January 11, 2017, interest is payable at an adjusted rate, as defined, and all
excess cash flow is applied toward principal amortization. The mortgage debt is
secured by first mortgages on all of our Inns, the land on which they are
located, or an assignment of our interest under the ground leases, including
ownership interest in all improvements thereon, fixtures and personal property
related thereto.

   The lender securitized the loan through the issuance and sale of commercial
mortgage backed securities backed by mortgages on a total of 71 properties. Our
Inns represent 50 of the 71 properties and approximately 33% of the principal
amount of the certificates. We previously reported to the limited partners
that, as a result of our decline in operating performance, Fitch IBCA, a major
credit rating agency, downgraded the two lowest classes of the CMBS on
September 2, 1999. On May 23, 2000, Fitch IBCA once again downgraded the two
lowest classes of the CMBS due to our continued decline in operating
performance. The downgrade of these securities has no effect on the current
terms of our mortgage debt, although it would impair our ability to obtain new
funding from other sources.

Employees

   We have no employees; however, Host LP provides the services of some of its
employees, including the executive officers of our general partner, to perform
administrative and other services for us. We and our general partner anticipate
that each executive officer of our general partner will generally devote a
sufficient portion of his time to our business; however, each of such executive
officers also will devote a significant portion of his time to the business of
Host LP and its other affiliates. We reimburse our general partner or Host LP
for the cost of providing such services. See Item 6, "Executive Compensation,"
for information regarding payments made to our general partner for the cost of
providing administrative and other services to us.

Prior Efforts to Sell Inns or Partnership Interests

   Our partnership agreement provides that the general partner will, from time
to time, consider whether or not, in its reasonable judgment, it would be in
the best interests of the partnership to sell all or a portion of the Inns. In
addition, the partnership agreement provides that, if all of the Inns have not
been sold prior to 2001, then, subject to the terms of the management agreement
and loan agreement, the general partner will use reasonable best efforts to
sell the remaining Inns, in one or more transactions, as it determines
appropriate in its reasonable judgment. In mid-1998, the general partner
engaged an investment banking firm to assist us in an effort to sell our Inns
or find a buyer for the limited partners' interests in the partnership and
thereby provide liquidity to limited partners. The general partner received
only a few indications of interest and none of them was on terms that would
have resulted in proceeds for our limited partners. Based on this prior
experience and

                                       7


the continuing decline in operating results and deteriorating financial
condition described above, the general partner does not believe that it is
currently feasible to sell the Inns or find a buyer for the limited partners'
interests at a price that would result in proceeds for limited partners.

Litigation Settlement

   In September 2000, our general partner, Marriott International and other
defendants settled a lawsuit filed by limited partners of seven limited
partnerships, including our limited partners. The terms of the settlement
required that the defendants make cash payments to our limited partners of
approximately $152 per unit in full satisfaction of the litigation and a
release of all claims. In addition, the manager agreed to forgive $23.5 million
of deferred incentive management fees payable by us.

   The discussion of the settlement in this registration statement is qualified
in its entirety by the terms of the actual settlement agreement and the court-
approved notice sent to our limited partners.

ITEM 2. FINANCIAL INFORMATION

Selected Financial Data

   The following table presents selected historical financial data for each of
the five years in the period ended December 31, 2000, which data has been
derived from our audited financial statements for those years. You should read
the following selected financial data together with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our audited
financial statements included in this registration statement.

                            Selected Financial Data
             (in thousands, except per unit amounts and ratio data)



                               2000      1999      1998      1997      1996
                             --------  --------  --------  --------  --------
                                                      
Income Statement Data:
Revenues.................... $ 91,478  $ 93,084  $ 94,370  $ 95,721  $ 97,441
Operating (loss) profit.....   (2,848)    3,885      (522)   11,963    17,316
Net income (loss)...........    8,709    (8,552)  (12,999)   (1,411)    1,420
Net income (loss) per
 limited partner unit
 (83,337 Units).............      103      (102)     (154)      (17)       17
Balance Sheet Data:
Total assets................ $147,082  $163,574  $173,064  $185,503  $184,992
Total liabilities...........  160,411   185,612   186,550   185,990   183,226
Other Data (unaudited):
Cash distributions per
 limited partner unit
 (83,337 Units).............      --        --        --         10       100
Ratio of earnings to fixed
 charges....................      --        --        --        --        1.1x
Deficiency of earnings to
 fixed charges..............  $14,774   $ 8,552   $12,999   $ 1,411   $   --


                                       8


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

General

   We are the owners of 50 limited service Inns, which are operated as part of
the Fairfield Inn by Marriott system, and managed by Fairfield FMC Corporation.

   During the period from 1998 through 2000, our revenues declined from $94.4
million to $91.5 million. Our revenues are primarily a function of room
revenues generated per available room or "RevPAR." RevPAR, represents the
combination of the average daily room rate charged and the average daily
occupancy achieved and is a commonly used indicator of hotel performance.
During the period from 1998 through 2000, our combined RevPAR decreased
approximately 3% from $37.79 to $36.76.

   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 Inn sales.

   The table below presents performance information for our Inns for the
indicated periods:



                                                       Year ended December
                                                               31,
                                                       ------------------------
                                                        2000     1999     1998
                                                       ------   ------   ------
                                                                
   Number of properties...............................     50       50       50
   Number of rooms....................................  6,676    6,676    6,676
   Average daily rate................................. $54.06   $52.35   $51.28
   Occupancy..........................................   68.0%    71.1%    73.7%
   RevPAR............................................. $36.76   $37.22   $37.79
   % RevPAR change....................................   (1.2%)   (1.5)%    --


Results of Operations

   The following discussion and analysis addresses results of operations for
the three years ended December 31, 2000 and should be read together with the
"Selected Financial Data" and our historical financial statements and related
notes included in this registration statement.

 2000 compared to 1999

   Rooms Revenues. Rooms revenues decreased $1.3 million, or approximately
1.5%, to $89.3 million in 2000 from $90.7 million in 1999, reflecting a 3.1
percentage point decrease in average occupancy to 68.0% partially offset by the
$1.71 increase in average rate to $54.06. The decrease in average occupancy was
primarily the result of increased competition in the economy segment. In 2000,
total Inn revenues decreased $1.6 million, or 1.8%, to $91.5 million when
compared to 1999.

   Operating Expense: Operating expenses increased $5.1 million, or 5.7%, to
$94.3 million when compared to 1999. The individual components are discussed
below.

     Rooms Costs: In 2000, rooms costs decreased $0.6 million, or 2.1%, to
  $27.9 million when compared to 1999. The overall decrease in controllable
  room costs is a result of the occupancy decreases at the Inns. These
  decreases were partially offset by an increase in the reservation costs due
  to the implementation of the Guestview reservation system in 2000.

     Selling, Administrative and other. Selling, administrative and other
  expenses increased by $0.8 million in 2000 to $27.7 million, or a 3.0%
  increase when compared to 1999. The increase in expenses was due to an
  increase in labor costs, repairs and maintenance expenses.

     Loss on impairment of long-lived assets. In 2000, we recorded impairment
  of long-lived assets of $8.1 million related to our Inns located in Johnson
  City, Tennessee, Raleigh and Charlotte Airport, North

                                       9


  Carolina, and Columbus North, Ohio. We recorded an impairment charge of
  $2.8 million in 1999 related to our Inns located in Lansing, Illinois and
  Charlotte-Northeast, North Carolina.

   Operating Profit (Loss). As a result of the changes in revenues and
operating expenses discussed above, operating profit decreased by $6.7 million,
resulting in an operating loss of $2.8 million for 2000, when compared to an
operating profit of $3.9 million in 1999.

   Interest Expense. Interest expense decreased by $0.3 million to $13.2
million in 2000 when compared to 1999. This decrease is due to the payment of
$4.3 million of principal on the mortgage debt.

   Loss Before Extraordinary Item. We generated a loss before extraordinary
item of $14.8 million in 2000 compared to a net loss of $8.6 million in 1999.
This increased loss is primarily due to the decrease in revenues coupled with
the increase in operating expenses discussed above.

   Extraordinary Gain. In connection with the class action litigation
settlement agreement that became effective in 2000, Fairfield FMC Corporation,
the manager of all our Inns, waived $23.5 million of deferred incentive
management fees.

   Net Income (Loss). Net income for 2000 was $8.7 million compared to a net
loss of $8.6 million for 1999. The increase is primarily due to the $23.5
million of deferred management fees waived in 2000 offset by slightly lower
revenues and increases in operating expenses.

 1999 compared to 1998

   Rooms Revenues. Rooms revenues decreased $0.9 million, or approximately
1.0%, to $90.7 million in 1999 from $91.5 million in 1998 reflecting the 2.6
percentage point decrease in average occupancy to 71.1% partially offset by the
slight increase in average rate to $52.35. The decrease in average occupancy
was primarily the result of increased competition in the economy segment. In
1999, Inn revenues decreased $1.3 million, or 1.4%, to $93.1 million when
compared to 1998.

   Operating Expenses: Operating expenses decreased $5.7 million, or 6.0%, to
$89.2 million when compared to 1998. The individual components are discussed
below.

     Rooms Costs: In 1999, rooms costs increased $1.3 million, or 4.8%, to
  $28.5 million when compared to 1998. The overall increase in room costs is
  due to an increase in salary and benefits.

     Selling, administrative and other. Selling, administrative and other
  expenses increased by $1.0 million in 1999 to $26.9 million, or a 4.1%
  increase when compared to 1998. The increase in expenses was due to an
  increase in labor costs, repairs and maintenance expenses and chain
  services.

     Incentive management fees. Incentive management fees decreased $0.9
  million in 1999 when compared to 1998 due to the addition of $2.4 million
  to the property improvement fund in 1999 by us to cover capital
  expenditures that exceeded the amount in the property improvement fund.
  This amount was treated as a deduction in calculating incentive management
  fees in 1999 under the terms of the management agreement.

     Loss on impairment of long-lived assets. We recorded an impairment of
  long-lived assets of $2.8 million in 1999 related to our Inns in Lansing,
  Illinois and Charlotte-Northeast, North Carolina and $9.5 million in 1998
  related to our Inns in Buena Park, California; Atlanta Airport, Georgia;
  Montgomery, Alabama; and Orlando South, Florida.

   Operating Profit (Loss). As a result of the changes in revenues and
operating expenses discussed above, our operating loss in 1998 of $0.5 million
increased to an operating profit of $3.9 million in 1999.

   Interest Expense. Interest expense decreased $0.3 million to $13.5 million
in 1999 when compared to 1998. This decrease is due to the payment of principal
on the mortgage debt.

                                       10


   Net Loss. We generated a net loss of $8.6 million in 1999 compared to a net
loss of $13.0 million in 1998. This decrease is primarily due to the loss
associated with an impairment of long-lived assets of approximately $9.5
million in 1998 compared to $2.8 million in 1999 related to the Inns discussed
above partially offset by the further decline in Inn revenues in 1999.

Liquidity and Capital Resources

   Adequate liquidity and capital are critical to our ability to continue as a
going concern. We have experienced declining operations in each year since
1996. As a result, cash flow from operations has declined from $19.4 million in
1997 to $10.5 million in 2000. During this same period, we have faced
increasing needs to make capital improvements to our Inns to enable them to
compete more effectively in their markets and to satisfy standards for the
Fairfield Inn brand, as required by the management agreement. Our general
partner is attempting to address the decline in operating cash flow and need
for additional capital through various avenues, as described below. We believe
that there is sufficient liquidity, including the availability of restricted
cash reserves to fund operations and meet debt service for the current year.
There can be no assurance that we will be able to reverse the decline in
operations or obtain additional financing.

Principal Sources and Uses of Cash

   Our principal source of cash is cash from operations. Our principal uses of
cash are to make debt service payments, fund the property improvement fund and
maintain required reserves.

   Cash provided by operations was $10.5 million in 2000, $16.4 million in 1999
and $16.5 million in 1998. The decrease from 1999 to 2000 is primarily
attributable to the decline in property level operating results and a decrease
in the amount of restricted cash made available for investing and financing
activities.

   Cash used in investing activities was $8.3 million, $12.7 million and $10.5
million in 2000, 1999 and 1998, respectively. Our cash investing activities
consisted of contributions to the property improvement fund and capital
expenditures for improvements to our Inns.

   Cash used in financing activities was $4.6 million, $2.3 million and $4.8
million in 2000, 1999 and 1998, respectively. Our financing activities
consisted of repayment of the mortgage debt and changes to the restricted cash
reserves.

Liquidity Concerns and Capital Shortfalls

   Operating Income in 2001 May be Inadequate to Fund Debt Service. Forecasts
provided by the manager indicate that our operating cash flow is likely to be
insufficient to cover debt service during 2001. The current estimated shortfall
before any ground rent deferrals is approximately $1 to $2 million for 2001,
but due to seasonality, it may be as much as $2 million at the end of the first
quarter. We expect to fund this shortfall from partnership cash (which totals
approximately $6.3 million, including approximately $4.3 million held in lender
reserve accounts) and, as permitted under the ground lease documents, from
deferral of a portion of ground rent expense. Based upon current estimates, the
ground rent deferral could provide approximately $1.1 million of additional
cash flow in 2001. We deferred $1.1 million of ground rent expense during 2000.
This deferred amount is a liability of the partnership, as would be any ground
rent that is deferred in 2001. Through reserves held by our lender, partnership
cash, deferral of ground rent and property cash flow, we expect to meet our
debt service requirements during 2001.

   Shortfall in Funds Available for Capital Expenditures. In light of the age
of our Inns, which range in age from 11 to 14 years, major capital expenditures
will be required over the next several years in an effort to remain competitive
in the markets where we operate and to satisfy brand standards, as required by
our management agreement. These capital expenditures include room
refurbishments planned for 22 of our Inns over the next several years and the
replacement of roofs, facades, carpets, wall vinyl and furniture. The 2001
capital expenditure needs for our Inns are estimated to total approximately $23
million.

                                       11


   The cost of future capital expenditures for our Inns are estimated to exceed
our available funds. Our property improvement fund became insufficient to meet
anticipated capital expenditures in 1999 and continued to be insufficient in
2000. To address this shortfall, we deposited an additional $2.4 million into
the property improvement fund during 1999 from our partnership cash beyond the
required contributions. In addition, the contribution rate to the property
improvement fund was increased to 7% of gross sales for 1997 and thereafter.
For the years ended December 31, 2000, 1999 and 1998, we contributed $6.0
million, $6.5 million and $6.6 million, respectively, to the property
improvement fund.

   We expect to continue to have inadequate funds in our property improvement
fund for the capital expenditures that the manager believes are necessary for
our Inns to satisfy the standards of quality under the management agreement for
Inns in the Fairfield Inn system. Based upon information provided by the
manager, the estimated capital expenditure shortfall by the end of 2001 will be
between $15 million and $17 million. Until we reach a resolution concerning
funding of the capital expenditure shortfall, the capital expenditures
exceeding the amount available in the property improvement fund will be
deferred.

   Under the management agreement, if the manager determines that our Inns are
not satisfactorily maintained as Fairfield Inn by Marriott properties due to
insufficient capital improvements, the manager may terminate its management of
those Inns which fail to meet brand standards. If this occurs, we would
attempt, with lender approval, to retain another manager and operate some or
all of our Inns as non-Fairfield Inn by Marriott properties. We believe that
the loss of the Fairfield Inn By Marriott brand is unlikely, however, there can
be no assurance that we will have sufficient capital to meet brand standards.
The loss of the Fairfield Inn by Marriott brand name and of the Marriott
affiliation and reservation system could negatively impact our Inn operating
results and our cash flows.

   The manager has notified us that it believes our failure to fund the capital
shortfall constitutes a default under the management agreement, giving it the
right to terminate the management agreement if we do not provide it with
additional funds to cure the shortfall. We have notified the manager that we
disagree with the manager's determination that there is a default under the
management agreement. Our general partner is working with the manager to
address the capital expenditure needs of our Inns but we cannot assure you that
a satisfactory resolution will be reached. If these issues are not resolved,
the manager may have termination rights under the management agreement in the
future. If the manager were to terminate the management agreement, the loss of
brand affiliation could significantly impair our revenues, our cash flow, and
the value of our Inns, and there can be no assurance that we would be able to
retain another manager on satisfactory terms, if at all. Moreover, termination
of the management agreement by the manager may ultimately lead to a default
under our loan agreement.

Restructuring Efforts

   Our general partner is currently in negotiations with a potential third
party investor and our mortgage lender in an effort to eliminate the debt
service and capital expenditure shortfalls facing us. However, we cannot assure
you that our negotiations will be successful or that if they are successful
that the funding of capital expenditures will improve operating results.

   In August 2000, our general partner met with the lender to discuss possible
modifications to the loan. In November 2000, the lender notified our general
partner that it has declared the loan a "specially serviced mortgage loan" and
as such, will be managed by a special servicer appointed by the lender. We have
agreed to pay the special servicer specified fees and reimburse the special
servicer for expenses incurred in connection with the proposed loan
restructuring. We are currently discussing a proposal with the special servicer
that would involve substitution of a new general partner, hiring a new manager
for our Inns and entering into a franchise agreement with Marriott
International, investment of additional capital by a third party investor with
existing limited partners having the opportunity to invest on the same terms,
and possible sales of assets to raise capital. We have not received any
definitive feedback on our proposal. Implementation of this proposal would be
subject to entering into agreements with the potential investor and Marriott
International, obtaining

                                       12


approval of the special servicer and the Rating Agencies, and obtaining limited
partner consent. While we are pursuing agreements and approvals from such third
parties, negotiations are ongoing and significant issues remain to be resolved.
We cannot assure you that any agreement will be reached or any approvals will
be received with respect to our proposed loan restructuring.

   Any amounts paid by us in connection with pursuing restructuring efforts
will further reduce the amount of cash available to fund the debt and other
obligations. If operations do not improve and the debt service reserve accounts
are depleted, we may be forced to default on the mortgage debt in 2002. We
believe that there is sufficient liquidity to fund operations and make debt
service for the current year. However, if we were to default and we were to
fail to remedy the default, the lender could initiate a foreclosure action and,
if successful, obtain title to our Inns. The general partner cannot assure you
that Inn operations will improve or that cash flow will increase even if the
necessary capital expenditures are made.

Quantitative and Qualitative Disclosures about Market Risk

   We do not have market risk with respect to interest rates, foreign currency
exchanges or other market rate or price risks, and we do not hold any financial
instruments for trading purposes. As of December 31, 2000, all of our debt has
a fixed interest rate.

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 room rates and prices.

Seasonality

   Demand, and thus room occupancy, is affected by seasonality. For most of our
Inns, demand is higher in the spring and summer months (March through October)
than during the remainder of the year.

                                       13


ITEM 3. PROPERTIES

   Our portfolio consists of 50 Fairfield Inn by Marriott properties as of
March 12, 2001. Our Inns, which range in age between 11 and 14 years, are
geographically diversified among 16 states.

   The following table presents the location and number of rooms for each of
our Inns. All of our properties are managed by an affiliate of Marriott
International. The land on which our Inns are located is owned by us, unless
otherwise specified.



                                                                      Number of
            Location of Inn                                             Rooms
            ---------------                                           ---------
                                                                   
     Alabama
       Birmingham--Homewood(1).......................................    132
       Montgomery....................................................    133
     California
       Los Angeles--Buena Park(1)....................................    135
       Los Angeles-- Placentia.......................................    135
     Florida
       Gainesville(1)................................................    135
       Miami--West(1)................................................    135
       Orlando--International Drive(1)...............................    135
       Orlando--South(1).............................................    132
     Georgia
       Atlanta--Airport(1)...........................................    132
       Atlanta--Gwinnett Mall........................................    135
       Atlanta--Northlake(1).........................................    133
       Atlanta--Northwest(1).........................................    130
       Atlanta--Peachtree Corners....................................    135
       Atlanta--Southlake............................................    134
       Atlanta--Savannah(1)..........................................    135
     Iowa
       Des Moines--West(1)...........................................    135
     Illinois
       Bloomington--Normal(1)........................................    128
       Chicago--Lansing(1)...........................................    135
       Peoria........................................................    135
       Rockford......................................................    135
     Indiana
       Indianapolis--Castleton(1)....................................    132
       Indianapolis--College Park....................................    132
     Kansas
       Kansas City--Merriam..........................................    135
       Kansas City--Overland Park....................................    134
     Michigan
       Detroit--Airport(1)...........................................    133
       Detroit--Auburn Hills(1)......................................    134
       Detroit--Madison Heights(1)...................................    134
       Detroit--Warren(1)............................................    132
       Detroit--West (Canton)(1).....................................    133
       Kalamazoo(1)..................................................    133
     Missouri
       St. Louis--Hazelwood..........................................    135


                                       14




                                                                      Number of
         Location of Inn                                                Rooms
         ---------------                                              ---------
                                                                   
     North Carolina
       Charlotte--Airport(1).........................................     135
       Charlotte--Northeast(1).......................................     133
       Durham(1).....................................................     135
       Fayetteville(1)...............................................     135
       Greensboro(1).................................................     135
       Raleigh--Northeast(1).........................................     132
       Wilmington....................................................     134
     Ohio
       Cleveland--Airport............................................     135
       Columbus--North(1)............................................     135
       Dayton--North(1)..............................................     135
       Toledo--Holland...............................................     134
     South Carolina
       Florence......................................................     135
       Greenville....................................................     132
       Hilton Head(1)................................................     120
     Tennessee
       Johnson City(1)...............................................     132
     Virginia
       Hampton.......................................................     134
       Virginia Beach(1).............................................     134
     Wisconsin
       Madison(1)....................................................     135
       Milwaukee--Brookfield.........................................     135
                                                                        -----
         TOTAL.......................................................   6,676
                                                                        =====

- - --------
(1) The land on which the Inn is located is leased by us from Marriott
    International under a long-term lease agreement.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   As of March 12, 2001, no person owned of record, or to our knowledge owned
beneficially, more than 5% of the total number of limited partnership units
other than our general partner.

   Our general partner owns 8,379 Units as of March 12, 2001, which represent
10% of the total units. These units were purchased by our former general
partner on the closing date of the public offering and transferred to our
current general partner in the merger in December 1998. See Item 11,
"Description of Registrant's Securities to be Registered," regarding
restrictions on the voting rights of units owned by our general partner. No
Units are owned by the executive officers or managers of our general partner.

   We are not aware of any arrangements which may, at a subsequent date, result
in a change in control of the partnership.

                                       15


ITEM 5. MANAGERS AND EXECUTIVE OFFICERS

   FIBM One LLC, our general partner, was organized in Delaware in 1998 as a
single member limited liability company and is a subsidiary of Host LP. Our
general partner was organized solely for the purpose of acting as our general
partner.

   We have no directors, managers, officers or employees. Our business policy
making functions are carried out through the managers and executive officers of
our general partner, who are listed below:



           Name            Age Principal Position
           ----            --- ------------------
                         
                               Executive Vice President and Chief Financial
 Robert E. Parsons, Jr. ..  45 Officer
 W. Edward Walter.........  45 Executive Vice President and Treasurer


   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 elected Treasurer in 1998, and Executive Vice President
in May 2000. He is also Executive Vice President and Treasurer of Host LP and
serves as 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 6. EXECUTIVE COMPENSATION

   Our general partner is required to devote to us such time as may be
necessary for the proper performance of its duties, but the officers and the
managers of our general partner are not required to devote their full time to
our matters. To the extent that any officer or manager of our general partner
or employee of Host Marriott devotes time to us, our general partner or Host
Marriott, as the case may be, is entitled to reimbursement for the cost of
providing such services. Any such costs may include a charge for overhead, but
without a profit to our general partner. For the fiscal years ended December
31, 2000, 1999 and 1998, administrative expenses reimbursed by us to our
general partner totaled $549,000, $136,000 and $215,000, respectively.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   We are a party to an ongoing management agreement with Marriott
International pursuant to which our Inns are managed by Marriott International.

   Prior to October 8, 1993, Marriott International was a wholly owned
subsidiary of Host Marriott, which was then named Marriott Corporation. On
October 8, 1993, Marriott Corporation's operations were divided into two
separate companies, Host Marriott and Marriott International. Marriott
International now conducts its management business as a separate publicly-
traded company and is not a parent or subsidiary of Host Marriott, although the
two corporations have various business and other relationships.

   A full description of the management agreement can be found under "Item 1.
Business."

                                       16


   The following table provides the significant expenses payable to Marriott
International and affiliates for the years ended December 31, 2000, 1999 and
1998 (in thousands):



                                                        Year ended December 31,
                                                        -----------------------
                                                         2000    1999    1998
                                                        ------- ------- -------
                                                               
     Fairfield Inn system fee.......................... $ 2,744 $ 2,792 $ 2,831
     Ground rent.......................................   2,977   2,872   2,863
     Reservation Costs.................................   3,031   2,494   2,084
     Marketing fund contribution.......................   2,526   2,262   2,359
     Incentive management fee..........................   2,849   2,775   3,640
     Base management fee...............................   1,830   1,862   1,887
     Chain services allocation.........................   1,691   1,773   1,600
                                                        ------- ------- -------
       Total........................................... $17,648 $16,830 $17,264
                                                        ======= ======= =======


ITEM 8. LEGAL PROCEEDINGS

   We 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 our business, financial condition or results of operations.

ITEM 9. MARKET FOR AND DISTRIBUTIONS ON LIMITED PARTNERSHIP UNITS AND RELATED
        SECURITY HOLDER MATTERS

   There is currently no public market for the Units. Transfers of Units are
limited to the first day of a fiscal quarter, and are subject to approval by
the general partner and certain other restrictions described in Item 11,
"Description of Registrant's Securities to be Registered." As of March 12,
2001, there were 2,720 holders of record of the 83,337 Units.

   There were no cash distribution to our limited partners during 1998, 1999 or
2000. Our ability to make cash distributions to our limited partners in the
future is subject to limitations contained in our partnership agreement that
are described in Item 11, "Description of Registrant's Securities to be
Registered--Distributions and Allocations." In addition, we are making payments
to reserves established by the lender, as described in Item 1,
"BusinessDeclining Operations," and Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" that limit the funds available for cash distributions.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

   None within the past three years.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

   The 83,337 units of limited partnership interests to be registered, which
include the 8,379 units owned by our general partner, represent a 99% interest
in us. Our general partner holds the remaining 1% interest.

   The following description is a summary of the material provisions of the
partnership agreement. It does not restate the partnership agreement in its
entirety. We urge you to read the partnership agreement in its entirety as it,
not this description, defines the rights of limited partners. A copy of the
partnership agreement is filed as an exhibit to this Form 10. Capitalized terms
used in this section for which no definition is provided is defined in the
partnership agreement.

                                       17


Authority of the General Partner

   Under the partnership agreement, the general partner has broad management
discretion over our business and with regard to the operation of our Inns. No
limited partner may take any part in the conduct or control of our business.
The authority of the general partner is limited in specified respects.

   The partnership agreement provides that, if all of the Inns have not been
sold prior to 2001, then, subject to the terms of the management agreement and
loan agreement, the general partner will use reasonable best efforts to sell
the remaining Inns, in one or more transactions, as it determines appropriate
in its reasonable judgment. As discussed above, the prior efforts to sell the
Inns or the equity interests in the partnership were unsuccessful and, in light
of the current financial condition of the partnership, the general partner does
not believe that a sale could be effected that would be in the best interests
of limited partners.

   Without the consent of all of the limited partners, the general partner does
not have the authority, on our behalf, to:

      (1) do any act in contravention of the partnership agreement;

      (2) except as otherwise provided in the partnership agreement, do any
  act which would make it impossible to carry on our ordinary business;

      (3) confess a judgment in an amount in excess of $100,000 against us;

      (4) convert our property to its own use, or possess or assign any
  rights in specific partnership property for other than a partnership
  purpose;

      (5) admit a person as either a general partner or a limited partner
  except as otherwise provided in the partnership agreement;

      (6) perform any act that would subject any limited partner to liability
  as a general partner in any jurisdiction or to any other liability except
  as provided in the Delaware Revised Uniform Limited Partnership Act (the
  "Delaware Act") or the partnership agreement; or

      (7) list, recognize or facilitate the trading of Units on any
  "established securities market," within the meaning of the Internal Revenue
  Code of 1986, as amended, or create for the Units a "secondary market"
  within the meaning of the Code, or the substantial equivalent thereof, or
  permit, recognize or facilitate trading of Units on any such market, or
  permit any of its affiliates to take such actions, if, as a result thereof,
  we would be taxed for federal income tax purposes as an association taxable
  as a corporation.

   Without the approval of limited partners holding a majority of the Units,
the general partner does not have the authority, on our behalf, to:

      (1) cause us to acquire an interest in other hotel properties or in
  other assets not reasonably related to the conduct of our business;

      (2) sell any of the Inns to the general partner or any affiliate unless
  specified procedures, including giving notice to the limited partners,
  obtaining independent appraisals of the Inn or Inns to be sold, paying cash
  for the Inns, and not paying any real estate commissions in connection with
  the sale, are followed;

      (3) effect any amendment to any agreement, contract or arrangement with
  the general partner or any of its affiliates which would reduce the
  responsibilities or duties of the general partners or would increase the
  compensation payable to the general partner or any of its affiliates or
  which would otherwise adversely affect the rights of or benefits to the
  limited partners;

      (4) incur debt except as set forth in the partnership agreement;

      (5) agree to the addition of transient guest rooms at any Inn unless
  the Inn has had an average occupancy rate of at least 70% for a consecutive
  period of at least 12 months immediately prior to commencement of
  construction of the addition;

                                       18


      (6) make any election to continue beyond our term, discontinue or
  dissolve us;

      (7) voluntarily withdraw as a general partner;

      (8) cause us to incur any debt in excess of $250,000 unless such debt
  was entirely "qualified nonrecourse financing" within the meaning of the
  Code;

      (9) cause us to merge or consolidate with any other entity;

     (10) accept the substitution of more than five Inns under the purchase
  agreement, sell, lease or otherwise dispose of, directly or indirectly, in
  one transaction or a series of related transactions, the greater of 15 Inns
  or a number of Inns where original purchase price exceeds 30% of the total
  purchase price for the Inns or sell, lease or otherwise dispose of any Inns
  except in accordance with paragraph (2) above;

     (11) cause us to sell all or substantially all of our assets, except
  upon dissolution and liquidation in accordance with the partnership
  agreement; or

     (12) cause us to incur any debt that would result in refinancing
  proceeds being distributed to the partners, unless such refinancing
  proceeds are distributed to the partners in the same taxable year in which
  we incurred such liability.

Restrictions on Assignments of Units

   A limited partner generally has the right to assign a Unit to another person
or entity, subject to specified conditions and restrictions. An assignment of a
Unit is subject to the following restrictions:

      (1) assignments will only be given effect on the first day of the next
  fiscal quarter;

      (2) no assignment may be made if, when added to all other prior
  assignments and transfers of interests in us within the preceding 12
  months, such assignment would cause us, in the opinion of our legal
  counsel, to be considered to have been terminated within the meaning of
  section 708 of the Code;

      (3) the general partner may prohibit any assignment that, in the
  opinion of our legal counsel, would require the filing of a registration
  statement under the Securities Act of 1933 or otherwise would violate any
  federal or state securities laws or regulations (including investor
  suitability standards) applicable to us or the Units;

      (4) no assignment may be made that would result in either the assignor
  or the assignee owning at least a fraction of a Unit but less than five
  Units, except for assignments by gift, inheritance or family dissolution or
  assignments to affiliates of the assignor;

      (5) no transfer, assignment or negotiation may be made if, in the
  opinion of our legal counsel, it would result in us being treated as an
  association taxable as a corporation for federal income tax purposes;

      (6) no transfer may be made if such transfer is effectuated through an
  "established securities market" or a "secondary market (or the substantial
  equivalent thereof)" within the meaning of section 7704 of the Code;

      (7) no assignment may be made if, in the opinion of our legal counsel,
  it would preclude us from either obtaining or retaining a liquor beverage
  license for any of our Inns;

      (8) no assignment may be made unless the transferee agrees in writing
  that it will not, directly or indirectly, create for the Units or
  facilitate the trading of the Units on a "secondary market (or the
  substantial equivalent thereof)" within the meaning of section 7704 of the
  Code;

      (9) no assignment or transfer may be made and any such purported
  transfer will be void ab initio if, as a result of such transfer, we would
  be unable to satisfy at least one of the "safe harbors" set forth in IRS
  Notice 88-75 within the meaning of section 7704 of the Code, unless we have
  received a favorable IRS ruling or opinion of legal counsel to the effect
  that such transfer will not result in us being classified as a "publicly
  traded partnership" within the meaning of section 7704 of the Code;

                                       19


     (10) no assignment may be made to any person who is not a "United States
  person" within the meaning of section 7701(a)(30) of the Code;

     (11) no assignment may be made to any person generally exempt from
  federal income tax under section 501 of the Code or otherwise;

     (12) no transfer or assignment may be made unless the proposed assignee
  has provided the general partner the required information under the
  partnership agreement and any other information reasonably requested by the
  general partner; or

     (13) no assignment may be made to any person who is related to any of
  our outside lenders whose loan is nonrecourse debt, as defined.

   The general partner is also authorized to impose any other restrictions on
the transfer of Units to the extent that it, in the exercise of its reasonable
discretion and based upon the advice of our counsel, determines such further
limitations are necessary or advisable to protect us from being considered a
publicly traded partnership within the meaning of the Code.

   We will not recognize for any purpose any assignment of any Units unless:

     (1) an instrument is executed making such assignment, signed by both the
  assignor and the assignee, and a duly executed application for assignment
  and admission as substituted limited partner is executed indicating the
  written acceptance by the assignee of all the terms and provisions of the
  partnership agreement; and

     (2) the general partner has determined that such as assignment is
  permitted under the partnership agreement.

   No assignee of a limited partner's Units will be entitled to become a
substituted limited partner unless:

     (1) the general partner gives its written consent, which consent may be
  withheld in its absolute discretion;

     (2) the transferring limited partner and the assignee have executed
  instruments that the general partner deems necessary or desirable to effect
  such admission;

     (3) the assignee has accepted, adopted and approved in writing all of
  the terms of the partnership agreement and executed a power of attorney
  similar to the power of attorney granted in the partnership agreement; and

     (4) the assignee pays all reasonable expenses incurred in connection
  with its admission as a substituted limited partner.

   An assignee only becomes a substituted limited partner when the general
partner has reflected the admission of such person as a limited partner in our
books and records, which will be done once each fiscal quarter.

   Any person who is the assignee of any of the Units of a limited partner,
but who does not become a substituted limited partner is entitled to all the
rights of an assignee of a limited partner interest under the Delaware Act,
including the right to receive distributions from us and the share of net
profits, net losses, gain, loss and recapture income attributable to the Units
assigned to the person, but shall not be deemed to be a holder of Units for
any other purpose under the partnership agreement.

                                      20


Amendments

   Amendments to the partnership agreement may be made by the general partner
with the consent of the limited partners holding a majority of the outstanding
Units, excluding those Units held by the general partner or its affiliates. No
amendment to the partnership agreement may be made, however, without the
approval of all of the limited partners which would:

     (1) convert a limited partner's interest into a general partner's
  interest;

     (2) adversely affect the liability of a limited partner;

     (3) alter the interest of a partner in net profits, net losses, gain,
  loss or distributions of cash available for distribution or capital
  receipts or reduce the percentage of partners which is required to consent
  to any action under the partnership agreement;

     (4) limit in any manner the liability of the general partner as provided
  in the partnership agreement;

     (5) permit the general partner to take any action otherwise prohibited
  by the partnership agreement without the consent of all of the limited
  partners;

     (6) cause us to be taxed for federal income tax purposes as an
  association taxable as a corporation; or

     (7) reduce the percentage of Units required to approve any amendment to
  the partnership agreement.

   The general partner may make an amendment to the partnership agreement,
without the consent of the limited partners, if such amendment is necessary
solely to clarify the provisions of the partnership agreement so long as such
amendment does not adversely affect the rights of the limited partners under
the partnership agreement.

Meetings and Voting

   The limited partners cannot participate in our management or control or our
business. The partnership agreement, however, extends to the limited partners
the right under some specified conditions to vote on or approve some
partnership matters. Any action that is required or permitted to be taken by
the limited partners may be taken either at a meeting of the limited partners
or without a meeting if approvals in writing setting forth the action so taken
are signed by limited partners owning not less than the minimum number of
Units that would be necessary to authorize or take such action at a meeting at
which all of the limited partners were present and voted. Meetings of the
limited partners may be called by the general partner and must be called by
the general partner upon receipt of a request in writing signed by holders of
10% or more of the Units held by the limited partners. Limited partners may
vote either in person or by proxy at meetings. Limited partners holding more
than 50% of the total number of all outstanding Units constitute a quorum at a
meeting of the limited partners. Matters submitted to the limited partners for
determination will be determined by the affirmative vote of the limited
partners holding a majority of the outstanding Units, excluding those Units
held by the general partner and its affiliates, except that a unanimous vote
of the limited partners will be required for specified actions referred to
above.

   The partnership agreement does not provide for annual meetings of the
limited partners and none have been held, nor does the general partner
anticipate calling such meetings.

Conflicts of Interest

   Because Host Marriott and its affiliates own hotels other than those owned
by us, potential conflicts of interest exist. With respect to these potential
conflicts of interest, Host Marriott and its affiliates may compete with our
Inns to the extent that they develop or invest in competing hotels. In
addition, Host Marriott, by virtue of the hotels in which it currently is
invested, may already compete directly or indirectly with our Inns.

                                      21


   Under Delaware law, a general partner has liability for a partnership's
obligations to the extent that the partnership's assets are insufficient to
satisfy the obligations, unless those obligations are, by contract, without
recourse to the partners of a limited partnership. Since our general partner
is entitled to manage and control our business and operations, and because
specified actions taken by our general partner or us could expose our general
partner to liability that is not shared by the limited partners (for example,
tort liability or environmental liability), this control could lead to a
conflict of interest. Under Delaware law, our general partner has a fiduciary
duty to us and is required to exercise good faith and loyalty in all its
dealings with respect to our affairs.

 Policies with Respect to Conflicts of Interest

   Our general partner has a policy that our relationship with it or any
affiliate, or persons employed by it are conducted on terms which are fair to
us and which are commercially reasonable. Agreements and relationships
involving our general partner or its affiliates and us are on terms consistent
with the terms on which our general partner or its affiliates have dealt with
unrelated parties.

   Our partnership agreement provides that agreements, contracts or
arrangements between us and our general partner, other than arrangements on
commercially reasonable terms for rendering legal, tax, accounting, financial,
engineering and procurement services to us by our general partner or its
affiliates, will be subject to the following conditions:

     (1) the services, goods or materials must be reasonably necessary to the
  operation of our business;

     (2) the general partner or any affiliate must have the ability to render
  such services or to sell or lease such goods or materials and must have
  been previously engaged in the business of rendering such services or
  selling or leasing such goods or materials as an ordinary and ongoing
  business;

     (3) any such agreement, contract or arrangement must be fair to us and
  reflect commercially reasonable terms and conditions that are as favorable
  to us as we could obtain from unaffiliated third parties, must provide for
  compensation to the general partner or its affiliate equal to the lesser of
  actual cost or 90% of the competitive price that would be charged for such
  services, goods or materials and must be contained in a written contract
  which precisely describes the subject matter thereof and all compensation
  to be paid therefor;

     (4) neither the general partner nor any affiliate may participate in any
  reciprocal business arrangements which would have the effect of
  circumventing any of the provisions of our partnership agreement;

     (5) no such agreement, contract or arrangement as to which the limited
  partners had previously given approval may be amended in a manner as to
  increase the fees or other compensation payable to the general partner or
  any affiliate or to decrease the responsibilities or duties of the general
  partner or any affiliate in the absence of the consent of the limited
  partners holding a majority of the units, excluding those units held by the
  general partner or its affiliates;

     (6) any such agreement, contract or arrangement which relates to or
  secures any funds advanced or loaned to us by the general partner or any
  affiliate must reflect commercially reasonable terms and conditions that
  are as favorable to us as we could obtain from unaffiliated third parties
  or banks and no prepayment charge or penalty may be required on any loan or
  advance; and

     (7) any such agreement, contract or arrangement which relates to the
  performance of services or the sale or lease of goods or materials, other
  than the management agreement, must contain a clause allowing termination
  without penalty on 60 days' notice.

     (8) with respect to architectural and engineering services for our Inns,
  the general partner or any affiliate rendering such services must have the
  ability to render such services and must have been previously engaged in
  the business of rendering such services as an ordinary and ongoing
  business, must

                                      22


  reflect commercially reasonable terms and provide for compensation at 90%
  of the competitive price for such services, the terms must be contained in
  a written contract which precisely describes the services to be provided
  and the compensation to be paid for such services and if the total cost of
  any single improvement to any Inn exceeds $250,000 and the general partner
  or any affiliate has rendered architectural or engineering services in
  connection with that improvement, we must obtain an appraisal, at the
  general partner's expense, to determine the fair market value of such
  improvement and we will only be required to reimburse the general partner
  or its affiliates for such costs of performing the services to the extent
  of such fair market value; and

     (9) we will not reimburse the general partner or its affiliates for the
  actual cost of services for which it gets paid a separate fee.

Distributions and Allocations

   Partnership allocations and distributions are generally made as follows:

   Cash available for distribution for each fiscal year is to be distributed
quarterly as follows:

     (1) until the partners have received, with respect to such fiscal year,
  an amount equal to the partners' preferred distribution (10% of original
  cash contributions reduced by cumulative distributions of net refinancing
  and sales proceeds), 99% to the limited partners and 1% to the general
  partner;

     (2) if the partners have received aggregate cumulative distributions of
  net refinancing and sales proceeds equal to 50% of their original capital
  contributions, 99% to the limited partners and 1% to the general partner;

     (3) if the partners have received aggregate cumulative distributions of
  net refinancing and sales proceeds equal to 100% of their original capital
  contributions, 90% to the limited partners and 10% to the general partner;
  and

     (4) if the partners have received aggregate cumulative distributions of
  capital receipts greater than 100% of their original capital contributions,
  80% to the limited partners and 20% to the general partner.

   Refinancing proceeds and sale proceeds from the sale or other disposition of
less than substantially all of our assets are to be distributed

     (1) until the partners have received the then outstanding partners' 12%
  preferred distribution, as defined, 99% to the limited partners and 1% to
  the general partner;

     (2) until the partners have received cumulative distributions of net
  refinancing and sales proceeds equal to 100% of their original capital
  contributions, 1% to the general partner and 99% to the limited partners;
  and

     (3) thereafter, 80% to the limited partners and 20% to the general
  partner.

   Sale proceeds from the sale of substantially all of our assets will be
distributed to the partners pro-rata in accordance with their capital account
balances as adjusted to take into account gain or loss resulting from such
sale.

   Net profits for each fiscal year generally will be allocated in the same
manner in which cash available for distribution is distributed. Net losses for
each fiscal year generally will be allocated 99% to the limited partners and 1%
to the general partner.

   Gain recognized by us generally will be allocated in the following order of
priority:

     (1) to those partners whose capital accounts have negative balances in
  the ratio of such negative balances until such negative balances are
  brought to zero;


                                       23


     (2) to the limited partners up to the amount necessary to bring the
  aggregate of their capital account balances to an amount equal to 99% of
  the partners' 12% preferred distribution plus their net invested capital,
  as defined, and to the general partner in the amount necessary to bring its
  capital account balance to an amount equal to 1% of the partners' 12%
  preferred distribution plus its net invested capital; and

     (3) thereafter, any remaining gain will be allocated among the partners
  so that the ratio of (A) the aggregate balance in the capital accounts of
  the limited partners in excess of 99% of the partners' 12% preferred
  distribution plus their net invested capital to (B) the balance in the
  general partners' capital account in excess of 1% of the partners' 12%
  preferred distribution plus its net invested capital, is 80 to 20.

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

   Upon our dissolution, the general partner will liquidate our assets. The
proceeds of such liquidation shall be applied and distributed in the following
order of priority:

     (1) to the payment of the expenses of the liquidation,

     (2) to the payment of debt and other liabilities;

     (3) to the payment of any loans or advances that may have been made by
  any of the partners to us; and

     (4) to the general partner and limited partners in proportion to the net
  balances in their respective capital accounts.


Other Matters

   If at any time any agreement (including the management agreement) pursuant
to which operating management of any of our Inns is vested in the general
partner or an affiliate of the general partner provides that we have a right to
terminate such agreement as a result of the failure of the operation of such
Inn to attain economic objectives, as specifically defined, the limited
partners, without the consent of the general partner, may, upon the affirmative
vote of the holders of a majority of the Units, take action to exercise our
right to terminate such agreements.

   The limited partners may also, by a vote of the holders of a majority of the
Units, remove the general partner, but only if a new general partner is
elected. Notwithstanding the foregoing, however, such a removal of the general
partner or the manager, if exercised, would be an event of default under the
mortgage debt, and would permit the lender or its assignee to accelerate the
maturity of the loan. Thus, the termination right could only be exercised with
the consent of the lender or its assignee.

   The partnership agreement provides that limited partners will not be
personally liable for the losses of the partnership beyond the amount committed
by them to the capital of the partnership. In the event that we are unable
otherwise to meet our obligations, the limited partners might, under applicable
law, be obligated under some circumstances to return distributions previously
received by them, with interest, to the extent such distributions constituted a
return of the capital contributions at the time when creditors had valid claims
outstanding against us.

                                       24


ITEM 12. INDEMNIFICATION OF MANAGERS AND OFFICERS

   Except as specifically provided in the Delaware Act, the general partner is
liable for our obligations in the same manner as a partner would be liable in a
partnership without limited partners to persons other than the partnership and
the other partners. Generally speaking, any such partner is fully liable for
any and all of the debts or other obligations of the partnership as and to the
extent the partnership is either unable or fails to meet such obligations.
Thus, the assets of the general partner may be reached by our creditors to
satisfy our obligations or other liabilities, other than non-recourse
liabilities, to the extent our assets are insufficient to satisfy such
obligations or liabilities.

   The Delaware Act provides that: "Subject to such standards and restrictions,
if any, as set forth in its partnership agreement, a limited partnership may,
and shall have the power to, indemnify and hold harmless any partner or other
person from and against any and all claims and demands whatsoever." The
partnership agreement provides that the general partner and its affiliates who
perform services for the partnership on behalf of the general partner (within
the scope of its authority as the general partner of the partnership) will not
be liable to the partnership or the limited partners for liabilities, costs and
expenses incurred as a result of any act or omission of the general partner or
such person provided:

     (1) such acts or omissions were determined by the general partner or
  such person, in good faith, to be in our best interests;

     (2) such acts or omissions were within the general partner's scope of
  authority granted by the partnership agreement, by law or by the limited
  partners in accordance with the partnership agreement; and

     (3) the conduct of the general partner or such person did not constitute
  negligence, fraud, misconduct or breach of fiduciary duty to us or any
  partner.

   The partnership agreement also provides that the general partner and such
persons will be indemnified out of partnership assets against any loss,
liability or expense arising out of any act or omission so long as the general
partner or such persons has satisfied the requirements of clauses (1), (2) and
(3) above. We, however, may indemnify the general partner or any other person
for losses, costs and expenses incurred in successfully defending or settling
claims arising out of alleged securities laws violations only if certain
specific additional requirements are met. The partnership agreement provides
that any indemnification obligation shall be paid solely out of our assets.

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to partners and controlling persons of the registrant
pursuant to the foregoing provisions or otherwise, we have been advised that,
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid in the successful defense or any action, suit or proceeding) is asserted
against us by such a person in connection with the securities registered
hereby, and if the Securities and Exchange Commission is still of the same
opinion, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

                                       25


ITEM 13. FINANCIAL STATEMENTS

                         INDEX TO FINANCIAL STATEMENTS



                                                                          Page
                                                                          ----
                                                                       
Report of Independent Public Accountants................................. F-2

Balance Sheets as of December 31, 2000 and 1999.......................... F-3

Statements of Operations for the fiscal years ended December 31, 2000,
 1999 and 1998........................................................... F-4

Statements of Changes in Partners' Capital for the fiscal years ended
 December 31, 2000, 1999 and 1998........................................ F-5

Statements of Cash Flows for the fiscal years ended December 31, 2000,
 1999 and 1998........................................................... F-6

Notes to Financial Statements............................................ F-7


                                      F-1


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE PARTNERS OF FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP:

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

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fairfield Inn by Marriott
Limited Partnership as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the three years in the period ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States.

                                          Arthur Andersen LLP

Vienna, Virginia
April 5, 2001

                                      F-2


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

                                 BALANCE SHEETS
                           December 31, 2000 and 1999
                                 (in thousands)



                                  2000      1999
                                --------  --------
                                    
            ASSETS
Property and equipment, net...  $122,013  $136,937
Deferred financing costs, net
 of accumulated amortization..     2,937     3,424
Due from Marriott
 International, Inc. and
 affiliates...................     1,215     1,285
Property improvement fund.....     5,489     3,886
Restricted cash...............     7,726     7,981
Cash and cash equivalents.....     7,702    10,061
                                --------  --------
      Total assets............  $147,082  $163,574
                                ========  ========

  LIABILITIES AND PARTNERS'
            DEFICIT
LIABILITIES
  Mortgage debt...............  $153,569  $157,897
  Due to Marriott
   International, Inc. and
   affiliates.................     3,931    24,529
  Accounts payable and accrued
   liabilities................     2,911     3,186
                                --------  --------
      Total liabilities.......   160,411   185,612
                                --------  --------
PARTNERS' DEFICIT
  General Partner
    Capital contribution......       813       813
    Capital distributions.....      (517)     (517)
    Cumulative net losses.....      (379)     (466)
                                --------  --------
                                     (83)     (170)
                                --------  --------
  Limited Partners
    Capital contributions.....    75,479    75,479
    Capital distributions.....   (51,270)  (51,270)
    Cumulative net losses.....   (37,455)  (46,077)
                                --------  --------
                                 (13,246)  (21,868)
                                --------  --------
      Total partners'
       deficit................   (13,329)  (22,038)
                                --------  --------
                                $147,082  $163,574
                                ========  ========


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

                                      F-3


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS
              Fiscal years ended December 31, 2000, 1999 and 1998
                (in thousands, except Unit and per Unit amounts)



                                                   2000      1999      1998
                                                 --------  --------  --------
                                                            
REVENUES
  Rooms......................................... $ 89,308  $ 90,653  $ 91,546
  Other.........................................    2,170     2,431     2,824
                                                 --------  --------  --------
    Total revenues..............................   91,478    93,084    94,370
                                                 --------  --------  --------
OPERATING EXPENSES
  Rooms.........................................   27,894    28,481    27,191
  Other department costs and expenses...........    1,670     1,597     1,604
  Selling, administrative and other.............   27,701    26,907    25,851
                                                 --------  --------  --------
    Total property-level costs and expenses.....   57,265    56,985    54,646
  Depreciation..................................   13,463    14,413    14,990
  Property taxes................................    3,886     3,749     3,702
  Fairfield Inn system fee......................    2,744     2,792     2,831
  Incentive management fee......................    2,849     2,775     3,640
  Ground rent...................................    2,964     2,742     2,646
  Base management fee...........................    1,830     1,862     1,887
  Insurance and other...........................    1,198     1,038     1,053
  Loss on impairment of long-lived assets (Note
   2)...........................................    8,127     2,843     9,497
                                                 --------  --------  --------
    Total operating expenses....................   94,326    89,199    94,892
                                                 --------  --------  --------
OPERATING PROFIT (LOSS).........................   (2,848)    3,885      (522)
  Interest expense..............................  (13,238)  (13,528)  (13,792)
  Interest income...............................    1,312     1,091     1,315
                                                 --------  --------  --------
LOSS BEFORE EXTRAORDINARY ITEM..................  (14,774)   (8,552)  (12,999)
EXTRAORDINARY ITEM
  Gain on the forgiveness of incentive
   management fees..............................   23,483       --        --
                                                 --------  --------  --------
NET INCOME (LOSS)............................... $  8,709  $ (8,552) $(12,999)
                                                 ========  ========  ========
ALLOCATION OF NET INCOME (LOSS)
  General Partner............................... $     87  $    (86) $   (130)
  Limited Partners..............................    8,622    (8,466)  (12,869)
                                                 --------  --------  --------
                                                 $  8,709  $ (8,552) $(12,999)
                                                 ========  ========  ========
NET INCOME (LOSS) PER LIMITED PARTNER UNIT
 (83,337 UNITS)................................. $    103  $   (102) $   (154)
                                                 ========  ========  ========


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

                                      F-4


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

              STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
              Fiscal years ended December 31, 2000, 1999 and 1998
                                 (in thousands)



                                                    General Limited
                                                    Partner Partners   Total
                                                    ------- --------  --------
                                                             
Balance, December 31, 1997.........................  $  46  $   (533) $   (487)
  Net loss.........................................   (130)  (12,869)  (12,999)
                                                     -----  --------  --------
Balance, December 31, 1998.........................    (84)  (13,402)  (13,486)
  Net loss.........................................    (86)   (8,466)   (8,552)
                                                     -----  --------  --------
Balance, December 31, 1999.........................   (170)  (21,868)  (22,038)
  Net income.......................................     87     8,622     8,709
                                                     -----  --------  --------
Balance, December 31, 2000.........................  $ (83) $(13,246) $(13,329)
                                                     =====  ========  ========




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

                                      F-5


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS
              Fiscal years ended December 31, 2000, 1999 and 1998
                                 (in thousands)



                                                      2000     1999      1998
                                                    --------  -------  --------
                                                              
OPERATING ACTIVITIES
  Net income (loss)...............................  $  8,709  $(8,552) $(12,999)
  Extraordinary gain on the forgiveness of
   incentive management fees......................   (23,483)     --        --
  Depreciation....................................    13,463   14,413    14,990
  Deferral of incentive management fee............     2,849    2,775     3,640
  Amortization of deferred financing costs as
   interest expense...............................       487      486       486
  Amortization of mortgage debt premium...........      (350)    (350)     (350)
  Loss on disposition of equipment................        16       28       --
  Loss on impairment of long-lived assets.........     8,127    2,843     9,497
  Changes in operating accounts:
    Due to/from Marriott International, Inc. and
     affiliates...................................       106      823     1,083
    Accounts payable and accrued liabilities......      (335)     776       910
    Change in restricted reserves.................       913    3,119      (734)
                                                    --------  -------  --------
      Cash provided by operations.................    10,502   16,361    16,523
                                                    --------  -------  --------
INVESTING ACTIVITIES
  Additions to property and equipment.............    (6,682)  (8,973)  (14,438)
  Change in property improvement fund.............    (1,603)  (3,678)    3,907
                                                    --------  -------  --------
      Cash used in investing activities...........    (8,285) (12,651)  (10,531)
                                                    --------  -------  --------
FINANCING ACTIVITIES
  Repayment of mortgage debt......................    (3,978)  (3,689)   (3,390)
  Change in restricted reserves...................      (598)   1,386    (1,387)
                                                    --------  -------  --------
      Cash used in financing activities...........    (4,576)  (2,303)   (4,777)
                                                    --------  -------  --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..    (2,359)   1,407     1,215
CASH AND CASH EQUIVALENTS at beginning of year....    10,061    8,654     7,439
                                                    --------  -------  --------
CASH AND CASH EQUIVALENTS at end of year..........  $  7,702  $10,061  $  8,654
                                                    ========  =======  ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for mortgage interest.................  $ 13,121  $13,409  $ 13,710
                                                    ========  =======  ========


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

                                      F-6


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

                         NOTES TO FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 1. THE PARTNERSHIP

 Description of the Partnership

   Fairfield Inn by Marriott Limited Partnership (the "Partnership"), a
Delaware limited partnership, was formed on August 23, 1989, to operate 50
Fairfield Inn by Marriott properties (the "Inns") located in sixteen states.
The Partnership leases the land underlying 32 of the Inns from Marriott
International, Inc. ("MII") and certain of its affiliates (the "Land Leases").
Of the Partnership's 50 Inns, seven are located in each of Georgia and North
Carolina; six in Michigan; four in each of Florida, Illinois, and Ohio; and
three or less in each of ten other states. The Inns are managed by Fairfield
FMC Corporation (the "Manager"), a wholly-owned subsidiary of MII, as part of
the Fairfield Inn by Marriott hotel system under a long-term management
agreement.

   Inn operations commenced on July 31, 1990 (the "Closing Date") after 83,337
limited partnership interests (the "Units") were sold in a public offering for
$1,000 per Unit. Marriott FIBM One Corporation ("FIBM One") contributed
$841,788 for a 1% general partnership interest and $1.1 million to establish
the initial working capital reserve of the Partnership at $1.5 million. In
addition, FIBM One had a 10% limited partnership interest while the remaining
90% of the limited partnership interest is owned by outside parties.

   On December 29, 1998, Host Marriott Corporation ("Host Marriott"), the
parent of FIBM One announced that it had completed substantially all the steps
necessary to qualify as a real estate investment trust ("REIT") under the
applicable Federal income tax laws beginning January 1, 1999 (the "REIT
Conversion"). Subsequent to the REIT Conversion, Host Marriott is referred to
as Host REIT. In connection with the REIT Conversion, Host REIT contributed
substantially all of its hotel assets to a newly-formed partnership, Host
Marriott L.P. ("Host LP").

   In connection with Host Marriott's REIT conversion, the following steps
occurred. Host Marriott formed FIBM One LLC, having three classes of member
interests (Class A--1% economic interest, managing; Class B--98% economic
interest, non-managing; Class C--1% economic interest, non-managing). FIBM One
merged with and into FIBM One LLC on December 24, 1998. On December 28, 1998,
Host Marriott contributed its entire interest in FIBM One LLC to Host LP, which
on December 30, 1998, contributed its 98% Class B and 1% Class C interests in
FIBM One LLC to Rockledge Hotel Properties, Inc. ("Rockledge"), a non-
controlled subsidiary, in which Host LP has a 95% economic non-voting interest.

 Partnership Allocations and Distributions

   Partnership allocations and distributions are generally made as follows:

   a. Cash available for distribution for each fiscal year will be distributed
quarterly as follows: (i) 99% to the limited partners and 1% to the General
Partner (collectively, the "Partners") until the Partners have received, with
respect to such fiscal year, an amount equal to the Partners' Preferred
Distribution (10% of the excess of original cash contributions over cumulative
distributions of net refinancing and sales proceeds ("Capital Receipts") on an
annualized basis); (ii) remaining cash available for distribution will be
distributed as follows, depending on the amount of Capital Receipts previously
distributed:

     1) 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

     2) 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

                                      F-7


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


     3) 80% to the limited partners and 20% 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.

   b. Refinancing proceeds and sale proceeds from the sale or other disposition
of less than substantially all of the assets of the Partnership will be
distributed (i) 99% to the limited partners and 1% to the General Partner until
the Partners have received the then outstanding Partners' 12% Preferred
Distribution, as defined, and cumulative distributions of Capital Receipts
equal to 100% of their original capital contributions; and (ii) thereafter, 80%
to the limited partners and 20% to the General Partner.

   c. Sale proceeds from the sale of substantially all of the assets of the
Partnership will be distributed to the Partners pro-rata in accordance with
their capital account balances as adjusted to take into account gain or loss
resulting from such sale.

   d. Net profits for each fiscal year generally will be allocated in the same
manner in which cash available for distribution is distributed. Net losses for
each fiscal year generally will be allocated 99% to the limited partners and 1%
to the General Partner.

   e. Gains recognized by the Partnership generally will be allocated in the
following order of priority: (i) to those Partners whose capital accounts have
negative balances until such negative balances are brought to zero; (ii) to all
Partners up to the amount necessary to bring the Partners' capital account
balances to an amount equal to their pro-rata share of the Partners' 12%
Preferred Distribution, as defined, plus their Net Invested Capital, as
defined; and (iii) thereafter, 80% to the limited partners and 20% to the
General Partner.

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

 Liquidity and Financing Requirements

   Adequate liquidity and capital are critical to the ability of the
Partnership to continue as a going concern. The Partnership has experienced
declining operations during the last four years. If operations in 2001 are
consistent with the results from 2000 and the budgeted operations for 2001, the
Partnership will have adequate cash flow to meet debt service during the year.
However, if operating results decline in 2001 the Partnership may not have
sufficient cash flow from current operations to make the required debt service
payments. In the event operations decline, the Partnership has the following
options in order to provide debt service funding. The Partnership can defer the
payment of ground rental expense exceeding 3% of gross revenues from the
32 leased Inns. The deferral becomes the obligation of the Partnership and is
payable thereafter to the extent that there is cash available after the payment
of debt service. The Partnership also has cash reserves to fund debt service.
However, depending on actual operating results, the reserves could be
diminished significantly. By virtue of subordinated ground rent and cash
reserves, the Partnership believes it will have sufficient cash to fund debt
service in 2001.

   The lack of available funds from operations over the past several years has
also delayed room refurbishments at the Inns. Based upon information provided
by the Manager, the estimated capital expenditure shortfall in available funds
by the end of 2001 will be between $15 million and $17 million. With the cost
of the capital expenditures reaching these levels, the cost does now, and will
continue to, exceed the Partnership's available funds. We currently are
pursuing various alternatives in an effort to meet our capital needs. Until a
resolution is reached concerning the capital expenditure shortfall, the capital
expenditures exceeding the amount available in the property improvement fund
will be deferred. The shortfall relates to scheduled room refurbishments at the
Inns as well as certain planned improvements to other areas of the
Partnership's Inns.

                                      F-8


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Given the age of the properties, major renovations are required, including the
replacement of roofs, facades, carpets, wall vinyl and furniture. Some of these
capital expenditures are required by the management agreement in order to
satisfactorily maintain the Partnership Inns as Fairfield Inn properties.

   The General Partner is working with the Manager to address the capital
expenditure needs of the Inns. Under the management agreement, if the Manager
determines that the Partnership Inns are not satisfactorily maintained as
Fairfield Inn properties due to insufficient capital improvements, the Manager
may terminate the agreement. The actual termination of the management agreement
could, under certain circumstances, ultimately lead to default under the loan
covenants. The Partnership can make no assurances that a satisfactory
resolution will be reached or that it would be able to retain another manager
on satisfactory terms, if at all.

   For the years ended December 31, 2000, 1999 and 1998, the Partnership
contributed $5,987,000, $6,516,000 and $6,606,000, respectively, to the
property improvement fund. However, the Partnership's property improvement fund
became insufficient beginning in 1999. Therefore, in both 2000 and 1999 the
Partnership deposited $2.4 million to the property improvement fund to cover
the capital expenditure shortfall. The shortfall is primarily due to room
refurbishments which are planned for a majority of the Partnership's Inns in
the next several years. The General Partner will work with the Manager to
resolve the shortfall. However, cash from 2001 operations will be reserved to
cover the shortfall. Therefore, no cash is expected to be available for
distribution to the partners in 2001.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Basis of Accounting

   The Partnership 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 which
is, generally 30 years for building, leasehold and land improvements, and 4 to
10 years for furniture and equipment. All property and equipment is pledged as
security for the refinanced mortgage debt.

   The Partnership assesses impairment of its real estate properties based on
whether estimated undiscounted future cash flows from such properties will be
less than their net book value. If a property is impaired, its basis is
adjusted to its estimated fair value. In 1998 and 1999, the Inns located in
Atlanta Airport, Georgia; Montgomery, Alabama; Orlando, Florida; Buena Park,
California; Lansing, Illinois and Charlotte-Northeast, North Carolina
experienced declining cash flows, primarily due to additional competition in
their local markets. In 2000, Inns located in Johnson City, Tennessee, Raleigh
and Charlotte Airport, North Carolina, and Columbus North, Ohio also
experienced declining cash flows due to additional competition in their local
markets. As a result, during 2000, 1999 and 1998, the Partnership concluded
that these Inns were impaired and adjusted their basis to their estimated fair
market value. The Partnership recorded an impairment charge of $8,127,000 in
2000, $2,843,000 in 1999 and $9,497,000 in 1998.

                                      F-9


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Deferred Financing Costs

   Deferred financing costs represent the costs incurred in connection with
the mortgage debt refinancing and are amortized over the term of the Mortgage
Debt. The Partnership incurred $4,864,000 of financing costs in connection
with the Mortgage Debt. The financing costs are being amortized using the
straight-line method, which approximates the effective interest method, over
the ten year term of the Mortgage Debt. At December 31, 2000 and 1999,
accumulated amortization of deferred financing costs totaled $1,927,000 and
$1,440,000, respectively.

 Restricted Cash

   The Partnership was required to establish certain reserves pursuant to the
terms of the mortgage debt. These are fully discussed in Footnote 5.

 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.

 Ground Rent

   The Land Leases include scheduled increases in minimum rents per property.
These scheduled rent increases, which are included in minimum lease payments,
are being recognized by the Partnership on a straight-line basis over the 99
year term of the leases. The adjustment included in ground rent expense and
Due to Marriott International, Inc. and affiliates to reflect minimum lease
payments on a straight-line basis was a decrease of $12,000 for the year ended
December 31, 2000 and $218,000 for each of the years ended December 31, 1999
and 1998. Deferred straight-line ground rent as of December 31, 1999 was
$12,000. At year end 2000, all deferred straight-line ground rent had been
recognized.

   In addition, ground rent exceeding 3% of gross revenues of $1,082,000 and
$1,034,000 was deferred at December 31, 2000 and 1999, respectively. For a
full discussion see Note 6.

 Income Taxes

   Provision for Federal and state income taxes has not been made in the
accompanying 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 loss for financial reporting
purposes and the net loss as reported in the Partnership's tax return.

 Reclassifications

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

                                     F-10


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


NOTE 3. PROPERTY AND EQUIPMENT

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



                                                             2000       1999
                                                           ---------  ---------
                                                                
     Land and improvements................................ $  14,873  $  14,873
     Building and leasehold improvements..................   169,454    173,705
     Furniture and equipment..............................    74,374     74,714
     Construction in progress.............................     3,077      2,403
                                                           ---------  ---------
                                                             261,778    265,695
     Less accumulated depreciation and amortization.......  (139,765)  (128,758)
                                                           ---------  ---------
                                                           $ 122,013  $ 136,937
                                                           =========  =========


NOTE 4. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

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



                              As of December 31, 2000  As of December 31, 1999
                              ------------------------ ------------------------
                                           Estimated                Estimated
                               Carrying       Fair      Carrying       Fair
                                Amount       Value       Amount       Value
                              ----------- ------------ ----------- ------------
                                                       
   Mortgage debt............. $   153,569 $   135,033  $   157,897 $   130,888
   Incentive management fee
    due to Fairfield FMC
    Corporation.............. $     2,849 $       194  $    23,483 $       --


   The estimated fair value of the mortgage debt obligation is based on the
expected future debt service payments discounted at estimated market rates.
Incentive management fee due to the Manager are valued based on the expected
future payments from operating cash flow discounted at estimated risk adjusted
rates. In connection with the litigation settlement agreement, the Manager
forgave $23.5 million of deferred incentive management fees payable as of
December 31, 2000 which is included as an extraordinary gain on the statement
of operations for 2000.

NOTE 5. DEBT

 Mortgage Debt

   In 1997, the Partnership's mortgage debt was refinanced and increased to
$165.4 million. The mortgage debt is non-recourse, bears interest at a fixed
rate of 8.40% and requires monthly payments of principal and interest based
upon a 20-year amortization schedule for a 10-year term expiring January 11,
2007. Thereafter, until the final maturity date of January 11, 2017, interest
is payable at an adjusted rate, and all excess cash flow is applied toward
principal amortization. The lender securitized the loan through the issuance
and sale of commercial mortgage backed securities.

   The mortgage premium of $3.5 million is being amortized based on a 20-year
amortization schedule for a 10-year term expiring January 11, 2007. Accumulated
amortization of the mortgage premium at December 31, 2000 and 1999 was
$1,387,000 and $1,037,000, respectively, resulting in an unamortized balance of
$2,113,000 and $2,463,000, respectively.

                                      F-11


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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


                                                                    
     2001............................................................. $  4,369
     2002.............................................................    4,756
     2003.............................................................    5,177
     2004.............................................................    5,602
     2005.............................................................    6,132
     Thereafter.......................................................  125,420
                                                                       --------
                                                                        151,456
     Mortgage premium.................................................    3,500
     Accumulated amortization of mortgage premium.....................   (1,387)
                                                                       --------
                                                                          2,113
       Total mortgage debt............................................ $153,569
                                                                       ========


   The mortgage debt is secured by first mortgages on all of the Inns, the land
on which they are located, or an assignment of the Partnership's interest under
the Land Leases, including ownership interest in all improvements thereon,
fixtures and personal property related thereto.

 Reserves

   The Partnership was required by the lender to establish various reserves for
capital expenditures, working capital, debt service and insurance needs.

   The balances in those reserves as of December 31 are as follows (in
thousands):



                                                                   2000   1999
                                                                  ------ ------
                                                                   
     Debt service reserve........................................ $4,873 $4,275
     Supplemental debt service reserve...........................  1,440  1,469
     Working capital reserve.....................................    677    691
     Taxes and insurance reserve.................................    300    241
     Ground rent reserve.........................................    225    225
     Condemnation reserve........................................    211    201
     Capital expenditure reserve.................................    --     879
                                                                  ------ ------
       Total restricted cash..................................... $7,726 $7,981
                                                                  ====== ======


   The Partnership established reserves totaling $3,899,000 for certain capital
expenditure which were completed as of December 31, 1999 and the remaining
balance of $879,000 was returned to the Partnership during first quarter 2000.
Additionally, the Partnership was required to deposit two months' debt service
payments, or $2,850,000, into a debt service reserve. The Partnership was also
required to establish a ground rent reserve, which is adjusted annually to
equal one month's anticipated ground rent. The Partnership's loan agreement
requires that if a single downgrade of MII's debt occurs, the Partnership is
required to contribute an additional month's debt service payment to the debt
service reserve which was fully funded in 1999 and over funded in 2000 by
$598,000 due to timing. In addition, pursuant to the terms of the mortgage debt
subsequent to a downgrade of MII's debt, the Partnership is required to
establish with the lender a separate escrow account for payments of insurance
premiums and real estate taxes (the "Tax and Insurance Escrow Reserve") for
each mortgaged property. During 1998, Orange County in Florida (the "County")
paid the Partnership $197,000 for a portion of the land in front of the Orlando
South Fairfield Inn in Orlando, Florida. The funds have been placed in an
escrow account and shown as the condemnation reserve pending the final
resolution on the value of the land taken by the County they will remain and
accrue interest.

                                      F-12


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In addition, the Partnership entered into a Working Capital Maintenance and
Supplemental Debt Service Agreement ("Agreement") with the Manager, effective
January 13, 1997. As part of this Agreement, the Partnership agreed to furnish
the Manager additional working capital to be deposited into a segregated
interest bearing account (the "Working Capital Reserve"). The Working Capital
Reserve is to be funded from Operating Profit, as defined, retained by or
distributed to the Partnership as such amounts become available, until the
Working Capital Reserve reaches $670,000. This Agreement also requires the
funding of another segregated account for debt service shortfalls (the
"Supplemental Debt Service Reserve"). This reserve is also to be funded out of
Operating Profit, as defined, retained or distributed to the Partnership as
such amounts become available, until the Supplemental Debt Service Reserve
reaches $1,425,000. Interest earned on these reserve accounts was transferred
to the Partnership during first quarter 2001.

NOTE 6. LAND LEASES

   The land on which 32 of the Inns are located is leased from MII or its
affiliates. The Land Leases expire on November 30, 2088 and provide that the
Partnership will pay annual rents equal to the greater of a specified minimum
rent for each property or a percentage rent based on gross revenues of the Inn
operated thereon. The minimum rentals are adjusted at various anniversary dates
through 2000, as defined in the agreements. The minimum rentals are adjusted
annually for the remaining life of the leases based on changes in the Consumer
Price Index. The percentage rent, which also varies from property to property,
is fixed at predetermined percentages of gross revenues that increase over
time.

   Minimum future rental payments during the term of the Land Leases as of
December 31, 2000 are as follows (in thousands):



                                                                        Minimum
     Lease Year                                                          Rental
     ----------                                                         --------
                                                                     
     2001.............................................................. $  2,825
     2002..............................................................    2,825
     2003..............................................................    2,825
     2004..............................................................    2,825
     2005..............................................................    3,093
     Thereafter........................................................  539,827
                                                                        --------
                                                                        $554,220
                                                                        ========


   Total rental expense on the Land Leases was $2,965,000 for 2000, $2,742,000
for 1999 and $2,646,000 for 1998.

   In connection with the refinancing, beginning in 1997 until the Mortgage
Debt is repaid, the payment of rental expense exceeding 3% of gross revenues
from the 32 leased Inns in the aggregate shall be deferred in any fiscal year
that cash flow is less than the regularly scheduled principal and interest
payments on the Mortgage Debt. The deferral shall then be payable in the
following year if cash flow is sufficient to pay the regularly scheduled
principal and interest payments for the Mortgage Debt. Ground rent payable to
MII and its affiliates at December 31, 2000 and 1999 was $1,082,000 and
$1,034,000, respectively, and is included in Due to Marriott International,
Inc. and affiliates on the accompanying balance sheet.

   Under the leases, the Partnership pays all costs, expenses, taxes and
assessments relating to the Inns and the underlying land, including real estate
taxes. Each Land Lease provides that the Partnership has a first right of
refusal in the event the applicable ground lessor decides to sell the leased
premises. Upon expiration or termination of a Land Lease, title to the
applicable Inn and all improvements reverts to the ground lessor.

                                      F-13


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


NOTE 7. MANAGEMENT AGREEMENT

   The Partnership is a party to a long-term management agreement (the
"Management Agreement") with the Manager.

   In conjunction with the 1997 mortgage refinancing, the initial term of the
Management Agreement was extended ten years to December 31, 2019. The Manager
has the option to renew the Management Agreement as to one or more of the Inns
at its option, for up to four additional 10-year terms plus one five-year term.
The Manager is paid a base management fee equal to 2% of gross Inn revenues and
a Fairfield Inn system fee equal to 3% of gross Inn revenues. In addition, the
Manager is entitled to an incentive management fee equal to 15% of Operating
Profit as defined, increasing to 20% after the Inns have achieved total
Operating Profit during any 12 month period equal to or greater than $33.9
million. As of December 31, 2000, operating profit did not exceed $33.9
million. The incentive management fee with respect to each Inn is payable out
of 50% of cash flow from operations remaining after payment of ground rent,
debt service, partnership administrative expenses and the owner's priority
return, as defined.

   In accordance with the Management Agreement, incentive management fees
earned through 1992 were waived by the Manager. Incentive management fees
earned after 1992 accrue and are payable as outlined above or from Capital
Receipts. Due to the litigation settlement agreement (see Note 8), $23,483,000
of deferred incentive management fees were waived by the Manager in 2000. As a
result, the Partnership recognized an extraordinary gain for this amount in
2000. During 2000, 1999 and 1998, the Manager deferred $2,849,130, $2,775,000
and $3,640,000 of incentive management fees, respectively. Deferred incentive
management fees at December 31, 2000 and 1999 were $2,849,130 and $23,483,000,
respectively.

   The Manager is required to furnish certain services ("Chain Services") which
are furnished generally on a central or regional basis to all managed or owned
Inns in the Fairfield Inn by Marriott hotel system. Costs and expenses incurred
in providing such services are allocated among all domestic Fairfield Inn by
Marriott hotels managed, owned or leased by MII or its subsidiaries, based upon
one or a combination of the following: (i) percent of revenues, (ii) total
number of hotel rooms, (iii) total number of reservations booked, and (iv)
total number of management employees. The Inns also participate in MII's
Marriott Rewards Program ("MRP"). The cost of this program is charged to all
hotels in the full-service, Residence Inn by Marriott, Courtyard by Marriott
and Fairfield Inn by Marriott systems based upon the MRP revenues at each
hotel. The total amount of chain services and MRP costs allocated to the
Partnership for the years ended December 31, 2000, 1999 and 1998 was
$1,691,000, $1,773,000 and $1,600,000, respectively. In addition, the Manager
maintains a marketing fund to pay the costs associated with certain system-wide
advertising, marketing, sales, promotional and public relations materials and
programs. Each Inn within the system contributes approximately 2.4% of gross
Inn revenues to the marketing fund. For the years ended December 31, 2000, 1999
and 1998, the Partnership contributed $2,526,000, $2,262,000 and $2,359,000,
respectively, to the marketing fund.

   Pursuant to the terms of the Management Agreement, the Partnership is
required to provide the Manager with working capital and supplies 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. This advance earns no interest and
remains the property of the Partnership throughout the term of the Management
Agreement. The Partnership is required to advance upon request of the Manager
any additional funds necessary to satisfy the needs of the Inns as their
operations may require from time to time. Upon termination of the Management
Agreement, the Manager will return to the Partnership any unused working
capital and supplies. The individual components of working capital and supplies
controlled by the Manager are not reflected in the Partnership's balance sheet.
At the inception of the Partnership, $1,000,000 was advanced to the Manager for
working capital and supplies which is included in Due from Marriott
International, Inc. and affiliates in the accompanying balance sheet.

                                      F-14


                 FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Management Agreement provides for the establishment of a property
improvement fund for the Inns to cover (a) the cost of certain non-routine
repairs and maintenance to the Inns which are normally capitalized; and (b) the
cost of replacements and renewals to the Inns' property and improvements.
Contributions to the property improvement fund are based on a percentage of
gross revenues of each Inn equal to 7%. During 2000, $416,000 of these
contributions were reallocated to pay for debt service. For the years ended
December 31, 2000, 1999 and 1998, the Partnership contributed $5,987,000,
$6,516,000, and $6,606,000, respectively, to the property improvement fund.
However, if the Manager determines 7% exceeds the amount needed for making
capital expenditures, then the Manager can adjust the incentive management fee
calculation to exclude as a deduction in calculating incentive management fees
up to one percentage point of contributions to the property improvement fund.
No adjustment was necessary for 2000. However, the Partnership's property
improvement fund became insufficient during 1999. Therefore, in 1999 the
Partnership deposited $2.4 million to the property improvement fund to cover
the capital expenditure shortfall. This amount was treated as a deduction in
calculating incentive management fees in 2000 under the terms of the Management
Agreement. The shortfall is primarily due to room refurbishments planned for a
majority of the Partnership's Inns over the next several years.

   The Management Agreement provides that the Partnership may terminate the
Management Agreement and remove the Manager if, specified minimum operating
results are not achieved. The Manager may, however, prevent termination by
paying to the Partnership such amount as necessary to achieve the above
performance standard.

NOTE 8. LITIGATION

   In March 2000, the Defendants entered into a settlement agreement with
counsel for the plaintiffs to resolve litigation in seven partnerships,
including the Partnership. Under the terms of the settlement, the Defendants
paid $18,809,103 in cash in exchange for dismissal of the litigation and a
complete release of all claims in October 2000. Each limited partner received
$152 per Unit. In addition to the Defendants' cash payments, the Manager
forgave $23,483,000 of deferred management fees.

                                      F-15


ITEM 14. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

   None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

   (a) The financial statements filed as a part of this Form 10 are listed in
Item 13, "Financial Statements."

   (b) Exhibits


      
     2.1 Amended and Restated Agreement of Limited Partnership of Fairfield Inn
         by Marriott Limited Partnership by and among Marriott FIBM One
         Corporation (General Partner), Christopher, G. Townsend
         (Organizational Limited Partner), and those persons who become Limited
         Partners (Limited Partners) dated July 31, 1990 (incorporated by
         reference to Exhibit 2.a to the Registrant's Form 10 filed on January
         29, 1998, SEC File No. 0-23685).

     2.2 First Amendment to Amended and Restated Agreement of Limited
         Partnership dated as of December 28, 1998.

    10.1 Management Agreement by and between Fairfield Inn by Marriott Limited
         Partnership (Owner) and Fairfield FMC Corporation (Management Company)
         dated November 17, 1989 (incorporated by reference to Exhibit 10.a to
         the Registrant's Form 10 filed on January 29, 1998, SEC File No. 0-
         23685).

    10.2 First Amendment to Management Agreement by and between Fairfield Inn
         by Marriott Limited Partnership (Owner), Fairfield FMC Corporation
         (Management Company) dated July 31, 1990 (incorporated by reference to
         Exhibit 10.b to the Registrant's Form 10 filed on January 29, 1998,
         SEC File No. 0-23685).

    10.3 Second Amendment to Management Agreement by and between Fairfield Inn
         by Marriott Limited Partnership (Owner) and Fairfield FMC Corporation
         (Manager) dated January 13, 1997 (incorporated by reference to Exhibit
         10.c to the Registrant's Form 10 filed on January 29, 1998, SEC File
         No. 0-23685).

    10.4 Loan Agreement between Fairfield Inn by Marriott Limited Partnership
         and Nomura Asset Capital Corporation dated January 13, 1997
         (incorporated by reference to Exhibit 10.g to the Registrant's Form 10
         filed on January 29, 1998, SEC File No. 0-23685).

    10.5 Secured Promissory Note made by Fairfield Inn by Marriott Limited
         Partnership (the "Maker") to Nomura Asset Capital Corporation (the
         "Payee") dated January 13, 1997 (incorporated by reference to Exhibit
         10.h to the Registrant's Form 10 filed on January 29, 1998, SEC File
         No. 0-23685).

    10.6 Form of Ground Lease (incorporated by reference to Exhibit 10.3 to the
         Registrant's Form S-1 filed on September 8, 1989, SEC File No. 33-
         30942)

    12.1 Computation of Ratio of Earnings to Fixed Charges



                                   SIGNATURES

   Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on this 6th day of
April, 2001.


                                          Fairfield Inn by Marriott Limited
                                           Partnership

                                          By: FIBM ONE LLC, its General
                                           Partner

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                                  Robert E. Parsons, Jr.
                                                  President and Secretary