<SUBMISSION>
<ACCESSION-NUMBER>0000950123-09-049558
<TYPE>S-11
<PUBLIC-DOCUMENT-COUNT>12
<FILING-DATE>20091009
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>Pebblebrook Hotel Trust
<CIK>0001474098
<IRS-NUMBER>271055421
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>S-11
<ACT>33
<FILE-NUMBER>333-162412
<FILM-NUMBER>091114290
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>10319 WESTLAKE DRIVE
<STREET2>SUITE 112
<CITY>BETHESDA
<STATE>MD
<ZIP>20817
<PHONE>301.765.6045
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>10319 WESTLAKE DRIVE
<STREET2>SUITE 112
<CITY>BETHESDA
<STATE>MD
<ZIP>20817
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>S-11
<SEQUENCE>1
<FILENAME>w75877sv11.htm
<DESCRIPTION>S-11
<TEXT>
<HTML>
<HEAD>
<TITLE>sv11</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>As filed with the Securities and Exchange Commission on
    October&#160;9, 2009</B>
</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Registration
    No.&#160;333-&#160;&#160;&#160;&#160;&#160;&#160;</B>
</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=0 -->

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<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 13pt">UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">Washington,&#160;D.C.
    20549</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 16%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt"><FONT style="white-space: nowrap">Form&#160;S-11</FONT></FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt">FOR REGISTRATION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt">UNDER</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt">THE SECURITIES ACT OF
    1933</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt">OF SECURITIES</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 11pt">OF CERTAIN REAL ESTATE
    COMPANIES</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 16%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 22pt">PEBBLEBROOK HOTEL
    TRUST</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 7pt">(Exact name of registrant as
    specified in governing instruments)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 16%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">10319&#160;Westlake Drive,
    Suite&#160;112</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Bethesda, MD 20817</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">(301)&#160;765-6045</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 7pt">(Address, including zip code,
    and telephone number, including area code, of registrant&#146;s
    principal executive offices)</FONT></I>
</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Jon E. Bortz</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">President and Chief Executive
    Officer</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">10319&#160;Westlake Drive,
    Suite&#160;112</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">Bethesda, MD 20817</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">(301)&#160;765-6045</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 7pt">(Name, address, including zip
    code, and telephone number, including area code, of agent for
    service)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 16%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I><FONT style="font-size: 9pt">Copies to:</FONT></I></B>
</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="49%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom">
<TD align="center" valign="top">
    <B>David C. Wright<BR>
    Hunton &#038; Williams LLP<BR>
    Riverfront Plaza, East Tower<BR>
    951&#160;E.&#160;Byrd Street<BR>
    Richmond, Virginia 23219-4074<BR>
    (804)&#160;788-8200<BR>
    (804)&#160;788-8218 (Telecopy)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>James O&#146;Connor<BR>
    Bartholomew A. Sheehan<BR>
    Sidley Austin LLP<BR>
    787 Seventh Avenue<BR>
    New York, New York 10019<BR>
    (212) 839-5300<BR>
    (212) 839-5599 (Telecopy) </B>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Approximate date of commencement of proposed sale to the
    public:</B>&#160;&#160;As soon as practicable after the
    effective date of this Registration Statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of the Securities registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule&#160;415 under the Securities Act, check the following
    box:&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is filed to register additional securities for an
    offering pursuant to Rule&#160;462(b) under the Securities Act,
    check the following box and list the Securities Act registration
    statement number of the earlier effective registration statement
    for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If delivery of the prospectus is expected to be made pursuant to
    Rule&#160;434, please check the following
    box.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    &#147;large accelerated filer,&#148; &#147;accelerated
    filer&#148; and &#147;smaller reporting company&#148; in Rule
    12b-2 of the Exchange Act. (Check one):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="21%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="12%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="31%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="21%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Large&#160;accelerated&#160;filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Accelerated&#160;filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <FONT style="white-space: nowrap">Non-accelerated&#160;filer&#160;</FONT><FONT style="font-family: Wingdings; font-variant: normal">&#254;</FONT><BR>
    (Do&#160;not&#160;check&#160;if&#160;a&#160;smaller&#160;reporting&#160;company)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Smaller&#160;Reporting&#160;company&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 16%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 9pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CALCULATION
    OF REGISTRATION FEE</FONT></B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Amount of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>Title of Securities<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Proposed Maximum Aggregate Offering <BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Registration<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>to be Registered</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Price<SUP style="font-size: 85%; vertical-align: top">(1)(2)</SUP></B>

</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Fee<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Shares of Beneficial Interest, $0.01&#160;par value per
    share
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $402,500,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $22,459.50
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 9pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">Estimated solely for the purpose of
    determining the registration fee in accordance with
    Rule&#160;457(o) of the Securities Act of 1933, as amended.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 9pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">Includes the offering price of
    common shares that may be purchased by the underwriters upon the
    exercise of their overallotment option.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 6%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant shall file a further amendment which
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section&#160;8(a)
    of the Securities Act of 1933 or until the Registration
    Statement shall become effective on such date as the Commission,
    acting pursuant to said Section&#160;8(a), may determine.</B>
</DIV>

<DIV style="margin-top: 5pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=0 -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=0 -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 94%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->

<TABLE style="color: #FF0000" width="100%" border="1" cellpadding="5"><TR><TD style=text-align:justify>
<FONT style="font-size: 10pt; color: #E8112D">The information in
this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and it is
not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.<BR>
</FONT>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="color: #E8112D">Subject to Completion</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="color: #E8112D">Preliminary Prospectus dated
    October&#160;9, 2009</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><U>PROSPECTUS</U></B>
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares</FONT></B>
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">Pebblebrook Hotel
    Trust</FONT></B>
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">Common Shares</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 17%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pebblebrook Hotel Trust is an internally managed hotel
    investment company recently organized to acquire and invest in
    hotel properties located primarily in the 20 largest United
    States cities, with an emphasis on the major coastal markets. In
    addition, we may invest in resort properties located near our
    primary urban target markets, as well as in select, unique
    destination markets. We believe we can achieve attractive
    risk-adjusted returns by acquiring hotel properties at
    cyclically low prices in the current economic climate and
    benefiting from increases in business and leisure travel as the
    economy improves.
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This is the initial public offering of our common shares of
    beneficial interest, $0.01&#160;par value per share, or common
    shares. We expect the initial public offering price of our
    common shares to be $&#160;&#160;&#160;&#160;&#160; per share.
    Prior to this offering, there has been no public market for our
    common shares. We intend to apply to list our common shares on
    the New York Stock Exchange under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    .&#148;
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to elect and qualify to be taxed as a real estate
    investment trust, or REIT, for federal income tax purposes. To
    assist us in qualifying as a REIT, among other reasons,
    ownership of our outstanding common shares by any person is
    limited to 9.8%, subject to certain exceptions. In addition, our
    declaration of trust contains various other restrictions on the
    ownership and transfer of our common shares.
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 12pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Investing in our common shares involves risks. You should
    read the section entitled &#147;Risk Factors&#148; beginning on
    page&#160;10 of this prospectus for a discussion of the
    following and other risks that you should consider before
    investing in our common shares:</B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="4%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We have no operating history and have no agreements to acquire
    any hotel properties. We have not identified any specific hotel
    properties to acquire or committed the net proceeds of this
    offering to any specific hotel property investment. Investors
    will not be able to evaluate the economic merits of any
    investments we make with the net proceeds prior to purchasing
    common shares in this offering. We may be unable to invest the
    proceeds on acceptable terms, or at all.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our success will depend upon the efforts and expertise of our
    management team. The loss of their services could have an
    adverse impact on our business.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Failure of lodging industry fundamentals to improve may
    adversely affect our ability to execute our business strategy.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    In order to qualify as a REIT, we will not be able to operate
    our hotels, and our returns will depend on the management of our
    hotels by third-party hotel management companies.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our failure to qualify as a REIT would result in higher taxes
    and reduced cash available for distribution to our shareholders
    and may have significant adverse consequences on the market
    price of our common shares.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 17%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="78%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="10%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Total</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters may also purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares from us, at the public offering price, less the
    underwriting discount, within 30&#160;days from the date of this
    prospectus to cover overallotments, if any.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither the Securities and Exchange Commission nor any state
    securities commission has approved or disapproved of these
    securities or determined if this prospectus is truthful or
    complete. Any representation to the contrary is a criminal
    offense.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The common shares will be ready for delivery on or
    about&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 17%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">    <B><FONT style="font-size: 18pt; font-family: 'Times New Roman', Times">BofA
    Merrill Lynch</FONT></B></TD>
    <TD nowrap align="right">    <B><FONT style="font-size: 18pt; font-family: 'Times New Roman', Times">
    Raymond James</FONT></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 17%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=90 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The date of this prospectus
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009.
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="95%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>PROSPECTUS SUMMARY</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>RISK FACTORS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>CAUTIONARY NOTE&#160;REGARDING FORWARD-LOOKING
    STATEMENTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>USE OF PROCEEDS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>CAPITALIZATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>OUR DISTRIBUTION POLICY</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>OUR BUSINESS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    47
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>OUR MANAGEMENT</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    51
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#110'>INVESTMENT POLICIES AND POLICIES WITH RESPECT TO
    CERTAIN ACTIVITIES</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    59
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>OUR PRINCIPAL SHAREHOLDERS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#113'>DESCRIPTION OF SHARES OF BENEFICIAL INTEREST</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    64
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#114'>SHARES ELIGIBLE FOR FUTURE SALE</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#115'>CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR
    DECLARATION OF TRUST&#160;AND BYLAWS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#116'>OUR OPERATING PARTNERSHIP AND THE PARTNERSHIP
    AGREEMENT</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
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    74
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#117'>MATERIAL FEDERAL INCOME TAX CONSIDERATIONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
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    78
</TD>
<TD>&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#118'>ERISA CONSIDERATIONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
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    103
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<TD>&nbsp;
</TD>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#119'>UNDERWRITING</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
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    104
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<TD>&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#120'>LEGAL MATTERS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
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    108
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<TD>&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#121'>EXPERTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    108
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<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#122'>WHERE YOU CAN FIND MORE INFORMATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109
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<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#123'>REPORTS TO SHAREHOLDERS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
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    109
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</TD>
</TR>
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<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#124'>INDEX TO FINANCIAL STATEMENTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-1
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

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</DIV>

<DIV align="left">
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</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should rely only on the information contained in this
    prospectus, any free writing prospectus prepared by us or
    information to which we have referred you. We have not, and the
    underwriters have not, authorized any other person to provide
    you with different information. If anyone provides you with
    different or inconsistent information, you should not rely on
    it. We are not, and the underwriters are not, making an offer to
    sell these securities in any jurisdiction where the offer or
    sale is not permitted. You should assume that the information
    appearing in this prospectus is accurate only as of the date on
    the front cover of this prospectus or another date specified
    herein. Our business, financial condition and prospects may have
    changed since such dates.
</DIV>

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<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following summary highlights information contained
    elsewhere in this prospectus. This summary is not complete and
    does not contain all of the information that you should consider
    before investing in our common shares. You should read the
    entire prospectus, including &#147;Risk Factors,&#148; before
    making a decision to invest in our common shares. In this
    prospectus, references to &#147;our company,&#148;
    &#147;we,&#148; &#147;us&#148; and &#147;our&#148; mean
    Pebblebrook Hotel Trust, a Maryland real estate investment
    trust, and our consolidated subsidiaries, including Pebblebrook
    Hotel, L.P., a Delaware limited partnership, the subsidiary
    through which we will conduct our business and which we refer to
    as our operating partnership, except where it is clear from the
    context that the term means only the issuer of the common
    shares, Pebblebrook Hotel Trust. Unless otherwise indicated, the
    information contained in this prospectus assumes that the
    underwriters&#146; overallotment option is not exercised.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Company</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are an internally managed hotel investment company recently
    organized to acquire and invest in hotel properties located
    primarily in the 20 largest United States cities, with an
    emphasis on the major coastal markets. In addition, we may
    invest in resort properties located near our primary urban
    target markets, as well as in select, unique destination
    markets. We intend to focus on full-service hotel properties in
    the &#147;upper upscale&#148; segment of the lodging industry as
    defined by Smith Travel Research, Inc. In addition, we may seek
    to acquire branded, upscale, select-service properties in our
    primary urban target markets. We believe that these investments
    can produce attractive risk-adjusted returns because we expect
    (i)&#160;to acquire properties at cyclically low prices in the
    current economic and financing environment and (ii)&#160;the
    properties we purchase will benefit from increasing business and
    leisure travel as the economy improves. We currently do not own
    any hotel properties and have no properties under contract. We
    intend to elect and qualify to be taxed as a real estate
    investment trust, or REIT, for federal income tax purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the current market environment will present a
    significant number of attractive investment opportunities and
    that our management team has the experience and expertise
    necessary to acquire a high quality portfolio of hotel
    properties. Our management team is led by Jon E. Bortz, the
    founder and former Chairman of the Board of Trustees and Chief
    Executive Officer of LaSalle Hotel Properties, a NYSE-listed
    hotel REIT. Prior to that, he founded and led Jones Lang
    LaSalle&#146;s Hotel Investment Group. Mr.&#160;Bortz has
    28&#160;years of lodging and real estate experience, having
    overseen more than $2.5&#160;billion of lodging-related
    transactions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will have approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million to invest in hotel
    properties and we will have no outstanding indebtedness.
    Accordingly, we believe we will be well-positioned to take
    advantage of attractive investment opportunities that we expect
    will be available in the lodging industry.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Market
    Opportunity</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S.&#160;hotel industry has experienced substantial
    declines in fundamentals as a result of the global economic
    recession and its adverse impact on business and leisure travel.
    We believe that the significant number of hotel properties
    experiencing substantial declines in operating cash flow,
    coupled with the challenged credit markets, near-term debt
    maturities and, in some instances, covenant defaults relating to
    outstanding indebtedness, will present attractive investment
    opportunities in the lodging industry. Accordingly, we believe
    the following factors will provide well-capitalized investors,
    such as our company, the opportunity to acquire high-quality
    hotel properties at prices significantly below replacement cost,
    with substantial appreciation potential as the U.S.&#160;economy
    recovers from the current recession:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Significant Debt Defaults.</I>&#160;&#160;Cash flow at many
    hotel properties has declined or will likely decline to levels
    that are inadequate to support required debt service payments or
    that violate applicable covenants. Real Capital Analytics
    estimates the aggregate value of hotel properties in distress
    (which includes default,
    <FONT style="white-space: nowrap">deed-in-lieu,</FONT>
    forced sales, foreclosure or bankruptcy) at approximately
    $18&#160;billion, including over 1,000 hotels, as of
    June&#160;30, 2009. We believe many of these hotel properties
    will be sold by lenders after foreclosure, while in receivership
    or in cooperation with the borrower.
</TD>
</TR>

</TABLE>
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    <BR>
    1
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    <TD width="7%"></TD>
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    <TD width="87%"></TD>
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<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Maturity Defaults and Lack of Available
    Financing.</I>&#160;&#160;According to Standard&#160;&#038;
    Poor&#146;s, hotel-related commercial mortgage-backed
    securities, or CMBS, with an aggregate principal amount of
    approximately $21&#160;billion are scheduled to mature over the
    next three years. In the current recessionary environment,
    traditional lending sources, such as banks, insurance companies
    and pension funds have adopted more conservative lending
    policies and have materially decreased new lending commitments
    to hotel properties. We believe the current and projected cash
    flows at many hotel properties, when coupled with more
    conservative lending policies, will only support mortgage
    financing that is significantly less than the amounts currently
    borrowed against such properties. As a result, we expect many
    owners of hotel properties will be unable to refinance maturing
    debt without significant additional equity investment, which may
    result in sales or foreclosures.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Under-Capitalized Owners.</I>&#160;&#160;Maintaining a
    hotel&#146;s physical condition at the levels required by major
    hotel brands often requires significant capital investment. This
    is particularly true for hotels in urban markets and in the
    upper upscale segment of the lodging industry, where we intend
    to focus our investment activity. We believe cash flow after
    debt service at many hotel properties may be insufficient to
    fund necessary capital expenditures and their owners may face
    capital investment demands that could require additional equity
    investments. We believe some hotel owners will be unable or
    unwilling to make the required equity investments and may choose
    or be compelled to sell their hotels.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Competitive
    Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect the following factors will benefit our company as we
    implement our business strategy:
</DIV>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Experienced Leadership.</I>&#160;&#160;Our senior executive
    management team is led by Jon E. Bortz, who has a proven track
    record and substantial experience in the hotel industry.
    Mr.&#160;Bortz has 28&#160;years of lodging and real estate
    experience, including expertise in hotel and resort property
    acquisitions, divestitures, repositioning, redevelopment, asset
    management, branding and financing. Our company represents
    Mr.&#160;Bortz&#146;s third lodging investment vehicle and his
    second publicly listed venture. He most recently served as Chief
    Executive Officer of LaSalle Hotel Properties, an internally
    managed, NYSE-listed hotel REIT, from its inception in April
    1998 and as the Chairman of its Board of Trustees from January
    2001 until his retirement in September 2009. Prior to LaSalle
    Hotel Properties, Mr.&#160;Bortz founded and led Jones Lang
    LaSalle&#146;s Hotel Investment Group, which acquired 15 hotels
    over his four-year tenure as its President. Through his past
    professional experiences, Mr.&#160;Bortz has developed strong
    relationships with hotel owners, management companies, brand
    companies, brokers, lenders and institutional investors.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Proven Acquirer with Strong Track Record of
    Growth.</I>&#160;&#160;Throughout his career, Mr.&#160;Bortz has
    demonstrated the ability to acquire, redevelop and reposition
    hotel properties. During Mr.&#160;Bortz&#146;s tenure as Chief
    Executive Officer of LaSalle Hotel Properties, he led
    transactions totaling $2.5&#160;billion in asset value. During
    this period, LaSalle Hotel Properties&#146; portfolio increased
    from 10 hotel properties at the time of its initial public
    offering in April 1998 to 31 properties with over 8,400 rooms at
    the time of Mr.&#160;Bortz&#146;s retirement in September 2009.
    In aggregate, Mr.&#160;Bortz oversaw the acquisition of 42 hotel
    and resort properties during his leadership tenure at LaSalle
    Hotel Properties and Jones Lang LaSalle&#146;s Hotel Investment
    Group. Mr.&#160;Bortz also established a strong capital sourcing
    network while at LaSalle Hotel Properties, overseeing that
    company&#146;s raising of more than $3.0&#160;billion of debt
    and equity capital to finance its significant growth over the
    past 11&#160;years.
</TD>
</TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Focused Property Investment Strategy.</I>&#160;&#160;We
    intend to invest primarily in upper upscale, full-service,
    branded and independent hotels across the 20 largest
    U.S.&#160;cities, with an emphasis on the major coastal markets,
    where we believe convention and business room night demand will
    experience the most robust recovery as the U.S.&#160;economy
    improves. In addition, we expect to
</TD>
</TR>

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    <BR>
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    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    acquire resort properties located near our primary urban target
    markets as well as in select, unique destination markets. We may
    also invest in branded, upscale, select-service hotels in
    premium urban locations in these 20&#160;cities. Within these
    markets, we intend to establish a diversified customer base by
    investing in urban, resort and convention hotels, each of which
    typically has a different mix of business transient, leisure
    transient and group and convention customers, all of which
    follow different demand trends.
</TD>
</TR>

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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Flexible and Diversified Operating Strategy with No Legacy
    Issues.</I>&#160;&#160;Upon completion of this offering, we
    expect to have approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million available for
    investment without the burden and distraction of any legacy
    operating or leverage issues. Since we are not affiliated with
    any hotel management company and have no contractual obligations
    to any particular hotel manager, we plan to retain multiple
    branded and independent third-party hotel management companies
    to operate our hotels, based on our assessment of the operator
    most beneficial for each property. We believe this strategy of
    retaining multiple hotel managers will assist us in identifying
    best practices that we will implement across our portfolio, as
    appropriate. Further, we generally intend to enter into flexible
    management contracts with third-party hotel management companies
    for the operation of our hotels that will provide us with the
    ability to replace operators
    <FONT style="white-space: nowrap">and/or</FONT>
    reposition properties, to the extent that we determine to do so,
    and will align our operators with our objective of generating
    the highest return on investment. In addition, we believe that
    flexible management contracts facilitate the sale of hotels, and
    we may seek to opportunistically sell hotels if we believe sales
    proceeds may be invested in hotel properties that offer more
    attractive risk-return profiles.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Intensive Asset Management.</I>&#160;&#160;We intend to
    employ a dedicated and experienced asset management team to
    proactively manage our third-party hotel management companies in
    order to improve operational performance and maximize our return
    on investment. Although we will not operate our hotel
    properties, both our asset managers and our executive management
    team will actively participate with our hotel managers in all
    aspects of our hotels&#146; operations, including property
    positioning and repositioning, operations analysis, physical
    design, renovation and capital improvements, guest experience
    and overall strategic direction. Through these initiatives, we
    will seek to improve property efficiencies, lower costs,
    maximize revenues, and enhance property operating margins. We
    also anticipate implementing certain value-added strategies,
    such as changing operators, re-branding and de-flagging, when
    appropriate.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Prudent Capital Structure.</I>&#160;&#160;We expect to
    maintain a low-leverage capital structure and intend to limit
    the sum of the outstanding principal amount of our consolidated
    indebtedness and the liquidation preference of any outstanding
    preferred shares to not more than 4.5x our earnings before
    interest, taxes, depreciation and amortization, or EBITDA, for
    the <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of such debt or the issuance of
    such preferred shares. Our board of trustees may modify or
    eliminate this limitation at any time without the approval of
    our shareholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Business
    Strategy and Investment Criteria</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to invest in hotel properties located primarily in the
    20 largest U.S.&#160;cities, with an emphasis on the major
    coastal markets. In addition, we may invest in resort properties
    located near our primary urban target markets, as well as in
    select, unique destination markets. We intend to focus on both
    branded and independent full-service hotels in the &#147;upper
    upscale&#148; segment of the lodging industry as defined by
    Smith Travel Research, based on average daily rates. In
    addition, we may seek to acquire branded, upscale,
    select-service hotels in our primary urban target markets. The
    full-service hotels on which we intend to focus our investment
    activity generally will have restaurant, lounge and meeting
    facilities and other amenities, as well as high service levels.
    The select-service hotels in which we may invest generally will
    not have comprehensive business meeting or banquet facilities
    and will have limited food and beverage outlets. We believe our
    target markets are characterized by high barriers to entry and
    that long-term room night demand and rate growth of these types
    of hotels will likely continue to outperform the national
    average, as they have historically.
</DIV>
</DIV><!-- End box 1 -->

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    <BR>
    3
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will utilize extensive research to evaluate any target market
    and property, including a detailed review of the long-term
    economic outlook, trends in local demand generators, competitive
    environment, property systems and physical condition, and
    property financial performance. Specific acquisition criteria
    may include, but are not limited to, the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    premier locations, facilities and other competitive advantages
    not easily replicated;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    significant barriers to entry in the market, such as scarcity of
    development sites, regulatory hurdles, high per room development
    costs and long lead times for new development;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    acquisition price at a significant discount to replacement cost;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    properties not subject to long-term management contracts with
    hotel management companies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    potential return on investment initiatives, including
    redevelopment, rebranding, redesign, expansion and change of
    management;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    opportunities to implement value-added operational
    improvements;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    strong demand growth characteristics supported by favorable
    demographic indicators.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that as the U.S.&#160;economy begins to stabilize and
    generate positive GDP growth, upper upscale full-service hotels
    and resorts and upscale select-service hotels located in major
    U.S.&#160;urban, convention and drive-to and destination resort
    markets are likely to generate the most favorable returns on
    investment in the lodging industry. Hotel developers&#146;
    inability to source construction financing over the past 18 to
    24&#160;months, and likely for the foreseeable future, creates
    an environment in which minimal new lodging supply is expected
    to be added through at least 2012. We believe that as transient
    and group travel rebounds, existing supply will accommodate
    incremental room night demand allowing hotel owners to grow
    occupancy and ultimately increase rates, thereby improving
    profitability. We believe that portfolio diversification will
    allow us to capitalize from growth in various customer segments
    including business transient, leisure transient, and group and
    convention room night demand.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We generally intend to enter into flexible management contracts
    with third-party hotel management companies for the operation of
    our hotels that will provide us with the ability to replace
    operators
    <FONT style="white-space: nowrap">and/or</FONT>
    reposition properties, to the extent that we determine to do so,
    and will align our operators with our objective of generating
    the highest return on investment. In addition, we believe that
    flexible management contracts facilitate the sale of hotels, and
    we may seek to opportunistically sell hotels if we believe sales
    proceeds may be invested in hotel properties that offer more
    attractive risk-adjusted returns.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Initially, we do not intend to engage in significant development
    or redevelopment of hotel properties. However, we do expect to
    engage in partial redevelopment and repositioning of certain
    properties, as we seek to maximize the financial performance of
    the hotels that we acquire. In addition, we may acquire
    properties that require significant capital improvement,
    renovation or refurbishment. Over the long-term, we may acquire
    hotel and resort properties that we believe would benefit from
    significant redevelopment or expansion, including, for example,
    adding rooms, meeting facilities or other amenities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may consider acquiring outstanding debt secured by a hotel or
    resort property from lenders and investors if we believe we can
    foreclose on or acquire ownership of the property in the
    near-term. We do not intend to originate any debt financing or
    purchase any debt where we do not expect to gain ownership of
    the underlying property.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Financing
    Strategies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to maintain a low-leverage capital structure and
    intend to limit the sum of the outstanding principal amount of
    our consolidated indebtedness and the liquidation preference of
    any outstanding preferred shares to not more than 4.5x our
    EBITDA for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of such debt or the issuance of
    such preferred shares. Over time, we intend to finance our
    long-term growth with common and preferred equity issuances and
    debt financing having staggered maturities. Our debt may include
    mortgage debt secured by our hotel properties and unsecured debt.
</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    4
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate arranging and utilizing a revolving credit
    facility to fund future acquisitions (following investment of
    the net proceeds of this offering), as well as for property
    redevelopments, return on investment initiatives and working
    capital requirements. We intend to repay amounts outstanding
    under any such credit facility from time to time with periodic
    common and preferred equity issuances, long-term debt financings
    and cash flows from operations. No assurance can be given that
    we will be able to obtain a credit facility.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    When purchasing hotel properties, we may issue limited
    partnership interests in our operating partnership as full or
    partial consideration to sellers who may desire to take
    advantage of tax deferral on the sale of a hotel or participate
    in the potential appreciation in value of our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Management Team</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our management team is led by Jon E. Bortz, who has
    28&#160;years of lodging and real estate experience, including
    expertise in hotel property acquisitions, divestitures,
    repositioning, redevelopment, asset management, branding,
    re-branding and financing. Mr.&#160;Bortz founded and led two
    prior lodging entities, where he oversaw:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    more than $2.5&#160;billion in hotel investments, including
    acquisitions, dispositions, mergers and joint ventures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    more than $3.0&#160;billion in financings, including mortgage
    financings, common and preferred equity financings and secured
    and unsecured credit facilities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the establishment of strong relationships within the lodging
    industry, including with hotel owners, management companies,
    brand companies and brokers;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the development of strong relationships within the financial
    community, including with leading institutional investors,
    investment banks, professional service firms and lenders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following completion of this offering, our executive management
    team will consist of professionals with extensive experience in
    hotel acquisitions, hotel asset management, accounting and
    finance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Risk Factors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An investment in our common shares involves various risks. You
    should carefully consider the matters discussed in &#147;Risk
    Factors&#148; beginning on page&#160;10 of this prospectus
    before you decide whether to invest in our common shares. Some
    of the risks include the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We were organized in October 2009 and have no operating history.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We currently do not own, and have no agreements to acquire, any
    hotel properties. We have not identified any specific hotel
    properties to acquire or committed any portion of the net
    proceeds of this offering to any specific hotel property
    investment. Accordingly, you will not be able to evaluate the
    merits of any investments we make with the net proceeds of this
    offering. We may be unable to invest the net proceeds on
    acceptable terms, or at all.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our success will depend upon the efforts and expertise of our
    management team. The loss of their services, and our inability
    to find suitable replacements, could have an adverse impact on
    our business.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    A substantial part of our business strategy is based on our
    belief that lodging industry fundamentals will improve. If these
    fundamentals do not improve when or as we expect, or
    deteriorate, our ability to execute our business strategy and
    our operating results may be adversely affected.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We will rely on third-party hotel management companies to
    operate our hotel properties under the terms of hotel management
    agreements. Even if we believe our hotel properties are being
    operated inefficiently or in a manner that does not result in
    satisfactory revenue per available
</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    5
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    room, or RevPAR, or profits we may not be able to force the
    hotel management company to change its method of operating our
    hotels.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Our hotel management agreements will require us to bear the
    operating risks of our hotel properties. Any increases in
    operating expenses or decreases in revenues may have a
    significant adverse impact on our earnings and cash flow.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    To qualify for taxation as a REIT, we generally will be required
    to distribute at least 90% of our REIT taxable income,
    determined without regard to the deduction for dividends paid
    and excluding any net capital gain, each year to our
    shareholders. As a result, our ability to fund capital
    expenditures, acquisitions, hotel redevelopment and development
    through retained earnings will be very limited. We may not be
    able to fund capital improvements or acquisitions solely from
    cash provided from our operating activities. Consequently, after
    investing the net proceeds of this offering, we will rely upon
    the availability of debt or equity capital to fund investments
    in hotel properties and capital improvements. There can be no
    assurance that we will be able to obtain such financing on
    favorable terms or at all. We also may not generate sufficient
    cash flow to fund distributions required to maintain our
    qualification as a REIT.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If we fail to qualify, or lose our qualification, as a REIT, we
    will be subject to federal income tax on our taxable income. Our
    hotel properties leased by lessees that are taxable REIT
    subsidiaries, or TRS lessees, must be operated by &#147;eligible
    independent contractors,&#148; as defined in the Internal
    Revenue Code of 1986, as amended, or the Code, in order for our
    TRS lessees to qualify as such and for the rental income from
    our TRS leases to qualify as rents from real property under the
    applicable REIT income tests. Complex constructive ownership
    rules under the Code apply in determining whether a person
    qualifies as an eligible independent contractor.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We will incur a 100% excise tax on transactions with taxable
    REIT subsidiaries, or TRSs, including our TRS lessees, that are
    not conducted on an arm&#146;s-length basis.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Subject to certain exceptions, our declaration of trust provides
    that no person may beneficially own more than 9.8% in value or
    in number of shares, whichever is more restrictive, of the
    outstanding shares of any class or series of our shares of
    beneficial interest. In addition, our declaration of trust and
    bylaws contain other provisions that may delay, defer or prevent
    an acquisition of control of our company by a third party
    without our board of trustees&#146; approval, even if our
    shareholders believe the change of control is in their best
    interests.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Because real estate investments are relatively illiquid, our
    ability to promptly sell one or more hotel properties for
    reasonable prices in response to changing economic, financial
    and investment conditions will be limited. In addition, because
    some of our hotel management agreements may be long-term and may
    not terminate in the event of a sale, our ability to sell hotel
    properties may be further limited.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Organizational Structure</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were formed as a Maryland real estate investment trust on
    October&#160;2, 2009. We will be the sole general partner of
    Pebblebrook Hotel, L.P., the subsidiary through which we will
    conduct substantially all of our operations and make
    substantially all of our investments and which we refer to as
    our operating partnership. Upon completion of this offering, we
    will contribute to our operating partnership the net proceeds of
    this offering as our initial capital contribution in exchange
    for substantially all of the limited partnership interests in
    our operating partnership. In the future we may issue limited
    partnership interests in our operating partnership as
    consideration for the purchase of hotel properties or in
    connection with our equity incentive plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order for the income from our hotel operations to constitute
    &#147;rents from real property&#148; for purposes of the gross
    income tests required for REIT qualification under the Code, we
    cannot directly operate any of our hotel properties. Instead, we
    must lease our hotel properties. Accordingly, we will lease each
    of our hotel properties to one of our TRS lessees, which will be
    wholly owned by our operating partnership. Our TRS
</DIV>
</DIV><!-- End box 1 -->

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    <BR>
    6
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    lessees will pay rent to us that can qualify as &#147;rents from
    real property,&#148; provided that the TRS lessees engage
    &#147;eligible independent contractors&#148; to manage our
    hotels. A TRS is a corporate subsidiary of a REIT that jointly
    elects with the REIT to be treated as a TRS of the REIT and that
    pays federal income tax at regular corporate rates on its
    taxable income. We expect that all of our hotel properties will
    be leased to one of our wholly owned TRS lessees, which will be
    able to pay us rent out of the revenue of the hotels, and will
    engage multiple eligible independent contractors to manage our
    hotels.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following chart shows the structure of our company following
    completion of this offering:
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587701.gif" alt="(FLOW CHART)">
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Includes grants
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares to our initial independent trustees.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Upon completion of this offering,
    we will issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;LTIP
    units to Mr.&#160;Bortz and certain of our other officers. See
    &#147;Our Management&#160;&#151; 2009 Equity Incentive
    Plan.&#148;
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">To be formed.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Tax
    Status</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to elect to be taxed as a REIT for federal income tax
    purposes commencing with our short taxable year ending on
    December&#160;31, 2009. Our qualification as a REIT will depend
    upon our ability to meet, on a continuing basis, through actual
    investment and operating results, various complex requirements
    under the Code relating to, among other things, the sources of
    our gross income, the composition and values of our assets, our
    distribution levels and the diversity of ownership of our shares
    of beneficial interest. We believe that we will be organized in
    conformity with the requirements for qualification as a REIT
    under the Code and that our intended manner of operation will
    enable us to meet the requirements for qualification and
    taxation as a REIT for federal income tax purposes commencing
    with our short taxable year ending December&#160;31, 2009 and
    continuing thereafter.
</DIV>
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    <BR>
    7
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a REIT, we generally will not be subject to federal income
    tax on our REIT taxable income that we distribute currently to
    our shareholders. Under the Code, REITs are subject to numerous
    organizational and operational requirements, including a
    requirement that they distribute each year at least 90% of their
    taxable income, determined without regard to the deduction for
    dividends paid and excluding any net capital gains. If we fail
    to qualify for taxation as a REIT in any taxable year and do not
    qualify for certain statutory relief provisions, our income for
    that year will be taxed at regular corporate rates, and we will
    be disqualified from taxation as a REIT for the four taxable
    years following the year during which we ceased to qualify as a
    REIT. Even if we qualify as a REIT for federal income tax
    purposes, we may still be subject to state and local taxes on
    our income and assets and to federal income and excise taxes on
    our undistributed income. Additionally, any income earned by our
    TRS lessees will be fully subject to federal, state and local
    corporate income tax.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Distribution
    Policy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend over time to make regular quarterly distributions to
    our common shareholders. However, until we invest a substantial
    portion of the net proceeds of this offering in hotel
    properties, we expect our quarterly distributions will be
    nominal. In order to qualify for taxation as a REIT, we intend
    to make annual distributions to our shareholders of at least 90%
    of our taxable income, determined without regard to the
    deduction for dividends paid and excluding any net capital
    gains. We cannot assure you as to when we will begin to generate
    sufficient cash flow to make distributions to our shareholders
    or our ability to sustain those distributions. Distributions
    will be authorized by our board of trustees and declared by us
    based upon a variety of factors deemed relevant by our trustees.
    Distributions to our shareholders generally will be taxable to
    our shareholders as ordinary income; however, because a
    significant portion of our investments will be equity ownership
    interests in hotel properties, which will generate depreciation
    and other non-cash charges against our income, a portion of our
    distributions may constitute a tax-free return of capital. To
    the extent not inconsistent with maintaining our qualification
    as a REIT, we may retain any earnings that accumulate in our
    TRSs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Restrictions
    on Ownership of Our Common Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to help us qualify as a REIT, among other reasons, our
    declaration of trust, subject to certain exceptions, restricts
    the amount of our shares of beneficial interest that a person
    may beneficially or constructively own. Our declaration of trust
    provides that, subject to certain exceptions, no person may
    beneficially or constructively own more than 9.8% in value or in
    number of shares, whichever is more restrictive, of the
    outstanding shares of any class or series of our shares of
    beneficial interest. Our declaration of trust also prohibits any
    person from (i)&#160;beneficially owning shares of beneficial
    interest to the extent that such beneficial ownership would
    result in our being &#147;closely held&#148; within the meaning
    of Section&#160;856(h) of the Code (without regard to whether
    the ownership interest is held during the last half of the
    taxable year), (ii)&#160;transferring our shares of beneficial
    interest to the extent that such transfer would result in our
    shares of beneficial interest being beneficially owned by less
    than 100&#160;persons (determined under the principles of
    Section&#160;856(a)(5) of the Code), (iii)&#160;beneficially or
    constructively owning our shares of beneficial interest to the
    extent such beneficial or constructive ownership would cause us
    to constructively own ten percent or more of the ownership
    interests in a tenant (other than a TRS) of our real property
    within the meaning of Section&#160;856(d)(2)(B) of the Code or
    (iv)&#160;beneficially or constructively owning or transferring
    our shares of beneficial interest if such ownership or transfer
    would otherwise cause us to fail to qualify as a REIT under the
    Code, including but not limited to, as a result of any hotel
    management companies failing to qualify as &#147;eligible
    independent contractors&#148; under the REIT rules. Our board of
    trustees, in its sole discretion, may prospectively or
    retroactively exempt a person from these limits and may
    establish or increase an excepted holder percentage limit for
    such person. The person seeking an exemption must provide to our
    board of trustees such representations, covenants and
    undertakings as our board of trustees may deem appropriate in
    order to conclude that granting the exemption will not cause us
    to lose our status as a REIT.
</DIV>
</DIV><!-- End box 1 -->

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    <BR>
    8
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common shares offered</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares (plus up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares that we may issue and sell upon the exercise of
    the underwriters&#146; overallotment option).</TD>
</TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common shares to be outstanding upon completion of this offering</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></TD>

</TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="bottom">
    We will contribute the net proceeds of this offering to our
    operating partnership. Our operating partnership will invest the
    net proceeds of this offering in hotel properties in accordance
    with our investment strategy described in this prospectus and
    for general business purposes. Prior to the full investment of
    the net offering proceeds in hotel properties, we intend to
    invest the net proceeds in interest-bearing short-term
    investment grade securities or money-market accounts which are
    consistent with our intention to qualify as a REIT. These
    initial investments are expected to provide a lower net return
    than we will seek to achieve from investments in hotel
    properties. We will use approximately
    $&#160;&#160;&#160;&#160;&#160; of the net proceeds to reimburse
    Mr.&#160;Bortz for out-of-pocket expenses he incurred in
    connection with the formation of our company and this offering
    and $1,000 to repurchase the shares he acquired in connection
    with the formation and initial capitalization of our company.
    See &#147;Use of Proceeds.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Proposed New York Stock Exchange symbol</TD>
    <TD></TD>
    <TD valign="bottom">
    &#147;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Ownership and transfer restrictions</TD>
    <TD></TD>
    <TD valign="bottom">
    Our declaration of trust, subject to certain exceptions,
    prohibits any person from directly or indirectly owning more
    than 9.8% by value or number of shares, whichever is more
    restrictive, of the outstanding shares of any class or series of
    our shares of beneficial interest. See &#147;Description of
    Shares of Beneficial Interest&#160;&#151; Restrictions on
    Ownership and Transfer.&#148;</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="bottom">
    Investing in our common shares involves risks. You should
    carefully read and consider the information set forth under
    &#147;Risk Factors&#148; and all other information in this
    prospectus before investing in our common shares.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Includes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted common shares that will be issued to our trustees
    upon completion of this offering under our 2009 Equity Incentive
    Plan. Does not include
    (i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares
    underlying&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    LTIP units that will be issued to Mr.&#160;Bortz and certain
    other officers upon completion of this offering,
    (ii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares reserved for issuance under the 2009 Equity Incentive
    Plan and
    (iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares issuable upon exercise of the underwriters&#146;
    overallotment option.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Information</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our principal executive offices are located at
    10319&#160;Westlake Drive, Suite&#160;112, Bethesda, MD 20817.
    Our telephone number is
    <FONT style="white-space: nowrap">(301)&#160;765-6045.</FONT>
</DIV>
</DIV><!-- End box 1 -->

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    <BR>
    9
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='102'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An investment in our common shares involves risks. In addition
    to other information in this prospectus, you should carefully
    consider the following risks before investing in our common
    shares offered by this prospectus. The occurrence of any of the
    following risks could materially and adversely affect our
    business, prospects, financial condition, results of operations
    and our ability to make cash distributions to our shareholders,
    which could cause you to lose all or a significant portion of
    your investment in our common shares. Some statements in this
    prospectus, including statements in the following risk factors,
    constitute forward-looking statements. See &#147;Cautionary Note
    Regarding Forward-Looking Statements.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Our Business and Properties</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have no operating history and may not be able to successfully
    operate our business or generate sufficient operating cash flows
    to make or sustain distributions to our
    shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were organized in October 2009, have no operating history and
    have no agreements to acquire any hotel properties. We will only
    commence operations upon completion of this offering. Our
    ability to make or sustain distributions to our shareholders
    will depend on many factors, including our availability to
    identify attractive acquisition opportunities that satisfy our
    investment strategy, our success in consummating acquisitions on
    favorable terms, the level and volatility of interest rates,
    readily accessible short-term and long-term financing on
    favorable terms, and conditions in the financial markets, the
    real estate market and the economy. We will face competition in
    acquiring attractive hotel properties. The value of the hotel
    properties that we acquire may decline substantially after we
    purchase them. We may not be able to successfully operate our
    business or implement our operating policies and investment
    strategy successfully. Furthermore, we may not be able to
    generate sufficient operating cash flow to pay our operating
    expenses and make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a newly formed company, we are subject to the risks of any
    newly established business enterprise, including risks that we
    will be unable to attract and retain qualified personnel, create
    effective operating and financial controls and systems or
    effectively mange our anticipated growth, any of which could
    have a material adverse effect on our business and our operating
    results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have not yet identified any specific hotel properties to acquire
    and you will be unable to evaluate the allocation of net
    proceeds of this offering or the economic merits of our
    investments prior to making your investment
    decision.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently do not own any properties and have no agreements to
    acquire any properties. Since we have not yet identified any
    specific hotel properties to acquire or committed the net
    proceeds of this offering to any specific hotel property
    investment, you will be unable to evaluate the allocation of the
    net proceeds of this offering or the economic merits of our
    acquisitions before making an investment decision to purchase
    our common shares. As a result, we will have broad authority to
    invest the net proceeds of this offering in any real estate
    investments that we may identify in the future and we may use
    those proceeds to make investments with which you may not agree.
    In addition, our investment policies may be amended or revised
    from time to time at the discretion of our board of trustees,
    without a vote of our shareholders. These factors will increase
    the uncertainty, and thus the risk, of investing in our common
    shares. Our failure to apply the net proceeds of this offering
    effectively or find suitable hotel properties to acquire in a
    timely manner or on acceptable terms could result in returns
    that are substantially below expectations or result in losses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the full investment of the net offering proceeds in
    hotel properties, we intend to invest the net proceeds in
    interest-bearing short-term, investment grade securities or
    money-market accounts which are consistent with our intention to
    qualify as a REIT. These investments are expected to provide a
    lower net return than we will seek to achieve from our
    investments in hotel properties. We may not be able to identify
    hotel investments that meet our investment criteria, we may not
    be successful in completing any investment we identify and our
    investments may not produce acceptable, or any, returns. We may
    be unable to invest the proceeds on acceptable terms, or at all.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    10
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    depend on the efforts and expertise of our key executive
    officers.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We depend on the efforts and expertise of our president and
    chief executive officer, as well as our other executive
    officers, to execute our business strategy. The loss of their
    services, and our inability to find suitable replacements, could
    have an adverse effect on our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Because
    our senior executive officers will have broad discretion to
    invest the net proceeds of this offering, they may make
    investments where the returns are substantially below
    expectations or which result in net operating
    losses.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our senior executive officers will have broad discretion, within
    the general investment criteria established by our board of
    trustees, to invest the net proceeds of this offering and to
    determine the timing of such investments. In addition, our
    investment policies may be revised from time to time at the
    discretion of our board of trustees, without a vote of our
    shareholders. Such discretion could result in investments that
    may not yield returns consistent with expectations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    intend to invest in the upper upscale segment of the lodging
    market which is highly competitive and generally subject to
    greater volatility than most other market segments and could
    negatively affect our profitability.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The upper upscale segment of the hotel business is highly
    competitive. Our hotel properties will compete on the basis of
    location, room rates, quality, service levels, reputation and
    reservations systems, among many factors. There are many
    competitors in the upper upscale segment, and many of these
    competitors may have substantially greater marketing and
    financial resources than we have. This competition could reduce
    occupancy levels and room revenue at our hotels. Over-building
    in the lodging industry may increase the number of rooms
    available and may decrease occupancy and room rates. In
    addition, in periods of weak demand, as may occur during a
    general economic recession, profitability is negatively affected
    by the relatively high fixed costs of operating upper upscale
    hotels.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Failure
    of the lodging industry to exhibit improvement may adversely
    affect our ability to execute our business
    strategy.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A substantial part of our business strategy is based on our
    belief that the lodging markets in which we intend to invest
    will experience improving economic fundamentals in the future.
    There can be no assurance as to whether, or when, lodging
    industry fundamentals will in fact improve or to what extent
    they will improve. In the event conditions in the industry do
    not improve when and as we expect, or deteriorate, our ability
    to execute our business strategy would be adversely affected,
    which could adversely affect our financial condition, results of
    operations, the market price of our common shares and our
    ability to pay operating expenses, make capital improvements,
    and make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    will rely on third-party management companies to operate our
    hotels.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since federal income tax laws restrict REITs and their
    subsidiaries from operating or managing a hotel, we will not
    operate any hotel properties we acquire. Instead, we will lease
    substantially all of our hotel properties to subsidiaries that
    qualify as TRSs, under applicable REIT laws, and our TRS lessees
    will retain third-party managers to operate our hotels pursuant
    to management agreements. Our cash flow from the hotels may be
    adversely affected if our managers fail to provide quality
    services and amenities or if they or their affiliates fail to
    maintain a quality brand name. In addition, our managers or
    their affiliates may manage, and in some cases may own, invest
    in or provide credit support or operating guarantees to hotels
    that compete with hotel properties that we acquire, which may
    result in conflicts of interest and decisions regarding the
    operation of our hotels that are not in our best interests.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will not have the authority to require any hotel property to
    be operated in a particular manner or to govern any particular
    aspect of the daily operations of any hotel property (for
    example, setting room rates). Thus, even if we believe our
    hotels are being operated inefficiently or in a manner that does
    not result in satisfactory occupancy rates, RevPAR and average
    daily rates, or ADR, we may not be able to force the
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    11
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    management company to change its method of operating our hotels.
    We generally will attempt to resolve issues with our managers
    through discussions and negotiations. However, if we are unable
    to reach satisfactory results through discussions and
    negotiations, we may choose to litigate the dispute or submit
    the matter to third-party dispute resolution. We can only seek
    redress if a management company violates the terms of the
    applicable management agreement with a TRS lessee, and then only
    to the extent of the remedies provided for under the terms of
    the management agreement. Additionally, in the event that we
    need to replace any management company, we may be required by
    the terms of the management agreement to pay substantial
    termination fees and may experience significant disruptions at
    the affected hotels.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    management agreements could affect the sale or financing of
    hotel properties.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we currently intend to enter into flexible management
    contracts that will provide us with the ability to replace our
    hotel managers on relatively short notice, we may enter into
    management contracts that contain some restrictive covenants.
    For example, the terms of some management agreements may
    restrict our ability to sell a property unless the purchaser is
    not a competitor of the manager and assumes the related
    management agreement and meets specified other conditions. If we
    enter into any such management agreements, we may be precluded
    from taking actions that would otherwise be in our best interest
    or could cause us to incur substantial expense.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    TRS lessee structure subjects us to the risk of increased hotel
    operating expenses.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our leases with our TRS lessees will require our TRS lessees to
    pay us rent based in part on revenues from our hotels. Our
    operating risks include decreases in hotel revenues and
    increases in hotel operating expenses, which would adversely
    affect our TRS lessees&#146; ability to pay us rent due under
    the leases, including but not limited to the increases in:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    wage and benefit costs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    repair and maintenance expenses;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    energy costs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    property taxes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    insurance costs;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    other operating expenses.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Increases in these operating expenses can have a significant
    adverse impact on our financial condition, results of
    operations, the market price of our common shares and our
    ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Operating
    hotels under franchise agreements could adversely affect our
    distributions to our shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect that many of our hotel properties will operate under
    franchise agreements, and we may be subject to the risks
    associated with concentrating hotel investments in several
    franchise brands. These risks include reductions in business
    following negative publicity related to one of the brands or the
    general decline of a brand.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The maintenance of the franchise licenses for our hotel
    properties will be subject to the franchisors&#146; operating
    standards and other terms and conditions. Franchisors will
    periodically inspect hotel properties to ensure that we and our
    lessees and management companies follow their standards. Failure
    by us, one of our TRS lessees or one of our third-party
    management companies to maintain these standards or other terms
    and conditions could result in a franchise license being
    canceled. If a franchise license terminates due to our failure
    to make required improvements or to otherwise comply with its
    terms, we also may be liable to the franchisor for a termination
    payment, which varies by franchisor and by hotel property. As a
    condition of maintaining a franchise license, a franchisor could
    require us to make capital expenditures, even if we do not
    believe the capital improvements are necessary or desirable or
    will result in an acceptable return on our investment. We may
    risk losing a franchise license if we do not make
    franchisor-required capital expenditures.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    12
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a franchisor terminates the franchise license or the license
    expires, we may try either to obtain a suitable replacement
    franchise or to operate the hotel without a franchise license.
    The loss of a franchise license could materially and adversely
    affect the operations and the underlying value of the hotel
    property because of the loss of associated name recognition,
    marketing support and centralized reservation systems provided
    by the franchisor and adversely affect our revenues. This loss
    of revenue could in turn adversely affect our financial
    condition, results of operations, the market price of our common
    shares and our ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    ability to make distributions to our shareholders is subject to
    fluctuations in our financial performance, operating results and
    capital improvements requirements.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify for taxation as a REIT, we will be required to
    distribute at least 90% of our taxable income (determined before
    the deduction for dividends paid and excluding any net capital
    gains) each year to our shareholders and we generally expect to
    make distributions in excess of such amount. In the event of
    downturns in our operating results, unanticipated capital
    improvements to our hotel properties or other factors we may be
    unable to declare or pay distributions to our shareholders. The
    timing and amount of distributions are in the sole discretion of
    our board of trustees which will consider, among other factors,
    our financial performance, any debt service obligations, any
    debt covenants, and capital expenditure requirements. We cannot
    assure you that we will generate sufficient cash in order to
    fund distributions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    cannot obtain financing, our growth will be
    limited.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify for taxation as a REIT, we will be required to
    distribute at least 90% of our taxable income (determined before
    the deduction for dividends paid and excluding any net capital
    gains) each year to our shareholders and we generally expect to
    make distributions in excess of such amount. As a result, our
    ability to retain earnings to fund acquisitions, redevelopment
    and development or other capital expenditures will be limited.
    After investing the net proceeds of this offering, we will have
    no debt. Although our business strategy contemplates future
    access to debt financing (including an anticipated revolving
    credit facility) to fund acquisitions, redevelopment,
    development, return on investment initiatives and working
    capital requirements, we have not yet initiated discussions with
    lenders and there can be no assurance that we will be able to
    obtain such financing on favorable terms or at all. Recent
    events in the financial markets have had an adverse impact on
    the credit markets and, as a result, credit has become
    significantly more expensive and difficult to obtain, if
    available at all. Some lenders are imposing more stringent
    credit terms, there has been and may continue to be a general
    reduction in the amount of credit available, and many banks are
    either unable or unwilling to provide new asset based lending.
    Tightening credit markets may have an adverse effect on our
    ability to obtain financing on favorable terms, if at all,
    thereby increasing financing costs
    <FONT style="white-space: nowrap">and/or</FONT>
    requiring us to accept financing with increasing restrictions.
    If adverse conditions in the credit markets&#160;&#151; in
    particular with respect to real estate or lodging industry
    finance&#160;&#151; materially deteriorate, our business could
    be materially and adversely affected. Our long-term ability to
    grow through investments in hotel properties will be limited if
    we cannot obtain additional financing. Market conditions may
    make it difficult to obtain financing, and we cannot assure you
    that we will be able to obtain additional debt or equity
    financing or that we will be able to obtain it on favorable
    terms.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Future
    debt service obligations could adversely affect our overall
    operating results, may require us to sell hotel properties, may
    jeopardize our qualification as a REIT and could adversely
    affect our ability to make distributions to our shareholders and
    the market price of our common shares.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business strategy contemplates the use of both secured and
    unsecured debt to finance long-term growth. We intend to limit
    the sum of the outstanding principal amount of our consolidated
    indebtedness and the liquidation preference of any outstanding
    preferred shares to not more than 4.5x our EBITDA for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of new debt or the issuance of
    preferred shares. Our board of trustees may modify or eliminate
    this limitation at any time without the approval of our
    shareholders. As a result, we may be able to incur substantial
    additional debt, including secured debt, in the future.
    Incurring debt could subject us to many risks, including the
    risks that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our cash flow from operations will be insufficient to make
    required payments of principal and interest;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    13
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our debt may increase our vulnerability to adverse economic and
    industry conditions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we may be required to dedicate a substantial portion of our cash
    flow from operations to payments on our debt, thereby reducing
    cash available for distribution to our shareholders, funds
    available for operations and capital expenditures, future
    business opportunities or other purposes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the terms of any refinancing will not be as favorable as the
    terms of the debt being refinanced;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the use of leverage could adversely affect our ability to make
    distributions to our shareholders and the market price of our
    common shares.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we violate covenants in future agreements relating to
    indebtedness that we may incur, we could be required to repay
    all or a portion of our indebtedness before maturity at a time
    when we might be unable to arrange financing for such repayment
    on attractive terms, if at all. In addition, future indebtedness
    agreements may require that we meet certain covenant tests in
    order to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we incur debt in the future and do not have sufficient funds
    to repay such debt at maturity, it may be necessary to refinance
    the debt through additional debt or additional equity
    financings. If, at the time of any refinancing, prevailing
    interest rates or other factors result in higher interest rates
    on refinancings, increases in interest expense could adversely
    affect our cash flow, and, consequently, cash available for
    distribution to our shareholders. If we are unable to refinance
    our debt on acceptable terms, we may be forced to dispose of
    hotel properties on disadvantageous terms, potentially resulting
    in losses. We may place mortgages on hotel properties that we
    acquire to secure a revolving credit facility or other debt. To
    the extent we cannot meet any future debt service obligations,
    we will risk losing some or all of our hotel properties that may
    be pledged to secure our obligations to foreclosure. Also,
    covenants applicable to any future debt could impair our planned
    investment strategy and, if violated, result in a default.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Higher interest rates could increase debt service requirements
    on any floating rate debt that we incur and could reduce the
    amounts available for distribution to our shareholders, as well
    as reduce funds available for our operations, future business
    opportunities, or other purposes. We may obtain in the future
    one or more forms of interest rate protection&#160;&#151; in the
    form of swap agreements, interest rate cap contracts or similar
    agreements&#160;&#151; to &#147;hedge&#148; against the possible
    negative effects of interest rate fluctuations. However, such
    hedging implies costs and we cannot assure you that any hedging
    will adequately relieve the adverse effects of interest rate
    increases or that counterparties under these agreement will
    honor their obligations thereunder. Adverse economic conditions
    could also cause the terms on which we borrow to be unfavorable.
    We could be required to liquidate one or more of our hotel
    properties in order to meet our debt service obligations at
    times which may not permit us to receive an attractive return on
    our investments.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Any
    joint venture investments that we make could be adversely
    affected by our lack of sole decision-making authority, our
    reliance on co-venturers&#146; financial condition and disputes
    between us and our co-venturers.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may co-invest in hotels in the future with third parties
    through partnerships, joint ventures or other entities,
    acquiring non-controlling interests in or sharing responsibility
    for a property, partnership, joint venture or other entity. In
    this event, we would not be in a position to exercise sole
    decision-making authority regarding the property, partnership,
    joint venture or other entity. Investments through partnerships,
    joint ventures, or other entities may, under certain
    circumstances, involve risks not present were a third party not
    involved, including the possibility that partners or
    co-venturers might become bankrupt, fail to fund their share of
    required capital contributions, make dubious business decisions
    or block or delay necessary decisions. Partners or co-venturers
    may have economic or other business interests or goals which are
    inconsistent with our business interests or goals, and may be in
    a position to take actions contrary to our policies or
    objectives. Such investments may also have the potential risk of
    impasses on decisions, such as a sale, because neither we nor
    the partner or co-venturer would have full control over the
    partnership or joint venture. Disputes between us and partners
    or co-venturers may result in litigation or arbitration that
    would increase our expenses and prevent our officers
    <FONT style="white-space: nowrap">and/or</FONT>
    trustees from focusing their time and effort on our business.
    Consequently, action
</DIV>

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    <BR>
    14
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    by, or disputes with, partners or co-venturers might result in
    subjecting properties owned by the partnership or joint venture
    to additional risk. In addition, we may in certain circumstances
    be liable for the actions of our third-party partners or
    co-venturers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Unanticipated
    expenses and insufficient demand for hotels in new geographic
    markets could adversely affect our profitability and our ability
    to make distributions to our shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of our business strategy, we may acquire or develop
    hotel properties in geographic areas in which our management may
    have little or no operating experience and in which potential
    customers may not be familiar with the brand of that particular
    hotel. As a result, we may have to incur costs relating to the
    opening, operation and promotion of such hotel properties that
    are substantially greater than those incurred in other areas.
    These hotels may attract fewer customers than other hotel
    properties we may acquire, while at the same time, we may incur
    substantial additional costs with such hotel properties. As a
    result, the results of operations at any hotel properties that
    we may acquire in unfamiliar markets may be less than those of
    other hotels that we may acquire. Unanticipated expenses and
    insufficient demand at a new hotel property, therefore, could
    adversely affect our financial condition and results of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    conflicts of interest policy we will adopt may not adequately
    address all of the conflicts of interest that may arise with
    respect to our activities.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to avoid any actual or perceived conflicts of interest
    with our trustees, officers or employees, we intend to adopt a
    conflicts of interest policy to specifically address some of the
    conflicts relating to our activities. Although under this policy
    the approval of a majority of our disinterested trustees will be
    required to approve any transaction, agreement or relationship
    in which any of our trustees, officers or employees has an
    interest, there is no assurance that this policy will be
    adequate to address all of the conflicts that may arise or will
    address such conflicts in a manner that is favorable to us. In
    addition, our current board of trustees consists only of
    Mr.&#160;Bortz, and as a result, the transactions and agreements
    entered into in connection with our formation prior to this
    offering have not been approved by any independent or
    disinterested trustees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    from time to time make distributions to our shareholders in the
    form of our common shares.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the extent that, in respect of any calendar year, cash
    available for distribution is less than our net taxable income,
    we could make distributions or a portion of the required
    distributions in the form of a taxable share distribution or
    distribution of debt securities. In addition, we might be
    required to sell assets or borrow funds to make distributions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Investments in Mortgage Loans</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    strategy of acquiring outstanding debt secured by a hotel or
    resort property may expose us to risks.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may consider acquiring outstanding debt secured by a hotel or
    resort property from lenders and investors if we believe we can
    ultimately foreclose or otherwise acquire ownership of the
    underlying property in the near-term through foreclosure,
    <FONT style="white-space: nowrap">deed-in-lieu</FONT>
    of foreclosure or other means. However, if we do acquire such
    debt, borrowers may seek to assert various defenses to our
    foreclosure or other actions and we may not be successful in
    acquiring the underlying property on a timely basis, or at all,
    in which event we could incur significant costs and experience
    significant delays in acquiring such properties, all of which
    could adversely affect our financial performance and reduce our
    expected returns from such investments. In addition, we may not
    earn a current return on such investments particularly if the
    loan that we acquire is in default.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to the Lodging Industry</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Current
    economic conditions may adversely affect the lodging
    industry.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The performance of the lodging industry has historically been
    closely linked to the performance of the general economy and,
    specifically, growth in U.S.&#160;gross domestic product, or
    GDP. It is also sensitive to business and personal discretionary
    spending levels. Declines in corporate budgets and consumer
    demand due
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    15
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    to adverse general economic conditions, risks affecting or
    reducing travel patterns, lower consumer confidence or adverse
    political conditions can lower the revenues and profitability of
    hotel properties and therefore the net operating profits of our
    TRS lessees to whom we intend to lease the hotel properties that
    we expect to acquire. The current global economic downturn has
    led to a significant decline in demand for products and services
    provided by the lodging industry, lower occupancy levels and
    significantly reduced room rates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that recovery of demand for products and services
    provided by the lodging industry will lag improvement in
    economic conditions. We cannot predict how severe or prolonged
    the global economic downturn will be or how severe or prolonged
    the lodging industry downturn will be. A further extended period
    of economic weakness would likely have an adverse impact on our
    revenues and negatively affect our financial condition, results
    of operations, the market price of our common shares and our
    ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    ability to make distributions to our shareholders may be
    affected by factors in the lodging industry.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Operating
    Risks</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We plan to own hotel properties which have different economic
    characteristics than many other real estate assets and a hotel
    REIT is structured differently than many other types of REITs. A
    typical office property owner, for example, has long-term leases
    with third-party tenants, which provides a relatively stable
    long-term stream of revenue. Our TRS lessees, on the other hand,
    will not enter into a lease with a hotel manager. Instead, our
    TRS lessees will engage the hotel manager pursuant to a
    management agreement and will pay the manager a fee for managing
    the hotel. The TRS lessees will receive all the operating profit
    or losses at the hotel. Moreover, virtually all hotel guests
    stay at the hotel for only a few nights, so the rate and
    occupancy at each of our hotels changes every day. As a result,
    we may have highly volatile earnings.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our hotel properties will be subject to various
    operating risks common to the lodging industry, many of which
    are beyond our control, including the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    competition from other hotel properties in our markets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    over-building of hotels in our markets, which could adversely
    affect occupancy and revenues at the hotel properties we acquire;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    dependence on business and commercial travelers and tourism;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    increases in energy costs and other expenses affecting travel,
    which may affect travel patterns and reduce the number of
    business and commercial travelers and tourists;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    increases in operating costs due to inflation and other factors
    that may not be offset by increased room rates;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in interest rates and in the availability, cost and
    terms of debt financing;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in governmental laws and regulations, fiscal policies
    and zoning ordinances and the related costs of compliance with
    laws and regulations, fiscal policies and ordinances;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    adverse effects of international, national, regional and local
    economic and market conditions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    unforeseen events beyond our control, such as terrorist attacks,
    travel related health concerns including pandemics and epidemics
    such as H1N1 influenza (swine flu), avian bird flu and SARS,
    political instability, regional hostilities, imposition of taxes
    or surcharges by regulatory authorities, travel related
    accidents and unusual weather patterns, including natural
    disasters such as hurricanes, tsunamis or earthquakes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    adverse effects of a downturn in the lodging industry;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    risks generally associated with the ownership of hotel
    properties and real estate, as we discuss in more detail below.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    16
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These factors could reduce the net operating profits of our TRS
    lessees, which in turn could adversely affect our financial
    condition, results of operations, the market price of our common
    shares and our ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Competition
    for Acquisitions</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to compete for investment opportunities with entities
    that may have substantially greater financial resources than we
    have. These entities generally may be able to accept more risk
    than we can prudently manage. This competition may generally
    limit the number of suitable investment opportunities offered to
    us or the number of properties that we are able to acquire. This
    competition may also increase the bargaining power of property
    owners seeking to sell to us, making it more difficult for us to
    acquire new properties on attractive terms.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Seasonality
    of Lodging Industry</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The lodging industry is seasonal in nature. This seasonality can
    be expected to cause quarterly fluctuations in our revenues. Our
    quarterly earnings may be adversely affected by factors outside
    our control, including weather conditions and poor economic
    factors. As a result, we may have to enter into short-term
    borrowings in certain quarters in order to offset these
    fluctuations in revenues and to make distributions to our
    shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cyclical
    Nature of Lodging Industry</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The lodging industry is highly cyclical in nature. Fluctuations
    in lodging demand and, therefore, hotel operating performance,
    are caused largely by general economic and local market
    conditions, which subsequently affect levels of business and
    leisure travel. In addition to general economic conditions, new
    hotel room supply is an important factor that can affect lodging
    industry fundamentals, and overbuilding has the potential to
    further exacerbate the negative impact of an economic recession.
    Room rates and occupancy, and thus RevPAR, tend to increase when
    demand growth exceeds supply growth. Although we believe that
    cyclical supply growth peaked in late 2008 to early 2009, and
    that lodging demand will begin to rebound in late 2010 to early
    2011, no assurances can be given that this will prove to be the
    case. The continued decline in lodging demand beyond late 2010
    to early 2011, or a continued growth in lodging supply, could
    result in continued deterioration in lodging industry
    fundamentals and returns that are substantially below
    expectations, or result in losses, which could adversely affect
    our financial condition, results of operations, the market price
    of our common shares and our ability to make distributions to
    our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Investment
    Concentration in Particular Segments of a Single
    Industry</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our entire business will be hotel-related. Therefore, a downturn
    in the lodging industry, in general, and the segments and
    markets in which we operate, in particular, would have a
    material adverse effect on our financial condition, results of
    operations, the market price of our common shares and our
    ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Capital
    Expenditures</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Some of the hotel properties we acquire may have a need for
    renovations and capital improvements at the time of acquisition
    and all the hotel properties we acquire will have an ongoing
    need for renovations and other capital improvements, including
    replacement, from time to time, of furniture, fixtures and
    equipment. The franchisors of hotel properties that we acquire
    will also require periodic capital improvements as a condition
    to our maintaining the franchise licenses. In addition, if we
    incur indebtedness, as we intend to do in the future, our
    lenders will likely require that we set aside annual amounts for
    capital improvements to our hotel properties. These capital
    improvements may give rise to the following risks:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    possible environmental problems;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    construction cost overruns and delays;
</TD>
</TR>

</TABLE>

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    <BR>
    17
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the possibility that revenues will be reduced while rooms or
    restaurants are out of service due to capital improvement
    projects;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a possible shortage of available cash to fund capital
    improvements and the related possibility that financing for
    these capital improvements may not be available to us on
    attractive terms;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    uncertainties as to market demand or a loss of market demand
    after capital improvements have begun.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The costs of renovations and capital improvements could
    adversely affect our financial condition, results of operations,
    the market price of our common shares and our ability to make
    distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Hotel
    and resort development and redevelopment is subject to timing,
    budgeting and other risks that may adversely affect our
    financial condition, results of operations, the market price of
    our common shares and our ability to make distributions to our
    shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Though not currently intended to be a primary focus of our
    initial investment strategy, we may engage in hotel development
    and redevelopment if suitable opportunities arise. Hotel
    development and redevelopment involves a number of risks,
    including risks associated with:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    construction delays or cost overruns that may increase project
    costs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the receipt of zoning, occupancy and other required governmental
    permits and authorizations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    development costs incurred for projects that are not pursued to
    completion;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    acts of God such as earthquakes, hurricanes, floods or fires
    that could adversely impact a project;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the negative impact of construction on operating performance
    during and soon after the construction period;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the ability to raise capital;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    governmental restrictions on the nature or size of a project.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot assure you that any development or redevelopment
    project will be completed on time or within budget. Our
    inability to complete a project on time or within budget could
    adversely affect our financial condition, results of operations,
    the market price of our common shares and our ability to make
    distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    increasing use of Internet travel intermediaries by consumers
    may adversely affect our profitability.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect that some of our hotel rooms will be booked through
    Internet travel intermediaries, such as Travelocity.com,
    Expedia.com and Priceline.com. As these Internet bookings
    increase, these intermediaries may be able to obtain higher
    commissions, reduced room rates or other significant contract
    concessions from the management companies that will operate the
    hotels we acquire. Moreover, some of these Internet travel
    intermediaries are attempting to offer hotel rooms as a
    commodity, by increasing the importance of price and general
    indicators of quality (such as &#147;three-star downtown
    hotel&#148;), at the expense of brand identification or quality
    of product or service. These intermediaries hope that consumers
    will eventually develop brand loyalties to their reservations
    system rather than to lodging brands or properties. If the
    amount of bookings made through Internet travel intermediaries
    proves to be more significant than we expect, room revenues may
    be lower than expected, and our financial condition, results of
    operations, the market price of our common shares and our
    ability to make distributions to our shareholders may be
    adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    be adversely affected by increased use of business related
    technology which may reduce the need for business related
    travel.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The increased use of teleconference and video-conference
    technology by businesses could result in decreased business
    travel as companies increase the use of technologies that allow
    multiple parties from
</DIV>

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    <BR>
    18
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    different locations to participate at meetings without traveling
    to a centralized meeting location. To the extent that such
    technologies play an increased role in day-to-day business and
    the necessity for business related travel decreases, hotel room
    demand may decrease and our financial condition, results of
    operations, the market price of our common shares and our
    ability to make distributions to our shareholders may be
    adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Future
    terrorist attacks or changes in terror alert levels could
    adversely affect us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Previous terrorist attacks and subsequent terrorist alerts have
    adversely affected the U.S.&#160;travel and hospitality
    industries over the past several years, often disproportionately
    to the effect on the overall economy. The impact that terrorist
    attacks in the U.S.&#160;or elsewhere could have on domestic and
    international travel and our business in particular cannot be
    determined but any such attacks or the threat of such attacks
    could have a material adverse effect on our business, our
    ability to finance our business, our ability to insure our
    properties and our results of operations and financial condition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    outbreak of influenza or other widespread contagious disease
    could reduce travel and adversely affect our
    business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The widespread outbreak of infectious or contagious disease in
    the U.S., such as the H1N1 virus, could reduce travel and
    adversely affect the hotel industry generally and our business
    in particular.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Uninsured
    and underinsured losses could adversely affect our operating
    results and our ability to make distributions to our
    shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to maintain comprehensive insurance on each of our
    hotel properties, including liability, fire and extended
    coverage, of the type and amount we believe are customarily
    obtained for or by hotel owners. There are no assurances that
    coverage will be available at reasonable rates. Various types of
    catastrophic losses, like earthquakes and floods, and losses
    from terrorist activities may not be insurable or may not be
    economically insurable. Initially, we do not expect to obtain
    terrorism insurance on the hotel properties we acquire because
    it is too costly. However, lenders may require such insurance
    and our failure to obtain such insurance could constitute a
    default under loan agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of a substantial loss, our insurance coverage may
    not be sufficient to cover the full current market value or
    replacement cost of our lost investment. Should an uninsured
    loss or a loss in excess of insured limits occur, we could lose
    all or a portion of the capital we have invested in a hotel
    property, as well as the anticipated future revenue from the
    property. In that event, we might nevertheless remain obligated
    for any mortgage debt or other financial obligations related to
    the property. Inflation, changes in building codes and
    ordinances, environmental considerations and other factors might
    also keep us from using insurance proceeds to replace or
    renovate a hotel after it has been damaged or destroyed. Under
    those circumstances, the insurance proceeds we receive might be
    inadequate to restore our economic position on the damaged or
    destroyed property.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    be subject to unknown or contingent liabilities related to the
    hotel properties we acquire.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The hotel properties that we acquire may be subject to unknown
    or contingent liabilities for which we may have no recourse, or
    only limited recourse, against the sellers. In general, the
    representations and warranties provided under the transaction
    agreements related to the sales of the hotel properties may not
    survive the closing of the transactions. While we will likely
    seek to require the sellers to indemnify us with respect to
    breaches of representations and warranties that survive, such
    indemnification may be limited and subject to various
    materiality thresholds, a significant deductible or an aggregate
    cap on losses. As a result, there is no guarantee that we will
    recover any amounts with respect to losses due to breaches by
    the sellers of their representations and warranties. In
    addition, the total amount of costs and expenses that may be
    incurred with respect to liabilities associated with these
    hotels may exceed our expectations, and we may experience other
    unanticipated adverse effects, all of which may adversely affect
    our financial condition, results of operations, the market price
    of our common shares and our ability to make distributions to
    our shareholders.
</DIV>

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    <BR>
    19
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    <B><I><FONT style="font-family: 'Times New Roman', Times">Noncompliance
    with governmental regulations could adversely affect our
    operating results.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Environmental
    Matters</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our hotel properties will be subject to various federal, state
    and local environmental laws. Under these laws, courts and
    government agencies have the authority to require us, as owner
    of a contaminated property, to clean up the property, even if we
    did not know of or were not responsible for the contamination.
    These laws also apply to persons who owned a property at the
    time it became contaminated, and therefore it is possible we
    could incur cleanup costs even after we sell some of the
    properties we acquire. In addition to the costs of cleanup,
    environmental contamination can affect the value of a property
    and, therefore, an owner&#146;s ability to borrow funds using
    the property as collateral or to sell the property. Under the
    environmental laws, courts and government agencies also have the
    authority to require that a person who sent waste to a waste
    disposal facility, such as a landfill or an incinerator, pay for
    the <FONT style="white-space: nowrap">clean-up</FONT>
    of that facility if it becomes contaminated and threatens human
    health or the environment. A person that arranges for the
    disposal or transports for disposal or treatment of a hazardous
    substance at a property owned by another may be liable for the
    costs of removal or remediation of hazardous substances released
    into the environment at that property.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, various court decisions have established that third
    parties may recover damages for injury caused by property
    contamination. For instance, a person exposed to asbestos while
    staying in a hotel may seek to recover damages if he or she
    suffers injury from the asbestos. Lastly, some of these
    environmental laws restrict the use of a property or place
    conditions on various activities. An example would be laws that
    require a business using chemicals (such as swimming pool
    chemicals at a hotel property) to manage them carefully and to
    notify local officials that the chemicals are being used.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We could be responsible for any of the costs discussed above.
    The costs to clean up a contaminated property, to defend against
    a claim, or to comply with environmental laws could be material
    and could adversely affect our financial condition, results of
    operations, the market price of our common shares and our
    ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result, we may become subject to material environmental
    liabilities. We can make no assurances that future laws or
    regulations will not impose material environmental liabilities
    or that the current environmental condition of our hotel
    properties will not be affected by the condition of the
    properties in the vicinity of our hotel properties (such as the
    presence of leaking underground storage tanks) or by third
    parties unrelated to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Americans
    with Disabilities Act and Other Changes in Governmental Rules
    and Regulations</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the Americans with Disabilities Act of 1990, or the ADA,
    all public accommodations must meet various federal requirements
    related to access and use by disabled persons. Compliance with
    the ADA&#146;s requirements could require removal of access
    barriers, and non-compliance could result in the
    U.S.&#160;government imposing fines or in private litigants
    winning damages.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2008, the Department of Justice proposed a substantial
    number of changes to the Accessibility Guidelines under the ADA.
    In January 2009, President Obama suspended final publication and
    implementation of these regulations, pending a comprehensive
    review by his administration. If implemented as proposed, the
    new guidelines could cause some of our hotel properties to incur
    costly measures to become fully compliant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we are required to make substantial modifications to our
    hotel properties, whether to comply with the ADA or other
    changes in governmental rules and regulations, our financial
    condition, results of operations, the market price of our common
    shares and our ability to make distributions to our shareholders
    could be adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    Employee Free Choice Act could substantially increase the cost
    of doing business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A number of members of the U.S.&#160;Congress and President
    Obama have stated that they support the Employee Free Choice
    Act, which, if enacted, would discontinue the current practice
    of having an open process where both the union and the employer
    are permitted to educate employees regarding the pros and cons
    of joining a union before having an election by secret ballot.
    Under the Employee Free Choice Act, the
</DIV>

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    <BR>
    20
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    employees would only hear the union&#146;s side of the argument
    before making a commitment to join the union. The Employee Free
    Choice Act would permit unions to quietly collect employee
    signatures supporting the union without notifying the employer
    and permitting the employer to explain its views before a final
    decision is made by the employees. Once a union has collected
    signatures from a majority of the employees, the employer would
    have to recognize, and bargain with, the union. If the employer
    and the union fail to reach agreement on a collective bargaining
    contract within a certain number of days, both sides would be
    forced to submit their respective proposals to binding
    arbitration and a federal arbitrator would be permitted to
    create an employment contract binding on the employer. If the
    Employee Free Choice Act is enacted, a number of the hotel
    properties we will own or seek to acquire could become unionized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally, unionized hotel employees are subject to a number of
    work rules which could decrease operating margins at the
    unionized hotels. If that is the case, we believe that the
    unionization of hotel employees at hotels that we acquire may
    result in a significant decline in hotel profitability and
    value, which could adversely affect our financial condition,
    results of operations, the market price of our common shares and
    our ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">General
    Risks Related to the Real Estate Industry</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Illiquidity
    of real estate investments could significantly impede our
    ability to respond to adverse changes in the performance of our
    hotel properties and adversely affect our financial
    condition.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because real estate investments are relatively illiquid, our
    ability to promptly sell one or more hotel properties for
    reasonable prices in response to changing economic, financial
    and investment conditions will be limited. The real estate
    market is affected by many factors beyond our control, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
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<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    adverse changes in international, national, regional and local
    economic and market conditions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in interest rates and in the availability, cost and
    terms of debt financing;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in governmental laws and regulations, fiscal policies
    and zoning ordinances and the related costs of compliance with
    laws and regulations, fiscal policies and ordinances;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the ongoing need for capital improvements, particularly in older
    structures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in operating expenses;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    civil unrest, acts of God, including earthquakes, floods and
    other natural disasters, which may result in uninsured losses,
    and acts of war or terrorism.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may decide to sell hotel properties in the future. We cannot
    predict whether we will be able to sell any hotel property for
    the price or on the terms set by us, or whether any price or
    other terms offered by a prospective purchaser would be
    acceptable to us. We also cannot predict the length of time
    needed to find a willing purchaser and to close the sale of a
    hotel property.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may be required to expend funds to correct defects or to make
    improvements before a hotel property can be sold. We cannot
    assure you that we will have funds available to correct those
    defects or to make those improvements. In acquiring a hotel
    property, we may agree to lock-out provisions that materially
    restrict us from selling that property for a period of time or
    impose other restrictions, such as a limitation on the amount of
    debt that can be placed or repaid on that property. These
    factors and any others that would impede our ability to respond
    to adverse changes in the performance of the hotel properties or
    a need for liquidity could adversely affect our financial
    condition, results of operations, the market price of our common
    shares and our ability to make distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Increases
    in our property taxes would adversely affect our ability to make
    distributions to our shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our hotel properties will be subject to real and
    personal property taxes. These taxes may increase as tax rates
    change and as the properties are assessed or reassessed by
    taxing authorities. If property taxes increase, our financial
    condition, results of operations and our ability to make
    distributions to our shareholders could be materially and
    adversely affected and the market price of our common shares
    could decline.
</DIV>

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    <BR>
    21
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    costs of compliance with or liabilities under environmental laws
    could significantly reduce our profitability.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Operating expenses at our hotels could be higher than
    anticipated due to the cost of complying with existing or future
    environmental laws and regulations. In addition, an owner of
    real property can face liability for environmental contamination
    created by the presence or discharge of hazardous substances on
    the property. We may face liability regardless of:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="7%"></TD>
    <TD width="2%"></TD>
    <TD width="91%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our lack of knowledge of the contamination;
</TD>
</TR>


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<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the timing of the contamination;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the cause of the contamination;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the party responsible for the contamination of the property.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Environmental laws also impose ongoing compliance requirements
    on owners and operators of real property. Environmental laws
    potentially affecting us address a wide variety of matters,
    including, but not limited to, asbestos-containing building
    materials, storage tanks, storm water and wastewater discharges,
    lead-based paint, mold/mildew and hazardous wastes. Failure to
    comply with these laws could result in fines and penalties
    <FONT style="white-space: nowrap">and/or</FONT>
    expose us to third-party liability. Some of our properties may
    have conditions that are subject to these requirements, and we
    could be liable for such fines or penalties
    <FONT style="white-space: nowrap">and/or</FONT>
    liable to third parties, as described below in &#147;Our
    Business&#160;&#151; Environmental Matters.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain hotel properties we may own in the future may contain,
    or may have contained, asbestos-containing building materials,
    or ACBMs. Environmental laws require that ACBMs be properly
    managed and maintained, and may impose fines and penalties on
    building owners and operators for failure to comply with these
    requirements. Also, certain properties may be adjacent or near
    other properties that have contained or currently contain
    storage tanks for the storage of petroleum products or other
    hazardous or toxic substances. These operations create a
    potential for the release of petroleum products or other
    hazardous or toxic substances. Third parties may be permitted by
    law to seek recovery from owners or operators for property
    damage
    <FONT style="white-space: nowrap">and/or</FONT>
    personal injury associated with exposure to contaminants,
    including, but not limited to, petroleum products, hazardous or
    toxic substances and asbestos fibers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we expect to obtain Phase I environmental site
    assessments on hotel properties we acquire in the future, Phase
    I environmental site assessments are intended to evaluate
    information regarding the environmental condition of the
    surveyed property and surrounding properties based generally on
    visual observations, interviews and certain publicly available
    databases. These assessments do not typically take into account
    all environmental issues including, but not limited to, testing
    of soil or groundwater or the possible presence of asbestos,
    lead-based paint, radon, wetlands or mold. As a result, these
    assessments may fail to reveal all environmental conditions,
    liabilities or compliance concerns. Material environmental
    conditions, liabilities or compliance concerns may arise after
    the Phase I assessments; and future laws, ordinances or
    regulations may impose material additional environmental
    liability. We cannot assure you that costs of future
    environmental compliance will not affect our ability to make
    distributions to our shareholders or that such costs or other
    remedial measures will not be material to us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The presence of hazardous substances on a property may limit our
    ability to sell the property on favorable terms or at all, and
    we may incur substantial remediation costs. The discovery of
    material environmental liabilities at our properties could
    subject us to unanticipated significant costs, which could
    significantly reduce our profitability and the cash available
    for distribution to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    properties may contain or develop harmful mold, which could lead
    to liability for adverse health effects and costs of remediating
    the problem.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    When excessive moisture accumulates in buildings or on building
    materials, mold growth may occur, particularly if the moisture
    problem remains undiscovered or is not addressed over a period
    of time. Some molds may produce airborne toxins or irritants.
    Concern about indoor exposure to mold has been increasing as
    exposure to mold may cause a variety of adverse health effects
    and symptoms, including allergic or other
</DIV>

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    <BR>
    22
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    reactions. Some of the properties in our portfolio may contain
    microbial matter such as mold and mildew. The presence of
    significant mold at any of our properties could require us to
    undertake a costly remediation program to contain or remove the
    mold from the affected property. The presence of significant
    mold could expose us to liability from hotel guests, hotel
    employees and others if property damage or health concerns arise.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Any
    mortgage debt obligations we incur will expose us to increased
    risk of property losses, which could adversely affect our
    financial condition, cash flow and ability to satisfy any of our
    other debt obligations and make distributions to our
    shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Incurring mortgage debt increases our risk of property losses,
    because any defaults on indebtedness secured by properties may
    result in foreclosure actions initiated by lenders and
    ultimately our loss of the property securing the loan for which
    we are in default. For tax purposes, a foreclosure of any of our
    properties would be treated as a sale of the property for a
    purchase price equal to the outstanding balance of the debt
    secured by the mortgage. If the outstanding balance of the debt
    secured by the mortgage exceeds our tax basis in the property,
    we would recognize taxable income on foreclosure but would not
    receive any cash proceeds. As a result, we may be required to
    identify and utilize other sources of cash for distributions to
    our shareholders of that income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, any default under our mortgage debt obligations may
    increase the risk of our default on other indebtedness. If this
    occurs, our financial condition, results of operations, the
    market price of our common shares and our ability to make
    distributions to our shareholders may be adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to Our Organization and Structure</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Provisions
    of our declaration of trust may limit the ability of a third
    party to acquire control of us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust authorizes our board of trustees to
    issue up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares and up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;preferred
    shares. In addition, our board of trustees may, without
    shareholder approval, amend our declaration of trust to increase
    the aggregate number of our shares or the number of shares of
    any class or series that we have the authority to issue and to
    classify or reclassify any unissued common shares or preferred
    shares and to set the preferences, rights and other terms of the
    classified or reclassified shares. As a result, our board of
    trustees may authorize the issuance of additional shares or
    establish a series of common or preferred shares that may have
    the effect of delaying or preventing a change in control of our
    company, including transactions at a premium over the market
    price of our shares, even if shareholders believe that a change
    of control is in their interest.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Provisions
    of Maryland law may limit the ability of a third party to
    acquire control of us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain provisions of the Maryland General Corporation Law, or
    the MGCL, applicable to Maryland real estate investment trusts
    may have the effect of inhibiting a third party from making a
    proposal to acquire us or of impeding a change of control under
    circumstances that otherwise could provide our common
    shareholders with the opportunity to realize a premium over the
    then-prevailing market price of such shares, including:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>&#147;business combination&#148; </I>provisions that, subject
    to limitations, prohibit certain business combinations between
    us and an &#147;interested shareholder&#148; (defined generally
    as any person who beneficially owns 10% or more of the voting
    power of our shares) or an affiliate of any interested
    shareholder for five years after the most recent date on which
    the shareholder becomes an interested shareholder, and
    thereafter imposes special appraisal rights and special
    shareholder voting requirements on these combinations;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>&#147;control share&#148; </I>provisions that provide that
    our &#147;control shares&#148; (defined as shares which, when
    aggregated with other shares controlled by the shareholder,
    entitle the shareholder to exercise one of three increasing
    ranges of voting power in electing trustees) acquired in a
    &#147;control share acquisition&#148; (defined as the direct or
    indirect acquisition of ownership or control of &#147;control
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    23
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    shares&#148;) have no voting rights except to the extent
    approved by our shareholders by the affirmative vote of at least
    two-thirds of all the votes entitled to be cast on the matter,
    excluding all interested shares.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    By resolution of our board of trustees, we have opted out of the
    business combination provisions of the MGCL and provided that
    any business combination between us and any other person is
    exempt from the business combination provisions of the MGCL,
    provided that the business combination is first approved by our
    board of trustees (including a majority of trustees who are not
    affiliates or associates of such persons). Pursuant to a
    provision in our bylaws, we have opted out of the control share
    provisions of the MGCL. However, our board of trustees may by
    resolution elect to opt in to the business combination
    provisions of the MGCL and we may, by amendment to our bylaws,
    opt in to the control share provisions of the MGCL in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, Title&#160;8, Subtitle 3 of the MGCL permits our
    board of trustees, without shareholder approval and regardless
    of what is currently provided in our declaration of trust or
    bylaws, to implement certain takeover defenses, such as a
    classified board, some of which we do not yet have. These
    provisions may have the effect of inhibiting a third party from
    making an acquisition proposal for us or of delaying, deferring
    or preventing a change in control of us under the circumstances
    that otherwise could provide our common shareholders with the
    opportunity to realize a premium over the then current market
    price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    ownership limitations may restrict or prevent you from engaging
    in certain transfers of our common shares.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order for us to qualify as a REIT for each taxable year after
    2009, no more than 50% in value of our outstanding shares of
    beneficial interest may be owned, directly or indirectly, by
    five or fewer individuals (as defined in the federal income tax
    laws to include various kinds of entities) during the last half
    of any taxable year. To assist us in qualifying as a REIT, our
    declaration of trust contains a share ownership limit.
    Generally, any of our shares owned by affiliated owners will be
    added together for purposes of the share ownership limit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If anyone transfers shares in a way that would violate the share
    ownership limit or prevent us from qualifying as a REIT under
    the federal income tax laws, those shares instead will be
    transferred to a trust for the benefit of a charitable
    beneficiary and will be either redeemed by us or sold to a
    person whose ownership of the shares will not violate the share
    ownership limit or we will consider the transfer to be null and
    void from the outset, and the intended transferee of those
    shares will be deemed never to have owned the shares. Anyone who
    acquires shares in violation of the share ownership limit or the
    other restrictions on transfer in our declaration of trust bears
    the risk of suffering a financial loss when the shares are
    redeemed or sold if the market price of our shares falls between
    the date of purchase and the date of redemption or sale.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, these ownership limitations may prevent an
    acquisition of control of us by a third party without our board
    of trustees&#146; approval, even if our shareholders believe the
    change of control is in their interest.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    rights and the rights of our shareholders to take action against
    our trustees and officers are limited, which could limit your
    recourse in the event of actions not in your best
    interests.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under Maryland law, generally, a trustee&#146;s actions will be
    upheld if he or she performs his or her duties in good faith, in
    a manner he or she reasonably believes to be in our best
    interests and with the care that an ordinarily prudent person in
    a like position would use under similar circumstances. In
    addition, our declaration of trust limits the liability of our
    trustees and officers to us and our shareholders for money
    damages, except for liability resulting from:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    actual receipt of an improper benefit or profit in money,
    property or services;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    active and deliberate dishonesty by the trustee or officer that
    was established by a final judgment as being material to the
    cause of action adjudicated.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    24
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust authorizes us to indemnify our trustees
    and officers for actions taken by them in those capacities to
    the maximum extent permitted by Maryland law. Our bylaws require
    us to indemnify each trustee or officer, to the maximum extent
    permitted by Maryland law, in the defense of any proceeding to
    which he or she is made, or threatened to be made, a party by
    reason of his or her service to us. In addition, we may be
    obligated to fund the defense costs incurred by our trustees and
    officers. As a result, we and our shareholders may have more
    limited rights against our trustees and officers than might
    otherwise exist absent the current provisions in our declaration
    of trust and bylaws or that might exist with other companies.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    declaration of trust and bylaws contain provisions that make
    removal of our trustees difficult, which could make it difficult
    for our shareholders to effect changes to our
    management.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust and bylaws provide that a trustee may
    be removed only for cause (as defined in our declaration of
    trust) and then only by the affirmative vote of at least
    two-thirds of the votes entitled to be cast generally in the
    election of trustees. Our declaration of trust also provides
    that vacancies on our board of trustees may be filled only by a
    majority of the remaining trustees in office, even if less than
    a quorum. These requirements prevent shareholders from removing
    trustees except for cause and with a substantial affirmative
    vote and from replacing trustees with their own nominees and may
    prevent a change in control of our company that is in the best
    interests of our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    ability of our board of trustees to change our major policies
    may not be in your interest.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees determines our major policies, including
    policies and guidelines relating to our acquisitions, leverage,
    financing, growth, operations and distributions to shareholders.
    Our board may amend or revise these and other policies and
    guidelines from time to time without the vote or consent of our
    shareholders. Accordingly, our shareholders will have limited
    control over changes in our policies and those changes could
    adversely affect our financial condition, results of operations,
    the market price of our common shares and our ability to make
    distributions to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    will enter into an agreement with Mr.&#160;Bortz that provides
    him with benefits in the event his employment is terminated by
    us without cause, by him for good reason or under certain
    circumstances following a change of control of us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agreement that we will enter into with Mr.&#160;Bortz upon
    completion of this offering provides benefits under certain
    circumstances that could make it more difficult for us to
    terminate him and may prevent or deter a change of control of us
    that would otherwise be in the interest of our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    fail to implement and maintain an effective system of internal
    controls, we may not be able to accurately determine our
    financial results or prevent fraud. As a result, our
    shareholders could lose confidence in our financial results,
    which could harm our business and the value of our common
    shares.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective internal controls are necessary for us to provide
    reliable financial reports and effectively prevent fraud. We are
    a newly formed company that will develop financial and
    operational reporting and control systems. We may in the future
    discover areas of our internal controls that need improvement.
    Section&#160;404 of the Sarbanes-Oxley Act of 2002 will require
    us to evaluate and report on our internal controls over
    financial reporting and have our independent auditors annually
    issue their own opinion on our internal controls over financial
    reporting. While we intend to undertake substantial work to
    prepare for compliance with Section&#160;404, we cannot be
    certain that we will be successful in implementing or
    maintaining adequate internal controls over our financial
    reporting and financial processes. Furthermore, as we grow our
    business, our internal controls will become more complex, and we
    will require significantly more resources to ensure our internal
    controls remain effective. If we or our independent auditors
    discover a material weakness, the disclosure of that fact, even
    if quickly remedied, could reduce the market value of our common
    shares. Additionally, the existence of any material weakness or
    significant deficiency would require management to devote
    significant time and incur significant expense to remediate any
    such material weaknesses or significant deficiencies and
    management may not be able to remediate any such material
    weaknesses or significant deficiencies in a timely manner.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    25
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to This Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have not established a minimum distribution payment level and we
    may be unable to generate sufficient cash flows from our
    operations to make distributions to our shareholders at any time
    in the future.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify for taxation as a REIT, we will be required to
    distribute to our shareholders at least 90% of our taxable
    income each year for us to qualify as a REIT under the Code. To
    the extent we satisfy the 90% distribution requirement but
    distribute less than 100% of our taxable income, we will be
    subject to a U.S.&#160;federal corporate income tax and a
    U.S.&#160;federal excise tax on our undistributed taxable
    income. We have not established a minimum distribution payment
    level, and our ability to make distributions to our shareholders
    may be adversely affected by the risk factors described in this
    prospectus. Because we currently have no hotel properties and
    will commence operations only upon completion of this offering,
    we may not generate sufficient income to make distributions to
    our shareholders. We currently do not expect to use the net
    proceeds from this offering to make distributions to our
    shareholders. Our board of trustees has the sole discretion to
    determine the timing, form and amount of any distributions to
    our shareholders. The amount of such distributions may be
    limited until we have a portfolio of income-generating hotel
    properties. Our board of trustees will make determinations
    regarding distributions based upon, among other factors, our
    financial performance, any debt service obligations, any debt
    covenants, and capital expenditure requirements. Among the
    factors that could impair our ability to make distributions to
    our shareholders are:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our inability to invest the net proceeds of this offering;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our inability to realize attractive risk-adjusted returns on our
    investments;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    unanticipated expenses or reduced revenues that reduce our cash
    flow or non-cash earnings;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    decreases in the value of our hotel properties.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result, no assurance can be given that we will be able to
    make distributions to our shareholders at any time in the future
    or that the level of any distributions we do make to our
    shareholders will increase or even be maintained over time, any
    of which could materially and adversely affect the market price
    of our common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, distributions that we make to our shareholders
    generally will be taxable to our shareholders as ordinary
    income. However, a portion of our distributions may be
    designated by us as long-term capital gains to the extent that
    they are attributable to capital gain income recognized by us or
    may constitute a return of capital to the extent that they
    exceed our accumulated earnings and profits as determined for
    tax purposes. A return of capital is not taxable, but has the
    effect of reducing the basis of a shareholder&#146;s investment
    in our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    cannot assure you that a public market for our common shares
    will develop.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has not been a public market for
    our common shares. We intend to apply to have our common shares
    listed on the New York Stock Exchange, or the NYSE, under the
    symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#148;.
    However, we cannot assure you that a regular trading market for
    our common shares will develop or, if one does develop, that any
    such market will be sustained. In the absence of a public
    trading market, an investor may be unable to liquidate an
    investment in our common shares. The initial public offering
    price has been determined by us and the representatives of the
    underwriters. We cannot assure you that the price at which the
    common shares will sell in the public market after the closing
    of this offering will not be lower than the price at which they
    are sold by the underwriters.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Common
    shares eligible for future sale may have adverse effects on our
    share price.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot predict the effect, if any, of future sales of common
    shares, or the availability of common shares for future sale, on
    the market price of our common shares. Sales of substantial
    amounts of common shares (including shares issued to our
    trustees and officers), or the perception that these sales could
    occur, may adversely affect prevailing market prices for our
    common shares.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    26
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our trustees and officers who has received share grants
    has entered into
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements with respect to their common shares, restricting the
    sale of such person&#146;s shares, for 180&#160;days. The
    representatives, at any time, may release all or a portion of
    the common shares subject to the foregoing
    <FONT style="white-space: nowrap">lock-up</FONT>
    provisions. If the restrictions under such agreements are
    waived, the affected common shares may be available for sale
    into the market, which could reduce the market price for our
    common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also may issue from time to time additional common shares or
    limited partnership interests in our operating partnership in
    connection with the acquisition of properties and we may grant
    demand or piggyback registration rights in connection with these
    issuances. Sales of substantial amounts of our common shares or
    the perception that these sales could occur may adversely affect
    the prevailing market price for our common shares or may impair
    our ability to raise capital through a sale of additional equity
    securities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    market price of our common shares may vary
    substantially.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The trading prices of equity securities issued by REITs
    historically have been affected by changes in market interest
    rates. One of the factors that may influence the price of our
    common shares is the annual yield from distributions on our
    common shares as compared to yields on other financial
    instruments. An increase in market interest rates, or a decrease
    in our distributions to shareholders, may lead prospective
    purchasers of our common shares to demand a higher annual yield,
    which could reduce the market price of our common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other factors that could affect the market price of our common
    shares include the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    actual or anticipated variations in our quarterly results of
    operations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in market valuations of companies in the hotel or real
    estate industries;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in expectations of future financial performance or
    changes in estimates of securities analysts;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    fluctuations in stock market prices and volumes;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our issuances of common shares or other securities in the future;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the addition or departure of key personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    announcements by us or our competitors of acquisitions,
    investments or strategic alliances;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    unforeseen events beyond our control, such as terrorist attacks,
    travel related health concerns including pandemics and epidemics
    such as H1N1 influenza (swine flu), avian bird flu and SARS,
    political instability, regional hostilities, increases in fuel
    prices, imposition of taxes or surcharges by regulatory
    authorities and travel related accidents and unusual weather
    patterns, including natural disasters such as hurricanes,
    tsunamis or earthquakes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Future
    offerings of debt or equity securities ranking senior to our
    common shares may adversely affect the market price of our
    common shares.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we decide to issue debt or equity securities in the future
    ranking senior to our common shares or otherwise incur
    indebtedness, it is possible that these securities or
    indebtedness will be governed by an indenture or other
    instrument containing covenants restricting our operating
    flexibility and limiting our ability to make distributions to
    our shareholders. Additionally, any convertible or exchangeable
    securities that we issue in the future may have rights,
    preferences and privileges, including with respect to
    distributions, more favorable than those of our common shares
    and may result in dilution to owners of our common shares.
    Because our decision to issue debt or equity securities in any
    future offering or otherwise incur indebtedness will depend on
    market conditions and other factors beyond our control, we
    cannot predict or estimate the amount, timing or nature of our
    future offerings or financings, any of which could reduce the
    market price of our common shares and dilute the value of our
    common shares.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    27
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Federal
    Income Tax Risk Factors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    failure to qualify, or our failure to remain qualified, as a
    REIT would result in higher taxes and reduced cash available for
    distribution to our shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to elect to be taxed as a REIT for federal income tax
    purposes, commencing with our short taxable year beginning on
    the business day prior to the closing of this offering and
    ending December&#160;31, 2009. However, qualification as a REIT
    involves the application of highly technical and complex
    provisions of the Code, for which only a limited number of
    judicial and administrative interpretations exist. Even an
    inadvertent or technical mistake could jeopardize our REIT
    qualification. Our qualification as a REIT will depend on our
    satisfaction of certain asset, income, organizational,
    distribution, shareholder ownership and other requirements on a
    continuing basis.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Moreover, new tax legislation, administrative guidance or court
    decisions, in each instance potentially applicable with
    retroactive effect, could make it more difficult or impossible
    for us to qualify as a REIT. If we were to fail to qualify as a
    REIT in any taxable year, we would be subject to federal income
    tax, including any applicable alternative minimum tax, on our
    taxable income at regular corporate rates, and distributions to
    shareholders would not be deductible by us in computing our
    taxable income. Any such corporate tax liability could be
    substantial and would reduce the amount of cash available for
    distribution to our shareholders, which in turn could have an
    adverse impact on the value of our shares of beneficial
    interest. If, for any reason, we failed to qualify as a REIT and
    we were not entitled to relief under certain Code provisions, we
    would be unable to elect REIT status for the four taxable years
    following the year during which we ceased to so qualify which
    would negatively impact the value of our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Failure
    to make required distributions would subject us to tax, which
    would reduce the cash available for distribution to our
    shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify as a REIT, we must distribute to our shareholders
    each calendar year at least 90% of our REIT taxable income
    (including certain items of non-cash income), determined before
    the deduction for dividends paid and excluding any net capital
    gain. To the extent that we satisfy the 90% distribution
    requirement, but distribute less than 100% of our taxable
    income, we will be subject to federal corporate income tax on
    our undistributed income. In addition, we will incur a 4%
    nondeductible excise tax on the amount, if any, by which our
    distributions in any calendar year are less than the sum of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    85% of our REIT ordinary income for that year;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    95% of our REIT capital gain net income for that year;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    any undistributed taxable income from prior years.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to distribute our net taxable income to our
    shareholders in a manner intended to satisfy the 90%
    distribution requirement and to avoid both corporate income tax
    and the 4% nondeductible excise tax. However, there is no
    requirement that TRSs distribute their after tax net income to
    their parent REIT or their shareholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our taxable income may substantially exceed our net income as
    determined based on GAAP, because, for example, realized capital
    losses will be deducted in determining our GAAP net income, but
    may not be deductible in computing our taxable income.
    Differences in timing between the recognition of income and the
    related cash receipts or the effect of required debt
    amortization payments could require us to borrow money or sell
    properties at prices or at times that we regard as unfavorable
    in order to pay out enough of our taxable income to satisfy the
    distribution requirement and to avoid corporate income tax and
    the 4% nondeductible excise tax in a particular year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    formation of our TRS lessees increases our overall tax
    liability.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The TRS lessees will be subject to federal and state income tax
    on their taxable income, which will consist of the revenues from
    the hotel properties leased by the TRS lessees, net of the
    operating expenses for such hotel properties and rent payments
    to us. Accordingly, although our ownership of the TRS lessees
    will
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    28
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    allow us to participate in the operating income from our hotel
    properties in addition to receiving rent, that operating income
    will be fully subject to income tax. The after-tax net income of
    the TRS lessees is available for distribution to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    ownership of our TRS lessees will be limited and our
    transactions with our TRS lessees will cause us to be subject to
    a 100% penalty tax on certain income or deductions if those
    transactions are not conducted on arm&#146;s-length
    terms.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A REIT may own up to 100% of the stock of one or more TRSs. A
    TRS may hold assets and earn income that would not be qualifying
    assets or income if held or earned directly by a REIT, including
    gross operating income from hotel operations pursuant to hotel
    management agreements. Both the subsidiary and the REIT must
    jointly elect to treat the subsidiary as a TRS. A corporation of
    which a TRS directly or indirectly owns more than 35% of the
    voting power or value of the stock will automatically be treated
    as a TRS. Overall, no more than 25% of the value of a
    REIT&#146;s assets may consist of stock or securities of one or
    more TRSs. In addition, the TRS rules limit the deductibility of
    interest paid or accrued by a TRS to its parent REIT to assure
    that the TRS is subject to an appropriate level of corporate
    taxation. The rules also impose a 100% excise tax on certain
    transactions between a TRS and its parent REIT that are not
    conducted on an arm&#146;s-length basis.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our TRS lessees will pay applicable federal, foreign, state and
    local income tax on their taxable income, and their after-tax
    net income will be available for distribution to us but is not
    required to be distributed by such domestic TRS lessee to us. We
    anticipate that the aggregate value of the stock and securities
    of our TRS lessees will be less than 25% of the value of our
    total assets (including our TRS lessees&#146; stock and
    securities). Furthermore, we will monitor the value of our
    respective investments in our TRS lessees for the purpose of
    ensuring compliance with TRS ownership limitations. In addition,
    we will scrutinize all of our transactions with our TRS lessees
    to ensure that they are entered into on arm&#146;s-length terms
    to avoid incurring the 100% excise tax described above. There
    can be no assurance, however, that we will be able to comply
    with the 25% limitation discussed above or to avoid application
    of the 100% excise tax discussed above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If the
    leases of our hotel properties to our TRS lessees are not
    respected as true leases for federal income tax purposes, we
    would fail to qualify as a REIT.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify as a REIT, we must satisfy two gross income tests,
    under which specified percentages of our gross income must be
    derived from certain sources, such as &#147;rents from real
    property.&#148; Rents paid to our operating partnership by our
    TRS lessees pursuant to the lease of our hotel properties will
    constitute substantially all of our gross income. In order for
    such rent to qualify as &#147;rents from real property&#148; for
    purposes of the gross income tests, the leases must be respected
    as true leases for federal income tax purposes and not be
    treated as service contracts, joint ventures or some other type
    of arrangement. If our leases are not respected as true leases
    for federal income tax purposes, we would fail to qualify as a
    REIT.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If our
    operating partnership failed to qualify as a partnership for
    federal income tax purposes, we would cease to qualify as a REIT
    and suffer other adverse consequences.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our operating partnership will qualify to be
    treated as a partnership for federal income tax purposes. As a
    partnership, our operating partnership will not be subject to
    federal income tax on its income. Instead, each of its partners,
    including us, will be required to pay tax on its allocable share
    of the operating partnership&#146;s income. No assurance can be
    provided, however, that the Internal Revenue Service, or IRS,
    will not challenge its status as a partnership for federal
    income tax purposes, or that a court would not sustain such a
    challenge. If the IRS were successful in treating our operating
    partnership as a corporation for tax purposes, we would fail to
    meet the gross income tests and certain of the asset tests
    applicable to REITs and, accordingly, cease to qualify as a
    REIT. Also, the failure of our operating partnership to qualify
    as a partnership would cause it to become subject to federal and
    state corporate income tax, which would reduce significantly the
    amount of cash available for debt service and for distribution
    to its partners, including us.
</DIV>

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    <BR>
    29
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If our
    hotel managers do not qualify as &#147;eligible independent
    contractors,&#148; we would fail to qualify as a
    REIT.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rent paid by a lessee that is a &#147;related party tenant&#148;
    of ours will not be qualifying income for purposes of the two
    gross income tests applicable to REITs. We expect to lease
    substantially all of our hotels to our TRS lessees. So long as
    any TRS lessee qualifies as a TRS, it will not be treated as a
    &#147;related party tenant&#148; with respect to our properties
    that are managed by an independent hotel management company that
    qualifies as an &#147;eligible independent contractor.&#148; We
    believe that our TRSs will qualify to be treated as TRSs for
    federal income tax purposes, but there can be no assurance that
    the IRS will not challenge the status of a TRS for federal
    income tax purposes or that a court would not sustain such a
    challenge. If the IRS were successful in disqualifying any of
    our TRSs lessees from treatment as a TRS, it is possible that we
    would fail to meet the asset tests applicable to REITs and
    substantially all of our income would fail to qualify for the
    gross income tests. If we failed to meet either the asset or
    gross income tests, we would likely lose our REIT qualification
    for federal income tax purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, if our hotel managers do not qualify as
    &#147;eligible independent contractors,&#148; we would fail to
    qualify as a REIT. Each of the hotel management companies that
    enters into a management contract with our TRS lessees must
    qualify as an &#147;eligible independent contractor&#148; under
    the REIT rules in order for the rent paid to us by our TRS
    lessees to be qualifying income for purposes of the REIT gross
    income tests. Among other requirements, in order to qualify as
    an eligible independent contractor a manager must not own,
    directly or through its shareholders, more than 35% of our
    outstanding shares, taking into account certain ownership
    attribution rules. The ownership attribution rules that apply
    for purposes of these 35% thresholds are complex. Although we
    intend to monitor ownership of our shares by our hotel managers
    and their owners, there can be no assurance that these ownership
    levels will not be exceeded.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Dividends
    payable by REITs do not qualify for the reduced tax rates
    available for some dividends.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The maximum tax rate applicable to income from &#147;qualified
    dividends&#148; payable to U.S.&#160;shareholders that are
    individuals, trusts and estates has been reduced by legislation
    to 15% (through the end of 2010). Dividends payable by REITs,
    however, generally are not eligible for the reduced rates.
    Although this legislation does not adversely affect the taxation
    of REITs or dividends payable by REITs, the more favorable rates
    applicable to regular corporate qualified dividends could cause
    investors who are individuals, trusts and estates to perceive
    investments in REITs to be relatively less attractive than
    investments in the stocks of non-REIT corporations that pay
    dividends, which could adversely affect the value of the shares
    of REITs, including our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Complying
    with REIT requirements may limit our ability to hedge
    effectively and may cause us to incur tax
    liabilities.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The REIT provisions of the Code substantially limit our ability
    to hedge our liabilities. Any income from a hedging transaction
    we enter into to manage risk of interest rate changes, price
    changes or currency fluctuations with respect to borrowings made
    or to be made to acquire or carry real estate assets does not
    constitute &#147;gross income&#148; for purposes of the 75% or
    95% gross income tests. To the extent that we enter into other
    types of hedging transactions, the income from those
    transactions is likely to be treated as non-qualifying income
    for purposes of both of the gross income tests. See
    &#147;Material Federal Income Tax Considerations&#160;&#151;
    Gross Income Tests&#160;&#151; Hedging Transactions.&#148; As a
    result of these rules, we may need to limit our use of
    advantageous hedging techniques or implement those hedges
    through a TRS. This could increase the cost of our hedging
    activities because our TRS would be subject to tax on gains or
    expose us to greater risks associated with changes in interest
    rates than we would otherwise want to bear. In addition, losses
    in our TRSs will generally not provide any tax benefit, except
    for being carried forward against future taxable income in the
    TRSs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Complying
    with REIT requirements may cause us to forego otherwise
    attractive opportunities or liquidate otherwise attractive
    investments.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify as a REIT for federal income tax purposes, we must
    continually satisfy tests concerning, among other things, the
    sources of our income, the nature and diversification of our
    assets, the amounts we distribute to our shareholders and the
    ownership of our shares of beneficial interest. In order to meet
    these tests, we may be required to forego investments we might
    otherwise make. Thus, compliance with the REIT requirements may
    hinder our performance.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In particular, we must ensure that at the end of each calendar
    quarter, at least 75% of the value of our assets consists of
    cash, cash items, government securities and qualified real
    estate assets. The remainder of our investment in securities
    (other than government securities and qualified real estate
    assets) generally cannot include more than 10% of the
    outstanding voting securities of any one issuer or more than 10%
    of the total value of the outstanding securities of any one
    issuer. In addition, in general, no more than 5% of the value of
    our assets (other than government securities and qualified real
    estate assets) can consist of the securities of any one issuer,
    and no more than 25% of the value of our total assets can be
    represented by the securities of one or more TRSs. If we fail to
    comply with these requirements at the end of any calendar
    quarter, we must correct the failure within 30&#160;days after
    the end of the calendar quarter or qualify for certain statutory
    relief provisions to avoid losing our REIT qualification and
    suffering adverse tax consequences. As a result, we may be
    required to liquidate otherwise attractive investments. These
    actions could have the effect of reducing our income and amounts
    available for distribution to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    ability of our board of trustees to revoke our REIT
    qualification without shareholder approval may cause adverse
    consequences to our shareholders.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides that our board of trustees may
    revoke or otherwise terminate our REIT election, without the
    approval of our shareholders, if it determines that it is no
    longer in our best interest to continue to qualify as a REIT. If
    we cease to be a REIT, we would become subject to federal income
    tax on our taxable income and would no longer be required to
    distribute most of our taxable income to our shareholders, which
    may have adverse consequences on our total return to our
    shareholders and on the market price of our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    be subject to adverse legislative or regulatory tax changes that
    could reduce the market price of our common
    shares.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At any time, the federal income tax laws governing REITs or the
    administrative and judicial interpretations of those laws may be
    amended. We cannot predict when or if any new federal income tax
    law, regulation, or administrative and judicial interpretation,
    or any amendment to any existing federal income tax law,
    regulation or administrative or judicial interpretation, will be
    adopted, promulgated or become effective and any such law,
    regulation, or interpretation may take effect retroactively. We
    and our shareholders could be adversely affected by any such
    change in, or any new, federal income tax law, regulation or
    administrative and judicial interpretation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    share ownership restrictions of the Code for REITs and the 9.8%
    share ownership limit in our declaration of trust may inhibit
    market activity in our shares of beneficial interest and
    restrict our business combination opportunities.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to qualify as a REIT for each taxable year after 2009,
    five or fewer individuals, as defined in the Code, may not own,
    actually or constructively, more than 50% in value of our issued
    and outstanding shares of beneficial interest at any time during
    the last half of a taxable year. Attribution rules in the Code
    determine if any individual or entity actually or constructively
    owns our shares of beneficial interest under this requirement.
    Additionally, at least 100&#160;persons must beneficially own
    our shares of beneficial interest during at least 335&#160;days
    of a taxable year for each taxable year after 2009. To help
    insure that we meet these tests, our declaration of trust
    restricts the acquisition and ownership of our shares of
    beneficial interest.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust, with certain exceptions, authorizes
    our trustees to take such actions as are necessary and desirable
    to preserve our qualification as a REIT. Unless exempted by our
    board of trustees, our declaration of trust prohibits any person
    from beneficially or constructively owning more than 9.8%
    (measured by value or number of shares, whichever is more
    restrictive) of any class or series of our shares of beneficial
    interest. Our board of trustees may not grant an exemption from
    these restrictions to any proposed transferee whose ownership in
    excess of 9.8% of the value of our outstanding shares would
    result in the termination of our qualification as a REIT. These
    restrictions on transferability and ownership will not apply,
    however, if our board of trustees determines that it is no
    longer in our best interest to continue to qualify as a REIT.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These ownership limits could delay or prevent a transaction or a
    change in control that might involve a premium price for our
    common shares or otherwise be in the best interest of the
    shareholders.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    31
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<A name='103'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAUTIONARY
    NOTE&#160;REGARDING FORWARD-LOOKING STATEMENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We make forward-looking statements in this prospectus that are
    subject to risks and uncertainties. These forward-looking
    statements include information about possible or assumed future
    results of our business, financial condition, liquidity, results
    of operations, plans and objectives. Statements regarding the
    following subjects are forward-looking by their nature.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our business and investment strategy;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our forecasted operating results;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    completion of hotel acquisitions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our ability to obtain future financing arrangements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our expected leverage levels;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our understanding of our competition;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    market and lodging industry trends and expectations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    anticipated capital expenditures;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    use of the net proceeds of this offering.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The forward-looking statements are based on our beliefs,
    assumptions and expectations of our future performance, taking
    into account all information currently available to us. These
    beliefs, assumptions and expectations can change as a result of
    many possible events or factors, not all of which are known to
    us. If a change occurs, our business, prospects, financial
    condition, liquidity and results of operations may vary
    materially from those expressed in our forward-looking
    statements. You should carefully consider this risk when you
    make an investment decision concerning our common shares.
    Additionally, the following factors could cause actual results
    to vary from our forward-looking statements:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the factors discussed in this prospectus, including those set
    forth under the sections titled &#147;Risk Factors,&#148;
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; and &#147;Our
    Business&#148;;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    general volatility of the capital markets and the market price
    of our common shares;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    performance of the lodging industry in general;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in our business or investment strategy;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    availability, terms and deployment of capital;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    availability of and our ability to attract and retain qualified
    personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our leverage levels;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our capital expenditures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    changes in our industry and the market in which we operate,
    interest rates or the general U.S.&#160;or international
    economy;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the degree and nature of our competition.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    When we use the words &#147;will,&#148; &#147;will likely
    result,&#148; &#147;may,&#148; &#147;anticipate,&#148;
    &#147;estimate,&#148; &#147;should,&#148; &#147;expect,&#148;
    &#147;believe,&#148; &#147;intend&#148; or similar expressions,
    we intend to identify forward-looking statements. You should not
    place undue reliance on these forward-looking statements. We are
    not obligated to publicly update or revise any forward-looking
    statements, whether as a result of new information, future
    events or otherwise.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We obtained certain data provided in this prospectus from
    publicly available materials published by Jones Lang LaSalle
    Hotels, or JLLH. The data was not prepared in connection with
    this offering.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    32
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='104'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that the net proceeds of this offering will be
    approximately $&#160;&#160;&#160;&#160;&#160;&#160;million after
    deducting the underwriting discount and other estimated offering
    expenses. If the underwriters&#146; overallotment option is
    exercised in full, our net proceeds will be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will contribute the net proceeds of this offering to our
    operating partnership. Our operating partnership will invest the
    net proceeds of this offering in hotel properties in accordance
    with our investment strategy described in this prospectus and
    for general business purposes. Prior to the full investment of
    the offering proceeds in hotel properties, we intend to invest
    the net proceeds in interest-bearing short-term investment grade
    securities or money-market accounts which are consistent with
    our intention to qualify as a REIT. Such investments may
    include, for example, government and government agency
    certificates, certificates of deposit, interest-bearing bank
    deposits and mortgage loan participations. These initial
    investments are expected to provide a lower net return than we
    will seek to achieve from investments in hotel properties. We
    will use approximately $&#160;&#160;&#160;&#160;&#160; of the
    net proceeds to reimburse Mr.&#160;Bortz for out-of-pocket
    expenses he incurred in connection with the formation of our
    company and this offering and $1,000 to repurchase the shares he
    acquired in connection with the formation and initial
    capitalization of our company.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    33
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='105'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our actual capitalization as of October&#160;7, 2009;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our pro forma capitalization, as adjusted to give effect to the
    sale of our common shares in this offering, at an offering price
    of $&#160;&#160;&#160;&#160;&#160; per share, not including
    shares subject to the underwriters&#146; overallotment option,
    and net of the underwriting discount and expenses payable by us
    in connection with this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the issuance
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares pursuant to restricted and unrestricted share
    awards to our trustees and our senior executive officers.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This table should be read in conjunction with the section
    captioned &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of October&#160;7, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As
    Adjusted<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Shareholders&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Preferred shares, $0.01&#160;par value per
    share,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    authorized, no shares issued and outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Common shares, $0.01&#160;par value, 1,000&#160;shares
    authorized, 1,000&#160;shares issued and
    outstanding;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issued and outstanding, as adjusted(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    990
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total shareholders&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">The as adjusted amounts do not
    include common shares issuable upon exercise of the
    underwriters&#146; overallotment option to purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares at the public offering price less the underwriting
    discount within 30&#160;days after the date of this prospectus.
    The as adjusted amounts also do not
    include&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares reserved for awards under our 2009 Equity Incentive Plan
    but not yet granted.
    </FONT></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    34
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='106'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    DISTRIBUTION POLICY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend over time to make regular quarterly distributions to
    holders of our common shares. However, until we invest a
    substantial portion of the net proceeds of this offering in
    hotel properties, we expect our quarterly distributions will be
    nominal. In order to qualify for taxation as a REIT, we intend
    to make annual distributions to our shareholders of an amount at
    least equal to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (i)&#160;90% of our REIT taxable income (determined before the
    deduction for dividends paid and excluding any net capital
    gain); plus
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (ii)&#160;90% of the excess of our after-tax net income, if any,
    from foreclosure property over the tax imposed on such income by
    the Code; less
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (iii)&#160;the sum of certain items of non-cash income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally, we expect to distribute 100% of our REIT taxable
    income so as to avoid the excise tax on underestimated REIT
    taxable income. However, we cannot assure you as to when we will
    begin to generate sufficient cash flow to make distributions to
    our shareholders or our ability to sustain those distributions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See the section entitled &#147;Material Federal Income Tax
    Considerations&#148; below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Distributions will be authorized by our board of trustees and
    declared by us based upon a variety of factors, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    actual results of operations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the timing of the investment of the net proceeds of this
    offering;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    any debt service requirements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    capital expenditure requirements for our properties;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our taxable income;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the annual distribution requirement under the REIT provisions of
    the Code;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our operating expenses;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    other factors that our board of trustees may deem relevant.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ability to pay distributions to our shareholders will
    depend, in part, upon our receipt of distributions from our
    operating partnership, which will depend upon receipt of rent
    payments from our TRS lessees and the management of our hotels
    by the third-party hotel management companies that our TRS
    lessees will engage to operate our hotels. Distributions to our
    shareholders generally will be taxable to our shareholders as
    ordinary income; however, because a significant portion of our
    investments will be equity ownership interests in hotel
    properties, which will generate depreciation and other non-cash
    charges against our income, a portion of our distributions may
    constitute a tax-free return of capital. To the extent not
    inconsistent with maintaining our qualification as a REIT, we
    may retain any earnings that accumulate in our TRSs.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    35
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='107'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    BUSINESS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Company</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are an internally managed hotel investment company recently
    organized to acquire and invest in hotel properties located
    primarily in the 20 largest United States cities, with an
    emphasis on the major coastal markets. In addition, we may
    invest in resort properties located near our primary urban
    target markets, as well as in select, unique destination
    markets. We intend to focus on full-service hotel properties in
    the &#147;upper upscale&#148; segment of the lodging industry as
    defined by Smith Travel Research, Inc. In addition, we may seek
    to acquire branded, upscale, select-service properties in our
    primary urban target markets. We believe that these investments
    can produce attractive risk-adjusted returns because we expect
    (i)&#160;to acquire properties at cyclically low prices in the
    current economic and financing environment and (ii)&#160;the
    properties we purchase will benefit from increasing business and
    leisure travel as the economy improves. We currently do not own
    any hotel properties and have no properties under contract. We
    intend to elect and qualify to be taxed as a real estate
    investment trust, or REIT, for federal income tax purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the current market environment will present a
    significant number of attractive investment opportunities and
    that our management team has the experience and expertise
    necessary to acquire a high quality portfolio of hotel
    properties. Our management team is led by Jon E. Bortz, the
    founder and former Chairman of the Board of Trustees and Chief
    Executive Officer of LaSalle Hotel Properties, a NYSE-listed
    hotel REIT. Prior to that, he founded and led Jones Lang
    LaSalle&#146;s Hotel Investment Group. Mr.&#160;Bortz has
    28&#160;years of lodging and real estate experience, having
    overseen more than $2.5&#160;billion of lodging-related
    transactions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will have approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million to invest in hotel
    properties and we will have no outstanding indebtedness.
    Accordingly, we believe we will be well-positioned to take
    advantage of attractive investment opportunities that we expect
    will be available in the lodging industry.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Market
    Opportunity</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S.&#160;hotel industry has experienced substantial
    declines in fundamentals as a result of the global economic
    recession and its adverse impact on business and leisure travel.
    We believe that the significant number of hotel properties
    experiencing substantial declines in operating cash flow,
    coupled with the challenged credit markets, near-term debt
    maturities and, in some instances, covenant defaults relating to
    outstanding indebtedness, will present attractive investment
    opportunities in the lodging industry. Accordingly, we believe
    the following factors will provide well-capitalized investors,
    such as our company, the opportunity to acquire high-quality
    hotel properties at prices significantly below replacement cost,
    with substantial appreciation potential as the U.S.&#160;economy
    recovers from the current recession:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Significant Debt Defaults.</I>&#160;&#160;Cash flow at many
    hotel properties has declined or will likely decline to levels
    that are inadequate to support required debt service payments or
    that violate applicable covenants. Real Capital Analytics
    estimates the aggregate value of hotel properties in distress
    (which includes default,
    <FONT style="white-space: nowrap">deed-in-lieu,</FONT>
    forced sales, foreclosure or bankruptcy) at approximately
    $18&#160;billion, including over 1,000 hotels, as of
    June&#160;30, 2009. We believe many of these hotel properties
    will be sold by lenders after foreclosure, while in receivership
    or in cooperation with the borrower. The following chart shows
    the increasing delinquency rates and amounts of hotel CMBS since
    November 2008.
</TD>
</TR>

</TABLE>

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    <BR>
    36
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<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Hotel
    CMBS Delinquency Rates and Amounts</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587702.gif" alt="(BAR GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Standard&#160;&#038; Poor&#146;s North American
    CMBS Monthly Snapshot
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Maturity Defaults and Lack of Available
    Financing.</I>&#160;&#160;According to Standard&#160;&#038;
    Poor&#146;s, hotel-related CMBS with an aggregate principal
    amount of approximately $21&#160;billion are scheduled to mature
    over the next three years, as shown in the chart below. In the
    current recessionary environment, traditional lending sources,
    such as banks, insurance companies and pension funds have
    adopted more conservative lending policies and have materially
    decreased new lending commitments to hotel properties. We
    believe the current and projected cash flows at many hotel
    properties, when coupled with more conservative lending
    policies, will only support mortgage financing that is
    significantly less than the amounts currently borrowed against
    such properties. As a result, we expect many owners of hotel
    properties will be unable to refinance maturing debt without
    significant additional equity investment, which may result in
    sales or foreclosures.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Hotel
    CMBS Fixed-Rate and Floating-Rate Final Maturities</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587703.gif" alt="(BAR GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Standard&#160;&#038; Poor&#146;s &#147;CMBS Lodging
    Performance Will Reflect Segments And Markets&#148;
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    37
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Under-Capitalized Owners.</I>&#160;&#160;Maintaining a
    hotel&#146;s physical condition at the levels required by major
    hotel brands often requires significant capital investment. This
    is particularly true for hotels in urban markets and in the
    upper upscale segment of the lodging industry, where we intend
    to focus our investment activity. We believe cash flow after
    debt service at many hotel properties may be insufficient to
    fund necessary capital expenditures and their owners may face
    capital investment demands that could require additional equity
    investments. We believe some hotel owners will be unable or
    unwilling to make the required equity investments and may choose
    or be compelled to sell their hotels.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transaction
    Landscape</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The aggregate value of sale transactions involving
    U.S.&#160;hotels with a purchase price of $10&#160;million or
    more decreased by approximately 81%, from approximately
    $45&#160;billion in 2007 to approximately $8.5&#160;billion in
    2008, and declined further to approximately $1.2&#160;billion in
    the first six months of 2009, as shown in the chart below. This
    decrease followed a dramatic increase in transaction volume from
    2004 through 2007, during which period attractive financing was
    widely available and lodging industry fundamentals were
    generally favorable. In 2008, as the capital markets collapsed
    and the economy declined significantly, availability of
    commercial real estate financing generally, and financing for
    hotel properties in particular, decreased dramatically.
    Traditional lending sources, such as banks, insurance companies
    and pension funds adopted more conservative lending policies and
    have materially decreased new lending commitments to hotel
    properties. The hotel CMBS market, once a large contributor to
    the availability of attractive debt financing, effectively
    closed in 2008 and has yet to reopen. Potential buyers of hotels
    have found it increasingly difficult to procure debt financing
    and thus both the number of bids for properties and the value of
    the bids themselves have decreased. As the price buyers are
    willing to pay for hotels has decreased, we believe many hotel
    owners have become reluctant to sell unless forced to do so.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe a number of factors, including significant debt
    defaults, maturity defaults and lack of available financing and
    under-capitalized owners, described above, will increase
    pressure on certain hotel owners to sell properties at prices
    that we believe are attractive and that transaction volumes will
    increase over the next several years. We expect that
    well-capitalized buyers, such as our company, with access to
    equity capital and the ability to use low leverage, will have
    opportunities to acquire high-quality hotel properties at
    historically attractive prices.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Hotel Transaction Volume (1995&#160;&#151; June&#160;30,
    2009)<BR>
    (Transactions $10&#160;million and above)</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587704.gif" alt="(BAR GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;JLLH (1995&#160;- 2008), Real Capital Analytics (1H
    2009)
</DIV>

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    <BR>
    38
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since August 2008, the U.S.&#160;lodging industry has
    experienced substantial declines in fundamentals as a result of
    the global recession and its adverse impact on business and
    leisure travel. Lodging demand decreased on a year-over-year
    basis in 2008 and year-to-date in 2009, while supply has risen
    as hotel properties that were under development before the
    financial crisis continue to be completed. As a result of
    falling demand, increasing supply and deteriorating average
    rates, RevPAR decreased over the same periods and is expected to
    decrease by 17.4% in 2009 and 2.4% in 2010, according to JLLH.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of the financial distress, lack of financing, severe
    recession and declining operating fundamentals over the past two
    years, many previously planned new hotel developments have been
    abandoned and the number of rooms under construction and in
    planning has declined and is expected to decline further over
    the next several years. Accordingly, new room supply growth is
    projected by JLLH to be just 1.0% in 2010, 0.5% in 2011 and 1.2%
    in 2012, significantly below the 2.1% annual average from 1988
    to 2008. We believe this below-average projected supply growth
    is due to scarcity of financing for hotel properties and
    operating fundamentals that do not generate adequate returns on
    the cost of new hotel construction. We believe that declining
    new room supply growth will create an environment favorable for
    future increases in hotel occupancy, ADR and RevPAR.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Industry
    Fundamentals</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S.&#160;hotel industry has experienced 13 consecutive
    months of RevPAR declines since August 2008, principally as a
    result of the declining economic environment, rising
    unemployment and an overall reduction in business and leisure
    travel. According to JLLH forecasts, the projected RevPAR
    decline in 2009 is expected to surpass the aggregate percentage
    declines for the periods following the
    <FONT style="white-space: nowrap">1990-91</FONT>
    recession and the recession surrounding the September&#160;11,
    2001 terrorist attacks, which are considered two of the worst
    periods in the modern history of the U.S.&#160;lodging industry.
    Specifically, JLLH projects RevPAR will decline 17.4% in 2009
    and an additional 2.4% in 2010. JLLH projects RevPAR growth will
    turn positive in 2011 through 2013, growing by 7.3%, 9.9%, and
    9.0%, respectively, similar to the above-average periods of
    RevPAR growth that followed the
    <FONT style="white-space: nowrap">1990-1991</FONT>
    and
    <FONT style="white-space: nowrap">2001-2002</FONT>
    industry downturns.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Hotel Industry&#160;&#151; Annual Historical and Projected<BR>
    Change in RevPAR, Room&#160;Demand and
    Room&#160;Supply</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587705.gif" alt="(BAR GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Smith Travel Research (1988&#160;- 2008), JLLH
    (2009E&#160;- 2013E)
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    39
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, RevPAR has experienced periods of above-average
    growth following industry downturns. In addition, as shown in
    the charts below, the urban and upper upscale sectors, in which
    we intend to focus our investments, have outperformed the
    broader U.S.&#160;hotel industry in RevPAR growth over the last
    21&#160;years, with average annual RevPAR growth of 4.3% and
    3.4%, respectively, as compared to the overall lodging industry
    average of 3.2%. During the four-year period following the
    <FONT style="white-space: nowrap">1990-1991</FONT>
    recession, the overall hotel industry achieved average annual
    RevPAR growth of 5.2%, while upper upscale and urban hotels each
    experienced average annual RevPAR growth of 7.1%. A similar
    trend followed the
    <FONT style="white-space: nowrap">2001-2002</FONT>
    downturn, when the overall lodging industry experienced average
    annual RevPAR growth of 7.5%, while upper upscale and urban
    sectors achieved average annual RevPAR growth of 7.6% and 10.2%,
    respectively. We believe that the recent lodging industry
    downturn will allow us to acquire hotels at attractive prices
    and that increases in RevPAR for urban and upper upscale
    properties are likely to outperform the broader U.S.&#160;hotel
    industry.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Hotels and U.S. Urban Hotels RevPAR Growth Comparison</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587706.gif" alt="(BAR GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Smith Travel Research
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Hotels and U.S. Upper Upscale Hotels RevPAR Growth
    Comparison</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587707.gif" alt="(BAR GRAPH)"><B> </B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Smith Travel Research
</DIV>

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    <BR>
    40
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Demand
    Overview</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    According to Smith Travel Research, hotel occupancy in the
    United States was 56.6% year-to-date through August&#160;31,
    2009, the lowest level in the last 21&#160;years and well below
    the industry average of 62.7% for that period, as shown in the
    chart below.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Hotel Industry Annual Occupancy Rate</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587708.gif" alt="(BAR GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Smith Travel Research (1988&#160;- 2008), JLLH
    (2009E&#160;- 2010E)
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historical growth in hotel room demand, as measured by rooms
    sold, has trended with growth in U.S.&#160;GDP, as shown in the
    chart below. U.S.&#160;GDP is expected to stabilize and grow in
    2010, which we believe will drive growth in hotel room demand,
    as it has historically.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Annual
    Percentage Change in U.S. Hotel Room&#160;Demand Growth vs. U.S.
    GDP Growth</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587709.gif" alt="(LINE GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    Source:&#160;</TD>
    <TD align="left">
    Smith Travel Research and U.S.&#160;Department of Commerce
    (1988&#160;- 2008), JLLH and International Monetary Fund
    (2009E&#160;- 2010E)
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Supply
    Overview</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that while the recent decline in lodging fundamentals
    is primarily a result of a significant decline in demand, room
    supply also has been an important factor in lodging cycles.
    Historically, following
</DIV>

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    <BR>
    41
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    economic and hotel industry downturns, increases in supply of
    hotel rooms typically lag increases in demand for hotel rooms
    for several years because of the lead time necessary to develop
    and construct new hotels. As shown in the chart below, according
    to Smith Travel Research, average annual growth in supply of
    hotel rooms for the five-year period 1991 through 1995 and for
    the six-year period 2002 through 2007 was significantly below
    the <FONT style="white-space: nowrap">21-year</FONT>
    historical average of 2.1%.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Lodging
    Supply vs. Demand</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="w75877w7587710.gif" alt="(LINE GRAPH)">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Source:&#160;Smith Travel Research (through August&#160;31, 2009)
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Given the significant declines in RevPAR over the last
    13&#160;months, hotel profit levels have decreased
    significantly. We believe that in most markets today, current
    hotel level profitability is significantly below levels that
    economically justify construction of new hotel rooms,
    particularly as development and construction debt and equity
    financing have become far less available. As a result,
    previously planned hotel developments have been abandoned and
    the number of rooms under construction and in planning has
    declined and is likely to continue to decline over the next
    several years. According to JLLH, new room supply growth is
    projected to be only 1.0% in 2010, 0.5% in 2011 and 1.2% in
    2012. We believe growth in new room supply will likely remain
    significantly below its historical annual average of 2.1%
    through at least 2012 due to the lack of economic feasibility of
    new construction, scarcity of financing and a reduced appetite
    for risk following the current recession.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Competitive
    Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect the following factors will benefit our company as we
    implement our business strategy:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Experienced Leadership.</I>&#160;&#160;Our senior executive
    management team is led by Jon E. Bortz, who has a proven track
    record and substantial experience in the hotel industry.
    Mr.&#160;Bortz has 28&#160;years of lodging and real estate
    experience, including expertise in hotel and resort property
    acquisitions, divestitures, repositioning, redevelopment, asset
    management, branding and financing. Our company represents
    Mr.&#160;Bortz&#146;s third lodging investment vehicle and his
    second publicly listed venture. He most recently served as Chief
    Executive Officer of LaSalle Hotel Properties, an internally
    managed, NYSE-listed hotel REIT, from its inception in April
    1998 and as the
</TD>
</TR>

</TABLE>

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    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    Chairman of its Board of Trustees from January 2001 until his
    retirement in September 2009. Prior to LaSalle Hotel Properties,
    Mr.&#160;Bortz founded and led Jones Lang LaSalle&#146;s Hotel
    Investment Group, which acquired 15 hotels over his four-year
    tenure as its President. Through his past professional
    experiences, Mr.&#160;Bortz has developed strong relationships
    with hotel owners, management companies, brand companies,
    brokers, lenders and institutional investors.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Proven Acquirer with Strong Track Record of
    Growth.</I>&#160;&#160;Throughout his career, Mr.&#160;Bortz has
    demonstrated the ability to acquire, redevelop and reposition
    hotel properties. During Mr.&#160;Bortz&#146;s tenure as Chief
    Executive Officer of LaSalle Hotel Properties, he led
    transactions totaling $2.5&#160;billion in asset value. During
    this period, LaSalle Hotel Properties&#146; portfolio increased
    from 10 hotel properties at the time of its initial public
    offering in April 1998 to 31 properties with over 8,400 rooms at
    the time of Mr.&#160;Bortz&#146;s retirement in September 2009.
    In aggregate, Mr.&#160;Bortz oversaw the acquisition of 42 hotel
    and resort properties during his leadership tenure at LaSalle
    Hotel Properties and Jones Lang LaSalle&#146;s Hotel Investment
    Group. Mr.&#160;Bortz also established a strong capital sourcing
    network while at LaSalle Hotel Properties, overseeing that
    company&#146;s raising of more than $3.0&#160;billion of debt
    and equity capital to finance its significant growth over the
    past 11&#160;years.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Focused Property Investment Strategy.</I>&#160;&#160;We
    intend to invest primarily in upper upscale, full-service,
    branded and independent hotels across the 20 largest
    U.S.&#160;cities, with an emphasis on the major coastal markets,
    where we believe convention and business room night demand will
    experience the most robust recovery as the U.S.&#160;economy
    improves. In addition, we expect to acquire resort properties
    located near our primary urban target markets as well as in
    select, unique destination markets. We may also invest in
    branded, upscale, select-service hotels in premium urban
    locations in these 20&#160;cities. Within these markets, we
    intend to establish a diversified customer base by investing in
    urban, resort and convention hotels, each of which typically has
    a different mix of business transient, leisure transient and
    group and convention customers, all of which follow different
    demand trends.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Flexible and Diversified Operating Strategy with No Legacy
    Issues.</I>&#160;&#160;Upon completion of this offering, we
    expect to have approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million available for
    investment without the burden and distraction of any legacy
    operating or leverage issues. Since we are not affiliated with
    any hotel management company and have no contractual obligations
    to any particular hotel manager, we plan to retain multiple
    branded and independent third-party hotel management companies
    to operate our hotels, based on our assessment of the operator
    most beneficial for each property. We believe this strategy of
    retaining multiple hotel managers will assist us in identifying
    best practices that we will implement across our portfolio, as
    appropriate. Further, we generally intend to enter into flexible
    management contracts with third-party hotel management companies
    for the operation of our hotels that will provide us with the
    ability to replace operators
    <FONT style="white-space: nowrap">and/or</FONT>
    reposition properties, to the extent that we determine to do so,
    and will align our operators with our objective of generating
    the highest return on investment. In addition, we believe that
    flexible management contracts facilitate the sale of hotels, and
    we may seek to opportunistically sell hotels if we believe sales
    proceeds may be invested in hotel properties that offer more
    attractive risk-return profiles.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Intensive Asset Management.</I>&#160;&#160;We intend to
    employ a dedicated and experienced asset management team to
    proactively manage our third-party hotel management companies in
    order to improve operational performance and maximize our return
    on investment. Although we will not operate our hotel
    properties, both our asset managers and our executive management
    team will actively participate with our hotel managers in all
    aspects of our hotels&#146; operations, including property
    positioning and repositioning, operations analysis, physical
    design, renovation and capital improvements, guest experience
    and overall strategic direction. Through these initiatives, we
    will seek to improve property efficiencies, lower costs,
    maximize revenues, and enhance property operating margins. We
    also anticipate implementing certain value-added strategies,
    such as changing operators, re-branding and de-flagging, when
    appropriate.
</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>Prudent Capital Structure.</I>&#160;&#160;We expect to
    maintain a low-leverage capital structure and intend to limit
    the sum of the outstanding principal amount of our consolidated
    indebtedness and the liquidation preference of any outstanding
    preferred shares to not more than 4.5x our EBITDA for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of such debt or the issuance of
    such preferred shares. Our board of trustees may modify or
    eliminate this limitation at any time without the approval of
    our shareholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Business
    Strategy and Investment Criteria</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to invest in hotel properties located primarily in the
    20 largest U.S.&#160;cities, with an emphasis on the major
    coastal markets. In addition, we may invest in resort properties
    located near our primary urban target markets, as well as in
    select, unique destination markets. We intend to focus on both
    branded and independent full-service hotels in the &#147;upper
    upscale&#148; segment of the lodging industry as defined by
    Smith Travel Research, based on average daily rates. In
    addition, we may seek to acquire branded, upscale,
    select-service hotels in our primary urban target markets. The
    full-service hotels on which we intend to focus our investment
    activity generally will have restaurant, lounge and meeting
    facilities and other amenities, as well as high service levels.
    The select-service hotels in which we may invest generally will
    not have comprehensive business meeting or banquet facilities
    and will have limited food and beverage outlets. We believe our
    target markets are characterized by high barriers to entry and
    that long-term room night demand and rate growth of these types
    of hotels will likely continue to outperform the national
    average, as they have historically.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will utilize extensive research to evaluate any target market
    and property, including a detailed review of the long-term
    economic outlook, trends in local demand generators, competitive
    environment, property systems and physical condition, and
    property financial performance. Specific acquisition criteria
    may include, but are not limited to, the following:
</DIV>

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    <TD width="7%"></TD>
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    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    premier locations, facilities and other competitive advantages
    not easily replicated;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    significant barriers to entry in the market, such as scarcity of
    development sites, regulatory hurdles, high per room development
    costs and long lead times for new development;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    acquisition price at a significant discount to replacement cost;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    properties not subject to long-term management contracts with
    hotel management companies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    potential return on investment initiatives, including
    redevelopment, rebranding, redesign, expansion and change of
    management;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    opportunities to implement value-added operational
    improvements;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    strong demand growth characteristics supported by favorable
    demographic indicators.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that as the U.S.&#160;economy begins to stabilize and
    generate positive GDP growth, upper upscale full-service hotels
    and resorts and upscale select-service hotels located in major
    U.S.&#160;urban, convention and drive-to and destination resort
    markets are likely to generate the most favorable returns on
    investment in the lodging industry. Hotel developers&#146;
    inability to source construction financing over the past 18 to
    24&#160;months, and likely for the foreseeable future, creates
    an environment in which minimal new lodging supply is expected
    to be added through at least 2012. We believe that as transient
    and group travel rebounds, existing supply will accommodate
    incremental room night demand allowing hotel owners to grow
    occupancy and ultimately increase rates, thereby improving
    profitability. We believe that portfolio diversification will
    allow us to capitalize from growth in various customer segments
    including business transient, leisure transient, and group and
    convention room night demand.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We generally intend to enter into flexible management contracts
    with third-party hotel management companies for the operation of
    our hotels that will provide us with the ability to replace
    operators
    <FONT style="white-space: nowrap">and/or</FONT>
    reposition properties, to the extent that we determine to do so,
    and will align our operators with our objective of generating
    the highest return on investment. In addition, we believe that
    flexible management contracts
</DIV>

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    <BR>
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    facilitate the sale of hotels, and we may seek to
    opportunistically sell hotels if we believe sales proceeds may
    be invested in hotel properties that offer more attractive
    risk-adjusted returns.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Initially, we do not intend to engage in significant development
    or redevelopment of hotel properties. However, we do expect to
    engage in partial redevelopment and repositioning of certain
    properties, as we seek to maximize the financial performance of
    the hotels that we acquire. In addition, we may acquire
    properties that require significant capital improvement,
    renovation or refurbishment. Over the long-term, we may acquire
    hotel and resort properties that we believe would benefit from
    significant redevelopment or expansion, including, for example,
    adding rooms, meeting facilities or other amenities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may consider acquiring outstanding debt secured by a hotel or
    resort property from lenders and investors if we believe we can
    foreclose on or acquire ownership of the property in the
    near-term. We do not intend to originate any debt financing or
    purchase any debt where we do not expect to gain ownership of
    the underlying property.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Financing
    Strategies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to maintain a low-leverage capital structure and
    intend to limit the sum of the outstanding principal amount of
    our consolidated indebtedness and the liquidation preference of
    any outstanding preferred shares to not more than 4.5x our
    EBITDA for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of such debt or the issuance of
    such preferred shares. Over time, we intend to finance our
    long-term growth with common and preferred equity issuances and
    debt financing having staggered maturities. Our debt may include
    mortgage debt secured by our hotel properties and unsecured debt.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate arranging and utilizing a revolving credit
    facility to fund future acquisitions (following investment of
    the net proceeds of this offering), as well as for property
    redevelopments, return on investment initiatives and working
    capital requirements. We intend to repay amounts outstanding
    under any such credit facility from time to time with periodic
    common and preferred equity issuances, long-term debt financings
    and cash flows from operations. No assurance can be given that
    we will be able to obtain a credit facility.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    When purchasing hotel properties, we may issue limited
    partnership interests in our operating partnership as full or
    partial consideration to sellers who may desire to take
    advantage of tax deferral on the sale of a hotel or participate
    in the potential appreciation in value of our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Competition</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to compete for hotel investment opportunities with
    institutional investors, private equity investors, other REITs
    and numerous local, regional and national owners, including
    franchisors, in each of our target markets. Some of these
    entities may have substantially greater financial resources than
    we do and may be able and willing to accept more risk than we
    can prudently manage. Competition generally may increase the
    bargaining power of property owners seeking to sell and reduce
    the number of suitable investment opportunities offered to us or
    purchased by us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The hotel industry is highly competitive. Hotels we acquire will
    compete with other hotels for guests in our markets. Competitive
    factors include location, convenience, brand affiliation, room
    rates, range of services, facilities and guest amenities or
    accommodations offered and quality of guest service. Competition
    in the markets in which our hotels will operate will include
    competition from existing, newly renovated and newly developed
    hotels in the relevant segments. Competition can adversely
    affect the occupancy, ADR and RevPAR of our hotels, and thus our
    financial results, and may require us to provide additional
    amenities, incur additional costs or make capital improvements
    that we otherwise might not choose to make, which may adversely
    affect our profitability.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Environmental
    Matters</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The hotel properties that we acquire will be subject to various
    federal, state and local environmental laws. Under these laws,
    courts and government agencies have the authority to require us,
    as owner of a contaminated property, to clean up the property,
    even if we did not know of or were not responsible for the
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    contamination. These laws also apply to persons who owned a
    property at the time it became contaminated, and therefore it is
    possible we could incur these costs even after we sell some of
    the properties we acquire. In addition to the costs of cleanup,
    environmental contamination can affect the value of a property
    and, therefore, an owner&#146;s ability to borrow using the
    property as collateral or to sell the property. Under the
    environmental laws, courts and government agencies also have the
    authority to require that a person who sent waste to a waste
    disposal facility, such as a landfill or an incinerator, pay for
    the <FONT style="white-space: nowrap">clean-up</FONT>
    of that facility if it becomes contaminated and threatens human
    health or the environment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, various court decisions have established that third
    parties may recover damages for injury caused by property
    contamination. For instance, a person exposed to asbestos while
    staying in a hotel may seek to recover damages if he or she
    suffers injury from the asbestos. Lastly, some of these
    environmental laws restrict the use of a property or place
    conditions on various activities. An example would be laws that
    require a business using chemicals (such as swimming pool
    chemicals at a hotel property) to manage them carefully and to
    notify local officials that the chemicals are being used.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We could be responsible for any of the costs discussed above.
    The costs to clean up a contaminated property, to defend against
    a claim, or to comply with environmental laws could be material
    and could adversely affect the funds available for distribution
    to our shareholders. We expect to obtain &#147;Phase I
    environmental site assessments,&#148; or ESAs, on each hotel
    property prior to acquiring it. However, these ESAs may not
    reveal all environmental costs that might have a material
    adverse effect on our business, assets, results of operations or
    liquidity and may not identify all potential environmental
    liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result, we may become subject to material environmental
    liabilities of which we are unaware. We can make no assurances
    that (1)&#160;future laws or regulations will not impose
    material environmental liabilities on us, or (2)&#160;the
    environmental condition of our hotel properties will not be
    affected by the condition of the properties in the vicinity of
    our hotel properties (such as the presence of leaking
    underground storage tanks) or by third parties unrelated to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Legal
    Proceedings</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are not involved in any material litigation nor, to our
    knowledge, is any material litigation threatened against us.
</DIV>

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<A name='108'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>
    AND RESULTS OF OPERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are an internally managed hotel investment company, recently
    organized to acquire and invest in hotel properties located
    primarily in the 20 largest United States cities, with an
    emphasis on the major coastal markets. As a newly formed company
    with no business activity to date, we have no operating history
    and only nominal assets, consisting only of cash contributed in
    connection with our formation. See &#147;Capitalization.&#148;
    We intend to elect and qualify to be taxed as a REIT for federal
    income tax purposes, commencing with our short taxable year
    ending December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For us to qualify as a REIT under the Code, we cannot operate
    the hotels we acquire. Therefore, our operating partnership and
    its subsidiaries will lease our hotel properties to our TRS
    lessees, who will in turn engage eligible independent
    contractors to manage our hotels. Each of these lessees will be
    treated as a TRS for federal income tax purposes and will be
    consolidated into our financial statements for accounting
    purposes. However, since both our operating partnership and our
    TRS lessees are controlled by us, our principal source of funds
    on a consolidated basis will be from the operations of our
    hotels. The earnings of our TRS lessees will be subject to
    taxation like other regular C corporations, which will reduce
    our funds from operations and the cash otherwise available for
    distribution to our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Liquidity
    and Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to limit the sum of the outstanding principal amount
    of our consolidated indebtedness and the liquidation preference
    of any outstanding preferred shares to not more than 4.5x our
    EBITDA for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of such debt or the issuance of
    such preferred shares. Compliance with this limitation will be
    judged at the time debt is incurred, and a subsequent decrease
    in EBITDA will not require us to repay debt. Our board of
    trustees may modify or eliminate this limitation at any time
    without the approval of our shareholders. Upon completion of
    this offering, we expect to have approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million in cash available
    to fund investments in hotel properties. We have no agreement to
    invest in any hotel properties. There can be no assurance that
    we will make any investments in any other properties that meet
    our investment criteria.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to meet our short-term liquidity requirements
    generally through net cash provided by operations, existing cash
    balances and, if necessary, short-term borrowings under an
    anticipated revolving credit facility. We believe that our net
    cash provided by operations will be adequate to fund operating
    requirements, pay interest on any borrowings and fund dividends
    in accordance with the REIT requirements of the federal income
    tax laws. We expect to meet our long-term liquidity
    requirements, such as hotel property acquisitions through the
    cash we will have available upon completion of this offering and
    borrowings and expect to fund other investments in hotel
    properties and scheduled debt maturities through long-term
    secured and unsecured borrowings and the issuance of additional
    equity or debt securities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also anticipate arranging and utilizing a revolving credit
    facility to fund future acquisitions (following investment of
    the net proceeds of this offering), as well as for property
    redevelopments, return on investment initiatives and working
    capital requirements. We intend to repay indebtedness incurred
    under our credit facility from time to time out of cash flow and
    from the net proceeds of issuances of additional equity and debt
    securities. No assurances can be given that we will obtain such
    credit facility or if we do what the amount and terms will be.
    Our failure to obtain such a facility on favorable terms could
    adversely impact our ability to execute our business strategy.
    In the future, we may seek to increase the amount of our credit
    facility, negotiate additional credit facilities or issue
    corporate debt instruments. Any debt incurred or issued by us
    may be secured or unsecured, long-term or short-term, fixed or
    variable interest rate and may be subject to such other terms as
    we deem prudent.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to invest in hotel properties only as suitable
    opportunities arise. In the near-term, we intend to fund future
    investments in properties with the net proceeds of this
    offering. Longer term, we intend to finance our investments with
    the net proceeds from additional issuances of common shares,
    issuances of units
</DIV>

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    47
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    of limited partnership interest in our operating partnership or
    other securities or borrowings. The success of our acquisition
    strategy may depend, in part, on our ability to access
    additional capital through issuances of equity securities. There
    can be no assurance that we will make any investments in any
    properties that meet our investment criteria.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Quantitative
    and Qualitative Disclosure About Market Risk</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Inflation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Operators of hotels, in general, possess the ability to adjust
    room rates daily to reflect the effects of inflation. However,
    competitive pressures may limit the ability of our management
    companies to raise room rates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Seasonality</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depending on a hotel&#146;s location and market, operations for
    the hotel may be seasonal in nature. This seasonality can be
    expected to cause fluctuations in our quarterly operating
    profits. To the extent that cash flow from operations is
    insufficient during any quarter, due to temporary or seasonal
    fluctuations in revenue, we expect to utilize cash on hand or
    borrowings under our anticipated revolving credit facility to
    make distributions to our equity holders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Critical
    Accounting Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Below is a discussion of the accounting policies that we believe
    will be critical once we commence operations. We consider these
    policies critical because they require estimates about matters
    that are inherently uncertain, involve various assumptions and
    require significant management judgment, and because they are
    important for understanding and evaluating our reported
    financial results. These judgments will affect the reported
    amounts of assets and liabilities and our disclosure of
    contingent assets and liabilities at the dates of the financial
    statements and the reported amounts of revenue and expenses
    during the reporting periods. Applying different estimates or
    assumptions may result in materially different amounts reported
    in our financial statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Hotel
    Properties</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Acquisitions
    and Property Improvements</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon acquisition, we allocate the purchase price based on the
    fair value of the acquired land, building, furniture, fixtures
    and equipment, identifiable intangible assets, other assets and
    assumed liabilities. Identifiable intangible assets typically
    arise from contractual arrangements. We determine the
    acquisition-date fair values of all assets and assumed
    liabilities using methods similar to those used by independent
    appraisers (<I>e.g.</I>, discounted cash flow analysis) and that
    utilize appropriate discount
    <FONT style="white-space: nowrap">and/or</FONT>
    capitalization rates and available market information. Estimates
    of future cash flows are based on a number of factors including
    historical operating results, known and anticipated trends, and
    market and economic conditions. Acquisition costs are expensed
    as incurred.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Hotel renovations
    <FONT style="white-space: nowrap">and/or</FONT>
    replacements of assets that improve or extend the life of the
    asset are capitalized and depreciated over their estimated
    useful lives. Furniture, fixtures and equipment under capital
    leases are carried at the present value of the minimum lease
    payments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Repair and maintenance costs are charged to expense as incurred.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Depreciation
    and Amortization</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Hotel properties are carried at cost and depreciated using the
    straight-line method over an estimated useful life of 25 to
    40&#160;years for buildings and one to 10&#160;years for
    furniture, fixtures and equipment. Intangible assets arising
    from contractual arrangements are typically amortized over the
    life of the contract.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are required to make subjective assessments as to the useful
    lives and classification of its properties for purposes of
    determining the amount of depreciation expense to reflect each
    year with respect to the assets. These assessments may impact
    our results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Impairment</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We monitor events and changes in circumstances for indicators
    that the carrying value of the hotel and related assets may be
    impaired. We will prepare an estimate of the undiscounted future
    cash flows, without interest charges, of the specific hotel and
    determine if the investment in such hotel is recoverable based
    on the undiscounted future cash flows. If impairment is
    indicated, an adjustment is made to the carrying value of the
    hotel to reflect the hotel at fair value. These assessments may
    impact the results of our operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A hotel is considered held for sale when a contract for sale is
    entered into, a substantial, non-refundable deposit has been
    committed by the purchaser, and sale is expected to close.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Revenue consists of amounts derived from hotel operations,
    including the sales of rooms, food and beverage, and other
    ancillary amenities. Revenue is recognized when rooms are
    occupied and services have been rendered. These revenue sources
    are affected by conditions impacting the travel and hospitality
    industry as well as competition from other hotels and businesses
    in similar markets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Share-Based
    Compensation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have adopted an equity incentive plan that provides for the
    grant of common share options, share awards, share appreciation
    rights, performance units and other equity-based awards.
    Equity-based compensation is recognized as an expense in the
    financial statements and measured at the fair value of the award
    on the date of grant. The amount of the expense may be subject
    to adjustment in future periods depending on the specific
    characteristics of the equity-based award and the application of
    the accounting guidance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to elect to be taxed as a REIT under the Code and
    intend to operate as such beginning with our taxable year ending
    December&#160;31, 2009. We expect to have little or no taxable
    income prior to electing REIT status. To qualify as a REIT, we
    must meet certain organizational and operational requirements,
    including a requirement to distribute at least 90% of our annual
    REIT taxable income to our shareholders (which is computed
    without regard to the dividends paid deduction or net capital
    gain and which does not necessarily equal net income as
    calculated in accordance with U.S.&#160;GAAP). As a REIT, we
    generally will not be subject to federal income tax to the
    extent we distribute qualifying dividends to our shareholders.
    If we fail to qualify as a REIT in any taxable year, we will be
    subject to federal income tax on our taxable income at regular
    corporate income tax rates and generally will not be permitted
    to qualify for treatment as a REIT for federal income tax
    purposes for the four taxable years following the year during
    which qualification is lost unless the IRS grants us relief
    under certain statutory provisions. Such an event could
    materially adversely affect our net income and net cash
    available for distribution to shareholders. However, we intend
    to organize and operate in such a manner as to qualify for
    treatment as a REIT.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Recently
    Issued Accounting Standards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, the Financial Accounting Standards Board
    (&#147;FASB&#148;) issued an accounting standard that
    establishes general standards of accounting for and disclosure
    of events that occur after the balance sheet date but before
    financial statements are issued or are available to be issued.
    It requires the disclosure of the date through which an entity
    has evaluated subsequent events and the basis for that date. It
    also requires public entities to evaluate subsequent events
    through the date that the financial statements are issued. While
    we are evaluating the effect of this accounting standard, the
    adoption of this standard did not have a material impact on our
    financial statements.
</DIV>

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    <BR>
    49
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued an accounting standard that
    requires enterprises to perform a more qualitative approach to
    determining whether or not a variable interest entity will need
    to be consolidated. This evaluation will be based on an
    enterprise&#146;s ability to direct and influence the activities
    of a variable interest entity that most significantly impact its
    economic performance. It requires ongoing reassessments of
    whether an enterprise is the primary beneficiary of a variable
    interest entity. This accounting standard is effective for
    fiscal years beginning after November&#160;15, 2009. Early
    adoption is not permitted. While we are evaluating the effect of
    this accounting standard, we currently believe that the adoption
    of this standard will not have a material impact on our
    financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued an accounting standard that made
    the FASB Accounting Standards Codification (the
    &#147;Codification&#148;) the source of authoritative GAAP
    recognized by the FASB to be applied by nongovernmental
    entities. Rules and interpretive releases of the SEC under
    authority of federal securities laws are also sources of
    authoritative GAAP for SEC registrants. The Codification will
    supersede all then-existing non-SEC accounting and reporting
    standards. All other nongrandfathered non-SEC accounting
    literature not included in the Codification will become
    nonauthoritative. This accounting standard is effective for
    financial statements issued for interim and annual periods
    ending after September&#160;15, 2009. Following the issuance of
    this accounting standard, the FASB will not issue new standards
    in the form of Statements, FASB Staff Positions, or Emerging
    Issues Task Force Abstracts. Instead, it will issue Accounting
    Standards Updates. The Board will not consider Accounting
    Standards Updates as authoritative in their own right.
    Accounting Standards Updates will serve only to update the
    Codification, provide background information about the guidance,
    and provide the bases for conclusions on the change(s) in the
    Codification. While we are evaluating the effect of this
    accounting standard, we currently believe that the adoption of
    this standard will not have a material impact on our financial
    statements.
</DIV>

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    <BR>
    50
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<A name='109'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Trustees
    and Executive Officers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, Mr.&#160;Bortz serves as our sole executive officer
    and trustee. Following completion of this offering, our
    executive management team will consist of professionals with
    extensive experience in hotel acquisitions, hotel property asset
    management, accounting and finance. Upon completion of this
    offering, our board of trustees will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    members. Certain information regarding our sole executive
    officer and trustee is set forth below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="45%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="50%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Age</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Position</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jon E. Bortz
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    52
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    President, Chief Executive Officer and Trustee
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Jon E. Bortz.</I>&#160;&#160;Mr.&#160;Bortz served as
    President, Chief Executive Officer and a Trustee of LaSalle
    Hotel Properties from its formation in April 1998 until his
    retirement in September 2009. In addition, Mr.&#160;Bortz served
    as Chairman of LaSalle Hotel Properties&#146; Board of Trustees
    from January&#160;1, 2001, until his retirement. Under his
    leadership, LaSalle Hotel Properties focused on investing in
    upscale and luxury full-service hotels located in urban, resort,
    and convention markets and grew to 31 upscale and luxury
    full-service hotels and resorts, with over 8,400 guestrooms in
    14 markets in 11&#160;states and the District of Columbia.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to forming LaSalle Hotel Properties, Mr.&#160;Bortz
    founded the Hotel Investment Group of Jones Lang LaSalle
    Incorporated in January 1994 and as its President oversaw all of
    Jones Lang LaSalle&#146;s hotel investment and development
    activities. From January 1995 to April 1998, as Managing
    Director of Jones Lang LaSalle&#146;s Investment Advisory
    Division, he was also responsible for certain East Coast
    development projects, including the redevelopment of Grand
    Central Terminal in New York City. From January 1990 to 1995, he
    was a Senior Vice President of Jones Lang LaSalle&#146;s
    Investment Division, with responsibility for East Coast
    development projects and workouts, including the redevelopment
    of Union Station in Washington,&#160;D.C. Mr.&#160;Bortz joined
    Jones Lang LaSalle in 1981. He is a former member of the Board
    of Governors and the Executive Committee of the National
    Association of Real Estate Investment Trusts, and serves on the
    board of trustees of Federal Realty Investment Trust and the
    board of directors of Metropark USA, Inc. Mr.&#160;Bortz holds a
    B.S. in Economics from The Wharton School of the University of
    Pennsylvania and is a Certified Public Accountant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Committees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, our board of trustees will
    appoint an Audit Committee, Compensation Committee and a
    Nominating and Corporate Governance Committee, and will adopt
    charters for each of these committees. Under these charters, the
    composition of each committee will be required to comply with
    the listing standards and other rules and regulations of the
    NYSE as amended or modified from time to time. Initially, each
    of these committees will have three trustees and will be
    composed exclusively of independent trustees, as defined by the
    listing standards of the NYSE then in effect.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Audit
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees will establish an Audit Committee, which
    will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    (Chairman),&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
    The Audit Committee will make recommendations concerning the
    engagement of independent public accountants, review with the
    independent public accountants the plans and results of the
    audit engagement, approve professional services provided by the
    independent public accountants, review the independence of the
    independent public accountants, consider the range of audit and
    non-audit fees and review the adequacy of our internal
    accounting
    controls.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    an independent trustee, will chair our Audit Committee and will
    be our audit committee financial expert as that term is defined
    by the Securities and Exchange Commission, or the SEC.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees will establish a Compensation Committee,
    which will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    (Chairman),&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
    The Compensation Committee will determine compensation for our
</DIV>

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    <BR>
    51
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    executive officers, administer our share plan, produce an annual
    report on executive compensation for inclusion in our annual
    meeting proxy statement and publish an annual committee report
    for our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Nominating
    and Corporate Governance Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees will establish a Nominating and Corporate
    Governance Committee, which will consist
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    (Chairman),&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
    The Nominating and Corporate Governance Committee will be
    responsible for seeking, considering and recommending to the
    board qualified candidates for election as trustees and
    recommending a slate of nominees for election as trustees at the
    annual meeting. It also will periodically prepare and submit to
    the board for adoption the committee&#146;s selection criteria
    for trustee nominees. It will review and make recommendations on
    matters involving general operation of the board and our
    corporate governance, and it annually recommends to the board
    nominees for each committee of the board. In addition, the
    committee will annually facilitate the assessment of the board
    of trustees&#146; performance as a whole and of the committees
    and individual trustees and reports thereon to the board.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Code of
    Ethics</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have adopted a corporate code of ethics relating to the
    conduct of our business by our employees, officers and trustees.
    We intend to maintain the highest standards of ethical business
    practices and compliance with all laws and regulations
    applicable to our business, including those relating to doing
    business outside the U.S.&#160;Specifically, our code of ethics
    prohibits payments, directly or indirectly, to any foreign
    official seeking to influence such official or otherwise obtain
    an improper advantage for our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee Interlocks and Insider Participation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There are no Compensation Committee interlocks and none of our
    employees participates on the Compensation Committee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Trustee
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our independent trustees who does not serve as the
    chairman of one of our committees will be paid a trustee&#146;s
    fee of $&#160;&#160;&#160;&#160;&#160; per year. Each trustee
    who serves as a committee chairman, other than our Audit
    Committee chairman, will be paid a trustee&#146;s fee of
    $&#160;&#160;&#160;&#160;&#160;. The trustee who serves as our
    Audit Committee chairman will be paid a trustee&#146;s fee of
    $&#160;&#160;&#160;&#160;&#160;. Trustees&#146; fees will be
    paid one-half in cash and one-half in our common shares although
    each trustee may elect to receive up to all of his trustee fees
    in the form of our common shares. Trustees who are employees
    will receive no additional compensation as trustees. In
    addition, we will reimburse all trustees for reasonable
    <FONT style="white-space: nowrap">out-of-pocket</FONT>
    expenses incurred in connection with their services on the board
    of trustees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our trustees who is not an employee will receive an
    initial grant of&#160;&#160;&#160;&#160;&#160; restricted common
    shares concurrent with completion of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Discussion and Analysis</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to pay base salaries and annual bonuses and make
    grants of awards under our 2009 Equity Incentive Plan to certain
    of our officers, effective upon completion of the offering. The
    initial awards under our 2009 Equity Incentive Plan will be
    granted to provide performance and retention incentives to these
    individuals and to recognize such individuals&#146; efforts on
    our behalf in connection with our formation and this offering.
    Our board of trustees and our Compensation Committee have not
    yet adopted compensation policies with respect to, among other
    things, setting base salaries, awarding bonuses or making future
    grants of equity awards to our executive officers. We anticipate
    that such determinations will be made by our Compensation
    Committee based on factors such as the desire to retain such
    officer&#146;s services over the long-term, aligning such
    officer&#146;s interest with those of our shareholders,
    incentivizing such officer over the near-, medium- and
    long-term, and rewarding such officer for exceptional
    performance. In addition, our Compensation Committee may
    determine to make awards to new executive officers to help
    attract them to our company.
</DIV>

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    <BR>
    52
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Set forth below are the initial annual cash compensation and
    equity awards to be granted to our President and Chief Executive
    Officer and our four other most highly compensated executive
    officers commencing upon completion of this offering:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Compensation Table</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=10 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=10 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=10 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=10 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Change in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pension<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Value and<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Non-Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Nonqualified<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Incentive<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Deferred<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Base<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Share<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Plan<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Principal Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Salary</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Bonus</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Awards</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Awards</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Compensation</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Earnings</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Compensation</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jon E. Bortz,<BR>
    President and Chief Executive Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    $
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    $
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">2009
    Equity Incentive Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees has adopted, and our sole shareholder has
    approved, our 2009 Equity Incentive Plan to attract and retain
    independent trustees, executive officers and other key employees
    and service providers, including officers and employees of our
    affiliates. The 2009 Equity Incentive Plan provides for the
    grant of options to purchase common shares, share awards, share
    appreciation rights, performance units and other equity-based
    awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Administration
    of the 2009 Equity Incentive Plan</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Equity Incentive Plan will be administered by our
    Compensation Committee and the Compensation Committee will
    approve all terms of awards under the 2009 Equity Incentive
    Plan. Our Compensation Committee will also approve who will
    receive grants under the 2009 Equity Incentive Plan and the
    number of common shares subject to the grant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Eligibility</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of our employees and employees of our subsidiaries and
    affiliates, including our operating partnership, are eligible to
    receive grants under the 2009 Equity Incentive Plan. In
    addition, our independent trustees and consultants and advisors
    who perform services for us and our subsidiaries and affiliates
    may receive grants under the 2009 Equity Incentive Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Share
    Authorization</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of common shares that may be issued under the 2009
    Equity Incentive Plan is equal to&#160;&#160;&#160;&#160;&#160;%
    of the aggregate number of our common shares outstanding upon
    completion of this offering, which will include any shares
    issued pursuant to exercise of the underwriters&#146;
    overallotment option.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with share splits, dividends, recapitalizations
    and certain other events, our board will make adjustments that
    it deems appropriate in the aggregate number of common shares
    that may be issued under the 2009 Equity Incentive Plan and the
    terms of outstanding awards.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any options or share appreciation rights terminate, expire or
    are canceled, forfeited, exchanged or surrendered without having
    been exercised or paid or if any share awards, performance units
    or other equity-based awards are forfeited, the common shares
    subject to such awards will again be available for purposes of
    the 2009 Equity Incentive Plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No awards under the 2009 Equity Incentive Plan were outstanding
    prior to completion of this offering. The initial grants
    described above will become effective upon completion of this
    offering.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    53
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Options</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Equity Incentive Plan authorizes our Compensation
    Committee to grant incentive share options (under
    Section&#160;421 of the Code) and options that do not qualify as
    incentive share options. The exercise price of each option will
    be determined by the Compensation Committee, provided that the
    price cannot be less than 100% of the fair market value of the
    common shares on the date on which the option is granted (or
    110% of the shares&#146; fair market value on the grant date in
    the case of an incentive share option to an individual who is a
    &#147;ten percent shareholder&#148; under Sections&#160;422 and
    424 of the Code). The exercise price for any option is generally
    payable (i)&#160;in cash, (ii)&#160;by certified check,
    (iii)&#160;by the surrender of common shares (or attestation of
    ownership of common shares) with an aggregate fair market value
    on the date on which the option is exercised, of the exercise
    price, or (iv)&#160;by payment through a broker in accordance
    with procedures established by the Federal Reserve Board. The
    term of an option cannot exceed ten years from the date of grant
    (or five years in the case of an incentive share option granted
    to a &#147;ten percent shareholder&#148;).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Share
    Awards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Equity Incentive Plan also provides for the grant of
    share awards. A share award is an award of common shares that
    may be subject to restrictions on transferability and other
    restrictions as our Compensation Committee determines in its
    sole discretion on the date of grant. The restrictions, if any,
    may lapse over a specified period of time or through the
    satisfaction of conditions, in installments or otherwise, as our
    Compensation Committee may determine. A participant who receives
    a share award will have all of the rights of a shareholder as to
    those shares, including, without limitation, the right to vote
    and the right to receive dividends or distributions on the
    shares. During the period, if any, when share awards are
    non-transferable or forfeitable, (i)&#160;a participant is
    prohibited from selling, transferring, pledging, exchanging,
    hypothecating or otherwise disposing of his or her share award
    shares, (ii)&#160;the company will retain custody of the
    certificates and (iii)&#160;a participant must deliver a share
    power to the company for each share award.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    of our common shares to persons who will become trustees upon
    completion of this offering. These grants to trustees will vest
    ratably over the first three anniversaries of the date of grant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Share
    Appreciation Rights</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Equity Incentive Plan authorizes our Compensation
    Committee to grant share appreciation rights that provide the
    recipient with the right to receive, upon exercise of the share
    appreciation right, cash, common shares or a combination of the
    two. The amount that the recipient will receive upon exercise of
    the share appreciation right generally will equal the excess of
    the fair market value of the common shares on the date of
    exercise over the shares&#146; fair market value on the date of
    grant. Share appreciation rights will become exercisable in
    accordance with terms determined by our Compensation Committee.
    Share appreciation rights may be granted in tandem with an
    option grant or independently from an option grant. The term of
    a share appreciation right cannot exceed ten years from the date
    of grant or five years in the case of a share appreciation right
    granted in tandem with an incentive share option awarded to a
    &#147;ten percent shareholder&#148;.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Performance
    Units</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The 2009 Equity Incentive Plan also authorizes our Compensation
    Committee to grant performance units. Performance units
    represent the participant&#146;s right to receive an amount,
    based on the value of the common shares, if performance goals
    established by the Compensation Committee are met. Our
    Compensation Committee will determine the applicable performance
    period, the performance goals and such other conditions that
    apply to the performance unit. Performance goals may relate to
    our financial performance or the financial performance of our
    operating partnership, the participant&#146;s performance or
    such other criteria determined by the Compensation Committee. If
    the performance goals are met, performance units will be paid in
    cash, our common shares or a combination thereof.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    54
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Equity-Based Awards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Compensation Committee may grant other types of share-based
    awards as equity-based awards under the 2009 Equity Incentive
    Plan, including LTIP units. Other equity-based awards are
    payable in cash, our common shares or other equity, or a
    combination thereof, determined by the Compensation Committee.
    The terms and conditions of other equity-based awards are
    determined by the Compensation Committee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    LTIP units are a special class of partnership interests in our
    operating partnership. Each LTIP unit awarded will be deemed
    equivalent to an award of one common share under the 2009 Equity
    Incentive Plan, reducing availability for other equity awards on
    a
    <FONT style="white-space: nowrap">one-for-one</FONT>
    basis. We will not receive a tax deduction for the value of any
    LTIP units granted to our employees. The vesting period for any
    LTIP units, if any, will be determined at the time of issuance.
    LTIP units, whether vested or not, will receive the same
    quarterly per unit profit distributions as units of our
    operating partnership, which profit distribution will generally
    equal per&#160;share dividends on our common shares. This
    treatment with respect to quarterly distributions is similar to
    the expected treatment of our restricted share awards, which
    will generally receive full dividends whether vested or not.
    Initially, LTIP units will not have full parity with operating
    partnership units with respect to liquidating distributions.
    Under the terms of the LTIP units, our operating partnership
    will revalue its assets upon the occurrence of certain specified
    events, and any increase in valuation from the time of grant
    until such event will be allocated first to the holders of LTIP
    units to equalize the capital accounts of such holders with the
    capital accounts of operating partnership unit holders. Upon
    equalization of the capital accounts of the holders of LTIP
    units with the other holders of operating partnership units, the
    LTIP units will achieve full parity with operating partnership
    units for all purposes, including with respect to liquidating
    distributions. If such parity is reached, vested LTIP units may
    be converted into an equal number of operating partnership units
    at any time, and thereafter enjoy all the rights of operating
    partnership units, including exchange rights. However, there are
    circumstances under which such parity would not be reached.
    Until and unless such parity is reached, the value that an
    executive officer will realize for a given number of vested LTIP
    units will be less than the value of an equal number of our
    common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will cause our operating
    partnership to issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;LTIP
    units to certain of our officers. These LTIP units will vest
    ratably over the first five anniversaries of the date of grant.
    See &#147;Our Operating Partnership and the Partnership
    Agreement&#148; for a further description of the rights of
    limited partners in our operating partnership.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Dividend
    Equivalents</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Compensation Committee may grant dividend equivalents in
    connection with the grant of options, share appreciation rights
    and performance units. Dividend equivalents may be paid
    currently or accrued as contingent cash obligations (in which
    case they will be deemed to have been invested in common shares)
    and may be payable in cash, common shares or a combination of
    the two. Our Compensation Committee will determine the terms of
    any dividend equivalents.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Change
    in Control</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we experience a change in control, the Compensation Committee
    may, at its discretion, provide that all outstanding options,
    share appreciation rights, share awards, performance units, or
    other equity based awards that are not exercised prior to the
    change in control will be assumed by the surviving entity, or
    will be replaced by a comparable substitute award of
    substantially equal value granted by the surviving entity. The
    Compensation Committee may also provide that (i)&#160;all
    outstanding options and share appreciation rights will be fully
    exercisable on the change in control, (ii)&#160;restrictions and
    conditions on outstanding share awards will lapse upon the
    change in control and (iii)&#160;performance units or
    equity-based awards will become earned in their entirety. The
    Compensation Committee may also provide that participants must
    surrender their outstanding options and share appreciation
    rights, share awards, performance units, and other equity based
    awards in exchange for a payment, in cash or our common shares
    or other securities or consideration received by shareholders in
    the change in control transaction, equal to the value received
    by shareholders in the change in control transaction (or, in the
    case of options and share appreciation rights, the amount by
    which that transaction value exceeds the exercise price).
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    55
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In summary, a change of control under the 2009 Equity Incentive
    Plan occurs if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a person, entity or affiliated group (with certain exceptions)
    acquires, in a transaction or series of transactions, more than
    50% of the total combined voting power of our outstanding
    securities or common shares;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we merge into another entity unless the holders of our voting
    shares immediately prior to the merger have more than 50% of the
    combined voting power of the securities in the merged entity or
    its parent;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we sell or dispose of all or substantially all of our assets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we are liquidated or dissolved;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    during any period of two consecutive years individuals who, at
    the beginning of such period, constitute our board of trustees
    together with any new trustees (other than individuals who
    become trustees in connection with certain transactions or
    election contests) cease for any reason to constitute a majority
    of our board of trustees.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Amendment;
    Termination</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees may amend or terminate the 2009 Equity
    Incentive Plan at any time; provided that no amendment may
    adversely impair the benefits of participants with outstanding
    awards. Our shareholders must approve any amendment if such
    approval is required under applicable law or stock exchange
    requirements. Our shareholders also must approve any amendment
    that materially increases the benefits accruing to participants
    under the 2009 Equity Incentive Plan, materially increases the
    aggregate number of common shares that may be issued under the
    2009 Equity Incentive Plan or materially modifies the
    requirements as to eligibility for participation in the 2009
    Equity Incentive Plan. Unless terminated sooner by our board of
    trustees or extended with shareholder approval, the 2009 Equity
    Incentive Plan will terminate on the day before the tenth
    anniversary of the date our board of trustees adopted the 2009
    Equity Incentive Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Severance
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will enter into an
    agreement with Mr.&#160;Bortz, our President and Chief Executive
    Officer, and we expect to enter into similar agreements with
    certain executive officers that we hire in the future, to
    provide benefits to each in the event his employment is
    terminated in certain circumstances. The Compensation Committee
    will review the terms of these severance agreements annually. As
    described in more detail below, because each officer&#146;s
    severance payment will be derived from his or her annual base
    salary and other annual incentive compensation, we expect that
    the effect on severance payments will be one of the factors
    considered by the Compensation Committee when annually reviewing
    the officer&#146;s total compensation and severance agreement
    terms.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Severance
    Agreement of Mr.&#160;Bortz</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Bortz&#146;s severance agreement will become effective
    upon closing of this offering and will have an initial term of
    three years; provided, however, that the term is automatically
    extended at the end of such term for successive one-year terms
    unless, not less than six months prior to the termination of the
    then existing term, our board of trustees provides notice to
    Mr.&#160;Bortz of its intent not to extend the term further.
    Mr.&#160;Bortz may terminate the agreement prior to the
    expiration of the term as described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Termination
    in Connection with a Change in Control</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon 30&#160;days&#146; prior written notice to us,
    Mr.&#160;Bortz may terminate his employment for &#147;good
    reason.&#148; The agreement provides that upon the termination
    of Mr.&#160;Bortz either by us without &#147;cause&#148; within
    one year of a change in control of our company or by
    Mr.&#160;Bortz for &#147;good reason,&#148; Mr.&#160;Bortz will
    be entitled to the following severance payments and benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    annual base salary, annual cash incentive bonus and accrued
    vacation time earned but not paid to the date of termination;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    56
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a lump sum cash payment equal to the product of three times the
    sum of (x)&#160;Mr.&#160;Bortz&#146;s then current annual base
    salary, plus (y)&#160;the average of the annual cash incentive
    bonuses paid to Mr.&#160;Bortz with respect to the three most
    recent fiscal years ending before the date of termination;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a lump sum cash payment equal to three times the annual premium
    for Mr.&#160;Bortz&#146;s health, dental, disability and life
    insurance benefits;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    such other or additional benefits, if any, as are provided under
    applicable plans, programs
    <FONT style="white-space: nowrap">and/or</FONT>
    arrangements of ours (including accelerated vesting of equity
    awards as discussed below under &#147;&#151;&#160;Vesting of
    Long-Term Equity Incentive Awards&#148;).
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Termination
    without Cause</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If Mr.&#160;Bortz is terminated without &#147;cause&#148; and
    not in connection with or within one year of a change in control
    of our company, Mr.&#160;Bortz will be entitled to the following
    severance payments and benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    annual base salary, annual cash incentive bonus and accrued
    vacation time earned but not paid to the date of termination;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a lump sum cash payment equal to the sum of
    (x)&#160;Mr.&#160;Bortz&#146;s then current annual base salary,
    plus (y)&#160;the average of the annual cash incentive bonuses
    paid to Mr.&#160;Bortz with respect to the three most recent
    fiscal years ending before the date of termination;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a lump sum cash payment equal to the annual premium for
    Mr.&#160;Bortz&#146;s health, dental, disability and life
    insurance benefits;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    such other or additional benefits, if any, as are provided under
    applicable plans, programs
    <FONT style="white-space: nowrap">and/or</FONT>
    arrangements of ours (including accelerated vesting of equity
    awards as discussed below under &#147;&#151;&#160;Vesting of
    Long-Term Equity Incentive Awards&#148;).
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Termination
    without Good Reason</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If Mr.&#160;Bortz voluntarily terminates his employment without
    &#147;good reason,&#148; Mr.&#160;Bortz will be entitled to the
    following severance payments and benefits:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    annual base salary, annual cash incentive bonus and accrued
    vacation time earned but not paid to the date of
    termination;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    such other or additional benefits, if any, as are provided under
    applicable plans, programs
    <FONT style="white-space: nowrap">and/or</FONT>
    arrangements of ours (including accelerated vesting of equity
    awards as discussed below under &#147;&#151;&#160;Vesting of
    Long-Term Equity Incentive Awards&#148;).
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Vesting
    of Long-Term Equity Incentive Awards</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The terms of the time-based share restricted share award
    agreements granted to Mr.&#160;Bortz will provide that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Upon a change in control of our company, the unvested shares
    vest.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Upon termination of Mr.&#160;Bortz&#146;s employment with our
    company without cause, the unvested shares vest.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Upon termination of Mr.&#160;Bortz&#146;s employment with our
    company because of his death or disability, the unvested shares
    vest.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Upon termination of Mr.&#160;Bortz&#146;s employment with our
    company for cause, the unvested shares are forfeited.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The time-based restricted share award agreements do not provide,
    in the absence of a change in control of our company, for
    accelerated vesting of the unvested shares in the event
    Mr.&#160;Bortz terminates his
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    57
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    employment with our company, for any reason other than death,
    disability or, under certain conditions, retirement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of the time-based restricted share award
    agreements, the definitions of &#147;cause,&#148; &#147;good
    reason&#148; and &#147;change in control&#148; are similar but
    not identical to the definitions contained in
    Mr.&#160;Bortz&#146;s severance agreement with our company. For
    example, the definition of &#147;good reason&#148; for purposes
    of the award agreements does not include any requirement of a
    change in control. In addition, the definition of &#147;change
    in control&#148; for purposes of the award agreements includes
    mergers and consolidations where the outstanding securities of
    our company represent less than 75% of the combined voting power
    of our company or surviving entity after the merger or
    consolidation and includes a sale of substantially all of our
    assets to an entity in which our shareholders own less than 75%
    of the combined voting power in substantially the same
    proportions as their ownership in our company before the sale.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">401(k)
    Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may establish and maintain a retirement savings plan under
    section&#160;401(k) of the Code to cover our eligible employees.
    The Code allows eligible employees to defer a portion of their
    compensation, within prescribed limits, on a pre-tax basis
    through contributions to the 401(k) plan. We may match
    employees&#146; annual contributions, within prescribed limits.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    58
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='110'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INVESTMENT
    POLICIES AND POLICIES WITH RESPECT TO CERTAIN
    ACTIVITIES</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a discussion of our investment policies and our
    policies with respect to certain other activities, including
    financing matters and conflicts of interest. These policies may
    be amended or revised from time to time at the discretion of our
    board of trustees, without a vote of our shareholders. Any
    change to any of these policies by our board of trustees,
    however, would be made only after a thorough review and analysis
    of that change, in light of then-existing business and other
    circumstances, and then only if, in the exercise of its business
    judgment, our board of trustees believes that it is advisable to
    do so in our and our shareholders&#146; best interests. We
    cannot assure you that our investment objectives will be
    attained.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Investments
    in Real Estate or Interests in Real Estate</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We plan to invest principally in hotel properties. At the
    completion of this offering, we will not have identified any
    specific hotel properties to acquire or committed the net
    proceeds of this offering to any specific hotel property
    investment. Our senior executive officers will identify and
    negotiate acquisition opportunities. For information concerning
    the investing experience of these individuals, please see the
    sections entitled &#147;Our Business&#148; and &#147;Our
    Management.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to conduct substantially all of our investment
    activities through our operating partnership and its
    subsidiaries. Our primary investment objectives are to enhance
    shareholder value over time by generating strong returns on
    invested capital, consistently paying attractive distributions
    to our shareholders and achieving long-term appreciation in the
    value of our hotel properties.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There are no limitations on the amount or percentage of our
    total assets that may be invested in any one property.
    Additionally, no limits have been set on the concentration of
    investments in any one location or facility type.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additional criteria with respect to our hotel properties is
    described in &#147;Our Business&#160;&#151; Business Strategy
    and Investment Criteria.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Investments
    in Mortgages, Structured Financings and Other Lending
    Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have no current intention of investing in loans secured by
    properties or making loans to persons other than in connection
    with the acquisition of mortgage loans through which we expect
    to achieve equity ownership of the underlying hotel property in
    the near-term.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Investments
    in Securities of or Interests in Persons Primarily Engaged in
    Real Estate Activities and Other Issuers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally speaking, we do not expect to engage in any
    significant investment activities with other entities, although
    we may consider joint venture investments with other investors.
    We may also invest in the securities of other issuers in
    connection with acquisitions of indirect interests in properties
    (normally general or limited partnership interests in special
    purpose partnerships owning properties). We may in the future
    acquire some, all or substantially all of the securities or
    assets of other REITs or similar entities where that investment
    would be consistent with our investment policies and the REIT
    qualification requirements. There are no limitations on the
    amount or percentage of our total assets that may be invested in
    any one issuer, other than those imposed by the gross income and
    asset tests that we must satisfy to qualify as a REIT. However,
    we do not anticipate investing in other issuers of securities
    for the purpose of exercising control or acquiring any
    investments primarily for sale in the ordinary course of
    business or holding any investments with a view to making
    short-term profits from their sale. In any event, we do not
    intend that our investments in securities will require us to
    register as an &#147;investment company&#148; under the
    Investment Company Act of 1940, as amended, and we intend to
    divest securities before any registration would be required.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not intend to engage in trading, underwriting, agency
    distribution or sales of securities of other issuers.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    59
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Disposition
    Policy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we have no current plans to dispose of any of the hotel
    properties we acquire, we will consider doing so, subject to
    REIT qualification and prohibited transaction rules under the
    Code, if our management determines that a sale of a property
    would be in our interests based on the price being offered for
    the hotel, the operating performance of the hotel, the tax
    consequences of the sale and other factors and circumstances
    surrounding the proposed sale. See &#147;Risk
    Factors&#160;&#151; Risks Related to Our Business and
    Properties.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Financing
    Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to maintain a low-leverage capital structure and
    intend to limit the sum of the outstanding principal amount of
    any consolidated indebtedness and the liquidation preference of
    any outstanding preferred shares to not more than 4.5x our
    EBITDA for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period preceding the incurrence of such debt or the issuance of
    such preferred shares. Compliance with this limitation will be
    judged at the time debt is incurred or preferred shares are
    issued, and a subsequent decrease in EBITDA will not require us
    to repay debt or redeem preferred shares. Our board of trustees
    will periodically review this limitation and may modify or
    eliminate it without the approval of our shareholders. For our
    initial debt financing, we intend to obtain a revolving credit
    facility for general business purposes, which may include the
    following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    funding of investments (following investment of the net proceeds
    of this offering);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    payment of declared distributions to shareholders;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    working capital needs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    payment of corporate taxes on our TRS lessees;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    any other payments deemed necessary or desirable by senior
    management and approved by the lender.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to have discussions with several lending institutions
    and negotiate a revolving credit facility. In seeking to obtain
    such a facility, we will consider factors as we deem relevant,
    including interest rate pricing, recurring fees, flexibility of
    funding, security required, maturity, restrictions on prepayment
    and refinancing and restrictions impacting our daily operations.
    There can be no assurance that we will be able to obtain such a
    facility on favorable terms or at all.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Going forward, we will consider a number of factors when
    evaluating our level of indebtedness and making financial
    decisions, including, among others, the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the interest rate of the proposed financing;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the extent to which the financing impacts the flexibility with
    which we asset manage our properties;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    prepayment penalties and restrictions on refinancing;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the purchase price of properties we acquire with debt financing;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our long-term objectives with respect to the financing;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our target investment returns;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the ability of particular properties, and our company as a
    whole, to generate cash flow sufficient to cover expected debt
    service payments;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    overall level of consolidated indebtedness;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    timing of debt maturities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    provisions that require recourse and cross-collateralization;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    corporate credit ratios, including debt service or fixed charge
    coverage, debt to EBITDA, debt to total market capitalization
    and debt to undepreciated assets;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the overall ratio of fixed- and variable-rate debt.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    60
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Equity
    Capital Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to applicable law and the requirements for listed
    companies on the NYSE, our board of trustees has the authority,
    without further shareholder approval, to issue additional
    authorized common shares and preferred shares or otherwise raise
    capital, including through the issuance of senior securities, in
    any manner and on the terms and for the consideration it deems
    appropriate, including in exchange for property. Existing
    shareholders will have no preemptive right to additional shares
    issued in any offering, and any offering might cause a dilution
    of investment. We may in the future issue common shares in
    connection with acquisitions. We also may issue limited
    partnership interests in our operating partnership in connection
    with acquisitions of property.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees may authorize the issuance of preferred
    shares with terms and conditions that could have the effect of
    delaying, deterring or preventing a transaction or a change in
    control of our company that might involve a premium price for
    holders of our common shares or otherwise might be in their best
    interests. Additionally, preferred shares could have
    distribution, voting, liquidation and other rights and
    preferences that are senior to those of our common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may, under certain circumstances, purchase common or
    preferred shares in the open market or in private transactions
    with our shareholders, if those purchases are approved by our
    board of trustees. Our board of trustees has no present
    intention of causing us to repurchase any shares, and any action
    would only be taken in conformity with applicable federal and
    state laws and the applicable requirements for qualifying as a
    REIT.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the future, we may institute a dividend reinvestment plan, or
    DRIP, which would allow our shareholders to acquire additional
    common shares by automatically reinvesting their cash dividends.
    Shares would be acquired pursuant to the plan at a price equal
    to the then prevailing market price, without payment of
    brokerage commissions or service charges. Shareholders who do
    not participate in the plan will continue to receive cash
    distributions as declared.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Conflict
    of Interest Policy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our current board of trustees consists of Mr.&#160;Bortz and as
    a result, the transactions and agreements entered into in
    connection with our formation prior to this offering have not
    been approved by any independent trustees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective upon closing of this offering, we intend to adopt
    policies to reduce potential conflicts of interest. Generally,
    we expect that our policy will provide that any transaction,
    agreement or relationship in which any of our trustees, officers
    or employees has an interest must be approved by a majority of
    our disinterested trustees. However, we cannot assure you that
    these policies will be successful in eliminating the influence
    of these conflicts. See &#147;Risk Factors&#160;&#151; Risks
    Related to Our Business and Properties.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Reporting
    Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally speaking, we intend to make available to our
    shareholders audited annual financial statements and annual
    reports. After this offering, we will become subject to the
    information reporting requirements of the Securities Exchange
    Act of 1934, as amended, or the Exchange Act. Pursuant to these
    requirements, we will file periodic reports, proxy statements
    and other information, including audited financial statements,
    with the SEC.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    61
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='111'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    PRINCIPAL SHAREHOLDERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information regarding the
    beneficial ownership of common shares by (i)&#160;each of our
    trustees, (ii)&#160;each of our executive officers and
    (iii)&#160;all of our trustees and executive officers as a group
    upon completion of this offering. Unless otherwise indicated,
    all shares are owned directly and the indicated person has sole
    voting and investment power.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="67%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="13%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name of Beneficial Owner</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Beneficially Owned</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent of Class</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Jon E. Bortz
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    All executive officers and trustees as a group
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(1)(2)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">*&#160;
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents less than 1% of the
    number of common shares upon completion of this offering.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Mr.&#160;Bortz acquired 1,000
    common shares in connection with the formation and initial
    capitalization of our company, which shares we will repurchase
    at his cost of $1,000 upon completion of this offering. The
    number of common shares above
    represents&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    shares issuable upon conversion of LTIP units to be granted to
    Mr.&#160;Bortz upon completion of this offering. These LTIP
    units will vest ratably over the first five anniversaries of the
    date of grant.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Includes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares to be granted to each independent trustee upon
    completion of this offering, which shares will vest ratably over
    the first three anniversaries of the date of grant.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently have outstanding 1,000 common shares, all of which
    are owned by our President and Chief Executive Officer,
    Mr.&#160;Bortz. Upon completion of this offering, we will
    repurchase all 1,000 common shares from Mr.&#160;Bortz at his
    cost of $1.00 per share.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    62
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='112'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will use approximately $&#160;&#160;&#160;&#160;&#160; of the
    net proceeds to reimburse Mr.&#160;Bortz for
    <FONT style="white-space: nowrap">out-of-pocket</FONT>
    expenses he incurred in connection with the formation of our
    company and this offering and $1,000 to repurchase the shares he
    acquired in connection with the formation and initial
    capitalization of our company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will cause our operating
    partnership to issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;LTIP
    units to certain of our officers. These LTIP units will vest
    ratably over the first five anniversaries of the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also expect to enter into indemnification agreements with our
    trustees and our executive officers providing for procedures for
    indemnification by us to the fullest extent permitted by law and
    advancements by us of certain expenses and costs relating to
    claims, suits or proceedings arising from their service to us.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    63
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='113'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF SHARES&#160;OF BENEFICIAL INTEREST</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although the following summary describes the material terms of
    our shares of beneficial interest, it is not a complete
    description of the Maryland REIT Law, or the MRL, the MGCL
    provisions applicable to a Maryland real estate investment trust
    or our declaration of trust and bylaws, copies of which are
    filed as exhibits to the registration statement of which this
    prospectus is a part. See &#147;Where You Can Find More
    Information.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">General</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides that we may issue up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares, $0.01&#160;par value per share,
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;preferred
    shares of beneficial interest, $0.01&#160;par value per share,
    or preferred shares. We issued 1,000 common shares in connection
    with our initial capitalization. Upon completion of this
    offering, we will repurchase these shares. Our declaration of
    trust authorizes our board of trustees to amend our declaration
    of trust to increase or decrease the aggregate number of
    authorized shares or the number of shares of any class or series
    without shareholder approval. Upon completion of this
    offering,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;common
    shares will be issued and outstanding on a fully diluted basis,
    including
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted common shares granted to our trustees under our
    equity incentive plan upon completion of this offering,
    or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares if the underwriters&#146; overallotment option is
    exercised in full, and no preferred shares will be issued and
    outstanding. Our equity incentive plan provides for grants of
    equity based awards up to an aggregate
    of&#160;&#160;&#160;&#160;&#160;% of our issued and outstanding
    common shares (on a fully diluted basis and including shares to
    be sold pursuant to the underwriters&#146; exercise of their
    overallotment option) at the time of the award.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under Maryland law, shareholders are not personally liable for
    the obligations of a real estate investment trust solely as a
    result of their status as shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of the common shares offered in this offering will be duly
    authorized, fully paid and nonassessable. Subject to the
    preferential rights, if any, of holders of any other class or
    series of shares of beneficial interest and to the provisions of
    our declaration of trust regarding the restrictions on ownership
    and transfer of shares of beneficial interest, holders of our
    common shares are entitled to receive distributions on such
    shares of beneficial interest out of assets legally available
    therefor if, as and when authorized by our board of trustees and
    declared by us, and the holders of our common shares are
    entitled to share ratably in our assets legally available for
    distribution to our shareholders in the event of our
    liquidation, dissolution or winding up after payment of or
    adequate provision for all of our known debts and liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to the provisions of our declaration of trust regarding
    the restrictions on ownership and transfer of common shares of
    beneficial interest and except as may otherwise be specified in
    the terms of any class or series of common shares, each
    outstanding common share entitles the holder to one vote on all
    matters submitted to a vote of shareholders, including the
    election of trustees, and, except as provided with respect to
    any other class or series of shares of beneficial interest, the
    holders of such common shares will possess the exclusive voting
    power. There is no cumulative voting in the election of our
    trustees, which means that the shareholders entitled to cast a
    majority of the votes entitled to be cast in the election of
    trustees can elect all of the trustees then standing for
    election, and the remaining shareholders will not be able to
    elect any trustees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of common shares have no preference, conversion,
    exchange, sinking fund, redemption or appraisal rights and have
    no preemptive rights to subscribe for any of our securities.
    Subject to the restrictions on ownership and transfer of shares
    contained in our declaration of trust and the terms of any other
    class or series of common shares, all of our common shares will
    have equal dividend, liquidation and other rights.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Power to
    Reclassify Our Unissued Shares of Beneficial Interest</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust authorizes our board of trustees to
    classify and reclassify any unissued common or preferred shares
    into other classes or series of shares of beneficial interest.
    Prior to the issuance of shares of each class or series, our
    board of trustees is required by Maryland law and by our
    declaration of
</DIV>

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    64
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    trust to set, subject to the provisions of our declaration of
    trust regarding the restrictions on ownership and transfer of
    shares of beneficial interest, the preferences, conversion or
    other rights, voting powers, restrictions, limitations as to
    dividends or other distributions, qualifications and terms or
    conditions of redemption for each class or series. Therefore,
    our board could authorize the issuance of common shares or
    preferred shares that have priority over our common shares as to
    voting rights, dividends or upon liquidation or with terms and
    conditions that could have the effect of delaying, deferring or
    preventing a change in control or other transaction that might
    involve a premium price for our common shares or otherwise be in
    the best interests of our shareholders. No preferred shares are
    presently outstanding, and we have no present plans to issue any
    preferred shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Power to
    Increase or Decrease Authorized Shares of Beneficial Interest
    and Issue Additional Common Shares and Preferred
    Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the power of our board of trustees to amend our
    declaration of trust to increase or decrease the number of
    authorized shares of beneficial interest, to authorize us to
    issue additional authorized but unissued common shares or
    preferred shares and to classify or reclassify unissued common
    shares or preferred shares and thereafter to issue such
    classified or reclassified shares of beneficial interest will
    provide us with increased flexibility in structuring possible
    future financings and acquisitions and in meeting other needs
    that might arise. The additional classes or series, as well as
    the common shares, will be available for issuance without
    further action by our shareholders, unless such action is
    required by applicable law or the rules of any stock exchange or
    automated quotation system on which our securities may be listed
    or traded. Although our board of trustees does not intend to do
    so, it could authorize us to issue a class or series that could,
    depending upon the terms of the particular class or series,
    delay, defer or prevent a change in control or other transaction
    that might involve a premium price for our common shares or
    otherwise be in the best interests of our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Restrictions
    on Ownership and Transfer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For us to qualify as a REIT under the Code, our shares of
    beneficial interest must be beneficially owned by 100 or more
    persons during at least 335&#160;days of a taxable year of
    12&#160;months (other than the first year for which an election
    to be a REIT has been made) or during a proportionate part of a
    shorter taxable year. Also, not more than 50% of the value of
    our outstanding shares of beneficial interest may be owned,
    directly or indirectly, by five or fewer individuals (as defined
    in the Code to include certain entities) during the last half of
    a taxable year (other than the first year for which an election
    to be a REIT has been made).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because our board of trustees believes it is at present
    essential for us to qualify as a REIT, our declaration of trust,
    subject to certain exceptions, restricts the amount of our
    shares of beneficial interest that a person may beneficially or
    constructively own. Our declaration of trust provides that,
    subject to certain exceptions, no person may beneficially or
    constructively own more than 9.8% in value or in number of
    shares, whichever is more restrictive, of the outstanding shares
    of any class or series of our shares of beneficial interest.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust also prohibits any person from
    (i)&#160;beneficially owning shares of beneficial interest to
    the extent that such beneficial ownership would result in our
    being &#147;closely held&#148; within the meaning of
    Section&#160;856(h) of the Code (without regard to whether the
    ownership interest is held during the last half of the taxable
    year), (ii)&#160;transferring our shares of beneficial interest
    to the extent that such transfer would result in our shares of
    beneficial interest being beneficially owned by less than
    100&#160;persons (determined under the principles of
    Section&#160;856(a)(5) of the Code), (iii)&#160;beneficially or
    constructively owning our shares of beneficial interest to the
    extent such beneficial or constructive ownership would cause us
    to constructively own ten percent or more of the ownership
    interests in a tenant (other than a TRS) of our real property
    within the meaning of Section&#160;856(d)(2)(B) of the Code or
    (iv)&#160;beneficially or constructively owning or transferring
    our shares of beneficial interest if such ownership or transfer
    would otherwise cause us to fail to qualify as a REIT under the
    Code, including, but not limited to, as a result of any hotel
    management companies failing to qualify as &#147;eligible
    independent contractors&#148; under the REIT rules. Any person
    who acquires or attempts or intends to acquire beneficial or
    constructive ownership of our shares of beneficial interest that
    will or may violate any of the foregoing restrictions on
    transferability and ownership, or any person who would have
    owned our shares of
</DIV>

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    <BR>
    65
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    beneficial interest that resulted in a transfer of shares to a
    charitable trust, is required to give written notice immediately
    to us, or in the case of a proposed or attempted transaction, to
    give at least 15&#160;days&#146; prior written notice, and
    provide us with such other information as we may request in
    order to determine the effect of such transfer on our status as
    a REIT. The foregoing restrictions on transferability and
    ownership will not apply if our board of trustees determines
    that it is no longer in our best interests to attempt to
    qualify, or to continue to qualify, as a REIT.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees, in its sole discretion, may prospectively
    or retroactively exempt a person from the limits described in
    the paragraph above and may establish or increase an excepted
    holder percentage limit for such person. The person seeking an
    exemption must provide to our board of trustees such
    representations, covenants and undertakings as our board of
    trustees may deem appropriate in order to conclude that granting
    the exemption will not cause us to lose our status as a REIT.
    Our board of trustees may not grant such an exemption to any
    person if such exemption would result in our failing to qualify
    as a REIT. Our board of trustees may require a ruling from the
    IRS or an opinion of counsel, in either case in form and
    substance satisfactory to the board of trustees, in its sole
    discretion, in order to determine or ensure our status as a REIT.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any attempted transfer of our shares of beneficial interest
    which, if effective, would violate any of the restrictions
    described above will result in the number of shares causing the
    violation (rounded up to the nearest whole share) to be
    automatically transferred to a trust for the exclusive benefit
    of one or more charitable beneficiaries, except that any
    transfer that results in the violation of the restriction
    relating to our shares of beneficial interest being beneficially
    owned by fewer than 100&#160;persons will be void <I>ab
    initio</I>. In either case, the proposed transferee will not
    acquire any rights in such shares. The automatic transfer will
    be deemed to be effective as of the close of business on the
    business day prior to the date of the purported transfer or
    other event that results in the transfer to the trust. Shares
    held in the trust will be issued and outstanding shares. The
    proposed transferee will not benefit economically from ownership
    of any shares held in the trust, will have no rights to
    dividends or other distributions and will have no rights to vote
    or other rights attributable to the shares held in the trust.
    The trustee of the trust will have all voting rights and rights
    to dividends or other distributions with respect to shares held
    in the trust. These rights will be exercised for the exclusive
    benefit of the charitable beneficiary. Any dividend or other
    distribution paid prior to our discovery that shares have been
    transferred to the trust will be paid by the recipient to the
    trustee upon demand. Any distribution authorized but unpaid will
    be paid when due to the trustee. Any dividend or other
    distribution paid to the trustee will be held in trust for the
    charitable beneficiary. Subject to Maryland law, the trustee
    will have the authority (i)&#160;to rescind as void any vote
    cast by the proposed transferee prior to our discovery that the
    shares have been transferred to the trust and (ii)&#160;to
    recast the vote in accordance with the desires of the trustee
    acting for the benefit of the charitable beneficiary. However,
    if we have already taken irreversible corporate action, then the
    trustee will not have the authority to rescind and recast the
    vote.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Within 20&#160;days of receiving notice from us that shares of
    beneficial interest have been transferred to the trust, the
    trustee will sell the shares to a person designated by the
    trustee, whose ownership of the shares will not violate the
    above ownership and transfer limitations. Upon the sale, the
    interest of the charitable beneficiary in the shares sold will
    terminate and the trustee will distribute the net proceeds of
    the sale to the proposed transferee and to the charitable
    beneficiary as follows. The proposed transferee will receive the
    lesser of (i)&#160;the price paid by the proposed transferee for
    the shares or, if the proposed transferee did not give value for
    the shares in connection with the event causing the shares to be
    held in the trust (<I>e.g.</I>, a gift, devise or other similar
    transaction), the market price (as defined in our declaration of
    trust) of the shares on the day of the event causing the shares
    to be held in the trust and (ii)&#160;the price received by the
    trustee (net of any commission and other expenses of sale) from
    the sale or other disposition of the shares. The trustee may
    reduce the amount payable to the proposed transferee by the
    amount of dividends or other distributions paid to the proposed
    transferee and owed by the proposed transferee to the trustee.
    Any net sale proceeds in excess of the amount payable to the
    proposed transferee will be paid immediately to the charitable
    beneficiary. If, prior to our discovery that our shares have
    been transferred to the trust, the shares are sold by the
    proposed transferee, then (i)&#160;the shares shall be deemed to
    have been sold on behalf of the trust and (ii)&#160;to the
    extent that the proposed transferee received an amount for the
    shares that exceeds the amount he or she was entitled to
    receive, the excess shall be paid to the trustee upon demand.
</DIV>

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    <BR>
    66
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, shares of beneficial interest held in the trust
    will be deemed to have been offered for sale to us, or our
    designee, at a price per share equal to the lesser of
    (i)&#160;the price per share in the transaction that resulted in
    the transfer to the trust (or, in the case of a devise or gift,
    the market price at the time of the devise or gift) and
    (ii)&#160;the market price on the date we, or our designee,
    accept the offer, which we may reduce by the amount of dividends
    and distributions paid to the proposed transferee and owed by
    the proposed transferee to the trustee. We will have the right
    to accept the offer until the trustee has sold the shares. Upon
    a sale to us, the interest of the charitable beneficiary in the
    shares sold will terminate and the trustee will distribute the
    net proceeds of the sale to the proposed transferee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a transfer to a charitable trust, as described above, would
    be ineffective for any reason to prevent a violation of a
    restriction, the transfer that would have resulted in such
    violation will be void <I>ab initio</I>, and the proposed
    transferee shall acquire no rights in such shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Every owner of more than 5% (or such lower percentage as
    required by the Code or the regulations promulgated thereunder)
    of our shares of beneficial interest, within 30&#160;days after
    the end of each taxable year, is required to give us written
    notice, stating his or her name and address, the number of
    shares of each class and series of our shares of beneficial
    interest that he or she beneficially owns and a description of
    the manner in which the shares are held. Each such owner will
    provide us with such additional information as we may request in
    order to determine the effect, if any, of his or her beneficial
    ownership on our status as a REIT and to ensure compliance with
    the ownership limits. In addition, each shareholder will upon
    demand be required to provide us with such information as we may
    request in good faith in order to determine our status as a REIT
    and to comply with the requirements of any taxing authority or
    governmental authority or to determine such compliance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These ownership limitations could delay, defer or prevent a
    transaction or a change in control that might involve a premium
    price for our common shares or otherwise be in the best interest
    of our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stock
    Exchange Listing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to apply for listing of our common shares on the NYSE
    under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    Agent and Registrar</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect the transfer agent and registrar for our common shares
    to
    be&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
</DIV>

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    <BR>
    67
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<A name='114'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SHARES&#160;ELIGIBLE
    FOR FUTURE SALE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no public market for our
    common shares. We cannot predict the effect, if any, that sales
    of common shares or the availability of shares for sale will
    have on the market price of our common shares prevailing from
    time to time. Sales of substantial amounts of our common shares
    in the public market, or the perception that such sales could
    occur, could adversely affect the prevailing market price of our
    common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares outstanding, including the common shares sold in
    this offering
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    restricted common shares granted to our trustees under our 2009
    Equity Incentive Plan,
    or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    common shares if the underwriters&#146; overallotment option is
    exercised in full. Our 2009 Equity Incentive Plan provides for
    grants of equity based awards up to an aggregate
    of&#160;&#160;&#160;&#160;&#160;% of our issued and outstanding
    common shares (on a fully diluted basis and including shares to
    be sold pursuant to the underwriters&#146; exercise of their
    overallotment option).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No assurance can be given as to the likelihood that an active
    trading market for our common shares will develop or be
    maintained, that any such market will be liquid, that
    shareholders will be able to sell the common shares when issued
    or at all or the prices that shareholders may obtain for any of
    the common shares. No prediction can be made as to the effect,
    if any, that future issuances of common shares or the
    availability of common shares for future issuances will have on
    the market price of our common shares prevailing from time to
    time, issuances of substantial amounts of common shares, or the
    perception that such issuances could occur, may affect adversely
    the prevailing market price of our common shares. See &#147;Risk
    Factors&#160;&#151; Risks Related to This Offering.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The common shares sold in this offering will be freely tradable
    without restriction or further registration under the Securities
    Act of 1933, as amended, or the Securities Act, unless the
    shares are held by any of our &#147;affiliates,&#148; as that
    term is defined in Rule&#160;144 under the Securities Act. As
    defined in Rule&#160;144, an &#147;affiliate&#148; of an issuer
    is a person that directly, or indirectly through one or more
    intermediaries, controls, is controlled by or is under common
    control with the issuer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, Rule&#160;144 provides that if (i)&#160;one year has
    elapsed since the date of acquisition of common shares from us
    or any of our affiliates and (ii)&#160;the holder is, and has
    not been, an affiliate of ours at any time during the three
    months preceding the proposed sale, such holder may sell such
    common shares in the public market under Rule&#160;144(b)(1)
    without regard to the volume limitations, manner of sale
    provisions, public information requirements or notice
    requirements under such rule. In general, Rule&#160;144 also
    provides that if (i)&#160;six months have elapsed since the date
    of acquisition of common shares from us or any of our
    affiliates, (ii)&#160;we have been a reporting company under the
    Exchange Act for at least 90&#160;days and (iii)&#160;the holder
    is not, and has not been, an affiliate of ours at any time
    during the three months preceding the proposed sale, such holder
    may sell such common shares in the public market under
    Rule&#160;144(b)(1) subject to satisfaction of
    Rule&#160;144&#146;s public information requirements, but
    without regard to the volume limitations, manner of sale
    provisions or notice requirements under such rule.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, under Rule&#160;144, if (i)&#160;one year (or,
    subject to us being a reporting company under the Exchange Act
    for at least the preceding 90&#160;days, six months) has elapsed
    since the date of acquisition of common shares from us or any of
    our affiliates and (ii)&#160;the holder is, or has been, an
    affiliate of ours at any time during the three months preceding
    the proposed sale, such holder may sell such common shares in
    the public market under Rule&#160;144(b)(1) subject to
    satisfaction of Rule&#160;144&#146;s volume limitations, manner
    of sale provisions, public information requirements and notice
    requirements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following completion of this offering, we intend to file a
    registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    to register the total number of common shares that may be issued
    under our 2009 Equity Incentive Plan.
</DIV>

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    <BR>
    68
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<A name='115'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST<BR>
    AND BYLAWS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although the following summary describes certain provisions of
    Maryland law and of our declaration of trust and bylaws, it is
    not a complete description of Maryland law and our declaration
    of trust and bylaws, copies of which are available from us upon
    request. See &#147;Where You Can Find More Information.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Number of
    Trustees; Vacancies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust and bylaws provide that the number of
    our trustees may be established by our board of trustees but may
    not be more than 15. Our declaration of trust also provides
    that, at such time as we have at least three independent
    trustees and a class of our common shares or preferred shares is
    registered under the Exchange Act, we elect to be subject to the
    provision of Subtitle 8 of Title&#160;3 of the MGCL regarding
    the filling of vacancies on our board of trustees. Accordingly,
    at such time, except as may be provided by our board of trustees
    in setting the terms of any class or series of shares, any and
    all vacancies on our board of trustees may be filled only by the
    affirmative vote of a majority of the remaining trustees in
    office, even if the remaining trustees do not constitute a
    quorum, and any individual elected to fill such vacancy will
    serve for the remainder of the full term of the class in which
    the vacancy occurred and until a successor is duly elected and
    qualifies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of our trustees will be elected by our shareholders to
    serve for a one-year term and until his or her successor is duly
    elected and qualifies. A plurality of all votes cast on the
    matter at a meeting of shareholders at which a quorum is present
    is sufficient to elect a trustee. The presence in person or by
    proxy of shareholders entitled to cast a majority of all the
    votes entitled to be cast at a meeting constitutes a quorum.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Removal
    of Trustees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides that, subject to the rights of
    holders of any series of preferred shares, a trustee may be
    removed only for &#147;cause,&#148; and then only by the
    affirmative vote of at least two-thirds of the votes entitled to
    be cast generally in the election of trustees. For this purpose,
    &#147;cause&#148; means, with respect to any particular trustee,
    conviction of a felony or a final judgment of a court of
    competent jurisdiction holding that such trustee caused
    demonstrable, material harm to us through bad faith or active
    and deliberate dishonesty. These provisions, when coupled with
    the exclusive power of our board of trustees to fill vacancies
    on our board of trustees, generally precludes shareholders from
    (i)&#160;removing incumbent trustees except for
    &#147;cause&#148; and with a substantial affirmative vote and
    (ii)&#160;filling the vacancies created by such removal with
    their own nominees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Policy on
    Majority Voting</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees will adopt a policy regarding the election
    of trustees in uncontested elections. Pursuant to such policy,
    in an uncontested election of trustees, any nominee who receives
    a greater number of votes affirmatively <I>withheld </I>from his
    or her election than votes <I>for</I> his or her election will,
    within two weeks following certification of the shareholder vote
    by our company, submit a written resignation offer to our board
    of trustees for consideration by our Nominating and Corporate
    Governance Committee. Our Nominating and Corporate Governance
    Committee will consider the resignation offer and, within
    60&#160;days following certification by our company of the
    shareholder vote with respect to such election, will make a
    recommendation to our board of trustees concerning the
    acceptance or rejection of the resignation offer. Our board of
    trustees will take formal action on the recommendation no later
    than 90&#160;days following certification of the shareholder
    vote by our company. We will publicly disclose, in a
    <FONT style="white-space: nowrap">Form&#160;8-K</FONT>
    filed with the SEC, the decision of our board of trustees. Our
    board of trustees will also provide an explanation of the
    process by which the decision was made and, if applicable, its
    reason or reasons for rejecting the tendered resignation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Business
    Combinations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under certain provisions of the MGCL applicable to Maryland real
    estate investment trusts, certain &#147;business
    combinations,&#148; including a merger, consolidation, share
    exchange or, in certain circumstances, an
</DIV>

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    <BR>
    69
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    asset transfer or issuance or reclassification of equity
    securities, between a Maryland real estate investment trust and
    an &#147;interested shareholder&#148; or, generally, any person
    who beneficially owns 10% or more of the voting power of the
    real estate investment trust&#146;s outstanding voting shares or
    an affiliate or associate of the real estate investment trust
    who, at any time within the two-year period prior to the date in
    question, was the beneficial owner of 10% or more of the voting
    power of the then outstanding voting shares of beneficial
    interest of the real estate investment trust, or an affiliate of
    such an interested shareholder, are prohibited for five years
    after the most recent date on which the interested shareholder
    becomes an interested shareholder. Thereafter, any such business
    combination must be recommended by the board of trustees of such
    real estate investment trust and approved by the affirmative
    vote of at least (a)&#160;80% of the votes entitled to be cast
    by holders of outstanding voting shares of beneficial interest
    of the real estate investment trust and (b)&#160;two-thirds of
    the votes entitled to be cast by holders of voting shares of
    beneficial interest of the real estate investment trust other
    than shares held by the interested shareholder with whom (or
    with whose affiliate) the business combination is to be effected
    or held by an affiliate or associate of the interested
    shareholder, unless, among other conditions, the real estate
    investment trust&#146;s shareholders receive a minimum price (as
    defined in the MGCL) for their shares and the consideration is
    received in cash or in the same form as previously paid by the
    interested shareholder for its shares. Under the MGCL, a person
    is not an &#147;interested shareholder&#148; if the board of
    trustees approved in advance the transaction by which the person
    otherwise would have become an interested shareholder. A real
    estate investment trust&#146;s board of trustees may provide
    that its approval is subject to compliance with any terms and
    conditions determined by&#160;it.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These provisions of the MGCL do not apply, however, to business
    combinations that are approved or exempted by a board of
    trustees prior to the time that the interested shareholder
    becomes an interested shareholder. Pursuant to the statute, our
    board of trustees has by resolution exempted business
    combinations between us and any other person from these
    provisions of the MGCL, provided that the business combination
    is first approved by our board of trustees, including a majority
    of trustees who are not affiliates or associates of such person,
    and, consequently, the five year prohibition and the
    supermajority vote requirements will not apply to such business
    combinations. As a result, any person may be able to enter into
    business combinations with us that may not be in the best
    interests of our shareholders without compliance by us with the
    supermajority vote requirements and other provisions of the
    statute. This resolution, however, may be altered or repealed in
    whole or in part at any time. If this resolution is repealed, or
    our board of trustees does not otherwise approve a business
    combination, the statute may discourage others from trying to
    acquire control of us and increase the difficulty of
    consummating any offer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Control
    Share Acquisitions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The MGCL provides that &#147;control shares&#148; of a Maryland
    real estate investment trust acquired in a &#147;control share
    acquisition&#148; have no voting rights except to the extent
    approved by the affirmative vote of two-thirds of the votes
    entitled to be cast on the matter, excluding shares of
    beneficial interest in a real estate investment trust in respect
    of which any of the following persons is entitled to exercise or
    direct the exercise of the voting power of such shares in the
    election of trustees: (1)&#160;a person who makes or proposes to
    make a control share acquisition, (2)&#160;an officer of the
    real estate investment trust or (3)&#160;an employee of the real
    estate investment trust who is also a trustee of the real estate
    investment trust. &#147;Control shares&#148; are voting shares
    which, if aggregated with all other such shares owned by the
    acquirer, or in respect of which the acquirer is able to
    exercise or direct the exercise of voting power (except solely
    by virtue of a revocable proxy), would entitle the acquirer to
    exercise voting power in electing trustees within one of the
    following ranges of voting power: (A)&#160;one-tenth or more but
    less than one-third, (B)&#160;one-third or more but less than a
    majority or (C)&#160;a majority or more of all voting power.
    Control shares do not include shares that the acquirer is then
    entitled to vote as a result of having previously obtained
    shareholder approval. A &#147;control share acquisition&#148;
    means the acquisition of control shares, subject to certain
    exceptions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A person who has made or proposes to make a control share
    acquisition, upon satisfaction of certain conditions (including
    an undertaking to pay expenses), may compel our board of
    trustees to call a special meeting of shareholders to be held
    within 50&#160;days of demand to consider the voting rights of
    the shares. If no request for a meeting is made, the real estate
    investment trust may itself present the question at any
    shareholders&#146; meeting.
</DIV>

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    <BR>
    70
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If voting rights are not approved at the meeting or if the
    acquirer does not deliver an acquiring person statement as
    required by the statute, then, subject to certain conditions and
    limitations, the real estate investment trust may redeem any or
    all of the control shares (except those for which voting rights
    have previously been approved) for fair value determined,
    without regard to the absence of voting rights for the control
    shares, as of the date of the last control share acquisition by
    the acquirer or of any meeting of shareholders at which the
    voting rights of such shares are considered and not approved. If
    voting rights for control shares are approved at a
    shareholders&#146; meeting and the acquirer becomes entitled to
    vote a majority of the shares entitled to vote, all other
    shareholders may exercise appraisal rights. The fair value of
    the shares as determined for purposes of such appraisal rights
    may not be less than the highest price per share paid by the
    acquirer in the control share acquisition.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The control share acquisition statute does not apply to
    (a)&#160;shares acquired in a merger, consolidation or share
    exchange if the real estate investment trust is a party to the
    transaction or (b)&#160;acquisitions approved or exempted by the
    declaration of trust or bylaws of the real estate investment
    trust.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our bylaws contain a provision exempting from the control share
    acquisition statute any and all acquisitions by any person of
    our shares. There is no assurance that such provision will not
    be amended or eliminated at any time in the future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Subtitle
    8</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subtitle 8 of Title&#160;3 of the MGCL permits a Maryland real
    estate investment trust with a class of equity securities
    registered under the Exchange Act and at least three independent
    trustees to elect to be subject, by provision in its declaration
    of trust or bylaws or a resolution of its board of trustees and
    notwithstanding any contrary provision in the declaration of
    trust or bylaws, to any or all of five provisions:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a classified board;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a two-thirds vote requirement for removing a trustee;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a requirement that the number of trustees be fixed only by vote
    of the trustees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a requirement that a vacancy on the board be filled only by the
    remaining trustees and for the remainder of the full term of the
    class of trustees in which the vacancy occurred; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a majority requirement for the calling of a special meeting of
    shareholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides that, at such time as we are
    eligible to make a Subtitle 8 election, we elect to be subject
    to the provision of Subtitle 8 that requires that vacancies on
    our board may be filled only by the remaining trustees and for
    the remainder of the full term of the trusteeship in which the
    vacancy occurred. Through provisions in our declaration of trust
    and bylaws unrelated to Subtitle 8, we already (1)&#160;require
    the affirmative vote of the holders of not less than two-thirds
    of all of the votes entitled to be cast on the matter for the
    removal of any trustee from the board, which removal will be
    allowed only for cause, (2)&#160;vest in the board the exclusive
    power to fix the number of trusteeships, (3)&#160;require that a
    vacancy on the board be filled only by the remaining trustees
    and (4)&#160;require, unless called by our chairman, chief
    executive officer, president or the board of trustees, the
    request of shareholders entitled to cast not less than a
    majority of the votes entitled to be cast at such meeting to
    call a special meeting of shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Meetings
    of Shareholders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to our declaration of trust and bylaws, a meeting of
    our shareholders for the purpose of the election of trustees and
    the transaction of any business will be held annually on a date
    and at the time and place set by our board of trustees. In
    addition, our chairman, chief executive officer, president or
    board of trustees may call a special meeting of our shareholders.
</DIV>

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    <BR>
    71
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Mergers;
    Extraordinary Transactions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the MRL, a Maryland real estate investment trust generally
    cannot merge with another entity unless advised by its board of
    trustees and approved by the affirmative vote of shareholders
    holding at least two-thirds of the shares entitled to vote on
    the matter unless a lesser percentage (but not less than a
    majority of all of the votes entitled to be cast on the matter)
    is set forth in the trust&#146;s declaration of trust. Our
    declaration of trust provides that these mergers may be approved
    by a majority of all of the votes entitled to be cast on the
    matter. Our declaration of trust also provides that we may sell
    or transfer all or substantially all of our assets if approved
    by our board of trustees and by the affirmative vote of a
    majority of all the votes entitled to be cast on the matter.
    However, many of our operating assets will be held by our
    subsidiaries, and these subsidiaries may be able to sell all or
    substantially all of their assets or merge with another entity
    without the approval of our shareholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Amendment
    to Our Declaration of Trust and Bylaws</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the MRL, a Maryland real estate investment trust generally
    cannot amend its declaration of trust unless advised by its
    board of trustees and approved by the affirmative vote of
    shareholders entitled to cast at least two-thirds of the votes
    entitled to be cast on the matter unless a different percentage
    (but not less than a majority of all of the votes entitled to be
    cast on the matter) is set forth in the trust&#146;s declaration
    of trust.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except for amendments to the provisions of our declaration of
    trust related to the removal of trustees and the vote required
    to amend the provision regarding amendments to the removal
    provisions itself (each of which require the affirmative vote of
    the holders of not less than two-thirds of all the votes
    entitled to be cast on the matter) and certain amendments
    described in our declaration of trust that require only approval
    by our board of trustees, our declaration of trust may be
    amended only with the approval of our board of trustees and the
    affirmative vote of the holders of not less than a majority of
    all of the votes entitled to be cast on the matter.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of trustees has the exclusive power to adopt, alter or
    repeal any provision of our bylaws and to make new bylaws.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Termination</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides for us to have a perpetual
    existence. Our termination must be approved by a majority of our
    entire board of trustees and the affirmative vote of the holders
    of not less than a majority of all of the votes entitled to be
    cast on the matter.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Advance
    Notice of Trustee Nominations and New Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our bylaws provide that, with respect to an annual meeting of
    shareholders, nominations of individuals for election to our
    board of trustees at an annual meeting and the proposal of
    business to be considered by shareholders may be made only
    (1)&#160;pursuant to our notice of the meeting, (2)&#160;by or
    at the direction of our board of trustees or (3)&#160;by a
    shareholder of record at the time of giving notice and who is
    entitled to vote at the meeting and has complied with the
    advance notice provisions set forth in our bylaws. Our bylaws
    currently require the shareholder generally to provide notice to
    the secretary containing the information required by our bylaws
    not less than 120&#160;days nor more than 150&#160;days prior to
    the first anniversary of the date of our proxy statement for the
    solicitation of proxies for election of trustees at the
    preceding year&#146;s annual meeting (or, if we did not mail a
    proxy statement for the preceding year&#146;s annual meeting,
    the date of the notice of the preceding year&#146;s annual
    meeting, which for purposes of the 2010 annual meeting will be
    deemed to have been given
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to special meetings of shareholders, only the
    business specified in our notice of meeting may be brought
    before the meeting. Nominations of individuals for election to
    our board of trustees at a special meeting may be made only
    (1)&#160;by or at the direction of our board of trustees or
    (2)&#160;provided that our board of trustees has determined that
    trustees will be elected at such meeting, by a shareholder of
    record at the
</DIV>

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    <BR>
    72
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    time of giving notice and who is entitled to vote at the meeting
    in the election of each individual so nominated and has complied
    with the advance notice provisions set forth in our bylaws. Such
    shareholder may nominate one or more individuals, as the case
    may be, for election as a trustee if the shareholder&#146;s
    notice containing the information required by our bylaws is
    delivered to the secretary not earlier than the
    120<SUP style="font-size: 85%; vertical-align: top">th</SUP> day

    prior to such special meeting and not later than 5:00&#160;p.m.,
    eastern time, on the later of (1)&#160;the
    90<SUP style="font-size: 85%; vertical-align: top">th</SUP> day

    prior to such special meeting or (2)&#160;the tenth day
    following the day on which public announcement is first made of
    the date of the special meeting and the proposed nominees of our
    board of trustees to be elected at the meeting.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Anti-takeover
    Effect of Certain Provisions of Maryland Law and of Our
    Declaration of Trust and Bylaws</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the applicable exemption in our bylaws is repealed and the
    applicable resolution of our board of trustees is repealed, the
    control share acquisition provisions and the business
    combination provisions of the MGCL, respectively, as well as the
    provisions in our declaration of trust and bylaws, as
    applicable, on removal of trustees and the filling of trustee
    vacancies and the restrictions on ownership and transfer of
    shares of beneficial interest, together with the advance notice
    and shareholder-requested special meeting provisions of our
    bylaws, alone or in combination, could serve to delay, deter or
    prevent a transaction or a change in our control that might
    involve a premium price for holders of our common shares or
    otherwise be in their best interests.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    and Limitation of Trustees&#146; and Officers&#146;
    Liability</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust authorizes us, and our bylaws require
    us, to the maximum extent permitted by Maryland law, to
    indemnify (i)&#160;any present or former trustee or officer or
    (ii)&#160;any individual who, while serving as our trustee or
    officer and at our request, serves or has served as a trustee,
    director, officer, partner, member, manager, employee or agent
    of another real estate investment trust, corporation,
    partnership, limited liability company, joint venture, trust,
    employee benefit plan or any other enterprise, from and against
    any claim or liability to which such person may become subject
    or which such person may incur by reason of his or her service
    in such capacity or capacities, and to pay or reimburse his or
    her reasonable expenses in advance of final disposition of such
    a proceeding. Upon completion of this offering, we expect to
    enter into indemnification agreements with each of our trustees
    and executive officers that provide for indemnification to the
    maximum extent permitted by Maryland law and advancements by us
    of certain expenses and costs relating to claims, suits or
    proceedings arising from their service to us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REIT
    Qualification</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides that our board of trustees may
    revoke or otherwise terminate our REIT election, without
    approval of our shareholders, if it determines that it is no
    longer in our best interest to continue to qualify as a REIT.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    73
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='116'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    OPERATING PARTNERSHIP AND THE PARTNERSHIP AGREEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summary of the terms of the agreement of limited
    partnership of our operating partnership does not purport to be
    complete and is subject to and qualified in its entirety by
    reference to the Agreement of Limited Partnership of Pebblebrook
    Hotel, L.P., a copy of which is an exhibit to the registration
    statement of which this prospectus is a part. See &#147;Where
    You Can Find More Information.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Management</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will be the sole general partner of our operating
    partnership, which we will organize as a Delaware limited
    partnership. We will conduct substantially all of our operations
    and make substantially all of our investments through the
    operating partnership. Pursuant to the partnership agreement, we
    will have full, exclusive and complete responsibility and
    discretion in the management and control of the operating
    partnership, including the ability to cause the operating
    partnership to enter into certain major transactions including
    acquisitions, dispositions, refinancings and selection of
    lessees, make distributions to partners, and to cause changes in
    the operating partnership&#146;s business activities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transferability
    of Interests</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may not voluntarily withdraw from the operating partnership
    or transfer or assign our interest in the operating partnership
    or engage in any merger, consolidation or other combination, or
    sale of all or substantially all of our assets in a transaction
    which results in a change of control of our company unless:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we receive the consent of limited partners holding more than 50%
    of the partnership interests of the limited partners (other than
    those held by our company or its subsidiaries);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    as a result of such transaction, all limited partners will
    receive for each partnership unit an amount of cash, securities
    or other property equal in value to the greatest amount of cash,
    securities or other property paid in the transaction to a holder
    of one of our common shares, provided that if, in connection
    with the transaction, a purchase, tender or exchange offer shall
    have been made to and accepted by the holders of more than 50%
    of the outstanding common shares, each holder of partnership
    units shall be given the option to exchange its partnership
    units for the greatest amount of cash, securities or other
    property that a limited partner would have received had it
    (A)&#160;exercised its redemption right (described below) and
    (B)&#160;sold, tendered or exchanged pursuant to the offer
    common shares received upon exercise of the redemption right
    immediately prior to the expiration of the offer; or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we are the surviving entity in the transaction and either
    (A)&#160;our shareholders do not receive cash, securities or
    other property in the transaction or (B)&#160;all limited
    partners (other than our company or our subsidiaries) receive
    for each partnership unit an amount of cash, securities or other
    property having a value that is no less than the greatest amount
    of cash, securities or other property received in the
    transaction by our shareholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also may merge with or into or consolidate with another
    entity if immediately after such merger or consolidation
    (i)&#160;substantially all of the assets of the successor or
    surviving entity, other than partnership units held by us, are
    contributed, directly or indirectly, to the partnership as a
    capital contribution in exchange for partnership units with a
    fair market value equal to the value of the assets so
    contributed as determined by the survivor in good faith and
    (ii)&#160;the survivor expressly agrees to assume all of our
    obligations under the partnership agreement and the partnership
    agreement shall be amended after any such merger or
    consolidation so as to arrive at a new method of calculating the
    amounts payable upon exercise of the redemption right that
    approximates the existing method for such calculation as closely
    as reasonably possible.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also may (i)&#160;transfer all or any portion of our general
    partnership interest to (A)&#160;a wholly owned subsidiary or
    (B)&#160;a parent company, and following such transfer may
    withdraw as the general partner and (ii)&#160;engage in a
    transaction required by law or by the rules of any national
    securities exchange on which our common shares are listed.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    74
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Capital
    Contribution</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will contribute, directly, to our operating partnership
    substantially all of the net proceeds of this offering as our
    initial capital contribution in exchange for substantially all
    of the limited partnership interests in our operating
    partnership. The partnership agreement provides that if the
    operating partnership requires additional funds at any time in
    excess of funds available to the operating partnership from
    borrowing or capital contributions, we may borrow such funds
    from a financial institution or other lender and lend such funds
    to the operating partnership on the same terms and conditions as
    are applicable to our borrowing of such funds. Under the
    partnership agreement, we are obligated to contribute the net
    proceeds of any future offering of shares as additional capital
    to the operating partnership. If we contribute additional
    capital to the operating partnership, we will receive additional
    partnership units and our percentage interest will be increased
    on a proportionate basis based upon the amount of such
    additional capital contributions and the value of the operating
    partnership at the time of such contributions. Conversely, the
    percentage interests of the limited partners will be decreased
    on a proportionate basis in the event of additional capital
    contributions by us. In addition, if we contribute additional
    capital to the operating partnership, we will revalue the
    property of the operating partnership to its fair market value
    (as determined by us) and the capital accounts of the partners
    will be adjusted to reflect the manner in which the unrealized
    gain or loss inherent in such property (that has not been
    reflected in the capital accounts previously) would be allocated
    among the partners under the terms of the partnership agreement
    if there were a taxable disposition of such property for its
    fair market value (as determined by us) on the date of the
    revaluation. The operating partnership may issue preferred
    partnership interests, in connection with acquisitions of
    property or otherwise, which could have priority over common
    partnership interests with respect to distributions from the
    operating partnership, including the partnership interests we
    own as the general partner.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Redemption&#160;Rights</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the partnership agreement, any future limited
    partners, other than us, will receive redemption rights, which
    will enable them to cause the operating partnership to redeem
    their limited partnership interests in exchange for cash or, at
    our option, common shares on a
    <FONT style="white-space: nowrap">one-for-one</FONT>
    basis. The cash redemption amount per unit is based on the
    market price of our common shares at the time of redemption. The
    number of common shares issuable upon redemption of limited
    partnership interests held by limited partners may be adjusted
    upon the occurrence of certain events such as share dividends,
    share subdivisions or combinations. We expect to fund any cash
    redemptions out of available cash or borrowings. Notwithstanding
    the foregoing, a limited partner will not be entitled to
    exercise its redemption rights if the delivery of common shares
    to the redeeming limited partner would:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    result in any person owning, directly or indirectly, common
    shares in excess of the share ownership limit in our declaration
    of trust;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    result in our common shares being owned by fewer than
    100&#160;persons (determined without reference to any rules of
    attribution);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    result in our being &#147;closely held&#148; within the meaning
    of Section&#160;856(h) of the Code;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    cause us to own, actually or constructively, 10% or more of the
    ownership interests in a tenant (other than a TRS) of ours, the
    operating partnership&#146;s or a subsidiary partnership&#146;s
    real property, within the meaning of Section&#160;856(d)(2)(B)
    of the Code;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    cause us to fail to qualify as a REIT under the Code, including,
    but not limited to, as a result of any hotel management company
    failing to qualify as an eligible independent contractor under
    the Code; or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    cause the acquisition of common shares by such redeeming limited
    partner to be &#147;integrated&#148; with any other distribution
    of common shares for purposes of complying with the registration
    provisions of the Securities Act.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may, in our sole and absolute discretion, waive any of these
    restrictions.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    75
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The partnership agreement will require that the operating
    partnership be operated in a manner that enables us to satisfy
    the requirements for being classified as a REIT, to avoid any
    federal income or excise tax liability imposed by the Code
    (other than any federal income tax liability associated with our
    retained capital gains) and to ensure that the partnership will
    not be classified as a &#147;publicly traded partnership&#148;
    taxable as a corporation under Section&#160;7704 of the Code.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to the administrative and operating costs and
    expenses incurred by the operating partnership, the operating
    partnership generally will pay all of our administrative costs
    and expenses, including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all expenses relating to our continuity of existence and our
    subsidiaries&#146; operations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all expenses relating to offerings and registration of
    securities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all expenses associated with the preparation and filing of any
    of our periodic or other reports and communications under
    federal, state or local laws or regulations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all expenses associated with our compliance with laws, rules and
    regulations promulgated by any regulatory body; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    all of our other operating or administrative costs incurred in
    the ordinary course of business on behalf of the operating
    partnership.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These expenses, however, do not include any of our
    administrative and operating costs and expenses incurred that
    are attributable to hotel properties that are owned by us
    directly rather than by the operating partnership or its
    subsidiaries.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Fiduciary
    Responsibilities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our trustees and officers have duties under applicable Maryland
    law to manage us in a manner consistent with the best interests
    of our shareholders. At the same time, we, as the general
    partner of our operating partnership, will have fiduciary duties
    to manage our operating partnership in a manner beneficial to
    our operating partnership and its partners. Our duties, as
    general partner to our operating partnership and its limited
    partners, therefore, may come into conflict with the duties of
    our trustees and officers to our shareholders. We will be under
    no obligation to give priority to the separate interests of the
    limited partners of our operating partnership or our
    shareholders in deciding whether to cause the operating
    partnership to take or decline to take any actions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The limited partners of our operating partnership expressly will
    acknowledge that as the general partner of our operating
    partnership, we are acting for the benefit of the operating
    partnership, the limited partners and our shareholders
    collectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Distributions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The partnership agreement will provide that the operating
    partnership will distribute cash from operations (including net
    sale or refinancing proceeds, but excluding net proceeds from
    the sale of the operating partnership&#146;s property in
    connection with the liquidation of the operating partnership) at
    such time and in such amounts as determined by us in our sole
    discretion, to us and the limited partners in accordance with
    their respective percentage interests in the operating
    partnership.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon liquidation of the operating partnership, after payment of,
    or adequate provision for, debts and obligations of the
    partnership, including any partner loans, any remaining assets
    of the partnership will be distributed to us and the limited
    partners with positive capital accounts in accordance with their
    respective positive capital account balances.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LTIP
    Units</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will cause our operating
    partnership to issue an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    LTIP units to certain of our officers. These LTIP units will
    vest ratably over the first five
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    76
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    anniversaries of the date of grant. In general, LTIP units are a
    class of partnership units in our operating partnership and will
    receive the same quarterly per unit profit distributions as the
    other outstanding units in our operating partnership. Initially,
    LTIP units will not have full parity with other outstanding
    units with respect to liquidating distributions. We expect that
    under the terms of the LTIP units, our operating partnership
    will revalue its assets upon the occurrence of certain specified
    events, and any increase in valuation from the time of grant
    until such event will be allocated first to the LTIP unit
    holders to equalize the capital accounts of such holders with
    the capital accounts of holders of our other outstanding
    partnership units. Upon equalization of the capital accounts of
    the LTIP unit holders with the capital accounts of the other
    holders of our operating partnership units, the LTIP units will
    achieve full parity with our other operating partnership units
    for all purposes, including with respect to liquidating
    distributions. If such parity is reached, vested LTIP units may
    be converted into an equal number of operating partnership units
    at any time, and thereafter enjoy all the rights of such units,
    including redemption rights. However, there are circumstances
    under which such parity would not be reached. Until and unless
    such parity is reached, the value for a given number of vested
    LTIP units will be less than the value of an equal number of our
    common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Allocations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Profits and losses of the partnership (including depreciation
    and amortization deductions) for each fiscal year generally will
    be allocated to us and the other limited partners in accordance
    with the respective percentage interests in the partnership. All
    of the foregoing allocations are subject to compliance with the
    provisions of Sections&#160;704(b) and 704(c) of the Code and
    Treasury regulations promulgated thereunder. To the extent
    Treasury regulations promulgated pursuant to Section&#160;704(c)
    of the Code permit, we, as the general partner, shall have the
    authority to elect the method to be used by the operating
    partnership for allocating items with respect to contributed
    property acquired in connection with this offering for which
    fair market value differs from the adjusted tax basis at the
    time of contribution, and such election shall be binding on all
    partners. Upon the occurrence of certain specified events, our
    operating partnership will revalue its assets and any net
    increase in valuation will be allocated first to the LTIP units
    to equalize the capital accounts of such holders with the
    capital accounts of the holders of the other outstanding units
    in our operating partnership.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Term</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The operating partnership will continue indefinitely, or until
    sooner dissolved upon:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our bankruptcy, dissolution, removal or withdrawal (unless the
    limited partners elect to continue the partnership);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the passage of 90&#160;days after the sale or other disposition
    of all or substantially all of the assets of the partnership;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the redemption of all partnership units (other than those held
    by us, if any); or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an election by us in our capacity as the general partner.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Tax
    Matters</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our partnership agreement will provide that we, as the sole
    general partner of the operating partnership, will be the tax
    matters partner of the operating partnership and, as such, will
    have authority to handle tax audits and to make tax elections
    under the Code on behalf of the operating partnership.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    77
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='117'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MATERIAL
    FEDERAL INCOME TAX CONSIDERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This section summarizes the material federal income tax
    considerations that you, as a shareholder, may consider
    relevant. Hunton&#160;&#038; Williams LLP has acted as our
    counsel, has reviewed this summary, and is of the opinion that
    the discussion contained herein is accurate in all material
    respects. Because this section is a summary, it does not address
    all aspects of taxation that may be relevant to particular
    shareholders in light of their personal investment or tax
    circumstances, or to certain types of shareholders that are
    subject to special treatment under the federal income tax laws,
    such as:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    insurance companies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    tax-exempt organizations (except to the limited extent discussed
    in &#147;&#151;&#160;Taxation of Tax-Exempt Shareholders&#148;
    below);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    financial institutions or broker-dealers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <FONT style="white-space: nowrap">non-U.S.&#160;individuals</FONT>
    and foreign corporations (except to the limited extent discussed
    in &#147;&#151;&#160;Taxation of
    <FONT style="white-space: nowrap">Non-U.S.&#160;Shareholders&#148;</FONT>
    below);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    U.S.&#160;expatriates;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    persons who
    <FONT style="white-space: nowrap">mark-to-market</FONT>
    our common shares;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    subchapter S&#160;corporations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    U.S.&#160;shareholders (as defined below) whose functional
    currency is not the U.S.&#160;dollar;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    regulated investment companies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    trusts and estates;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    holders who receive our common shares through the exercise of
    employee share options or otherwise as compensation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    persons holding our common shares as part of a
    &#147;straddle,&#148; &#147;hedge,&#148; &#147;conversion
    transaction,&#148; &#147;synthetic security&#148; or other
    integrated investment;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    persons subject to the alternative minimum tax provisions of the
    Code;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    persons holding our common shares through a partnership or
    similar pass-through entity; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    persons holding a 10% or more (by vote or value) beneficial
    interest in our shares of beneficial interest.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This summary assumes that shareholders hold shares as capital
    assets for federal income tax purposes, which generally means
    property held for investment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The statements in this section are based on the current federal
    income tax laws, are for general information purposes only and
    are not tax advice. We cannot assure you that new laws,
    interpretations of law, or court decisions, any of which may
    take effect retroactively, will not cause any statement in this
    section to be inaccurate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE
    SPECIFIC TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND
    SALE OF OUR COMMON SHARES&#160;AND OF OUR ELECTION TO BE TAXED
    AS A REIT. SPECIFICALLY, YOU ARE URGED TO CONSULT YOUR OWN TAX
    ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER
    TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION,
    AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Taxation
    of Our Company</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently have in effect an election to be taxed as a
    pass-through entity under subchapter S of the Code, but intend
    to revoke our S election on the business day prior to the
    closing date of this offering. We
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    78
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    intend to elect to be taxed as a REIT for federal income tax
    purposes commencing with our short taxable year beginning on the
    business day prior to the closing of this offering and ending
    December&#160;31, 2009. We believe that, commencing with such
    short taxable year, we will be organized and will operate in
    such a manner as to qualify for taxation as a REIT under the
    federal income tax laws, and we intend to continue to operate in
    such a manner, but no assurances can be given that we will
    operate in a manner so as to qualify or remain qualified as a
    REIT. This section discusses the laws governing the federal
    income tax treatment of a REIT and its shareholders. These laws
    are highly technical and complex.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, Hunton&#160;&#038; Williams
    LLP is expected to render an opinion that, commencing with our
    short taxable year beginning on the business day prior to the
    closing of this offering and ending on December&#160;31, 2009,
    we will be organized in conformity with the requirements for
    qualification and taxation as a REIT under the federal income
    tax laws, and our proposed method of operations will enable us
    to satisfy the requirements for qualification and taxation as a
    REIT under the federal income tax laws. Investors should be
    aware that Hunton&#160;&#038; Williams LLP&#146;s opinion is
    based upon customary assumptions, will be conditioned upon
    certain representations made by us as to factual matters,
    including representations regarding the nature of our assets and
    the conduct of our business, is not binding upon the IRS, or any
    court, and speaks as of the date issued. In addition,
    Hunton&#160;&#038; Williams LLP&#146;s opinion will be based on
    existing federal income tax law governing qualification as a
    REIT, which is subject to change either prospectively or
    retroactively. Moreover, our qualification and taxation as a
    REIT depend upon our ability to meet on a continuing basis,
    through actual annual operating results, certain qualification
    tests set forth in the federal tax laws. Those qualification
    tests involve the percentage of income that we earn from
    specified sources, the percentage of our assets that falls
    within specified categories, the diversity of ownership of our
    shares of beneficial interest, and the percentage of our
    earnings that we distribute. Hunton&#160;&#038; Williams LLP
    will not review our compliance with those tests on a continuing
    basis. Accordingly, no assurance can be given that our actual
    results of operations for any particular taxable year will
    satisfy such requirements. For a discussion of the tax
    consequences of our failure to qualify as a REIT, see
    &#147;&#151;&#160;Failure to Qualify.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we qualify as a REIT, we generally will not be subject to
    federal income tax on the taxable income that we distribute to
    our shareholders. The benefit of that tax treatment is that it
    avoids the &#147;double taxation,&#148; or taxation at both the
    corporate and shareholder levels, that generally results from
    owning stock in a corporation. However, we will be subject to
    federal tax in the following circumstances:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We will pay federal income tax on any taxable income, including
    undistributed net capital gain, that we do not distribute to
    shareholders during, or within a specified time period after,
    the calendar year in which the income is earned.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We may be subject to the &#147;alternative minimum tax&#148; on
    any items of tax preference including any deductions of net
    operating losses.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We will pay income tax at the highest corporate rate on:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    net income from the sale or other disposition of property
    acquired through foreclosure (&#147;foreclosure property&#148;)
    that we hold primarily for sale to customers in the ordinary
    course of business, and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    other non-qualifying income from foreclosure property.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We will pay a 100% tax on net income from sales or other
    dispositions of property, other than foreclosure property, that
    we hold primarily for sale to customers in the ordinary course
    of business.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If we fail to satisfy one or both of the 75% gross income test
    or the 95% gross income test, as described below under
    &#147;&#151;&#160;Gross Income Tests,&#148; and nonetheless
    continue to qualify as a REIT because we meet other
    requirements, we will pay a 100% tax on:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the gross income attributable to the greater of the amount by
    which we fail the 75% gross income test or the 95% gross income
    test, in either case, multiplied by
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a fraction intended to reflect our profitability.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    79
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 5%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#149;&#160;&#160;&#160;&#160;&#160;If we fail to distribute
    during a calendar year at least the sum of (1)&#160;85% of our
    REIT ordinary income for the year, (2)&#160;95% of our REIT
    capital gain net income for the year, and (3)&#160;any
    undistributed taxable income required to be distributed from
    earlier periods, we will pay a 4% nondeductible excise tax on
    the excess of the required distribution over the amount we
    actually distributed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We may elect to retain and pay income tax on our net long-term
    capital gain. In that case, a U.S.&#160;shareholder would be
    taxed on its proportionate share of our undistributed long-term
    capital gain (to the extent that we made a timely designation of
    such gain to the shareholders) and would receive a credit or
    refund for its proportionate share of the tax we paid.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We will be subject to a 100% excise tax on transactions with a
    TRS that are not conducted on an arm&#146;s-length basis.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    In the event of a failure of any of the asset tests, other than
    a <I>de minimis</I> failure of the 5% asset test or the 10% vote
    or value test, as described below under &#147;&#151;&#160;Asset
    Tests,&#148; as long as the failure was due to reasonable cause
    and not to willful neglect, we file a description of each asset
    that caused such failure with the IRS, and we dispose of the
    assets or otherwise comply with the asset tests within six
    months after the last day of the quarter in which we identify
    such failure, we will pay a tax equal to the greater of $50,000
    or the highest federal income tax rate then applicable to
    U.S.&#160;corporations (currently 35%) on the net income from
    the nonqualifying assets during the period in which we failed to
    satisfy the asset tests.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    In the event we fail to satisfy one or more requirements for
    REIT qualification, other than the gross income tests and the
    asset tests, and such failure is due to reasonable cause and not
    to willful neglect, we will be required to pay a penalty of
    $50,000 for each such failure.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    If we acquire any asset from a C corporation, or a corporation
    that generally is subject to full corporate-level tax, in a
    merger or other transaction in which we acquire a basis in the
    asset that is determined by reference either to the C
    corporation&#146;s basis in the asset or to another asset, we
    will pay tax at the highest regular corporate rate applicable if
    we recognize gain on the sale or disposition of the asset during
    the <FONT style="white-space: nowrap">10-year</FONT>
    period after we acquire the asset provided no election is made
    for the transaction to be taxable on a current basis. The amount
    of gain on which we will pay tax is the lesser of:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the amount of gain that we recognize at the time of the sale or
    disposition, and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the amount of gain that we would have recognized if we had sold
    the asset at the time we acquired it.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    We may be required to pay monetary penalties to the IRS in
    certain circumstances, including if we fail to meet
    record-keeping requirements intended to monitor our compliance
    with rules relating to the composition of a REIT&#146;s
    shareholders, as described below in
    &#147;&#151;&#160;Recordkeeping Requirements.&#148;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    The earnings of our lower-tier entities that are subchapter C
    corporations, including TRSs, will be subject to federal
    corporate income tax.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, notwithstanding our status as a REIT, we may also
    have to pay certain state and local income taxes, because not
    all states and localities treat REITs in the same manner that
    they are treated for federal income tax purposes. Moreover, as
    further described below, TRSs will be subject to federal, state
    and local corporate income tax on their taxable income.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Requirements
    for Qualification</FONT></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A REIT is a corporation, trust, or association that meets each
    of the following requirements:
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="15%"></TD>
    <TD width="3%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    1.&#160;
</TD>
    <TD align="left">
    It is managed by one or more directors or trustees.
</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    2.&#160;
</TD>
    <TD align="left">
    Its beneficial ownership is evidenced by transferable shares, or
    by transferable certificates of beneficial interest.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    80
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="15%"></TD>
    <TD width="3%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    3.&#160;
</TD>
    <TD align="left">
    It would be taxable as a domestic corporation, but for the REIT
    provisions of the federal income tax laws.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    4.&#160;
</TD>
    <TD align="left">
    It is neither a financial institution nor an insurance company
    subject to special provisions of the federal income tax laws.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    5.&#160;
</TD>
    <TD align="left">
    At least 100&#160;persons are beneficial owners of its shares or
    ownership certificates.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    6.&#160;
</TD>
    <TD align="left">
    Not more than 50% in value of its outstanding shares or
    ownership certificates is owned, directly or indirectly, by five
    or fewer individuals, which the Code defines to include certain
    entities, during the last half of any taxable year.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    7.&#160;
</TD>
    <TD align="left">
    It elects to be a REIT, or has made such election for a previous
    taxable year, and satisfies all relevant filing and other
    administrative requirements established by the IRS that must be
    met to elect and maintain REIT status.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    8.&#160;
</TD>
    <TD align="left">
    It meets certain other qualification tests, described below,
    regarding the nature of its income and assets and the amount of
    its distributions to shareholders.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    9.&#160;
</TD>
    <TD align="left">
    It uses a calendar year for federal income tax purposes and
    complies with the recordkeeping requirements of the federal
    income tax laws.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must meet requirements 1 through 4, 7, 8 and 9 during our
    entire taxable year and must meet requirement 5 during at least
    335&#160;days of a taxable year of 12&#160;months, or during a
    proportionate part of a taxable year of less than
    12&#160;months. Requirements 5 and 6 will apply to us beginning
    with our 2010 taxable year. If we comply with all the
    requirements for ascertaining the ownership of our outstanding
    shares in a taxable year and have no reason to know that we
    violated requirement 6, we will be deemed to have satisfied
    requirement 6 for that taxable year. For purposes of determining
    share ownership under requirement 6, an &#147;individual&#148;
    generally includes a supplemental unemployment compensation
    benefits plan, a private foundation, or a portion of a trust
    permanently set aside or used exclusively for charitable
    purposes. An &#147;individual,&#148; however, generally does not
    include a trust that is a qualified employee pension or profit
    sharing trust under the federal income tax laws, and
    beneficiaries of such a trust will be treated as holding our
    shares in proportion to their actuarial interests in the trust
    for purposes of requirement 6.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust provides restrictions regarding the
    transfer and ownership of our shares of beneficial interest. See
    &#147;Description of Shares of Beneficial Interest&#160;&#151;
    Restrictions on Ownership and Transfer.&#148; We believe that we
    will issue sufficient shares of beneficial interest with
    sufficient diversity of ownership to allow us to satisfy
    requirements 5 and 6 above. If we do not issue common shares to
    at least 100&#160;shareholders by January 2010 pursuant to this
    or subsequent offerings, we anticipate that we would satisfy
    requirement 5 by issuing preferred shares with a nominal value
    and a low liquidation preference to a limited number of
    investors. The restrictions in our declaration of trust are
    intended (among other things) to assist us in continuing to
    satisfy requirements 5 and 6 described above. These
    restrictions, however, may not ensure that we will, in all
    cases, be able to satisfy such share ownership requirements. If
    we fail to satisfy these share ownership requirements, our
    qualification as a REIT may terminate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we must satisfy all relevant filing and other
    administrative requirements established by the IRS that must be
    met to elect and maintain REIT status and comply with the
    record-keeping requirements of the Code and regulations
    promulgated thereunder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Qualified REIT Subsidiaries.</I>&#160;&#160;A corporation
    that is a &#147;qualified REIT subsidiary&#148; is not treated
    as a corporation separate from its parent REIT. All assets,
    liabilities, and items of income, deduction, and credit of a
    &#147;qualified REIT subsidiary&#148; are treated as assets,
    liabilities, and items of income, deduction, and credit of the
    REIT. A &#147;qualified REIT subsidiary&#148; is a corporation,
    other than a TRS, all of the stock of which is owned by the
    REIT. Thus, in applying the requirements described herein, any
    &#147;qualified REIT subsidiary&#148; that we own will be
    ignored, and all assets, liabilities, and items of income,
    deduction, and credit of such subsidiary will be treated as our
    assets, liabilities, and items of income, deduction, and credit.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    81
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Disregarded Entities and
    Partnerships.</I>&#160;&#160;An unincorporated domestic entity,
    such as a partnership or limited liability company that has a
    single owner, generally is not treated as an entity separate
    from its parent for federal income tax purposes. An
    unincorporated domestic entity with two or more owners is
    generally treated as a partnership for federal income tax
    purposes. In the case of a REIT that is a partner in a
    partnership that has other partners, the REIT is treated as
    owning its proportionate share of the assets of the partnership
    and as earning its allocable share of the gross income of the
    partnership for purposes of the applicable REIT qualification
    tests. Our proportionate share for purposes of the 10% value
    test (see &#147;&#151;&#160;Asset Tests&#148;) will be based on
    our proportionate interest in the equity interests and certain
    debt securities issued by the partnership. For all of the other
    asset and income tests, our proportionate share will be based on
    our proportionate interest in the capital interests in the
    partnership. Our proportionate share of the assets, liabilities,
    and items of income of any partnership, joint venture, or
    limited liability company that is treated as a partnership for
    federal income tax purposes in which we acquire an equity
    interest, directly or indirectly, will be treated as our assets
    and gross income for purposes of applying the various REIT
    qualification requirements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Taxable REIT Subsidiaries.</I>&#160;&#160;A REIT may own up
    to 100% of the capital stock of one or more TRSs. A TRS is a
    fully taxable corporation that may earn income that would not be
    qualifying income if earned directly by the parent REIT. The
    subsidiary and the REIT must jointly elect to treat the
    subsidiary as a TRS. A corporation of which a TRS directly or
    indirectly owns more than 35% of the voting power or value of
    the stock will automatically be treated as a TRS. However, an
    entity will not qualify as a TRS if it directly or indirectly
    operates or manages a lodging or health care facility or,
    generally, provides to another person under a franchise,
    license, or otherwise, rights to any brand name under which any
    lodging facility or health care facility is operated, unless
    such rights are provided to an &#147;eligible independent
    contractor&#148; (as defined below under &#147;&#151;&#160;Gross
    Income Tests&#160;&#151; Rents from Real Property&#148;) to
    operate or manage a lodging facility or health care facility and
    such lodging facility or health care facility is either owned by
    the TRS or leased to the TRS by its parent REIT. Additionally, a
    TRS will not be considered to operate or manage a qualified
    lodging facility located outside of the United States, as long
    as an &#147;eligible independent contractor&#148; is responsible
    for the daily supervision and direction of such individuals on
    behalf of the TRS pursuant to a management agreement or similar
    service contract.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are not treated as holding the assets of a TRS or as
    receiving any income that the subsidiary earns. Rather, the
    stock issued by a TRS to us is an asset in our hands, and we
    treat the distributions paid to us from such taxable subsidiary,
    if any, as income. This treatment can affect our compliance with
    the gross income and asset tests. Because we do not include the
    assets and income of TRSs in determining our compliance with the
    REIT requirements, we may use such entities to undertake
    indirectly activities that the REIT rules might otherwise
    preclude us from doing directly or through pass-through
    subsidiaries. Overall, no more than 25% of the value of a
    REIT&#146;s assets may consist of stock or securities of one or
    more TRSs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A TRS will pay income tax at regular corporate rates on any
    income that it earns. In addition, the TRS rules limit the
    deductibility of interest paid or accrued by a TRS to its parent
    REIT to assure that the TRS is subject to an appropriate level
    of corporate taxation. Further, the rules impose a 100% excise
    tax on transactions between a TRS and its parent REIT or the
    REIT&#146;s tenants that are not conducted on an
    arm&#146;s-length basis. We intend to form several TRSs which
    will be the lessees of our hotel properties. See
    &#147;&#151;&#160;Taxable REIT Subsidiaries.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Gross
    Income Tests</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must satisfy two gross income tests annually to maintain our
    qualification as a REIT. First, at least 75% of our gross income
    for each taxable year must consist of defined types of income
    that we derive, directly or indirectly, from investments
    relating to real property or mortgages on real property or
    qualified temporary investment income. Qualifying income for
    purposes of that 75% gross income test generally includes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    rents from real property;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    interest on debt secured by mortgages on real property, or on
    interests in real property;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    82
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    dividends or other distributions on, and gain from the sale of,
    shares in other REITs;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    gain from the sale of real estate assets; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    income derived from the temporary investment of new capital that
    is attributable to the issuance of our shares of beneficial
    interest or a public offering of our debt with a maturity date
    of at least five years and that we receive during the one-year
    period beginning on the date on which we received such new
    capital.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Second, in general, at least 95% of our gross income for each
    taxable year must consist of income that is qualifying income
    for purposes of the 75% gross income test, other types of
    interest and dividends, gain from the sale or disposition of
    shares or securities, or any combination of these. Gross income
    from our sale of property that we hold primarily for sale to
    customers in the ordinary course of business is excluded from
    both the numerator and the denominator in both gross income
    tests. In addition, income and gain from &#147;hedging
    transactions&#148; that we enter into to hedge indebtedness
    incurred or to be incurred to acquire or carry real estate
    assets and that are clearly and timely identified as such will
    be excluded from both the numerator and the denominator for
    purposes of the 75% and 95% gross income tests. In addition,
    certain foreign currency gains will be excluded from gross
    income for purposes of one or both of the gross income tests.
    See &#147;&#151;&#160;Foreign Currency Gain&#148; below. The
    following paragraphs discuss the specific application of the
    gross income tests to us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Rents from Real Property.</I>&#160;&#160;Rent that we receive
    from our real property will qualify as &#147;rents from real
    property,&#148; which is qualifying income for purposes of the
    75% and 95% gross income tests, only if the following conditions
    are met:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    First, the rent must not be based, in whole or in part, on the
    income or profits of any person, but may be based on a fixed
    percentage or percentages of receipts or sales.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Second, neither we nor a direct or indirect owner of 10% or more
    of our shares of beneficial interest may own, actually or
    constructively, 10% or more of a tenant from whom we receive
    rent, other than a TRS. If the tenant is a TRS, such TRS may not
    directly or indirectly operate or manage the related property.
    Instead, the property must be operated on behalf of the TRS by a
    person who qualifies as an &#147;independent contractor&#148;
    and who is, or is related to a person who is, actively engaged
    in the trade or business of operating lodging facilities for any
    person unrelated to us and the TRS. See
    &#147;&#151;&#160;Taxable REIT Subsidiaries.&#148;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Third, if the rent attributable to personal property leased in
    connection with a lease of real property is 15% or less of the
    total rent received under the lease, then the rent attributable
    to personal property will qualify as rents from real property.
    However, if the 15% threshold is exceeded, the rent attributable
    to personal property will not qualify as rents from real
    property.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Fourth, we generally must not operate or manage our real
    property or furnish or render services to our tenants, other
    than through an &#147;independent contractor&#148; who is
    adequately compensated and from whom we do not derive revenue.
    However, we need not provide services through an
    &#147;independent contractor,&#148; but instead may provide
    services directly to our tenants, if the services are
    &#147;usually or customarily rendered&#148; in connection with
    the rental of space for occupancy only and are not considered to
    be provided for the tenants&#146; convenience. In addition, we
    may provide a minimal amount of &#147;noncustomary&#148;
    services to the tenants of a property, other than through an
    independent contractor, as long as our income from the services
    (valued at not less than 150% of our direct cost of performing
    such services) does not exceed 1% of our income from the related
    property. Furthermore, we may own up to 100% of the stock of a
    TRS which may provide customary and noncustomary services to our
    tenants without tainting our rental income for the related
    properties. See &#147;&#151;&#160;Taxable REIT
    Subsidiaries.&#148;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our TRS lessees will lease from our operating partnership and
    its subsidiaries the land, buildings, improvements, furnishings
    and equipment comprising our hotel properties. In order for the
    rent paid under the leases to constitute &#147;rents from real
    property,&#148; the leases must be respected as true leases for
    federal income
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    83
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    tax purposes and not treated as service contracts, joint
    ventures or some other type of arrangement. The determination of
    whether our leases are true leases depends on an analysis of all
    the surrounding facts and circumstances. In making such a
    determination, courts have considered a variety of factors,
    including the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the intent of the parties;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the form of the agreement;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the degree of control over the property that is retained by the
    property owner (for example, whether the lessee has substantial
    control over the operation of the property or whether the lessee
    was required simply to use its best efforts to perform its
    obligations under the agreement); and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the extent to which the property owner retains the risk of loss
    with respect to the property (for example, whether the lessee
    bears the risk of increases in operating expenses or the risk of
    damage to the property) or the potential for economic gain with
    respect to the property.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the federal income tax law provides that a contract
    that purports to be a service contract or a partnership
    agreement is treated instead as a lease of property if the
    contract is properly treated as such, taking into account all
    relevant factors. Since the determination of whether a service
    contract should be treated as a lease is inherently factual, the
    presence or absence of any single factor may not be dispositive
    in every case.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently intend to structure our leases so that they qualify
    as true leases for federal income tax purposes. For example,
    with respect to each lease, we generally expect that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our operating partnership and the lessee will intend for their
    relationship to be that of a lessor and lessee, and such
    relationship will be documented by a lease agreement;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will have the right to exclusive possession and use
    and quiet enjoyment of the hotels covered by the lease during
    the term of the lease;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will bear the cost of, and will be responsible for,
    <FONT style="white-space: nowrap">day-to-day</FONT>
    maintenance and repair of the hotels other than the cost of
    certain capital expenditures, and will dictate through hotel
    managers that are eligible independent contractors, who will
    work for the lessee during the terms of the lease, and how the
    hotels will be operated and maintained;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will bear all of the costs and expenses of operating
    the hotels, including the cost of any inventory used in their
    operation, during the term of the lease, other than real estate
    and personal property taxes and the cost of certain furniture,
    fixtures and equipment, and certain capital expenditures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will benefit from any savings and will bear the
    burdens of any increases in the costs of operating the hotels
    during the term of the lease;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    in the event of damage or destruction to a hotel, the lessee
    will be at economic risk because it will bear the economic
    burden of the loss in income from operation of the hotels
    subject to the right, in certain circumstances, to terminate the
    lease if the lessor does not restore the hotel to its prior
    condition;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will generally indemnify the lessor against all
    liabilities imposed on the lessor during the term of the lease
    by reason of (A)&#160;injury to persons or damage to property
    occurring at the hotels or (B)&#160;the lessee&#146;s use,
    management, maintenance or repair of the hotels;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will be obligated to pay, at a minimum, substantial
    base rent for the period of use of the hotels under the lease;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the lessee will stand to incur substantial losses or reap
    substantial gains depending on how successfully it, through the
    hotel managers, who work for the lessees during the terms of the
    leases, operates the hotels;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    84
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we expect that each lease that we enter into, at the time we
    enter into it (or at any time that any such lease is
    subsequently renewed or extended) will enable the tenant to
    derive a meaningful profit, after expenses and taking into
    account the risks associated with the lease, from the operation
    of the hotels during the term of its leases; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    upon termination of each lease, the applicable hotel will be
    expected to have a substantial remaining useful life and
    substantial remaining fair market value.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Investors should be aware that there are no controlling Treasury
    regulations, published rulings or judicial decisions involving
    leases with terms substantially the same as our leases that
    discuss whether such leases constitute true leases for federal
    income tax purposes. If our leases are characterized as service
    contracts or partnership agreements, rather than as true leases,
    part or all of the payments that our operating partnership and
    its subsidiaries receive from the TRS lessees may not be
    considered rent or may not otherwise satisfy the various
    requirements for qualification as &#147;rents from real
    property.&#148; In that case, we likely would not be able to
    satisfy either the 75% or 95% gross income test and, as a
    result, would lose our REIT status unless we qualify for relief,
    as described below under &#147;&#151;&#160;Failure to Satisfy
    Gross Income Tests.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As described above, in order for the rent that we receive to
    constitute &#147;rents from real property,&#148; several other
    requirements must be satisfied. One requirement is that
    percentage rent must not be based in whole or in part on the
    income or profits of any person. Percentage rent, however, will
    qualify as &#147;rents from real property&#148; if it is based
    on percentages of receipts or sales and the percentages:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    are fixed at the time the percentage leases are entered into;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    are not renegotiated during the term of the percentage leases in
    a manner that has the effect of basing percentage rent on income
    or profits; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    conform with normal business practice.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    More generally, percentage rent will not qualify as &#147;rents
    from real property&#148; if, considering the leases and all the
    surrounding circumstances, the arrangement does not conform with
    normal business practice, but is in reality used as a means of
    basing the percentage rent on income or profits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Second, we must not own, actually or constructively, 10% or more
    of the shares or the assets or net profits of any lessee (a
    &#147;related party tenant&#148;), other than a TRS. The
    constructive ownership rules generally provide that, if 10% or
    more in value of our shares of beneficial interest is owned,
    directly or indirectly, by or for any person, we are considered
    as owning the shares owned, directly or indirectly, by or for
    such person. We anticipate that all of our hotels will be leased
    to TRSs. In addition, our declaration of trust prohibits
    transfers of our shares of beneficial interest that would cause
    us to own actually or constructively, 10% or more of the
    ownership interests in any non-TRS lessee. Based on the
    foregoing, we should never own, actually or constructively, 10%
    or more of any lessee other than a TRS. However, because the
    constructive ownership rules are broad and it is not possible to
    monitor continually direct and indirect transfers of our shares
    of beneficial interest, no absolute assurance can be given that
    such transfers or other events of which we have no knowledge
    will not cause us to own constructively 10% or more of a lessee
    (or a subtenant, in which case only rent attributable to the
    subtenant is disqualified) other than a TRS at some future date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As described above, we may own up to 100% of the capital stock
    of one or more TRSs. A TRS is a fully taxable corporation that
    is permitted to lease hotel properties from the related REIT as
    long as it does not directly or indirectly operate or manage any
    lodging facilities or health care facilities or provide rights
    to any brand name under which any lodging or health care
    facility is operated, unless such rights are provided to an
    &#147;eligible independent contractor&#148; to operate or manage
    a lodging or health care facility if such rights are held by the
    TRS as a franchisee, licensee, or in a similar capacity and such
    hotel is either owned by the TRS or leased to the TRS by its
    parent REIT. A TRS will not be considered to operate or manage a
    qualified lodging facility solely because the TRS directly or
    indirectly possesses a license, permit, or similar instrument
    enabling it to do so. Additionally, a TRS will not be considered
    to operate or manage a qualified lodging facility located
    outside of the United States, as long as an &#147;eligible
    independent contractor&#148; is responsible for the daily
    supervision and direction of such individuals on behalf of the
    TRS pursuant to a management agreement or
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    similar service contract. However, rent that we receive from a
    TRS will qualify as &#147;rents from real property&#148; as long
    as the property is operated on behalf of the TRS by an
    &#147;independent contractor&#148; who is adequately
    compensated, who does not, directly or through its shareholders,
    own more than 35% of our shares, taking into account certain
    ownership attribution rules, and who is, or is related to a
    person who is, actively engaged in the trade or business of
    operating &#147;qualified lodging facilities&#148; for any
    person unrelated to us and the TRS lessee (an &#147;eligible
    independent contractor&#148;). A &#147;qualified lodging
    facility&#148; is a hotel, motel, or other establishment more
    than one-half of the dwelling units in which are used on a
    transient basis, unless wagering activities are conducted at or
    in connection with such facility by any person who is engaged in
    the business of accepting wagers and who is legally authorized
    to engage in such business at or in connection with such
    facility. A &#147;qualified lodging facility&#148; includes
    customary amenities and facilities operated as part of, or
    associated with, the lodging facility as long as such amenities
    and facilities are customary for other properties of a
    comparable size and class owned by other unrelated owners. See
    &#147;&#151;&#160;Taxable REIT Subsidiaries.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to form several TRSs to lease our hotel properties.
    Our TRS lessees will engage independent third-party hotel
    managers that qualify as &#147;eligible independent
    contractors&#148; to operate the related hotels on behalf of
    such TRS lessees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Third, the rent attributable to the personal property leased in
    connection with the lease of a hotel must not be greater than
    15% of the total rent received under the lease. The rent
    attributable to the personal property contained in a hotel is
    the amount that bears the same ratio to total rent for the
    taxable year as the average of the fair market values of the
    personal property at the beginning and at the end of the taxable
    year bears to the average of the aggregate fair market values of
    both the real and personal property contained in the hotel at
    the beginning and at the end of such taxable year (the
    &#147;personal property ratio&#148;). To comply with this
    limitation, a TRS lessee may acquire furnishings, equipment and
    other personal property. With respect to each hotel in which the
    TRS lessee does not own the personal property, we believe either
    that the personal property ratio will be less than 15% or that
    any rent attributable to excess personal property will not
    jeopardize our ability to qualify as a REIT. There can be no
    assurance, however, that the IRS would not challenge our
    calculation of a personal property ratio, or that a court would
    not uphold such assertion. If such a challenge were successfully
    asserted, we could fail to satisfy the 75% or 95% gross income
    test and thus potentially lose our REIT status.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Fourth, we cannot furnish or render noncustomary services to the
    tenants of our hotels, or manage or operate our hotels, other
    than through an independent contractor who is adequately
    compensated and from whom we do not derive or receive any
    income. However, we need not provide services through an
    &#147;independent contractor,&#148; but instead may provide
    services directly to our tenants, if the services are
    &#147;usually or customarily rendered&#148; in connection with
    the rental of space for occupancy only and are not considered to
    be provided for the tenants&#146; convenience. In addition, we
    may provide a minimal amount of &#147;noncustomary&#148;
    services to the tenants of a property, other than through an
    independent contractor, as long as our income from the services
    does not exceed 1% of our income from the related property.
    Finally, we may own up to 100% of the capital stock of one or
    more TRSs, which may provide noncustomary services to our
    tenants without tainting our rents from the related hotel
    properties. We will not perform any services other than
    customary ones for our lessees, unless such services are
    provided through independent contractors or TRSs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a portion of the rent that we receive from a hotel does not
    qualify as &#147;rents from real property&#148; because the rent
    attributable to personal property exceeds 15% of the total rent
    for a taxable year, the portion of the rent that is attributable
    to personal property will not be qualifying income for purposes
    of either the 75% or 95% gross income test. Thus, if such rent
    attributable to personal property, plus any other income that is
    nonqualifying income for purposes of the 95% gross income test,
    during a taxable year exceeds 5% of our gross income during the
    year, we would lose our REIT qualification. If, however, the
    rent from a particular hotel does not qualify as &#147;rents
    from real property&#148; because either (1)&#160;the percentage
    rent is considered based on the income or profits of the related
    lessee, (2)&#160;the lessee either is a related party tenant or
    fails to qualify for the exception to the related party tenant
    rule for qualifying TRSs or (3)&#160;we furnish noncustomary
    services to the tenants of the hotel, or manage or operate the
    hotel, other than through a qualifying independent contractor or
    a TRS, none of the rent from that hotel would qualify as
    &#147;rents from real property.&#148; In that case, we might
    lose our REIT qualification because we might be unable to
    satisfy either the 75% or 95% gross
</DIV>

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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    income test. In addition to the rent, the lessees will be
    required to pay certain additional charges. To the extent that
    such additional charges represent either (1)&#160;reimbursements
    of amounts that we are obligated to pay to third parties, such
    as a lessee&#146;s proportionate share of a property&#146;s
    operational or capital expenses, or (2)&#160;penalties for
    nonpayment or late payment of such amounts, such charges should
    qualify as &#147;rents from real property.&#148; However, to the
    extent that such charges do not qualify as &#147;rents from real
    property,&#148; they instead will be treated as interest that
    qualifies for the 95% gross income test.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Interest.</I>&#160;&#160;The term &#147;interest&#148;
    generally does not include any amount received or accrued,
    directly or indirectly, if the determination of such amount
    depends in whole or in part on the income or profits of any
    person. However, interest generally includes the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an amount that is based on a fixed percentage or percentages of
    receipts or sales;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an amount that is based on the income or profits of a debtor, as
    long as the debtor derives substantially all of its income from
    the real property securing the debt from leasing substantially
    all of its interest in the property, and only to the extent that
    the amounts received by the debtor would be qualifying
    &#147;rents from real property&#148; if received directly by a
    REIT.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a loan contains a provision that entitles a REIT to a
    percentage of the borrower&#146;s gain upon the sale of the real
    property securing the loan or a percentage of the appreciation
    in the property&#146;s value as of a specific date, income
    attributable to that loan provision will be treated as gain from
    the sale of the property securing the loan, which generally is
    qualifying income for purposes of both gross income tests.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may, on a select basis, purchase mortgage loans. Interest on
    debt secured by a mortgage on real property or on interests in
    real property, including, for this purpose, discount points,
    prepayment penalties, loan assumption fees, and late payment
    charges that are not compensation for services, generally is
    qualifying income for purposes of the 75% gross income test.
    However, if a loan is secured by real property and other
    property and the highest principal amount of a loan outstanding
    during a taxable year exceeds the fair market value of the real
    property securing the loan as of the date the REIT agreed to
    acquire the loan, a portion of the interest income from such
    loan will not be qualifying income for purposes of the 75% gross
    income test, but will be qualifying income for purposes of the
    95% gross income test. The portion of the interest income that
    will not be qualifying income for purposes of the 75% gross
    income test will be equal to the portion of the principal amount
    of the loan that is not secured by real property&#160;&#151;
    that is, the amount by which the loan exceeds the value of the
    real estate that is security for the loan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may also, on a select basis, purchase mezzanine loans, which
    are loans secured by equity interests in an entity that directly
    or indirectly owns real property, rather than by a direct
    mortgage of the real property. IRS Revenue Procedure
    <FONT style="white-space: nowrap">2003-65</FONT>
    provides a safe harbor pursuant to which a mezzanine loan, if it
    meets each of the requirements contained in the Revenue
    Procedure, will be treated by the IRS as a real estate asset for
    purposes of the REIT asset tests described below, and interest
    derived from it will be treated as qualifying mortgage interest
    for purposes of the 75% gross income test. Although the Revenue
    Procedure provides a safe harbor on which taxpayers may rely, it
    does not prescribe rules of substantive tax law. Moreover, we
    anticipate that the mezzanine loans we will acquire typically
    will not meet all of the requirements for reliance on this safe
    harbor. We intend to invest in mezzanine loans in manner that
    will enable us to continue to satisfy the gross income and asset
    tests.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Dividends.</I>&#160;&#160;Our share of any dividends received
    from any corporation (including any TRS, but excluding any REIT)
    in which we own an equity interest will qualify for purposes of
    the 95% gross income test but not for purposes of the 75% gross
    income test. Our share of any dividends received from any other
    REIT in which we own an equity interest, if any, will be
    qualifying income for purposes of both gross income tests.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Prohibited Transactions.</I>&#160;&#160;A REIT will incur a
    100% tax on the net income (including foreign currency gain)
    derived from any sale or other disposition of property, other
    than foreclosure property, that the REIT holds primarily for
    sale to customers in the ordinary course of a trade or business.
    We believe that none of our assets will be held primarily for
    sale to customers and that a sale of any of our assets will not
    be in the ordinary course of our business. Whether a REIT holds
    an asset &#147;primarily for sale to customers in the
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ordinary course of a trade or business&#148; depends, however,
    on the facts and circumstances in effect from time to time,
    including those related to a particular asset. A safe harbor to
    the characterization of the sale of property by a REIT as a
    prohibited transaction and the 100% prohibited transaction tax
    is available if the following requirements are met:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the REIT has held the property for not less than two years;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the aggregate expenditures made by the REIT, or any partner of
    the REIT, during the two-year period preceding the date of the
    sale that are includable in the basis of the property do not
    exceed 30% of the selling prince of the property;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    either (1)&#160;during the year in question, the REIT did not
    make more than seven sales of property other than foreclosure
    property or sales to which Section&#160;1033 of the Code
    applies, (2)&#160;the aggregate adjusted bases of all such
    properties sold by the REIT during the year did not exceed 10%
    of the aggregate bases of all of the assets of the REIT at the
    beginning of the year or (3)&#160;the aggregate fair market
    value of all such properties sold by the REIT during the year
    did not exceed 10% of the aggregate fair market value of all of
    the assets of the REIT at the beginning of the year;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    in the case of property not acquired through foreclosure or
    lease termination, the REIT has held the property for at least
    two years for the production of rental income;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    if the REIT has made more than seven sales of non-foreclosure
    property during the taxable year, substantially all of the
    marketing and development expenditures with respect to the
    property were made through an independent contractor from whom
    the REIT derives no income.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will attempt to comply with the terms of safe-harbor
    provision in the federal income tax laws prescribing when an
    asset sale will not be characterized as a prohibited
    transaction. We cannot assure you, however, that we can comply
    with the safe-harbor provision or that we will avoid owning
    property that may be characterized as property that we hold
    &#147;primarily for sale to customers in the ordinary course of
    a trade or business.&#148; The 100% tax will not apply to gains
    from the sale of property that is held through a TRS or other
    taxable corporation, although such income will be taxed to the
    corporation at regular corporate income tax rates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Foreclosure Property.</I>&#160;&#160;We will be subject to
    tax at the maximum corporate rate on any income from foreclosure
    property, which includes certain foreign currency gains and
    related deductions, other than income that otherwise would be
    qualifying income for purposes of the 75% gross income test,
    less expenses directly connected with the production of that
    income. However, gross income from foreclosure property will
    qualify under the 75% and 95% gross income tests. Foreclosure
    property is any real property, including interests in real
    property, and any personal property incident to such real
    property:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    that is acquired by a REIT as the result of the REIT having bid
    on such property at foreclosure, or having otherwise reduced
    such property to ownership or possession by agreement or process
    of law, after there was a default or default was imminent on a
    lease of such property or on indebtedness that such property
    secured;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    for which the related loan was acquired by the REIT at a time
    when the default was not imminent or anticipated;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    for which the REIT makes a proper election to treat the property
    as foreclosure property.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A REIT will not be considered to have foreclosed on a property
    where the REIT takes control of the property as a
    <FONT style="white-space: nowrap">mortgagee-in-possession</FONT>
    and cannot receive any profit or sustain any loss except as a
    creditor of the mortgagor. Property generally ceases to be
    foreclosure property at the end of the third taxable year
    following the taxable year in which the REIT acquired the
    property, or longer if an extension is granted by the Secretary
    of the Treasury. However, this grace period terminates and
    foreclosure property ceases to be foreclosure property on the
    first day:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    on which a lease is entered into for the property that, by its
    terms, will give rise to income that does not qualify for
    purposes of the 75% gross income test, or any amount is received
    or
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    88
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    accrued, directly or indirectly, pursuant to a lease entered
    into on or after such day that will give rise to income that
    does not qualify for purposes of the 75% gross income test;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    on which any construction takes place on the property, other
    than completion of a building or any other improvement, where
    more than 10% of the construction was completed before default
    became imminent;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    which is more than 90&#160;days after the day on which the REIT
    acquired the property and the property is used in a trade or
    business which is conducted by the REIT, other than through an
    independent contractor from whom the REIT itself does not derive
    or receive any income.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Hedging Transactions.</I>&#160;&#160;From time to time, we or
    our operating partnership may enter into hedging transactions
    with respect to one or more of our assets or liabilities. Our
    hedging activities may include entering into interest rate
    swaps, caps, and floors, options to purchase such items, and
    futures and forward contracts. Income and gain from
    &#147;hedging transactions&#148; will be excluded from gross
    income for purposes of both the 75% and 95% gross income tests.
    A &#147;hedging transaction&#148; means either (1)&#160;any
    transaction entered into in the normal course of our or our
    operating partnership&#146;s trade or business primarily to
    manage the risk of interest rate changes, price changes, or
    currency fluctuations with respect to borrowings made or to be
    made, or ordinary obligations incurred or to be incurred, to
    acquire or carry real estate assets and (2)&#160;any transaction
    entered into primarily to manage the risk of currency
    fluctuations with respect to any item of income or gain that
    would be qualifying income under the 75% or 95% gross income
    test (or any property which generates such income or gain). We
    are required to clearly identify any such hedging transaction
    before the close of the day on which it was acquired or entered
    into and to satisfy other identification requirements. We intend
    to structure any hedging transactions in a manner that does not
    jeopardize our qualification as a REIT.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Foreign Currency Gain.</I>&#160;&#160;Certain foreign
    currency gains will be excluded from gross income for purposes
    of one or both of the gross income tests. &#147;Real estate
    foreign exchange gain&#148; will be excluded from gross income
    for purposes of the 75% gross income test. Real estate foreign
    exchange gain generally includes foreign currency gain
    attributable to any item of income or gain that is qualifying
    income for purposes of the 75% gross income test, foreign
    currency gain attributable to the acquisition or ownership of
    (or becoming or being the obligor under) obligations secured by
    mortgages on real property or on interests in real property and
    certain foreign currency gain attributable to certain
    &#147;qualified business units&#148; of a REIT. &#147;Passive
    foreign exchange gain&#148; will be excluded from gross income
    for purposes of the 95% gross income test. Passive foreign
    exchange gain generally includes real estate foreign exchange
    gain as described above, and also includes foreign currency gain
    attributable to any item of income or gain that is qualifying
    income for purposes of the 95% gross income test and foreign
    currency gain attributable to the acquisition or ownership of
    (or becoming or being the obligor under) obligations. Because
    passive foreign exchange gain includes real estate foreign
    exchange gain, real estate foreign exchange gain is excluded
    from gross income for purposes of both the 75% and 95% gross
    income tests. These exclusions for real estate foreign exchange
    gain and passive foreign exchange gain do not apply to any
    certain foreign currency gain derived from dealing, or engaging
    in substantial and regular trading, in securities. Such gain is
    treated as nonqualifying income for purposes of both the 75% and
    95% gross income tests.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Failure to Satisfy Gross Income Tests.</I>&#160;&#160;If we
    fail to satisfy one or both of the gross income tests for any
    taxable year, we nevertheless may qualify as a REIT for that
    year if we qualify for relief under certain provisions of the
    federal income tax laws. Those relief provisions are available
    if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our failure to meet those tests is due to reasonable cause and
    not to willful neglect;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    following such failure for any taxable year, we file a schedule
    of the sources of our income in accordance with regulations
    prescribed by the Secretary of the U.S.&#160;Treasury.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot predict, however, whether in all circumstances we
    would qualify for the relief provisions. In addition, as
    discussed above in &#147;&#151;&#160;Taxation of Our
    Company,&#148; even if the relief provisions apply, we would
    incur a 100% tax on the gross income attributable to the greater
    of the amount by which we fail the 75% gross income test or the
    95% gross income test multiplied, in either case, by a fraction
    intended to reflect our profitability.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    89
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Asset
    Tests</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To qualify as a REIT, we also must satisfy the following asset
    tests at the end of each quarter of each taxable year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    First, at least 75% of the value of our total assets must
    consist of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    cash or cash items, including certain receivables and, in
    certain circumstances, foreign currencies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    government securities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    interests in real property, including leaseholds and options to
    acquire real property and leaseholds;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    interests in mortgages loans secured by real property;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    stock in other REITs;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    investments in stock or debt instruments during the one-year
    period following our receipt of new capital that we raise
    through equity offerings or public offerings of debt with at
    least a five-year term.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Second, of our investments not included in the 75% asset class,
    the value of our interest in any one issuer&#146;s securities
    may not exceed 5% of the value of our total assets, or the 5%
    asset test.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Third, of our investments not included in the 75% asset class,
    we may not own more than 10% of the voting power or value of any
    one issuer&#146;s outstanding securities, or the 10% vote or
    value test.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Fourth, no more than 25% of the value of our total assets may
    consist of the securities of one or more TRSs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Fifth, no more than 25% of the value of our total assets may
    consist of the securities of TRSs and other non-TRS taxable
    subsidiaries and other assets that are not qualifying assets for
    purposes of the 75% asset test, or the 25% securities test.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of the 5% asset test and the 10% vote or value
    test, the term &#147;securities&#148; does not include shares in
    another REIT, equity or debt securities of a qualified REIT
    subsidiary or TRS, mortgage loans that constitute real estate
    assets, or equity interests in a partnership. The term
    &#147;securities,&#148; however, generally includes debt
    securities issued by a partnership or another REIT, except that
    for purposes of the 10% value test, the term
    &#147;securities&#148; does not include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    <I>&#147;Straight debt&#148; </I>securities, which is defined as
    a written unconditional promise to pay on demand or on a
    specified date a sum certain in money if (i)&#160;the debt is
    not convertible, directly or indirectly, into shares, and
    (ii)&#160;the interest rate and interest payment dates are not
    contingent on profits, the borrower&#146;s discretion, or
    similar factors. &#147;Straight debt&#148; securities do not
    include any securities issued by a partnership or a corporation
    in which we or any controlled TRS (<I>i.e.</I>, a TRS in which
    we own directly or indirectly more than 50% of the voting power
    or value of the stock) hold non-&#147;straight debt&#148;
    securities that have an aggregate value of more than 1% of the
    issuer&#146;s outstanding securities. However, &#147;straight
    debt&#148; securities include debt subject to the following
    contingencies:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a contingency relating to the time of payment of interest or
    principal, as long as either (i)&#160;there is no change to the
    effective yield of the debt obligation, other than a change to
    the annual yield that does not exceed the greater of 0.25% or 5%
    of the annual yield, or (ii)&#160;neither the aggregate issue
    price nor the aggregate face amount of the issuer&#146;s debt
    obligations held by us exceeds $1&#160;million and no more than
    12&#160;months of unaccrued interest on the debt obligations can
    be required to be prepaid;&#160;and
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    90
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a contingency relating to the time or amount of payment upon a
    default or prepayment of a debt obligation, as long as the
    contingency is consistent with customary commercial practice.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Any loan to an individual or an estate;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Any &#147;section&#160;467&#160;rental agreement,&#148; other
    than an agreement with a related party tenant;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Any obligation to pay &#147;rents from real property&#148;;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Certain securities issued by governmental entities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Any security issued by a REIT;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Any debt instrument issued by an entity treated as a partnership
    for federal income tax purposes in which we are a partner to the
    extent of our proportionate interest in the equity and debt
    securities of the partnership;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    Any debt instrument issued by an entity treated as a partnership
    for federal income tax purposes not described in the preceding
    bullet points if at least 75% of the partnership&#146;s gross
    income, excluding income from prohibited transactions, is
    qualifying income for purposes of the 75% gross income test
    described above in &#147;&#151;&#160;Gross Income Tests.&#148;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of the 10% value test, our proportionate share of
    the assets of a partnership is our proportionate interest in any
    securities issued by the partnership, without regard to the
    securities described in the last two bullet points above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As described above, we may, on a select basis, invest in
    mezzanine loans. Although we expect that our investments in
    mezzanine loans will generally be treated as real estate assets,
    we anticipate that the mezzanine loans in which we invest will
    not meet all the requirements of the safe harbor in IRS Revenue
    Procedure
    <FONT style="white-space: nowrap">2003-65.</FONT>
    Thus no assurance can be provided that the IRS will not
    challenge our treatment of mezzanine loans as real estate
    assets. We intend to invest in mezzanine loans in a manner that
    will enable us to continue to satisfy the asset and gross income
    test requirements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will monitor the status of our assets for purposes of the
    various asset tests and will manage our portfolio in order to
    comply at all times with such tests. If we fail to satisfy the
    asset tests at the end of a calendar quarter, we will not lose
    our REIT qualification if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we satisfied the asset tests at the end of the preceding
    calendar quarter;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the discrepancy between the value of our assets and the asset
    test requirements arose from changes in the market values of our
    assets and was not wholly or partly caused by the acquisition of
    one or more non-qualifying assets.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we did not satisfy the condition described in the second
    item, above, we still could avoid disqualification by
    eliminating any discrepancy within 30&#160;days after the close
    of the calendar quarter in which it arose.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event that we violate the 5% asset test or the 10% vote
    or value test described above, we will not lose our REIT
    qualification if (1)&#160;the failure is <I>de minimis </I>(up
    to the lesser of 1% of our assets or $10&#160;million) and
    (2)&#160;we dispose of assets or otherwise comply with the asset
    tests within six months after the last day of the quarter in
    which we identify such failure. In the event of a failure of any
    of the asset tests (other than <I>de minimis </I>failures
    described in the preceding sentence), as long as the failure was
    due to reasonable cause and not to willful neglect, we will not
    lose our REIT status if we (1)&#160;dispose of assets or
    otherwise comply with the asset tests within six months after
    the last day of the quarter in which we identify the failure,
    (2)&#160;we file a description of each asset causing the failure
    with the IRS and (3)&#160;pay a tax equal to the greater of
    $50,000 or 35% of the net income from the nonqualifying assets
    during the period in which we failed to satisfy the asset tests.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the assets that we will hold will satisfy the
    foregoing asset test requirements. However, we will not obtain
    independent appraisals to support our conclusions as to the
    value of our assets
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    91
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and securities, or the real estate collateral for the mortgage
    or mezzanine loans that support our investments. Moreover, the
    values of some assets may not be susceptible to a precise
    determination. As a result, there can be no assurance that the
    IRS will not contend that our ownership of securities and other
    assets violates one or more of the asset tests applicable to
    REITs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Distribution
    Requirements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each taxable year, we must distribute dividends, other than
    capital gain dividends and deemed distributions of retained
    capital gain, to our shareholders in an aggregate amount at
    least equal to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the sum of
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    90% of our &#147;REIT taxable income,&#148; computed without
    regard to the dividends paid deduction and our net capital gain
    or loss,&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    90% of our after-tax net income, if any, from foreclosure
    property, minus
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the sum of certain items of non-cash income.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must pay such distributions in the taxable year to which they
    relate, or in the following taxable year if either (a)&#160;we
    declare the distribution before we timely file our federal
    income tax return for the year and pay the distribution on or
    before the first regular dividend payment date after such
    declaration or (b)&#160;we declare the distribution in October,
    November or December of the taxable year, payable to
    shareholders of record on a specified day in any such month, and
    we actually pay the dividend before the end of January of the
    following year. The distributions under clause&#160;(a) are
    taxable to the shareholders in the year in which paid, and the
    distributions in clause&#160;(b) are treated as paid on
    December&#160;31st&#160;of the prior taxable year. In both
    instances, these distributions relate to our prior taxable year
    for purposes of the 90% distribution requirement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will pay federal income tax on taxable income, including net
    capital gain, that we do not distribute to shareholders.
    Furthermore, if we fail to distribute during a calendar year, or
    by the end of January following the calendar year in the case of
    distributions with declaration and record dates falling in the
    last three months of the calendar year, at least the sum of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    85% of our REIT ordinary income for such year,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    95% of our REIT capital gain income for such year,&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    any undistributed taxable income from prior periods,
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    we will incur a 4% nondeductible excise tax on the excess of
    such required distribution over the amounts we actually
    distribute.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may elect to retain and pay income tax on the net long-term
    capital gain we receive in a taxable year. If we so elect, we
    will be treated as having distributed any such retained amount
    for purposes of the 4% nondeductible excise tax described above.
    We intend to make timely distributions sufficient to satisfy the
    annual distribution requirements and to avoid corporate income
    tax and the 4% nondeductible excise tax.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    It is possible that, from time to time, we may experience timing
    differences between the actual receipt of income and actual
    payment of deductible expenses and the inclusion of that income
    and deduction of such expenses in arriving at our REIT taxable
    income. For example, we may not deduct recognized capital losses
    from our &#147;REIT taxable income.&#148; Further, it is
    possible that, from time to time, we may be allocated a share of
    net capital gain attributable to the sale of depreciated
    property that exceeds our allocable share of cash attributable
    to that sale. As a result of the foregoing, we may have less
    cash than is necessary to distribute taxable income sufficient
    to avoid corporate income tax and the excise tax imposed on
    certain undistributed income or even to meet the 90%
    distribution requirement. In such a situation, we may need to
    borrow funds or, if possible, pay taxable dividends of our
    shares of beneficial interest or debt securities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under certain circumstances, we may be able to correct a failure
    to meet the distribution requirement for a year by paying
    &#147;deficiency dividends&#148; to our shareholders in a later
    year. We may include such deficiency dividends in our deduction
    for dividends paid for the earlier year. Although we may be able
    to
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    92
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    avoid income tax on amounts distributed as deficiency dividends,
    we will be required to pay interest to the IRS based upon the
    amount of any deduction we take for deficiency dividends.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Taxable
    REIT Subsidiaries</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As described above, we may own up to 100% of the capital stock
    of one or more TRSs. A TRS is a fully taxable corporation that
    may earn income that would not be qualifying income if earned
    directly by us. A TRS may provide services to our lessees and
    perform activities unrelated to our lessees, such as third-party
    management, development, and other independent business
    activities. However, a TRS may not directly or indirectly
    operate or manage any lodging facilities or health care
    facilities or provide rights to any brand name under which any
    hotel or health care facility is operated, unless such rights
    are provided to an &#147;eligible independent contractor&#148;
    (as described below) to operate or manage a lodging facility if
    such rights are held by the TRS as a franchisee, licensee, or in
    a similar capacity and such lodging facility is either owned by
    the TRS or leased to the TRS by its parent REIT. A TRS will not
    be considered to operate or manage a qualified lodging facility
    solely because the TRS directly or indirectly possesses a
    license, permit, or similar instrument enabling it to do so.
    Additionally, a TRS will not be considered to operate or manage
    a qualified lodging facility located outside of the United
    States, as long as an &#147;eligible independent
    contractor&#148; is responsible for the daily supervision and
    direction of such individuals on behalf of the TRS pursuant to a
    management agreement or similar service contract.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We and our corporate subsidiary must elect for the subsidiary to
    be treated as a TRS. A corporation of which a qualifying TRS
    directly or indirectly owns more than 35% of the voting power or
    value of the shares will automatically be treated as a TRS.
    Overall, no more than 25% of the value of our assets may consist
    of securities of one or more TRSs, and no more than 25% of the
    value of our assets may consist of the securities of TRSs and
    other taxable subsidiaries and other assets that are not
    qualifying assets for purposes of the 75% asset test.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rent that we receive from our TRSs will qualify as &#147;rents
    from real property&#148; as long as the property is operated on
    behalf of the TRS by a person who qualifies as an
    &#147;independent contractor&#148; and who is, or is related to
    a person who is, actively engaged in the trade or business of
    operating &#147;qualified lodging facilities&#148; for any
    person unrelated to us and the TRS lessee (an &#147;eligible
    independent contractor&#148;). A &#147;qualified lodging
    facility&#148; includes customary amenities and facilities
    operated as part of, or associated with, the lodging facility as
    long as such amenities and facilities are customary for other
    properties of a comparable size and class owned by other
    unrelated owners.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to lease all of our hotel properties to TRSs, and all
    of those TRSs will engage &#147;eligible independent
    contractors&#148; to operate and manage those hotels.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The TRS rules limit the deductibility of interest paid or
    accrued by a TRS to us to assure that the TRS is subject to an
    appropriate level of corporate taxation. Further, the rules
    impose a 100% excise tax on certain transactions between a TRS
    and us or our tenants that are not conducted on an
    arm&#146;s-length basis. We believe that all transactions
    between us and each of our TRSs will be conducted on an
    arm&#146;s-length basis.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recordkeeping
    Requirements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must maintain certain records in order to qualify as a REIT.
    In addition, to avoid a monetary penalty, we must request on an
    annual basis information from our shareholders designed to
    disclose the actual ownership of our outstanding shares of
    beneficial interest. We intend to comply with these requirements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Failure
    to Qualify</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we fail to satisfy one or more requirements for REIT
    qualification, other than the gross income tests and the asset
    tests, we could avoid disqualification if our failure is due to
    reasonable cause and not to willful neglect and we pay a penalty
    of $50,000 for each such failure. In addition, there are relief
    provisions for a failure of the gross income tests and asset
    tests, as described in &#147;&#151;&#160;Gross Income
    Tests&#148; and &#147;&#151;&#160;Asset Tests.&#148;
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    93
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we fail to qualify as a REIT in any taxable year, and no
    relief provision applies, we would be subject to federal income
    tax and any applicable alternative minimum tax on our taxable
    income at regular corporate rates. In calculating our taxable
    income in a year in which we fail to qualify as a REIT, we would
    not be able to deduct amounts paid out to shareholders. In fact,
    we would not be required to distribute any amounts to
    shareholders in that year. In such event, to the extent of our
    current and accumulated earnings and profits, all distributions
    to shareholders would be taxable as ordinary income. Subject to
    certain limitations of the federal income tax laws, corporate
    shareholders might be eligible for the dividends received
    deduction and shareholders taxed at individual rates may be
    eligible for the reduced federal income tax rate of 15% through
    2010 on such dividends. Unless we qualified for relief under
    specific statutory provisions, we also would be disqualified
    from taxation as a REIT for the four taxable years following the
    year during which we ceased to qualify as a REIT. We cannot
    predict whether in all circumstances we would qualify for such
    statutory relief.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Taxation
    of Taxable U.S. Shareholders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used herein, the term &#147;U.S.&#160;shareholder&#148; means
    a holder of our common shares that for U.S.&#160;federal income
    tax purposes is:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a citizen or resident of the United States;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a corporation (including an entity treated as a corporation for
    federal income tax purposes) created or organized in or under
    the laws of the United States, any of its states or the District
    of Columbia;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an estate whose income is subject to federal income taxation
    regardless of its source;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    any trust if (1)&#160;a U.S.&#160;court is able to exercise
    primary supervision over the administration of such trust and
    one or more U.S.&#160;persons have the authority to control all
    substantial decisions of the trust or (2)&#160;it has a valid
    election in place to be treated as a U.S.&#160;person.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a partnership, entity or arrangement treated as a partnership
    for U.S.&#160;federal income tax purposes holds our common
    shares, the federal income tax treatment of a partner in the
    partnership will generally depend on the status of the partner
    and the activities of the partnership. If you are a partner in a
    partnership holding our common shares, you are urged to consult
    your tax advisor regarding the consequences of the ownership and
    disposition of our common shares by the partnership.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As long as we qualify as a REIT, a taxable U.S.&#160;shareholder
    must generally take into account as ordinary income
    distributions made out of our current or accumulated earnings
    and profits that we do not designate as capital gain dividends
    or retained long-term capital gain. A U.S.&#160;shareholder will
    not qualify for the dividends received deduction generally
    available to corporations. In addition, dividends paid to a
    U.S.&#160;shareholder generally will not qualify for the 15% tax
    rate for &#147;qualified dividend income.&#148; The maximum tax
    rate for qualified dividend income received by non-corporate
    taxpayers is 15% through 2010. The maximum tax rate on qualified
    dividend income is lower than the maximum tax rate on ordinary
    income, which is currently 35%. Qualified dividend income
    generally includes dividends paid to taxpayers taxed at
    individual rates by domestic C corporations and certain
    qualified foreign corporations. Because we are not generally
    subject to federal income tax on the portion of our REIT taxable
    income distributed to our shareholders (see
    &#147;&#151;&#160;Taxation of Our Company&#148; above), our
    dividends generally will not be eligible for the 15% rate on
    qualified dividend income. As a result, our ordinary REIT
    dividends will be taxed at the higher tax rate applicable to
    ordinary income. However, the 15% tax rate for qualified
    dividend income will apply to our ordinary REIT dividends
    (i)&#160;attributable to dividends received by us from non-REIT
    corporations, such as our TRS, and (ii)&#160;to the extent
    attributable to income upon which we have paid corporate income
    tax (<I>e.g.</I>, to the extent that we distribute less than
    100% of our taxable income). In general, to qualify for the
    reduced tax rate on qualified dividend income, a shareholder
    must hold our common shares for more than 60&#160;days during
    the <FONT style="white-space: nowrap">121-day</FONT>
    period beginning on the date that is 60&#160;days before the
    date on which our common shares becomes ex-dividend.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A U.S.&#160;shareholder generally will take into account as
    long-term capital gain any distributions that we designate as
    capital gain dividends without regard to the period for which
    the U.S.&#160;shareholder has held our
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    94
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    common shares. We generally will designate our capital gain
    dividends as either 15% or 25% rate distributions. See
    &#147;&#151;&#160;Capital Gains and Losses.&#148; A corporate
    U.S.&#160;shareholder, however, may be required to treat up to
    20% of certain capital gain dividends as ordinary income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may elect to retain and pay income tax on the net long-term
    capital gain that we receive in a taxable year. In that case, to
    the extent that we designate such amount in a timely notice to
    such shareholder, a U.S.&#160;shareholder would be taxed on its
    proportionate share of our undistributed long-term capital gain.
    The U.S.&#160;shareholder would receive a credit for its
    proportionate share of the tax we paid. The
    U.S.&#160;shareholder would increase the basis in its shares of
    beneficial interest by the amount of its proportionate share of
    our undistributed long-term capital gain, minus its share of the
    tax we paid.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A U.S.&#160;shareholder will not incur tax on a distribution in
    excess of our current and accumulated earnings and profits if
    the distribution does not exceed the adjusted basis of the
    U.S.&#160;shareholder&#146;s common shares. Instead, the
    distribution will reduce the adjusted basis of such shares of
    beneficial interest. A U.S.&#160;shareholder will recognize a
    distribution in excess of both our current and accumulated
    earnings and profits and the U.S.&#160;shareholder&#146;s
    adjusted basis in his or her shares of beneficial interest as
    long-term capital gain, or short-term capital gain if the shares
    of beneficial interest have been held for one year or less,
    assuming the shares of beneficial interest are a capital asset
    in the hands of the U.S.&#160;shareholder. In addition, if we
    declare a distribution in October, November, or December of any
    year that is payable to a U.S.&#160;shareholder of record on a
    specified date in any such month, such distribution shall be
    treated as both paid by us and received by the
    U.S.&#160;shareholder on December 31 of such year, provided that
    we actually pay the distribution during January of the following
    calendar year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Shareholders may not include in their individual income tax
    returns any of our net operating losses or capital losses.
    Instead, these losses are generally carried over by us for
    potential offset against our future income. Taxable
    distributions from us and gain from the disposition of our
    common shares will not be treated as passive activity income
    and, therefore, shareholders generally will not be able to apply
    any &#147;passive activity losses,&#148; such as losses from
    certain types of limited partnerships in which the shareholder
    is a limited partner, against such income. In addition, taxable
    distributions from us and gain from the disposition of our
    common shares generally will be treated as investment income for
    purposes of the investment interest limitations. We will notify
    shareholders after the close of our taxable year as to the
    portions of the distributions attributable to that year that
    constitute ordinary income, return of capital and capital gain.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Taxation
    of U.S. Shareholders on the Disposition of Common
    Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A U.S.&#160;shareholder who is not a dealer in securities must
    generally treat any gain or loss realized upon a taxable
    disposition of our common shares as long-term capital gain or
    loss if the U.S.&#160;shareholder has held our common shares for
    more than one year and otherwise as short-term capital gain or
    loss. In general, a U.S.&#160;shareholder will realize gain or
    loss in an amount equal to the difference between the sum of the
    fair market value of any property and the amount of cash
    received in such disposition and the
    U.S.&#160;shareholder&#146;s adjusted tax basis. A
    shareholder&#146;s adjusted tax basis generally will equal the
    U.S.&#160;shareholder&#146;s acquisition cost, increased by the
    excess of net capital gains deemed distributed to the
    U.S.&#160;shareholder (discussed above) less tax deemed paid on
    such gains and reduced by any returns of capital. However, a
    U.S.&#160;shareholder must treat any loss upon a sale or
    exchange of common shares held by such shareholder for six
    months or less as a long-term capital loss to the extent of
    capital gain dividends and any other actual or deemed
    distributions from us that such U.S.&#160;shareholder treats as
    long-term capital gain. All or a portion of any loss that a
    U.S.&#160;shareholder realizes upon a taxable disposition of our
    common shares may be disallowed if the U.S.&#160;shareholder
    purchases other common shares within 30&#160;days before or
    after the disposition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Capital
    Gains and Losses</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A taxpayer generally must hold a capital asset for more than one
    year for gain or loss derived from its sale or exchange to be
    treated as long-term capital gain or loss. The highest marginal
    individual income tax rate currently is 35% (which, absent
    additional congressional action, rate will apply until
    December&#160;31, 2010). The maximum tax rate on long-term
    capital gain applicable to taxpayers taxed at individual rates
    is 15% for
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    95
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    sales and exchanges of assets held for more than one year
    occurring through December&#160;31, 2010. The maximum tax rate
    on long-term capital gain from the sale or exchange of
    &#147;Section&#160;1250 property,&#148; or depreciable real
    property, is 25%, which applies to the lesser of the total
    amount of the gain or the accumulated depreciation on the
    Section&#160;1250 property.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to distributions that we designate as capital gain
    dividends and any retained capital gain that we are deemed to
    distribute, we generally may designate whether such a
    distribution is taxable to our shareholders taxed at individual
    rates at a 15% or 25% rate. Thus, the tax rate differential
    between capital gain and ordinary income for those taxpayers may
    be significant. In addition, the characterization of income as
    capital gain or ordinary income may affect the deductibility of
    capital losses. A non-corporate taxpayer may deduct capital
    losses not offset by capital gains against its ordinary income
    only up to a maximum annual amount of $3,000. A non-corporate
    taxpayer may carry forward unused capital losses indefinitely. A
    corporate taxpayer must pay tax on its net capital gain at
    ordinary corporate rates. A corporate taxpayer may deduct
    capital losses only to the extent of capital gains, with unused
    losses being carried back three years and forward five years.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Taxation
    of Tax-Exempt Shareholders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Tax-exempt entities, including qualified employee pension and
    profit sharing trusts and individual retirement accounts,
    generally are exempt from federal income taxation. However, they
    are subject to taxation on their unrelated business taxable
    income, or UBTI. Although many investments in real estate
    generate UBTI, the IRS has issued a ruling that dividend
    distributions from a REIT to an exempt employee pension trust do
    not constitute UBTI so long as the exempt employee pension trust
    does not otherwise use the shares of beneficial interest in the
    REIT in an unrelated trade or business of the pension trust.
    Based on that ruling, amounts that we distribute to tax-exempt
    shareholders generally should not constitute UBTI. However, if a
    tax-exempt shareholder were to finance its acquisition of common
    shares with debt, a portion of the income that it receives from
    us would constitute UBTI pursuant to the &#147;debt-financed
    property&#148; rules. Moreover, social clubs, voluntary employee
    benefit associations, supplemental unemployment benefit trusts
    and qualified group legal services plans that are exempt from
    taxation under special provisions of the federal income tax laws
    are subject to different UBTI rules, which generally will
    require them to characterize distributions that they receive
    from us as UBTI. Finally, in certain circumstances, a qualified
    employee pension or profit sharing trust that owns more than 10%
    of our shares of beneficial interest must treat a percentage of
    the dividends that it receives from us as UBTI. Such percentage
    is equal to the gross income we derive from an unrelated trade
    or business, determined as if we were a pension trust, divided
    by our total gross income for the year in which we pay the
    dividends. That rule applies to a pension trust holding more
    than 10% of our shares of beneficial interest only if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the percentage of our dividends that the tax-exempt trust must
    treat as UBTI is at least 5%;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    we qualify as a REIT by reason of the modification of the rule
    requiring that no more than 50% of our shares of beneficial
    interest be owned by five or fewer individuals that allows the
    beneficiaries of the pension trust to be treated as holding our
    shares of beneficial interest in proportion to their actuarial
    interests in the pension trust;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    either:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="13%"></TD>
    <TD width="5%"></TD>
    <TD width="82%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    one pension trust owns more than 25% of the value of our shares
    of beneficial interest;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a group of pension trusts individually holding more than 10% of
    the value of our shares of beneficial interest collectively owns
    more than 50% of the value of our shares of beneficial interest.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Taxation
    of <FONT style="white-space: nowrap">Non-U.S.</FONT>
    Shareholders</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The term
    <FONT style="white-space: nowrap">&#147;non-U.S.&#160;shareholder&#148;</FONT>
    means a holder of our common shares that is not a
    U.S.&#160;shareholder or a partnership (or entity treated as a
    partnership for federal income tax purposes). The rules
    governing federal income taxation of nonresident alien
    individuals, foreign corporations, foreign partnerships, and
    other
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    96
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    foreign shareholders are complex. This section is only a summary
    of such rules. <B>We urge
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholders</FONT>
    to consult their own tax advisors to determine the impact of
    federal, state, and local income tax laws on the purchase,
    ownership and sale of our common shares, including any reporting
    requirements</B>.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    that receives a distribution that is not attributable to gain
    from our sale or exchange of a &#147;United States real property
    interest,&#148; or USRPI, as defined below, and that we do not
    designate as a capital gain dividend or retained capital gain
    will recognize ordinary income to the extent that we pay such
    distribution out of our current or accumulated earnings and
    profits. A withholding tax equal to 30% of the gross amount of
    the distribution ordinarily will apply to such distribution
    unless an applicable tax treaty reduces or eliminates the tax.
    However, if a distribution is treated as effectively connected
    with the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder&#146;s</FONT>
    conduct of a U.S.&#160;trade or business, the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    generally will be subject to federal income tax on the
    distribution at graduated rates, in the same manner as
    U.S.&#160;shareholders are taxed with respect to such
    distribution, and a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    that is a corporation also may be subject to the 30% branch
    profits tax with respect to that distribution. We plan to
    withhold U.S.&#160;income tax at the rate of 30% on the gross
    amount of any such distribution paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    unless either:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    a lower treaty rate applies and the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    files an IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    evidencing eligibility for that reduced rate with us;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    files an IRS
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    with us claiming that the distribution is effectively connected
    income.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    will not incur tax on a distribution in excess of our current
    and accumulated earnings and profits if the excess portion of
    such distribution does not exceed the adjusted basis of its
    common shares. Instead, the excess portion of such distribution
    will reduce the adjusted basis of such shares of beneficial
    interest. A
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    will be subject to tax on a distribution that exceeds both our
    current and accumulated earnings and profits and the adjusted
    basis of its common shares, if the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    otherwise would be subject to tax on gain from the sale or
    disposition of its common shares, as described below. Because we
    generally cannot determine at the time we make a distribution
    whether the distribution will exceed our current and accumulated
    earnings and profits, we normally will withhold tax on the
    entire amount of any distribution at the same rate as we would
    withhold on a dividend. However, a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    may claim a refund of amounts that we withhold if we later
    determine that a distribution in fact exceeded our current and
    accumulated earnings and profits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For any year in which we qualify as a REIT, a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    will incur tax on distributions that are attributable to gain
    from our sale or exchange of a USRPI under the Foreign
    Investment in Real Property Act of 1980, or FIRPTA. A USRPI
    includes certain interests in real property and stock in
    corporations at least 50% of whose assets consist of interests
    in real property. Under FIRPTA, a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    is taxed on distributions attributable to gain from sales of
    USRPIs as if such gain were effectively connected with a
    U.S.&#160;business of the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder.</FONT>
    A
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    thus would be taxed on such a distribution at the normal capital
    gains rates applicable to U.S.&#160;shareholders, subject to
    applicable alternative minimum tax and a special alternative
    minimum tax in the case of a nonresident alien individual. A
    <FONT style="white-space: nowrap">non-U.S.&#160;corporate</FONT>
    shareholder not entitled to treaty relief or exemption also may
    be subject to the 30% branch profits tax on such a distribution.
    We would be required to withhold 35% of any distribution that we
    could designate as a capital gain dividend. A
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    may receive a credit against its tax liability for the amount we
    withhold.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    However, if our common shares are regularly traded on an
    established securities market in the United States, capital gain
    distributions on our common shares that are attributable to our
    sale of real property will be treated as ordinary dividends
    rather than as gain from the sale of a USRPI, as long as the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    did not own more than 5% of our common shares at any time during
    the one-year period preceding the distribution. As a result,
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholders</FONT>
    generally will be subject to withholding tax on such capital
    gain distributions in the same manner as they are subject to
    withholding tax on ordinary dividends. We anticipate that our
    common shares will be regularly traded on an established
    securities market in the United States following this offering.
    If our common shares are not regularly traded on an established
    securities market in the United States or the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    owned more than 5% of our common shares at any
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    97
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    time during the one-year period preceding the distribution,
    capital gain distributions that are attributable to our sale of
    real property would be subject to tax under FIRPTA, as described
    in the preceding paragraph. Moreover, if a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    disposes of our common shares during the
    <FONT style="white-space: nowrap">30-day</FONT>
    period preceding a dividend payment, and such
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    (or a person related to such
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder)</FONT>
    acquires or enters into a contract or option to acquire our
    common shares within 61&#160;days of the first day of the
    <FONT style="white-space: nowrap">30-day</FONT>
    period described above, and any portion of such dividend payment
    would, but for the disposition, be treated as a USRPI capital
    gain to such
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder,</FONT>
    then such
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    shall be treated as having USRPI capital gain in an amount that,
    but for the disposition, would have been treated as USRPI
    capital gain.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="white-space: nowrap">Non-U.S.&#160;shareholders</FONT>
    could incur tax under FIRPTA with respect to gain realized upon
    a disposition of our common shares if we are a United States
    real property holding corporation during a specified testing
    period. If at least 50% of a REIT&#146;s assets are United
    States real property interests, then the REIT will be a United
    States real property holding corporation. We anticipate that we
    will be a United States real property holding corporation based
    on our investment strategy. However, if we are a United States
    real property holding corporation, a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    generally would not incur tax under FIRPTA on gain from the sale
    of our common shares if we are a &#147;domestically controlled
    qualified investment entity.&#148; A domestically controlled
    qualified investment entity includes a REIT in which, at all
    times during a specified testing period, less than 50% in value
    of its shares are held directly or indirectly by
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholders.</FONT>
    We cannot assure you that this test will be met. If our common
    shares are regularly traded on an established securities market,
    an additional exception to the tax under FIRPTA will be
    available with respect to our common shares, even if we do not
    qualify as a domestically controlled qualified investment entity
    at the time the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    sells our common shares. Under that exception, the gain from
    such a sale by such a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    will not be subject to tax under FIRPTA if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our common shares are treated as being regularly traded under
    applicable U.S.&#160;Treasury regulations on an established
    securities market;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    owned, actually or constructively, 5% or less of our common
    shares at all times during a specified testing period.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As noted above, we anticipate that our common shares will be
    regularly traded on an established securities market following
    this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the gain on the sale of our common shares were taxed under
    FIRPTA, a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    would be taxed on that gain in the same manner as
    U.S.&#160;shareholders, subject to applicable alternative
    minimum tax and a special alternative minimum tax in the case of
    nonresident alien individuals. Furthermore, a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    generally will incur tax on gain not subject to FIRPTA if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the gain is effectively connected with the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder&#146;s</FONT>
    U.S.&#160;trade or business, in which case the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    will be subject to the same treatment as U.S.&#160;shareholders
    with respect to such gain;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    is a nonresident alien individual who was present in the
    U.S.&#160;for 183&#160;days or more during the taxable year and
    has a &#147;tax home&#148; in the United States, in which case
    the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    will incur a 30% tax on his or her capital gains.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Information
    Reporting Requirements and Backup Withholding</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will report to our shareholders and to the IRS the amount of
    distributions we pay during each calendar year, and the amount
    of tax we withhold, if any. Under the backup withholding rules,
    a shareholder may be subject to backup withholding at a rate of
    28% with respect to distributions unless the holder:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    is a corporation or qualifies for certain other exempt
    categories and, when required, demonstrates this fact;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    provides a taxpayer identification number, certifies as to no
    loss of exemption from backup withholding, and otherwise
    complies with the applicable requirements of the backup
    withholding rules.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    98
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A shareholder who does not provide us with its correct taxpayer
    identification number also may be subject to penalties imposed
    by the IRS. Any amount paid as backup withholding will be
    creditable against the shareholder&#146;s income tax liability.
    In addition, we may be required to withhold a portion of capital
    gain distributions to any shareholders who fail to certify their
    non-foreign status to us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding will generally not apply to payments of
    dividends made by us or our paying agents, in their capacities
    as such, to a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    provided that the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    furnishes to us or our paying agent the required certification
    as to its
    <FONT style="white-space: nowrap">non-U.S.&#160;status,</FONT>
    such as providing a valid IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    or <FONT style="white-space: nowrap">W-8ECI,</FONT>
    or certain other requirements are met. Notwithstanding the
    foregoing, backup withholding may apply if either we or our
    paying agent has actual knowledge, or reason to know, that the
    holder is a U.S.&#160;person that is not an exempt recipient.
    Payments of the net proceeds from a disposition or a redemption
    effected outside the U.S.&#160;by a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    made by or through a foreign office of a broker generally will
    not be subject to information reporting or backup withholding.
    However, information reporting (but not backup withholding)
    generally will apply to such a payment if the broker has certain
    connections with the U.S.&#160;unless the broker has documentary
    evidence in its records that the beneficial owner is a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    and specified conditions are met or an exemption is otherwise
    established. Payment of the net proceeds from a disposition by a
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    of common shares made by or through the U.S.&#160;office of a
    broker is generally subject to information reporting and backup
    withholding unless the
    <FONT style="white-space: nowrap">non-U.S.&#160;shareholder</FONT>
    certifies under penalties of perjury that it is not a
    U.S.&#160;person and satisfies certain other requirements, or
    otherwise establishes an exemption from information reporting
    and backup withholding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding is not an additional tax. Any amounts
    withheld under the backup withholding rules may be refunded or
    credited against the shareholder&#146;s federal income tax
    liability if certain required information is furnished to the
    IRS. Shareholders are urged consult their own tax advisors
    regarding application of backup withholding to them and the
    availability of, and procedure for obtaining an exemption from,
    backup withholding.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Other Tax
    Consequences</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Tax
    Aspects of Our Investments in Our Operating Partnership and
    Subsidiary Partnerships</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following discussion summarizes certain federal income tax
    considerations applicable to our direct or indirect investments
    in our operating partnership and any subsidiary partnerships or
    limited liability companies that we form or acquire (each
    individually a &#147;Partnership&#148; and, collectively, the
    &#147;Partnerships&#148;). The discussion does not cover state
    or local tax laws or any federal tax laws other than income tax
    laws.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Classification as Partnerships.</I>&#160;&#160;We will be
    entitled to include in our income our distributive share of each
    Partnership&#146;s income and to deduct our distributive share
    of each Partnership&#146;s losses only if such Partnership is
    classified for federal income tax purposes as a partnership (or
    an entity that is disregarded for federal income tax purposes if
    the entity has only one owner or member) rather than as a
    corporation or an association taxable as a corporation. An
    unincorporated entity with at least two owners or members will
    be classified as a partnership, rather than as a corporation,
    for federal income tax purposes if it:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    is treated as a partnership under the Treasury regulations
    relating to entity classification (the
    <FONT style="white-space: nowrap">&#147;check-the-box</FONT>
    regulations&#148;);&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    is not a &#147;publicly traded&#148; partnership.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the
    <FONT style="white-space: nowrap">check-the-box</FONT>
    regulations, an unincorporated entity with at least two owners
    or members may elect to be classified either as an association
    taxable as a corporation or as a partnership. If such an entity
    fails to make an election, it generally will be treated as a
    partnership (or an entity that is disregarded for federal income
    tax purposes if the entity has only one owner or member) for
    federal income tax purposes. Each Partnership intends to be
    classified as a partnership for federal income tax purposes and
    no Partnership will elect to be treated as an association
    taxable as a corporation under the
    <FONT style="white-space: nowrap">check-the-box</FONT>
    regulations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A publicly traded partnership is a partnership whose interests
    are traded on an established securities market or are readily
    tradable on a secondary market or the substantial equivalent
    thereof. A publicly traded
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    99
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    partnership will not, however, be treated as a corporation for
    any taxable year if, for each taxable year beginning after
    December&#160;31, 1987 in which it was classified as a publicly
    traded partnership, 90% or more of the partnership&#146;s gross
    income for such year consists of certain passive-type income,
    including real property rents, gains from the sale or other
    disposition of real property, interest, and dividends, or (the
    &#147;90% passive income exception&#148;). Treasury regulations
    (the &#147;PTP regulations&#148;) provide limited safe harbors
    from the definition of a publicly traded partnership. Pursuant
    to one of those safe harbors (the &#147;private placement
    exclusion&#148;), interests in a partnership will not be treated
    as readily tradable on a secondary market or the substantial
    equivalent thereof if (1)&#160;all interests in the partnership
    were issued in a transaction or transactions that were not
    required to be registered under the Securities Act of 1933, as
    amended, and (2)&#160;the partnership does not have more than
    100 partners at any time during the partnership&#146;s taxable
    year. In determining the number of partners in a partnership, a
    person owning an interest in a partnership, grantor trust, or
    S&#160;corporation that owns an interest in the partnership is
    treated as a partner in such partnership only if
    (1)&#160;substantially all of the value of the owner&#146;s
    interest in the entity is attributable to the entity&#146;s
    direct or indirect interest in the partnership and (2)&#160;a
    principal purpose of the use of the entity is to permit the
    partnership to satisfy the 100-partner limitation. Each
    Partnership is expected to qualify for the private placement
    exclusion in the foreseeable future. Additionally, if our
    operating partnership were a publicly traded partnership, we
    believe that our operating partnership would have sufficient
    qualifying income to satisfy the 90% passive income exception
    and thus would continue to be taxed as a partnership for federal
    income tax purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have not requested, and do not intend to request, a ruling
    from the IRS that the Partnerships will be classified as
    partnerships for federal income tax purposes. If for any reason
    a Partnership were taxable as a corporation, rather than as a
    partnership, for federal income tax purposes, we likely would
    not be able to qualify as a REIT unless we qualified for certain
    relief provisions. See &#147;&#151;&#160;Gross Income
    Tests&#148; and &#147;&#151;&#160;Asset Tests.&#148; In
    addition, any change in a Partnership&#146;s status for tax
    purposes might be treated as a taxable event, in which case we
    might incur tax liability without any related cash distribution.
    See &#147;&#151;&#160;Distribution Requirements.&#148; Further,
    items of income and deduction of such Partnership would not pass
    through to its partners, and its partners would be treated as
    shareholders for tax purposes. Consequently, such Partnership
    would be required to pay income tax at corporate rates on its
    net income, and distributions to its partners would constitute
    dividends that would not be deductible in computing such
    Partnership&#146;s taxable income.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Income
    Taxation of the Partnerships and their Partners</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Partners, Not the Partnerships, Subject to
    Tax.</I>&#160;&#160;A partnership is not a taxable entity for
    federal income tax purposes. Rather, we are required to take
    into account our allocable share of each Partnership&#146;s
    income, gains, losses, deductions, and credits for any taxable
    year of such Partnership ending within or with our taxable year,
    without regard to whether we have received or will receive any
    distribution from such Partnership.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Partnership Allocations.</I>&#160;&#160;Although a
    partnership agreement generally will determine the allocation of
    income and losses among partners, such allocations will be
    disregarded for tax purposes if they do not comply with the
    provisions of the federal income tax laws governing partnership
    allocations. If an allocation is not recognized for federal
    income tax purposes, the item subject to the allocation will be
    reallocated in accordance with the partners&#146; interests in
    the partnership, which will be determined by taking into account
    all of the facts and circumstances relating to the economic
    arrangement of the partners with respect to such item. Each
    Partnership&#146;s allocations of taxable income, gain, and loss
    are intended to comply with the requirements of the federal
    income tax laws governing partnership allocations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Tax Allocations With Respect to Our
    Properties.</I>&#160;&#160;Income, gain, loss, and deduction
    attributable to appreciated or depreciated property that is
    contributed to a partnership in exchange for an interest in the
    partnership must be allocated in a manner such that the
    contributing partner is charged with, or benefits from,
    respectively, the unrealized gain or unrealized loss associated
    with the property at the time of the contribution. The amount of
    such unrealized gain or unrealized loss (&#147;built-in
    gain&#148; or &#147;built-in loss&#148;) is generally equal to
    the difference between the fair market value of the contributed
    property at the time of contribution and the adjusted tax basis
    of such property at the time of contribution (a &#147;book-tax
    difference&#148;). Any property purchased by our operating
    partnership for cash initially will have an adjusted tax basis
    equal to its fair market
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    100
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    value, resulting in no book-tax difference. In the future,
    however, our operating partnership may admit partners in
    exchange for a contribution of appreciated or depreciated
    property, resulting in book-tax differences. Such allocations
    are solely for federal income tax purposes and do not affect the
    book capital accounts or other economic or legal arrangements
    among the partners. The U.S.&#160;Treasury Department has issued
    regulations requiring partnerships to use a &#147;reasonable
    method&#148; for allocating items with respect to which there is
    a book-tax difference and outlining several reasonable
    allocation methods. Under certain available methods, the
    carryover basis of contributed properties in the hands of our
    operating partnership (i)&#160;would cause us to be allocated
    lower amounts of depreciation deductions for tax purposes than
    would be allocated to us if all contributed properties were to
    have a tax basis equal to their fair market value at the time of
    the contribution and (ii)&#160;in the event of a sale of such
    properties, could cause us to be allocated taxable gain in
    excess of the economic or book gain allocated to us as a result
    of such sale, with a corresponding benefit to the contributing
    partners. An allocation described in (ii)&#160;above might cause
    us to recognize taxable income in excess of cash proceeds in the
    event of a sale or other disposition of property, which might
    adversely affect our ability to comply with the REIT
    distribution requirements and may result in a greater portion of
    our distributions being taxed as dividends. We have not yet
    decided what method will be used to account for book-tax
    differences for properties that may be acquired by our operating
    partnership in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Basis in Partnership Interest.</I>&#160;&#160;Our adjusted
    tax basis in our partnership interest in our operating
    partnership generally is equal to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the amount of cash and the basis of any other property
    contributed by us to our operating partnership;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    increased by our allocable share of our operating
    partnership&#146;s income and our allocable share of
    indebtedness of our operating partnership;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    reduced, but not below zero, by our allocable share of our
    operating partnership&#146;s loss and the amount of cash
    distributed to us, and by constructive distributions resulting
    from a reduction in our share of indebtedness of our operating
    partnership.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the allocation of our distributive share of our operating
    partnership&#146;s loss would reduce the adjusted tax basis of
    our partnership interest below zero, the recognition of such
    loss will be deferred until such time as the recognition of such
    loss would not reduce our adjusted tax basis below zero. To the
    extent that our operating partnership&#146;s distributions, or
    any decrease in our share of the indebtedness of our operating
    partnership, which is considered a constructive cash
    distribution to the partners, reduce our adjusted tax basis
    below zero, such distributions will constitute taxable income to
    us. Such distributions and constructive distributions normally
    will be characterized as long-term capital gain.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Depreciation Deductions Available to Our Operating
    Partnership.</I>&#160;&#160;To the extent that our operating
    partnership acquired its hotels in exchange for cash, its
    initial basis in such hotels for federal income tax purposes
    generally was or will be equal to the purchase price paid by our
    operating partnership. Our operating partnership generally will
    depreciate such depreciable hotel property for federal income
    tax purposes under the modified accelerated cost recovery system
    of depreciation (&#147;MACRS&#148;). Under MACRS, our operating
    partnership generally will depreciate furnishings and equipment
    over a seven-year recovery period using a 200% declining balance
    method and a half-year convention. If, however, our operating
    partnership places more than 40% of its furnishings and
    equipment in service during the last three months of a taxable
    year, a mid-quarter depreciation convention must be used for the
    furnishings and equipment placed in service during that year.
    &#147;Qualified property&#148; includes qualified leasehold
    improvement property (as defined below) and property with a
    recovery period of less than 20&#160;years such as furnishings
    and equipment. &#147;Qualified leasehold improvement
    property&#148; generally includes improvements made to the
    interior of nonresidential real property that are placed in
    service more than three years after the date the building was
    placed in service. Under MACRS, our operating partnership
    generally will depreciate buildings and improvements over a
    <FONT style="white-space: nowrap">39-year</FONT>
    recovery period using a straight line method and a mid-month
    convention. Our operating partnership&#146;s initial basis in
    hotels acquired in exchange for units in our operating
    partnership should be the same as the transferor&#146;s basis in
    such hotels on the date of acquisition by our operating
    partnership. Although the law is not entirely clear, our
    operating partnership generally will depreciate such depreciable
    hotel property for
</DIV>

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    <BR>
    101
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    federal income tax purposes over the same remaining useful lives
    and under the same methods used by the transferors. Our
    operating partnership&#146;s tax depreciation deductions will be
    allocated among the partners in accordance with their respective
    interests in our operating partnership, except to the extent
    that our operating partnership is required under the federal
    income tax laws governing partnership allocations to use a
    method for allocating tax depreciation deductions attributable
    to contributed properties that results in our receiving a
    disproportionate share of such deductions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sale of a
    Partnership&#146;s Property</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally, any gain realized by a Partnership on the sale of
    property held by the Partnership for more than one year will be
    long-term capital gain, except for any portion of such gain that
    is treated as depreciation or cost recovery recapture. Any gain
    or loss recognized by a Partnership on the disposition of
    contributed properties will be allocated first to the partners
    of the Partnership who contributed such properties to the extent
    of their built-in gain or loss on those properties for federal
    income tax purposes. The partners&#146; built-in gain or loss on
    such contributed properties will equal the difference between
    the partners&#146; proportionate share of the book value of
    those properties and the partners&#146; tax basis allocable to
    those properties at the time of the contribution. Any remaining
    gain or loss recognized by the Partnership on the disposition of
    the contributed properties, and any gain or loss recognized by
    the Partnership on the disposition of the other properties, will
    be allocated among the partners in accordance with their
    respective percentage interests in the Partnership.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our share of any gain realized by a Partnership on the sale of
    any property held by the Partnership as inventory or other
    property held primarily for sale to customers in the ordinary
    course of the Partnership&#146;s trade or business will be
    treated as income from a prohibited transaction that is subject
    to a 100% penalty tax. Such prohibited transaction income also
    may have an adverse effect upon our ability to satisfy the
    income tests for REIT status. See &#147;&#151;&#160;Gross Income
    Tests.&#148; We do not presently intend to acquire or hold or to
    allow any Partnership to acquire or hold any property that
    represents inventory or other property held primarily for sale
    to customers in the ordinary course of our or such
    Partnership&#146;s trade or business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sunset of
    Reduced Tax Rate Provisions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Several of the tax considerations described herein are subject
    to a sunset provision. The sunset provisions generally provide
    that for taxable years beginning after December&#160;31, 2010,
    certain provisions that are currently in the Code will revert
    back to a prior version of those provisions. These provisions
    include provisions related to the reduced maximum income tax
    rate for long-term capital gains of 15% (rather than 20%) for
    taxpayers taxed at individual rates, the application of the 15%
    tax rate to qualified dividend income, and certain other tax
    rate provisions described herein. The impact of this reversion
    is not discussed herein. Consequently, prospective shareholders
    are urged to consult their own tax advisors regarding the effect
    of sunset provisions on an investment in our common shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">State,
    Local and Foreign Taxes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We <FONT style="white-space: nowrap">and/or</FONT>
    you may be subject to taxation by various states, localities and
    foreign jurisdictions, including those in which we or a
    shareholder transacts business, owns property or resides. The
    state, local and foreign tax treatment may differ from the
    federal income tax treatment described above. Consequently, you
    are urged to consult your own tax advisors regarding the effect
    of state, local and foreign tax laws upon an investment in our
    common shares.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    102
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='118'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ERISA
    CONSIDERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A fiduciary of a pension, profit sharing, retirement or other
    employee benefit plan, or plan, subject to the Employee
    Retirement Income Security Act of 1974, as amended, or ERISA,
    should consider the fiduciary standards under ERISA in the
    context of the plan&#146;s particular circumstances before
    authorizing an investment of a portion of such plan&#146;s
    assets in the common shares. Accordingly, such fiduciary should
    consider (i)&#160;whether the investment satisfies the
    diversification requirements of Section&#160;404(a)(1)(C) of
    ERISA, (ii)&#160;whether the investment is in accordance with
    the documents and instruments governing the plan as required by
    Section&#160;404(a)(1)(D) of ERISA, and (iii)&#160;whether the
    investment is prudent under ERISA. In addition to the imposition
    of general fiduciary standards of investment prudence and
    diversification, ERISA, and the corresponding provisions of the
    Code, prohibit a wide range of transactions involving the assets
    of the plan and persons who have certain specified relationships
    to the plan (&#147;parties in interest&#148; within the meaning
    of ERISA, &#147;disqualified persons&#148; within the meaning of
    the Code). Thus, a plan fiduciary considering an investment in
    our common shares also should consider whether the acquisition
    or the continued holding of the shares might constitute or give
    rise to a direct or indirect prohibited transaction that is not
    subject to an exemption issued by the Department of Labor, or
    the DOL. Similar restrictions apply to many governmental and
    foreign plans which are not subject to ERISA. Thus, those
    considering investing in the shares on behalf of such a plan
    should consider whether the acquisition or the continued holding
    of the shares might violate any such similar restrictions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The DOL has issued final regulations, or the DOL Regulations, as
    to what constitutes assets of an employee benefit plan under
    ERISA. Under the DOL Regulations, if a plan acquires an equity
    interest in an entity, which interest is neither a
    &#147;publicly offered security&#148; nor a security issued by
    an investment company registered under the Investment Company
    Act of 1940, as amended, the plan&#146;s assets would include,
    for purposes of the fiduciary responsibility provision of ERISA,
    both the equity interest and an undivided interest in each of
    the entity&#146;s underlying assets unless certain specified
    exceptions apply. The DOL Regulations define a publicly offered
    security as a security that is &#147;widely held,&#148;
    &#147;freely transferable,&#148; and either part of a class of
    securities registered under the Exchange Act, or sold pursuant
    to an effective registration statement under the Securities Act
    (provided the securities are registered under the Exchange Act
    within 120&#160;days after the end of the fiscal year of the
    issuer during which the public offering occurred). The shares
    are being sold in an offering registered under the Securities
    Act and will be registered under the Exchange Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The DOL Regulations provide that a security is &#147;widely
    held&#148; only if it is part of a class of securities that is
    owned by 100 or more investors independent of the issuer and of
    one another. A security will not fail to be &#147;widely
    held&#148; because the number of independent investors falls
    below 100 subsequent to the initial public offering as a result
    of events beyond the issuer&#146;s control. We expect our common
    shares to be &#147;widely held&#148; upon completion of this
    offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The DOL Regulations provide that whether a security is
    &#147;freely transferable&#148; is a factual question to be
    determined on the basis of all relevant facts and circumstances.
    The DOL Regulations further provide that when a security is part
    of an offering in which the minimum investment is $10,000 or
    less, as is the case with this offering, certain restrictions
    ordinarily will not, alone or in combination, affect the finding
    that such securities are &#147;freely transferable.&#148; We
    believe that the restrictions imposed under our declaration of
    trust on the transfer of our shares are limited to the
    restrictions on transfer generally permitted under the DOL
    Regulations and are not likely to result in the failure of the
    common shares to be &#147;freely transferable.&#148; The DOL
    Regulations only establish a presumption in favor of the finding
    of free transferability, and, therefore, no assurance can be
    given that the DOL will not reach a contrary conclusion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Assuming that the common shares will be &#147;widely held&#148;
    and &#147;freely transferable,&#148; we believe that our common
    shares will be publicly offered securities for purposes of the
    DOL Regulations and that our assets will not be deemed to be
    &#147;plan assets&#148; of any plan that invests in our common
    shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each holder of our common shares will be deemed to have
    represented and agreed that its purchase and holding of such
    common shares (or any interest therein) will not constitute or
    result in a non-exempt prohibited transaction under ERISA or
    Section&#160;4975 of the Code.
</DIV>

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    <BR>
    103
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<A name='119'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Merrill Lynch, Pierce, Fenner&#160;&#038; Smith Incorporated and
    Raymond James&#160;&#038; Associates, Inc. are acting as
    representatives of each of the underwriters named below. Subject
    to the terms and conditions set forth in a purchase agreement
    among us, our operating partnership and the underwriters, we
    have agreed to sell to the underwriters, and each of the
    underwriters has agreed, severally and not jointly, to purchase
    from us, the number of common shares set forth opposite its name
    below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="88%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Underwriter</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Shares</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -52pt; margin-left: 52pt">
    Merrill Lynch, Pierce, Fenner&#160;&#038; Smith<BR>
    Incorporated
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Raymond James&#160;&#038; Associates, Inc.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 62pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to the terms and conditions set forth in the purchase
    agreement, the underwriters have agreed, severally and not
    jointly, to purchase all of the shares sold under the purchase
    agreement if any of these shares are purchased. If an
    underwriter defaults, the purchase agreement provides that the
    purchase commitments of the nondefaulting underwriters may be
    increased or the purchase agreement may be terminated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed to indemnify the underwriters against certain
    liabilities, including liabilities under the Securities Act, or
    to contribute to payments the underwriters may be required to
    make in respect of those liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters are offering the shares, subject to prior sale,
    when, as and if issued to and accepted by them, subject to
    approval of legal matters by their counsel, including the
    validity of the shares, and other conditions contained in the
    purchase agreement, such as the receipt by the underwriters of
    officer&#146;s certificates and legal opinions. The underwriters
    reserve the right to withdraw, cancel or modify offers to the
    public and to reject orders in whole or in part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Commissions
    and Discounts</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The representatives have advised us that the underwriters
    propose initially to offer the shares to the public at the
    public offering price set forth on the cover page of this
    prospectus and to dealers at that price less a concession not in
    excess of $&#160;&#160;&#160;&#160;&#160; per share. The
    underwriters may allow, and the dealers may reallow, a discount
    not in excess of $&#160;&#160;&#160;&#160;&#160; per share to
    other dealers. After the initial offering, the public offering
    price, concession or any other term of the offering may be
    changed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the public offering price,
    underwriting discount and proceeds, before expenses, to us. The
    information assumes either no exercise or full exercise by the
    underwriters of their overallotment option.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Without Option</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>With Option</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    $
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The expenses of the offering, not including the underwriting
    discount, are estimated at $&#160;&#160;&#160;&#160;&#160; and
    are payable by us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overallotment
    Option</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted an option to the underwriters to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;additional shares at the
    public offering price, less the underwriting discount. The
    underwriters may exercise this option for 30&#160;days from the
    date of this prospectus solely to cover any overallotments. If
    the underwriters exercise this option, each will be obligated,
    subject to conditions contained in the purchase agreement, to
    purchase a number of additional shares proportionate to that
    underwriter&#146;s initial amount reflected in the above table.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    104
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">No Sales
    of Similar Securities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We, our executive officers and our trustees have agreed not to
    sell or transfer any common shares or securities convertible
    into, exchangeable for, exercisable for, or repayable with
    common shares, for 180&#160;days after the date of this
    prospectus without first obtaining the written consent of the
    representatives. Specifically, we and these other persons have
    agreed, with certain limited exceptions, not to directly or
    indirectly
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    offer, pledge, sell or contract to sell any common shares,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    sell any option or contract to purchase any common shares,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    purchase any option or contract to sell any common shares,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    grant any option, right or warrant for the sale of any common
    shares,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    lend or otherwise dispose of or transfer any common shares,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    request or demand that we file a registration statement related
    to the common shares,&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    enter into any swap or other agreement that transfers, in whole
    or in part, the economic consequence of ownership of any common
    shares whether any such swap or transaction is to be settled by
    delivery of shares or other securities, in cash or otherwise.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This <FONT style="white-space: nowrap">lock-up</FONT>
    provision applies to common shares and to securities convertible
    into or exchangeable or exercisable for or repayable with common
    shares. It also applies to common shares owned now or acquired
    later by the person executing the agreement or for which the
    person executing the agreement later acquires the power of
    disposition. In the event that either (x)&#160;during the last
    17&#160;days of
    <FONT style="white-space: nowrap">lock-up</FONT>
    period referred to above, we issue an earnings release or
    material news or a material event relating to us occurs or
    (y)&#160;prior to the expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period, we announce that we will release earnings results or
    become aware that material news or a material event will occur
    during the
    <FONT style="white-space: nowrap">16-day</FONT>
    period beginning on the last day of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period, the restrictions described above shall continue to apply
    until the expiration of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    occurrence of the material news or material event.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">New York
    Stock Exchange Listing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to apply for listing of our common shares on the NYSE
    under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.&#148;
    In order to meet the requirements for listing on that exchange,
    the underwriters will undertake to sell a minimum number of
    shares to a minimum number of beneficial owners as required by
    that exchange.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Before this offering, there has been no public market for our
    common shares. The initial public offering price will be
    determined through negotiations between us and the
    representatives. In addition to prevailing market conditions,
    the factors to be considered in determining the initial public
    offering price are
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="7%"></TD>
    <TD width="6%"></TD>
    <TD width="87%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the valuation multiples of publicly traded companies that the
    representatives believe to be comparable to us,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    our financial information,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the history of, and the prospects for, our company and the
    industry in which we compete,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    an assessment of our management, its past and present
    operations, and the prospects for, and timing of, our future
    revenues,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the present state of our development,&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;&#160;&#160;&#160;&#160;
</TD>
    <TD align="left">
    the above factors in relation to market values and various
    valuation measures of other companies engaged in activities
    similar to ours.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An active trading market for the shares may not develop. It is
    also possible that after this offering the shares will not trade
    in the public market at or above the initial public offering
    price.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    105
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters do not expect to sell more than 5% of the
    shares in the aggregate to accounts over which they exercise
    discretionary authority.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Price
    Stabilization, Short Positions and Penalty Bids</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until the distribution of the shares is completed, SEC rules may
    limit underwriters and selling group members from bidding for
    and purchasing our common shares. However, the representatives
    may engage in transactions that stabilize the price of the
    common shares, such as bids or purchases to peg, fix or maintain
    that price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, the underwriters may purchase
    and sell our common shares in the open market. These
    transactions may include short sales, purchases on the open
    market to cover positions created by short sales and stabilizing
    transactions. Short sales involve the sale by the underwriters
    of a greater number of shares than they are required to purchase
    in this offering. &#147;Covered&#148; short sales are sales made
    in an amount not greater than the underwriters&#146;
    overallotment option. The underwriters may close out any covered
    short position by either exercising their overallotment option
    or purchasing shares in the open market. In determining the
    source of shares to close out the covered short position, the
    underwriters will consider, among other things, the price of
    shares available for purchase in the open market as compared to
    the price at which they may purchase shares through the
    overallotment option. &#147;Naked&#148; short sales are sales in
    excess of the overallotment option. The underwriters must close
    out any naked short position by purchasing shares in the open
    market. A naked short position is more likely to be created if
    the underwriters are concerned that there may be downward
    pressure on the price of our common shares in the open market
    after pricing that could adversely affect investors who purchase
    in this offering. Stabilizing transactions consist of various
    bids for or purchases of common shares made by the underwriters
    in the open market prior to the completion of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters may also impose a penalty bid. This occurs when
    a particular underwriter repays to the underwriters a portion of
    the underwriting discount received by it because the
    representatives have repurchased shares sold by or for the
    account of such underwriter in stabilizing or short covering
    transactions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Similar to other purchase transactions, the underwriters&#146;
    purchases to cover the syndicate short sales may have the effect
    of raising or maintaining the market price of our common shares
    or preventing or retarding a decline in the market price of our
    common shares. As a result, the price of our common shares may
    be higher than the price that might otherwise exist in the open
    market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither we nor any of the underwriters make any representation
    or prediction as to the direction or magnitude of any effect
    that the transactions described above may have on the price of
    our common shares. In addition, neither we nor any of the
    underwriters make any representation that the representatives
    will engage in these transactions or that these transactions,
    once commenced, will not be discontinued without notice.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Electronic
    Offer, Sale and Distribution of Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, certain of the underwriters or
    securities dealers may distribute prospectuses by electronic
    means, such as
    <FONT style="white-space: nowrap">e-mail.</FONT> In
    addition, Merrill Lynch, Pierce, Fenner&#160;&#038; Smith
    Incorporated may facilitate Internet distribution for this
    offering to certain of its Internet subscription customers.
    Merrill Lynch, Pierce, Fenner&#160;&#038; Smith Incorporated may
    allocate a limited number of shares for sale to its online
    brokerage customers. An electronic prospectus is available on
    the Internet website maintained by Merrill Lynch, Pierce,
    Fenner&#160;&#038; Smith Incorporated. Other than the prospectus
    in electronic format, the information on the Merrill Lynch,
    Pierce, Fenner&#160;&#038; Smith Incorporated website is not
    part of this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Other
    Relationships</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Some of the underwriters and their affiliates may in the future
    engage in investment banking and other commercial dealings in
    the ordinary course of business with us or our affiliates and
    they may receive customary fees and commissions for these
    transactions.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    106
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Notice to
    Prospective Investors in the EEA</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In relation to each Member State of the European Economic Area
    which has implemented the Prospectus Directive (each, a
    &#147;Relevant Member State&#148;) an offer to the public of any
    shares which are the subject of this offering contemplated by
    this prospectus may not be made in that Relevant Member State,
    except that an offer to the public in that Relevant Member State
    of any shares may be made at any time under the following
    exemptions under the Prospectus Directive, if they have been
    implemented in that Relevant Member State:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;to legal entities which are authorized or regulated to
    operate in the financial markets or, if not so authorized or
    regulated, whose corporate purpose is solely to invest in
    securities;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;to any legal entity which has two or more of
    (1)&#160;an average of at least 250&#160;employees during the
    last financial year; (2)&#160;a total balance sheet of more than
    &#128;43,000,000 and (3)&#160;an annual net turnover of more
    than &#128;50,000,000, as shown in its last annual or
    consolidated accounts;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;by the underwriters to fewer than 100 natural or legal
    persons (other than &#147;qualified investors&#148; as defined
    in the Prospectus Directive) subject to obtaining the prior
    consent of the representatives for any such offer;&#160;or
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (d)&#160;in any other circumstances falling within
    Article&#160;3(2) of the Prospectus Directive;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    provided that no such offer of shares shall result in a
    requirement for the publication by us or any representative of a
    prospectus pursuant to Article&#160;3 of the Prospectus
    Directive.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any person making or intending to make any offer of shares
    within the EEA should only do so in circumstances in which no
    obligation arises for us or any of the underwriters to produce a
    prospectus for such offer. Neither we nor the underwriters have
    authorized, nor do they authorize, the making of any offer of
    shares through any financial intermediary, other than offers
    made by the underwriters which constitute the final offering of
    shares contemplated in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the purposes of this provision, and your representation
    below, the expression an &#147;offer to the public&#148; in
    relation to any shares in any Relevant Member State means the
    communication in any form and by any means of sufficient
    information on the terms of the offer and any shares to be
    offered so as to enable an investor to decide to purchase any
    shares, as the same may be varied in that Relevant Member State
    by any measure implementing the Prospectus Directive in that
    Relevant Member State and the expression &#147;Prospectus
    Directive&#148; means Directive 2003/71/EC and includes any
    relevant implementing measure in each Relevant Member State.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each person in a Relevant Member State who receives any
    communication in respect of, or who acquires any shares under,
    the offer of shares contemplated by this prospectus will be
    deemed to have represented, warranted and agreed to and with us
    and each underwriter that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;it is a &#147;qualified investor&#148; within the
    meaning of the law in that Relevant Member State implementing
    Article&#160;2(1)(e) of the Prospectus Directive;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;in the case of any shares acquired by it as a financial
    intermediary, as that term is used in Article&#160;3(2) of the
    Prospectus Directive, (i)&#160;the shares acquired by it in this
    offering have not been acquired on behalf of, nor have they been
    acquired with a view to their offer or resale to, persons in any
    Relevant Member State other than &#147;qualified investors&#148;
    (as defined in the Prospectus Directive), or in circumstances in
    which the prior consent of the representatives has been given to
    the offer or resale; or (ii)&#160;where shares have been
    acquired by it on behalf of persons in any Relevant Member State
    other than qualified investors, the offer of those shares to it
    is not treated under the Prospectus Directive as having been
    made to such persons.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Notice to
    Prospective Investors in Switzerland</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document, as well as any other material relating to the
    shares which are the subject of this offering contemplated by
    this prospectus, do not constitute an issue prospectus pursuant
    to Article&#160;652a of the
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    107
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Swiss Code of Obligations. The shares will not be listed on the
    SWX Swiss Exchange and, therefore, the documents relating to the
    shares, including, but not limited to, this document, do not
    claim to comply with the disclosure standards of the listing
    rules of SWX Swiss Exchange and corresponding prospectus schemes
    annexed to the listing rules of the SWX Swiss Exchange. The
    shares are being offered in Switzerland by way of a private
    placement, <I>i.e. </I>to a small number of selected investors
    only, without any public offer and only to investors who do not
    purchase the shares with the intention to distribute them to the
    public. The investors will be individually approached by us from
    time to time. This document, as well as any other material
    relating to the shares, is personal and confidential and do not
    constitute an offer to any other person. This document may only
    be used by those investors to whom it has been handed out in
    connection with this offering described herein and may neither
    directly nor indirectly be distributed or made available to
    other persons without our express consent. It may not be used in
    connection with any other offer and shall in particular not be
    copied
    <FONT style="white-space: nowrap">and/or</FONT>
    distributed to the public in (or from) Switzerland.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Notice to
    Prospective Investors in the Dubai International Financial
    Centre</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document relates to an exempt offer in accordance with the
    Offered Securities Rules of the Dubai Financial Services
    Authority. This document is intended for distribution only to
    persons of a type specified in those rules. It must not be
    delivered to, or relied on by, any other person. The Dubai
    Financial Services Authority has no responsibility for reviewing
    or verifying any documents in connection with exempt offers. The
    Dubai Financial Services Authority has not approved this
    document nor taken steps to verify the information set out in
    it, and has no responsibility for it. The shares which are the
    subject of this offering contemplated by this prospectus may be
    illiquid
    <FONT style="white-space: nowrap">and/or</FONT>
    subject to restrictions on their resale. Prospective purchasers
    of the shares offered should conduct their own due diligence on
    the shares. If you do not understand the contents of this
    document you should consult an authorised financial adviser.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Notice to
    Prospective Investors in Korea</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus should not be construed in any way as our (or
    any of our affiliates or agents) soliciting investment or
    offering to sell our shares in the Republic of Korea
    (&#147;Korea&#148;). We are not making any representation with
    respect to the eligibility of any recipients of this prospectus
    to acquire the shares under the laws of Korea, including,
    without limitation, the Financial Investment Services and
    Capital Markets Act (the &#147;FSCMA&#148;), the Foreign
    Exchange Transaction Act (the &#147;FETA&#148;), and any
    regulations thereunder. The shares have not been registered with
    the Financial Services Commission of Korea (the &#147;FSC&#148;)
    in any way pursuant to the FSCMA, and the shares may not be
    offered, sold or delivered, or offered or sold to any person for
    reoffering or resale, directly or indirectly, in Korea or to any
    resident of Korea except pursuant to applicable laws and
    regulations of Korea. Furthermore, the shares may not be resold
    to any Korean resident unless such Korean resident as the
    purchaser of the resold shares complies with all applicable
    regulatory requirements (including, without limitation,
    reporting or approval requirements under the FETA and
    regulations thereunder) relating to the purchase of the resold
    shares.
</DIV>
<A name='120'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain legal matters in connection with this offering will be
    passed upon for us by Hunton&#160;&#038; Williams LLP. Venable
    LLP, Baltimore, Maryland, will issue an opinion to us regarding
    certain matters of Maryland law, including the validity of the
    common shares offered by this prospectus. Sidley Austin LLP, New
    York, New York, will act as counsel to the underwriters.
</DIV>
<A name='121'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The balance sheet of Pebblebrook Hotel Trust as of
    October&#160;7, 2009, has been included herein and in the
    registration statement in reliance upon the report of KPMG LLP,
    independent registered public accounting firm, appearing
    elsewhere herein, and upon the authority of said firm as experts
    in accounting and auditing.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    108
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='122'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">WHERE YOU
    CAN FIND MORE INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed with the SEC a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-11,</FONT>
    including exhibits and schedules filed with this registration
    statement, under the Securities Act of 1933, as amended, with
    respect to our common shares to be sold in this offering. This
    prospectus does not contain all of the information set forth in
    the registration statement and exhibits and schedules to the
    registration statement. For further information with respect to
    our company and our common shares to be sold in this offering,
    reference is made to the registration statement, including the
    exhibits and schedules to the registration statement. Statements
    contained in this prospectus as to the contents of any contract
    or other document referred to in this prospectus are not
    necessarily complete and, where that contract is an exhibit to
    the registration statement, each statement is qualified in all
    respects by reference to the exhibit to which the reference
    relates. Copies of the registration statement, including the
    exhibits and schedules to the registration statement, may be
    examined without charge at the public reference room of the
    Securities and Exchange Commission, 100&#160;F&#160;Street,
    N.E., Room&#160;1580, Washington, DC 20549. Information about
    the operation of the public reference room may be obtained by
    calling the SEC at
    <FONT style="white-space: nowrap">1-800-SEC-0300.</FONT>
    Copies of all or a portion of the registration statement can be
    obtained from the public reference room of the SEC upon payment
    of prescribed fees. Our SEC filings, including our registration
    statement, are also available to you on the SEC&#146;s website
    www.sec.gov.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of this offering, we will become subject to the
    information and reporting requirements of the Securities
    Exchange Act of 1934, as amended, and will file periodic reports
    and proxy statements and will make available to our shareholders
    quarterly reports for the first three quarters of each fiscal
    year containing unaudited interim financial information.
</DIV>
<A name='123'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORTS
    TO SHAREHOLDERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will furnish our shareholders with annual reports containing
    consolidated financial statements audited by our independent
    certified public accountants.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    109
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='124'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDEX TO
    FINANCIAL STATEMENTS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="95%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#300'>Report of independent registered public
    accounting firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#301'>Balance sheet as of October&#160;7, 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#302'>Notes to balance sheet</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-4
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-1
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='300'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Board of Trustees and Shareholder
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pebblebrook Hotel Trust:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying balance sheet of Pebblebrook
    Hotel Trust (the &#147;Company&#148;) as of October&#160;7,
    2009. This financial statement is the responsibility of the
    Company&#146;s management. Our responsibility is to express an
    opinion on the financial statement based on our audit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audit in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statement is
    free of material misstatement. An audit includes examining, on a
    test basis, evidence supporting the amounts and disclosures in
    the financial statement. 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 audit provides a
    reasonable basis for our opinion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, the balance sheet referred to above presents
    fairly, in all material respects, the financial position of
    Pebblebrook Hotel Trust as of October&#160;7, 2009, in
    conformity with U.S.&#160;generally accepted accounting
    principles.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">KPMG
    LLP</FONT></DIV>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    McLean, Virginia
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    October&#160;8, 2009
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-2
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PEBBLEBROOK
    HOTEL TRUST<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='301'><B><FONT style="font-family: 'Times New Roman', Times">BALANCE
    SHEET<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    </A><B><FONT style="font-family: 'Times New Roman', Times">October&#160;7,
    2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="93%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="5" align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>ASSETS:</B>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD colspan="5">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="5" align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B>
</DIV>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Liabilities:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Shareholders&#146; Equity:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common shares, $0.01&#160;par value per share; 1,000&#160;shares
    authorized; 1,000&#160;shares issued and outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Additional
    <FONT style="white-space: nowrap">paid-in-capital</FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    990
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total shareholders&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities and shareholders&#146; equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of this financial
    statement.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-3
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PEBBLEBROOK
    HOTEL TRUST<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='302'><B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    BALANCE SHEET<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    </A><B><FONT style="font-family: 'Times New Roman', Times">October&#160;7,
    2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">1.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Organization</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pebblebrook Hotel Trust (the &#147;Company&#148;) was formed as
    a Maryland real estate investment trust on October&#160;2, 2009.
    The Company is internally-managed and was organized to acquire
    and invest in hotel properties located primarily in the 20
    largest United States cities, with an emphasis on major coastal
    markets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has no assets other than cash and has not yet
    commenced operations. The Company has not entered into any
    contracts to acquire hotel properties or other assets. The
    Company is in the process of forming a subsidiary, Pebblebrook
    Hotel Limited Partnership (the &#147;Operating
    Partnership&#148;). The Company will be the sole general partner
    of the Operating Partnership and plans to conduct substantially
    all of its business through the Operating Partnership following
    its formation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Below is a discussion of significant accounting policies as the
    Company prepares to commence operations and acquire hotel assets:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Basis
    of Presentation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The balance sheet includes all of the accounts of the Company as
    of October&#160;7, 2009, presented in accordance with
    U.S.&#160;generally accepted accounting principles.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Use of
    Estimates</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The preparation of the financial statement in conformity with
    U.S.&#160;generally accepted accounting principles requires
    management to make estimates and assumptions that affect the
    reported amounts of assets and liabilities and disclosure of
    contingent assets and liabilities at the date of the financial
    statements. Actual results could differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Hotel
    Properties</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Acquisitions and Property Improvements.</I>&#160;&#160;Upon
    acquisition, we allocate the purchase price based on the fair
    value of the acquired land, building, furniture, fixtures and
    equipment, identifiable intangible assets, other assets and
    assumed liabilities. Identifiable intangible assets typically
    arise from contractual arrangements. We determine the
    acquisition-date fair values of all assets and assumed
    liabilities using methods similar to those used by independent
    appraisers (<I>e.g.</I>, discounted cash flow analysis) and that
    utilize appropriate discount
    <FONT style="white-space: nowrap">and/or</FONT>
    capitalization rates and available market information. Estimates
    of future cash flows are based on a number of factors including
    historical operating results, known and anticipated trends, and
    market and economic conditions. Acquisition costs are expensed
    as incurred.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Hotel renovations
    <FONT style="white-space: nowrap">and/or</FONT>
    replacements of assets that improve or extend the life of the
    asset are capitalized and depreciated over their estimated
    useful lives. Furniture, fixtures and equipment under capital
    leases are carried at the present value of the minimum lease
    payments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Repair and maintenance costs are charged to expense as incurred.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Depreciation and Amortization.</I>&#160;&#160;Hotel
    properties are carried at cost and depreciated using the
    straight-line method over an estimated useful life of 25 to
    40&#160;years for buildings and one to 10&#160;years for
    furniture, fixtures and equipment. Intangible assets arising
    from contractual arrangements are typically amortized over the
    life of the contract.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-4
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PEBBLEBROOK
    HOTEL TRUST<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    BALANCE SHEET&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are required to make subjective assessments as to the useful
    lives and classification of our properties for purposes of
    determining the amount of depreciation expense to reflect each
    year with respect to the assets. These assessments may impact
    our results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Impairment.</I>&#160;&#160;We monitor events and changes in
    circumstances for indicators that the carrying value of the
    hotel and related assets may be impaired. We will prepare an
    estimate of the undiscounted future cash flows, without interest
    charges, of the specific hotel and determine if the investment
    in such hotel is recoverable based on the undiscounted future
    cash flows. If impairment is indicated, an adjustment is made to
    the carrying value of the hotel to reflect the hotel at fair
    value. These assessments may impact the results of our
    operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A hotel is considered held for sale when a contract for sale is
    entered into, a substantial, non-refundable deposit has been
    committed by the purchaser, and sale is expected to close.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Cash
    and Cash Equivalents</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company considers all highly liquid investments with an
    original maturity of three months or less to be cash equivalents.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Revenue consists of amounts derived from hotel operations,
    including the sales of rooms, food and beverage, and other
    ancillary amenities. Revenue is recognized when rooms are
    occupied and services have been rendered. These revenue sources
    are affected by conditions impacting the travel and hospitality
    industry as well as competition from other hotels and businesses
    in similar markets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has elected to be taxed as a pass-through entity
    under subchapter S of the Internal Revenue Code, but intends to
    revoke the subchapter S election on the business day prior to
    the closing of a proposed offering of common shares to the
    public. The Company intends to elect to be taxed as a real
    estate investment trust (&#147;REIT&#148;) for federal income
    tax purposes commencing with a short taxable year beginning on
    the date of the revocation of the subchapter S election and
    ending on December&#160;31, 2009. The Company expects to have
    little or no taxable income prior to electing REIT status. To
    qualify as a REIT, the Company must meet certain organizational
    and operational requirements, including a requirement to
    distribute at least 90% of the Company&#146;s annual REIT
    taxable income to its shareholders (which is computed without
    regard to the dividends paid deduction or net capital gain and
    which does not necessarily equal net income as calculated in
    accordance with U.S.&#160;generally accepted accounting
    principals). As a REIT, the Company generally will not be
    subject to federal income tax to the extent it distributes
    qualifying dividends to its shareholders. If the Company fails
    to qualify as a REIT in any taxable year, it will be subject to
    federal income tax on its taxable income at regular corporate
    income tax rates and generally will not be permitted to qualify
    for treatment as a REIT for federal income tax purposes for the
    four taxable years following the year during which qualification
    is lost unless the Internal Revenue Service grants the Company
    relief under certain statutory provisions. Such an event could
    materially adversely affect the Company&#146;s net income and
    net cash available for distribution to shareholders. However,
    the Company intends to organize and operate in such a manner as
    to qualify for treatment as a REIT.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Share-based
    Compensation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have adopted an equity incentive plan that provides for the
    grant of common share options, share awards, share appreciation
    rights, performance units, LTIP units and other equity-based
    awards. Equity-based compensation is recognized as an expense in
    the financial statements and measured at the fair value of the
    award
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PEBBLEBROOK
    HOTEL TRUST<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    BALANCE SHEET&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    on the date of grant. The amount of the expense may be subject
    to adjustment in future periods depending on the specific
    characteristics of the equity-based award and the application of
    the accounting guidance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of October&#160;7, 2009, the Company has not granted or
    issued any share based awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Organizational
    and Offering Costs</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company expenses organization costs as incurred and offering
    costs, which include selling commissions, will be deferred and
    charged to shareholders&#146; equity.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Recently
    Issued Accounting Standards</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, the Financial Accounting Standards Board
    (&#147;FASB&#148;) issued an accounting standard that
    establishes general standards of accounting for and disclosure
    of events that occur after the balance sheet date but before
    financial statements are issued or are available to be issued.
    It requires the disclosure of the date through which an entity
    has evaluated subsequent events and the basis for that date. It
    also requires public entities to evaluate subsequent events
    through the date that the financial statements are issued. The
    adoption of this accounting standard did not have a material
    impact on the Company&#146;s financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued an accounting standard that
    requires enterprises to perform a more qualitative approach to
    determining whether or not a variable interest entity will need
    to be consolidated. This evaluation will be based on an
    enterprise&#146;s ability to direct and influence the activities
    of a variable interest entity that most significantly impact its
    economic performance. It requires ongoing reassessments of
    whether an enterprise is the primary beneficiary of a variable
    interest entity. This accounting standard is effective for
    fiscal years beginning after November&#160;15, 2009. Early
    adoption is not permitted. The Company is currently evaluating
    the impact of this accounting standard.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued an accounting standard that made
    the FASB Accounting Standards Codification (the
    &#147;Codification&#148;) the source of authoritative GAAP
    recognized by the FASB to be applied by nongovernmental
    entities. Rules and interpretive releases of the SEC under
    authority of federal securities laws are also sources of
    authoritative GAAP for SEC registrants. The Codification will
    supersede all then-existing non-SEC accounting and reporting
    standards. All other nongrandfathered non-SEC accounting
    literature not included in the Codification will become
    nonauthoritative. This accounting standard is effective for
    financial statements issued for interim and annual periods
    ending after September&#160;15, 2009. Following the issuance of
    this accounting standard, the FASB will not issue new standards
    in the form of Statements, FASB Staff Positions, or Emerging
    Issues Task Force Abstracts. Instead, it will issue Accounting
    Standards Updates. The Board will not consider Accounting
    Standards Updates as authoritative in their own right.
    Accounting Standards Updates will serve only to update the
    Codification, provide background information about the guidance,
    and provide the bases for conclusions on the change(s) in the
    Codification. The adoption of this accounting standard did not
    have a significant impact on the Company&#146;s financial
    statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Shareholders&#146;
    Equity</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the Declaration of Trust of the Company, the total number
    of shares authorized for issuance is 1,000 common shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At formation, the Company issued the sole shareholder of the
    Company 1,000 common shares at $1&#160;per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">4.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Initial
    Public Offering</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company intends to offer for sale up to $402,500,000 in
    common shares through the filing of a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-11.</FONT>
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-6
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PEBBLEBROOK
    HOTEL TRUST<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    BALANCE SHEET&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company will reimburse its sole shareholder for any
    <FONT style="white-space: nowrap">out-of-pocket</FONT>
    expenses to be incurred in connection with the organization of
    the Company and the proposed offering of common shares to the
    public. As of October&#160;7, 2009, organizational costs
    incurred by the shareholder were inconsequential. If the
    proposed offering is terminated, the Company will have no
    obligation to reimburse the shareholder for any organizational
    or offering costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">5.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Subsequent
    Events</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has evaluated the need for disclosures
    <FONT style="white-space: nowrap">and/or</FONT>
    adjustments resulting from subsequent events through
    October&#160;8, 2009, the date the financial statements were
    available to be issued. This evaluation did not result in any
    subsequent events that necessitated disclosures
    <FONT style="white-space: nowrap">and/or</FONT>
    adjustments.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-7
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 85%; margin-left: 7%"><!-- BEGIN PAGE WIDTH -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=0 -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=0 -->

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#160;&#160;&#160;&#160;&#160;Until&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009 (25&#160;days after the date of this prospectus), all
    dealers that effect transactions in our common shares, whether
    or not participating in this offering, may be required to
    deliver a prospectus. This is in addition to the dealers&#146;
    obligation to deliver a prospectus when acting as underwriters
    and with respect to their unsold allotments or subscriptions.
</DIV>

<DIV style="margin-top: 36pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares</FONT></B>
</DIV>

<DIV style="margin-top: 36pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">Pebblebrook Hotel
    Trust</FONT></B>
</DIV>

<DIV style="margin-top: 36pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">Common Shares</FONT></B>
</DIV>

<DIV style="margin-top: 135pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 20%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=90 -->

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 20%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=90 -->

<DIV style="margin-top: 135pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV><B><FONT style="font-size: 18pt">BofA
    Merrill Lynch</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV><B><FONT style="font-size: 18pt">Raymond
    James</FONT></B>
</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV>
<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=0 -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=432 length=0 -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 85%; margin-left: 7%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PART&#160;II.
    INFORMATION NOT REQUIRED IN PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;31.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Expenses of Issuance and Distribution.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the costs and expenses of the
    sale and distribution of the securities being registered, all of
    which are being borne by the Registrant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="87%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SEC registration fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    22,459.50
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    FINRA filing fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,750.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    NYSE listing fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Printing and engraving fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounting fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blue Sky fees and expenses (including legal fees)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transfer agent and registrar fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Director and officer liability insurance policy premium
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Miscellaneous expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All expenses, except the Securities and Exchange Commission
    registration fee and FINRA &#147;filing&#148; fee, are estimated.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;32.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Sales
    to Special Parties.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On October&#160;6, 2009, we issued 1,000 common shares to
    Mr.&#160;Bortz in connection with the formation and initial
    capitalization of our company for an aggregate purchase price of
    $1,000.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;33.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Recent
    Sales of Unregistered Securities.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have issued the following securities that were not registered
    under the Securities Act of 1933, as amended (the
    &#147;Securities Act&#148;):
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On October&#160;6, 2009, we issued 1,000 common shares to
    Mr.&#160;Bortz in connection with the formation and initial
    capitalization of our company for an aggregate purchase price of
    $1,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The shares were issued in reliance on the exemption set forth in
    Section&#160;4(2) of the Securities Act and Rule&#160;506 of
    Regulation&#160;D thereunder.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;34.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Trustees and Officers.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Maryland law permits a Maryland real estate investment trust to
    include in its declaration of trust a provision limiting the
    liability of its trustees and officers to the real estate
    investment trust and its shareholders for money damages except
    for liability resulting from (a)&#160;actual receipt of an
    improper benefit or profit in money, property or services or
    (b)&#160;active or deliberate dishonesty established by a final
    judgment as being material to the cause of action. Our
    declaration of trust contains a provision which limits the
    liability of our trustees and officers to the maximum extent
    permitted by Maryland law.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our declaration of trust permits us and our bylaws obligate us,
    to the maximum extent permitted by Maryland law, to indemnify
    and to pay or reimburse reasonable expenses in advance of final
    disposition of a proceeding to (a)&#160;any present or former
    trustee or officer or (b)&#160;any individual who, while a
    trustee or officer and at our request, serves or has served
    another real estate investment trust, corporation, partnership,
    limited liability company, joint venture, trust, employee
    benefit plan or any other enterprise as a director, trustee,
    officer, member, manager or partner and who is made or is
    threatened to be made a party to the proceeding by
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    reason of his or her service in any such capacity, from and
    against any claim or liability to which that individual may
    become subject or which that individual may incur by reason of
    his or her service in any such capacity and to pay or reimburse
    his or her reasonable expenses in advance of final disposition
    of a proceeding. Our declaration of trust and bylaws also permit
    us to indemnify and advance expenses to any person who served a
    predecessor of our company in any of the capacities described
    above and to any employee or agent of our company or a
    predecessor of our company. Maryland law requires us to
    indemnify a trustee or officer who has been successful, on the
    merits or otherwise, in the defense of any proceeding to which
    he is made a party by reason of his service in that capacity.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Maryland General Corporation Law permits a Maryland real
    estate investment trust to indemnify and advance expenses to its
    trustees, officers, employees and agents to the same extent as
    permitted for directors and officers of Maryland corporations.
    The MGCL permits a corporation to indemnify its present and
    former directors and officers, among others, against judgments,
    penalties, fines, settlements and reasonable expenses actually
    incurred by them in connection with any proceeding to which they
    may be a party by reason of their service in those or other
    capacities unless it is established that (a)&#160;the act or
    omission of the director or officer was material to the matter
    giving rise to the proceeding and (i)&#160;was committed in bad
    faith or (ii)&#160;was a result of active and deliberate
    dishonesty, (b)&#160;the director or officer actually received
    an improper personal benefit in money, property or services or
    (c)&#160;in the case of any criminal proceeding, the director or
    officer has reasonable cause to believe that the act or omission
    was unlawful. However, a Maryland corporation may not indemnify
    for an adverse judgment in a suit by or in the right if the
    corporation or if the director or officer was adjudged to be
    liable for an improper personal benefit, unless in either case a
    court orders indemnification and then only for expenses. In
    accordance with the Maryland General Corporation Law and our
    bylaws, our bylaws require us, as a condition to advancing
    expenses, to obtain (a)&#160;a written affirmation by the
    trustee or officer of his or her good faith belief that he or
    she has met the standard of conduct necessary for
    indemnification and (b)&#160;a written statement by or on his or
    her behalf to repay the amount paid or reimbursed by us if it
    shall ultimately be determined that the standard of conduct was
    not met.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also expect to enter into indemnification agreements with our
    trustees and our executive officers providing for procedures for
    indemnification by us to the fullest extent permitted by law and
    advancements by us of certain expenses and costs relating to
    claims, suits or proceedings arising from their service to us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect to obtain an insurance policy under which our trustees
    and executive officers will be insured, subject to the limits of
    the policy, against certain losses arising from claims made
    against such trustees and officers by reason of any acts or
    omissions covered under such policy in their respective
    capacities as trustees or officers, including certain
    liabilities under the Securities Act of 1933.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have been advised that the SEC has expressed the opinion that
    indemnification of trustees, officers or persons otherwise
    controlling a company for liabilities arising under the
    Securities Act of 1933 is against public policy and is therefore
    unenforceable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;35.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Treatment
    of Proceeds from Shares&#160;Being Registered.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    None of the net proceeds will be credited to an account other
    than the appropriate capital share account.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;36.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Financial
    Statements and Exhibits.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;<I>Financial Statements.</I>&#160;&#160;See
    <FONT style="white-space: nowrap">page&#160;F-1</FONT>
    for an index of the financial statements included in the
    Registration Statement.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;<I>Exhibits.</I>&#160;&#160;The following exhibits are
    filed as part of, or incorporated by reference into, this
    registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-11:</FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Exhibit Description</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Underwriting Agreement by and among Pebblebrook Hotel
    Trust, Pebblebrook Hotel, L.P. and the Underwriters named herein
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Amended and Restated Declaration of Trust of Pebblebrook
    Hotel Trust
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Bylaws of Pebblebrook Hotel Trust
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Agreement of Limited Partnership of Pebblebrook Hotel, L.P.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of Venable LLP
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    8
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Tax opinion of Hunton&#160;&#038; Williams LLP
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Pebblebrook Hotel Trust&#160;2009 Equity Incentive Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Severance and Change of Control Agreement between
    Pebblebrook Hotel Trust and Jon&#160;E.&#160;Bortz
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    21
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    List of Subsidiaries of Pebblebrook Hotel Trust
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    KPMG LLP Consent
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Venable LLP Consent (included in Exhibit&#160;5.1)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Hunton&#160;&#038; Williams LLP Consent (included in
    Exhibit&#160;8.1)
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 12pt; margin-left: 0%; width: 10%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=48 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;37.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Undertakings.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;The undersigned registrant hereby undertakes to provide
    to the underwriters at the closing specified in the underwriting
    agreement certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;Insofar as indemnification for liabilities arising
    under the Securities Act of 1933&#160;may be permitted to
    trustees, officers or controlling persons of the registrant
    pursuant to the foregoing provisions, or otherwise, the
    registrant has 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 by a trustee, officer or
    controlling person of the registrant in the successful defense
    of any action, suit or proceeding) is asserted by such trustee,
    officer or controlling person in connection with the securities
    being registered, the registrant will, unless in the opinion of
    its counsel the matter has been settled by controlling
    precedent, submit to a court of appropriate jurisdiction the
    question whether such indemnification by it is against public
    policy as expressed in the Act, and will be governed by the
    final adjudication of such issue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (c)&#160;The undersigned Registrant hereby further undertakes
    that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance under Rule&#160;430A and contained in a form of
    prospectus filed by the Registrant pursuant to
    Rule&#160;424(b)(1) or (4), or 497(h) under the Securities Act
    shall be deemed to be part of this registration statement as of
    the time it was declared effective.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 7%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    herein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SIGNATURES</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, the
    registrant certifies that it has reasonable grounds to believe
    that it meets all of the requirements for filing on
    <FONT style="white-space: nowrap">Form&#160;S-11</FONT>
    and has duly caused this registration statement to be signed on
    its behalf by the undersigned, thereunto duly authorized, in the
    City of Bethesda, State of Maryland on the 9th day of October,
    2009.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    PEBBLEBROOK HOTEL TRUST
</DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="49%"></TD>
    <TD width="4%"></TD>
    <TD width="47%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    By:&#160;
</TD>
    <TD align="left">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Jon
    E. Bortz</DIV>
</TD>
</TR>

</TABLE>

<DIV style="font-size: 2pt; margin-left: 53%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=0 -->

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Jon E. Bortz
</DIV>

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    President and Chief Executive Officer
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 7%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, this
    registration statement has been signed below by the following
    person in the capacities and on the dates indicated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="38%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="38%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Signature</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Title</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 12pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Jon
    E. Bortz</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=187 length=0 -->Jon
    E. Bortz
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    President, Chief Executive Officer and Trustee (Principal
    Executive Officer, Principal Financial Officer and Principal
    Accounting Officer)
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    October 9, 2009
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-4
</DIV><!-- END PAGE WIDTH -->
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</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>2
<FILENAME>w75877exv23w1.htm
<DESCRIPTION>EX-23.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 18pt">EXHIBIT 23.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Consent of Independent Registered Public Accounting Firm
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Board of Trustees<BR>
Pebblebrook Hotel Trust:

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We consent to the use of our report included herein and to the reference to our firm under the
heading &#147;Experts&#148; in the prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 18pt">/s/ KPMG LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">McLean, Virginia<BR>
October&nbsp;9, 2009

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>




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</HTML>
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