P. 1
Star Wood

Star Wood

|Views: 9|Likes:

More info:

Published by: Peerapol Taechanurug on Oct 27, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

04/30/2013

pdf

text

original

SHERATON HOHHOT HOTEL, CHINA THE WESTIN MUMBAI GARDEN CITY, INDIA

2011 proxy statement & 2010 annual report

LE MERIDIEN CHAMBERS MINNEAPOLIS, UNITED STATES THE ST. REGIS LHASA RESORT, CHINA

dear fellow stockholders
As any athlete knows, recovery is critical in the pursuit of peak performance. With that in mind, the Starwood team has worked tirelessly during the challenging economic conditions of the last few years to position the Company to ‘Own the Upswing’ in 2010. Our 2010 results prove the success of that approach, and we believe we are in the early stages of what looks to be a multi-year, global recovery for lodging. The lodging recovery firmly took hold in 2010. Business travel, which drives 75% of our total revenue, rebounded sharply as companies began to scour the globe for growth opportunities. As expected, the recovery was driven by strong, late breaking business among transient and group travelers. For the full year, worldwide RevPAR grew by 9%, driven almost entirely by occupancy gains. Rates steadily improved throughout the year thanks mostly to a better mix of business at our hotels. With occupancies in many markets now back to prior peak levels, and with little new supply anticipated in developed markets through at least 2013, we expect rates to post strong increases in the coming years. Our group business improved sequentially throughout 2010 and we expect to enjoy healthy rate increases and higher volumes in 2011. We also expect 2011 corporate negotiated rates to rise high single digits after their 20% decline from peak levels. Most importantly, the momentum we experienced in 2010 has continued thus far into 2011. Our customers are telling us they plan to travel more in 2011. We’re very pleased with our performance in 2010. Starwood gained share, grew faster than our competition, and converted higher revenue into higher profits. We added 72 hotels over the course of 2010, translating into 5% net unit growth. And roughly two-thirds of our portfolio of hotels is new or freshly renovated, so we believe we are well positioned to delight our guests as the recovery continues. Our ‘Path to Peak’ program is well underway with a goal of our hotels reaching — and then surpassing — prior peak profitability through a combination of driving top-line growth while containing costs. Focus areas include revenue management, procurement, sales effectiveness, food and beverage initiatives and lean hotel operations. Our efforts are clearly paying off. In 2010, we grew our worldwide RevPAR index by approximately one percent, with our newly revitalized Sheraton brand leading the charge. This is a significant move for a system of more than 1,000 hotels. In North America, Sheraton’s RevPAR index jumped two percent, a monumental move in the first year of a brand relaunch. And despite hotels that are increasingly full, our Guest and Meeting Planner Satisfaction Scores hit record highs for the fourth year in a row. Worldwide owned margins increased by 1.6%, but we have a long runway ahead and are working hard to drive our hotels back towards peak profitability.

Global leGacy and reach Starwood has evolved to become the most global hotel company, operating in more than 100 countries. Today we have more hotels outside of the U.S. than inside, and we generate almost 60% of our lodging fees from non-U.S. markets. Our transformation will continue and, like many global brands, we expect to derive 80% of our profits from outside of the U.S. in the coming years.
Capitalizing on our global advantage is a key priority for Starwood. Approximately 70% of the world’s GDP growth over the next decade is expected to come from emerging markets. And with almost 80% of Starwood’s pipeline outside of the developed world, we are growing where the world is growing. We have an important first-mover advantage in several key markets — we entered the Middle East in the 1960s, Africa, Latin America and India in the 1970s, and China in the 1980s. Since that time, we have built long-standing relationships with owners and developers in their respective markets and cultivated “local-smart” teams that have decades of experience getting things done in different parts of the world. Starwood’s success in China offers a powerful example of how we are leveraging growth opportunities in emerging markets. China recently became Starwood’s largest hotel market outside of the U.S., and we expect that in 2011, one in every three new Starwood hotels will open in China. Today we have nearly 70 hotels in China and another 85 hotels in the pipeline. Importantly, demand continues to outpace supply and we still have significant opportunities for additional growth. There are nearly 200 cities in China with populations of more than one million, many of which do not yet have a major, international hotel. Globalization, and all that comes with it, including billions of new travelers and generations connected by social networks, translates into a truly global consumer base with an unprecedented appetite for our brands. This highlights the importance of building hotel brands that will capture the loyalty of increasingly brand-savvy global travelers. Gen Y will be the biggest consumer group in history, with a new and distinct take on design, technology, service and sustainability. We intend to lead the way in what hotel branding will mean to travelers. Our philosophy and approach to branding, innovation and design are what make Starwood special in the eyes of our associates, our guests and our owners.

Our alignment around this strategy is playing a fundamental role in enabling us to become a better company which will continue to succeed over the long-term and outperform our competition. Last year the nearly 140. With almost 140 luxury hotels among the St. In fact. we are committed to our goal of having our profits be at least 80% fee-driven. deliver branded experiences that keep guests coming back. and to create a great foundation for tomorrow’s growth. growing our base of loyal guests will drive our success. We are targeting a 30% reduction in energy use per available room and a 20% decrease in water consumption per available room by 2020. China continues to be the richest source of new. migrating existing innovations to new geographies and adapting innovations across brands. critical asset for us. Aloft and Element. loyal travelers for us. Looking ahead. so despite a focus on cost containment over the past few years. Selling our owned portfolio may take time as we want to get the most value by selling at the right price. We are determined to make a difference for our communities. Starwood has the size. Rest assured. is powerful and growing. Consumers are increasingly choosing brands that share their sense of purpose. It remains very straightforward — to attract excellent talent to our properties. associates and. and we are well positioned to benefit from the continued recovery in luxury. owners. Put simply. One example of this is the Link@Sheraton. our award-winning loyalty program. To that end. Following a deep drop-off in 2008 and 2009.S. of course. It is critical for Starwood to cultivate loyalty among global brand zealots who will have an increasingly outsized impact on the worldwide travel industry. and we have set aggressive environmental goals in order to do our part. For example. design and loyalty. we offer our guests ‘More Luxury in More Destinations’. and with the right management contract.. and creating value for our owners. Having a culture of associates that are motivated and empowered to make our guests happy is a Frits van Paasschen Chief Executive Officer . Our strategy. to meet the various travel needs of our customers around the world.and five-star hotels worldwide. SPG. making China the second largest source of SPG members. We believe that through the recovery Starwood has become a stronger.000 associates who responded to our survey told us that they have never felt more engaged. sustainability is no longer optional. Importantly. during 2010 we made further progress in growing our managed and franchised business while reducing the size of our owned and leased hotel portfolio. Luxury Collection and W brands. our business model boils down to owning the hearts and minds of our guests. We’re extremely bullish on the Company’s long-term future. Starwood is ahead of the curve. so does our SPG enrollment. which we refer to as the Journey. our luxury brands outperformed in 2010. to the right partner. We recognize that our brands are at the heart of Starwood’s competitive advantage. We look forward to updating you on our progress and thank you for your continued support. We have also established partnerships with Conservation International and UNICEF to develop our ongoing commitment to the environment and to the communities in which we operate. But with over 21. our lobby cybercafe for today’s multitasking social traveler. faster and more disciplined company.000 owned rooms. With brands like W. our shareholders. scope and spirit to affect positive environmental change. We continue to lead the industry in design and opened our design headquarters in Manhattan a year ago. we never stopped investing in innovation.busIness Model We continue to believe that the hotel fee business is one of the great business models in the capitalist world. Starwood is the largest operator of four. This is why we work hard on training and communicating with our associates. After all. Regis. lays out our common goals and shared values in a way that each of our associates across the world can relate to. Brand loyalty also comes down to delivering great experiences. and leverage the strength of our global platform to build new hotels and generate great returns for all of our stakeholders. as evidenced by the 58% jump in SPG enrollment in 2010. located primarily in urban and resort locations. we still have a long way to go. driving nearly one out of two guests to our hotels versus one in three in 2003. and our guests tell us time and again that great service matters more than anything else. just as our footprint grows outside of the U. all created for and by Gen Y. guests. Starwood is uniquely positioned to leverage the powerful combination of our game-changing brands and industryleading global platform. We work hard to keep our brands distinct and compelling. We also look forward to having you stay with us! leadInG Global brands Our approach remains centered on new innovations.

2011 proxy statement & 2010 annual report starwood hotels & resorts Worldwide. . Inc.

.

your vote is important. on a nonbinding advisory basis.2011 ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT March 21. on a non-binding advisory basis.m. on how frequently the Company should hold a Say-on-Pay vote. which is being held on Thursday. Duncan Chairman of the Board . or every three years. you will be asked to (i) elect eleven Directors. (ii) ratify the appointment of Ernst & Young LLP as Starwood’s independent registered public accounting firm for 2011. At this year’s Annual Meeting. 2011 Dear Stockholder: You are cordially invited to attend Starwood’s Annual Meeting of Stockholders. 88 West Paces Ferry Road. We appreciate your continued support and interest in Starwood. every two years. Please vote as soon as possible. You have the opportunity to request a Say-on-Pay vote every year. (local time). As owners of Starwood. as disclosed in the compensation section of the proxy statement (a “Say-on-Pay” vote). or abstain from voting on the matter completely. Regis Atlanta. Frits van Paasschen Chief Executive Officer and President Bruce W. and (iv) vote. it is important that your shares be represented. at 10:00 a. Instructions on how to vote are contained herein. Whether or not you are able to attend the Annual Meeting in person. Atlanta. at The St. 2011. May 5. (iii) approve. Very truly yours. Georgia 30305. the compensation of the Company’s named executive officers.

.

or every three years) of future advisory votes to approve the compensation of the Company’s Named Executive Officers. a copy of the Annual Report by contacting Investor Relations at the Company’s headquarters. Stockholders may also obtain.” as described in the Compensation Discussion and Analysis.m. 4. Georgia 30305 1. 2011 10:00 a. To transact such other business as may properly come before the meeting or any postponement or adjournment thereof. compensation tables and narrative discussion included in the accompanying proxy statement. The Annual Report may also be obtained from the Company’s website at www. To consider and vote upon the ratification of the appointment of Ernst & Young LLP as Starwood Hotels & Resorts Worldwide. 2011 are entitled to vote at the meeting. To have a non-binding advisory vote on the frequency (every year.DATE: TIME: PLACE: NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS OF STARWOOD HOTELS & RESORTS WORLDWIDE. 2011 White Plains. INC. Most stockholders can authorize a proxy over the Internet or by telephone. every two years.’s (the “Company”) independent registered public accounting firm for the fiscal year ending December 31. ITEMS OF BUSINESS: RECORD DATE: ANNUAL REPORT: PROXY VOTING: Kenneth S. 3.com/corporate/investor _ relations. is enclosed. (local time) The St. You can authorize a proxy to vote your shares by completing and returning the proxy card sent to you. 2011. 2. New York . Holders of record of the Company’s stock at the close of business on March 10. The Company’s 2010 Annual Report on Form 10-K (“Annual Report”). 5. To have a non-binding advisory vote on approval of the compensation of the Company’s “Named Executive Officers. If Internet or telephone authorization is available to you. A Maryland Corporation May 5. Your promptness will assist us in avoiding additional solicitation costs. It is important that your shares be represented and voted at the meeting. Inc. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the accompanying proxy statement. Siegel Corporate Secretary March 21. which is not a part of the proxy soliciting material. Regis Atlanta 88 West Paces Ferry Road Atlanta. without charge. To elect eleven Directors to serve until the next Annual Meeting of Stockholders (“Annual Meeting”) and until their successors are duly elected and qualified. instructions are printed on your proxy card.starwoodhotels.html.

.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONQUALIFIED DEFERRED COMPENSATION . . . . . . . . POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL . EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . DIRECTOR COMPENSATION . . . . . . . . OTHER MATTERS . . . . . . . . . . . . . . . . . . .TABLE OF CONTENTS WHO CAN HELP ANSWER YOUR QUESTIONS? . . . . . . . . . . . . . . COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SOLICITATION COSTS . . . . . . . . EXECUTIVE AND DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . THE ANNUAL MEETING AND VOTING — QUESTIONS AND ANSWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUMMARY COMPENSATION TABLE . . . AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii 1 6 8 13 13 14 14 16 18 18 19 33 34 36 37 38 39 40 41 45 49 50 50 51 51 52 53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE REPORT. . . . . . . . . . . . . . . . . . . ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION DISCUSSION & ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADVISORY VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . GRANTS OF PLAN-BASED AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HOUSEHOLDING . . . . . STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . OPTION EXERCISES AND STOCK VESTED . . . . . . . . . . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . .

WHO CAN HELP ANSWER YOUR QUESTIONS? If you have any questions about the Annual Meeting.F. King & Co. you should contact: Starwood Hotels & Resorts Worldwide. or if you have questions about the Annual Meeting or need assistance in voting your shares. 1111 Westchester Avenue White Plains. Inc. you should contact: D. Inc.. 48 Wall Street New York. New York 10005 Phone Number: 1-800-859-8511 (toll free) ii . New York 10604 Attention: Investor Relations Phone Number: 1-914-640-8100 If you would like additional copies of this proxy statement or the Annual Report.

the stockholders of the Company will consider and vote upon: 1. 2011 THE ANNUAL MEETING AND VOTING — QUESTIONS AND ANSWERS Why did I receive these materials? Starwood Hotels & Resorts Worldwide. When and where will the Annual Meeting be held? The Annual Meeting will be held on May 5. 88 West Paces Ferry Road. 1 . of the compensation of the Company’s Named Executive Officers. the Company is lowering the costs and reducing the environmental impact of providing its Annual Meeting. every two years or every three years) of future Say-on-Pay votes. 2011. If you plan to attend the Annual Meeting and have a disability or require special assistance. has delivered printed versions of these materials to you by mail. By furnishing this Notice. 3. Such other business as may properly come before the meeting or any adjournment or postponement thereof. 5. Georgia 30305.. of the frequency (every year. If any other matter is properly presented at the Annual Meeting. compensation tables and narrative discussion contained in this proxy statement (a “Say-on-Pay” vote). 2011. NY 10604 PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 5. vote the shares for which such persons have voting authority in accordance with their discretion on any such matter. The Board is not aware of any other matter that may properly be presented at the Annual Meeting that is not described above. as disclosed in the Compensation Discussion & Analysis. in the absence of stockholder instructions to the contrary. on a non-binding advisory basis. 4. please contact the Company’s Investor Relations department at (914) 640-8100. and at any postponement or adjournment of the Annual Meeting. the persons named as proxies on the enclosed proxy card will. 2. Inc. 2011 at 10:00 a. a Maryland corporation (the “Company” or “Starwood”). INC. The ratification of the appointment of Ernst & Young LLP (“Ernst & Young”) as the Company’s independent registered public accounting firm for 2011. The approval. The approval. Regis Atlanta. in connection with the solicitation of proxies by the Board of Directors (the “Board”) for use at the Company’s 2011 Annual Meeting of Stockholders (the “Annual Meeting”). on a non-binding advisory basis. 1111 WESTCHESTER AVENUE WHITE PLAINS. upon your request. has made these materials available to you on the Internet or. The Company intends to start sending paper or electronic copies of its proxy statement and 2010 Annual Report to its stockholders on or about March 21.STARWOOD HOTELS & RESORTS WORLDWIDE.m. The election of eleven Directors to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. The Company is first making these materials available (and is mailing the Notice of Meeting and Internet Availability of Proxy Materials) on or about March 21. (local time) at The St. Atlanta. What proposals will be voted on at the Annual Meeting? At the Annual Meeting. This Notice contains instructions on how to access the Company’s proxy statement and 2010 Annual Report and authorize a proxy to vote online.

Who is entitled to vote at the Annual Meeting? If you were a stockholder of record of the Company at the close of business on March 10. you will also need to bring a copy of a brokerage statement (in a name matching your photo identification) reflecting your stock ownership as of the Record Date to be admitted to the Annual Meeting. If you choose to receive future proxy materials by email. or • Credited to your account in the Company’s Savings and Retirement Plan (the “Savings Plan”). All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. You have one vote for each share of common stock of the Company (“Shares”) you held of record at the close of business on the Record Date on each matter that is properly submitted to a vote at the Annual Meeting. Please note that cameras. such as a driver’s license or passport. 2011 (the “Record Date”).899 Shares outstanding and entitled to vote at the Annual Meeting and there were 14. Who may attend the Annual Meeting? Only stockholders of record. Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual stockholders’ meetings on the environment. 2011. Your election to receive proxy materials by email will remain in effect until you terminate it. If you are a representative of a corporate or institutional stockholder. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice.951 record holders of Shares. you must present valid photo identification along with proof that you are a representative of such stockholder. On the Record Date there were 195. How can I get electronic access to the proxy materials? The Notice will provide you with instructions regarding how to: • View our proxy materials for the Annual Meeting on the Internet. you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. To gain admittance. If you hold Shares in “street name” (through a broker or other nominee). Accordingly. or their duly authorized proxies. you must present valid picture identification. the Annual Meeting.Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? Pursuant to the rules adopted by the Securities and Exchange Commission (“SEC”). and to vote at. recording devices and other electronic devices will not be permitted at the Annual Meeting. The Shares are the only outstanding class of voting securities of the Company. In addition. bank or other nominee.121. 2 . may attend the Annual Meeting. we sent a Notice of Meeting and Internet Availability of Proxy Materials (the “Notice”) to our stockholders of record and beneficial owners as of the close of business on March 10. • Held for you in an account with a broker. you are entitled to notice of. and • Instruct us to send our future proxy materials to you electronically by email. we are providing access to our proxy materials over the Internet. Registration and seating will begin at 9:00 a.m. stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. including Shares: • Held directly in your name as the stockholder of record.

e. compensation tables and narrative discussion of this proxy statement. the Say-on-Pay advisory vote. approval of a frequency requires votes for that frequency from a majority of the votes cast on the matter at the Annual Meeting. If a majority of the votes cast at the Annual Meeting vote “AGAINST” the approval of the compensation of the Company’s Named Executive Officers. either in person or represented by properly authorized proxy. If no frequency receives the affirmative vote of a majority of the votes cast. Ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm requires “FOR” votes from a majority of the votes cast on the matter at the Annual Meeting. If a motion is made to adjourn the Annual Meeting. What are broker non-votes? If you have Shares that are held by a broker. With respect to the frequency of future Say-on-Pay advisory votes. the Board and the Compensation Committee will consider the outcome of the vote when making future compensation decisions. requires “FOR” votes from a majority of the votes cast on the matter at the Annual Meeting. This is referred to as a broker non-vote. Abstentions and broker nonvotes will not have any effect on the matter. Shares of stockholders of record are counted as present at the meeting if you: • are present in person at the Annual Meeting. the broker may vote at its discretion on all routine matters (i. or • have properly executed and submitted a proxy card. Brokers may vote uninstructed customer Shares on this matter. Because stockholders have four choices (one year. Stockholders cannot cumulate votes in the election of Directors. three years or abstain) on the advisory approval of a frequency of future Say-on-Pay votes. advisory basis the compensation of the Company’s Named Executive Officers. either in person or represented by properly authorized proxy. compensation tables and narrative discussion of this proxy statement. and on the frequency of future Say-on-Pay advisory votes. Abstentions will have no effect on the matter. our Board intends to 3 . the ratification of an independent registered public accounting firm). Adoption of a resolution approving on a non-binding. as disclosed in the Compensation Discussion and Analysis. the Annual Meeting may be adjourned by the presiding officer to a date not more than 120 days after the Record Date. For non-routine matters. or authorized a proxy over the telephone or the Internet. Broker non-votes will not have any effect on the election of Directors. See “What happens if a Director nominee does not receive a majority of the votes cast?” below for information concerning our director resignation policy. prior to the Annual Meeting. it is possible that no frequency will receive a majority vote. including: the election of Directors. the Board and the Audit Committee will reconsider its appointment. How many votes are required to approve each proposal? Directors will be elected by a plurality of the votes cast in the election of directors at the Annual Meeting. This means that the eleven nominees who receive the largest number of “FOR” votes cast will be elected as Directors. Abstentions and broker non-votes are counted as present for purposes of determining whether a quorum is present at the Annual Meeting. If a quorum is not present when the Annual Meeting is convened. or if for any other reason the presiding officer believes that the Annual Meeting should be adjourned. either in person or represented by properly completed or authorized proxy.How many Shares must be present to hold the Annual Meeting? The presence in person or by proxy of stockholders entitled to cast all of the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business.. two years. the broker may NOT vote using its discretion. the persons named as proxies on the enclosed proxy card will have discretion to vote on such adjournment all Shares for which such persons have voting authority. you may give the broker voting instructions and the broker must vote as you directed. as disclosed in the Compensation Discussion and Analysis. If a majority of the votes cast at the Annual Meeting vote “AGAINST” ratification of the appointment of Ernst & Young. either in person or represented by properly authorized proxy. however. If you do not give the broker any instructions.

regard the frequency receiving the greatest number of votes as the recommendation of our stockholders. Abstentions and broker non-votes will not have any effect on the matter. The Board and the Compensation Committee will consider the outcome of the vote when making its determination regarding how frequently (every one, two or three years) over the next six years the Say-on-Pay advisory vote will be held, after which period another frequency vote will be held. What happens if a Director nominee does not receive a majority of the votes cast? Under our Bylaws, a Director nominee, running uncontested, who receives more “Withheld” than “For” votes is required to tender his or her resignation for consideration by the Board. The Corporate Governance and Nominating Committee will recommend to the Board whether to accept or reject the resignation. The Board will act on the tendered resignation and publicly disclose its decision within 90 days following certification of the election results. The Director who tenders his or her resignation will not participate in the Board’s decision with respect to the resignation. What is the advisory vote regarding executive compensation? The stockholders of the Company are entitled to cast an advisory vote at the Annual Meeting to approve the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement in accordance with SEC rules, including the Compensation Discussion & Analysis, compensation tables and narrative discussion. While this stockholder vote on executive compensation is an advisory vote that is not binding on the Company or the Board of Directors, the Company values the opinions of its stockholders and will consider the outcome of the vote when making future compensation decisions. What is the advisory vote regarding the frequency of executive compensation advisory votes? The stockholders of the Company are entitled to cast an advisory vote at the Annual Meeting to determine how frequently an advisory vote to approve the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement, should be held. The choices are every year, every two years, or every three years. While this stockholder vote regarding frequency is an advisory vote that is not binding on the Company or the Board of Directors, the Company values the opinions of its stockholders and will consider the outcome of the vote when making its determination regarding how frequently the Say-on-Pay advisory vote will be cast. How do I vote? If you are a stockholder of record, you may vote in person at the Annual Meeting. We will give you a ballot when you arrive. If you do not wish to vote in person or if you will not be attending the Annual Meeting, you may vote by proxy. You can vote your Shares by authorizing a proxy over the Internet by following the instructions provided in the Notice, or, if you request printed copies of the proxy materials by mail, you can also authorize a proxy to vote your Shares by mail or by telephone or Internet. Each Share represented by a properly completed written proxy or properly authorized proxy by telephone or over the Internet will be voted at the Annual Meeting in accordance with the stockholder’s instructions specified in the proxy, unless such proxy has been revoked. If no instructions are specified, such Shares will be voted FOR the election of each of the nominees for Director named in this proxy statement, FOR ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm for 2011, FOR the approval, on an advisory basis, of the Say-on-Pay vote on compensation of our Named Executive Officers, FOR the approval, on an advisory basis, of a frequency of 1 YEAR for future Say-on-Pay advisory votes on the compensation of our Named Executive Officers, and, in the discretion of the proxy holder, on any other business that may properly come before the meeting. If you participate in the Savings Plan and have contributions invested in Shares, the proxy card will serve as a voting instruction for the trustee of the Savings Plan. You must return your proxy card to the transfer agent on or prior to 11:59 p.m. (Eastern Time) on April 29, 2011. If your proxy card is not received by the transfer agent by that date or if you sign and return your proxy card without instructions marked in the boxes, the trustee will vote your 4

Shares in the same proportion as other Shares held in the Savings Plan for which the trustee received timely instructions unless contrary to ERISA (Employee Retirement Income Security Act). How can I revoke a previously submitted proxy? If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may submit a proxy again on a later date on the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the meeting will be counted), or by signing and returning a new proxy card with a later date, or by attending the meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote at the meeting or specifically request in writing that your prior proxy be revoked. What does it mean if I receive more than one proxy card? If you receive more than one proxy card from the Company, it means your Shares are not all registered in the same way (for example, some are held in your name and others are held jointly with a spouse) and are in more than one account. Please sign and return all proxy cards you receive to ensure that all Shares held by you are voted. How does the Board recommend that I vote? The Board recommends that you vote FOR each of its Director nominees, FOR ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm for 2011, FOR the approval, on an advisory basis, of the Say-on-Pay vote on the compensation of our Named Executive Officers, and FOR the approval, on an advisory basis, of a frequency of 1 YEAR for future Say-on-Pay votes on the compensation of our Named Executive Officers.

5

CORPORATE GOVERNANCE Starwood is committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our Company’s integrity in the marketplace. Board Leadership Structure and Risk Oversight We believe that the composition of our Board and its committees results in a strong leadership structure for our Company. As of the date of this proxy statement, our Board has eleven directors, comprised of one chairman (who is not the Chief Executive Officer and President of the Company), nine additional non-employee members, and the Chief Executive Officer and President of the Company. Biographies of our Directors can be found in the Election of Directors section beginning on page 8. The Board has the following four standing committees: (1) Audit, (2) Capital, (3) Compensation and Option and (4) Corporate Governance and Nominating. The current committee membership, the number of meetings held during the last fiscal year and the function of each of the standing committees are described in the Board Meetings and Committees section beginning on page 11. Each of the standing committees operates under a written charter adopted by the Board. All of the committee charters are available on the Company’s website at www.starwoodhotels.com/corporate/investor _ relations.html. As part of its general oversight duties, the Board oversees the Company’s risk management. The Board regularly invites key members of the Company’s management to its meetings in order to inform the Board of any operational and/or financial risks that the Company is facing, and the Board reviews and directs management to address and mitigate such risks. In addition, one of the responsibilities of the Audit Committee is to discuss and review the systems of internal controls over financial reporting, accounting, legal compliance and our ethics policies, as established by the Board and/or management, in order to assess risk and oversee risk management. In setting compensation practices, the Compensation and Option Committee considers the risks to our stockholders, and the Company as a whole, and structures our incentive compensation to discourage the taking of excessive risks. Corporate Governance Policies In addition to our charter and Bylaws, we have adopted Corporate Governance Guidelines (the “Guidelines”), which are posted on our website at www.starwoodhotels.com/corporate/investor _ relations.html, to address significant corporate governance matters. The Guidelines provide a framework for the Company’s corporate governance and cover topics including, but not limited to, Board and committee composition, Director Share ownership guidelines, and Board evaluations. The Corporate Governance and Nominating Committee is responsible for overseeing and reviewing the Guidelines and reporting and recommending to the Board any changes to the Guidelines. The Company has adopted a Finance Code of Ethics applicable to its Chief Executive Officer, Chief Financial Officer, Corporate Controller, Corporate Treasurer, Senior Vice President-Taxes and persons performing similar functions. The Finance Code of Ethics is posted on the Company’s website at www.starwoodhotels.com/corporate/investor _ relations.html. The Company intends to post amendments to, and waivers from, the Finance Code of Ethics that require disclosure under applicable SEC rules on its website. In addition, the Company has a Code of Business Conduct and Ethics (the “Code of Conduct”) applicable to all employees and Directors that addresses legal and ethical issues that may be encountered in carrying out their duties and responsibilities. Subject to applicable law, employees are required to report any conduct they believe to be a violation of the Code of Conduct. The Code of Conduct is posted on the Company’s website at www.starwoodhotels.com/corporate/investor _ relations.html. The Company has a Disclosure Committee, comprised of certain senior executives, to design, establish and maintain the Company’s internal controls and other procedures with respect to the preparation of periodic reports filed with the SEC, earnings releases and other written information that the Company will disclose to the investment community. The Disclosure Committee evaluates the effectiveness of the Company’s disclosure controls and procedures on a regular basis and maintains written records of its meetings. 6

and Buddy Media and the Chief Executive Officer of The Huffington Post. In fact. In the case of American Express Company. Directors who are employees of the Company must retire from the Board upon their retirement from the Company. with which the Company co-brands the American Express Starwood Preferred Guest credit card. In addition. Inc. and Ambassador Barshefsky is a director of American Express Company and Intel Corporation. The Board observes all criteria for independence established by the NYSE listing standards and other governing laws and regulations. legal. Ryder is a director of Amazon.com.com. charitable or other business relationships each Director may have with the Company. consulting. accounting. Amazon.The Board has a policy under which Directors who are not employees of the Company or any of its subsidiaries may not stand for re-election after reaching the age of 72. As that service was more than three years ago. Buddy Media. Mr.. the Company typically schedules Board of Directors’ and committee meetings to coincide with the dates of its Annual Meetings. van Paasschen is not independent because he is serving as the Chief Executive Officer and President of the Company. Mr. Duncan served as the Company’s Chief Executive Officer on an interim basis from April 1. the Board has determined that all of the Directors. In its annual review of Director independence. under this policy. the Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent director. The Company indemnifies its Directors and officers to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. have no relationship with the Company except as a Director and stockholder of the Company and that the remaining seven non-employee Directors have relationships with companies that do business with the Company that are consistent with the NYSE independence standards. 2007 to September 24. stockholder or partner of an organization that has a relationship with the Company.” including but not limited to those set forth in pertinent listing standards of the NYSE in effect from time to time. the Board also has a policy that Directors who change their principal occupation (including through retirement) should voluntarily tender their resignation to the Board.. and the Company has also signed agreements with each of those individuals contractually obligating it to provide this indemnification to them. 2010. banking. Galbreath. Mr. The Gap. Inc.5% of the Company’s and/or each such other entity’s annual consolidated revenues for each of the past three years. Yahoo! Inc. In addition. This is required under the Company’s charter.. are independent directors. Burger King Holdings. principal or greater than 10% stockholder. American Express Company and Intel Corporation are the only companies to transact business with the Company over the past three years in which any of the Company’s independent directors served as a director. Aron and Daley and Ms. and The Gap. 2007. Hippeau is a director of Yahoo! Inc. Director Independence In accordance with New York Stock Exchange (the “NYSE”) rules. the Board determined that Mr. the Board makes an annual determination as to the independence of the Directors and nominees for election as a Director. from time to time. The Huffington Post. Inc. other commitments prevent all Directors from attending a meeting. and received a salary and other benefits for his services. Youngblood is a director of Burger King Holdings. Duncan.. directly or as an officer. In the case of each public company other than American Express Company. Messrs... Inc. The Company encourages all Directors to attend the Annual Meeting and believes that attendance at the Annual Meeting is as important as attendance at meetings of the Board of Directors and its committees. which was held on May 13. the Board took into account that three of the non-employee Directors. the combined annual payments from the Company to each such entity and from each such entity to the Company has been less than 0. the combined annual payments from the Company to American Express Company and from American Express Company to the Company has been 7 . All but one of the Directors who were Board members at the time attended the most recent annual meeting of stockholders. the Board considered the fact that Mr. Inc. executive officer or is a partner. van Paasschen. However. As a result of its annual review. Duncan is an independent director. No Director will be deemed to be independent unless the Board affirmatively determines that the Director has no material relationship with the Company. Inc. Mr. Pursuant to the Guidelines. with the exception of Mr. In making this determination. With respect to Mr. the Board considers any commercial.

In addition. Quazzo has informed the Company that he did not derive any direct personal benefit from the office space lease. each of the Company’s Directors is elected to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualified. Each nominee has agreed to serve on the Board if elected. New York 10604. Prior to March 31. in part. the Board considered that in January 2008 a fund managed by Transwestern Investment Company.com/corporate/investor _ relations. less than 9. internal or auditing matters or directed to the non-management directors. 8 . which has been confirmed by each of them for inclusion in this proxy statement. 2007 to the present. the building in Phoenix where the Company maintains an office was sold to a third party and Transwestern Investment Company. Quazzo is the Chief Executive Officer. the Corporate Secretary or his designee will present a summary of all such communications received since the last meeting that were not forwarded and shall make those communications available to the Directors upon request. ran meetings of the Board. The Company’s lease for the office space was originally negotiated and entered into prior to the acquisition with unaffiliated third parties at arms-length and was not amended in connection with the acquisition of the building by the fund. Communications with the Board The Company has adopted a policy which permits stockholders and other interested parties to contact the Board of Directors. on Transwestern Investment Company.starwoodhotels. in the case of Mr. Mr. LLC no longer holds any interest in the building. Please note that the information on the Company’s website is not incorporated by reference in this proxy statement. Duncan. This policy is also posted on the Company’s website at www. If you are a stockholder or interested party and would like to contact the Board of Directors you may send a letter to the Board of Directors. Duncan’s appointment as Chief Executive Officer on an interim basis. attempt to handle the inquiry directly (for example where it is a request for information or a stock-related matter). LLC. as an alternative. Mr. the Corporate Secretary will forward the correspondence to the Director to whom it is addressed or otherwise as would be appropriate under the circumstances. These relationships are consistent with the NYSE independence standards. 2007.5% for 2009 and less than 4% for 2008. and from September 24. 1111 Westchester Avenue.com. White Plains. has served as non-executive Chairman of the Board from May 2005 until March 31. If the correspondence concerns other matters. LLC’s results of operations. proxy holders and stockholders may vote for another nominee proposed by the Board or.hotethics. If a nominee becomes unavailable for election. New York 10604 or online at www. who was an independent Director prior to his interim appointment as the Company’s Chief Executive Officer. Duncan. 1111 Westchester Avenue. or not forward the communication if it is primarily commercial in nature or relates to an improper or irrelevant topic. 2011 regarding the nominees of the Board of Directors for election as a Director. If the correspondence contains complaints about Starwood’s accounting. Mr. During Mr. Set forth below is information as of March 10.less than 1% of American Express Company’s annual consolidated revenues for each of the past three years and payments from American Express Company were less than 4% of the Company’s annual consolidated revenues for 2010. the Board may reduce the number of Directors to be elected at the meeting. 2007 when he was appointed Chief Executive Officer on an interim basis. You should specify in the communication that you are a stockholder or an interested party. purchased the office building in Phoenix where the Company maintains an office. Quazzo.html. although his compensation does depend. White Plains. the Corporate Secretary will forward that correspondence to a member of the Audit Committee. as Chairman. At each regularly scheduled Board meeting. Ambassador Barshefsky serves solely as a director of American Express Company and derives no personal benefit from these payments. Posted Documents You may also obtain a free copy of any of the aforementioned posted documents by sending a letter to the Company’s Investor Relations Department. 2007 and following September 24. In 2010. c/o the Corporate Secretary of the Company. of which Mr. the Chairman of the Corporate Governance and Nominating Committee presided at the meetings of the Board held in executive session. ELECTION OF DIRECTORS Under the Company’s charter.

Inc. Rewards Network. his significant public company managerial experience. and was a Trustee of the Trust. Mr. his financial expertise. van Paasschen has been a Director of the Company since September 2007. van Paasschen served as Vice President. and Intel Corporation since January 2004. in Washington. Inc. an owner and operator of ski resorts and hotels. has been Senior International Partner at the law firm of WilmerHale. Mr. The Corporate Governance and Nominating Committee considered these qualifications. and a requirement under his employment agreement that he serve on the Company’s Board (subject to customary procedures and conditions to Board membership. Aron. van Paasschen worked independently through FPaasschen Consulting and Mercator Investments. since January 2009. Inc. In the past 5 years Ambassador Barshefsky also served as a director of Idenix Pharmaceuticals. since August 1995. and his experience with the Company in making the determination that Mr. including stockholder election) in making the determination that Mr. Mr. The Corporate Governance and Nominating Committee considered these qualifications. van Paasschen should be a nominee for director of the Company.Directors Nominated at the Annual Meeting will be Elected to Serve Until the 2012 Annual Meeting of Stockholders and Until his or her Successor is Duly Elected and Qualified Frits van Paasschen. From 1995 to 1997. American Express Company since July 2001. He also has been a senior advisor to Kohlberg Kravis & Roberts & Co. and Cap Juluca Properties Ltd. From 1996 through 2006. proposing. has been Chief Executive Officer and President of the Company since September 2007. Inc. and held various positions at EQR from March 2002 to December 2005.. his significant experience in the leisure travel industry. and of the Council on Foreign Relations. From May 2005 to December 2005. Aron also served as a director of e-Miles LLC. and President and Trustee from March 2002 to December 2002. the chief trade negotiator and principal trade policymaker for the United States and a member of the President’s Cabinet. Mr. Inc. a real estate investment trust and former subsidiary of the Company (the “Trust”). and negotiating private equity transactions. The Corporate Governance and Nominating Committee considered these qualifications. D. prior to its merger with Miller Brewing Company and the formation of MillerCoors LLC. Finance and Planning at Disney Consumer Products and earlier in his career was a management consultant for eight years at McKinsey & Company and the Boston Consulting Group. Aron is a director of Norwegian Cruise Line Limited. from April 2004 until March 2005. 59. Inc. She has been a Director of the Company. Adam M. Duncan should be a nominee for director of the Company. and his tenure with the Company in making the determination that Mr. Duncan served as Chief Executive Officer of the Company on an interim basis. Aron served as Chairman and Chief Executive Officer of Vail Resorts. his experience as Chief Executive Officer of other publicly traded companies.. 50. Aron has been a Director of the Company since August 2006. since 2006. Inc. Mr. prior to which time he was a private investor since January 2006.. From March 2005 until September 2007. 56. most recently as Corporate Vice President/General Manager. his experience with the Company. including President. evaluating. he served as President and CEO of Molson Coors Brewing Company’s largest division. Mr. Prestige Cruise Holdings. Duncan has served as a Director of the Company since April 1999. Mr. Ambassador Barshefsky is a member of the Council on Foreign Relations and a Trustee of the Howard Hughes Medical Institute. Prior to joining Coors. Chief Executive Officer and Director of First Industrial Realty Trust.. Inc. Chief Executive Officer and Trustee from January 2003 to May 2005. Prior thereto. Europe. Ambassador Barshefsky is a director of The Estee Lauder Companies. 60. From March 1997 to January 2001. Duncan was Chief Executive Officer and Trustee of Equity Residential (“EQR”). 9 . Duncan. has been Chairman and Chief Executive Officer of World Leisure Partners. LLP. Mr. has been President. since October 2001. Ambassador Barshefsky was the United States Trade Representative. Aron should be a nominee for director of the Company. a publicly traded apartment company. a leisurerelated consultancy. Middle East and Africa from 2000 to 2004. Mr. Charlene Barshefsky. From April to September 2007. In the past 5 years. since September 2001. from July 2008 to January 2009. Inc. Mr. Bruce W. and Marathon Acquisition Corp. van Paasschen spent seven years at Nike. Coors Brewing Company.C. Mr. and was a Trustee of Starwood Hotels & Resorts. FTD Group. since July 2001.

and her tenure with the Company in making the determination that Ms.. The Corporate Governance and Nominating Committee considered these qualifications. development and marketing. Dr. a technology venture capital firm. from 1993 to March 2000 and held various other positions with Ziff-Davis from 1989 to 1993. since 2001. primarily in research. Chairman and Chief Executive Officer of The Galbreath Company.. a global marketer of consumer and commercial products. In addition.. Inc. 10 . since June 2009. 51. has been Managing Partner of Galbreath & Company. Mr. From 1984 to 1997. an integrated media and marketing company. U. and has held a number of key accounting and finance positions including Chief Financial Officer and Vice Chair for Procter & Gamble. since 1999. Stephen R. is the Chief Executive Officer and has been the Managing Director and co-founder of Transwestern Investment Company. Ms. his experience in corporate strategy and planning for a global consumer products company. Dr. Hippeau has been a Director of the Company. From April 1997 to 1999. Mr. his financial expertise. he was a Managing Partner of Softbank Capital. since 2003. Operations for Procter & Gamble USA. and her tenure with the Company in making the determination that Ambassador Barshefsky should be a nominee for director of the Company. Inc. He was appointed Divisional Vice President in charge of marketing in 1987. since April 1999. Mr. From April 1991 to March 1996. the predecessor entity of Galbreath & Company. Mr. Daley. Clarke should be a nominee for director of the Company. The Corporate Governance and Nominating Committee considered these qualifications. a designer. Lizanne Galbreath. Mr. is the Chief Executive Officer of The Huffington Post. Eric Hippeau. The Corporate Governance and Nominating Committee considered these qualifications. 59.. Ms. The Corporate Governance and Nominating Committee considered these qualifications. Clayton C. and his tenure with the Company in making the determination that Mr. his significant experience as a director including at many privately held companies. a news website. Clarke has been a Director of the Company since April 2008. since March 1996. Galbreath should be a nominee for director of the Company. AG since 2009. his expertise in brand marketing. Comptroller.S. The Corporate Governance and Nominating Committee considered these qualifications. design. Ms. her expertise in real estate. Hippeau should be a nominee for director of the Company. Daley is Senior Advisor to TPG Capital. a real estate principal investment firm. a subsidiary of Equity Group Investments. Clarke is also a director of Newell Rubbermaid Inc. has been President of New Business Ventures of Nike. Hippeau served as Chairman and Chief Executive Officer of Ziff-Davis Inc. and was a Trustee of the Trust. spent his entire professional career with The Procter & Gamble Company. Mr. and was a Trustee of the Trust. Mr. From 2000 to 2009. Clarke. and his experience with the Company in making the determination that Mr. Dr. since January 1996. Thomas E. and his experience with the Company in making the determination that Dr. L. and served as President and Chief Operating Officer from 1994 to 2000. since August 1995.. Galbreath has been a Director of the Company. joining the company in 1974. 59. apparel and accessory products. Daley retired from Procter & Gamble in October 2009. Clarke previously held various positions with Nike.C. and was a Trustee of the Trust. 59. Mr. her significant public policy experience. Daley is also a director of Nucor Corporation since 2001 and Foster Wheeler. Daley has been a Director of the Company since November 2008. Galbreath was Managing Director of LaSalle Partners/Jones Lang LaSalle where she also served as a director. Jr. Corporate Vice President in 1990. Quazzo has been a Director of the Company since April 1999. developer and marketer of footwear.The Corporate Governance and Nominating Committee considered these qualifications. 53. Inc. Daley should be a nominee for director of the Company. his expertise in real estate. Dr. Quazzo. Galbreath served as a Managing Director.L. Hippeau has been a director of Yahoo! Inc. since May 2005. Quazzo was President of Equity Institutional Investors. and his tenure with the Company in making the determination that Mr. a real estate investment firm. Clarke joined Nike in 1980. Vice President and Comptroller of Procter & Gamble International and Vice President and Treasurer. Quazzo should be a nominee for director of the Company. Mr.

business service companies and health care companies. which provides travel. The Audit Committee selects and engages the Company’s independent registered public accounting firm to audit the Company’s annual consolidated financial statements and discusses with it the scope and results of the audit. Capital Committee. The Board has determined that Meessrs. since November 2002. a position he had held since January 1. Daley (chairperson).. is a founding partner of Pharos Capital Group. Quad/Graphics. 66. financial. Inc. The Gap. The Audit Committee. In addition to meetings of the full Board. Youngblood has been a Director of the Company. 11 . From July 1985 to December 1997. Mr. a mutual fund company managed by AMR Investments. Capital. auditing and financial reporting practices of the Company. The Board has established Audit. policies and practices and the adequacy of the Company’s accounting. The Audit Committee also discusses with the independent registered public accounting firm. and Quad/Graphics. Hippeau and Ryder. Inc. he has been a director of Amazon. financial and network services. Board Meetings and Committees The Board of Directors held six meetings during 2010. Mr. He is the former Chairman of the Board of the American Beacon Funds. Inc. his financial expertise. a private equity fund focused on technology companies. Mr. 2005. retired as Chairman of the Board of The Reader’s Digest Association. Clarke and Youngblood. since April 2001. Inc. Quazzo (chairperson). Inc. all of whom are “independent” Directors. Kneeland C. The Corporate Governance and Nominating Committee considered these qualifications. from October 1995 to April 1998. Inc. Ryder was Chairman of the Board and Chief Executive Officer of that company from April 1998 through December 31. The Board has adopted a written charter for the Audit Committee which states that the Audit Committee provides oversight regarding accounting. Directors attended meetings of individual Board committees. he was in private medical practice. Ryder. Mr. and was a Trustee of the Trust. as determined by the Board in accordance with the NYSE listing requirements and applicable federal securities laws. Ryder and Aron are an “audit committee financial expert” under federal securities laws. since November 2006. Compensation and Option and Corporate Governance and Nominating Committees. and was a Trustee of the Trust. In addition. and his tenure with the Company in making the determination that Mr. as amended (the “Exchange Act”). Each Director attended at least 75% of the total number of meetings of the full Board and committees on which he or she serves. The Audit Committee met nine times during 2010. divestitures and other significant corporate opportunities between meetings of the Board. Inc. from July 2009 to July 2010. 2006.C. The Corporate Governance and Nominating Committee considered these qualifications. Ryder should be a nominee for director of the Company. and Energy Future Holdings (formerly TXU Corp. Inc. which has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. financial accounting and reporting principles. Daley. from October 2007 to November 2009. among other things. Mr.com. since January 1998. an investment affiliate of American Airlines. Youngblood should be a nominee for director of the Company. his experience as a director of large public companies. since April 2001. 55. and his tenure with the Company in making the determination that Mr. Inc. as determined by the Board in accordance with the NYSE listing requirements.Thomas O. In addition. Ryder was Chairman of the Board and Chairman of the Audit Committee of Virgin Mobile USA. Mr. American Express Travel Related Services International. is currently comprised of Messrs. since July 2010. Ryder was President. Galbreath and Messrs. The Capital Committee met four times during 2010. capital plans and needs. in July 2010. Ryder has been a Director of the Company. L. He has also been a director of Burger King Holdings. Youngblood. in January 2007. acquired World Color Press. The Board unanimously recommends a vote FOR election of these nominees. operating and disclosure controls. Ms. Ryder was a director of World Color Press. Aron.) since October 2007. the principal functions of which are described below: Audit Committee. all of whom are “independent” Directors. since October 2004. The Capital Committee is currently comprised of Mr.L. mergers and acquisitions. a division of American Express Company. The Capital Committee was established in November 2005 to exercise some of the power of the Board relating to. and with management.

if applicable. recommending Directors for service on Board committees. an inquiring and independent mind. Under the terms of its charter. The Board looks for candidates with qualities that include strength of character. the Company’s governance policies (including policies that govern potential conflicts of interest) and monitors and advises the Company as to compliance with those policies. The Compensation Committee met six times during 2010. The Corporate Governance and Nominating Committee was established in May 2004. as determined by the Board in accordance with the NYSE listing requirements. Clarke. all of whom are “independent” Directors. The Board seeks to insure that at least two-thirds of the Directors are independent under the Company’s Governance Guidelines. skills and perspectives among Board members. However. There are no firm prerequisites to qualify as a candidate for the Board. as determined by the Board in accordance with the NYSE listing requirements. including the Company’s 2004 Long-Term Incentive Compensation Plan. Duncan and Hippeau. employees and stockholders. skills and perspectives of the nominee would contribute to the total mix of backgrounds. such as opportunities in which a Director or executive officer or their affiliates has a personal interest. a Director’s service on other boards in evaluating the suitability of individual Directors and making its recommendations to Company stockholders. The Corporate Governance and Nominating Committee is currently comprised of Ambassador Barshefsky (chairperson). the Corporate Governance and Nominating Committee is responsible for making recommendations for candidates for the Board of Directors. Service on boards and/or committees of other organizations should be consistent with the Company’s conflict of interest policies. The Corporate Governance and Nominating Committee establishes. although the Board seeks a diverse group of candidates who possess the background. and time involved in. relationships and transactions that are governed by such policies. and the Board has not adopted any guidelines limiting such activities. Aron (chairperson). or candidates that possess a particular geographical or international perspective. The Corporate Governance and Nominating Committee does not have a set policy for considering or weighing diversity in identifying nominees but does seek to have a diversity of backgrounds. skills and expertise relevant to the business of the Company. Annually the Corporate Governance and Nominating Committee reviews the qualifications and backgrounds of the Directors and the overall composition of the Board. combining the functions of the Corporate Governance Committee and the Nominating Committee. In addition. taking into account suggestions made by officers. and Messrs. the Corporate Governance and Nominating Committee and the full Board will take into account the nature of. The Corporate Governance and Nominating Committee met four times during 2010. opportunities. Galbreath. skills and perspectives that would be available to the Board as a whole. practical wisdom and mature judgment. and are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986.Compensation and Option Committee. and recommends to the full Board the slate of Directors to be recommended for nomination for election at the annual meeting of stockholders. or assists in the establishment of. Corporate Governance and Nominating Committee. and considers how the background. the Compensation and Option Committee (the “Compensation Committee”) is required to consist of three or more members of the Board of Directors who meet the independence requirements of the NYSE. The Corporate Governance and Nominating Committee may from time-to-time utilize the services of a search firm to help identify and evaluate candidates for Director who meet the qualifications outlined above. Directors. Ryder and Youngblood. are “non-employee directors” pursuant to SEC Rule 16b-3. Ms. The Compensation Committee is currently comprised of Messrs. as amended. The Corporate Governance and Nominating Committee reviews. The Board does not believe that its members should be prohibited from serving on boards and/or committees of other organizations. all of whom are “independent” Directors. 12 . advises and makes recommendations to the Board with respect to situations. analyzes. Daley. developing and reviewing background information for candidates. and making recommendations to the Board for changes to the Corporate Governance Guidelines as they pertain to the nomination or qualifications of Directors or the size of the Board. The Compensation Committee makes recommendations to the Board with respect to the salaries and other compensation to be paid to the Company’s executive officers and other members of senior management and administers the Company’s employee benefits plans. and that members of the Company’s Audit Committee meet the financial literacy requirements under the rules of the NYSE and at least one of them qualifies as an “audit committee financial expert” under applicable federal securities laws.

all Directors are given written materials providing information on the Company’s business.The Corporate Governance and Nominating Committee will consider candidates for nomination recommended by stockholders and submitted for consideration. In addition. stockholder nominations of individuals to be elected as directors at an annual meeting of our stockholders must be made in writing and delivered to the Corporate Secretary. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board has appointed and is requesting ratification by stockholders of the appointment of Ernst & Young as the Company’s independent registered public accounting firm. In accordance with the Company’s current Bylaws. such notice shall set forth as to each proposed nominee (i) the name. the Board is asking the stockholders to ratify the selection of Ernst & Young as a matter of good corporate practice. file with the SEC (and provide a copy to the Company) certain reports relating to their ownership of Shares. executive officers and greater than 10 percent beneficial owners were complied with for the most recent fiscal year. in addition to other required information specified in the Bylaws. The Board unanimously recommends a vote FOR ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm for 2011. and be received by the Corporate Secretary no later than the close of business on the 75th day nor earlier than the close of business on the 100th day prior to the first anniversary of the preceding year’s annual meeting. (iii) the number of Shares which are beneficially owned and owned of record by the nominating stockholder. if they desire to do so. the Board and the Audit Committee will reconsider the selection of the independent registered public accounting firm. ADVISORY VOTE ON EXECUTIVE COMPENSATION The Board of Directors is committed to excellence in governance and is aware of the significant interest in executive compensation matters by investors and the general public. reward and retain the senior management talent required to achieve our corporate objectives and increase stockholder value. White Plains. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires that the Company’s Directors and executive officers. Representatives of Ernst & Young are expected to be present at the Annual Meeting. Duncan failed to timely file one Form 4 with respect to one transaction. The Company has designed its executive compensation programs to attract. While not required by law. Duncan. motivate. the Corporate Governance and Nominating Committee believes that stockholder candidates should be reviewed in substantially the same manner as other candidates. We believe 13 . without limitation. To the Company’s knowledge. This transaction report was filed late by the Company on behalf of Mr. and written representations from our Directors and executive officers. will have an opportunity to make a statement. (ii) the principal occupation or employment of each such nominee. If the appointment of Ernst & Young is not ratified. based solely on a review of the copies of these reports furnished to the Company for the fiscal year ended December 31. Although it has no formal policy regarding stockholder candidates. Under the Company’s current Bylaws. and (iv) any other information concerning the nominee that must be disclosed of nominees in proxy solicitations regulated by Regulation 14A of the Exchange Act. all Section 16(a) filing requirements applicable to its Directors. including. except that Mr. It includes a corporate overview. such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected. one-on-one meetings with senior management and an orientation meeting. 1111 Westchester Avenue. The Company provides a comprehensive orientation for all new Directors. New York 10604. and persons who own more than ten percent of the outstanding Shares. and will be available to respond to appropriate questions. and a statement as to the qualification of each nominee. 2010. age and business address of each nominee proposed in such notice.

two or three years) of future Say-on-Pay advisory votes will apply for the next six years. that the Company stockholders approve. Accordingly. compensation tables and narrative discussion of this proxy statement. you have the option to vote for one of the following choices. 2 years. compensation tables and narrative discussion of this proxy statement. three years or abstain on the proxy card when voting on this proposal. 3 years. two years. the Board recommends to the stockholders an annual frequency for Say-on-Pay votes. The information in this table is based upon the latest filings of either a Schedule 13D. The Board values constructive dialog on executive compensation and other important governance topics with our stockholders. 2011. Although the vote is advisory in nature and therefore will not bind the Board. the Compensation Committee or the Board of Directors. the Board intends to carefully consider the outcome of the vote when making future decisions about the frequency for holding an advisory vote on executive compensation. If no frequency receives a majority of the votes cast on the proposal. or to abstain from voting. after which period another vote on the frequency of the Say-on-Pay vote will be held. two or three years) receiving the greatest number of votes to be the frequency approved by stockholders. compensation tables and narrative discussion. on an advisory basis. we are asking our stockholders to vote “FOR” the following resolution at the Annual Meeting: “RESOLVED. Accordingly. stockholders will not be voting to approve or disapprove the Board’s recommendation. 14 . our Board will consider the option (one. ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION The Company is presenting this proposal. See the discussion of the compensation of our executive officers in the section entitled Compensation Discussion and Analysis beginning on page 19. BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS The table below shows the number of Shares beneficially owned by principal stockholders who beneficially own more than five percent of our outstanding Shares as of March 10. policies and practices. The Board anticipates that its decision on the frequency (one. Approval of a frequency of future Say-on-Pay advisory votes requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. which gives you as a stockholder the opportunity to inform the company as to how often you wish the Company to hold a stockholder vote on a Say-on-Pay proposal. the compensation paid to our Named Executive Officers.that our compensation programs are centered on pay-for-performance principles and are strongly aligned with the long-term interests of our stockholders. Schedule 13G or Form 13F as filed by the respective stockholder with the SEC as of the date stated in the below footnotes. in our proxy statement for the 2011 Annual Meeting of Stockholders. but rather the overall compensation of our Named Executive Officers and related philosophy. The Board unanimously recommends a vote FOR the approval of the executive compensation program for the Company’s Named Executive Officers as disclosed in the Compensation Discussion & Analysis. as indicated on the proxy card: to hold the advisory vote on executive compensation every 1 year. However. as disclosed pursuant to Item 402 of Regulation S-K. The Say-on-Pay vote is not intended to address any specific item of compensation. Stockholders may vote on their preferred frequency for voting on approval of executive compensation by selecting the option of one year.” This Say-on-Pay vote is advisory. the Compensation Committee and the Board value the opinions of our stockholders and will consider the outcome of the Say-on-Pay vote when making future compensation decisions. when casting a vote on this proposal. Please note that. The Board believes an advisory vote every year will provide an effective way to obtain information on stockholder sentiment about our executive compensation program. As a stockholder. including the Compensation Discussion & Analysis. and therefore is not binding on the Company. We are asking our stockholders to indicate their support for our Named Executive Officer compensation disclosed in the Compensation Discussion & Analysis.

(“WRI”). dated February 14. These securities are owned by various individual and institutional investors which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities. The Price Associates 13G reports that Price Associates has sole voting power over 4.. FMR and Edward C.597 Shares indirectly. Price Associates is deemed to be a beneficial owner of such securities. . . The FMR 13G/A reports that FMR has sole voting power over 772. investment companies. WRIMCO holds 7. with respect to the Company. . . . . the record date for the Annual Meeting..285. with respect to the Company reporting beneficial ownership as of December 31. .. (3) Based on information contained in a Schedule 13G/A. . The BlackRock 13G/A reports that BlackRock has sole voting and dispositive power over 11. . holds 9. Waddell & Reed. . . . . . . . KS 66202 T. . the beneficial owner of such securities. . .. . . . . . Rowe Price Associates.581. .27% (1) Based on information contained in a Schedule 13G/A. . a foreign-based entity that provides investment advisory and management services to non-U.(3) . . . WRI holds 7.. . . . .318.. .398 Shares. .134. . 11. Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class Waddell & Reed Financial. . . . . According to the FMR 13G/A. . . . an indirect wholly-owned subsidiary of FMR. .429. . Waddell & Reed Investment Management Company (“WRIMCO”). Pyramis Global Advisors Trust Company (“PGATC”). For the purposes of the reporting requirements of the Exchange Act.597 9. . . to form a controlling group with respect to FMR. 10.285. . . . holds 401.. . 2011 (the “FMR 13G/A”).062 Shares. . and IICO holds 11. 19. Edward C. Inc. dated February 11. . . . dated January 21.398 5. Inc.394 Shares directly. . . filed by FMR LLC (“FMR”) with the SEC. filed by BlackRock. 2010..90% . reporting beneficial ownership as of December 31. . . . . FIL Limited. under the Investment Company Act of 1940..(1) . . . Waddell & Reed Financial Services. . NY 10022 FMR LLC(4) . . . Through ownership of voting common stock and the execution of a certain stockholders’ voting agreement.. each has sole dispositive power over 9. 40 East 52nd Street New York. . Johnson 3rd family may be deemed. . . .We calculate the stockholder’s percentage of ownership of Shares assuming the stockholder beneficially owned that number of Shares on March 10.86% . 2011 (the “Waddell & Reed 13G/A”). 82 Devonshire Street Boston. 15 .. . . . . . . through its control of Fidelity.394 Shares indirectly. . . . .. (4) Based on information contained in a Schedule 13G/A.631..850 Shares and sole dispositive power over 10. . 6300 Lamar Avenue Overland Park. . Inc. . with respect to the Company.981 5. 2010. . .394 Shares indirectly. (“WRFSI”). Pratt Street Baltimore.131 Shares.581.687. through its control of PGATC. Inc.062 Shares. Inc. . . Rowe Price Associates. Edward C. (“Price Associates”) with the SEC. . (2) Based on information contained in a Schedule 13G. 2011 (the “Price Associates 13G”). .513.203 Shares directly. . . . ..597 Shares as follows: WDR holds 19.. .96% . MD 21202 BlackRock Inc. . reporting beneficial ownership as of December 31.S... . (WDR”). each has sole dispositive power and sole voting power over 9. .010 Shares. 2011 (the “BlackRock 13G/A”). .429. filed by T..687. . . Johnson 3rd and FMR. .322 Shares. . . . . . a wholly-owned subsidiary of FMR. 2010. WRFSI holds 7. Inc. . .131 Shares. . Price Associates expressly disclaims that it is. . . . and Ivy Investment Management Company (“IICO”) (collectively “Waddell & Reed”) with the SEC.703 Shares and sole dispositive power over 13. .687. 2011. . .318. Chairman of FMR. Unless otherwise indicated. . The Waddell & Reed 13G/A reports that Waddell & Reed has sole voting power and sole dispositive power over 19. . .. . . 2010. . Johnson 3rd. .(2) . . . dated February 8. . in fact. 13. Johnson 3rd and FMR. . with respect to the Company.513. 100 E. and the funds. holds 778 Shares. Inc. . the stockholder had sole voting and dispositive power over the Shares. ..322 6. (“BlackRock”) with the SEC. . . Inc. MA 02109 .318.131 Shares. reporting beneficial ownership as of December 31. members of the Edward C. . a registered investment adviser and wholly owned subsidiary of FMR. each has sole voting power and sole dispositive power over 401.981 Shares as follows: Fidelity Management & Research Company (“Fidelity”). however. . . filed by Waddell & Reed Financial.513.. Strategic Advisers. According to the FMR 13G/A. holds 371. .

.680 for Ms. . . . . . Turner . . . . (3) Amount includes the following number of “phantom” stock units received as a result of the following Directors’ election to defer Directors’ Annual Fees: 3.754 Shares held by a trust of which Mr. . . . . . . . (ii) each nominee for Director. . . . . . . . . . . . . . . . Clayton C. . . Nominees for Directors and executive officers as a group (17 persons) . . . .079(1) 189. . . . . . . . . . . Beneficial ownership includes Shares a Director. . . . . Aron . . .104 for Mr.171(1)(3) 22. .991(1)(3) 70. . . . . 47. . . . . . . Prabhu. . . . . . . .185 for Mr. . .476 for Mr. . . . 24. van Paasschen.823(1) 38. . . . . . . . . . Thomas O. Daley. . . . All Directors. McAveety. Youngblood . . . . . . . . . . . . . . . . 2011. . . . . . . . . . . . Daley. . . . . . . . . 17. . . . . . . . Quazzo’s wife in a retirement account. . . Galbreath. . . . . . . . . . . . . . . . . Quazzo . 24. . Jr.448 for Mr. Quazzo is settlor and over which he shares investment control. . . Lizanne Galbreath. .355(1) 71. . . . . . . . . . . . Prabhu . . . .112 for Ambassador Barshefsky. . . .BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The table below shows the beneficial ownership of our Shares of (i) each Director. . . .400 for Ambassador Barshefsky. . . Matthew E. . . . . . . . . . . . our Chief Financial Officer and each of the other three most highly paid executive officers and (iv) all directors and executive officers as a group.813(1)(3) 348. Cava. . . . 43. . 2011. . nominee for Director or executive officer may acquire pursuant to stock options and other derivative securities that were exercisable at that date or that will become exercisable within 60 days thereafter. . . . . 58. . . . Daley. . . . . . . . . Duncan. Eric Hippeau . Youngblood. . . . .118 for Mr. . . (6) Includes 19. . Charlene Barshefsky . . . . restricted stock and restricted stock units that will become exercisable or vest within 60 days of January 31. Vasant M. 494. . . . . . . . . . . . . . . . . . . . Simon M. . . Duncan . . .295 for Mr. .500 for Mr. . . . . . . . 169. . . . . . . . . . . . . .221 for Mr. . .507(1) 38. . . . . . (iii) our Chief Executive Officer. . . .958 Shares owned jointly with spouse. . . . . . . . .918 for Mr. . . 331. . . .549(1)(3)(4) 45. . . . . 7. . . . . . Siegel .866 Shares held by The Bruce W. . . . Quazzo. .499 for Mr. . . . . . . . . Thomas E. . Galbreath.173(1)(3) 194. . . . . . and options. . .705(1) 20. . . . . . . . . 96. . Duncan is a trustee and beneficiary. . . .560(1)(3) 136. . . . . .313 for Mr. . . . . . . . . . Avril . . . . . . Bruce W. . . . . . . . . Frits van Paasschen . . . . .311 for Ms. . . . . . . . . . . Kneeland C. . . 74. . . . (2) Less than 1%. . . . Duncan. . . . . . . . . . . . .297 for Mr. and 397 Shares owned by Mr. . . . 46. Turner. . . . . . . . . Ryder. . . . . . . . . . Hippeau. . . . . . . . . . . Kenneth S. 11. . . . . . . . . . the stockholder had sole voting and dispositive power over the Shares.124(1) 143. . 46. Duncan Revocable Trust of which Mr. . . . 3. . .267 for Mr. . . . and 19. . . . 16 . . . . . 41. . . . . . .255(1)(5) 76. . . as follows: 27. . . . . . . . . . . . . Siegel. . . . . . . . . . . . . Name (Listed alphabetically) Amount and Nature of Beneficial Ownership Percent of Class Adam M. . . . Clarke. . 34. as of January 31. . Hippeau. . . .563 for Mr. (5) Includes 29. . . . . Ryder. . . . . . . . . . . and 29. . Stephen R. . . Unless otherwise indicated. .056. . . . . . . 143. . . . .631 for Mr. . . . . . . . .057 for Mr. . . . . . . . .200 for Mr. . . . Ryder . . Avril.542 for Mr.823 for Mr. . . . . . . . . . . . . Clarke . Aron. (4) Includes 121. . . . .616(1) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (1) Includes Shares subject to presently exercisable options.029(1) 2. .076(1)(6) 496. . . . . . 13. . . .

182. . .06 52. .466 — 17. . The Executive Plan as it was approved by stockholders at the 2010 Annual Meeting did not limit the number of deferred restricted stock units that may be issued. 17 .807. .807. .466 $15. Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options. . . .The following table provides information as of December 31. . . . . . . . . . . a stock purchase plan meeting the requirements of Section 423 of the Code. . . 10. . 2010 Number of Securities to be Issued Upon Exercise of Outstanding Options. . . . In addition. . . .415 (1) Does not include deferred restricted stock units (that vest over three years and may be settled in Shares) that have been issued pursuant to the Executive Plan. Equity compensation plans not approved by security holders . . . . 17. 2010 regarding Shares that may be issued under equity compensation plans maintained by the Company. . . . . . . . . . .06 — $15. . . Total . .182. . . . . . .157.415(1) — 52. . . Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Plan Category Equity compensation plans approved by security holders. . . .990 Shares remain available for issuance under our Employee Stock Purchase Plan. . Equity Compensation Plan Information-December 31. .

. from June 2003 to May 2008. . President. 18 . . . . Consumer Products Group. . . has been Executive Vice President and Chief Brand Officer since April 2008. Mr. . . . Prior to joining the company. Prabhu served as Executive Vice President and Chief Financial Officer for Safeway Inc. Brand Marketing. .. Inc. . Vice Chairman and Chief Financial Officer Kenneth S. .. Cava. Mr. Executive Vice President and Chief Human Resources Officer Philip P. Hotel Group Jeffrey M. . Mr. . Avril. . . . . . . . . Prabhu. has been Chief Administrative Officer and General Counsel since May 2006. . Avril . . . . . Chief Administrative Officer. . . Middle East and Africa at Nike. Prior to joining the Company. Inc. . Global Development The biography for Mr. Mr. has been President. . Prabhu. . Siegel . from September 2002 to May 2005. Europe. McAveety . EXECUTIVE OFFICERS Our executive officers and their positions as of March 10. Mr. has been Vice Chairman and Chief Financial Officer since February 2010. In February 2001. . . . a provider of research and analysis on information technology industries. Hotel Group since September 2008. . . . Mr. Siegel was formerly the Senior Vice President and General Counsel of Gartner. . . . . . . General Counsel and Secretary Simon M. . From May 2005 until August 2008. Vice President Human Resources for The Walt Disney Company. . (SVO’s predecessor entity) for the ten year period from January 1989 to December 1998. . Cava was Vice President and Chief Human Resources Officer for Nike. Mr. . . . . . Mr. . . .EXECUTIVE AND DIRECTOR COMPENSATION I. From August 1983 to May 1992 he was a partner at Booz Allen Hamilton Inc. . van Paasschen. . . Mr. . . . and Vice President of Global Staffing. our Chief Executive Officer and President. . he was President and Managing Director of Operations for Starwood Vacation Ownership (“SVO”). Mr. 59. from June 1992 to May 1998. Prior to joining Vistana. Turner . . he was Executive Vice President and Chief Financial Officer since January 2004. . . . . serving as its Executive Vice President and Chief Operating Officer and. . Kenneth S. . . .. prior to that. Prior to that time. Prabhu was previously the President of the Information and Media Group at the McGraw-Hill Companies. Biographies for our other executive officers are: Matthew E. . . Jeffrey M. 51. . 2011 are: Name (listed alphabetically. . . . . Mr. Cava served as Executive Vice President and Chief Human Resources Officer for Wendy’s International. Mr. . Prior to joining Wendy’s. . a fashion footwear company. . has been Executive Vice President and Chief Human Resources Officer since May 2008. . Avril was with Vistana. Mr. . Vasant M. From July 1997 until December 2006. McAveety. . 50. McAveety was Global Brand Director of Camper. 55. from January 2007 until March 2008. Chief Executive Officer and President and a Director Matthew E. as the company’s Chief Financial Officer. From November 2000 to May 2006. Siegel. . he was also appointed as the Secretary of the Company. Inc. Inc. . Siegel. McAveety. a non-profit global human resources professional organization. Inc. . Avril. . .. Cava. Prabhu is a member of the board of directors of Mattel. served as Senior Vice President for SVO. SL. he served as Senior Vice President. from June 1998 to August 2000. . he served as Vice President. from January 2000 to November 2000. . after Chief Executive Officer) Position Frits van Paasschen . from September 2000 through December 2003. . . 44. Mr. . . . Prabhu . Cava. an international management consulting firm. Executive Vice President and Chief Brand Officer Vasant M. Philip P. a certified public accountant. Inc. Siegel held the position of Executive Vice President and General Counsel. follows the table listing our Directors under Election of Directors beginning on page 8 above.. . . Avril. President. . Mr. Inc. . . . . Cava is also a member of the board of directors of The Society for Human Resources Management. Prior to that. spent five years with KPMG Peat Marwick. . . . Training and Development for ITT Sheraton Corporation. . . . Mr. Mr. and held several senior positions at divisions of PepsiCo. Avril is also a member of the board of directors of API Technologies Corp. and immediately prior. Inc. . . . .

Mr. enabling the Company to attract. easily understood. and reward executive officers and other key employees who contribute to the Company’s long-term success and motivate executive officers and key employees to enhance longterm stockholder value. Inc. the Compensation Committee considers the Company’s current compensation programs and whether to modify them or introduce new programs or elements of compensation in order to better meet the Company’s overall compensation objectives. an information services company. Mr. Prior to that time.General Counsel and Corporate Secretary of IMS Health Incorporated. a hotel investment advisory firm. Mr. The Compensation Committee reviews and sets the Company’s overall compensation strategy for all employees on an annual basis. overall program competitiveness must take these other markets into account. From June 1996 to April 2008. Simon M. As a consumer lifestyle company with a branded hotel portfolio at its core. 49. • Align Interests: We endeavor to align the interests of stockholders and our executives by tying executive compensation to the Company’s business results and stock performance. brand enhancement and consumer experience. The Compensation Committee changed its philosophy on tax gross-ups in change in control agreements and eliminated gross-ups for arrangements put in place in 2008 and thereafter. and one element of this endeavor is to bring in key talent from other industries. serving as a member of the Human Resources Committee and the Audit Committee. Global Development since May 2008.. In the course of this review. Siegel is also a Trustee of Cancer Hope Network. as determined for 2010 (our “Named Executive Officers”). He was also a member of the board of directors of Fairmont Raffles Hotels International and was chairman of the Audit Committee. the Company’s compensation program for our principal executive officer. • Motivate: We seek to motivate our executives to sustain high performance and achieve Company financial and strategic/operational goals over the course of business cycles and in various market conditions. based in both New York and London. Turner served on the board of directors of Four Season Hotels. A. In its review of the overall compensation strategy and program in 2008. Therefore. the Company operates in a competitive. he was a principal of Hotel Capital Advisers. COMPENSATION DISCUSSION AND ANALYSIS Introduction The Company’s compensation programs are designed to align compensation with its business objectives and performance. a non-profit entity. Turner. We provide information below with regard to the specific compensation of our Chief Executive Officer. Chief Financial Officer and our three other most highly compensated executive officers. the Compensation Committee made several key changes. Mr. During this period. most of which became effective for the 2009 performance year and have carried forward for 2010. Turner. From July 1987 to May 1996. principal financial officer and other executive officers has the following key objectives: • Attract and Retain: We seek to attract and retain talented executives from within and outside the hospitality industry who understand the importance of innovation. has been President. Overview of Starwood’s Executive Compensation Program 1. the Compensation Committee made structural changes to fund the pool entirely based upon the Company’s financial performance 19 .. Siegel was a Partner in the law firm of Baker & Botts. In step with this mission and environment. LLP. Mr. and with respect to bonus pool funding. We are working to reinvent the hospitality industry. a Trustee of Minority Corporate Counsel Association. the Compensation Committee eliminated a floor below which compensation could not fall. we strive to keep the executive compensation program transparent. Inc. Moreover. II. and its predecessors from February 1997 to December 1999. and a Trustee of the American Hotel & Lodging Educational Foundation. Turner was a member of the Investment Banking Department of Salomon Brothers. Program Objectives and Other Considerations Objectives. The Compensation Committee also revised the structure of determining annual incentive compensation under the Company’s Executive Plan: with respect to the goal based upon the Company’s financial performance. in line with market practices and consistent with high standards of good corporate governance. dynamic and challenging business environment. retain.

5-to-1 ratio).. and to manage operational aspects of the Company’s compensation programs. Our Chief Executive Officer.. to ensure achievement of all program objectives and (iii) recommending pay levels. These changes were designed to better align compensation with the creation and preservation of stockholder value. reviews the performance of each other Named Executive Officer and presents to the Compensation Committee his conclusions and recommendations. The Compensation Committee makes all compensation decisions with respect to our Named Executive Officers. ensuring that long-term compensation is strongly tied to stockholder returns. Our executive compensation program is strongly weighted toward variable compensation tied to Company results. among other things. the Compensation Committee lowered the ratio from three times as many options as the number of Shares whose aggregate value on the grant date equals the dollar-denominated award (i. Further. Direct responsibilities include. These objectives may be related to. outstanding equity awards. cost containment/efficiency. brand enhancement. deferred compensation. a 3-to-1 ratio) to two and one-half times (i. and development of future talent are key success factors for the Company and a portion of compensation for the Named Executive Officers is dependent on satisfaction of core leadership competencies. The Compensation Committee reviews and considers these tally sheets in making compensation decisions for our Named Executive Officers. teambuilding. The role of the Company’s management is to provide reviews and recommendations for the Compensation Committee’s consideration. when translating dollar-denominated long-term equity incentive awards into a number of stock options to be granted under the Company’s 2004 Long-Term Incentive Compensation Plan (“LTIP”). Roles and Responsibilities The Compensation Committee is responsible for. • Achievement of Strategic/Operational Objectives: A portion of Named Executive Officer compensation is tied to achievement of specific individual objectives that are directly aligned with the execution of our business strategy. Specifically. annual incentive compensation. innovation. payout and/or awards for executive officers other than the Chief Executive Officer. Management also prepares tally sheets which describe and quantify all components of total compensation for our Named Executive Officers.e. • Achievement of Company Financial Objectives: A portion of Named Executive Officer compensation is tied directly to the Company’s financial performance. and reviews and monitors the Company’s performance as it affects the Company’s employees and the overall compensation policies for the Company’s employees. The Compensation Committee may exercise its discretion in modifying any recommended salary adjustments or awards to these executives. long-term incentive compensation.e. • Overall Leadership and Stewardship of the Company: Leadership. operational excellence. (i) providing an ongoing review of the effectiveness of the compensation programs. the establishment and review of compensation policies and programs for our executive officers and ensuring that the executive officers are compensated in a manner consistent with the objectives and principles outlined above. together with the Chief Human Resources Officer. as well as the annual fees or other compensation paid to our Board. our compensation program for our Named Executive Officers is designed to ensure the following: • Alignment with Stockholders: A significant portion of Named Executive Officer compensation is delivered in the form of equity. growth. including competitiveness.goals. What the Program Intends to Reward. policies and governance. 2. including salary adjustments and annual incentive compensation amounts (as described in more detail in the Annual Incentive Compensation section below). It also monitors the Company’s executive succession plan. Pearl Meyer & Partners worked with management and the Compensation Committee in reviewing the compensation structure of the 20 . a 2. benefits. if necessary. (ii) recommending changes. customer experience and/or teamwork. and alignment with the Company’s objectives. perquisites and potential severance and change in control payments. including salary. The Compensation Committee retained Pearl Meyer & Partners to assist in the review and determination of compensation awards to the Named Executive Officers (including the Chief Executive Officer) for the 2010 performance period. among others. but are not limited to.

A report of the findings was provided to the Compensation Committee for its review and consideration. • Minimum and Maximum Thresholds For Annual Incentives: Each year our Compensation Committee establishes within the first 90 days of any fiscal year a threshold level of EBITDA that the Company must achieve in order for any bonus to be paid to our Named Executive Officers or other Company employees eligible to receive an annual incentive for any given year. including the Named Executive Officers. For example. without placing an inappropriate emphasis on any particular form of compensation. incentive compensation. that may be paid to any executive officer for any 12-month performance period. • Balance of Compensation: Across the Company. operating income. our Vice Chairman and Chief Financial Officer. so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long term. Following this assessment. For the Chief Executive Officer. and Pearl Meyer & Partners were among the participants in the special meeting. This vesting period encourages our executives to focus on sustaining the Company’s long-term performance. The fees paid to Pearl Meyer & Partners for services performed for the Compensation Committee during 2010 were $136. the multiple is five times base 21 . • Objective Formula and Pre-established Performance Measures Dictate Annual Incentives: Under the Executive Plan. incentive compensation is payable under our incentive plans only upon the attainment of performance targets related to business criteria that are in the interests of our stockholders. arising out of our compensation programs. we believe that the Company has instituted policies that align our executive officers’ interests with those of our stockholders without creating incentives for our executive officers to take risks that are reasonably likely to have a material adverse effect on the Company. our Chief Administrative Officer and General Counsel.000. and for certain of our employees.Company and of the companies in the peer group. the Company’s employees other than the Named Executive Officers that are eligible to receive an annual incentive receive such incentive subject to the satisfaction of specific company-wide annual performance targets determined under an incentive formula established by our Compensation Committee. As a result of this threshold performance requirement and the design of our Executive Plan. and the Company as a whole. incentive plans (both at the executive and property management levels) and equity plans. net revenues. individual elements of our compensation program include base salaries. Their review considered risk-determining characteristics of the overall structure and individual components of our Company-wide compensation program. consolidated pre-tax earnings. the Company’s external legal counsel for compensation matters. earnings before interest and taxes. cash flow measures. payment of annual incentives to our Named Executive Officers is subject to the satisfaction of specific company-wide annual performance targets determined under an incentive formula established by our Compensation Committee within the first 90 days of each fiscal year. The Executive Plan also specifies a maximum incentive amount. Risk Assessment In setting compensation. our Compensation Committee also considers the risks to our stockholders. In January 2011. net earnings. Similarly. management held a special meeting to discuss and assess the risk profile of our compensation programs. the Company’s compensation programs as a whole provide a balanced approach to incentivizing and retaining employees. 3. • Share Ownership Guidelines: Our Share ownership guidelines require our executive officers. equity-based awards. • Use of Long-Term Incentive Compensation: Equity-based long-term incentive compensation that vests over a period of years is a key component of total compensation of our executive employees. including our base salaries. in dollars. return on net assets employed or earnings per share for the applicable fiscal year. The Chief Human Resources Officer. These performance targets are directly and specifically tied to one or more of the following company-wide business criteria: EBITDA. return on equity. Pearl Meyer & Partners does not provide any other services to the Company and no other fees were paid to Pearl Meyer & Partners by the Company during 2010. to hold that number of Shares having a market value equal to or greater than a multiple of each executive’s base salary. These grants are also made annually. By providing a mix of different elements of compensation which reward both short-term and long-term performance.

pay is structured to award performance upon achievement of pre-established financial and strategic performance goals.250. Elements of Compensation 1. In addition. van Paasschen. but excluding benefits and perquisites). We describe each of the compensation elements below and explain why we pay each element and how we determine the amount of each element. the Company engages an external compensation consulting firm for design and review of our compensation programs. In the case of Named Executive Officers other than the Chief Executive Officer. including equity awards in the form of restricted stock and stock options and restrictions on selling equity awards for two years (other than to satisfy tax withholding obligations). the multiple is four times base salary. See the section entitled Share Ownership Guidelines on page 32 for a description of the securities that count towards meeting the target and other considerations. the Compensation Committee believes the actual cash and equity compensation delivered for the 2010 performance year was appropriate in light of the Company’s overall performance and the performance of the particular executives. As a result. As a result. base salary for 2010 was $1. Specifically. van Paasschen. van Paasschen’s compensation structure was established in 2007 pursuant to his employment agreement. Base salary serves as a minimum 22 . B. Total compensation for this group is evaluated against the peer group identified in this proxy statement. van Paasschen would benefit greatly in the form of long-term incentive compensation (stock options and restricted stock). base salary typically accounts for approximately 20% of total compensation at target (i. as well as external legal counsel to assist with the periodic review of our compensation plans to ensure compliance with applicable laws and regulations. total compensation assuming performance goals are satisfied at targeted levels. Mr. A retention requirement of 35% is applied to restricted Shares upon vesting (net Shares after tax withholding) and Shares obtained from option exercises until the executive meets the target.e. Further. • Internal Processes Further Restrict Risk: The Company has in place additional processes to limit risk to the Company from our compensation programs. or if an executive falls out of compliance.salary and for the other Named Executive Officers. in the event of strong financial and individual performance.. the processes and controls associated with respect to our compensation programs are audited each year to insure that all expenditures have been approved within the Company’s guidelines and by required approval authorities. base salary accounted for approximately 14% of total compensation at target for Mr.000. Mr. van Paasschen and the Company agreed to a compensation structure which was heavily weighted towards performance and long-term incentives. Base Salary. Evaluated on this basis. which reduces the risk of inappropriate expenditures by an individual. Primary Elements The primary elements of the Company’s compensation program for our Named Executive Officers are: • Base Salary • Incentive Compensation O Annual Incentive Compensation O Long-Term Incentive Compensation • Benefits and Perquisites Mr. In the case of Mr. the Company has financial policies that restrict the amount of capital that any individual may deploy absent obtaining internal approvals. The Company believes it is essential to provide our Named Executive Officers with competitive base salaries that will enable the Company to continue to attract and retain critical senior executives from within and outside the hospitality industry. but his compensation would be significantly lower if the Company did not perform well or if his employment with the Company was terminated after a short period of time (due to the vesting requirements of the equity awards under which there is generally no acceleration of equity awards for a termination with or without cause). For the other Named Executive Officers.

Annual cash bonuses are a key part of the Company’s executive compensation program. the achievement of the threshold is considered substantially uncertain for purposes of Section 162(m). • it targets and attracts highly motivated and talented executives within and outside the hospitality industry. The deferred stock awards generally vest over a threeyear period. Each Named Executive Officer has an annual opportunity to receive an incentive award under the stockholder-approved Executive Plan. respectively (29% and 57% for Mr. The Company generally seeks to position base salaries of our Named Executive Officers at or near the median base salary of the Company’s peer group for similar positions. and • it provides long-term incentives for Named Executive Officers to remain in the Company’s employ. each year. in 2010).000. an annual bonus award for 2010 was paid under the Executive Plan. a Named Executive Officer will receive payment of a bonus award under the Executive Plan only if he remains employed by the Company on the award payment date. For the Named Executive Officers. van Paasschen. The Company believes that this structure allows it to provide each Named Executive Officer with substantial incentive compensation opportunities if performance objectives are met. The Company believes that the allocation between base and incentive compensation is appropriate and beneficial because: • it promotes the Company’s competitive position by allowing it to provide Named Executive Officers with above-median total competitive compensation if targets are met. with annual cash bonus compensation and long-term incentive compensation accounting for 23% and 57%. respectively. Annual bonuses also provide a complementary balance to equity incentives (discussed below). For 2010. See the Background Information on the Executive Compensation Program — Use of Peer Data section beginning on page 31 below for a list of the peer companies used in this analysis. • it promotes achievement of business and individual performance objectives. the annual bonus payments attributable to both Company financial and strategic/operational performance can range from 0% . other than the Chief Executive Officer. • it aligns senior management’s interests with those of stockholders. Generally.275% of target for the Named Executive Officers. which is one of the requirements for compensation paid under the Executive Plan to be deductible as performance-based compensation under Section 162(m). See additional detail regarding these deferred stock awards in the Long-Term Incentive Compensation section beginning on page 28 below. subject to attaining the EP 23 . If and when earned. The bonuses directly link the achievement of Company financial and strategic/ operational performance objectives to executive pay. Minimum Threshold. awards are typically paid to Named Executive Officers partly in cash and. Salaries for Named Executive Officers are generally based on the responsibilities of each position and are reviewed annually against similar positions among a group of peer companies developed by the Company and its advisors consisting of similarly-sized hotel and hospitality companies as well as other companies representative of markets in which the Company competes for key executive talent. Under the Executive Plan. Viewed on a combined basis once minimum performance is attained. Annual Incentive Compensation. the EP Threshold was $640. that may be paid to any executive for any 12-month performance period. partly as deferred stock awards (under the Executive Plan). the Compensation Committee establishes in advance a threshold level of EBITDA that the Company must achieve in order for any bonus to be paid under the Executive Plan for that year (the “EP Threshold”).level of compensation to Named Executive Officers in circumstances when achieving Company financial and strategic/operational objectives becomes challenging and the level of incentive compensation is impacted. Incentive compensation typically accounts for approximately 80% of total compensation at target (86% for Mr. When the threshold is established at the beginning of a year.000. unless the Compensation Committee otherwise elects. van Paasschen in 2010). However. Incentive compensation includes annual cash bonus awards under the Company’s Executive Plan and long-term incentive compensation in the form of equity awards under the Company’s LTIP. in dollars. The Executive Plan also specifies a maximum bonus amount. Incentive Compensation.

the basis for its use would be detailed in the Company’s proxy statement. .06 Company EBITDA .e.. as determined by the Compensation Committee.000 $900. using the metrics described above. The table below sets forth for each metric the performance levels for 2010 which would have resulted in 100% bonus pool payout (i. . Consistent with maintaining these high standards and subject to achieving the EP Threshold. the Company’s performance in comparison to the financial and strategic/operational goals for the year set by the Compensation Committee is then used to determine a Named Executive Officer’s actual bonus. The Compensation Committee. . This ability is intended to be narrowly and infrequently used and. if applicable. which reflects an adjusted EBITDA amount that is normalized to exclude the potential impact of asset sales and/or foreign exchange swings. .000 $1. the “Maximum”) and the Compensation Committee may apply its discretion to reduce such amount to the actual bonus amount for each Named Executive Officer.000 For the 2010 performance period. the minimum performance level (i. as follows: Financial Goals. once the EP Threshold is achieved. pro rata awards may be paid at the discretion of the Compensation Committee in the event of death.80 $ 0. For Named Executive Officers. the Compensation Committee also establishes specific annual Company financial and strategic/operational performance goals and a related target bonus amount for each executive. in response. If the EP Threshold under the Executive Plan is met for a year. .000.000.000. Additional Performance Criteria.85 $ 0. EBITDA (which exceeded the EP Threshold) for purposes of determining annual bonuses was $884. which reflects earnings before special items. approved a maximum payout eligibility of 24 .000.000. $640. the minimum and maximum annual bonus amount specified in the Executive Plan becomes available for award. .000. As noted above. . the Compensation Committee retains the ability to consider whether an adjustment of the financial goals for any year is necessitated by exceptional circumstances. the maximum annual bonus amount specified in the Executive Plan becomes available for each Named Executive Officer and the Compensation Committee may apply its discretion to reduce such amount to determine the actual bonus amount for each individual. an increased focus by the Compensation Committee on the Company’s performance relative to the industry. $ 0.. e. . “Target”). .g. Once the EP Threshold is achieved. .Threshold in the relevant year.68 $ 0.000. disability. the table sets forth the approximate mid-points of payout between the Minimum to Target and Target to Maximum and indicates the related required performance level: Minimum (20%) Mid-point (75%) Target (100%) Mid-point (150%) Maximum (200%) Earnings per Share . .000 $800. representing a superior level of performance. The maximum bonus payout for the applicable Company financial performance metric is limited to 200% of target (i.000 $750. the “Minimum”) that would have resulted in a 20% bonus pool payout and the Maximum that would have resulted in a 200% bonus pool payout.26. van Paasschen’s total target annual bonus opportunity and 50% of the total target opportunities for the other Named Executive Officers. the Company financial performance portion is based 50% on earnings per share and 50% on EBITDA of the Company.e. Performance against the financial goals determined 60% of Mr. Subject to achieving the EP Threshold. In addition.e. The Company financial goals for Named Executive Officers under the Executive Plan consist of EBITDA and earnings per share targets.. These financial and strategic/operational goals are described below. the Company financial and strategic/operational goals to achieve such award levels are considered challenging but achievable. As the Compensation Committee generally sets target bonus award opportunities above the median among the Company’s peer group. retirement or other termination of employment. with each criteria accounting for half of the financial goal portion of the annual bonus. .000. an unanticipated and material downturn in the business cycle that triggers. To determine the actual bonus to be paid for a year under the Executive Plan.. actual bonuses paid to Named Executive Officers for financial performance may range from 0% to 200% of the pre-determined target bonus for this category of performance. Actual results for earnings per Share for purposes of determining annual bonuses were $1.96 $ 1.

together with the Chief Human Resources Officer and with oversight and input from the Compensation Committee. the extent to which the Company’s financial performance goals were achieved and whether the Company achieved the applicable minimum threshold(s) required to pay awards. van Paasschen and the other Named Executive Officers with respect to each executive’s strategic/operational goals for 2010 is described below. the Compensation Committee determined that the Company financial portion of the annual bonus would pay out only at 120% of target. the Chief Executive Officer may recommend a market adjustment to the base amount that is subjected to this percentage. “Big 5” refers to each executive’s specific deliverables within the Company’s critical performance categories — win with talent. van Paasschen’s total target opportunity and 50% of the total target opportunities for the other Named Executive Officers. conducts a formal performance review process each year to evaluate performance against the officer’s strategic/operational performance goals for the prior year. Strategic/Operational Goals. and they integrate and align an executive with the Company’s strategic and operational plan. van Paasschen. The Compensation Committee also determines the extent to which the Company’s financial performance goals were achieved and whether the Company achieved the applicable minimum threshold(s) required to pay awards. The Chief Executive Officer also meets in executive session with the Board of Directors to inform the Board of his performance assessments regarding the Named Executive Officers and the basis for the compensation recommendations he presented to the Compensation Committee. This PMP rating corresponds to a payout range under the Executive Plan determined annually by the Compensation Committee for that rating. and drive outstanding results. which results in a PMP rating for each executive. Actual bonuses paid to Named Executive Officers for strategic/operational performance may range from 0% to 175% of the pre-determined target amount for this category of performance. The Compensation Committee also determines. execute brilliantly. Where necessary to preserve the competitive position of the Company’s compensation scale. The portion of annual bonus awards attributable to strategic/operational management performance represents 40% of Mr. In determining the actual award payable to a Named Executive Officer under the Executive Plan. build great brands. The evaluation of Mr. At the conclusion of his review. The Chief Executive Officer conducts this evaluation through the Performance Management Process (“PMP”). deliver global growth. As part of a structured process that cascades down throughout the Company.170% of target for the Company financial portion of the annual bonus for the 2010 fiscal year for the Named Executive Officers. for 2010 the portion of the Executive Plan payouts based on PMP ratings could range from 0% to 175% of target once the target has been adjusted to reflect the Company’s performance. the Compensation Committee reviews the Chief Executive Officer’s evaluation and makes a final determination as to how the executive performed against his strategic/ operational goals for the year. the Compensation Committee conducts a formal performance review process each year during which the Compensation Committee evaluates how Mr. The strategic/operational performance goals for Named Executive Officers under the Executive Plan consists of “Big 5” and leadership competency objectives that link individual contributions to execution of our business strategy and major financial and operating goals. In the case of Mr. the Chief Executive Officer submits his recommendations to the Compensation Committee for final review and approval. Mr. van Paasschen performed against the strategic/operational/talent management performance goals established for the prior year. With respect to the other Named Executive Officers. van Paasschen. as determined by the Compensation Committee. reflecting the Compensation Committee’s judgment that the economic recovery was stronger than anticipated at the time the 2010 targets were established. 25 . Evaluation Process. based on management’s report. Achievement of “Big 5” objectives typically accounts for 80% of the strategic/operational performance evaluation. Using negative discretion. As noted. and achievement of leadership competency objectives typically accounts for 20% of such evaluation. these objectives are developed at the beginning of the year.

Avril’s accomplishments in 2010. • Exceeded the Company’s cash flow budget by almost $800 million and lowered net debt to $2 billion with approximately $650 million in cash reserves at year-end.Mr. despite inherent pressures from raising rates and occupancy levels.100 for 2010. In light of Mr. outpacing our budgeted revenue growth by 7%. • Opened 72 hotels worldwide and delivered strong guest satisfaction index (GSI) scores across all brands. EPS. in excess of both the S&P 500 average and the S&P 500 average for hotel companies for 2010. van Paasschen’s accomplishments and impact on the Company. van Paasschen’s accomplishments for the 2010 performance year included the following: • Delivered strong financial returns. and retention of management talent throughout our hotels. for a total annual bonus of $3. In light of Mr. for a total annual bonus of $902. and • Managed the Company’s financial operations efficiently. • Achieved increased employee satisfaction scores and introduced new initiatives to develop management talent within the Company.100 for 2010. strong owner relations.000 for 2010. and • Furthered key relationships with hotel owners. joint venture partners and our Company’s personnel to drive revenue. Prabhu’s accomplishments. he received an “accomplished objectives” PMP performance rating and was awarded a payout at 120% of target for the strategic/operational portion of the annual bonus.1% increase in market share for our Sheraton brand. and a 7.5% increase over last year in our North America Division led by a 2.6 billion credit facility to 2013 and significantly reducing debt. • Led a strategic sourcing team that delivered savings of $37 million with the successful negotiation of contracts in 2010. resulting in a significant increase in the Company’s Preferred Guest Program.1% increase over last year for our W brand globally. Prabhu’s accomplishments for the 2010 performance year included the following: • Continued to strengthen the Company’s liquidity position and reduce leverage by extending the Company’s $1. • Furthered strong growth in the Company’s hotel portfolio by opening 72 new hotels and executing signed deals for 96 new hotels and 59 re-engagements of existing hotels.000. and 32% in each case. 26 . • Maintained Starwood’s position as a brand leader and innovator by improving market share across most Company brands and increasing membership in the Company’s Preferred Guest Program. with global initiatives rolled out to support these goals. Mr. for a total annual bonus of $902. • Redesigned the Starwood Preferred Guest enrollment process. In light of Mr. respectively. improving the accuracy of our forecasting and continuing a focus on strong internal controls. and • Announced water and energy reduction targets. and shareholder return. representing 120% of his overall annual bonus target. as measured by key financial measures including EBITDA. the Compensation Committee awarded him a payout at 120% of target for the strategic/operational portion of the annual bonus. • Significantly increased from the prior year the hotel group EBITDA and owned hotels EBITDA. Mr. including an 1. Avril’s accomplishments for the 2010 performance year included the following: • Significantly gained market share across most Company brands. he received an “accomplished objectives” PMP performance rating and the Compensation Committee awarded him a payout at 120% of target for the strategic/operational portion of the annual bonus. representing 120% of his overall annual bonus target. representing 120% of his overall annual bonus target. • Received a total tax refund of $245 million for the successful settlement of a tax matter with the United States Internal Revenue Service.

covering 80% of wholly owned properties. which exceeds 2009 growth levels by approximately 25% and 35% respectively. In light of Mr. the resolution of a hacker-instituted malware incident. the Company’s hotel operating agreements for more expedient negotiations with owners. led efforts to block “Card Check” legislation and tax windfall legislation favoring Online Travel Agencies (OTAs). including new deals. Overall. • Managed. along with the management of over 600 matters in active litigation. efficient negotiations with owners. Turner’s accomplishments for the 2010 performance year included the following: • Successfully managed the global development team to achieve agreements for 96 new hotels (approximately 22.Mr. • Successfully resolved a litigation matter against certain former employees and their new employer regarding substantial theft of intellectual property from the Company. Siegel’s individual accomplishments for the 2010 performance year included the following: • Provided legal support for over 145 hotel management and franchise transactions. and streamlined. Mr. in coordination with our finance and information security teams. he received an “accomplished objectives” PMP performance rating and was awarded a payout at 120% of target for the strategic/operational portion of the annual bonus. • In partnership with the hotel industry.500 for 2010. strategic hotel sales and sale-and-manage-back transactions. Turner’s accomplishments in 2010. changes in ownership and re-engagements worldwide. • Completed a series of Strategic Asset Reviews to set direction for future development. representing 120% of his overall annual bonus target. including instituting four “Foundational Environmental Initiatives” in our hotel brand standards and secured LEED Volume Certification for our Element brand hotels. for a total annual bonus of $766. and • Completed a comprehensive review of the Company’s hotel operating agreements in partnership with the legal team.000 rooms). • Completed strategic sale transactions generating pre-tax proceeds of $148 million. which will allow for more streamlined. the Compensation Committee paid the Named Executive Officers individual bonuses under the Executive Plan at 120% of target. he received an “accomplished objectives” PMP performance rating and was awarded a payout at 120% of target for the strategic/operational portion of the annual bonus.188 for 2010. for a total annual bonus of $778. In light of Mr. and the negotiation of the Company’s new headquarters lease along with eight additional corporate lease transactions. • Continued focus on accelerating growth of the Aloft brand with 17 incremental Aloft hotel deals signed in 2010. representing 120% of his overall annual bonus target. and • Made significant progress in long-term Global Citizenship goals. and the contribution made by each of the Named Executive Officers under his strategic/ operational goals. Annual awards made to our Named Executive Officers under the Executive Plan with respect to 2010 performance are reflected in the Summary Compensation Table on page 34 and described in the accompanying narrative. Siegel’s accomplishments. 27 . in coordination with our development team.200 new rooms) and 59 re-engagements or changes to ownership involving existing hotels (approximately 15. which reflected the target payout based upon the Company’s financial performance goals.

Long-Term Incentive Compensation. Like the annual incentives described above, long-term incentives are a key part of the Company’s executive compensation program. Long-term incentives are strongly tied to returns achieved by stockholders, providing a direct link between the interests of stockholders and the Named Executive Officers. Long-term incentive compensation for our Named Executive Officers consists primarily of equity compensation awards granted annually (in February of each year following the announcement of the Company’s earnings for the previous year) under the Company’s LTIP and secondarily of the portion of the Executive Plan awards that are deferred in the form of deferred stock awards. Taken together, approximately 60% of total compensation at target award levels is equity-based long-term incentive compensation. The Compensation Committee grants awards under the LTIP to Mr. van Paasschen that are a combination of stock options and restricted stock. Mr. van Paasschen’s employment agreement, which reflects an emphasis on performance and long-term incentives, provides that in the event of strong financial and individual performance Mr. van Paasschen benefits greatly in the form of long-term incentive compensation that, for the 2010 fiscal year, would not be less than $5,000,000. The Compensation Committee generally grants awards under the LTIP to all other Named Executive Officers that are a combination of stock options and restricted stock awards. For the other Named Executive Officers, compensation is also geared towards performance and long-term incentives, but to a lesser degree than Mr. van Paasschen. The Compensation Committee believes an emphasis on long-term equity compensation (i.e., stock options and restricted stock) is particularly appropriate for the leader of a management team committed to the creation of stockholder value. In 2010, for all Named Executive Officers, the Compensation Committee used a grant approach in which the award is articulated as a dollar value. Under this approach, an overall award value, in dollars, was determined for each executive based upon our compensation strategy and competitive market positioning taking into account the Company and individual performance factors for the Named Executive Officers described above in Annual Incentive Compensation. The Compensation Committee determines the appropriate mix of restricted stock and stock options to be given to our Named Executive Officers. For 2010, the Compensation Committee determined that a split of 75% of restricted stock awards and 25% of stock options was the appropriate balance to maximize cost effectiveness and encourage equity ownership among our management. The number of shares of restricted stock was calculated by dividing 75% of the award value by the fair market value of the Company’s stock on the grant date. The number of stock options was determined by dividing the remaining 25% of the award value by the fair market value of the Company’s stock on the grant date and multiplying the result by two and one-half. The Named Executive Officers are able to elect a greater portion of options (up to 100% options). Based on the factors set forth above, including the Company’s performance and individual performance of each Named Executive Officer in 2010, the Compensation Committee believes that the equity award grants in 2010 were appropriate. The exercise price for each stock option is equal to fair market value of the Company’s common stock on the option grant date. See the section entitled Equity Grant Practices on page 32 below for a description of the manner in which we determine fair market value for this purpose. Currently, most stock options vest in 25% increments annually starting with the first anniversary of the date of grant. For stock options granted in 2010, awards granted to associates who are retirement eligible, as defined in the LTIP, vest in 16 equal quarterly periods. Unexercised stock options expire eight years from the date of grant, or earlier in the event of termination of employment. Stock options provide compensation only when vested and only if the Company’s stock price appreciates and exceeds the exercise price of the option. Therefore, during business downturns, option awards may not represent any economic value to an executive. Named Executive Officers have a mandatory deferral of 25% of their awards under the Executive Plan in the form of deferred restricted stock units, unless reduced in the discretion of the Compensation Committee. The deferred amount (as increased as described below) is deemed to represent a number of shares of the Company determined by dividing the amount by the fair market value of a Share on the date of grant, which will be delivered to the Named Executive Officer upon vesting of the Shares. As such, the awards combine performance-based compensation with a further link to stockholder interests. First, amounts must be earned based on annual Company financial and strategic/operational performance under the Executive Plan. Second, 28

these already earned amounts are put at risk through a vesting schedule. Vesting occurs in installments for employment over a three-year period. Third, these earned amounts become subject to Share price performance. Primarily in consideration of this vesting risk being applied to already earned compensation (but also taking into account the enhanced stockholder alignment that results from being subject to Share performance), the deferred amount is increased by 33% of value. For awards granted in 2009 or later, vesting will accelerate in the event of death, disability or retirement. Restricted stock and restricted stock unit awards provide some measure of mitigation of business cyclicality while maintaining a direct tie to Share price. The Company seeks to enhance the link to stockholder performance by building a strong retention incentive into the equity program. Consequently, for 2010 grants, 100% of restricted stock unit awards vest on the fiscal year end of the year immediately prior to the third anniversary of the date of grant and 100% of restricted stock awards vest on the third anniversary of the date of grant. For restricted stock granted in 2010, awards granted to associates who are retirement eligible, as defined in the LTIP, vest in twelve equal quarterly periods. This vesting places an executive’s long-term compensation at risk to Share price performance for a significant portion of the business cycle, while encouraging long-term retention of executives. Pursuant to his employment agreement, Mr. van Paasschen agreed not to sell any Company stock awards or Shares received on exercise of options (except as may be withheld for taxes) without prior consultation with the Board of Directors. Benefits and Perquisites. Base salary and incentive compensation are supplemented by benefits and perquisites. Current Benefits. The Company believes the employee benefits it provides are consistent with local practices and competitive markets, including group health benefits, life and disability insurance, dependent care flexible spending accounts, health savings account, and a pre-tax premium payment arrangement. Each of these benefits is provided to a broad group of employees within the Company and our Named Executive Officers participate in the arrangements on the same basis as other employees. Perquisites. As reflected in the Summary Compensation Table below, the Company provides certain limited perquisites to select Named Executive Officers when necessary to provide an appropriate compensation package, particularly in connection with enabling the executives and their families to smoothly transition from previous positions which may require relocation. For example, Mr. van Paasschen and his immediate family had access to a Company owned or leased airplane on an “as available” basis for personal travel, i.e., assuming such plane was not needed for business purposes, with an obligation to reimburse for personal use based upon the Company’s operating cost. The Company also reimburses Named Executive Officers generally for travel expenses and other out-of-pocket costs incurred with respect to attendance by their spouses at one meeting of the Board each year. Retirement Benefits. The Company maintains a tax-qualified retirement savings plan pursuant to Code section 401(k) for a broadly-defined group of eligible employees that includes the Company’s Named Executive Officers. Eligible employees may contribute a portion of their eligible compensation to the plan on a before-tax basis, subject to certain limitations prescribed by the Code. Prior to 2008, the Company matched 100% of the first 2% of eligible compensation and 50% of the next 2% of eligible compensation that an eligible employee contributes. Beginning in 2008, the Company matches 100% of the first 1% of eligible compensation and 50% of the next 6% of eligible compensation that an eligible employee contributes. These matching contributions, as adjusted for related investment returns, become fully vested upon the eligible employee’s completion of two years of service with the Company. Our Named Executive Officers, in addition to certain other eligible employees, were permitted to make additional deferrals of base pay and regular annual incentive awards under our nonqualified deferred compensation plan. This plan is discussed in further detail under the heading Nonqualified Deferred Compensation on page 40. 29

2. Change in Control Arrangements On March 25, 2005, the Company adopted a policy proscribing certain terms of severance agreements triggered upon a change in control of the Company. Pursuant to the policy, the Company is required to seek stockholder approval of severance agreements with executive officers that provide Benefits (as defined in the policy) in excess of 2.99 times base salary plus such officer’s most recent annual incentive award. In 2006, the Board reviewed the change in control arrangements then in place with the Named Executive Officers and decided to enter into new change in control agreements with the Named Executive Officers at that time, which included Messrs. Prabhu and Siegel. In connection with the hiring of Mr. Turner in May 2008 as President, Global Development, and the promotion of Mr. Avril in September 2008 to President, Hotel Group, the Company entered into change in control arrangements with them that were similar to the arrangements in place for the other Named Executive Officers (other than the Chief Executive Officer). Pursuant to the Company’s 2008 policy decision to cease paying tax gross-ups in change in control agreements, the arrangements with Messrs. Turner and Avril, however, do not provide for a tax gross-up if the benefits payable thereunder are subject to the excise tax under Section 280G of the Code. Instead, the benefits provided are reduced to the point that it would be more advantageous to the executive to pay the excise tax rather than reduce benefits further. The Company also included change in control arrangements in Mr. van Paasschen’s employment agreement. These change in control arrangements are described in more detail beginning on page 41 under the heading entitled Potential Payments Upon Termination or Change in Control. The change in control severance agreements are intended to promote stability and continuity of senior management. The Company believes that the provision of severance pay to these Named Executive Officers upon a change in control aligns their interests with those of stockholders. By making severance pay available, the Company is able to mitigate executive concern over employment termination in the event of a change in control that benefits stockholders. In addition, the acceleration of equity compensation vesting in connection with a change in control provides these Named Executive Officers with protection against equity forfeiture due to termination and ample incentive to achieve Company goals, including facilitating a sale of the Company at the highest possible price per share, which would benefit both stockholders and executives. In addition, the Company acknowledges that seeking a new senior position is a long and time-consuming process. Lastly, each severance agreement permits the executive to maintain certain benefits for a period of two years following termination and to receive outplacement services. The aggregate effect of our change in control provisions is intended to focus executives on maximizing value to stockholders. In addition, should a change in control occur, benefits will be paid only after a “double trigger” event as described in Potential Payments Upon Termination or Change in Control. The Company believes benefit levels have been set to be competitive with peer group practices. In connection with Section 409A of the Code (“Section 409A”), in 2008 the Company amended the employment arrangements with each of the Named Executive Officers (including the Chief Executive Officer). These amendments made several technical changes designed to make the employment arrangements with such officers comply with Section 409A and the final regulations issued thereunder, and generally affect the timing, but not the amount, of the compensation of such officers under specified circumstances.

3. Additional Severance Arrangements In 2007, the Company entered into a letter agreement with Mr. Prabhu clarifying that his severance included the acceleration of 50% of unvested stock options in the event that his employment was terminated without cause or by him for good reason. Mr. Prabhu’s employment agreement dated November 13, 2003, provides for the acceleration of 50% of unvested restricted stock in the event that his employment was terminated without cause or by him for good reason. The clarification formally documented Mr. Prabhu’s existing severance arrangements as part of his employment with the Company. This additional severance arrangement is described in more detail beginning on page 41 under the heading entitled Potential Payments Upon Termination or Change in Control. 30

C. Background Information on the Executive Compensation Program 1. Use of Peer Data In determining competitive compensation levels, the Compensation Committee reviews data from several major compensation consulting firms that reflects compensation practices for executives in comparable positions in a peer group consisting of companies in the hotel and hospitality industries and companies with similar revenues in other industries relevant to key talent recruitment needs. The executive team and Compensation Committee review the peer group bi-annually to ensure it represents a relevant market perspective. The Compensation Committee utilizes the peer group for a broad set of comparative purposes, including levels of total compensation, pay mix, incentive plan and equity usage and other terms of employment. The Company believes that by conducting the competitive analysis using a broad peer group, which includes companies outside the hospitality industry, it is able to attract and retain talented executives from outside the hospitality industry. The Company’s experience has proven that key executives with diversified experience prove to be major contributors to its continued growth and success. The peer group approved by the Compensation Committee for 2010 is set out below. We expect that it will be necessary to update the list periodically. Avon Products Carnival Corp. Colgate Palmolive Corporation Estee Lauder Cos. Inc. Federal Express Corp. Host Hotels & Resorts Kellogg Corporation Limited Brands Inc. Marriott International, Inc. McDonald’s Corp. MGM Mirage Nike, Inc. Simon Property Group Inc. Staples Inc. Starbucks Corp. Williams Sonoma Inc. Walt Disney Co. Wyndham Worldwide Corporation Yum Brands Inc.

In performing its competitive analysis, the Compensation Committee typically reviews: • base pay; • target and actual total cash compensation, consisting of salary, target and actual annual incentive awards in prior years; and • direct total compensation consisting of salary, target and actual annual incentive awards, and the value of option and restricted stock/restricted stock unit awards. When establishing target compensation levels for 2010, the Compensation Committee reviewed peer group data on payments to named executive officers as reported in proxy statements available as of February 2010 as provided by Pearl Meyer & Partners. 2. Tax Considerations Section 162(m) generally disallows a federal income tax deduction to public companies for incentive compensation in excess of $1,000,000 paid to the chief executive officer and the four other most highly compensated executive officers. Qualified performance-based compensation is not subject to the deduction limit if certain requirements are met. The Company believes that compensation paid under the Executive Plan for 2010 meets these requirements and is generally fully deductible for federal income tax purposes. In designing the Company’s compensation programs, the Compensation Committee carefully considers the effect of this provision together with other factors relevant to its business needs. In certain circumstances the Company may approve compensation that does not meet these requirements in order to advance the long-term interests of its stockholders. In February 2010 the Compensation Committee approved an increase in Mr. van Paasschen’s base salary from $1,000,000 to $1,250,000. For the 2011 fiscal year, the Compensation Committee determined that Mr. van Paasschen’s base salary should remain $1,250,000. The Company has 31

historically taken, and intends to continue taking, reasonably practicable steps to minimize the impact of the loss of deductibility under Section 162(m). Accordingly, the Compensation Committee has determined that each of the Named Executive Officers will participate under the Executive Plan for 2011. On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law, adding Section 409A to the Code and thereby changing the tax rules applicable to nonqualified deferred compensation arrangements effective January 1, 2005. While final Section 409A regulations were not effective until January 1, 2010, the Company believes it was operating in good faith compliance with Section 409A and the interpretive guidance thereunder. The Company entered into amendments to the employment arrangements with its senior officers, including the Chief Executive Officer and Named Executive Officers, and amended its bonus and compensation plans in December 2008 to meet the requirements of these regulations. A more detailed discussion of the Company’s nonqualified deferred compensation plan is provided on page 40 under the heading Nonqualified Deferred Compensation.

3. Share Ownership Guidelines The Company has adopted share ownership guidelines for our executive officers, including the Named Executive Officers. Pursuant to the guidelines, the Named Executive Officers, including the Chief Executive Officer, are required to hold that number of Shares having a market value equal to or greater than a multiple of each executive’s base salary. For the Chief Executive Officer, the multiple is five times base salary and for the other Named Executive Officers, the multiple is four times base salary. A retention requirement of 35% is applied to restricted Shares upon vesting (net Shares after tax withholding) and Shares obtained from option exercises until the executive meets the target, or if an executive falls out of compliance. Shares owned, stock equivalents (vested/ unvested restricted stock units), and unvested restricted stock (pre-tax) count towards meeting ownership targets. However, stock options do not count towards meeting the target. Officers have five years from the date of hire or, if later, the date they first become subject to the policy, to meet the ownership requirements.

4. Equity Grant Practices Determination of Option Exercise Prices. The Compensation Committee grants stock options with an exercise price equal to the fair market value of a Share on the grant date. Under the LTIP, the fair market value of our common stock on a particular date is determined as the average of the high and low trading prices of a Share on the NYSE on that date. Timing of Equity Grants. The Compensation Committee generally makes annual equity compensation grants to Named Executive Officers following its first regularly scheduled meeting that occurs after the release of the Company’s earnings for the prior year (typically the grant date is the last business day in February). The timing of this meeting is determined based on factors unrelated to the pricing of equity grants. The Compensation Committee approves equity compensation awards to a newly hired executive officer at the time that the Board meets to approve the executive’s employment package. Generally, the date on which the Board approves the employment package becomes the grant date of the newly-hired executive officer’s equity compensation awards. However, if the Company and the new executive officer enter into an employment agreement regarding the employment relationship, the Company requires the executive officer to sign his employment agreement shortly following the date of Board approval of the employment package; the later of the date on which the executive officer signs his employment agreement or the date that the executive officer begins employment becomes the grant date of these equity compensation awards. The Company’s policy is that the grant date of equity compensation awards is always on or shortly after the date the Compensation Committee approves the grants, which is generally in February. However, the Compensation Committee has the discretion under unusual circumstances to award grants at other times in the year. 32

III. COMPENSATION COMMITTEE REPORT The Compensation and Option Committee of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. (the “Company”) has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders. COMPENSATION AND OPTION COMMITTEE Adam M. Aron, Chairman Thomas E. Clarke Clayton C. Daley, Jr. Thomas O. Ryder Kneeland C. Youngblood

33

. .243 1. .956 3.625 625. . Salary ($)(1) 1. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. Hotel Group (since September 2008) Vasant M.696 132. .034 5. . . . See the Grants of Plan-Based Awards Table on page 36 for information on awards granted in 2010.500 531. . 2010. refer to Note 23 of the Company’s financial statements filed with the SEC as part of the Form 10-K for the year ended December 31..210. For additional information.054 634. . Chief Executive Officer and President Matthew E. .935 112.250 416. . . . .063 187.188 522. which includes $200. .798 deferred from a special one-time cash bonus enhancement awarded by the Compensation Committee. .539 3.000 134.411 522.077 — 44.938(B) 130. .000.000 1.539 644. . which includes $51. . .000 902. (2) Represents the grant date fair value for restricted stock and restricted stock unit awards granted during the year computed in accordance with ASC 718.724. . .361. . 2010. . . . . Turner . . Chief Administrative Officer. .125 5. . .784 559.000.287. . .820. . .832 522.888.298. .000(6) 150.271 93. as discussed under the Annual Incentive Compensation section beginning on page 23.572 82.013 Total ($) 9.371 484.838 44.615 4. General Counsel and Secretary Simon M.910 30..564.197 Bonus ($) Stock awards ($)(2) Option awards ($)(3) Non-equity incentive plan All other compensation compensation ($)(4) ($)(5) 3. .129.559 582. . . . . . 750. Turner . President.813 455.999 766. . .139 102. . . Global Development Group (since May 2008) .361 3.582 615.468.525 225.443. .000 1.292 725. .000 1.324.957. . .324 376. Vice Chairman and Chief Financial Officer Kenneth S. For additional information.538 — 2.167 1.000 deferred from a special one-time cash bonus enhancement awarded by the Compensation Committee.922 104.769 1. 693.100 616. . .312.792 625. .148 46. . 2010 and 2009 with respect to performance in 2010. . . .538 40.892 3.100 544. . . .395 800.000.226 34. .751 4. . . President. . Prabhu. . (B) This amount is an aggregate of cash incentive awards deferred in respect of the 2009 fiscal year. (4) Represents cash awards paid in March 2011. Siegel .166 1.067 3.832 4. See the Grants of Plan-Based Awards Table on page 36 for information on awards granted in 2010.208. .550.898 (1) Represents salary actually earned during the fiscal year listed.023.000 601. . .191(6) — — — — — — 500.742. Siegel . . .369 2. .865.257.167 (A) This amount is an aggregate of cash incentive awards deferred in respect of the 2009 fiscal year. determined under the Executive Plan.851. .548 4.575. . .667 171. .003 3. .333 1.756 2. . .731. .616 8.547 194. . . . .IV.945 459.000 1. .000 747. .250 536.686 778. . . respectively. . Cash incentive awards include the following amounts that were converted into restricted stock units and such number of restricted stock units was increased by 33% in accordance with the Executive Plan: Name 2010 Amount Deferred 2009 Amount Deferred 2008 Amount Deferred van Paasschen . .750 139. . .546. Prabhu . . .658 638. .661 27.. .360 726. . . Avril . . .402 — — — — 207.896 733.332.013. .500 902. .794. .525 191. .269 2. . . .021 116. . . .721 . . .151. .956. .908 188. . .421 1.335.953 1..621. .824 1.000 225. . . . . Avril . .545.515 17. . .380 115.103 57. .969 3.700. 34 . . . .262 1. SUMMARY COMPENSATION TABLE The table below sets forth a summary of the compensation received by the Named Executive Officers for the past three years: Name and principal position (listed alphabetically following the Chief Executive Officer) Frits van Paasschen .039 612. .544 3.235 640. . .035 1. . refer to Note 23 of the Company’s financial statements filed with the SEC as part of the Form 10-K for the year ended December 31.497.096 1.982.125 145. . These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers.090. .626 63. (3) Represents the grant date fair value for stock option awards granted during the year computed in accordance with ASC 718.775 Year 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008 — 3. .000(A) 154.000 407. . .578 1. . 2009 and 2008. .

. . . . Turner . the following table specifies the value for each element of All Other Compensation not specified above (other than perquisites and personal benefits) that is valued in excess of $10. and tax and financial planning services. all of which he reimbursed to the Company in January 2010.000 credit for personal use of the Company’s aircraft during the first 12 months of his employment with the Company. With respect to expenses incurred in 2008. . . . . . van Paasschen’s personal travel (discussed below).000 in the aggregate for a year but must be identified by type for each Named Executive Officer for whom the aggregate amount was equal to or greater than $10. . .254 85. crew expenses. . There was no net aggregate incremental cost to the Company of Mr. Avril .186 89. . .746. .135 105. . . This applies to Mr. The cost of the Company-owned plane includes the cost of fuel. . In that regard. . navigation and telecommunications. dividends on restricted stock.917 76. Prabhu . catering and aircraft supplies. . Pursuant to SEC rules. life insurance premiums.728 69. . Mr. . . . . there was $329. . . van Paasschen’s personal use of the Company-owned plane and chartered aircraft in 2010. . . . van Paasschen’s employment agreement provides that the Company would provide Mr. legal fees paid by the Company.000. ground services and landing fees.(5) Pursuant to SEC rules.480. the All Other Compensation column of the Summary Compensation Table includes perquisites and other personal benefits consisting of the following: annual physical examinations.000 in the aggregate.671 48.000. . .699 30. . 35 . . . . Siegel . perquisites and personal benefits are not reported for any Named Executive Officer for whom such amounts were less than $10. . . spousal accompaniment while on business travel. .328 — — — — (6) Represents special one-time cash bonus enhancements awarded by the Compensation Committee in recognition of 2009 accomplishments. and in 2008. . . . . . . These amounts (other than the reimbursed expenses for use of the Company-owned plane and chartered aircraft in 2009) are included in the All Other Compensation column. SEC rules further require specification of the cost of any perquisite or personal benefit when this cost exceeds $25. . Dividend Equivalents on Restricted Stock ($) (2010) Dividend Equivalents on Restricted Stock ($) (2009) Relocation ($) (2009) Dividend Equivalents on Restricted Stock ($) (2008) Relocation ($) (2008) Name van Paasschen . in 2009 there was $3.225 — 31. . aircraft cleaning and an allocable share of maintenance. . . 151.221 — — 57. . Company contributions to the Company’s tax-qualified 401(k) plan. . . . .538 — 165. These amounts are included in the All Other Compensation column. . . van Paasschen with up to a $500.438 — — — — — 150. .

24 484. . . below. . . Prabhu. . . (2) Represents the potential values of the awards granted to the Named Executive Officers under the Executive Plan if the threshold. For restricted stock and restricted stock units. . GRANTS OF PLAN-BASED AWARDS The table below sets forth a summary of the grants of plan-based incentive awards to the Named Executive Officers made during 2010: Grant date (or Compensation year with Committee respect to Approval non-equity date incentive plan (c)(1) award) (b)(1) All Other All Other Option Stock Exercise Grant Date Awards: Awards: Fair Value or Base Number of Number of of Stock Price of Shares of Securities and Option Option Stock or Underlying Awards Awards Options Units ($)(j)(5) (#)(h)(3) ($/Sh)(i)(4) (#)(g) Name (listed alphabetically by name following the Chief Executive Officer) (a) Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) Threshold Target Maximum ($)(d) ($)(e) ($)(f) van Paasschen. For additional information. Avril.847(7) 6. 2/26/2010 2/26/2010 3/01/2010 2010 2/11/2010 2/11/2010 (6) — 2/11/2010 2/11/2010 (6) 150. (5) Represents the fair value of the awards disclosed in columns (g) and (h) on their respective grant dates. .167 1. .814 Turner .24 459.078(7) 21. There can be no assurance that these amounts will correspond to the actual value that will be recognized by the Named Executive Officers. .000 98.425.750 1. fair value is calculated in accordance with ASC 718 using the average of the high and low price of Shares on the grant date. as defined in the LTIP. 2/26/2010 2/26/2010 3/01/2010 2010 31.489(6) 751. . The amount included in stock awards in the summary compensation table only includes the 33% increase.698 2/11/2010 2/11/2010 (6) 129.953 1. . .015 249.995 176.456(6) 751.312 58. .231(7) 5. .350 2/11/2010 2/11/2010 (6) 150.997 204. second and third fiscal year-ends following the date of grant. . . .784.906 Prabhu . Dividends are paid to the Named Executive Officers in amounts equal to those paid to holders of 36 . 2010. target and maximum goals are satisfied for all applicable performance measures.000 3.501 38. .750 2. .012 831. . van Paasschen. fair value is calculated in accordance with ASC 718 using a lattice valuation model. .562(6) 638.490 1. (6) On March 1. .24 1.067. 2/26/2010 2/26/2010 3/01/2010 2010 127. Siegel and Turner’s annual bonus with respect to 2009 performance was converted into restricted stock units and the number of units was increased by 33%. . Mr. . .24 726. . . .395 3. third and fourth anniversary of their grant. .499. in accordance with the Executive Plan. 25% of Messrs. .062 17.731 38. (3) The options generally vest in equal installments on the first. 2010.500.292(6) 2. 2/26/2010 2/26/2010 3/01/2010 2010 49.312 39. .350 2/11/2010 2/11/2010 (6) 127. . As of September 4.976 Siegel . Siegel’s awards vest quarterly in equal installments over four years due to his retirement eligible status.241 Avril . 2010.018 173. as the deferral of the bonus amount is disclosed separately. .058 38. .250.270(7) 4.755. . For stock options.067. These restricted stock units vest in equal installments on the first.226 649.888.693 38.243 2. . .750 2. . and vested units are distributed on the earlier of (i) the third fiscal year-end or (ii) a termination of employment. .641 (1) Grant date differs from Compensation Committee approval date in accordance with the procedure outlined in the discussion on page 32 under the heading Equity Grant Practices. . (4) The exercise price was determined by using the average of the high and low price of Shares on the grant date. See detailed discussion of these awards in section VI. 2/26/2010 2/26/2010 3/01/2010 2010 32. .000(7) 4.848 37.750. .039 38.750.468(6) 81. .V. refer to Note 23 of the Company’s financial statements filed with the SEC as part of the Form 10-K for the year ended December 31.24 1.750 648.210. second.

. . . . . . . . . No separate Compensation Committee approval was required for award of these deferred stock units. . .000 225.500 299. . . 751. .948 299. (7) This award vests on the third anniversary of the grant date. .525 225.750 638. .750 Siegel . and • the bonuses paid to executive officers performing comparable functions in peer companies. Each of the Named Executive Officers received an award in March 2011 relating to his 2010 performance. . These awards are reflected in both the Summary Compensation Table on page 34 and the Grants of Plan-Based Awards section on page 36. . . . .547 194. .Shares. except with respect to Mr.500 750. 648. .750 751. . .000 902. the portion of the award that is deferred into restricted stock units and the related 33% increase in his restricted stock units. . .100 902. . . . . 751. .250. . .000 Avril . . Siegel whose awards as of September 4. . actual award.500. which are provided by plan terms. 1. . . 2010. . . . target award as both a percentage of salary and a dollar amount. .000 751. NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION We describe below the Executive Plan awards granted to our Named Executive Officers for 2010. Award Target Relative to Salary (%) Award Deferred into Restricted Stock/Restricted Stock Units ($) Increased Award Deferred into Restricted Stock/Restricted Stock Units ($) Name Salary ($) Award Target ($) Actual Award ($) van Paasschen .100 766. . as defined in the LTIP.490 648. as further described in the Annual Incentive Compensation assessment commencing on page 23 above. VI. .750 3. . . The table below sets forth for each Named Executive Officer his salary.000. . . .188 778.625 997.525 191. vest quarterly in equal installments over three years due to his retirement eligible status.758 258. . • the strategic and operational performance goals for each Named Executive Officer that link individual contributions to execution of our business strategy and major financial and operating goals. 638. 37 .851 The following factors contributed to the Compensation Committee’s determination of the 2010 Executive Plan awards for the Named Executive Officers: • the Company’s 2010 financial performance as measured by EBIDTA and earnings per share. .750 Prabhu . .750 200% 100% 100% 100% 100% 2. . .490 Turner . . . .948 254. . . .

24 9/24/2015 2/28/2016 2/27/2017 2/26/2018 31.452.344(3) 5.39 38.046 5.610 1. 9/24/2007 2/28/2008 2/27/2009 2/26/2010 9/24/2007 3/02/2009 2/26/2010 3/01/2010 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2007 2/28/2008 9/02/2008 3/02/2009 2/26/2010 3/01/2010 2/10/2005 2/07/2006 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2007 2/28/2008 2/27/2009 3/02/2009 2/26/2010 3/01/2010 47. . .000 79. Avril . .594.742 1. .312(4) 1.721 261. .056(4) 58.61 11. .078(3) 14.348 205. . . . .181 869.913 25.279 368. .460 214. .847(3) 4. The market value of the stock awards is based on the closing price of a Share on December 31.61 11.361(3) 22.673.69 48. Each equity grant is shown separately for each Named Executive Officer.739 1.941.883 15. 2010. .947(3) 18. .543 — — — 5. .039 48.922 51.863 49.434 823. .39 38.220(3) 40. .350. .78. . .110 247.231(3) 3. This table includes unexercised and unvested stock options.731 58. .905(4) 98. . . .304(4) 1.39 48. .484 — 15.39 38.452 81.15 48.572(4) 39.348 — — — — 8. Option awards Number of Securities Underlying Unexercised OptionsExercisable (#)(1)(2) Number of Securities Underlying Unexercised Options Unexercisable (#)(1)(2) Stock awards Market value of Shares or Units of Stock That Have Not Vested ($) Name (listed alphabetically following the Chief Executive Officer) Grant Date Option Exercise Price ($)(1) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) van Paasschen . .666 2. .VII. .597 38 .961. .904 39.149.532 2. .232(3) 109.108 338. .084 3.432 40. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table provides information on the current holdings of stock options and stock awards by the Named Executive Officers as of December 31.269(3) 26. Prabhu . . .80 65. which was $60. . 2010.049.24 2/28/2015 2/28/2016 2/27/2017 2/26/2018 10.528(4) 629.436 74.576.794(3) 6.634 39. unvested restricted stock and unvested restricted stock units. .61 11. .15 48.381 6.24 2/10/2013 2/07/2014 2/28/2015 2/28/2016 2/27/2017 2/26/2018 17.180 11.384.973 51.693 65.035 32.

2008 award will vest on the third anniversary of the grant date. .6122 Host shares and $0. the restricted stock or restricted stock units generally vest 75% on the third anniversary and 25% on the fourth anniversary of the date of grant. . this impacts Mr.15 48. . Company stockholders received 0. . (4) These restricted stock units vest in equal installments on the first.726 127. (3) For awards granted in 2007. . for each Named Executive Officer.825 — 9. . .854 — — — 67. as defined in the LTIP. (i) option awards representing Shares acquired pursuant to exercise of stock options during 2010. The option information provided reflects the number of options granted and the option exercise prices after these adjustments were made. .233 65. . . .041 353. . Prabhu’s holdings only.684 25. . As of December 31. 2009 and 2010 awards vest quarterly in equal installments over four years due to his retirement eligible status.041(4) 263. 2010.260 184. 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2008 3/02/2009 2/26/2010 3/01/2010 5/07/2008 2/27/2009 2/26/2010 3/02/2009 2/26/2010 3/01/2010 34. . In order to preserve the value of the Company’s options immediately before and after the Host transaction.056 1.642(3) 5. and (ii) stock awards representing (A) Shares of restricted Company stock that vested in 2010 and (B) Shares acquired in 2010 on account of vesting of restricted 39 .24 2/28/2015 2/28/2016 2/27/2017 2/26/2018 9.923 181. VIII.39 38. Siegel’s 2008 and 2010 awards vest quarterly in equal installments over four and three years. and vested units are distributed on the earlier of (i) the third fiscal year-end or (ii) a termination of employment. .832 (1) In connection with the sale of 33 hotels to Host Hotels & Resorts. Siegel’s 2008. For awards granted in 2009 and 2010.501 53.328(4) 17. Avril’s September 2. 2010.219 — 5. the restricted stock or restricted stock units generally vest 100% on the third anniversary of their grant. the Company adjusted its stock options to reduce the strike price and increase the number of stock options using the intrinsic value method based on the Share price immediately before and after the transaction.Option awards Number of Securities Underlying Unexercised OptionsExercisable (#)(1)(2) Number of Securities Underlying Unexercised Options Unexercisable (#)(1)(2) Stock awards Market value of Shares or Units of Stock That Have Not Vested ($) Name (listed alphabetically following the Chief Executive Officer) Grant Date Option Exercise Price ($)(1) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Siegel .61 11. 2010. . Turner .992(4) 586.538 21.952(3) 2.503 in cash for each of their Class B Shares.698. . the restricted stock or restricted stock units generally vest 50% on each of the third and fourth anniversaries of their grant date. .813(4) 27. Mr. For awards granted in 2008. . OPTION EXERCISES AND STOCK VESTED The following table discloses. . Inc. respectively. . .642 234. Mr. provided that Mr. second.314 1.25 11. . due to his retirement eligible status as defined in the LTIP.612 411. . third and fourth anniversary of their grant.033. (2) These options generally vest in equal installments on the first. .39 38. As of September 4. . (or “Host”). Holders of Company employee stock options and restricted stock did not receive this consideration while the market price of Shares was reduced to reflect the payment of this consideration directly to the holders of the Class B Shares.000(3) 3. As of September 4. second and third fiscal year-ends following the date of grant.24 5/07/2016 2/27/2017 2/26/2018 4. .

Turner . .237.. . . . . . . . . . and up to 75% of their base salary for a calendar year. but no other unscheduled withdrawals are permitted. Avril .434.. . .846 322. .123 974. The Plan uses the investment funds listed below as potential indices for calculating investment returns on a participant’s Plan account balance. No Named Executive Officer made deferrals under the Plan in 2010.549 — 3. . Payment will be made immediately in the event a participant terminates employment on account of death. . . disability or on account of certain changes in control. .stock units. . Avril .444. . the participant may change the scheduled distribution date or form of payment so long as the change is made at least 12 months in advance of the scheduled distribution date. . . . .632. Prabhu .050 465. .039 61. .463 — IX. . The table also discloses the value realized by the Named Executive Officer for each such event. . . . . . . . . . otherwise payment will be made in a lump sum. .750 9. . . . Executive Contributions in Last FY ($) Registrant Contributions in Last FY ($) Aggregate Earnings in Last FY ($) Aggregate Withdrawals/ Distributions ($) Aggregate Balance at Last FYE ($) Name van Paasschen . . . . . . . . so long as the account balance exceeds $50. A participant may elect to receive payment of his account balance in either a lump sum or in annual installments. . . . The deferrals the participant directs for investment into these funds are adjusted based on a deemed investment in the applicable funds. .284 12.140 2. Deferral elections are made in June for annual incentive awards that are earned for performance in that calendar year but paid in March of the following year. . Deferral elections are irrevocable.302 204. . Prabhu . . . .000. . Withdrawals for hardship that result from an unforeseeable emergency are available. . . . Siegel . . . calculated prior to the deduction of any applicable withholding taxes and brokerage commissions.. . . . that election and the corresponding form of payment election are irrevocable. .. . . . The Company does not contribute to the Plan. . . . . . . . . . . . . . . Siegel . .000 159. . — — — — — — — — — — 83. . . . .025 4. .072 3. .422 70. as applicable. . including our Named Executive Officers.644 — — — — — — — — — 585. . . . . . . . to defer up to 100% of their Executive Plan cash bonus award. . Turner . . .465 5. . . . A participant may elect to receive payment on February 1 of a calendar year while still employed or either 6 or 12 months following employment termination. . If a participant elects to receive a distribution upon employment termination. . .854 9. . . . . Elections as to the time and form of payment are made at the same time as the corresponding deferral election.795. .864. . . . . . . .376 — — — — Deferral elections are made in December for base salary paid in pay periods beginning in the following calendar year. . Any such change must provide that distribution will commence at least five years later than the scheduled distribution date. . . ..218. . . The participant does not actually own the investments that he 40 . . . . . . If a participant elects an in-service distribution. . . . . .137 22. 200. . . . . . . . Option Awards Number of Shares Acquired on Value Realized Exercise on Exercise (#) ($) Stock Awards Number of Shares Acquired on Value Realized Vesting on Vesting (#) ($) Name van Paasschen .420 257. . . . . . . NONQUALIFIED DEFERRED COMPENSATION The Company’s Deferred Compensation Plan (the “Plan”) permits eligible executives. . .

PIMCO VIT Total Return — Admin Shares . . . . 2008. . Fidelity VIP II Contrafund — Service Class . . . Mr. . van Paasschen’s employment were terminated because of his death or permanent disability. . . . . . . . . . . . the Company will accelerate the vesting of 50% of Mr.19% 14. . . When it does. . . . . . .00% 19. . These benefits are described below. . . . Prabhu’s employment is terminated by the Company without cause or by Mr. . Pursuant to Mr. . . . . . . . . . . . . . . . . . . . . Prabhu voluntarily with good reason. . . . .40% 16. . . . . . . . in the event Mr. . . . . Termination Before Change in Control: Involuntary Other than for Cause. . . Siegel’s employment is terminated by the Company without cause. . . . . . . . . . . . . . . . International Growth — Series I Shares . . . . . .59% X. .96% 21. . . . . . . . A. . The Company entered into a letter agreement on August 14. . . if Mr.97% 25. Mr. . . . . . . . Pursuant to his employment agreement. . . . . . . . . . . . Pursuant to Mr. .96% 30. . . make identical investments pursuant to a variable universal life insurance product.selects. .51% 31. . van Paasschen’s employment agreement. Mr. . . 2007 confirming the terms of the agreement as it relates to the acceleration of 50% of Mr. .25% 6. . . . . The Company may. . . . . . . . . . . . Avril’s employment agreement. T. . . . . . . Dreyfus IP Small Cap Stock Index — Service Shares . . . . . . . . . . . Prabhu will receive severance benefits of twelve months of base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. In addition. . . . In addition. . . . If Mr. . Mr. . Voluntary for Good Reason. . . These benefits are in addition to benefits available generally to salaried employees. . van Paasschen as a severance benefit (i) two times the sum of his base salary and target annual bonus and (ii) a pro rated target bonus for the year of termination. . . . . . . participants have no direct interest in this life insurance. . . . . . . . . . . . . . Dreyfus Stock Index — Initial Shares . if Mr. . . . . . 2008. . . . . NVIT Inv Dest Moderate — Class 2 . van Paasschen would be accelerated. . Avril will also be entitled to acceleration of all of his restricted stock and options that were granted prior to August 19. 0. . . . . . . Prabhu’s unvested restricted stock and options. . . . if Mr. . . Siegel’s employment agreement. . . . . . . . . . . . . . . . . but is not required to. . . . . . NVIT International Index — Class 2 .60% 21. . . . .44% 20. . . . . . . both in connection with a change in control and otherwise. . . . . . . . 41 . . . . . . . . . . . . . . . . Name of Investment Fund 1-Year Annualized Rate of Return (as of 2/28/11) NVIT Money Market — Class V . Avril’s employment is terminated by the Company without cause. . . . . . . . . . . van Paasschen’s employment is terminated by the Company other than for cause or by Mr. . . . . . . Prabhu’s unvested restricted stock and options if his employment is terminated by the Company without cause or is terminated by him voluntarily with good reason. Death or Disability Pursuant to Mr. . . . . . Avril will receive severance benefits of twelve months of base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. . . . such as distributions under the Company’s tax-qualified retirement savings plan. Invesco V. . . . . Fidelity VIP High Income — Service Class . the Company will pay Mr. NVIT Mid Cap Index Class I . . . van Paasschen (or his estate) would be entitled to receive a pro rated target bonus for the year of termination and all of his equity awards would accelerate and vest. . Mr. disability insurance benefits and life insurance benefits. . POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The Company provides certain benefits to our Named Executive Officers in the event of employment termination. . . . . . . Siegel will receive severance benefits of twelve months of base salary plus 100% of his target annual incentive and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. . . Rowe Price Equity Income — Class II. . . . . . . . . . van Paasschen for good reason. . but no acceleration for equity awards granted on or after August 19. . . . . . . . . . . . . None of the other equity awards granted to Mr. . . . . . . . .I. . . . . . . . .

following a Change in Control. above: • two times the sum of his base salary plus the average of the annual bonuses earned by the executive in the three fiscal years ending immediately prior to the fiscal year in which the termination occurs or. until the first acceptance by the executive of an offer of employment. B. • a majority of the Directors cease to serve on the Company’s Board in connection with a successful hostile proxy contest. Termination in the Event of Change in Control The Company has entered into severance agreements with each of Messrs. • a lump sum payment of the executive’s deferred compensation paid in accordance with Section 409A distribution rules. the cost of which will not exceed 20% of the executive’s base salary. and • immediate vesting of all unvested 401(k) contributions in the executive’s 401(k) account or payment by the Company of an amount equal to any such unvested amounts that are forfeited by reason of the executive’s termination of employment. to the extent that any executive becomes subject to the “golden parachute” excise tax imposed under Section 4999 of the Code. at the target level. and (B) the aggregate value of all contingent incentive compensation awards allocated or awarded to the executive for all then uncompleted periods under any such plan that the executive would have earned on the last day of the performance award period. Under the severance agreements. Prabhu and Siegel. if higher. 42 . • continued medical benefits for two years. Turner’s employment is terminated by the Company other than for cause or by Mr. assuming the achievement. • immediate vesting of stock options and restricted stock held by the executive under any stock option or incentive plan maintained by the Company. • a lump sum amount. with automatic one-year extensions until either the executive or the Company notifies the other that such party does not wish to extend the agreement. equal to the sum of (A) any unpaid incentive compensation which had been allocated or awarded to the executive for any measuring period preceding termination under any annual or long-term incentive plan and which. Each agreement provides that if.Pursuant to Mr. Each severance agreement provides for a term of three years. In addition. a “Change in Control” is deemed to occur upon any of the following events: • any person becomes the beneficial owner of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 25% or more of the combined voting power of the Company. the executive would receive the following in addition to the items described in A. • outplacement services suitable to the executive’s position for a period of two years or. reduced to the extent benefits of the same type are received by or made available to the executive from another employer. the annual bonus earned in the immediately prior year. if earlier. Turner will receive severance benefits of twelve months base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. of the individual and corporate performance goals established with respect to such award. the executive would receive a gross-up payment in an amount sufficient to offset the effects of such excise tax. the agreement will continue for at least 24 months following the date of such Change in Control. Turner for good reason. as of the date of termination. the executive’s employment is terminated without Cause (as defined in the agreement) or with Good Reason (as defined in the agreement). Turner’s employment agreement. is contingent only upon the continued employment of the executive until a subsequent date. Mr. if Mr. in cash. If a Change in Control (as described below) occurs.

in cash. In December 2008. or O a merger or consolidation effected to implement a recapitalization of the Company in which no person becomes the beneficial owner of 25% or more of the voting power of the Company. 2010 under various circumstances. van Paasschen’s employment agreement provides that he would be entitled to the following benefits if his employment were terminated without cause or he resigned with good reason following a Change in Control: • two times the sum of his base salary and target annual bonus. However. other than a sale to an entity in which the Company’s stockholders would hold at least 70% of the voting power in substantially the same proportions as their ownership of the Company immediately prior to such sale. he would receive a gross-up payment in an amount sufficient to offset the effects of such excise tax. and includes amounts earned through that date. payable at the maximum level of performance. the Company amended the employment arrangements and change in control agreements with each of the Named Executive Officers. Each of Messrs. provided that no tax gross-up is provided if such payments become subject to the excise tax. In addition. Avril and Turner entered into similar change in control agreements in connection with their employment with the Company. Estimated Payments Upon Termination The tables below reflect the estimated amounts payable to the Named Executive Officers in the event their employment with the Company had terminated on December 31. • a lump sum payment of his nonqualified deferred compensation paid in accordance with Section 409A distribution rules. The actual amounts that would become payable in the event of an actual employment termination can only be determined at the time of such termination.• a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation. The amendments did not change any of the amounts payable to the Named Executive Officers. 43 . The amendments were technical in nature and were designed to meet the guidelines of 409A of the Code. • immediate vesting of stock options and restricted stock held under any stock option or incentive plan maintained by the Company. • a lump sum payment. C. If such payments are subject to the excise tax. a “Change in Control” does not include a transaction in which Company stockholders continue to hold substantially the same proportionate ownership in the entity which would own all or substantially all of the Company’s assets following such transaction. van Paasschen becomes subject to the “golden parachute” excise tax imposed under Section 4999 of the Code. or • approval of a plan of liquidation or dissolution by the stockholders or the consummation of a sale of all or substantially all of the Company’s assets. other than: O a merger or consolidation in which securities of the Company would represent at least 70% of the voting power of the surviving entity. equal to the unpaid incentive compensation then subject to performance conditions. and • immediate vesting of all unvested 401(k) contributions in his 401(k) account or payment by the Company of an amount equal to any such unvested amounts that are forfeited by reason of his termination of employment. to the extent that Mr. the benefits under the agreement will be reduced until the point where the executive is better off paying the excise tax rather than reducing the benefits. Mr.

. .654. .992. . .376 of Mr. Includes vested but deferred restricted stock units in accordance with the Executive Plan.. .. . Siegel(3) .154. .622 13.. . ..101 — 1. . 648. .750 . 648.750 Siegel . Involuntary Termination without Cause or Voluntary Termination for Good Reason The following table discloses the amounts that would have become payable on account of an involuntary termination without cause or a voluntary termination for good reason outside of the change in control context.878. With respect to Mr. . . . Avril(3) ..390. . 751. .. (2) Includes vested stock options. . . . . .802 — — — 135. . .. . . disability or certain changes in control as discussed in the Nonqualified Deferred Compensation section beginning on page 40.. .628. . . ..000 2.397 1. .076 26. .851 (1) Includes values for holdings of restricted stock and restricted stock units. . . 1.735 14. Termination on Account of Death or Disability The following table discloses the amounts that would have become payable on account of a termination on account of death or disability. . . .980 Turner. 751. . .750 Prabhu .075 11. Severance Pay ($) Medical Benefits ($) Vesting of Restricted Stock ($)(1) Vesting of Stock Options ($)(2) Total ($) Name van Paasschen(3). . .075 11.737. . . . . . .750 .668. .000 Avril . van Paasschen’s nonqualified deferred compensation that is payable upon death.220 11.750 — 11. .1. .000. . 751. . includes vested but deferred restricted stock units in accordance with the Executive Plan. .500. . . .882 8.. 10. 44 .220 11.480. (2) Excludes vested stock options. .838.074.273 7. . . . . ..156 13. .. . .448 11.. . . .617. . . . 2. .. . .276.625 — — 10. .000 .. . . 2. .980 .448 11.706 47. 751. . . .. .101 12.000.. . .685. 1.038 21. . . . . Prabhu . . . . .980.055 659. . .. .101 12. . . .268. . . . Siegel and Avril’s employment agreements provide for payments in the event of involuntary termination other than for cause but do not provide for payments in the event of voluntary termination for good reason.. .582. (3) Messrs. . ..099.750 — 11. .152 23. . (3) Excludes $585.172 62.276. . Prabhu. ... ..264 5. . .708 17. .609 14.876. . Vested stock options could be subject to loss by the Named Executive Officers in the event of a termination for cause and certain other events but could not in the event of termination on account of death or disability. .. Turner .429 28.574. .721. .637 3. . . . .288.729 (1) Includes values for holdings of restricted stock and restricted stock units. . .. . . .. . . Name Severance Pay ($) Medical Benefits ($) Vesting of Restricted Stock ($)(1) Vesting of Stock Options ($)(2) Total ($) van Paasschen .869 2. . . . . . .

.150 Turner .706 47. XI.685. 3. thus artificially increasing the excise tax that would apply on a change in control and.637 3. . the Company considers the significant amount of time that members of the Board spend in fulfilling their duties to the Company as well as the skill level required by the Company of its Directors.278 24. .816 n/a — — n/a 77. . . A Non-Employee Director may elect to receive up to one-half of the annual fee in cash and to defer (at an annual interest rate of LIBOR plus 11⁄2% for deferred cash amounts) any or all of the annual fee payable in cash. Excludes $585. .989. . a 20% excise tax is imposed on the excess amount of such severance pay and other benefits. .154. 45 . . . . correspondingly. .617. . . 3. . . 3. . Any new Director shall be given a period of three years to satisfy this requirement. . . . . van Paasschen’s recent hire.750 — — — — — 7. .600.609 14.390. If any Director fails to satisfy this requirement. .622 13.000 Avril . .573 (1) Includes values for holdings of restricted stock and restricted stock units.869 2. van Paasschen. .668. . Change in Control The following table discloses the amounts that would have become payable on account of an involuntary termination without cause following a change in control or a voluntary termination with good reason following a change in control.750 Siegel .000.099.654. DIRECTOR COMPENSATION The Company uses a combination of cash and stock-based awards to attract and retain qualified candidates to serve on the Board. . sales of Shares by such Director shall be subject to a 35% retention requirement. . the tax gross-up payment due under the estimate. .582.3.139 30. The current compensation structure is described below.156 13. . . Severance Pay ($) Medical Benefits ($) Vesting of Restricted Stock ($)(1) Vesting of Stock Options ($)(2) Outplacement ($) 401(k) Payment ($) Tax Gross-Up ($) Total ($) Name van Paasschen(3) . . For 2010.152 23. The number of Shares to be issued is based on the fair market value of a Share using the average of the high and low price of the Company’s stock on December 31 of the year prior to grant. payable in four equal installments of Shares issued under our LTIP. . . A. . Annual Fees Each Non-Employee Director receives an annual fee in the amount of $80.994 28. Non-employee members of the Board (“Non-Employee Directors”) receive compensation for their services as described below.220. .074.463.195 12. Because of Mr.898. (2) Includes vested stock options. disability or certain changes in control as discussed in the Nonqualified Deferred Compensation section beginning on page 40.882 8. . . (3) If the amount of severance pay and other benefits payable on change in control is greater than three times certain base period taxable compensation for Mr. . van Paasschen’s nonqualified deferred compensation that is payable upon death.172 — 150.350 127.008. . 1.125 30. . .376 of Mr. .519 30.698 129.357 19. .350 150. . . .015. Vested stock options could be subject to loss by the Named Executive Officers in the event of a termination for cause and certain other events but could not in the event of an involuntary termination without cause following a change in control or a voluntary termination with good reason following a change in control. . .758.750 Prabhu .000. . . In setting Director compensation. under the Company’s Director share ownership guidelines.721.470 32. . . . each Director was required to own Shares (or deferred compensation stock equivalents) that have a market price equal to four times the annual Director’s fees paid to such Director.101 12.750 5. . his base period taxable compensation does not reflect the total value of restricted stock granted to him in earlier years. . . Company employees who serve as members of the Board receive no fees for their services in this capacity. . . . .157. Includes vested but deferred restricted stock units in accordance with the Executive Plan.424 31. . 3. .487. . .

Quazzo . . Clarke. . . . . B.853 55.853 11. The chairperson of each other committee of the Board receive an additional annual fee in cash of $12.302 11. . Daley. . .000. . Other Compensation The Company reimburses Non-Employee Directors for travel expenses. .623 142.000 ($25. payable quarterly in restricted stock units which vest in three years. . . C.000 59.250 18. . . . . .802 219. . The number of restricted stock units is determined by dividing the value by the average of the high and low Share price on the date of grant.000 142. . Jr. Starwood Preferred Guest Program Points and Rooms In 2010. . Charlene Barshefsky. van Paasschen is not included in this table because he was an employee of the Company and thus received no compensation for his services as a Director. . .Deferred cash amounts are payable in accordance with the Non-Employee Director’s advance election.572 (1) Mr. .602 — 12. . . Duncan . . Bruce W. Kneeland C.250 12. .571 102.203 50. . . D. .898 50.469 292. The options are fully vested and exercisable upon grant and are scheduled to expire eight years after the grant date. each Director received an annual grant of 750. . Thomas O. . for one meeting per year. . .853 55.571 142. . Attendance Fees Non-Employee Directors do not receive fees for attendance at meetings.335 21.853 55. . Lizanne Galbreath .853 55. A NonEmployee Director is also permitted to elect to defer to a deferred unit account any or all of the annual fee payable in Shares or cash. 46 .853 55.853 55. Thomas E. . The number of options is determined by dividing the value by the average of the high and low Share price on the date of grant (also the exercise price) and multiplying by two and one half. . .478 — 4.500. E.469 102. . .436 217. .853 55. The equity grant was delivered 50% in restricted stock units and 50% in stock options. . .500 47.571 142. . . . . . . The Chairman of the Board receive an additional retainer of $150. Youngblood . . Mr. . Aron .853 55. other out-of-pocket costs they incur when attending meetings and.469 55. .250 14.582 11.250 232.908 20.672 11. . . .000 for the Chairman of the Audit Committee).500 9. . We have summarized the compensation paid by the Company to our Non-Employee Directors in 2010 in the table below. . each Non-Employee Director received an annual equity grant (made at the same time as the annual grant is made to Company employees) under our LTIP with a value of $125. Non-Employee Directors serving as members of the Audit Committee receive an additional annual fee in cash of $10. .853 55. .174 225. Equity grant In 2010.929 219. . 22.000.000 Starwood Preferred Guest (“SPG”) Points to encourage them to visit and personally evaluate our properties.571 102. . . . Ryder . . Deferred stock or cash amounts are payable in accordance with the Non-Employee Director’s advance election. . .572 230. Name of Director(1) Fees earned or Paid in Cash ($) Stock Awards (2) (3) ($) Option Awards (4) ($) All Other compensation (5) ($) Total ($) Adam M. . .096 222. . . Eric Hippeau . van Paasschen’s 2010 compensation from the Company is disclosed in the Summary Compensation Table on page 34. . Stephen R.571 142. The restricted stock units awarded pursuant to the annual grant generally vest upon the earlier of (i) the third anniversary of the grant date and (ii) the date such person ceases to be a Director of the Company.174 220.960 14. .934 219. . . . . . . Clayton C. . .469 102.135 370. . . expenses related to attendance by spouses.

. . Thomas E.067. . Aron .514 9. . .989 9. .989 9. For additional information. . Mr.989 62.989 9. each Director beneficially owns the following aggregate number of Shares (deferred or otherwise) outstanding: Mr.635 270 270 270 270 1.513 20.101. . . . . . . Ambassador Barshefsky. . Bruce W.989 62. 14. .513 20. .014 541 1. .014 20. . . . .059. The grant date fair value of each stock award is set forth below: Director Grant Date Number of Shares of Stock/Units Grant Date Fair Value ($) Adam M.265.014 37. . Aron.513 20. . . .014 20.514 20. 24. . .014 20. Youngblood.989 9. Jr. . . . . Charlene Barshefsky . . . 2010. . .513 20. . Ryder.635 270 270 270 270 1. 30. Mr. (3) Represents the grant date fair value for restricted stock and unit awards granted during the year computed in accordance with ASC 718. .514 9. . 2010. . . . .514 37.514 9. Lizanne Galbreath .014 541 1.989 9. Clarke. . . . .787. Mr. . . . . . Clayton C. . . . . 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 3/31/2010 6/30/2010 6/30/2010 9/30/2010 9/30/2010 12/31/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 1. .(2) As of December 31. .151.989 9. Galbreath. .989 9. .635 1. Clarke .014 20.014 541 1. .014 62. . .014 20.313. . 8. 30. .014 47 . Duncan . .014 37. . .014 37. Mr. . 11. . 6. . .829.635 270 270 270 270 1. Daley. Hippeau. . . . . . . Mr. 20. Duncan. Mr. . . . . . . . .989 9. .542. .311. .635 541 541 541 541 62.014 541 1. Quazzo. 136.514 20. .635 541 541 541 541 1.989 9. refer to Note 23 of the Company’s financial statements filed with the SEC as part of the Form 10-K for the year ended December 31. .014 62. .014 20. Ms. Mr. . 4. . Daley.989 62. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. .

. .014 20.635 541 541 541 541 1. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Directors. Duncan. . . In addition. . . .672.000 SPG Points valued at $11.649. . As of December 31. . . 44. . . . Mr. 26.014 20. (5) We reimburse Non-Employee Directors for travel expenses and other out-of-pocket costs they incur when attending meetings and. .514 20. .514 9. 33. . 2010. Mr. . Kneeland C. Clarke. .014 20. . .989 (4) Represents the grant date fair value for stock option awards granted during the year computed in accordance with ASC 718. SEC rules do not require specification of the value of any type of perquisite or personal benefit provided to the Non-Employee Directors because no such value exceeded $25.014 62. . . attendance by spouses.014 20. each Director has the following aggregate number of stock options outstanding: Mr. 2010. Thomas O. Galbreath. Mr.989 9.014 20.651. Youngblood. . . Non-Employee Directors receive interest on deferred dividends.014 20. 28.150. . Ms.918. .028. . Mr. . .989 9.514 20. Mr.897. . Stephen R. Quazzo . perquisites and personal benefits are not reported for any Director for whom such amounts were less than $10. Ambassador Barshefsky. . Pursuant to SEC rules. 2010 with a grant date fair value of $55. .Director Grant Date Number of Shares of Stock/Units Grant Date Fair Value ($) Eric Hippeau .087 options on February 26. Mr. . Ryder . . . . . Aron. . . 22. . . . All Directors received a grant of 4.014 20. . . . . Ryder. . . . .171. 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 1.000 in the aggregate. 44. Quazzo.853.514 20. . . 13. 66. . Hippeau.635 541 541 541 541 1. Daley. . .989 9. Mr.000. for one meeting per year. .014 62. 39.635 270 270 270 270 62. . Youngblood . . . in 2010 Non-Employee Directors received 750. For additional information. . .631. 48 .014 62. .250. 17.000 in the aggregate for 2010 but must be identified by type for each Director for whom such amounts were equal to or greater than $10.014 20. refer to Note 23 of the Company’s financial statements filed with the SEC as part of the Form 10-K for the year ended December 31.014 20.635 541 541 541 541 1.649.

the review of quarterly financial statements and assistance with financial reports required as part of regulatory and statutory filings and the audit of the Company’s internal controls over financial reporting with the objective of obtaining reasonable assurance about whether effective internal controls over financial reporting were maintained in all material respects. as amended. . Ernst & Young LLP. . which is comprised entirely of “independent” Directors. . . .6 $0. . .4 (1) Audit fees include the fees paid for the annual audit. . . . . . . . are as follows (in millions): 2010 2009 Audit Fees(1) . . . . . . . . .AUDIT COMMITTEE REPORT The information contained in this Audit Committee Report shall not be deemed to be “soliciting material” or “filed” or “incorporated by reference” in future filings with the SEC. . 2010. . . . . . . .4 $6. . . . . . . . $7. . . . . . . . . Ernst & Young.1 $5. . . except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933. . . . . . 2010 and 2009 to the Company’s principal accounting firm. . . 49 . . . . as amended. . . (the “Company”). . . . . . . . . . . (3) Tax fees include fees for the preparation and review of certain foreign tax returns. . . . . . . . accounting and legal compliance. Inc. . . . 2010 with management. the Company’s internal auditors and the independent registered public accounting firm. . . .6 Audit-Related Fees(2) . . . Audit Committee of the Board of Directors Clayton C. . Clarke Kneeland C. . . . . . . . . including the matters required to be discussed with the independent accountant by Statement of Auditing Standards No. . . . as determined by the Board in accordance with the New York Stock Exchange (the “NYSE”) listing requirements and applicable federal securities laws. (ii) monitoring compliance with legal and regulatory requirements. . . . . . or the Exchange Act. . . . Youngblood Audit Fees The aggregate amounts paid by the Company for the fiscal years ended December 31.. $0. . . Jr. . . . Daley. . . . . . $5. In the first quarter of 2011. . audit and accounting consultation and other attest services. . . including a review of audit and non-audit fees and the written disclosures and letter from Ernst & Young LLP to the Audit Committee required pursuant to Rule 3526 of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the Audit Committee concerning independence. . Aron Thomas E. . . . . . . the Audit Committee recommended to the Board that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31. . . . . the Audit Committee reviewed and discussed the audited financial statements for the year ended December 31. . . serves as an independent and objective party to assist the Board in fulfilling its oversight responsibilities including. . . (2) Audit-related fees include fees for audits of employee benefit plans. . . . The Audit Committee also discussed with the independent registered public accounting firm matters relating to its independence. (i) monitoring the quality and integrity of the Company’s financial statements. . . Chairman Adam M. . . . . . . Based on the reviews and discussions referred to above. .6 Total .9 Tax Fees(3) . . . . . . or subject to the liabilities of Section 18 of the Exchange Act. (iii) assessing the qualifications and independence of the independent registered public accounting firm and (iv) establishing and monitoring the Company’s systems of internal controls regarding finance. . . $0. but not limited to. . . The Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”) of Starwood Hotels & Resorts Worldwide. The Audit Committee operates under a written charter which meets the requirements of applicable federal securities laws and the NYSE requirements. . . . .4 $0. 61.

For purposes of the policy. (iii) where the hire would have direct involvement in providing information for use in its financial reporting systems. No Compensation Committee member had any relationship requiring disclosure under “Certain Relationships and Related Transactions. The independent registered public accounting firm also submits an audit services fee proposal. 2010 and 2009 were pre-approved by the Audit Committee or our Board of Directors. a “Related Person Transaction” means any transaction involving the Company in which a Covered Person has a direct or indirect material interest. and no member was an employee or former employee. regulations and related commentary regarding the definition of “independence” for independent registered public accounting firms. The Audit Committee may delegate authority to one of its members to pre-approve all audit/non-audit services by the independent registered public accounting firm. Management and the independent registered public accounting firm report to the Audit Committee at each of its regular meetings as to the non-audit services actually provided by the independent registered public accounting firm and the approximate fees incurred by the Company for those services. or be perceived to be. based on considerations other than the Company’s best interests. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Policies of the Board of Directors of the Company The Board has adopted a Corporate Opportunity and Related Person Transaction Policy (the “Related Person Transaction Policy”). (ii) in its accounting or tax departments. review and approval or ratification of transactions with Directors. During fiscal year 2010. we seek to avoid Related Person Transactions because they can involve potential or actual conflicts of interest and pose the risk that they may be. Pre-Approval of Services The Audit Committee pre-approves all services. director nominees. The engagement letter must be formally accepted by the Audit Committee before any audit commences. the purpose of which is to address the reporting. As a general matter. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION All members of the Compensation Committee during fiscal year 2010 were independent Directors. Management and the independent registered public accounting firm must each confirm to the Audit Committee that the performance of the non-audit services on the list would not compromise the independence of the registered public accounting firm and would be permissible under all applicable legal requirements. the independent registered public accounting firm provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year. The Audit Committee must approve both the list of non-audit services and the budget for each such service before commencement of the work. executive officers. stockholders known to own of record or beneficially more than five percent of our Shares (“5% Holders”) and each of the foregoing’s respective family members and/or corporate affiliates (collectively “Covered Persons”). All audit and permissible non-audit services provided by Ernst & Young to the Company for the fiscal years ended December 31.” below. none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose officer served on our Compensation Committee. Management submits to the Audit Committee all non-audit services that it recommends the independent registered public accounting firm be engaged to provide and an estimate of the fees to be paid for each.The Company has adopted a policy which requires the Audit Committee of the Board of Directors to approve the hiring of any current or former employee (within the last five years) of the Company’s independent registered public accounting firm into any position (i) as a manager or higher. For audit services (including statutory audit engagements as required under local country laws). as long as these approvals are presented to the full Audit Committee at its next regularly scheduled meeting. which also must be approved by the Audit Committee before the audit commences. provided by the Company’s independent registered public accounting firm. the Audit Committee considers applicable laws. A transaction involving entities controlled by the Company shall be deemed 50 . including both audit and non-audit services. or (iv) where the hire would be in a policy setting position. When undertaking its review.

The policy may be changed at any time by the Board. The solicitation is being made by mail and over the Internet and may also be made by telephone or in person using the services of a number of regular employees of the Company at nominal cost. executive officer.html. and. if a Director. 2010 and the deadline for stockholders to submit matters for consideration at the Annual Meeting without having the proposal included in these proxy materials expired on February 27. if any other matter properly comes before the Annual Meeting. and (2) the Company is reasonably capable of pursuing. The Company has engaged D. in connection with (iii). except as otherwise provided. to solicit proxies and to assist with the distribution of proxy materials for a fee of $18. including the cost of mailing.500 plus reasonable out-of-pocket expenses. 51 . However. with the party who brought the proposed transaction to the Company’s attention or with another third party. Under the Related Person Transaction Policy. it is the intention of the persons named in the enclosed proxy to vote the Shares represented thereby in accordance with their discretion. make recommendations to the Board. to recuse himself from any vote or other deliberation. SOLICITATION COSTS The Company will pay the cost of soliciting proxies for the Annual Meeting. In its review. and 5% Holder is required to submit any such Related Person Transaction or Corporate Opportunity to the Governance Committee for review. the Governance Committee is to consider all relevant facts and circumstances to determine whether it should (i) reject the proposed transaction. a “Corporate Opportunity” means any opportunity (1) that is within the Company’s existing line of business or is one in which the Company either has an existing interest or a reasonable expectancy of an interest.. at the Governance Committee’s option. However.starwoodhotels. The Board has charged the Corporate Governance and Nominating Committee (the “Governance Committee”) with establishing and reviewing (on a periodic basis) our Related Person Transaction Policy. we recognize that in some circumstances transactions between us and related persons may be incidental to the normal course of business or provide an opportunity that is in the best interests of the Company. The Related Person Transaction Policy also governs certain corporate opportunities to ensure that Corporate Opportunities are not pursued by Covered Persons unless and until the Company has determined that it is uninterested in pursuing said opportunity. brokerage firms and other custodians.com/ corporate/investor _ relations. The Company will reimburse banks. or that is not inconsistent with the best interests of the Company. A copy of the policy is posted on our website at www. and in the case of a Corporate Opportunity suggest that the Company pursue the Corporate Opportunity on its own. or (iii) ask the Board to consider the proposed transaction so that the Board may then take either of the actions described in (i) or (ii) above. The deadline for stockholders to submit matters for consideration at the Annual Meeting and have it included in these proxy materials expired on November 16. King & Co. (ii) conclude that the proposed transaction is appropriate and suggest that the Company pursue it on the terms presented or on different terms.F. each Director. or is more efficient to pursue than an alternative transaction. nominees and fiduciaries for expenses incurred in sending proxy materials to beneficial owners of Shares. Inc. 2011. For purposes of the policy. OTHER MATTERS The Board is not aware of any matters not referred to in this proxy statement that may properly be presented for action at the Annual Meeting.a transaction in which the Company participates. Any person bringing a proposed transaction to the Governance Committee is obligated to provide any and all information requested by the Governance Committee and.

starwoodhotels. by addressing a request to Investor Relations.” can result in significant cost savings for us. 1111 Westchester Avenue. the Company and banks and brokerage firms that hold your Shares have delivered only one proxy statement and annual report to multiple stockholders who share an address unless one or more of the stockholders has provided contrary instructions. referred to as “householding. 52 . but not the record holder. bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future. A stockholder who wishes to receive a separate copy of the proxy statement and annual report.html). upon written or oral request. NY 10604 or by calling (914) 640-8100. you will need to contact your broker. White Plains.com/corporate/investor _ relations. Starwood Hotels & Resorts Worldwide. The Company will deliver promptly. of the Shares and wish to receive only one copy of the proxy statement and annual report in the future. now or in the future. You may also obtain a copy of the proxy statement and annual report from the investor relations page on the Company’s website (www. Stockholders of record sharing an address who are receiving multiple copies of proxy materials and annual reports and wish to receive a single copy of such materials in the future should submit their request by contacting us in the same manner. may obtain one..HOUSEHOLDING The SEC allows us to deliver a single proxy statement and annual report to an address shared by two or more of our stockholders. a separate copy of the proxy statement and annual report to any stockholder at a shared address to which a single copy of the documents was delivered. Inc. If you are the beneficial owner. In order to take advantage of this opportunity. This delivery method. without charge.

Inc. If the Company does not receive your proposal or nomination by the appropriate deadline and in accordance with the terms of the Company’s Bylaws. The fact that the Company may not insist upon compliance with these requirements should not be construed as a waiver by the Company of its right to do so at any time in the future. including that the Company must receive your proposal on or after January 26. INC. 1111 Westchester Avenue. White Plains..STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING If you want to make a proposal for consideration at next year’s Annual Meeting and have it included in the Company’s proxy materials. 2011. By Order of the Board of Directors STARWOOD HOTELS & RESORTS WORLDWIDE. Starwood Hotels & Resorts Worldwide. and the proposal must comply with the rules of the SEC. Kenneth S. then it may not properly be brought before the 2012 Annual Meeting. you must comply with the then current advance notice provisions and other requirements set forth in the Company’s Bylaws. If you want to make a proposal or nominate a Director for consideration at next year’s Annual Meeting without having the proposal included in the Company’s proxy materials. Siegel Corporate Secretary March 21. You should address your proposals or nominations to the Corporate Secretary. 2011 53 . 2012 and on or prior to February 20. the Company must receive your proposal by November 22. with certain exceptions if the date of next year’s Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the 2011 Annual Meeting. New York 10604. 2012.

• Turn left and follow the signs for Peachtree Road South. • Take first exit — Lenox Road. • Continue one mile and turn right on West Paces Ferry Road. • Take Exit 2 — Lenox Road. • Continue one mile and turn right on West Paces Ferry Road. From Peachtree-Dekalb Airport (PDK) • Proceed west on Chamblee Tucker Road toward West Hospital Avenue. • Turn right on Peachtree Road. • Take Interstate 85 North and follow to Exit GA 400 North. • The St. • Turn right on Peachtree Road. and from the Greyhound Bus Station. • Take Exit 2 — Lenox Road. Regis Atlanta is two blocks on the left. Regis Atlanta is two blocks on the left. *The Atlanta Link is the exclusive shuttle service running to and from Hartsfield-Jackson International Airport. • Turn right on Peachtree Road. • The St. the Atlanta Amtrak Station. Regis Atlanta is two blocks on the left. • The St. Regis Atlanta is two blocks on the left. • Turn right on Peachtree Road. • Turn right on Peachtree Road. From South • Take Interstate 85 North to Exit GA 400 North. Regis Atlanta is two blocks on the left. • Take first exit — Lenox Road. 54 . From West • Take Interstate 285 East to Exit GA 400 South. From East • Travel on Interstate 20 West to Interstate 85 North. • Turn right and follow signs for Peachtree Road South. • Continue to follow GA-141. Regis Atlanta From North • Take Interstate 285 East (from Interstate 75) or Interstate 285 West (from Interstate 85) to Exit GA 400 South. • Turn right onto West Paces Ferry Road. • The St. • The St. Regis Atlanta is two blocks on the left. • Continue one mile and turn right on West Paces Ferry Road. • Turn left and follow the signs for Peachtree Road South. Taxi service is available from the airports. • Take first exit — Lenox Road.General Directions To The St. From Hartsfield-Jackson International Airport (ATL)* • Take Interstate 85 North to Exit GA 400 North. • The St. • Continue one mile and turn right on West Paces Ferry Road. • Turn right and follow signs for Peachtree Road South. • Continue one mile and turn right on West Paces Ferry Road. • Turn right and follow signs for Peachtree Road South. • Turn left onto Peachtree Industrial Boulevard GA-141.

or a smaller reporting company. in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. a non-accelerated filer. if any. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports). 11. D. including area code) Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock. Yes ¥ No n Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website. every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232. and (2) has been subject to such filing requirements for the past 90 days.01 per share New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer. 2011. the Corporation had outstanding 192. See the definitions of “large accelerated filer. As of February 11. 2011. and will not be contained.” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. see the Company’s definitive Proxy Statement for the Company’s Annual Meeting of Stockholders to be held on May 5. employer identification no. Yes n No ¥ Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. NY 10604 (Address of principal executive offices.UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington. an accelerated filer. 20549 Form 10-K ¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31. 12. 2010. includes all Shares other than those held by the registrant’s Directors and executive officers) computed by reference to the closing sales price as quoted on the New York Stock Exchange was $7.C.165. Yes ¥ No n Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 52-1193298 (I. ¥ Indicate by check mark whether the registrant is a large accelerated filer. the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates (for purposes of this Annual Report only. Yes ¥ No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.S. For information concerning ownership of Shares. 2010 n OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number: 1-7959 STARWOOD HOTELS & RESORTS WORLDWIDE. (Check one): Large accelerated filer ¥ Accelerated filer n Non-accelerated filer n Smaller reporting company n (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No ¥ As of June 30. including zip code) (914) 640-8100 (Registrant’s telephone number. as defined in Rule 405 of the Securities Act. par value $0.823.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). which is incorporated by reference under various Items of this Annual Report. Document Incorporated by Reference: Document Where Incorporated Proxy Statement Part III (Items 10. INC.076.807 shares of common stock. 13 and 14) . to the best of the registrant’s knowledge.R.405 of this chapter) is not contained herein.279.) 1111 Westchester Avenue White Plains.

. . . .. ... Item 1A... Item 7A. . . .. . . . . . . . .. .. . .. . . . . . . . . . . . . . . Item 8. . .. .... . .. . .. . . . . . . . . ... . . . Item 9A. . . .. . . . . . . . . . . . .. Executive Compensation.. . . . . . . . . . . . .. . . .. . . . . ... . . .... .. . . . . . . . Item 9B. Unresolved Staff Comments .... . Item 7. .. .... .. ... . . . . . . . . . . . . ... . . . . . ... . . .. . . .. . . . . .. . . . . ..... . . Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . ... . . . . . Item 10. . . Risk Factors . . . . . . . . .. . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . .... . Item 14. . . . . . . . ... . .. . . . Item 11. .. . .. .. . . .. .. . Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . .. .. . . ... Item 2... . .. .. . .. . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .. . .. . . . .. . . . .. . .. ... . ... . . .. ... . . . . . . . . .. .. . . .. . .. .... . . .. . . . .. .. . . . . . .. . .. Financial Statements and Supplementary Data . . . . . . . Executive Officers and Corporate Governance . . . . . . . . . . ... . . . . . . . . . . . . .. . . . . . Item 6. . . ... . . . Legal Proceedings . . . . . .. . . . . .. . . . . .. .. . .. . . . . . .. . . . . . . . . . . . . .. . .. . . . . . Item 9. . . . Properties . .. . .. . . . . . . . . . . .. . . . . . ... . .. . Item 1. . . .. . . . . . . . . . Item 13. . .. . . . . ... . . . . . . .. . . . . . . . . .. . . . Business . ... . .. . . . . .. .. . . . .. . . . . .. . .. . . . .. . .. . .. . . . Item 15. 1 1 5 14 14 20 PART II Market for Registrants’ Common Equity. . . . .. .. . ... . . .. .. . . . . .. . . .. . ... . . PART III Directors. . . . . .. . . . .. . .. . . .. . PART IV Exhibits. . . .. .... . . . . Item 1B...... . ... . . . . . . . . . . . . . . . . .. Certain Relationships and Related Transactions and Director Independence . . Item 3. . . . Quantitative and Qualitative Disclosures about Market Risk . ... . . . . . . . .. .TABLE OF CONTENTS Page PART I Forward-Looking Statements . . . .. .. . . . . . . . . .. . ... . . . .. Selected Financial Data . . . . .. . . . Item 12. . . . . . . . . . . .. . . .. . . . .. .. . . . Financial Statement Schedules . . . .. .. .. .. . .. .. ... . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . .. . . . . . .. . . . . Item 5. . .. ... .. . .. . . . . . . . . . . . . . . .. . . . . . . .. . .. . . . . . . . Other Information . .. . 21 23 23 38 40 40 40 42 42 42 42 42 42 42 . Controls and Procedures . . . . . .

PART I Forward-Looking Statements This Annual Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. a Delaware limited partnership (the “Operating Partnership”). resorts and residences) are for connoisseurs who desire the finest expressions of luxury. spectacular settings and impeccable service. a Maryland corporation (the “Corporation”). They are distinguished by magnificent decor. Starwood undertakes no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances. Such forward-looking statements may include statements regarding the intent. “Host”). Management’s Discussion and Analysis of Financial Condition and Results of Operations.. (collectively. Item 1. 2006.P. On April 7. of the Trust (“Class B Shares”) were attached and traded together and were held or transferred only in units consisting of one Corporation Share and one Class B Share (a “Share”). Inc. Until April 7. these remarkable hotels and resorts enable the most discerning traveler to collect a world of unique. par value $0. collectively through April 7. Our brand names include the following: St. and certain other subsidiaries of Host Hotels & Resorts. the Corporation Shares trade alone under the symbol “HOT” on the New York Stock Exchange (“NYSE”). “Starwood”. retreats and residences) feature world class design. They provide flawless and bespoke service to high-end leisure and business travelers. without limitation. As a result of the depairing. “our”. Regis» (luxury full-service hotels. which was sold in the Host Transaction (defined below). 2006. world class restaurants and “on trend” bars and lounges and its signature Whatever\Whenever» service standard. including SLC Operating Limited Partnership. 2006. 2006. the risks and uncertainties set forth below. From legendary palaces and remote retreats to timeless modern classics. Such statements appear in several places in this Annual Report. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements including.This Annual Report is filed by Starwood Hotels & Resorts Worldwide. all references to the Trust include the Trust and those entities owned or controlled by the Trust. its subsidiary Host Marriot L. The Luxury Collection» (luxury full-service hotels and resorts) is a group of unique hotels and resorts offering exceptional service to an elite clientele. Regis hotels are located in the ultimate locations within the world’s most desired destinations. par value $0. which prior to April 10. and they typically have individual design characteristics to capture the distinctive personality of each location. Unless the context otherwise requires. the section of Item 1. W» (luxury and upscale full service hotels. Business. belief or current expectations of Starwood. the Shares were depaired and the Corporation Shares became transferable separately from the Class B Shares. neither Shares nor Class B Shares are listed or traded on the NYSE. of the Corporation (“Corporation Shares”) and the Class B shares of beneficial interest. its Directors or its officers with respect to the matters discussed in this Annual Report. Business General We are one of the world’s largest hotel and leisure companies. St. and all references to “we”. It’s a sensory multiplex that not only indulges the senses. the shares of common stock. 2006 included Starwood Hotels & Resorts. including. Inc. “us”. without limitation. We conduct our hotel and leisure business both directly and through our subsidiaries. in connection with a transaction (the “Host Transaction”) with Host Hotels & Resorts.. important emerging markets and yet to be discovered paradises. authentic and enriching experiences indigenous to each destination that capture the sense of both luxury and place. As of April 10. it delivers an emotional experience.01 per share. a Delaware limited partnership (the “Realty Partnership”). all references to the Corporation include those entities owned or controlled by the Corporation. or the “Company” refer to the Corporation. captioned “Business Strategy” and Item 7. Whether it’s “behind the scenes” 1 .01 per share. Inc. the Trust and its respective subsidiaries. including SLT Realty Limited Partnership. a Maryland real estate investment trust (the “Trust”).

upscale and intuitively designed hotel experience that allows guests to live well and feel in control. 463 hotels managed by 2 . Healthful indulgence from SuperFoodsRxTM menus. because we believe. In Sheraton lobbies you’ll find the Link@SheratonSM experienced with Microsoft. and thrive while they are away.000 rooms in approximately 100 countries. Inspired by Westin. as you ease on down the road. Bringing a cozy harmony of modern elements to the classic on-the-road tradition. feel alive. our hotel portfolio included owned. ultra effortless alternative for both the business and leisure traveler. Each of its hotels. Westin» (luxury and upscale full-service hotels. Our guests start their day feeling energized and finish up relaxed. W hotels delivers an experience unmatched in the hotel segment. Style at a Steal. iconic brand has welcomed guests. A welcoming oasis to the savvy traveler. destination after destination. Truly restorative sleep in the world-renowned Heavenly» Bed. Great Rates. Element is intuitively constructed with an efficient use of space that encourages guests to stay connected. resorts and residences) is our largest brand serving the needs of upscale business and leisure travelers worldwide. Aloft provides new heights: an oasis where you least expect it. Through our brands. leased.027 hotels with approximately 302. Fresh. Aloft is an experience to be discovered and rediscovered. Energizing exercise with WestinWORKOUT». Spa-like invigoration with the Heavenly» Bath. which fosters connections. From being the first hotel brand to step into major international markets like China. Element(SM) (extended stay hotels). that life is better when shared. upscale environment. every innovative service aims to help guests thrive so they feel better than when they arrived. becoming a trusted friend to travelers and one of the world’s most recognized hotel brands. and fulfilling. which include management and other fees earned from hotels we manage pursuant to management contracts. Sheraton» (luxury and upscale full-service hotels. It will already be opening its 50th property in 2011. Great Hotels. a brand introduced in 2006 with the first hotel opened in 2008. whether face-to-face or webcam-to-webcam. a spirited neighborhood outpost. the industry’s first smoke-free policy. or our cutting edge music. Sheraton understands that travel is about bringing people together. Our operations are reported in two business segments. With its underlying passion for food. and is comprised of 62 hotels that we own or lease or in which we have a majority equity interest. a haven at the side of the road. It’s the little indulgences that make their time away from home special. resorts and residences) is a European-inspired brand with a French accent.access at W Happenings. Space to live your life. Primarily all Element hotels are LEED certified. we are well represented in most major markets around the world. whether city. The Sheraton Club is also a social space where guests indulge in the upside of everything with likeminded travelers. Our revenue and earnings are derived primarily from hotel operations. resorts and residences) provides a thoughtfully designed experience making the healthiest choices irresistibly appealing. as strongly as ever. For over 70 years this full-service. fun. Le Méridien offers a unique experience at some of the world’s top travel destinations. Sheraton transcends lifestyles. Westin ensures guests are well rested. All at the honest value our guests deserve. provides a modern. We seek to acquire interests in. lighting and scent programs. Our hotel business emphasizes the global operation of hotels and resorts primarily in the luxury and upscale segment of the lodging industry. airport or resort has a distinctive character driven by its individuality and the Le Méridien brand values. Four Points» (select-service hotels) delights the self-sufficient traveler with what is needed for greater comfort and productivity. At December 31. Whether an epic city center location or refreshing resort destination. maybe even with one of our Best Brews (local craft beer). managed and franchised hotels totaling 1. art and style and its classic yet stylish design. Decidedly modern with an emphasis on nature. depicting the importance of the environment in today’s world. Fresh air from BreatheWestinSM. well nourished and well cared for. generations and geographies and will continue to welcome generation after generation of world traveler. 2010. Le Méridien» (luxury and upscale full-service hotels. the receipt of franchise and other fees and the operation of our owned hotels. Aloft» (select-service hotels) first opened in 2008. hotels and vacation ownership and residential operations. Aloft offers a sassy. Element hotels promote balance through a thoughtful. refreshing. to completely captivating entire destinations like Waikiki. or management or franchise rights with respect to properties in this segment.

.. (a) Includes wholly owned.. . . At December 31. . . ... . . Africa and the Middle East .. . .. . .. .100 7.. . . . . . . . . . . . . . . . . . . . . Vistana.. . . ... .. . . . .. .. marketing and selling of residential units at mixed use hotel projects owned by us as well as fees earned from the marketing and selling of residential units at mixed use hotel projects developed by third-party owners of hotels operated under our brands. . . . ... 463 502 62 14 1. .. . . . . . . our revenue and earnings are derived from the development. . . . . . . .. . . . . . . . .. Starwood Vacation Ownership (and its predecessor. . . we have sold 62 hotels for approximately $5. We plan to meet these objectives by leveraging our global assets. . . . . have been serving guests for more than 60 years. . . . Generally these resorts are marketed under the brand names described above. . . . . . . . . . ... . Inc. . . . . ... .041 159. . .. ... . Vacation ownership resorts and stand-alone properties . . . . . . . . . . . We have thereby decided that no new vacation ownership projects are being initiated and we have decided not to develop certain vacation ownership sites and future phases of certain existing projects. in 2009 we evaluated all of our existing vacation ownership projects. . . . . . . .700 Total properties . . .400 21. . . ownership and operation of vacation ownership resorts.800 61. .. . . eight mixed-use and one unconsolidated joint venture) in the United States.. . . . Sheraton Hotels & Resorts and Westin Hotels & Resorts. . . . broad customer base and other resources and by taking advantage of our scale to reduce costs. . . . . . .. Europe. . . Franchised hotels . . . . . . ... . Additionally. . 2010. . .. . . ... . . . . .. . . . .200 121.. . marketing and selling vacation ownership interests (“VOIs”) in the resorts and providing financing to customers who purchase such interests. .. . . . . . Due to the global economic crisis and its impact on the long-term growth outlook for the timeshare industry. . .300 58. .. . . . . . . . . . majority owned and leased hotels. ... . . . . . we had 23 owned vacation ownership resorts and residential properties (including 14 stand-alone. Our operations are in geographically diverse locations around the world. . . .. . . We have implemented a strategy of reducing our investment in owned real estate and increasing our focus on the management and franchise business.. . . .. . our primary business objective is to maximize earnings and cash flow by increasing the number of our hotel management contracts and franchise agreements.. . as well as land held for future vacation ownership projects. . . . 2010: Number of Properties Rooms Managed and unconsolidated joint venture hotels .. . ... . . .. . . . . .. ... selling VOIs. . .. . Latin America . .. .. .. Our revenues and earnings are also derived from the development. 3 . . .. . . . As a result. . . . which may include selectively acquiring interests in additional assets and disposing of non-core hotels (including hotels where the return on invested capital is not adequate) and “trophy” assets that may be sold at significant premiums.. .. Asia Pacific . . . . . . . 551 247 181 62 1. . The implementation of our strategy and financial planning is impacted by the uncertainty relating to geopolitical and economic environments around the world and its consequent impact on travel. . .3 billion. .100 308. . Owned hotels(a) . . . .) has been selling VOIs for more than 20 years. . .. . . ... . .. ..... . . . .... .700 Number of Properties Rooms North America (and Caribbean) . . The Corporation was incorporated in 1980 under the laws of Maryland. In furtherance of this strategy. . . Total properties . .. Starwood’s largest brands. . ... .. . . .us on behalf of third-party owners (including entities in which we have a minority equity interest) and 502 hotels for which we receive franchise fees.. . . . . . .. ......000 308.. .500 13. . . Mexico and the Bahamas. and investing in real estate assets where there is a strategic rationale for doing so.. . . . . . . .. The following tables reflect our hotel and vacation ownership and residential properties by type of revenue source and geographical presence by major geographic area as of December 31. .. . . . . ... . . . . . .. . since 2006.041 175.. . . .

Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment. or new interpretations would depend upon the specific requirements enacted and cannot be determined at this time. USTs or CFCs. under. White Plains. and in the future may incur. national and international hotel brands. we could be held liable for costs of remedial or other action with respect to PCBs. storage or disposal of wastes at facilities owned by others. or in our currently or formerly owned or operated properties. assets and geographical segments. owners and operators of real property may face liability for personal injury or property damage because of various 4 . decorative treatments and piping located at certain of our hotels) in the event of damage or demolition. restaurant and meeting facilities and services. regulation.S. and ownership companies (including hotel REITs). Such laws often impose liability without regard to whether the owner or operator knew of. residential. and our telephone number is (914) 640-8100. several are large national and international chains that own and operate their own hotels. we could be held liable for the costs of removing or cleaning up hazardous or toxic substances at. We encounter strong competition as a hotel. Competition The hotel and timeshare industry is highly competitive. Under common law. as well as manage hotels for third-party owners and sell VOIs. see the notes to financial statements of this Annual Report. resort and vacation ownership operator. the presence of such hazardous or toxic substances. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws. A number of our hotels have underground storage tanks (“USTs”) and equipment containing chlorofluorocarbons (“CFCs”). tiles. Competition is generally based on quality and consistency of room. Management believes that we compete favorably in these areas. Congress and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. For additional information concerning our business. For discussion of our revenues. While some of our competitors are private management firms. The cost impact of such legislation. federal. costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment. storage or disposal facility. on. which may be present in electrical equipment. Environmental Laws are not the only source of environmental liability. Under such laws. price. floor coverings. or was responsible for. profits. New or revised laws and regulations or new interpretations of existing laws and regulations. including facilities owned by local interests and facilities owned by national and international chains. ordinances and regulations (“Environmental Laws”). of this Annual Report. attractiveness of locations. under a variety of brands that compete directly with our brands. the operation and subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. or certain renovations or remodeling. such as those related to climate change. see Item 2 Properties. Environmental Matters We are subject to certain requirements and potential liabilities under various foreign and U. state and local environmental laws. Our principal competitors include other hotel operating companies. ceiling coverings. Environmental Laws also regulate polychlorinated biphenyls (“PCBs”). regardless of whether such facility is owned or operated by such person. The presence of hazardous or toxic substances may adversely affect the owner’s ability to sell or rent such real property or to borrow using such real property as collateral. New York 10604. operation and management of our properties. availability of a global distribution system. Our properties compete with other hotels and resorts in their geographic markets.Our principal executive offices are located at 1111 Westchester Avenue. the ability to earn and redeem loyalty program points and other factors. Other Environmental Laws govern occupational exposure to asbestos-containing materials (“ACMs”) and require abatement or removal of certain ACMs (limited quantities of which are present in various building materials such as spray-on insulation. In connection with our ownership. could affect the operation of our hotels and/or result in significant additional expense and operating restrictions on us. and we from time to time have incurred.

Although we have incurred and expect to incur remediation and various environmental-related costs during the ordinary course of operations.m. Employees At December 31.000 people were employed at our corporate offices. Our SEC filings are also available on our website at http://www. 2010. ACMs. owned and managed hotels and vacation ownership resorts. in Washington. Other events. Risk Factors. Seasonality and Diversification The hotel industry is seasonal in nature.C. third or fourth quarters.starwoodhotels. you should call (212) 656-5060. Our filings with the SEC are also available at the New York Stock Exchange. Comparability of Owned Hotel Results We continually update and renovate our owned. of which approximately 26% were employed in the United States. 20549 on official business days during the hours of 10 a.environmental conditions such as alleged exposure to hazardous or toxic substances (including. management does not anticipate that such costs will have a material adverse effect on our operations or financial condition. Generally. these hotels are generally not operating at full capacity and. Risks Relating to Hotel. our revenues and operating income have been lower in the first quarter than in the second. and such events can negatively impact our revenues and operating income.html as soon as reasonably practicable after they are filed with or furnished to the SEC. For more information on obtaining copies of our public filings at the New York Stock Exchange. Resort. proxy statements and other information with the Securities & Exchange Commission (“SEC”). Please call the SEC at (800) SEC-0330 for further information. PCBs and CFCs).S. NE. the sale of such assets can significantly reduce our revenues and operating income. labor relations have been maintained in a normal and satisfactory manner. approximately 34% of the U. Where You Can Find More Information We file annual. You may also obtain a copy of our filings free of charge by calling Investor Relations at (914) 640-8165. working hours. • impact of war and terrorist activity (including threatened terrorist activity) and heightened travel security measures instituted in response thereto. Operating risks common to the hotel and vacation ownership and residential industries include: • changes in general economic conditions.com/ corporate/investor relations. however. and management believes that our employee relations are satisfactory. the periods during which our properties experience higher revenue activities vary from property to property and depend principally upon location.gov. approximately 145. Our SEC filings are available to the public over the Internet at the SEC’s website at http://www. but not limited to. • domestic and international political and geopolitical conditions. Finally. 2010. leased and consolidated joint venture hotels. Item 1A. for basic pay rates. You may also read and copy any document we file with the SEC at its public reference room located at 100 F Street. While undergoing renovation. such as the occurrence of natural disasters may cause a full or partial closure or sale of a hotel. quarterly and special reports. D. Generally. as such. radon or poor drinking water quality. generally.m. 5 . poor indoor air quality. other conditions of employment and orderly settlement of labor disputes. At December 31.sec. as we pursue our strategy of reducing our investment in owned real estate assets.-based employees were covered by various collective bargaining agreements providing. these renovations can negatively impact our owned hotel revenues and operating income. to 3 p. Vacation Ownership and Residential Operations We Are Subject to All the Operating Risks Common to the Hotel and Vacation Ownership and Residential Industries. including the severity and duration of downturns in the US and global economies.

licensing. market absorption or oversupply in a particular market. among others. but most allow the hotel owner to replace us in certain circumstances. • restrictive changes in zoning and similar land use laws and regulations or in health. management and franchise agreements and in most cases our recourse is limited to the equity value said party has in the property. labor costs (including the impact of unionization). franchise or representation agreements or obtain new agreements on as favorable terms as the existing agreements. The Recent Recession in the Lodging Industry and the Global Economy Generally Will Continue to Impact Our Financial Results and Growth. • changes in travel patterns. We utilize our brands in connection with the residential portions of certain properties that we develop and license our brands to third parties to use in a similar manner for a fee.• travelers’ fears of exposures to contagious diseases. Residential properties using our brands could become less attractive due to changes in mortgage rates and the availability of mortgage financing generally. • disputes with owners of properties. • the financial condition of third-party owners. food costs. Our hotel management contracts are typically long-term arrangements. and regulations under the Office of Foreign Assets Control and the Foreign Corrupt Practices Act. labor and employment. and • regulation or taxation of carbon dioxide emissions by airlines and other forms of transportation. We are also impacted by our relationships with owners and franchisees. The recent economic recession has had a negative impact on the hotel and vacation ownership and residential industries. Accordingly. • the costs and administrative burdens associated with compliance with applicable laws and regulations. franchisees and homeowner associations which may result in litigation. Additionally. • the availability and cost of capital to allow us and potential hotel owners and franchisees to fund construction. energy. our operating results would be adversely affected if we could not maintain existing management. including. our financial results have been impacted by the economic recession and both our future financial results and growth could be further harmed if recovery from the economic recession slows or the economic 6 . Substantial increases in air and ground travel costs and decreases in airline capacity have reduced demand for our hotel rooms and interval and fractional timeshare products. insurance and unanticipated costs such as acts of nature and their consequences. upon a sale of the property. project developers and franchisees. but not limited to. timeshare. As a result. including a reduction in business travel as a result of general economic conditions. rules and regulations and other governmental and regulatory action. renovations and investments. which may impact our ability to recover indemnity payments that may be owed to us and their ability to fund amounts required under development. • changes in operating costs including. workers’ compensation and health-care related costs. such as the bankruptcy of the hotel owner or franchisee. • the impact of internet intermediaries on pricing and our increasing reliance on technology. franchising. • decreases in the demand for transient rooms and related lodging services. • the financial condition of the airline industry and the impact on air travel. privacy. the risks described in this section. • foreign exchange fluctuations. we and our third party licensees may not be able to sell these residences for a profit or at the prices that we or they have anticipated. the failure to meet certain financial or performance criteria and in certain cases. • decreases in demand or increases in supply for vacation ownership interests. including condominium hotels. among other things. Our ability to meet these financial and performance criteria is subject to. safety and environmental laws. • cyclical over-building in the hotel and vacation ownership industries.

could impact our financial results. including the failures and near failures of financial services companies and the decrease in liquidity and available capital. New or revised regulations on businesses participating in government financial assistance programs. The hotel. Our Businesses Are Capital Intensive. Moreover. or Market Share Could Be Harmed If We Are Unable to Compete Effectively. Litigation has been and may continue to be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. Moreover. The terms of our management agreements. 7 . The negative publicity associated with such companies holding large events has also resulted in reduced bookings. renew agreements. We rely on trademark laws to protect our proprietary rights. see Note 26 of the consolidated financial statements. Our properties compete for customers with other hotel and resort properties. and. Some of our competitors may have substantially greater marketing and financial resources than we do. we apply to have certain trademarks registered. have negatively impacted the capital markets for hotel and real estate investments. with respect to our vacation ownership resorts and residential projects. We compete with other hotel companies for management and franchise agreements. In connection with entering into management or franchise agreements. including fractional ownership. may result in counterclaims or other claims against us and could significantly harm our results of operations. or apartments. and leases for each of our lodging facilities are influenced by contract terms offered by our competitors. and we may be forced to loan or contribute monies to fund the shortfall of performance levels or terminate the management contract. funds must be borrowed or otherwise obtained. Monitoring the unauthorized use of our intellectual property is difficult. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future collaborations. Profits. managed and franchised properties to remain attractive and competitive. modernized and refurbished. even if required by the terms of our management or franchise agreements. As a result of the impact of the economic downturn on the lodging industry. We cannot assure you that all of the steps we have taken to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our trademarks by others. Our Revenues. which could adversely affect our business. our present growth strategy for development of additional lodging facilities entails entering into and maintaining various arrangements with property owners. the property owners and we have to spend money periodically to keep the properties well maintained. we may be required to make investments in or guarantee the obligations of third parties or guarantee minimum income to third parties. This creates an ongoing need for cash. vacation ownership and residential industries are highly competitive. as well as the negative publicity associated with conferences and corporate events. To the extent that property owners and we cannot fund expenditures from cash generated by operations. In certain cases. Failure to make the investments necessary to maintain or improve such properties could adversely affect the reputation of our brands. There is no guarantee that such trademark registrations will be granted. Recent events. In addition. we have entered into third party hotel management contracts which contain performance guarantees specifying that certain operating metrics will be achieved.recession becomes worse. we may not meet the requisite performance levels. Litigation of this type could result in substantial costs and diversion of resources. with owners reselling their VOIs. Any Failure to Protect our Trademarks Could Have a Negative Impact on the Value of Our Brand Names and Adversely Affect Our Business. The success of our business depends in part upon our continued ability to use our trademarks to increase brand awareness and further develop our brand in both domestic and international markets. From time to time. face restrictions on the ability to travel and hold conferences or events at resorts and luxury hotels. among other things. For a more detailed description of our performance guarantees. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance. particularly financial institutions. franchise agreements. or enter into new agreements in the future on terms that are as favorable to us as those that exist today. For our owned. Third-party property owners may be unable to access capital or unwilling to spend available capital when necessary. reduce their prices or expand or improve their marketing programs in ways that adversely affect our operating results. many businesses. competitive advantages or goodwill. and they may improve their facilities. We believe our trademarks are an important component of our business.

expropriation and nationalization as well as the impact in cases in which there are inconsistencies between U. managed or franchised properties in Europe. We intend to develop hotel and resort properties and residential components of hotel properties. Various other international jurisdictions have laws limiting the ability of non-U.S.Our Dependence on Hotel and Resort Development Exposes Us to Timing. 62 owned. or fail to invest at estimated levels. hurricanes. earnings. including but not limited to labor. operations.com». As the percentage of internet bookings increases. In addition. and local reporting or legal requirements. • development costs incurred for projects that are not pursued to completion. real estate. 2010. Our Current Growth Strategy is Heavily Dependent on Growth in International Markets. Further 60% of our pipeline represents new properties in Asia Pacific with 45% of our pipeline representing new growth in China alone. including sites held for development of vacation ownership resorts.S. In addition. Budgeting and Other Risks. We must rely on third parties to build and complete these projects as planned and cannot ensure that all such hotels will be timely constructed. occupancy and other required governmental permits and authorizations. • ability to raise capital. Orbitz. and • governmental restrictions on the nature or size of a project or timing of completion.S. managed or franchised properties in the Asia Pacific region (including four properties with majority ownership). as could other changes in the international regulatory climate and international economic conditions. and 181 owned. reduced room rates or other significant contract concessions from us. floods or fires that could adversely impact a project. • defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to be closed during the period required to rectify the situation. law and the laws of an international jurisdiction. In addition. International operations generally are subject to various political.. as suitable opportunities arise. These risks include the risk of war. We cannot assure you that any development project. • receipt of zoning. geopolitical. terrorism. We have significant international operations which as of December 31. the time period or the budget of such development may be greater than initially contemplated and the actual number of units or rooms constructed may be less than initially contemplated.S. sales in international jurisdictions typically are made in local currencies.com». entities to pay dividends and remit earnings to affiliated companies unless specified conditions have been met. • so-called acts of God such as earthquakes. civil unrest. the projects may not be realized or may not be as successful as anticipated. our financial results could be materially adversely affected. have construction and operational logistics different than the U. some of these internet travel intermediaries are attempting to commoditize hotel rooms by increasing the 8 . the owners and developers of new-build properties that we have entered into management or franchise agreements with are subject to these same risks which may impact the amount and timing of fees we had expected to collect from those properties. some international jurisdictions restrict the repatriation of non-U. and. Many countries in the Asia Pacific region. including risks associated with: • construction delays or cost overruns that may increase project costs. transportation. including China. managed or franchised properties in Latin America (including nine properties with majority ownership). International Operations Are Subject to Unique Political and Monetary Risks. if developed. As of December 31.S. 2010 included 247 owned. If our thirdparty property owners fail to invest in these projects. Africa and the Middle East (including 16 properties with majority ownership). and other risks that are not present in U. Moreover. Our dependence on international markets for growth is also limited by the availability of new markets. Expedia. Currency devaluations and unfavorable changes in international monetary and tax policies could have a material adverse effect on our profitability and financing plans. If our international expansion plans are unsuccessful. which subject us to risks associated with currency fluctuations. will in fact be developed. taking into consideration the general economic climate. Some of our hotel rooms are booked through third party internet travel intermediaries such as Travelocity. and we face established competitors that are similarly looking to grow in new markets. New project development has a number of risks.com». 84% of our pipeline represented international growth. Third Party Internet Reservation Channels May Negatively Impact Our Bookings. these intermediaries may be able to obtain higher commissions.com» and Priceline.

Such laws often impose liability without regard to whether the owner or operator knew of. there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system. If our properties do not generate revenue sufficient to meet operating expenses. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment. as financing becomes less available. There can be no assurance that as various systems and technologies become outdated or new technology is required. or in our currently or formerly owned or operated properties. Sometimes this taking is for less compensation than the owner believes the property is worth. There is a concentration of ownership of hotels operated under our brands by any single owner. Finally. or was responsible for. and there is the risk that advanced new technologies will be introduced. expanding or renovating real property increases and real property values may decrease as the number of potential buyers decreases. a variety of other factors affect income from properties and real estate values. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws. under. tax and eminent domain laws. costs related to cleaning up contamination resulting from historic uses at certain of our current or former properties or our treatment. insurance. While the risks associated with such ownership are no different than exist generally (i. In addition. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties. equity real estate investments are difficult to sell quickly and we may not be able to adjust our portfolio of owned properties quickly in response to economic or other conditions. including debt service and capital expenditures. Our Real Estate Investments Subject Us to Numerous Risks. single ownership groups own significant numbers of hotels operated by us. Similarly. and we from time to time have incurred. including governmental regulations. regardless of whether such facility is owned or operated by such person. We are subject to the risks that generally relate to investments in real property because we own and lease hotels and resorts. the development and maintenance of these technologies may require significant capital. our income will be adversely affected. procurement. Any of these factors could have a material adverse impact on our results of operations or financial condition. storage or disposal of wastes at facilities owned by others. including to comply with the legal requirements such as privacy regulations and requirements established by third parties such as the payment card industry.e. These technologies can be expected to require refinements. the presence of such hazardous or toxic substances. Under such laws. distribution and guest amenities. we could be held liable for the costs of removing or cleaning up hazardous or toxic substances at. we will be able to replace or introduce them as quickly as our competition or within budgeted costs and timeframes. our business and profitability may be significantly harmed. We May Be Subject to Environmental Liabilities.importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. the cost of acquiring. Although we expect to derive most of our business from traditional channels and our websites. A Failure to Keep Pace with Developments in Technology Could Impair Our Operations or Competitive Position. These agencies hope that consumers will eventually develop brand loyalties to their reservations system rather than to our lodging brands. For example. they are more concentrated. on. governments can take real property. Significant Owners of Our Properties May Concentrate Risks. the financial position of the owner. Other Environmental Laws govern 9 . The presence of hazardous or toxic substances may adversely affect the owner’s ability to sell or rent such real property or to borrow using such real property as collateral. Further. The hospitality industry continues to demand the use of sophisticated technology and systems including technology utilized for property management. and the expenses incurred. reservation systems. interest rate levels and the availability of financing. the overall state of the relationship with the owner and their participation in optional programs and the impact on cost efficiencies if they choose not to participate). developing. zoning. Following the acquisition of the Le Méridien brand business and a large disposition transaction to one ownership group in 2006. new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand. When interest rates increase.. brand assurance and compliance. Our properties and operations are subject to a number of Environmental Laws. and in the future may incur. storage or disposal facility. under eminent domain laws. it becomes more difficult both to acquire and to sell real property. In addition. if the amount of sales made through internet intermediaries increases significantly. Further. operation of our customer loyalty program. modify or renovate hotels.

Delays. we are subject to: (i) the risk that cash flow from operations will be insufficient to meet required payments of principal and interest.S. A breach of a covenant could result in an event of default that.occupational exposure to ACMs and require abatement or removal of certain ACMs (limited quantities of which are present in various building materials such as spray-on insulation. or realize equity investments from such projects. and local law. depending on the nature of any further sanctions that might be imposed. Environmental Laws also regulate PCBs. downgrades of our public debt ratings by rating agencies could increase our cost of capital. or the exportation of services to. Our ability to recover loans and guarantee advances from hotel operations or from owners through the proceeds of hotel sales. The United States does not prohibit U. If so. This amount constitutes significantly less than 1% of our worldwide annual revenues. Current and prospective hotel owners may find hotel financing expensive and difficult to obtain. Although we anticipate that we will be able to repay or refinance our existing indebtedness and any other indebtedness when it matures. there can be no assurance that we will be able to do so or that the terms of such refinancing will be favorable. A number of our hotels have USTs and equipment containing CFCs. refinancing of debt or otherwise may also affect our ability to raise new capital. regulation. capital expenditures or other purposes. our activities in Syria may be adversely affected. In addition. and (iii) interest rate risk.S. including a prohibition on the exportation of U. As a result of our debt obligations. decorative treatments and piping located at certain of our hotels) in the event of damage or demolition. or certain renovations or remodeling. floor coverings.-origin goods to Syria and the operation of government-owned Syrian air carriers in the United States except in limited circumstances. investments in. Syria. In order to fund new hotel investments. However. if necessary. The United States may impose further sanctions against Syria at any time for foreign policy reasons. For a more detailed description of the covenants imposed by our debt obligations. and our activities in that country are in full compliance with U. USTs or CFCs. we could be held liable for costs of remedial or other action with respect to PCBs. the United States has imposed limited sanctions as a result of Syria’s support for terrorist groups and its interference with Lebanon’s sovereignty. Starwood subsidiaries generated approximately $2 million of revenue from management and other fees from hotels located in Syria. In connection with our ownership. We Have Little Control Over the Availability of Funds Needed to Fund New Investments and Maintain Existing Hotels. increased costs and other impediments to restructuring such projects may affect our ability to realize fees. could affect the operation of our hotels and/or result in significant additional expense and operating restrictions on us. if not cured or waived. Congress and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. Risks Relating to Operations in Syria During fiscal 2010. including covenants relating to certain financial ratios. New or revised laws and regulations or new interpretations of existing laws and regulations. In addition. Our leverage may have important consequences including the following: (i) our ability to obtain additional financing for acquisitions. as well as refurbish and improve existing hotels. recover loans and guarantee advances. could result in an acceleration of all or a substantial portion of our debt. (ii) restrictive covenants. The cost impact of such legislation. the operation and subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. or new interpretations would depend upon the specific requirements enacted and cannot be determined at this time. working capital. The availability of funds for new investments and maintenance of existing hotels depends in large measure on capital markets and liquidity factors over which we have little control. tiles. operation and management of our properties. ceiling coverings. may be impaired or such financing may not be available on terms favorable to us and (ii) a substantial decrease in operating cash flow. see Item 7. which may be present in electrical equipment. our activities in Syria may reduce demand for our stock among certain investors. Risks Relating to Debt Financing Our Debt Service Obligations May Adversely Affect our Cash Flow. Management’s Discussion and Analysis of 10 . EBITDA (as defined in our credit agreements) or a substantial increase in our expenses could make it difficult for us to meet our debt service requirements and restrictive covenants and force us to sell assets and/or modify our operations. such as those related to climate change. both we and current and potential hotel owners must have access to capital.S. a country that the United States has identified as a state sponsor of terrorism.

Generally. Our property policies also provide that for the coverage of critical earthquake (California and Mexico). terrorist activity (including threats of terrorist activity). political risks. the claims from each affected hotel will be added together to determine whether the per occurrence limit. under those circumstances. In addition. avian flu. and the dollar amounts of these sub-limits are significantly lower than the dollar amounts of the overall coverage limit. the past outbreaks of SARS and avian flu had a severe impact on the travel industry.Financial Condition and Results of Operations — Liquidity and Capital Resources — Cash Used for Financing Activities in this Annual Report. our “all-risk” property policies provide that coverage is available on a per occurrence basis and that. for each occurrence. 11 . such as natural disasters. expediting costs or landscaping replacement. depending on the type of claim. such delays may result in either increased borrowings to provide capital to replace anticipated proceeds from such sales or reduced spending in order to maintain our leverage and return targets. Volatility in the credit markets may impact the timing and volume of the timeshare loans that we are able to sell. annual aggregate limit or sub-limits. if insurable events occur that affect more than one of our owned hotels and/or managed hotels owned by third parties that participate in our insurance program. In addition. business interruption and other risks with respect to our owned and leased properties and we make available insurance programs for owners of properties we manage. swine flu or another pandemic disease also may result in health or other government authorities imposing restrictions on travel. biological or chemical terrorism. there are also other risks including but not limited to war. political unrest and other forms of civil strife and geopolitical uncertainty have caused in the past. debris removal. all of the claims from each of our properties resulting from a particular insurable event must be combined together for purposes of evaluating whether the annual aggregate limits and sub-limits contained in our policies have been exceeded and any such claims will also be combined with the claims of owners of managed hotels that participate in our insurance program for the same purpose. A prolonged recurrence of SARS. For example. and may cause in the future. wars (including the potential for war). property. Terrorist Activity and War Our financial and operating performance may be adversely affected by so-called acts of God. Our vacation ownership business provides financing to purchasers of our vacation ownership units. Although we expect to realize the economic value of our vacation ownership note portfolio even if future note sales are temporarily or indefinitely delayed. our results to differ materially from anticipated results. Volatility in the Credit Markets Will Continue to Adversely Impact Our Ability to Sell the Loans That Our Vacation Ownership Business Generates. Therefore. claims by third party owners will reduce the coverage available for our owned and leased properties. certain forms of terrorism such as nuclear. Sub-limits exist for certain types of claims such as service interruption. Risks Relating to So-Called Acts of God. some environmental hazards and/or acts of God that may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or may be too expensive to justify insuring against. These policies offer coverage terms and conditions that we believe are usual and customary for our industry. in locations where we own and/or operate significant properties and areas of the world from which we draw a large number of customers. Our Insurance Policies May Not Cover All Potential Losses We carry insurance coverage for general liability. Risks Related to Pandemic Diseases Our business could be materially and adversely affected by the effect of a pandemic disease on the travel industry. there may be overall limits under the policies. Any of these events could result in a significant drop in demand for our hotel and vacation ownership businesses and adversely affect our financial condition and results of operations. and we attempt to sell interests in those loans in the securities markets. have been reached and if the limits or sub-limits are exceeded each affected hotel will only receive a proportional share of the amount of insurance proceeds provided for under the policy. Similarly. hurricane and flood. there is a limit as well as various sub-limits on the amount of insurance proceeds we will receive in excess of applicable deductibles. In addition. and the recent outbreak of swine flu in Mexico had a similar impact.

In particular. as a co-venturer. Should an uninsured loss or a loss in excess of insured limits occur. our joint venture partners could take actions binding on the joint venture without our consent. There can be no assurance regarding the level of acceptance of these brands in the development and consumer marketplaces. Similarly. 12 . we have from time to time invested. We may develop and launch additional brands in the future. or that the ability to obtain such financing will not be restricted by the terms of our debt agreements. as well as the anticipated future revenue from the hotel or resort. state. we may be unable to take action without the approval of our joint venture partners. There can be no assurance that we will be able to identify acquisition or investment candidates or complete transactions on commercially reasonable terms or at all. and expect to continue to invest. or a determination by a regulatory authority that we were not in compliance. Alternatively. we could become liable for our partner’s share of joint venture liabilities. that the cost incurred in developing the brands will be recovered or that the anticipated benefits from these new brands will be realized. In that event. We are focused on restructuring and enhancing real estate returns and monetizing investments. which typically entitle the buyer to ownership of a fully-furnished resort unit for a one-week period on either an annual or an alternate-year basis. There can be no assurance. or have economic or business interests or goals that are inconsistent with our business interests or goals. In addition.We may also encounter challenges with an insurance provider regarding whether it will pay a particular claim that we believe to be covered under our policy. Our Vacation Ownership Business is Subject to Extensive Regulation and Risk of Default We market and sell VOIs. may attempt to sell these identified properties and assets. Although we believe that we are in material compliance with all applicable federal. actions by a co-venturer might subject hotels and resorts owned by the joint venture to additional risk. that we will be able to complete dispositions on commercially reasonable terms or at all or that any anticipated benefits will actually be received. and from time to time. Additionally. could adversely affect us. Consequently. are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. no longer complement our business. Joint venturers often have shared control over the operation of the joint venture assets. and provide financing to purchasers of VOIs. joint venture investments may involve risks such as the possibility that the co-venturer in an investment might become bankrupt or not have the financial resources to meet its obligations. local and foreign laws and regulations to which vacation ownership marketing. or be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. increased regulations of telemarketing activities could adversely impact the marketing of our VOIs. we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. however. We periodically review our business to identify properties or other assets that we believe either are non-core. sales and operations are currently subject. Our Acquisitions/Dispositions and Investments in New Brands May Ultimately Not Prove Successful and We May Not Realize Anticipated Benefits We will consider corporate as well as property acquisitions and investments that complement our business. Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk In addition to acquiring or developing hotels and resorts or acquiring companies that complement our business directly. develop and operate vacation ownership resorts. These activities are all subject to extensive regulation by the federal government and the states in which vacation ownership resorts are located and in which VOIs are marketed and sold including regulation of our telemarketing activities under state and federal “Do Not Call” laws. there can be no assurance that any anticipated benefits will actually be realized. If transactions are consummated. we could lose all or a portion of the capital we have invested in a hotel or resort. We also acquire. there can be no assurance that we will be able to obtain additional financing for acquisitions or investments. Further. the laws of most states in which we sell VOIs grant the purchaser the right to rescind the purchase contract at any time within a statutory rescission period. Therefore. changes in these requirements. In many cases. should a joint venture partner become bankrupt. we will be competing for these opportunities with third parties who may have substantially greater financial resources or different or lower acceptable financial metrics than we do.

In addition. Risks Related to Our Ability to Manage Growth Our future success and our ability to manage future growth depend in large part upon the efforts of our senior management and our ability to attract and retain key officers and other highly qualified personnel. that our allowance for losses will be adequate. it is possible that they may seek to collect the additional tax payment from us and we would not be able to collect these taxes from the customers. such actions could have a material adverse effect on our business. Over the last few years we have been pursuing a strategy of reducing our investment in owned real estate and increasing our focus on the management and franchise business. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products. Accordingly. We cannot be sure that these interpretations are accurate or that the responsible taxing or other governmental authority is in agreement with our views. it is possible that we might have additional tax exposure. To the extent that any tax authority succeeds in asserting that the hotel occupancy tax applies to the gross revenue on these transactions. we will not have recovered the marketing. Our current business practice with our internet reservation channels is that the intermediary collects hotel occupancy tax from its customer based on the price that the intermediary paid us for the hotel room. Tax Risks Evolving Government Regulation Could Impose Taxes or Other Burdens on Our Business. However. Competition for such personnel is intense.We bear the risk of defaults under purchaser mortgages on VOIs. In such event. The imposition of additional taxes or requirements to change the way we conduct our business could cause us to have to pay taxes that we currently do not collect or pay or increase the costs of our services or increase our costs of operations. non-compliance with applicable privacy regulations by us (or in some circumstances noncompliance by third parties engaged by us) or a breach of security on systems storing our data may result in fines. we have experienced significant changes in our senior management. they should seek the additional tax payments from the intermediary. In the past several years. Several jurisdictions have stated that they may take the position that the tax is also applicable to the intermediaries’ gross profit on these hotel transactions. there can be no assurance that our senior management will be able to successfully execute and implement our growth and operating strategies. Accordingly. and such costs will be incurred again in connection with the resale of the repossessed VOI. results of operations and financial condition. If jurisdictions take this position. There can be no assurance that our strategy will be successful. This increase will require us to recruit and train a substantial number of new associates to work at these hotels as well as increasing our capabilities to enable hotels to open on time and successfully. “Directors. We then remit these taxes to the various tax authorities. We rely upon generally available interpretations of tax laws and other types of laws and regulations in the countries and locales in which we operate. 13 . selling (other than commissions in certain events). including marketing and promotional purposes. we are planning on substantially increasing the number of hotels we open every year and increasing the overall number of hotels in our system. in the event of such defaults. properties and services to our guests. payment of damages or restrictions on our use or transfer of data. we believe that any additional tax would be the responsibility of the intermediary. there is no assurance that the sales price will be fully or partially recovered from a defaulting purchaser or. including executive officers (see Item 10. The collection and use of personal data are governed by privacy laws and regulations enacted in the United States and other jurisdictions around the world. Executive Officers and Corporate Governance” of this Annual Report). however. If a VOI purchaser defaults on the mortgage during the early part of the loan amortization period. Risks Related to Privacy Initiatives We collect information relating to our guests for various business purposes. There can be no assurance that we will continue to be successful in attracting and retaining qualified personnel. As a result. Privacy regulations continue to evolve and on occasion may be inconsistent from one jurisdiction to another. and general and administrative costs associated with such VOI.

.. . .. . . our Board of Directors may give the holders preferences. . . ... . .... . ... . .. . .. . . ... . .. .. .. . . . Item 1B.. . .. . . .. . . .200 26. . . Our hotel business included 1...000. . Regis and Luxury Collection . such as a classified board. .. . quality and variety of services offered in the markets in which they are located. ... .800 4. . .. . without a vote of shareholders. .. .. . . . . . .. .. .. . .. . .. . .... Our Board of Directors has the authority.200. with operations in approximately 100 countries.. . . . Le Méridien . .. . Certain provisions of Maryland law permit our Board of Directors. ... . . ... . . Westin . Sheraton . .. . .. Not applicable. . . ... .. .. . For further information see Item 7. . managed or franchised hotels with approximately 302... Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources in this Annual Report. In addition.. . . .... as of December 31... .. 2010: Hotels.041 19.. . . ... . . . ... . .. . ... . . . . ... . . . Item 2. predominantly under seven brands. . . generally to be premier establishments with respect to desirability of location. . ... which provisions may be amended only by the affirmative vote of our shareholders holding two-thirds of the votes entitled to be cast on the matter.. . . . . .. Since our Board of Directors has the power to establish the preferences and rights of preferred shares without a shareholder vote.. . . .027 owned. . size. . . . Four Points .. . powers and rights. .. . . . . .. . . .. . ..... . Although obsolescence arising from age. . . . .. physical condition. .. . facilities. The issuance of preferred shares having special preferences or rights could delay or prevent a change in control even if a change in control would be in the interests of our shareholders. . . . . .. . . . .. . . . ...500 308..000 rooms and our owned vacation ownership and residential business included 14 stand-alone vacation ownership resorts and residential properties at December 31. .. ... . . .... 14 . . . .000. . . . ... . VOI and Residential(a) Properties Rooms St. .. . .. . 97 38 181 100 401 158 46 20 1. . Our Board of Directors May Implement Anti-Takeover Devices and Our Charter and Bylaws Contain Provisions which May Prevent Takeovers. . . and style can adversely affect our Resorts.. ..400 6. . 2010. .. senior to the rights of holders of our shares. . . . Properties. without stockholder approval. . .. . Starwood and third-party owners of managed and franchised Resorts expend substantial funds to renovate and maintain their facilities in order to remain competitive. .. to implement possible takeover defenses that are not currently in place... .. . ... .. . .... .700 Total . . . . . ... . . . consisting of one billion shares of common stock and 200 million shares of preferred stock. ... ..Risks Relating to Ownership of Our Shares Our Board of Directors May Issue Preferred Stock and Establish the Preferences and Rights of Such Preferred Stock. . . . . .. .. . . . condition of facilities. . . .. .. .. . .. . ..700 141. Our charter provides that the total number of shares of stock of all classes which the Corporation has authority to issue is 1... . . . . .... . All brands (other than the Four Points by Sheraton and the Aloft and Element brands) represent full-service properties that range in amenities from luxury hotels and resorts to more moderately priced hotels. . . . . . . Aloft and Element brands are select service properties that cater to more value oriented consumers... .200 71. . . including voting rights. . We consider our hotels and resorts. . . including vacation ownership resorts (together “Resorts”).. . .500 27..... . . . The following table reflects our hotel and vacation ownership properties.. Independent / Other . . our charter contains provisions relating to restrictions on transferability of the Corporation Shares. W... . .. . .. . . Unresolved Staff Comments. . our Bylaws provide that directors have the exclusive right to amend our Bylaws. .. ... ... ... .. . . ... Aloft . by brand. to establish the preferences and rights of any preferred shares to be issued and to issue such shares.. . . . .400 11. . . We are one of the largest hotel and leisure companies in the world.. . . .. .. . As permitted under the Maryland General Corporation Law.. . . .. . . . . . .... .. . .. . . Our Four Points by Sheraton.

. . Caribbean & Canada). . Europe . . . . . . In addition to our owned and leased hotels. . . . . . . . . . a small portion of which opened in 2010 and the majority of which will open in the future. . . . For additional fees. . . . . . . will accept or will retain a particular management contract. 100. . Our ability or willingness to make such investments may determine. including centralized reservations. . . . . . . .(a) Includes vacation ownership properties of which 14 are stand-alone.200 rooms worldwide. . . .000 rooms left our system. . usually under a long-term agreement with the hotel owner (including entities in which we have a minority equity interest). . . . . . . . . . . public relations and national and international media advertising. Le Méridien. . . . .7% Total . . . centralized reservations and other centralized administrative functions. . . . . . . . . . 2010. . debt or other investments from us to help finance hotel renovations or conversions to a Starwood brand so as to align the interests of the owner and Starwood. . whether we will be offered. . Managed Hotels. . . . . . 2010. Management believes that companies. . . . . . . . . . . . . . .000 rooms. . . . . Hotel owners typically enter into management contracts with hotel management companies to operate their hotels. . . . at December 31. . . . . . . Americas (Latin America. . . . . . . . . . . including brand-specific products. . . . . . . . Luxury Collection. Hotel and resort properties in the United States are often owned by entities that do not manage hotels or own a brand name. . . . . . . . . . . . . . . sales and marketing. . . and the location of. . Hotel Business Managed and Franchised Hotels. We manage hotels worldwide. Westin. . . . . . training and supervising the managers and employees that operate these facilities. . . . .1% 26. . . . . . . . we opened 39 managed hotels with approximately 9. . . the hotel owner often chooses to pay separate franchise fees to secure the benefits of brand marketing. . . . . we opened 70 managed and franchised hotels with approximately 15. . . We franchise our Sheraton. . . . . . public relations and national and international media advertising. . . . . . . .0% Management contracts typically provide for base fees tied to gross revenue and incentive fees tied to profits as well as fees for other services. . . we signed management agreements for 61 hotels with approximately 15. . . . franchised hotels and review 15 . . . Asia Pacific .000 rooms. . . . . . . . . . . Some of our management contracts permit the hotel owner to terminate the agreement when the hotel is sold or otherwise transferred to a third party. . . . owners seek hotel managers that can provide attractively priced base. . . . . . . . Brand Franchising and Licensing. . . .6% 7. . . . . . . . as well as if we fail to meet established performance criteria. .4% 15. . . . . Aloft and Element brand names and generally derive licensing and other fees from franchisees based on a fixed percentage of the franchised hotel’s room revenue. . . a franchisee may also purchase hotel supplies. . . . . . . we generated management fees by geographic area as follows: United States . . . . . . during 2010. . . . . . . particularly in the sales and marketing area. . During the year ended December 31. In our experience. . . . from certain Starwood-approved vendors. . many hotel owners seek equity. . 33. . marketing and reservation services. . . . . . . . . When a management company does not offer a brand affiliation. Our responsibilities under hotel management contracts typically include hiring. . . . . In 2010. . . sales and marketing. . In addition. . . . . . .000 rooms and 22 managed and franchised hotels with approximately 7. . . . . such as Starwood. . . we provide centralized reservation services and coordinate national advertising and certain marketing and promotional services. . . . . . . We approve certain plans for. In addition. . incentive and marketing fees combined with demonstrated sales and marketing expertise and operations-focused management designed to enhance profitability. . . . . . and 15 managed hotels with approximately 5. . In addition. we managed 463 hotels with approximately 159. . . .2% 17. . 2010. . . . . . as well as fees for other services. . . . . . . . . . . . . We prepare and implement annual budgets for the hotels we manage and are responsible for allocating property-owner funds for periodic maintenance and repair of buildings and furnishings.000 rooms left the system. . . . . . . . . . . in part. . During the year ended December 31. . . that offer both hotel management services and wellestablished worldwide brand names appeal to hotel owners by providing the full range of management. . eight are mixed-use and one is an unconsolidated joint venture totaling rooms of 7. . .000. . . . Four Points by Sheraton. . including centralized reservations. . . . . . Middle East and Africa . . . . . . . . . .

. . . . . . . .... . . . . . . . . . . In addition. . . .... and seven franchised hotels with approximately 2. .. . . . . . . .. . . . . . . . . . .400 rooms. .. . . . ... leased and consolidated joint venture hotels and a significant portion of these results are driven by these hotels in North America....000 rooms left our system.. 13... . $1. ...9% 16 .. .. . . . To date. . .. Since the beginning of 2006. ... . . . . . . . The following represents our top five markets in the United States by metropolitan area as a percentage of our total owned. . . . . . . . . . . . 63. ... . . Caribbean & Canada). 2010. . .. . .. . . NY .. .... . . AZ . .. 2010. .. .. . . . . .. . .. . .2% . . . . . . .. ... . 2010. . .. .. .. .. . . .. . .. . . .. . . Boston.. leased and consolidated joint venture hotels. . . .. .. .704 billion.. . . . ... ... . . . .... Owned.. .1% 4. . 2009 and 2008 were $1. . . . . ... . .584 billion and $2. . . . .. Total revenues generated from our owned. . . .. there were 502 franchised properties with approximately 121.... . Leased and Consolidated Joint Venture Hotels. .. . . .... . . . 12.2% 5. . .. . .. . a portion of which opened in 2010 and a portion of which will open in the future. . leased and consolidated joint venture hotels worldwide for the years ending December 31. Americas (Latin America. .. . . .. . .9% . . we embarked upon a strategy of selling a significant number of hotels... . .000 rooms. we have derived the majority of our revenues and operating income from our owned. . . . . . . respectively). . . . ... .0% 4. . .067 billion. . .. . 100.their design. . .. we have not provided seller financing or other financial assistance to buyers. . . Asia Pacific . .. . . . . .. . .. During the year ended December 31. .. . .. . . . leased and consolidated joint venture revenues for the year ended December 31. . . .3% 5. during 2010 we signed franchise agreements for 35 hotels with approximately 7. . . . Historically. .. . . . where we have sold hotels. . . . . .. .. . . . . . . .. .. . . Middle East and Africa . . At December 31. . . . . . . . .. . .... . $1. . . . .. . . . .4% 4. . we have sold 62 wholly owned hotels which has substantially reduced our revenues and operating income from owned. .. . . . . . . . . . . . . . . . . The majority of these hotels were sold subject to long-term management or franchise contracts. . .. . 9.7% 6. . . .380 billion for 2010. . .. . 0.... . . . . . .. . . . . . . .. . . ..212 billion. . . we generated franchise fees by geographic area as follows: United States . . 2009 and 2008. .. . . . . . .. . .6% .. . . . Europe . MA . . ..000 rooms. . ... .. ... .. . . . .. .. . . . .. . . 2010 (with comparable data for 2009): Top Five Domestic Markets in the United States as a % of Total Owned Revenues for the Year Ended December 31.. Phoenix. However. . . . . . .. . 2010.. 2010 with Comparable Data for 2009(1) Metropolitan Area 2010 Revenues 2009 Revenues New York... . . . . . . . . . . . . . . .. we opened 31 franchised hotels with approximately 6. . .. . .3% 14. . .. . .4% . . . . . . . . . . .. . . . ... . . Hawaii . . . .. . . . .0% In addition to the franchise contracts we retained in connection with the sale of hotels during the year ended December 31..9% . .. . . . . .2% 6. . . ... . . . . leased and consolidated joint venture hotels in North America were $1. . ..024 billion and $1. . . Total . 12. . . . . . .. .. . respectively (total revenues from our owned.. . . . . . .. Chicago. . . .. .. .. . IL . beginning in 2006.... . . . . . .4% 3. . . . . ..

..The following represents our top five international markets by country as a percentage of our total owned.. French Quarter W Atlanta The Westin Maui Resort & Spa The Westin Peachtree Plaza... . . NY San Francisco. . .068 450 397 175 394 206 251 136 136 123 177 150 941 665 135 251 . San Francisco The Phoenician W New York — Times Square W Chicago Lakeshore W Los Angeles Westwood W Chicago City Center W New Orleans W New Orleans. IL New Orleans. . GA Maui. . AZ New York.... . . .8% 4. NY Chicago. . ... .... .. . IL San Francisco.. HI Atlanta... LA New Orleans. CA Chicago.. LA Atlanta. .. . ... John Resort & Villas Sheraton Kauai Resort Sheraton Steamboat Springs Resort Sheraton Suites Philadelphia Airport Aloft Lexington Aloft Philadelphia Airport Element Lexington Four Points by Sheraton Philadelphia Airport Four Points by Sheraton Tucson University Plaza The Boston Park Plaza Hotel & Towers The Manhattan at Times Square Tremont Hotel Clarion Hotel 17 New York. . MA Philadelphia. ....... .. . . . Italy .. PA Lexington. ... CA St. .. HI Steamboat Springs... CA Scottsdale... ... . . . .. .... New York St. .. Spain .. . . Regis Hotel... ....... Regis Hotel. . .0% 5...5% 2... .. . . .. ..3% Includes the revenues of hotels sold for the period prior to their sale.. . CA 229 260 643 509 520 258 368 423 87 275 759 1. ... 10.. .. . . PA Lexington. ... ... MA Philadelphia... we currently own or lease 62 hotels as follows: Hotel Location Rooms U... .. . . . NY Chicago. . ...... . . .. . . Atlanta The Westin Gaslamp San Diego The Westin San Francisco Airport The Westin St. Virgin Islands Kauai.. . .. . . .... .... . ... ... .. .. Australia . .8% 7... . .1% 9... . Following the sale of a significant number of our hotels in the past three years. PA Tucson. .5% 4.. Hotels: The St. . AZ Boston. . .. .... 2010 (with comparable data for 2009): Top Five International Markets as a % of Total Owned Revenues for the Year Ended December 31. . . .. . ... leased and consolidated joint venture revenues for the year ended December 31... 2010 with Comparable Data for 2009(1) Country 2010 Revenues 2009 Revenues Canada .. .. (1) . . . . . ....... . . .. . .. .. CO Philadelphia. ...7% 5. John. . .. GA San Diego.. .. ....3% 7. .... . .. . .. .. .. CA San Francisco..S. ...... ..1% 4. . . . Mexico .. . MA New York. IL Los Angeles.. . . . . . ....

Spain Barcelona. Vienna Hotel Goldener Hirsch Hotel Maria Cristina W Barcelona The Westin Excelsior. England 276 189 143 161 160 107 91 180 147 138 140 69 136 473 316 243 280 171 379 273 163 1. London Scranton. Regis Grand Hotel. Argentina Mexico City. Fiji Dublin. Mexico Toronto. Rome The Westin Resort & Spa. PA Rome. Austria Salzburg. Italy Los Cabos. Austria San Sebastian. Japan Florence. Rome St. Spain Nadi. Ireland Toronto. Canada Montreal. Austria Vienna. Mexico Lima. Italy Buenos Aires. Italy Tokyo. PA Scranton. Italy Venice. Canada Sydney. Peru Rascafria. Australia Rio de Janeiro. Florence The Westin Resort & Spa Cancun The Westin Denarau Island Resort The Westin Dublin Hotel Sheraton Centre Toronto Hotel Sheraton On The Park Sheraton Rio Hotel & Resort Sheraton Diana Majestic Hotel Sheraton Ambassador Hotel Sheraton Lima Hotel & Convention Center Sheraton Santa Maria de El Paular Sheraton Fiji Resort Sheraton Buenos Aires Hotel & Convention Center Sheraton Maria Isabel Hotel & Towers Sheraton Gateway Hotel in Toronto International Airport Le Centre Sheraton Montreal Hotel Sheraton Paris Airport Hotel & Conference Centre The Park Lane Hotel. Argentina Seville. Mexico Nadi.377 557 559 106 229 431 44 264 739 755 474 825 252 303 18 . Spain Vienna. PA Scranton.Hotel Location Rooms Cove Haven Resort Pocono Palace Resort Paradise Stream Resort International Hotels: St. Mexico Florence. Fiji Buenos Aires. Los Cabos The Westin Resort & Spa. Italy Cancun. Italy Monterrey. Spain Rome. Puerto Vallarta The Westin Excelsior. Canada Paris. France London. Regis Osaka Grand Hotel Hotel Gritti Palace Park Tower Hotel Alfonso XIII Hotel Imperial Hotel Bristol. Brazil Milan. Mexico Puerto Vallarta.

. . .6% 5.81 $ 92. . . . . . . . . 73. . . AZ. . . . . .05 $116. . . . .. . managed and franchised hotels. . . . . . . . . . . .. . . . . . . . .08 $174. . . . International (26 hotels with approximately 7. . . . Occupancy .. . . . 65. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . Westin Peachtree Plaza in Atlanta. . we invested approximately $184 million and $171 million. ADR . . . . .. . . . . . . . Occupancy . . . . . . $202. . GA. . . . . . . . 63. . . NY. . . . $141. REVPAR may not be comparable to similarly titled measures such as revenues. . . . . . . . . . . . . . . . . . . . . . leased. .6% 4. . . . . . . . . . . .. . . . .45 . . . . . . . . . . $136. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9% 5. . which is derived from rooms and suites rented or leased. . . . . . . .29 . . . . . . . . . .5% . . Westin Gaslamp in San Diego. . . . . . . . .000 rooms) REVPAR . .2% 2. . . as it measures the period-over-period growth in rooms revenue for comparable properties. . . . . . . $106. . . .. . . .1 8. . . . . . . . . IL. . . The following table summarizes REVPAR. . . . ADR . 2010 2009 Variance Worldwide (54 hotels with approximately 19. . .6% 56. . . . . . . .6% . . . . . . . . . $147. . . .7 (1) REVPAR is calculated by dividing room revenue. . . . . . . . . . .3% 0. . Occupancy . . .An indicator of the performance of our owned. . . . . . . . . . . . . Same-Store Systemwide Hotels represent results for the same store owned.8 10. The Phoenician in Scottsdale. CA. . . . . This is particularly the case in the United States where there is no impact on this measure from foreign exchange rates. . . . . .57 $ 97. . . . . . . .. . . . for capital expenditures at owned hotels. .27 $122. .5% 4. The following table summarizes REVPAR. . ADR . . .. . . . . . .. . . . . . . . . . . . . . . . .04 . . . . . . . . . 19 . .26 . . . . Occupancy . . . . 66. . . . . . . . . . . During the years ended December 31. . . .5 . . . . . . . . . . . . . . . $196. . .9% 11. . . . . . . . . . . . . . Occupancy . . .6% 1. . . . . . . .57 . . . . . . . . . . Year Ended December 31. . .02 $126. . . . International REVPAR . $192.6% 61. . . . . . . . . . . . . . ADR . . . . . . . . . . . . . leased and consolidated joint venture hotels is revenue per available room (“REVPAR”)(1). 69. . . . . . . .. . . . . . . . . . . . . North America (28 hotels with approximately 12. . . . . . . . . . .17 . and the Manhattan Hotel at Times Square in New York. .. . .. . . . .97 $184. . . . . ADR and occupancy for our Same-Store Systemwide Hotels on a year-to-year basis for the years ended December 31.5 10. . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . $129. . . . . . .90 $104.75 .4% 0. . . . . . . . . . .68 .00 $158. . . . . . . . . . 2010 and 2009. . . . . . . . . . . 2010 and 2009: Year Ended December 31. . . . $115. . . . . . .. North America REVPAR . . These capital expenditures include construction costs at W City Center in Chicago. . . .3% 64. . .0)% 6.3 11. . . . .99 $147. . . . . . . .99 $205. . .000 rooms) REVPAR . .000 rooms) REVPAR . . . . . . . . . . . . . . average daily rates (“ADR”) and average occupancy rates on a year-to-year basis for our 54 owned. . .60 . . .5% (1. . . . . . . . . . . . . . . . . 2010 2009 Variance Worldwide REVPAR .1% 68. . . . . . . . . . . . .0% . . . . . leased and consolidated joint venture hotels (excluding nine hotels sold or closed and eight hotels undergoing significant repositionings or without comparable results in 2010 and 2009) (“Same-Store Owned Hotels”) for the years ended December 31. 2010 and 2009. . . . . . . .7% 4. . . . . . . . . . . . . . . . . . . $ 99. . 67. .0% 9.. . . . . $160. . . . . . . . .6% . . . . .41 . . . . . .. . . . . . . . . . . . . . . . . . . respectively. . . . . . . . . . . . .4% 62. . . . . . . .62 $191. . . . . $177. . . . . . . . . . . . . ADR . . . .5% 60. .. . Occupancy .51 . . . . . .74 . by total room nights available for a given period. . . .. . .4% 5.

as well as construction costs at the St. We have entered into licensing agreements for the use of certain of our brands to allow the owners to offer branded condominiums to prospective purchasers.Vacation Ownership and Residential Business We develop. The licensing arrangement generally terminates upon the earlier of sell-out of the units or a specified length of time. CA. for vacation ownership capital expenditures. resulting in a primarily non-cash pre-tax impairment charge in 2009 of $255 million. FL. As a result of these decisions and future plans for the vacation ownership business. Due to the global economic crisis and its impact on the long-term outlook for the timeshare industry. Financial Statements and Supplementary Data. own and operate vacation ownership resorts. or for hotel stays at Starwood properties. At December 31. including VOI construction at the Westin Desert Willow Villas in Palm Desert. As a result. we typically receive a licensing fee equal to a percentage of the gross sales revenue of the units sold. No new projects are being initiated and we have decided not to develop three vacation ownership sites and future phases of certain existing projects. Commitments and Contingencies. we also recorded a $90 million non-cash charge for the impairment of goodwill associated with the vacation ownership reporting unit. provide financing to customers who purchase such ownership interests. we had 23 residential and vacation ownership resorts and sites in our portfolio with 17 actively selling VOIs and residences including one unconsolidated joint venture. inventories. in the consolidated financial statements set forth in Item 8. We have also entered into arrangements with several owners for mixed use hotel projects that will include a residential component. in many cases. resulting in a pre-tax charge of $17 million. the Westin Lagunamar Ocean Resort in Cancun. we securitize or sell the receivables generated from our sale of VOIs. Legal Proceedings. Additionally. market and sell the VOIs in the resorts and. we made a decision to reduce the pricing of certain inventory at existing projects. During 2010 and 2009 we invested approximately $151 million and $145 million. respectively. Regis Bal Harbour Resort in Miami Beach. Item 3. Owners of VOIs can trade their interval for intervals at other Starwood vacation ownership resorts. 2010. fixed assets and land values at certain projects were determined to be impaired and were written down to their fair value. Incorporated by reference to the description of legal proceedings in Note 26. we completed a comprehensive review of our vacation ownership projects. From time to time. In consideration. during the fourth quarter of 2009. for intervals at certain vacation ownership resorts not otherwise sponsored by Starwood through an exchange company. 20 . in connection with this review of the business.

. . . . . . . . . .16 $39. . . . . . . . . . . which was paid in December 2010. Sale of Unregistered Securities In 2006. . . . . . we redeemed all of the Class A Exchangeable Preferred Shares of the Trust (“Class A EPS”) (approximately 562. . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . .. . .. . . . . . . 2011. . . . . .72 $54. .49 $12. The following table sets forth the quarterly range of the high and low sale prices of the Corporation Shares for the fiscal periods indicated as reported on the NYSE Composite Tape: High Low 2010 Fourth quarter . . . . . . .. 21 . Second quarter . . $62. . . . . . . (b) The Corporation declared a dividend in the fourth quarter of 2009 to shareholders of record on December 31.99 As of February 11. . . . . . . . . . . . . 2010 and 2009: Dividends Declared 2010 Annual dividend .. . .. . . . . .25 $56. . in connection with the Host Transaction. . . . . . .. . . . . . . . . . . . . . . Approximate Number of Equity Security Holders .000 of these units outstanding at December 31. . . Also in 2006. . .000 units) for approximately $34 million in cash. .78 $52. . . .. . . .12 $ 8. . . . . .. . .68 $23. . 2010. . . . . . . . In 2006. . . . . . . . . . . . we completed the redemption of the remaining 25. . . . . . .. . . which was paid in January 2010.15 $27. . . . . . . . . respectively. . . . . . . . .52 $37. . . . . . . . . and there were approximately 166.. . . . . . . . .. . . . . . . . . .66 $18. . .60 $41. . . . . 2009.000 holders of record of Corporation Shares. . .55 $34. . . .. .. . . . . .20(b) (a) The Corporation declared a dividend in the fourth quarter of 2010 to shareholders of record on December 16. . . . . . . . . Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Corporation Shares are traded on the New York Stock Exchange (the “NYSE”) under the symbol “HOT”. . . . . . . . .. . . .. .. . . . . . . .. . . .. . . . . . . . . . 2009 Fourth quarter . . . .. . . Third quarter . .78 $26. . .28 $33. . . . . . . . . . . . . . . . . . . . . . . . . SLC Operating Limited Partnership units are convertible into Corporation Shares at the unit holder’s option. . . . . .. . . . . . . . . .. . . . . . . . . . .. . . . . Second quarter . .. . . . . . . . .. 2010 and 2009. . . . . . . . . . 2009 Annual dividend . . . . . . . . . $0. . . . . . Market for Registrant’s Common Equity. . . .. . . . . .000 and 169.000 shares) and Realty Partnership units (approximately 40. . . . . . . . . . we redeemed approximately 926. . . .PART II Item 5. . . . . . . . . . .. . . . .000 SLC Operating Limited Partnership units for approximately $56 million in cash. . . . . . . . ... . . . . . . .. . . . Third quarter . . . there were approximately 14. . . . . . . Dividends The following table sets forth the frequency and amount of dividends made by the Corporation to holders of Corporation Shares for the years ended December 31. . . ... . . . . . Issuer Purchases of Equity Securities We did not repurchase any Corporation Shares during 2010. . . . . . . . . .30(a) $0. . . . . . .. . . . . . . . . . .000 outstanding shares of Class B Exchangeable Preferred Shares of the Trust (“Class B EPS”) for approximately $1 million in cash. . . . . Conversion of Securities. . . . . . . . . . . .65 $47. . . . . . . First quarter . . . . . provided that we have the option to settle conversion requests in cash or Corporation Shares. .

14 100.89 77.22 122.38 97.78 114.33 80.72 115.67 76.STOCK RETURN PERFORMANCE AND CUMULATIVE TOTAL RETURN Set forth below is a line graph comparing the cumulative total stockholder return on the Corporation Shares (and Shares until April 7.96 51.35 37. The graph assumes that the value of the investments was 100 on December 31. The comparisons are provided in response to SEC disclosure requirements and are not intended to forecast or be indicative of future performance. 2006) against the cumulative total return on the S&P 500 and the S&P 500 Hotel Index (the “S&P 500 Hotel”) for the five fiscal years beginning December 31.87 129. the Share prices for the periods prior to the Host Transaction on April 10.01 123.00 122.00 100.60 88. 250 Starwood 200 S&P 500 S&P 500 Hotel 150 DOLLARS 100 50 0 2005 2006 12/31/05 2007 12/31/06 12/31/07 2008 12/31/08 2009 12/31/09 2010 12/31/10 Starwood S&P 500 S&P 500 Hotel 100.94 22 . 2010. 2005 and ending December 31. In addition. 2005 and that all dividends and other distributions were reinvested.24 112.00 100. 2006 have been adjusted based on the value shareholders received for their Class B shares.

. . . . . . . .90 (a) In connection with the Host Transaction. . 2008 2007 (In millions) 2006 Balance Sheet Data Total assets . . goodwill and intangible assets. . .635) $ 90 $ 276 $ 0. . net of current maturities and including exchangeable units and Class B preferred shares . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations. . . . 2009 2008 2007 (In millions. the Trust declared distributions totaling $0.00 $ 764 $ 571 $ (71) $ 116 $ (26) $ (993) $ 93 $ 165 $ 0. . . excluding noncontrolling interests). . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) discusses our consolidated financial statements. . . 23 . . . In December 2006. . . .20 $5. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. . . . . . . financing operations. . . Operating Data Cash from operating activities . . . plant. . . self-insurance claims payable. . .761 $9. . . . . . .96 $ 884 $ 500 $ (215) $ 1. . . . . .776 $8.754 $ 610 $ 249 $ 1. . . .Item 6. . . . . . . . . restructuring costs. .90 $ 0. except per share data) 2006 Income Statement Data Revenues. . .703 $9. . . . . . . . . . .071 $4. . . . .999 $ 5. . . . . The following financial and operating data should be read in conjunction with the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto appearing elsewhere in this Annual Report and incorporated herein by reference. . . . . . . . . . . . . .84(a) $ 0. On an ongoing basis. . . . in February and March 2006. . . . Actual results may differ from these estimates under different assumptions and conditions. . bad debts. . . .52 $ 4.955 $3. . . .590 $1. Cash used for financing activities . . . Income (loss) from continuing operations(b) . . . . . Cash distributions and dividends declared per Share .502 $3. . . . . frequent guest program liability. Cash from (used for) investing activities . .105 $ 2. .42 per Corporation Share. . . .63 $ 0. . . . Selected Financial Data. . . . . inventories. .42 per Corporation Share.402 $ (712) $(2. . . . . . the Corporation declared a dividend of $0. . . . the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. . which have been prepared in accordance with accounting principles generally accepted in the United States. . . . . . . . . . . . . . . . . . . management evaluates its estimates and judgments. . .215 $2. .840 $ 841 $ 824 $ 532 $ 1. . The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. investments. the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting periods. . . . (b) Amounts represent income from continuing operations attributable to Starwood Shares (i.696 $ 600 $ 26 $ 310 $ (1) $ 1. Operating income . $9. . $5. .e. . . . .622 $9. . . 2010 Year Ended December 31. Aggregate cash distributions paid .280 $3. . . . . . . . Diluted earnings per share from continuing operations . . . Long-term debt.30 $ 0. . . . . . property and equipment. . . retirement benefits and contingencies and litigation. . . 2010 2009 At December 31. . .34 $ $ $ $ 646 (172) (243) 172 $5. . . . . . . . . . including those relating to revenue recognition. . . . income taxes. .827 Item 7. . . . . . .

which is generally based on a percentage of gross revenues. Revenue is generally recognized upon the buyer demonstrating a sufficient level of initial and continuing investment. The following is a description of the composition of our revenues: • Owned. we record reserves against these revenues based on expected default levels. usually under long-term contracts. leased and consolidated joint venture hotels as it measures the period-over-period growth in rooms revenue for comparable properties. the U. We determine the portion of revenues to recognize for sales accounted for under the percentage of completion method based on judgments and estimates including total project costs to complete. • Management and Franchise Revenues — Represents fees earned on hotels managed worldwide. Generally. revenues are recognized when the services have been rendered. these revenues and corresponding expenses have no effect on our operating income and our net income. in particular. as well as interest rate and other economic conditions affecting the lending market. Our fees from these agreements are generally based on the gross sales revenue of units sold. Our revenues are primarily derived from the following sources: (1) hotel and resort revenues at our owned. Revenue is recognized when rooms are occupied and services have been rendered. • Revenues from Managed and Franchised Properties — These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. franchise fees received in connection with the franchise of our Sheraton. Leased and Consolidated Joint Ventures — Represents revenue primarily derived from hotel operations. the fee to the owner is deemed fixed and determinable and collectability of the fees is reasonably assured. Franchise fees are generally based on a percentage of hotel room revenues. (4) revenues from managed and franchised properties. and an incentive fee. leased and consolidated joint venture properties. 24 . Additionally. the period of cancellation with refund has expired and receivables are deemed collectible. REVPAR is a leading indicator of revenue trends at owned. which is generally based on the property’s profitability.CRITICAL ACCOUNTING POLICIES We believe the following to be our critical accounting policies: Revenue Recognition. during periods prior to year-end. Westin. Residential fee revenue is recorded in the period that a purchase and sales agreement exists.S. For any time during the year. and (5) other revenues which are ancillary to our operations. These revenues are impacted by global economic conditions affecting the travel and hospitality industry as well as relative market share of the local competitive set of hotels. (3) management and franchise revenues. We have also entered into licensing agreements with third-party developers to offer consumers branded condominiums or residences. the incentive fees recorded may not be indicative of the eventual incentive fees that will be recognized at yearend as conditions and incentive hurdle calculations may not be final. Since the reimbursements are made based upon the costs incurred with no added margin. As with hotel revenues discussed above. delivery of services and obligations has occurred. these revenue sources are affected by conditions impacting the travel and hospitality industry as well as competition from other hotel management and franchise companies. Such revenues are impacted by the state of the global economies and. when the provisions of our management contracts allow receipt of incentive fees upon termination. Changes in costs could lead to adjustments to the percentage of completion status of a project. economy. incentive fees are recognized for the fees due and earned as if the contract was terminated at that date. Four Points by Sheraton. which may result in differences in the timing and amount of revenues recognized from the projects. leased or consolidated joint venture hotels and resorts. termination fees and the amortization of deferred gains related to sold properties for which we have significant continuing involvement. Management fees are comprised of a base fee. These costs relate primarily to payroll costs at managed properties where we are the employer. Therefore. exclusive of any termination fees due or payable. including the rental of rooms and food and beverage sales from owned. Le Méridien and Luxury Collection brand names. (2) vacation ownership and residential revenues. • Vacation Ownership and Residential — We recognize revenue from VOI sales and financings and the sales of residential units which are typically a component of mixed use projects that include a hotel.

Frequent Guest Program. at the time. Impairment charges. Loan Loss Reserves. for such assets and such qualitative factors as future development in the surrounding area. managed and franchised hotels. such as conversion to airline miles. respectively. current estimated net sales proceeds from pending offers. sales of similar assets. can have a material impact on the carrying value of the asset. and through participation in affiliated partners’ programs such as co-branded credit cards. We do not amortize goodwill and intangible assets with indefinite lives. status of expected local competition and projected incremental income from renovations. is included in accrued expenses. through the services of third-party actuarial analysts. of which $225 million and $244 million. Changes to our plans. Westin. We consolidate the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. the hotels recognize revenue and the SPG point liability is reduced. and Other) as we believe there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. SPG members earn points based on spending at our owned. we use a technique referred to as static pool analysis. we 25 . We evaluate the carrying value of our long-lived assets based on our plans. We hold large amounts of homogeneous VOI notes receivable and therefore assess uncollectibility based on pools of receivables. the average estimated default rate for our pools of receivables was 10%. as incentives to first-time buyers of VOIs and residences. For the vacation ownership and residential segment. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions. or upon the occurrence of a trigger event. Goodwill and intangible assets arise in connection with acquisitions. the excess of the net book value over the estimated fair value is charged to current earnings. including the acquisition of management contracts. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis. We review all goodwill and intangible assets for impairment by comparing their fair values to book values annually. If the expected undiscounted future cash flows are less than the net book value of the assets. Long-Lived Assets. We charge our owned. In estimating loan loss reserves. Intangible assets with finite lives are amortized on a straight-line basis over their respective useful lives. When points are redeemed by the SPG members. as of December 31. The Company’s management and franchise agreements require that we be reimbursed for the costs of operating the SPG program. managed and franchised hotels the cost of operating the SPG program. We. respectively. As points are earned. which tracks defaults for each year’s mortgage originations over the life of the respective notes and projects an estimated default rate. We evaluate the carrying value of our long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets if certain trigger events occur. the Company increases the SPG point liability for the amount of cash it receives from its managed and franchised hotels related to the future redemption obligation. are recognized in operating results. based on a percentage of our SPG members’ qualified expenditures. managed and franchised hotels as well as through other redemption opportunities with third parties. 2010. Points can be redeemed at substantially all of our owned. including marketing. determine the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience. including the estimated cost of our future redemption obligation.Goodwill and Intangible Assets. including an estimate of the “breakage” for points that will never be redeemed. As of December 31. if any. including a decision to dispose of or change the intended use of an asset. if appropriate. appraisals and. SPG is our frequent guest incentive marketing program. and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other third parties in respect of other redemption opportunities for point redemptions. The primary credit quality indicator used by us to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton. The total actuarially determined liability (see Note 18). 2010 and 2009 is $753 million and $689 million. For its owned hotels we record an expense for the amount of our future redemption obligation with the offset to the SPG point liability. we record an estimate of expected uncollectibility on our VOI notes receivable as a reduction of revenue at the time we recognize a timeshare sale. promotions and communications and performing member services for the SPG members.

and the Fair Isaac Corporation (“FICO”) scores of the buyers.1% change estimated to have an impact of approximately $3 million. Upon designation as an asset held for sale. we measure the impairment of a loan based on the present value of expected future cash flows. we evaluate the recognized tax benefits for derecognition. We evaluate. With respect to uncertain tax positions. classification. Any gain realized in connection with the sale of a property for which we have significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the related agreement. We generally do not modify vacation ownership notes that become delinquent or upon default. and we stop recording depreciation expense. discounted at the loan’s original effective interest rate. We are subject to various legal proceedings and claims. we recognize the amount of income tax payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. Upon reaching 120 days outstanding. We also measure and recognize the amount of tax benefit that should be recorded for financial statement purposes for uncertain tax positions taken or expected to be taken in a tax return. Legal Contingencies. We provide for income taxes in accordance with principles contained in ASC 740. interim period accounting and disclosure requirements. Uncollectible VOI notes receivable are charged off when title to the unit is returned to us. Income Taxes. For loans that we have determined to be impaired. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. among other factors. All delinquent loans are placed on nonaccrual status and we do not resume interest accrual until payment is made. We apply the loan impairment policy individually to all loans in the portfolio and do not aggregate loans for the purpose of applying such policy. An estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Under these principles. the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The operations of the properties held for sale prior to the sale date are recorded in discontinued operations unless we will have continuing involvement (such as through a management or franchise agreement) after the sale. Changes in these factors could materially impact our financial position or our results of operations. We consider a VOI note receivable delinquent when it is more than 30 days outstanding. with a 0. Assets Held for Sale. the loan is considered to be in default and we commence the repossession process. or the estimated fair value of the collateral. we record the carrying value of each property or group of properties at the lower of its carrying value which includes allocable segment goodwill or its estimated fair value. less estimated costs to sell. 26 . we recognize interest income on a cash basis. For the hotel segment. We consider properties to be assets held for sale when management approves and commits to a formal plan to actively market a property or group of properties for sale and a signed sales contract and significant non-refundable deposit or contract break-up fee exist. current default trends by brand and origination year.supplement the process by evaluating certain qualitative data. including the aging of the respective receivables. a change in the projected default rate can have a significant impact to its loan loss reserve requirements. interest and penalties. Income Taxes. For impaired loans. Given the significance of our respective pools of VOI notes receivable. the outcomes of which are subject to significant uncertainty.

. . . . . . . . . . . .421 billion for the year ended December 31. . . . . Despite the improvement in revenues. . We are the largest operator of upper upscale and luxury hotels in the world and we are seeing luxury travel leading the increases in occupancy. is leading the recovery. leased and consolidated joint venture hotels was primarily due to improved REVPAR (as discussed below) at our existing owned.RESULTS OF OPERATIONS The following discussion presents an analysis of results of our operations for the years ended December 31. . . 2009 Continuing Operations Increase / Percentage Year Ended (Decrease) Change Year Ended December 31. . . . . . 2010. . 2010. $1. . 27 .117 $5.6% 8. Vacation Ownership and Residential . 2009 and 2008. These sold or closed hotels had revenues of $18 million in the year ended December 31. . . . . Leased and Consolidated Joint Venture Hotels. 2009-16 and 2009-17 on January 1. 2010 no longer reflects securitization income. . .071 $1. .584 658 523 1.9% 9. . . . . In addition.704 712 538 2. . . . . . from Prior from Prior 2009 Year Year 2010 Owned. . which accounts for the majority of our revenues. . . . . we will no longer record initial gains or losses on new securitization activity since securitized vacation ownership notes receivable no longer receive sale accounting treatment. our statement of income beginning with the year ended December 31. we no longer recognize gains or losses on the revaluation of the interestonly strip receivable as that asset is not recognized in a transaction accounted for as a secured borrowing. . . 2009 and our balance sheet as of December 31. As corporate profits have continued to rise. . . . . . . leased and consolidated joint venture hotels. Franchise Fees and Other Income . . but have improved during 2010. 2010 compared to $98 million in the corresponding period of 2009. . and interest expense associated with debt issued from the trusts to third-party investors in the same line items in our statement of income as debt.2%. . . . . .696 $120 54 15 186 $375 7. offset in part by lost revenues from eight wholly owned hotels sold or closed in 2010 and 2009. 2010 Compared with Year Ended December 31. . Revenues at our Same-Store Owned Hotels (54 hotels for the year ended December 31. . . the supply side growth has been lower than recent years which has led us to achieve upper single digit to low double digit REVPAR growth in many of our leading markets. . . . . . following the adoption of ASU Nos. . . . Finally. .0% The increase in revenues from owned. . . . . . . . our business from the business travelers. . .6% 8. . . . . 2009 have not been retrospectively adjusted to reflect the adoption of ASU Nos.2% 2. . . and the stabilization of room rates. . . . to $1. Business conditions in the global lodging industry were extremely difficult beginning in the middle of 2008 through late 2009. Therefore. 2010 and 2009. 2010 when compared to $1. 2009-16 and 2009-17. . As discussed in Note 2 of the financial statements. . These improvements have resulted from better than expected occupancy primarily related to our three main classes of customers: business. leisure and group travelers. . . . Additionally. we continue to enforce previously instituted rigorous policies to control costs. . Other Revenues from Managed and Franchise Properties . . Total Revenues . . . . . or $107 million. . . . December 31.931 $4. . . . . . . . . . . but instead reports interest income. net charge-offs and certain other income associated with all securitized loan receivables. . . . . . . . excluding the eight hotels sold or closed and eight additional hotels undergoing significant repositionings or without comparable results in 2010 and 2009) increased 8. . . Management Fees. . particularly with regards to: • Vacation ownership and residential sales and services • Interest expense Year Ended December 31. . Our statement of income for the year ended December 31. .314 billion in the same period of 2009 due primarily to an increase in REVPAR. . current period results will not be comparable to prior period amounts.

administrative and other expenses for the year ended December 31. the average contract amount per vacation ownership unit sold decreased 6. 2010 Year Ended December 31. as a credit to restructuring. and other special (credits) charges. goodwill impairment.000. 2010 when compared to the same period in 2009. . 2010 when compared to the corresponding 2009 period. . Residential revenue increased approximately $6 million in the year ended December 31. REVPAR growth was particularly strong at our owned hotels in New York. Management fees increased $53 million or 14.6% for the year ended December 31. 2010 compared to $191. . . New York. Toronto. China which opened in 2010. Since the reimbursements are made based upon the costs incurred with no added margin.3% in the year ended December 31. 2010 when compared to 64. These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer.0% in the same period in 2009.62 for the year ended December 31. .9% to $538 million compared to $523 million in 2009 primarily driven by the impact of ASU 2009-17. Goodwill Impairment and Other Special Charges (Credits). 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Selling. franchise fees and other income was primarily a result of a $59 million or 9. Chicago. The increase in REVPAR at these Same-Store Owned Hotels resulted from a 2.27 for the year ended December 31. $344 $314 $30 9. Additionally. The decline in tour flow was a result of the economic climate and resulting closure of fractional sales centers in the latter part of 2009. 2010 when compared to the same period of 2009. Administrative and Other . .6% excluding the unfavorable effects of foreign currency translation. 28 . Originated contract sales of VOI inventory decreased 3.2% to $136. 2010 Year Ended December 31.6% The increase in selling. net of the reimbursement of legal costs incurred in connection with the litigation. .7% compared to the year ended December 31. Total vacation ownership and residential sales and services revenue increased 2. Illinois. General. We recorded this settlement.4% increase in management and franchise revenue to $689 million for the year ended December 31.8% for the year ended December 31. Louisiana. REVPAR for Same-Store Owned Hotels internationally increased 11. 2010 when compared to the same period of 2009. 2009. 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Restructuring. . This decline was primarily driven by lower tour flow which was down 6. . REVPAR at our international Same-Store Owned Hotels increased by 10. these revenues and corresponding expenses have no effect on our operating income and our net income. Canada and New Orleans. Net .6% increase in ADR to $196. .REVPAR at our Same-Store Owned Hotels increased 11. . we received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. driven by price reductions and inventory mix.5% for the year ended December 31. 2010 compared to $630 million in the corresponding period in 2009. REVPAR at Same-Store Owned Hotels in North America increased 11. .1% for the year ended December 31. . .60 for the corresponding 2009 period and an increase in occupancy rates to 69. 2010 when compared to the same period in 2009. . This increase was partially offset by the reimbursement of previously expensed legal costs in connection with the favorable settlement of a lawsuit and an $8 million reversal of a guarantee liability which was favorably settled during the period (see Note 26). The increase in management fees.9% and franchise fees increased $23 million or 16. 2010 primarily due to the recognition of $4 million of marketing and license fees associated with a new hotel and residential project in Guangzhou. Year Ended December 31. These increases were due to growth in REVPAR at existing hotels as well as the net addition of 27 managed and 65 franchised hotels to our system since the beginning of 2009.0% to approximately $15. general. Other revenues from managed and franchised properties increased primarily due to an increase in payroll costs commensurate with increased occupancy at our existing managed hotels and payroll costs for the new hotels entering the system. $(75) $379 $454 n/m During the year ended December 31. 2010 was primarily a result of higher incentive based compensation in the current year when compared to the prior year. Year Ended December 31. 2010.

Net . . 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Operating Income .0% The increase in net interest expense was primarily due to interest of $27 million on securitized debt related to the adoption of ASU No. 2009.73% at December 31. . . throughout 2009. . we completed a comprehensive review of our vacation ownership business. we recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit. related to an unfavorable mark-to-market adjustment on a US dollar denominated loan in an unconsolidated venture in Mexico. . .86% at December 31. when compared to the same period of 2009. 2010. . 29 . the increase in operating income was favorably impacted by improved operating results in primarily all of our revenue streams. . . when compared to the same period of 2009. in 2009. . 2010 Year Ended December 31.8% The decrease in depreciation expense for the year ended December 31. . . . . . . . . . . as discussed earlier. . we recorded restructuring and other special charges of $34 million related to our ongoing initiative of rationalizing our cost structure. . . Year Ended December 31. . goodwill impairment and other special charges (credits) line item. During the year ended December 31. . we recorded an $8 million credit related to the reversal of a reserve associated with an acquisition in 1998 as the liability is no longer deemed necessary. . . goodwill impairments and other special charges (credits) favorable benefit of $75 million in 2010 compared to a charge of $379 million in 2009 (see earlier discussion). . . partially offset by certain early debt extinguishment costs of $21 million that were incurred in 2009. $10 $(4) $14 n/m The increase in equity earnings and gains and losses from unconsolidated joint ventures for the year ended December 31. . These charges related to severance charges and costs to close vacation ownership sales galleries. . . 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Net Interest Expense . . Our weighted average interest rate was 6. was due to reduced depreciation expense from sold hotels offset by additional capital expenditures made in the last twelve months. was primarily due to improved operating results at several properties owned by joint ventures in which we hold non-controlling interests. Additionally. . . 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Depreciation and Amortization . Year Ended December 31. . 2010. . We decided not to develop certain vacation ownership sites and future phases of certain existing projects. . 2010 Year Ended December 31. 2010 Year Ended December 31. . . . . . . Additionally. $285 $309 $(24) 7. . . . we recorded a primarily non-cash impairment charge of $255 million in the restructuring. 2010 as compared to 6. . . 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Equity Earnings (Losses) and Gains and Losses from Unconsolidated Ventures. . . when compared to the same period of 2009.Additionally. . $236 $227 $9 4. 2009. . Year Ended December 31. 2010. . . . Additionally. . . . The increase also relates to a charge of approximately $4 million. . . Year Ended December 31. . . As a result of these decisions. . . . . . $600 $26 $574 n/m The increase in operating income for the year ended December 31. . . . . . . is primarily related to the restructuring. 2010 Year Ended December 31. . . 2009-17. .

a $13 million impairment of an investment in a hotel management contract that has been cancelled. $(39) $(91) $52 n/m During the year ended December 31. 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Loss on Asset Dispositions and Impairments. . including a $120 million deferred tax benefit for an Italian tax incentive program in which the tax basis of land and building for the hotels we own in Italy was stepped up to fair value in exchange for paying a current tax of $9 million. Net of Tax During the year ended December 31. These charges were partially offset by a gain of $14 million from insurance proceeds received for a claim at a whollyowned hotel that suffered damage from a storm in 2008. 2009 has been recorded in discontinued operations resulting in income of $76 million. . . . . . . The remaining increase is primarily due to higher pretax income in 2010. and a $2 million impairment on one hotel whose carrying value exceeded its fair value. net of tax. . were reported in discontinued operations resulting in a loss of $2 million. Discontinued Operations. . primarily related to $41 million of impairment charges on six hotels whose carrying values exceeded their fair values. the net gain on the assets sold in 2009 and the one hotel held for sale at December 31. 2010. a $22 million impairment of our retained interests in vacation ownership mortgage receivables. . primarily related to a $53 million loss on the sale of one wholly-owned hotel (see Note 5) as well as a $4 million impairment of fixed assets that are being retired in connection with a significant renovation of a wholly-owned hotel. Net . In addition. . 2010. . . 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Income Tax (Benefit) Expense . a $5 million gain as a result of an acquisition of a controlling interest in a joint venture in which we previously held a non-controlling interest (see Note 4) and a $4 million gain from the sale of non-hotel assets. . .Year Ended December 31. . . net of tax. . . . During the year ended December 31. . . . . 2010 Year Ended December 31. 2009. we sold our Bliss spa business and other non-core assets for cash proceeds of $227 million. . . 2010 Year Ended December 31. Year Ended December 31. a $51 million tax benefit related to previously unrecognized foreign tax credits for prior tax years and a $10 million benefit to reverse the deferred interest accrual associated with the deferral of taxable income. . partially offset by a benefit of $42 million related to an IRS audit. During the year ended December 31. . . . we recorded a net loss on dispositions of approximately $39 million. we recorded a gain of $134 million related to the final settlement with the IRS regarding the World Directories disposition and a gain of approximately $36 million related to the sale of one wholly-owned hotel. . Revenues and expenses from the Bliss spa business. 2009. . 30 . together with revenues and expenses from one hotel that was sold in 2010. a $5 million impairment of certain technology-related fixed assets and a $4 million loss on the sale of a wholly-owned hotel. . The tax benefit was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. . $27 $(293) $320 n/m The $320 million increase in income tax expense primarily relates to 2009 items that did not recur in 2010. . . we recorded a net loss on dispositions of approximately $91 million. . . .

$1. . . .23 for the corresponding 2008 period and a decrease in occupancy rates to 64. as the 2008 period included license fees in connection with two St. . Revenues at our SameStore Owned Hotels (53 hotels for the year ended December 31. The decrease in management fees. . This decline was primarily driven by lower tour flow which was down 19. . 2009 when compared to the same period of 2008. . . . 2009 compared to $717 million in the corresponding period in 2008. Leased and Consolidated Joint Venture Hotels. .754 $ (628) (93) (226) (111) $(1. . . . . . 2009 when compared to the same period of 2008. 2008 Continuing Operations Year Ended December 31. 2009 and 2008. . . . . driven by a higher sales mix of lowerpriced inventory. REVPAR at Same-Store Owned Hotels in North America decreased 24.4)% (12. . . . Additionally. . . . excluding the 15 hotels sold or closed and 10 additional hotels undergoing significant repositionings or without comparable results in 2009 and 2008) decreased 24.22 for the year ended December 31. Management Fees.0%.2% in the same period in 2008.212 751 749 2.386 billion for the year ended December 31. 2009 compared to $240. . 31 . leased and consolidated joint venture hotels was primarily due to the economic crisis in the United States and internationally. Regis projects. . . . . . The decrease in vacation ownership and residential sales and services was primarily due to lower originated contract sales of VOI inventory. . . The decrease was also due to lost revenues from 15 wholly owned hotels sold or closed in 2009 and 2008. Total Revenues . Other Revenues from Managed and Franchise Properties . . 2009 Compared with Year Ended December 31. 2009 when compared to $1. . .6% to $128. . 2009 compared to $248 million in the corresponding period of 2008. . . or $437 million. 2009 when compared to the corresponding 2008 period. . .058) (28.Year Ended December 31.823 billion in the same period of 2008 due primarily to a decrease in REVPAR.000. .95 for the year ended December 31. . 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Owned. . . REVPAR at our international Same-Store Owned Hotels decreased by 25. 2009 when compared to 71. REVPAR at our Same-Store Owned Hotels decreased 24. .2% for the year ended December 31. . to $1. 2009 Year Ended December 31. These sold or closed hotels had revenues of $68 million in the year ended December 31. . . . . .696 $2. . . which represents vacation ownership revenues before adjustments for percentage of completion accounting and other deferrals. partially offset by fees from the net addition of 40 managed and franchised hotels to our system and approximately $15 million in termination fees recognized in 2009 when compared to $4 million in 2008. . The decrease in REVPAR at these Same-Store Owned Hotels resulted from a 17. Originated contract sales of VOI inventory decreased 39% for the year ended December 31.0% for the year ended December 31. . . the average contract amount per vacation ownership unit sold decreased 21.931 $4. partially offset by gains of $23 million relating to securitizations. . . .3% excluding the unfavorable effects of foreign currency translation. 2009 when compared to the same period in 2008. . . . The decrease is also due to a $43 million decrease in residential revenue. REVPAR for Same-Store Owned Hotels internationally decreased 20. . The decrease was due to the significant decline in base and incentive management fees as a result of the global economic crisis.584 658 523 1. .4)% (18.2)% (5. REVPAR declined in most of our major international markets. .1% decrease in ADR to $199. . . .4% for the year ended December 31. The decline in tour flow was a result of the economic climate and resulting closure of underperforming sales centers.4% to approximately $16. . .4)% (30. .042 $5. . . REVPAR declined in substantially all of our major domestic markets. . .7% in the year ended December 31. . Vacation Ownership and Residential . franchise fees and other income was primarily a result of an $87 million decrease in management and franchise revenue to $630 million for the year ended December 31. . . . including a higher percentage of lower-priced biennial inventory. . 2009 when compared to the same period in 2008. .4)% The decrease in revenues from owned. . . . Franchise Fees and Other Income . .

. Year Ended December 31. . operating income was impacted by a 32 . 2008. Goodwill Impairment and Other Special Charges. . Administrative and Other . . . goodwill impairment and other special charges line item.3)% The decrease in depreciation expense was due to reduced depreciation expense from sold hotels offset by additional capital expenditures made in the last twelve months. . . . Since the reimbursements are made based upon the costs incurred with no added margin. Year Ended December 31.) A majority of the cost containment initiatives were completed and implemented in late 2008 and early 2009 and are now being realized. . . throughout 2009. . . Additionally. $309 $313 $(4) (1. $26 $610 $(584) n/m The decrease in operating income was primarily due to the decline in our core business units. . 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Restructuring. we began an activity value analysis project to review our cost structure across a majority of our corporate departments and divisional headquarters. . Year Ended December 31.Other revenues from managed and franchised properties decreased primarily due to a decrease in costs. These charges related to severance charges and costs to close vacation ownership sales galleries. 2009 Year Ended December 31. . general. these revenues and corresponding expenses have no effect on our operating income and our net income. . we recorded restructuring and other special charges of $34 million related to our ongoing initiative of rationalizing our cost structure. Beginning in the middle of 2008. . Additionally. We also recorded impairment charges of approximately $79 million primarily related to the decision not to develop two vacation ownership projects as a result of the economic climate and its impact on business conditions. . 2009 Year Ended December 31. . We decided not to develop certain vacation ownership sites and future phases of certain existing projects. 2009 Year Ended December 31. . . Additionally. . due to the severe impact from the global economic crisis as discussed above and the related impairments and restructuring charges previously discussed. $379 $141 $238 n/m During the fourth quarter of 2009. . we completed a comprehensive review of our vacation ownership business. including $62 million of severance and related charges associated with our ongoing initiative of rationalizing our cost structure in light of the current economic climate. . . These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. at our managed and franchised hotels. Net . 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Operating Income . . . 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Depreciation and Amortization . hotels and vacation ownership. . . . we recorded a primarily non-cash impairment charge of $255 million in the restructuring. we recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit. $314 $377 $(63) (16. Costs and expenses related to our former Bliss spa business were reclassified to discontinued operations for both periods presented as a result of its sale at the end of 2009. . 2009 Year Ended December 31. . . . General. commensurate with the decline in revenues. 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Selling. During the year ended December 31. Year Ended December 31. . . we recorded restructuring and other special charges of $141 million.7)% The decrease in selling. administrative and other expenses was primarily a result of our focus on reducing our cost structure in the current economic climate. (See Note 14 for a summary of charges associated with this initiative. . . . As a result of these decisions.

$(293) $72 $(365) n/m The $365 million decrease in income tax expense primarily relates to a deferred tax benefit of $120 million (net) in 2009 for an Italian tax incentive program in which the tax basis of land and buildings for the hotels we own in Italy was stepped-up to fair value in exchange for paying a current tax of $9 million. Net . . we recorded a net loss on dispositions of approximately $91 million. Our weighted average interest rate was 6. Year Ended December 31. . . . . . related to a price reduction in vacation ownership intervals. . . .73% at December 31. recorded in the vacation ownership costs and expenses line. . $(4) $16 $(20) n/m The decrease in equity earnings and gains and losses from unconsolidated joint ventures was primarily due to decreased operating results at several properties owned by joint ventures in which we hold non-controlling interests. Year Ended December 31. . .1)% During 2009. . $(91) $(98) $(7) (7. . . . 2009 as compared to 5. a $13 million impairment of an investment in a hotel management contract that has been cancelled. a benefit of $10 million was recognized to reverse the deferred interest accrual associated with the deferral of taxable income. . . . . . 33 . 2009 when compared to the same period of 2008 and early debt extinguishment costs of $21 million that were incurred in 2009. . . . . . . . . administrative and other costs as a result of our activity value analysis costs savings project and other cost savings initiatives and a favorable $14 million income item related to the expiration of the statute of limitations on an indirect tax exposure and a Brazilian water claim. . . related to an unfavorable mark-to-market adjustment on a US dollar denominated loan in an unconsolidated venture in Mexico. . 2008. These decreases were partially offset by the reduction in selling. . Additionally. . . a $22 million impairment of our retained interests in vacation ownership mortgage receivables. . . . During 2008. . Net . . 2009 Year Ended December 31. 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Net Interest Expense . . . . . . . 2009 Year Ended December 31. . . The decrease also relates to a charge of approximately $4 million. . . .7% The increase in net interest expense was primarily due to higher interest rates in the year ended December 31. . . . . $227 $207 $20 9. . Year Ended December 31. The remaining decrease primarily relates to tax benefits of $67 million associated with impairments. . The remaining decrease is primarily due to lower pretax income. . . 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Loss on Asset Dispositions and Impairments. .24% at December 31. . . . we recorded a net loss of $98 million primarily related to $64 million of impairment charges on five hotels. 2009 Year Ended December 31. . . . Year Ended December 31. . . . . primarily related to $41 million of impairment charges on six hotels whose carrying values exceeded their fair values. and an $11 million write-off of our investment in a joint venture in which we hold minority interest (see Note 5). . . . general. This was partially offset by a lower average debt balance in 2009 as compared to 2008. restructuring and asset sales and $37 million related to a foreign tax credit election change. 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Income Tax (Benefit) Expense . . . following an in-depth review of the business. in 2009.$17 million charge. a $5 million impairment of certain technologyrelated fixed assets and a $4 million loss on the sale of a wholly-owned hotel. 2009 Year Ended December 31. a $22 million impairment of our investment in vacation ownership notes receivable that we have previously securitized. . . . 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Equity (Losses) Earnings and Gains and Losses from Unconsolidated Ventures. . . . . . . . .

cash payments received from buyers of units under construction are held in escrow during the period prior to obtaining a certificate of occupancy. we had short-term restricted cash balances of $53 million and $47 million. were reported in discontinued operations resulting in a loss of $2 million. Discontinued operations for the year ended December 31. At December 31. net of tax.07 and 0. 34 . we sold our Bliss spa business and other non-core assets for cash proceeds of $227 million. We believe that our existing borrowing availability together with capacity for additional borrowings and cash from operations will be adequate to meet all funding requirements for our operating expenses. During 2010. • We received proceeds of $75 million as a result of the favorable settlement of a lawsuit. in 2009. the net gain on the assets sold in 2009 and the one hotel held for sale at December 31. 2008. Our day-to-day operations are financed through net working capital. In addition. we completed a series of disposition. a practice that is common in our industry. Additionally. State and local regulations governing sales of VOIs and residential properties allow the purchaser of such a VOI or property to rescind the sale subsequent to its completion for a pre-specified number of days. principal and interest payments on debt. In a recessionary economy. respectively. LIQUIDITY AND CAPITAL RESOURCES Cash From Operating Activities Cash flow from operating activities is generated primarily from management and franchise revenues. 2010 and 2009. we sweep the majority of the cash at our owned hotels on a daily basis and fund payables as needed by drawing down on our existing revolving credit facility. For the year ended December 31. 2010 and 2009. dividend payments and property and income taxes. net of tax. Revenues and expenses from the Bliss spa business.74 as of December 31. The impact of declining demand in the industry and higher hotel supply in key markets could have a material impact on our sources of cash. These payments and the deposits collected from sales during the rescission period are the primary components of our restricted cash balances in our consolidated balance sheets. servicing financial assets and interest income. operating income from our owned hotels and sales of VOIs and residential units. These are the principal sources of cash used to fund our operating expenses. that impacts the tax liability associated with the disposition of one of our businesses several years ago. capital expenditures. Consistent with industry practice. $5 million was reclassified to discontinued operations (in the 2008 results) relating to one hotel that was in the process of being sold at the end of 2009. The majority of our cash flow is derived from corporate and leisure travelers and is dependent on the supply and demand in the lodging industry. • We received a tax refund from the IRS of $245 million (see Note 15). 2009 has been recorded in discontinued operations resulting in income of $76 million. financing and other transactions that resulted in proceeds of approximately $650 million as outlined below: • We securitized vacation ownership receivables resulting in proceeds of approximately $180 million. 2008 also includes a $49 million tax charge as a result of a 2008 administrative tax ruling for an unrelated taxpayer. respectively. Net of Tax During 2009. • We sold assets that resulted in cash proceeds of approximately $150 million. we experience significant declines in business and leisure travel. The tax impact on this transaction was minimized due to the utilization of capital loss carryforwards. interest payments on debt. The ratio of our current assets to current liabilities was 1. capital expenditures.Discontinued Operations. together with revenues and expenses from two hotels which were sold in 2010. the gain on dispositions includes a $124 million gain ($129 million pretax) on the sale of three properties which were sold unencumbered by management or franchise contracts. dividends and any share repurchase program we may initiate in the foreseeable future. Other sources of cash are distributions from joint ventures. In addition.

. . and from cash generated from operations. . . . . through the assumption of debt. 42 Subtotal. . During the year ended December 31. . $377 (1) Maintenance capital expenditures include improvements. . . we currently expect to spend approximately $150 million for investment projects. . $106 Corporate and information technology . . . . . . we have made loans to third-party owners. . . . . . Additionally. . . . . . . made minority investments in joint ventures and provided certain guarantees and indemnifications. . . . . . . . . . . . . . . . . . . . . . . . . Regis Bal Harbour) . . . Regis Bal Harbour. Development Capital . . . . . Regis Bal Harbour . . . . . . . . . formerly owned by the joint venture. . (2) 148 (34) 146 112 117 Total Capital Expenditures . . . . . . . . as hotels in certain markets could become less desirable. . . . . . . . . . . . . During the year ended December 31. . . . . unfunded loan commitments. . . . . . renovations. . . . . . . and $117 million of development capital. . 2010. . under a long-term management contract. . . . . . . In addition. . . . . . . Defensive spending is related to maintenance and renovations that we believe are necessary to stay competitive in the markets we are in. . . . . . . . . . . Investment spending on gross vacation ownership interest and residential inventory was $168 million. . . . . . . . through the net proceeds from dispositions. . . . . . . . we will continue to manage the hotel. . . . . . . . . . We currently anticipate that our defensive capital expenditures for the full year 2011 (excluding vacation ownership and residential inventory) will be approximately $300 million for maintenance. . . . . . We intend to finance the acquisition of additional hotel properties (including equity investments). . for the full year 2011. Our interest in this unconsolidated joint venture was subsequently sold. . . . .Cash From Investing Activities Gross capital spending during the full year ended December 31. we consider defensive capital to be discretionary. although reductions to this capital program could result in decreases to our cash flow from operations. . . . . . . . . Other than capital to address fire and life safety issues. . . The offensive capital expenditures. . 2010 was as follows (in millions): Maintenance Capital Expenditures(1): Owned. . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation Ownership and Residential Capital Expenditures : Net capital expenditures for inventory (excluding St. we made a $23 million investment into an unconsolidated joint venture. . . . . VOI and residential construction. . . . . Capital expenditures for inventory — St. . Subtotal. . . . . . . . . . . . . . . . . . . . technology spend and other core and ancillary business acquisitions and investments and provide for general corporate purposes (including dividend payments and share repurchases) through our credit facilities described below. . . . . . . . . . . performance guarantees and indemnifications we are obligated under. . . . Our partner in the joint venture contributed an equal amount and the funds were used to pay off a third-party mortgage. . . . . 2010. . primarily in Bal Harbour. . . . . . are also considered discretionary. capital improvements. . . . . renewals and extraordinary repairs that extend the useful life of the asset. . . . . . . 35 . . . . . . . . . (2) Represents gross inventory capital expenditures of $168 less cost of sales of $56. . . . Florida. . . . . . 2010 included approximately $148 million of maintenance capital. . . we paid approximately $23 million to acquire a controlling interest in a joint venture in which we had previously held a non-controlling interest (see Note 4). . . . See Note 26 of the consolidated financial statements for discussion regarding the amount of loans we have outstanding with owners. . . . . . . . . equity and other potential contributions. Our capital expenditure program includes both offensive and defensive capital. . . . . . . and we received cash proceeds of approximately $42 million. construction of the St. . . In order to secure management or franchise agreements. . . . . . . . . Leased and Consolidated Joint Venture Hotels . . . . . . . . . . . . . . . . . and technology capital. . . . . Gross capital spending during the year ended December 31. hotel renovations. . surety bonds outstanding. . . . . . which are primarily related to new projects that we expect will generate a return. . and investments in hotels and joint ventures. .

There can be no assurance. that we will be able to complete future dispositions on commercially reasonable terms or at all. . . . The 2010 asset sales resulted in gross cash proceeds from investing activities of approximately $150 million and are discussed in our general liquidity discussion under cash used for financing activities. .99% 4. . . .83% 4. . . . . . . net debt was reduced to $2.3 4. . . Total/Average .5 billion Senior Credit Facility (“New Facility”).56% 7. . issuances. . 2011. . . . . . financing and other transactions that resulted in proceeds of approximately $650 million. . .31% 6. Interest Rate Swaps . Interest Rate Swaps .3 billion in numerous transactions (see Note 5 of the consolidated financial statements). .698 118 (500) $2. . We have evaluated the commitments of each of the lenders in our Revolving Credit Facilities (the “Facilities”). .857 billion. 2009. . . . . . On April 20. . . . We are focused on enhancing real estate returns and monetizing investments. . we have reviewed our debt covenants and do not anticipate any issues regarding the availability of funds under the Facilities. are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. Additionally. we had cash and cash equivalents of $797 million (including $44 million of restricted cash) at December 31. . Our gross debt at December 31. 2010 and 2009. no longer complement our business.06% 7. . . . . . . . . . . . . . . . . . .316 $2. . . . Fixed Rate Debt Senior Notes . . . .857 (a) Excludes approximately $434 million of our share of unconsolidated joint venture debt and securitized vacation ownership debt of $494 million. . . . our 2010 cash flows from financing activities include the borrowings and repayments of securitized vacation ownership debt. . . . . . . . . Total/Average . all of which is non-recourse. . . . . . . . . . .060 billion compared to net debt of $2. . . . . 2010 Average Maturity (In years) Floating Rate Debt Revolving Credit Facilities .3 2. . as discussed in Notes 2. . . . . . . . . .86% 2. . . see Note 16 of the consolidated financial statements. . . 10. . . . . Mortgages and Other . . . . . . 2010(a) (Dollars in millions) Interest Rate at December 31. .26% 7. . . 2010. . . . . . we adopted 36 . .We periodically review our business to identify properties or other assets that we believe either are non-core (including hotels where the return on invested capital is not adequate). . . . . . . . . . .8 2. . . . . . . . . . The New Facility matures on November 15. . . Since 2006. . . . . . . . 2010. . . .2 $ 541 $2. however. . . . . .92% 7. . 2010: Amount Outstanding at December 31. . . . . . . . . . . . . . $ — 41 500 — 5.2 4. . . . . . Due to the adoption of ASU Nos. . . . . . as previously described in Cash from Operating Activities. During 2010. . . . . . In addition. 2010 was $2. Total Debt Total Debt and Average Terms . . . . we have sold 62 hotels realizing proceeds of approximately $5.819 billion as of December 31. we executed a new $1. . . For specifics related to our financing transactions. . . Cash Used for Financing Activities The following is a summary of our debt portfolio (including capital leases) as of December 31. . . . . . .875 billion Revolving Credit Agreement. . . . . . .1 7. . which would have matured on February 11. Mortgages and Other . and terms entered into for the years ended December 31. and 11. we completed a series of disposition. .2 4. . . As a result of these transactions and cash flow from operations. . . As discussed earlier. . . . . 2009-16 and 2009-17. . . excluding debt associated with securitized vacation ownership notes receivable. 2013 and replaces the former $1.

all of which is non-recourse. the timing of which is uncertain. if refinanced. . . . . 37 . . 2010 and. . . . . . . In addition. . Interest payable . . to a certain extent. . there can be no assurance that in our continuing business we will generate cash flow at or above historical levels. at December 31. . . our net debt was $2. (2) Excludes securitized debt of $494 million. we may be required to sell additional assets at lower than preferred amounts. . (4) Excludes sublease income of $13 million. . . . . . Including this debt and restricted cash associated with securitized vacation ownership receivables. 2010. reduce capital expenditures. We had the following contractual obligations (1) outstanding as of December 31. the table excludes amounts related to the construction of our St. financial. . 2010. . 2010. . dividends. 2010 we had $494 million of non-recourse debt and $19 million of restricted cash associated with securitized vacation ownership receivables. . However. general and administrative costs and postponing discretionary capital expenditures. $2. . that currently anticipated results will be achieved or that we will be able to complete dispositions on commercially reasonable terms or at all. Other long-term obligations . .332 $ 685 156 2 939 4 — $1. . . Operating lease obligations(4) . .4 billion at December 31. .ASU Nos. In addition. . . management believes that our cash flow from operations and asset sales.855 890 2 1. . . . which. 2009-16 and 2009-17 on January 1. . 2010. . .818 $ 951 204 — 149 28 — $1. As of December 31. We have the ability to manage the business in order to reduce our leverage ratio by reducing operating costs. 2010). legislative and regulatory factors beyond our control. 2010 (in millions): Total Due in Less Than 1 Year Due in 1-3 Years Due in 3-5 Years Due After 5 Years Debt(2) . Based upon the current level of operations. . . Regis Bal Harbour project that has a total project cost of $750 million. Capital lease obligations(3) . are subject to general conditions in or affecting the hotel and vacation ownership industries and to general economic. Our Facilities are used to fund general corporate cash needs.4 billion under the Facilities. other discretionary investments. competitive. . as a result. capital expenditures. Unconditional purchase obligations(5) . . . . . interest and scheduled principal payments and share repurchases for the foreseeable future. to pay interest on or to refinance our indebtedness depends on our future performance and financial results. we have availability of over $1.786 (1) The table below excludes unrecognized tax benefits that would require cash outlays for $341 million. . . marketing and advertising program expenditures. . together with our significant cash balances (approximately $816 million at December 31. . If we are unable to generate sufficient cash flow from operations in the future to service our debt. . .320 $ 9 208 — 96 69 2 $384 $1. . there can be no assurance that we will be able to refinance our indebtedness as it becomes due and. on favorable terms. refinance all or a portion of our existing debt or obtain additional financing at unfavorable rates. . . . (3) Excludes sublease income of $2 million. . . . . Our ability to make scheduled principal payments. . . we were in compliance with this covenant and expect to remain in compliance through the end of 2011.535 billion at December 31. As of December 31. of which $532 million has been paid through December 31. . . . selling. available borrowings under the Facilities and other bank credit facilities (approximately $1. We have reviewed the financial covenants associated with our Facilities. . . . . 2010. . . . and capacity for additional borrowings will be adequate to meet anticipated requirements for scheduled maturities. Refer to Note 15 of the consolidated financial statements for additional discussion on this matter. (5) Included in these balances are commitments that may be reimbursed or satisfied by our managed and franchised properties. including $63 million of short-term and long-term restricted cash). . . However. . political. . . . . .210 322 — 161 124 1 $1. Total contractual obligations . . there can be no assurance that we will stay below the required leverage ratio if the current economic climate deteriorates. . . the most restrictive being the leverage ratio. . . working capital. .345 225 3 $5. .

At December 31. $159 $144 $12 $— $3 A dividend of $0. . . 2010. we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. . we were party to the following derivative instruments: • Forward contracts to hedge forecasted transactions for management and franchise fee revenues earned in foreign currencies. . . . . A dividend of $0. We continue to have exposure to such risks to the extent they are not hedged. . 2010. . • Forward foreign exchange contracts to manage the foreign currency exposure related to certain intercompany loans not deemed to be permanently invested. . and we do not engage in such transactions for trading or speculative purposes. 2010 (in millions): Total Less Than 1 Year 1-3 Years 3-5 Years After 5 Years Standby letters of credit . Off-Balance Sheet Arrangements Our off-balance sheet arrangements include letters of credit of $159 million. and they expire in 2011.30 per share was paid in December 2010 to shareholders of record as of December 16. unconditional purchase obligations of $225 million and surety bonds of $23 million.20 per share was paid in January 2010 to shareholders of record as of December 31. In limited instances. The aggregate dollar equivalent of the notional amounts of the forward contracts was approximately $759 million and they expire in 2011. Item 7A.We had the following commercial commitments outstanding as of December 31. . We enter into a derivative financial arrangement to the extent it meets the objectives described above. . The aggregate dollar equivalent of the notional amounts was approximately $37 million. . Quantitative and Qualitative Disclosures about Market Risk. . These items are more fully discussed earlier in this section and in the Notes to Financial Statements and Item 8 of Part II of this report. . . 38 . 2009. .

. . . Average interest rate . . . . . . . . . . . . . . . . . . .33 $ — . . . . . . .33 $ (1) . . . .92% $2. . . . . . . . Average Exchange rate . Average Exchange rate . . . Average Exchange rate . . . . . Fixed (CAD) to Fixed (USD) .31% $ 541 4. . .01 $ $ — — $110 $ 52 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — 1 1. . . . . . . . . . . . . . .03 $ (1) . . . Fixed (THB) to Fixed (USD) . Fixed (CLP) to Fixed (USD). . Fixed (AUD) to Fixed (USD) . . . . .99 (1) (1) — $ $ $ 1 (1) $ 13 $ 60 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ $ — (1) $358 $ — $ — $ — $ — $ — $ (5) $ 29 $ — $ — $ — $ — $ — $ $ (1) $ 63 $ 56 $ 18 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ $ $ $ $ $ (1) (1) — 39 . . . . . . . . . . . . . Average Exchange rate . . . . . .The following table sets forth the scheduled maturities and the total fair value of our debt portfolio and other financial instruments as of December 31. . . . . . . Average interest rate . . . . . . . . . . . . . . . . . . . . . Floating rate . . . Fixed (JPY) to Fixed (THB) . . . . . . . . .316 7. . . Fixed (GBP) to Fixed (EUR) . . . . . Fixed (JPY) to Fixed (USD) . . . . . . . . . 2010 (in millions. . . . . . . . .01 $ (5) 1. . . . .588 $ 541 $ 31 $ 6 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — 1. Fixed (JPY) to Fixed (USD) . . . . . . . . 2010 Total Fair Value at December 31. . . . . . . . . . . . . . .00 (1) . . . excluding average exchange rates): Expected Maturity or Transaction Date At December 31. . 2011 2012 2013 2014 2015 Total at December 31. . Fixed (AUD) to Fixed (EUR) . . . Forward Foreign Exchange Hedge Contracts: Fixed (EUR) to Fixed (USD) . 2010 Thereafter Liabilities Fixed rate . Average Exchange rate . . . . . Average Exchange rate . Average Exchange rate . . $ 8 $ 1 $415 $238 $306 $251 $444 $ 50 $456 $ 1 $687 $ — $2. . Forward Foreign Exchange Contracts: Fixed (EUR) to Fixed (USD) . . . . .00 $ — . Average Exchange rate . . . . . .

2010. and its subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting. summarized. Controls and Procedures. the Company’s management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). as such term is defined in Exchange Act Rule 13a-15(f) or 15(d)-15(f). the Company’s internal control over financial reporting is effective. Item 9A. our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded. as appropriate to allow timely decisions regarding required disclosure. internal control over financial reporting may not prevent or detect misstatements. use or disposition of the Company’s assets that could have a material effect on the financial statements. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”) and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company. as of December 31. management believes that. Inc. and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. our internal control over financial reporting. and the receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company. the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K. Financial Statements and Supplementary Data. or is reasonably likely to materially affect. or that the degree of compliance with policies or procedures may deteriorate. including our principal executive and principal financial officers. The financial statements and supplementary data required by this Item are included in Item 15 of this Annual Report and are incorporated herein by reference. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions. Item 9. Based upon the foregoing evaluation. and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition. processed. Because of its inherent limitations. Not applicable. we carried out an evaluation. to attest to the Company’s internal control over financial reporting. 40 . 2010. under the supervision and with the participation of our management. Its report is included herein. • Provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP. There has been no change in our internal control over financial reporting (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act) that occurred during the period covered by this report that has materially affected. Management’s Report on Internal Control over Financial Reporting Management of Starwood Hotels & Resorts Worldwide. including our principal executive and principal financial officers. Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report.Item 8. Management has engaged Ernst & Young LLP. and to provide reasonable assurance that such information is accumulated and communicated to our management. of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). In making this assessment. Based on our assessment and those criteria. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. The Company’s management assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31.

assessing the risk that a material weakness exists. (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles. and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company.’s (the “Company”) internal control over financial reporting as of December 31. Inc. or that the degree of compliance with the policies or procedures may deteriorate. and the related consolidated statements of income. in all material respects. based on the COSO criteria. and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. In our opinion. internal control over financial reporting may not prevent or detect misstatements. equity and cash flows for each of the three years in the period ended December 31. the Company maintained. 2010 of the Company and our report dated February 17. We believe that our audit provides a reasonable basis for our opinion. accurately and fairly reflect the transactions and dispositions of the assets of the company. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. Because of its inherent limitations. Also. expressed an unqualified opinion thereon. comprehensive income. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). use or disposition of the company’s assets that could have a material effect on the financial statements. testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. 2010. New York February 17. We also have audited. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. We have audited Starwood Hotels & Resorts Worldwide. and performing such other procedures as we considered necessary in the circumstances. the consolidated balance sheets of the Company as of December 31. Inc. 2010. 2010 and 2009. projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions. /s/ New York.Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Starwood Hotels & Resorts Worldwide. effective internal control over financial reporting as of December 31. in reasonable detail. The Company’s management is responsible for maintaining effective internal control over financial reporting. 2011. in accordance with the standards of the Public Company Accounting Oversight Board (United States). 2011 Ernst & Young LLP 41 . A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that. based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Our audit included obtaining an understanding of internal control over financial reporting.

Exhibits. 2011 made by the Form 10-K/A report filed by the Company on March 11. which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Information regarding certain relationships and related transactions and director independence is incorporated by reference to the Proxy Statement. (a) The following documents are filed as part of this Annual Report: 1-2. Information regarding executive compensation is incorporated by reference to the Proxy Statement. Executive Officers and Corporate Governance. Item 13. 3. 42 . 2010 that has materially affected. which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Directors. 2011 (the “Proxy Statement”). Executive Compensation. Item 9B. which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. 2010 filed with the Securities and Exchange Commission on February 18. Item 12. 2011. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. executive officers and corporate governance is incorporated by reference to our Proxy Statement for the Annual Meeting of Stockholders to be held May 5.Changes in Internal Controls There has not been any change in our internal control over financial reporting identified in connection with the evaluation that occurred during the year ended December 31. Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference to the Proxy Statement. The financial statements and financial statement schedule listed in the Index to Financial Statements and Schedule following the signature pages hereof. Other Information. Information regarding directors. which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. those controls. or is reasonably likely to materially affect. Financial Statement Schedules. Principal Accounting Fees and Services. Certain Relationships and Related Transactions and Director Independence. Item 11. Not applicable. Item 14. PART III Item 10. Information regarding principal accounting fees and services is incorporated by reference to the Proxy Statement. Item 15. Exhibits:* * This list of exhibits has been revised to reflect amendments to the Company’s Form 10-K Annual Report for the year ended December 31.

2008 (incorporated by reference to Exhibit 3. 1995. Horizon SLT Merger Sub.Exhibit Number Description of Exhibit 2. dated as of September 13. 2006 (the “April 13 Form 8-K”).2 4.3 to the April 13 Form 8-K).3 2. (The SEC file number of all filings made by the Company pursuant to the Securities Exchange Act of 1934. Sheraton Holding Corporation and Bank of New York Trust Company. dated as of November 15. Amendment to Amended and Restated Bylaws of the Company. among the Company. 1994.1 2. First Indenture Supplement. and referenced herein is 1-7959). Amendment Agreement. L. 1 to Formation Agreement. among the Company. 1996). dated as of July 1995.23 to the Company’s Registration Statement on Form S-2 filed with the SEC on June 29. as of May 30.. among Host Marriott Corporation.8 Formation Agreement.S. dated as of April 19. as trustee (incorporated by reference to Exhibit 4.C. 43 .. as trustee (incorporated by reference to Exhibit 4. the Company and The Bank of New York (incorporated by reference to Exhibit 4. Second Indenture Supplement. dated as of November 14.S. 2006). between the Company and the U. 2006. 1994). L. 2007 (incorporated by reference to Appendix A to the Company’s 2007 Notice of Annual Meeting and Proxy Statement).6 4. Host Marriott. Articles of Amendment and Restatement of the Company.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 14.) and the First National Bank of Chicago.P. Horizon Supernova Merger Sub. L. dated as of November 11. among the Company and the Starwood Partners (incorporated by reference to Exhibit 10.1 of the Joint Current Report on Form 8-K filed with the SEC on March 29.7 4. 2006 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 17. among ITT Corporation. 1998. Amended and Restated Rights Agreement. 2005.2 of the April 13 Form 8-K).1 4.1 3. 2006. 2002. as amended and restated through April 10. dated as of April 7. Form of Amendment No.. as amended.P. Bank National Association.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 18. 1995 (Registration Nos.3 4. 2006. Starwood Hotels & Resorts Worldwide. Supplemental Indenture. 2007. as trustee (incorporated by reference to Exhibit 4. between the Company and American Stock Transfer and Trust Company.1 of the April 13 Form 8-K)..2 to the Company’s Current Report on Form 8-K filed with the SEC on April 13. to the Merger Agreement (incorporated by reference to Exhibit 2.5 4.2 to the September 17 Form 8-K).1 to the Company’s Current Report on Form 8-K filed with the SEC on January 8.S. Master Agreement and Plan of Merger. Starwood Hotels & Resorts. 2006 between the Company and the Trust (incorporated by reference to Exhibit 4. 1995 between ITT Corporation (formerly known as ITT Destinations. as Amended and Restated as of December 15. 2002).4 4.3 4. Bank National Association. N.L. Amended and Restated Bylaws of the Company. dated as of March 13. 33-59155 and 33-59155-01)). Inc. as trustee (incorporated by reference to Exhibit 4..2 3. as Rights Agent (which includes the form of Amended and Restated Articles Supplementary of the Series A Junior Participating Preferred Stock as Exhibit A. 2007. 2008). Indenture. 2007 (the “September 17 Form 8-K”)).A. Bank National Association.4 3. the guarantor parties named therein and U. dated as of April 9. Inc. Sheraton Holding Corporation and SLT Realty Limited Partnership (the “Merger Agreement”) (incorporated by reference to Exhibit 10. dated as of September 13.IV to the First Amendment to ITT Corporation’s Registration Statement on Form S-3 filed with the SEC on November 13. between the Company and the U. 2005). among the Company.A. Termination Agreement dated as of April 7. Indenture. Starwood Capital and the Starwood Partners (incorporated by reference to Exhibit 2 to the Company’s Current Report on Form 8-K filed with the SEC on November 16. Amended and Restated Indenture.1 to the Company’s and Sheraton Holding Corporation’s Joint Registration Statement on Form S-4 filed with the SEC on November 19.2 2. dated as of March 24. as trustee (incorporated by reference to Exhibit 4. dated as of December 31. the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C) (incorporated by reference to Exhibit 4. 1999).

certain additional Dollar Revolving Loan Borrowers. certain additional Alternate Currency Revolving Loan Borrowers.A. as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 28.* 2004 Long-Term Incentive Compensation Plan.2 to the 2003 10-Q1). 2008. 1998). between the Company and the U. 1997.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30. dated as of December 10.P. 2010. between the Company and U. Bank National Association. 2008 (“2004 LTIP”) (incorporated by reference to Exhibit 10. Bank National Association.11 10. defining the rights of long-term debt holders of the registrant and its consolidated subsidiaries upon the request of the Commission. 2009). between Starwood Capital and the Company (incorporated by reference to Exhibit 10.Exhibit Number Description of Exhibit 4.* Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10. Deutsche Bank Securities Inc. 2009.11 10. 1999. 2009 (the “January 2009 8-K”)). The registrant hereby agrees to file with the Commission a copy of any instrument. as Lead Arrangers and Book Running Managers. 1999 Long-Term Incentive Compensation Plan (the “1999 LTIP”) (incorporated by reference to Exhibit 10. as Syndication Agent.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 6.6 10. * Form of Non-Qualified Stock Option Agreement pursuant to the 1999 LTIP (incorporated by reference to Exhibit 10. Third Amended and Restated Limited Partnership Agreement for Operating Partnership. 2001).* Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10. 2001 (incorporated by reference to Exhibit 10. J. N.35 to the 2004 Form 10-K). 2.14 10.S. dated as of November 20.* Form of Restricted Stock Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.4 to the 2004 Form 10-Q2).30 to the 2004 Form 10-K). between the Company and the U.* 44 .S. 3.22 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31. Supplemental Indenture No. dated as of May 7.1 to the 2003 10-Q1).10 10.* Form of Restricted Stock Agreement pursuant to the 1999 LTIP (incorporated by reference to Exhibit 10.31 to the 2004 Form 10-K). 1997). 1999).1 10. 2008).2 to the Company’s Annual Report on Form 10-K405 for the fiscal year ended December 31.3 10. 4.8 10. and Banc of America Securities LLC. 2003 (the “2002 10-K”)). Inc.* Starwood Hotels & Resorts Worldwide.* First Amendment to the 1999 LTIP. 2009.15 Supplemental Indenture No.* Form of Non-Qualified Stock Option Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10. as trustee (incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30.10 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 22. Bank National Association.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 23. Starwood Hotels & Resorts Worldwide. Deutsche Bank AG New York Branch. 2002 Long-Term Incentive Compensation Plan (the “2002 LTIP”) (incorporated by reference to Annex B of the Company’s 2002 Proxy Statement). including indentures. various Lenders. dated January 6.* Second Amendment to the 1999 LTIP (incorporated by reference to Exhibit 10.4 10.7 10. 2009).5 10.2 10. Supplemental Indenture No.12 10. among the Company. dated as of May 23. Credit Agreement. JPMorgan Chase Bank. 2010). amended and restated as of December 31. Form of Trademark License Agreement. dated as of April 20. dated as of August 1. Inc. (incorporated by reference to Exhibit 10.9 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 12..9 4. Morgan Securities Inc.13 10. as Administrative Agent. as trustee (incorporated by reference to Exhibit 4.49 to the 2002 Form 10-K filed on February 28..S. among the Company and the limited partners of Operating Partnership (incorporated by reference to Exhibit 10.* First Amendment to the 2002 LTIP (incorporated by reference to Exhibit 10.38 to the 2004 Form 10-K).

2 to the January 2009 8-K).31 10.21 10.43 to the 2008 Form 10-K). dated as of August 2.10 to the Company’s Current Report on Form 8-K filed with the SEC on November 25. dated August 14.* Amended and Restated Employment Agreement. Siegel (incorporated by reference to Exhibit 10.* Form of Restricted Stock Unit Agreement between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10. 2006 (the February 2006 Form 8-K”)). between the Company and Bruce W.52 to the 2008 Form 10-K).* Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.* Amendment.* Letter Agreement. 2000.35 Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10. dated as of December 30. to employment agreement between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10. 2008.23 10.2 to the Company’s Current Report on Form 8-K filed February 13. 2007. dated as of September 25.73 to the 2004 Form 10-K).* Employment Agreement.34 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31.* Letter Agreement.* Form of Amended and Restated Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10. Inc. 2006 (the 2006 Form 10-Q2”)).26 10. to employment agreement between the Company and Kenneth S.* Form of Restricted Stock Grant between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.1 to the February 2006 Form 8-K). 2007. 2007. Siegel (incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31. 2007). dated August 14. between the Company and Kenneth Siegel (incorporated by reference to Exhibit 10.* Employment Agreement. 2008. between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.* Form of Amended and Restated Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.* Letter Agreement.28 10. * 45 .25 10.30 10. 2008 (the “2008 Form 10-K”). 2007 (the “August 17 Form 8-K”)).20 10.* Annual Incentive Plan for Certain Executives.19 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on August 17.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31.34 10. dated as of November 13. Duncan (incorporated by reference to Exhibit 10.32 10. between the Company and Frits van Paasschen (incorporated by reference to Exhibit 10. 2008 (incorporate by reference to Exhibit 10. 2003.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30. 2007).22 10. 2007). between the Company and Kenneth S.33 10. effective as of January 22. dated July 22.18 10.* Form of Non-Qualified Stock Option Agreement between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10. 2007 (the “2007 Form 10-Q3”)).5 to the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30.68 to the 2003 10-K).* Form of Restricted Stock Unit Agreement between the Company and Bruce W.1 to the August 17 Form 8-K).* Amendment. between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10. dated as of December 30. 2004 between the Company and Kenneth Siegel (incorporated by reference to Exhibit 10.* Starwood Hotels & Resorts Worldwide.* Employment Agreement. 2008.6 to the 2007 Form 10-Q3). dated as of December 30.27 10.29 10. Duncan pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.24 10. Amended and Restated Deferred Compensation Plan. amended and restated as of December 2008 (incorporated by reference to Exhibit 10.16 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30.* Form of Indemnification Agreement between the Company and each of its Directors and executive officers (incorporated by reference to Exhibit 10.7 to the 2007 Form 10-Q3). 2000 (the “2000 Form 10-K”)). 2009).Exhibit Number Description of Exhibit 10.2 to the 2006 Form 10-Q2).17 10.

(iv) the Consolidated Statements of Equity. dated as of December 30.62 10. 46 .3 to the 2009 Form 10-Q1). dated as of December 30.1 31.† List of our Subsidiaries. 2008. Siegel and Prabhu (incorporated by reference to Exhibit 10. 2010.Exhibit Number Description of Exhibit 10. to employment agreement between the Company and Matthew Avril (incorporated by reference to Exhibit 10.2 32. between the Company and Matthew Avril (incorporated by reference to Exhibit 10.1 31.59 10.+ The following materials from the Company’s Annual Report on Form 10-K for the period ended December 31. between the Company and Matthew Avril (incorporated by reference to Exhibit 10.1 32.2 to the 2009 Form 10-Q1). (ii) the Consolidated Statements of Income.* Amended and Restated Severance Agreement. † Copies of these exhibits are included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 18. (iii) the Consolidated Statements of Comprehensive Income. and shall not be deemed incorporated by reference to any filing. 2008.* Amendment.+ Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial Officer. dated as of December 30.58 10.* Letter Agreement.* Calculation of Ratio of Earnings to Total Fixed Charges. 2009 (the “2009 Form 10-Q1”).+ Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial Officer. dated as of December 30.60 10.† Consent of Ernst & Young LLP. dated August 22. between the Company and Simon Turner (incorporated by reference to Exhibit 10. 2008.8 to the 2009 Form 10-Q1). 2008.1 21.* Amendment.+ Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer.63 12. dated April 15. 2011. to employment agreement between the Company and Simon Turner (incorporated by reference to Exhibit 10.9 to the 2009 Form 10-Q1). in accordance with Item 601 of Regulation S-K. 2008.2 101 Form of Severance Agreement between the Company and each of Messrs.61 10.† Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer. and (vi) the Notes to Consolidated Financial Statements. (v) the Consolidated Statements of Cash Flows.1 23.** + Filed herewith. between the Company and Simon Turner (incorporated by reference to Exhibit 10.* Amended and Restated Severance Agreement. 2008.57 to the 2008 Form 10-K).57 10. formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets.* Letter Agreement. * Indicates management contract or compensatory plan or arrangement ** This exhibit is being furnished rather than filed.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31.7 to the 2009 Form 10-Q1).

2011 Director February 17. 2011 Director February 17. SCHNAID Alan M. JR. Corporate Controller and Principal Accounting Officer Director February 17. this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. ARON Adam M. 2011 Executive Vice President and Chief Financial Officer (Principal Financial Officer) Senior Vice President. 2011 February 17.SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. the registrant has duly caused this report to be signed on its behalf by the undersigned. 2011 Director February 17. DALEY. Signature Title Date /s/ FRITS VAN PAASSCHEN Frits van Paasschen /s/ BRUCE W. 2011 Pursuant to the requirements of the Securities Exchange Act of 1934. INC. Schnaid /s/ ADAM M. Clarke /s/ CLAYTON C. DUNCAN Bruce W. Duncan /s/ VASANT M. 2011 47 . 2011 Director February 17. By: /s/ FRITS VAN PAASSCHEN Frits van Paasschen Chief Executive Officer and Director Date: February 17. 2011 February 17. Jr. CLARKE Thomas E. Aron /s/ CHARLENE BARSHEFSKY Charlene Barshefsky /s/ THOMAS E. Prabhu /s/ ALAN M. 2011 Director February 17. Clayton C. 2011 Chairman and Director February 17. PRABHU Vasant M. /s/ LIZANNE GALBREATH Lizanne Galbreath /s/ ERIC HIPPEAU Eric Hippeau Chief Executive Officer and Director February 17. STARWOOD HOTELS & RESORTS WORLDWIDE. thereunto duly authorized. Daley.

2011 48 . Quazzo /s/ THOMAS O. QUAZZO Stephen R. 2011 Director February 17. Ryder /s/ KNEELAND C.Signature Title Date /s/ STEPHEN R. RYDER Thomas O. Youngblood Director February 17. YOUNGBLOOD Kneeland C. 2011 Director February 17.

. . . . . . . . . . . . . . Schedule: Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010. . Consolidated Statements of Cash Flows for the Years Ended December 31. . . . . . . . . . . . . . . . . Consolidated Statements of Income for the Years Ended December 31. . . . . . . . . . 2010. . . . . . . . . . . Consolidated Statements of Equity for the Years Ended December 31. . . . . . . . . . . . Consolidated Balance Sheets as of December 31. . Consolidated Statements of Comprehensive Income for the Years Ended December 31. . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . . . . . . . . . . 2010 and 2009 . . . . . . . . . . . . . . . . INC. . . . . . . . . . . . . . . . 2009 and 2008 . . . . . . . . . . . 2010. . . . . . . . . . . 2009 and 2008 . . . . . 2009 and 2008 . . . . . . . . . . . 2009 and 2008. . . . . . . . . 2010. . . . . . . . . . . . . . . . . . . . . . INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Page Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . F-2 F-3 F-4 F-5 F-6 F-7 F-8 S-1 F-1 . . Notes to Financial Statements . . . . . . . . .

Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets (formerly Statement of Financial Accounting Standards (“SFAS”) No. as well as evaluating the overall financial statement presentation. evidence supporting the amounts and disclosures in the financial statements. and ASU No. and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31. Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. (the “Company”) as of December 31. comprehensive income. The Company adopted SFAS No. 2010. 166). 167) on January 1. and cash flows for each of the three years in the period ended December 31. and the related consolidated statements of income. Inc. the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. These financial statements and schedule are the responsibility of the Company’s management. on a test basis. 2010. Consolidations) on January 1. when considered in relation to the basic financial statements taken as a whole. We believe that our audits provide a reasonable basis for our opinion. 2010 and 2009. Our audits also included the financial statement schedule listed in the Index at Item 15(a). In our opinion. in all material respects. 2009-16. in our opinion. 2011 Ernst & Young LLP F-2 . the consolidated financial position of the Company at December 31. 2011 expressed an unqualified opinion thereon. As discussed in Note 2 to the consolidated financial statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Inc. the financial statements referred to above present fairly. 2009-17. equity. in accordance with the standards of the Public Company Accounting Oversight Board (United States). the Company’s internal control over financial reporting as of December 31. the related financial statement schedule. We also have audited. 2009. 2010. 51 (codified in FASB Accounting Standards Codification Topic 810. 2010 and 2009. presents fairly in all material respects the information set forth therein.S. 160. We have audited the accompanying consolidated balance sheets of Starwood Hotels & Resorts Worldwide. Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (formerly SFAS No. An audit includes examining. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). generally accepted accounting principles. Also. New York February 17.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Starwood Hotels & Resorts Worldwide. 2010. based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17. in conformity with U. An audit also includes assessing the accounting principles used and significant estimates made by management. /s/ New York. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

. . . . . .903 6. . . . . . . . . . . . . Securitized vacation ownership notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . Total Starwood stockholders’ equity . . . . . . . . . . . . . . Accrued expenses . Restricted cash . Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .955 — 31 1. . . . . . . . . . Long-term securitized vacation ownership debt . . . . .553 1. . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . Investments . . . . . . . . . . . . . . . Commitments and contingencies Stockholders’ equity: Common stock. . . Inventories . . . . . . . . . . . .306 312 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED BALANCE SHEETS December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant. . . . . Accrued taxes and other . . . . . . . . F-3 .947 2. Total current liabilities . .437 and 186. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .01 par value. . . . . . . . . . . . . . . respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . Prepaid expenses and other . .761 The accompanying notes to financial statements are an integral part of the above statements. . . . . . . . . . . . . . . . . . . . . $ 9 138 127 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . wages and benefits . . . . . .063 982 438 — $8. . . . . . . . . . . . . . . . . . . .290 $ 5 139 — 1. .489 368 3. . . . . . . . . . . . . . . . . . . . . . .761 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Short-term borrowings and current maturities of long-term debt . . . $ 753 53 513 802 59 126 2. . . . . . . .776 2 552 (283) 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .848 367 28 1. . . . . . . . . . . . . . . . . . . . . . .824 21 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . property and equipment. . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . .776 $ 87 47 445 783 — 127 1. .970. . . . . . Deferred income taxes. . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . . 2010 2009 (In millions.845 $8. . . .916 2 805 (283) 1. . . . . . . . . net. . . . . .212 303 368 2. . . . . . . . outstanding 192. . . . . . . . . . . . . . . . . . . . . . . . . . . . . net of allowance for doubtful accounts of $10 and $0 . . . . . . . . . . . .350 71 2. . . . . . . . . . . . .027 2. . . . . . . . . . . . . . . . . . . . . . . . .000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .471 15 2. .000. . . . . . . . . . . . . . . . . . . . . .067 979 381 408 $9. . . . . $0. . . Total current assets . .486 $9. . . . . . . . Securitized vacation ownership notes receivable. . . . . . . . . . . . . . . . . . . . . . .785. . . . . net . . . . . . . . Current maturities of long-term securitized vacation ownership debt . . . . . . . . . . . . . . . . . . 2010 and 2009. . . . . . . . . . . . . . . . . INC. . . . . . . . . . Accounts payable . . authorized 1. . . . . . . . . . . . . .104 410 373 2. Goodwill and intangible assets. . . . . . .000 shares. . . . . . . . . . . . . . . . . . . . . . . . .323 — 2. . . . . . . . . . . . . . . . . . . . . . . . . .161 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net. . . . . . . . . . . . Other assets . . . . . .068 shares at December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . except share data) ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .886 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable. . . net of allowance for doubtful accounts of $45 and $54 . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . .41 $ 0. . . . .77 $ 249 80 $ 329 181 185 $ 0. . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Net income . . . . . . . except per share data) Revenues Owned. . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . . $ 477 Weighted average number of shares . . . . . . . . .41 $ $ (1) 74 73 180 180 $ 0. . net of interest income of $2. . . . . . . . . . . .754 1. . . . . . . . . . . . . . . .30 The accompanying notes to financial statements are an integral part of the above statements. . . . . . . . . .20 Dividends declared per share . .91 Net income . . . . . . . .584 523 658 1. . $ 2. . . . . . . $ 310 Discontinued operations . . . . . . . .. . . . . . . . . . . . . . . . . . . Gain (loss) on dispositions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31. . . . . . . 538 . Selling. . . . . . . . . . . . . . . . . . . . . Amortization .63 Discontinued operations . . .. . . . . . . . . . .315 422 314 379 274 35 1. . . .670 26 (4) (227) (91) (296) 293 (3) (2) 76 71 2 73 $2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .395 405 344 (75) 252 33 2. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .61 Earnings (Losses) Per Share — Diluted Continuing operations . . . Interest expense. . . leased and consolidated joint venture hotels . . . . . . . . . . . . . . . . . . . . . . . . . .37 0. . . . . . . . . . 2010 2009 2008 (In millions. . . . Depreciation . . . . . . . . . . . . . $1. . . .117 5. . . . F-4 . . . . . . . . . Income tax benefit (expense) . . . . . . . . .. . .042 5. . .. . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .212 749 751 2. . . .. . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Net income . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . Net income attributable to Starwood. . . . . . . . . . . . . . . . . . . . . . Equity earnings (losses) and gains and losses from unconsolidated ventures. . . . . . . . . . . . . . . . . . . franchise fees and other income . . . . . . Discontinued operations: Income (loss) from operations. . . .34 0. . . . . . . . . . . . . . . . . . . . . . .90 Costs and Expenses Owned. . . . . . . . . . . net of tax (benefit) expense of $0. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . administrative and other . . . . . . . . . . .. .51 Amounts attributable to Starwood’s Common Shareholders Income (loss) from continuing operations . . . . . . . . . . .. . . . . . . . . . . . Income (loss) from continuing operations . . . . . . .41 $ 0. Other revenues from managed and franchised properties . . 0. . . . . . . . . . . . . . . . . . . . . .. . . . . . . Net (income) loss attributable to noncontrolling interests . .688 583 377 141 281 32 2. . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before taxes and noncontrolling interests . . .00 0. . . . . . . . . . . .00 0. . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . .696 1. . . . . . $(35) and $54 . . . . $ 1. . . . . . . . . . . . . . . . . . . INC. . . . . . . . . . . . . . net of tax (benefit) expense of $(166). . . . . . $ $ Earnings (Losses) Per Share — Basic Continuing operations . . . 712 . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . $3 and $3 . . . . . . . . . $ 1.071 1. 0. . . . . . . . . . . . . . . . . . . . . . . . . .44 $ 1. . . . . . . . . . . . . . . . Other expenses from managed and franchised properties . . . 183 190 $ 0. . . . . . . . . . . . . . . . . $ 2. . . .117 4. . . . . . .. . . . . . . . . . . . . . . . $(2) and $4 . . . . . . . . . . . . . . . . . . . Restructuring. . . . . . . Gain (loss) on asset dispositions and impairments. . . . . . .042 5. goodwill impairment and other special charges (credits). . . . . .41 $ 0. . . . . . . .931 4. . . . . . Weighted average number of shares assuming dilution . . . . . . . . . . . . . . . . .144 610 16 (207) (98) 321 (72) 249 5 75 329 — $ 329 $ 1. . . . . . . . . . .471 600 10 (236) (39) 335 (27) 308 (1) 168 475 2 477 $1. . . . . . . . . . . net. . . . . . . . . . . . . . . . . . . . . . . leased and consolidated joint venture hotels . .43 $ 1. . . . . .704 . . . . . . . . . . . . . . $ 0. . . . Vacation ownership and residential . . . . . . . . . . . . .81 $ 1. . . . . . . . . . . .. . . . . . . . . . .70 Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . .931 4. . . general. Vacation ownership and residential sales and services . . . . . . . . . . . . . . . . . . . . . . . Management fees. . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net of taxes: Foreign currency translation adjustments . . . F-5 . . . . . . . . . . . . . . . . . . . . . — 475 2 (1) $ 71 86 (13) 10 23 5 — (6) 3 — 108 179 2 1 $182 $ 329 (190) — (61) 1 2 4 2 (1) (1) (244) 85 — — $ 85 Comprehensive income (loss) attributable to Starwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Less: Recognition of accumulated foreign currency translation adjustments on sold hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Change in fair value of investments . . . . . . . . . . . . . . . . . . . . . INC. . . . . . . . — Amortization of actuarial gains and losses included in net periodic pension cost . . . . . (1) Reclassification for gains and amortization included in net income . . . . . . . . . . . . Foreign currency translation adjustments attributable to noncontrolling interests . . — Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Change in fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $476 The accompanying notes to financial statements are an integral part of the above statements. . . . . . . Comprehensive (income) loss attributable to noncontrolling interests . . . . . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . (1) Reclassification adjustments for losses (gains) included in net income . . . 2010 2009 2008 (In millions) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Defined benefit pension and postretirement benefit plans net gains (losses) arising during the year . . . . . . . . . . . . . . . . . . . $475 Other comprehensive income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31. . . . . . . . (4) Net curtailment and settlement gains . . . . . . . . . . . . . . . . .

. . . . The accompanying notes to financial statements are an integral part of the above statements. . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . Balance at December 31. . . . . . . . . . . ESPP stock issuances. . Other comprehensive income (loss) . . . . net . . .845 475 248 5 (26) (1) (60) $2. net . .486 (1) Stock option and restricted stock award transactions are net of a tax (expense) benefit of $28 million. . . . . . . . .517 73 — — — (37) 1. . . . . . . . . . . . . 2010. . . . . . . Impact of adoption of ASU No. . . . . . . . . . . . . . . Dividends declared . . . . . . . . . . 2009. . . . . . ESPP stock issuances. . . .644 71 54 5 109 (38) 1. . . . Net income (loss) . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . F-6 . . . . . . Stock option and restricted stock award transactions. . . . . . . . ESPP stock issuances. . Stock option and restricted stock award transactions. . . 2010. . . . ($18) million and $33 million in 2010. . Dividends declared . this balance is comprised of $227 million of cumulative translation adjustments and $56 million of cumulative pension adjustments. . . . . . . 2007. . . . . . . . . Balance at December 31. . . . . . . 2009. . . . . Dividends declared .353 329 — — — — — (165) 1. .947 $26 — — — — (2) — (1) 23 (2) — — 1 (1) 21 (2) — — — (1) (3) $15 $2. . . . . . Net income (loss) . 2009-17 . . . . . . INC. net . . . . . . . . Stock option and restricted stock award transactions. . . . . . . . . Other . . . . . . . . . . . . . and 2008 respectively. . .102 329 212 6 (593) (2) (244) (166) 1. . . Net income (loss) . 191 — 6 — (14) — — — 183 — 4 — — — 187 — 6 — — — — 193 $ 2 — — — — — — — 2 — — — — — 2 — — — — — — $ 2 $ 868 — 212 6 (593) — — — 493 — 54 5 — — 552 — 248 5 — — — $ 805 $(147) — — — — — (244) — (391) — — — 108 — (283) — — — — — — $(283) $1. . . . . . . . . . . (2) As of December 31. . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF EQUITY Equity Attributable to Starwood Stockholders Accumulated Other Comprehensive (Loss) Income(2) (In millions) Equity Attributable to Noncontrolling Interests Shares Shares Amount Additional Paid-in Capital(1) Retained Earnings Total Balance at December 31. . . . . Share repurchases . . . . . . . . . . .553 477 — — (26) — (57) $1. . . Balance at December 31. . . . 2008. . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . Increase (decrease) in cash and cash equivalents . Share repurchases . . . . . . . Amortization of deferred gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess stock-based compensation tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . F-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . Collection of notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . $ 244 $(171) $ $ 214 12 $ 170 $ 58 The accompanying notes to financial statements are an integral part of the above statements. . . . . . . . . . . . . . . . . . . . . . . . . Supplemental Disclosures of Cash Flow Information Cash paid (received) during the period for: Interest . . . . . . . . . . . . . Exchange rate effect on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents — end of period . . . . . . . . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . . . . . . . . . . Inventories . . . Changes in working capital: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . VOI notes receivable activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred loan costs . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash foreign currency (gains) losses. . Prepaid expenses and other . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INC. . . . . . . . . . . . . . . . goodwill impairment and other special charges (credits). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other adjustments relating to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of VOI notes receivable . . . . . . . . . . . . . . . . . . Cash (used for) from investing activities . . Issuance of notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168) — — 72 (20) 285 13 (7) (39) (81) 55 3 — 39 16 9 (22) (110) 1 13 200 (29) 1 58 764 (227) 148 (1) 2 (18) (32) 49 8 (71) (114) 3 (9) 280 (224) (93) 141 20 — (30) (26) (1) 666 87 $ 753 $ (76) 8 — 53 — 309 10 332 (6) (82) 72 30 (24) 91 (260) 46 63 (98) 10 (44) (50) — 167 (51) 571 (196) 310 (4) 2 — (5) 35 (26) 116 (102) 726 (1. . . . . . . . . . . . . . . . . . Depreciation and amortization . . . Financing Activities Revolving credit facility and short-term borrowings (repayments). . . . . . . . . . . . . . . . . . . . . . Distributions in excess (deficit) of equity earnings . . . . . . . . . . net . . . . . . $ 475 $ 71 $ 329 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . Proceeds from investments . . . . . . . . Non-cash portion of restructuring. . . . . . . . . . . . . . . . . . . net of acquired cash . . . CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31. . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to net income: Discontinued operations: (Gain) loss on dispositions. . . . . . . . . . . Non-cash portion of income tax expense (benefit) . . . . . . Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents — beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . 2010 2009 2008 (In millions) Operating Activities Net income . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess stock-based compensation tax benefit (expense) . . . . . . . . . . Other. . . . . . . net . . . . . . . . . . . . . . Investing Activities Purchases of plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt repaid . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash (used for) from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized VOI notes receivable activity. . . . . . . . . . . . . . Loss (gain) on asset dispositions and impairments. . . . . . . . Long-term debt issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued income taxes . . . . . . . . . . .681) — — (165) 2 — — 227 (993) 4 (302) 389 87 (75) 10 — 68 (16) 313 5 74 (5) (83) 64 21 (4) 98 24 102 34 (280) 2 85 (22) — (150) 52 646 (476) 320 (1) 5 — (38) 39 (21) (172) (570) 986 (4) — — (172) 120 16 (593) (26) (243) 7 238 151 $ 389 Cash (used for) from operating activities . . . . . . . . Proceeds from asset sales. . . . . . . . . . . . . . . .

Inventories are comprised principally of VOIs of $307 million and $434 million as of December 31. Inventories. and its subsidiaries (the “Company”). Basis of Presentation The accompanying consolidated financial statements represent the consolidated financial position and consolidated results of operations of Starwood Hotels & Resorts Worldwide. which is comprised of a worldwide hospitality network of almost 1. including the F-8 . china. VOI and residential inventory is carried at the lower of cost or net realizable value and includes $29 million. Hotel inventory also includes linens. glass. Loan Loss Reserves. The accompanying consolidated financial statements of the Company and its subsidiaries include the assets. Westin. respectively. Restricted cash primarily consists of deposits received on sales of VOIs and residential properties that are held in escrow until a certificate of occupancy is obtained. The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton. Starwood is one of the world’s largest hotel and leisure companies. silver. the average estimated default rate for the Company’s pools of receivables was 10%.STARWOOD HOTELS & RESORTS WORLDWIDE. vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale. Restricted Cash. Hotel inventory includes operating supplies and food and beverage inventory items which are generally valued at the lower of FIFO cost (first-in. We have evaluated all subsequent events through the date the consolidated financial statements were filed. respectively. 2010 and 2009. uniforms. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis. and providing financing to customers who purchase such interests. the Company had short-term restricted cash balances of $53 million and $47 million. At December 31. and hotel inventory. As of December 31. the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes a timeshare sale. NOTES TO FINANCIAL STATEMENTS Note 1. the Company supplements the process by evaluating certain qualitative data. Intercompany transactions and balances have been eliminated in consolidation. development and operation of vacation ownership resorts. Significant purchases of these items with a useful life of greater than one year are recorded at purchased cost and amortized over their useful life. 2010. Inc. the legal rescission period has expired and the deed of trust has been recorded in governmental property ownership records. Inc. utensils and guest room items. The principal operations of Starwood Vacation Ownership. Cash and Cash Equivalents. Significant Accounting Policies Principles of Consolidation. In consolidating. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. In estimating loan loss reserves. Note 2. first-out) or market. The consolidated financial statements include the accounts of the Company and all of its controlled subsidiaries and partnerships. residential inventory of $462 million and $315 million at December 31. marketing and selling vacation ownership interests (“VOIs”) in the resorts. The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses uncollectibility based on pools of receivables. (“SVO”) include the acquisition. all material intercompany transactions are eliminated. 2010 and 2009. the Company uses a technique referred to as static pool analysis. revenues and expenses of majority-owned subsidiaries over which the Company exercises control. respectively. $31 million and $25 million of capitalized interest incurred in 2010. For the vacation ownership and residential segment.000 full-service hotels. respectively. 2009 and 2008. 2010 and 2009. and Other) as the Company believes there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. INC. which tracks defaults for each year’s mortgage originations over the life of the respective notes and projects an estimated default rate. liabilities. Normal replacement purchases are expensed as incurred. The Company’s principal business is hotels and leisure.

the Company may have to record impairment charges. equipment and fixtures. Costs for normal repairs and maintenance are expensed as incurred. For non-traded investments. property and equipment are capitalized. Any gain realized in connection with the sale of a property for which the Company has significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the related agreement (See Note 13). discounted at the loan’s original effective interest rate. Plant. the Company establishes a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. If the Company’s interest exceeds 50% or. The Company considers properties to be assets held for sale when management approves and commits to a formal plan to actively market a property or group of properties for sale and a signed sales contract and significant non-refundable deposit or contract break-up fee exist. with a 0. and the lesser of the lease term or the F-9 . Uncollectible VOI notes receivable are charged off when title to the unit is returned to the Company. For impaired loans. Property and Equipment. which is dependent on the performance of the investment as well as the volatility inherent in external markets for these types of investments. the Company records the carrying value of each property or group of properties at the lower of its carrying value which includes allocable segment goodwill or its estimated fair value. Upon reaching 120 days outstanding. For the hotel segment. $2 million and $6 million incurred in 2010. 3 to 10 years for furniture. Assets Held for Sale. Depreciation is recorded on a straight-line basis over the estimated useful economic lives of 15 to 40 years for buildings and improvements. For loans that the Company has determined to be impaired. Investments. Plant. NOTES TO FINANCIAL STATEMENTS — (Continued) aging of the respective receivables. the Company measures the impairment of a loan based on the present value of expected future cash flows. and the Fair Isaac Corporation (“FICO”) scores of the buyers. a change in the projected default rate can have a significant impact to its loan loss reserve requirements. INC. Given the significance of the Company’s respective pools of VOI notes receivable. respectively. the Company recognizes interest income on a cash basis. the Company will consider these factors as well as forecasted financial performance of its investment. 2009 and 2008. are recorded in discontinued operations unless the Company will have continuing involvement (such as through a management or franchise agreement) after the sale. The cost of improvements that extend the life of plant. Upon designation as an asset held for sale. less estimated costs to sell. All delinquent loans are placed on nonaccrual status and the Company does not resume interest accrual until payment is made. current default trends by brand and origination year. including capitalized interest of $2 million. These capitalized costs may include structural improvements.1% change estimated to have an impact of approximately $3 million. and the Company stops recording depreciation expense. fair value is estimated based on the underlying value of the investment. If these forecasts are not met. All other investments are generally accounted for under the cost method. 3 to 20 years for information technology software and equipment. The Company applies the loan impairment policy individually to all loans in the portfolio and does not aggregate loans for the purpose of applying such policy. fixtures and equipment. if material. The Company considers a VOI note receivable delinquent when it is more than 30 days outstanding. if the Company has the power to direct the economic activities of the entity and the obligation to absorb losses. or the estimated fair value of the collateral.STARWOOD HOTELS & RESORTS WORLDWIDE. applicable to major project expenditures are recorded at cost. property and equipment. The fair market value of investments is based on the market prices for the last day of the period if the investment trades on quoted exchanges. The Company generally does not modify vacation ownership notes that become delinquent or upon default. The operations of the properties held for sale prior to the sale date. the loan is considered to be in default and the Company commences the repossession process. In assessing potential impairment for these investments. Investments in joint ventures are generally accounted for under the equity method of accounting when the Company has a 20% to 50% ownership interest or exercises significant influence over the venture. the results of the joint venture are consolidated herein.

2010 and 2009. Contingencies requires that an estimated loss from a loss contingency be accrued with a corresponding charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. as incentives to first-time buyers of VOIs and residences. including the acquisition of management contracts. among F-10 . if any. the excess of the net book value over the estimated fair value is charged to current earnings. Goodwill and intangible assets arise in connection with acquisitions. Frequent Guest Program. managed and franchised hotels as well as through other redemption opportunities with third parties. respectively. current estimated net sales proceeds from pending offers. including an estimate of the “breakage” for points that will never be redeemed. and through participation in affiliated partners’ programs such as co-branded credit cards. Goodwill and Intangible Assets. Gains or losses on the sale or retirement of assets are included in income when the assets are sold provided there is reasonable assurance of the collectability of the sales price and any future activities to be performed by the Company relating to the assets sold are insignificant. SPG members earn points based on spending at the Company’s owned. Property Plant. The Company evaluates the carrying value of its assets for impairment. As points are earned. If the expected undiscounted future cash flows are less than the net book value of the assets. and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other thirdparties in respect of other redemption opportunities for point redemptions. managed and franchised hotels the cost of operating the SPG program. is $753 million and $689 million. are recognized in operating results. NOTES TO FINANCIAL STATEMENTS — (Continued) economic useful life for leasehold improvements. comparative sales for similar assets. the outcomes of which are subject to significant uncertainty. including marketing. of which $225 million and $244 million. as of December 31. The Company. based on a percentage of its SPG members qualified expenditures. The total actuarially determined liability (see Note 18). Fair value is based upon discounted cash flows of the assets at rates deemed reasonable for the type of asset and prevailing market conditions. Impairment charges. the Company increases the SPG point liability for the amount of cash it receives from its managed and franchised hotels related to the future redemption obligation. Legal Contingencies. or upon the occurrence of a trigger event. The Company evaluates. respectively. managed and franchised hotels. the hotels recognize revenue and the SPG point liability is reduced. Points can be redeemed at substantially all of the Company’s owned. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. The Company reviews all goodwill and intangible assets for impairment by comparisons of fair value to book value annually. and performing member services for the SPG members. The Company’s management and franchise agreements require that the Company be reimbursed for the costs of operating the SPG program. appraisals and. INC. Starwood Preferred Guest» (“SPG”) is the Company’s frequent guest incentive marketing program. ASC 450. through the services of third-party actuarial analysts. the expected undiscounted future cash flows of the assets are compared to the net book value of the assets. When points are redeemed by the SPG members. and Equipment occur.STARWOOD HOTELS & RESORTS WORLDWIDE. including the estimated cost of its future redemption obligation. The Company does not amortize goodwill and intangible assets with indefinite lives. such as conversion to airline miles. The Company charges its owned. is included in accrued expenses. Intangible assets with finite lives are amortized on a straight-line basis over their respective useful lives. promotions and communications. For its owned hotels the Company records an expense for the amount of its future redemption obligation with the offset to the SPG point liability. For assets in use when the trigger events specified in Accounting Standards Codification (“ASC”) 360. The Company is subject to various legal proceedings and claims. leased. The Company consolidates the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. if appropriate. determines the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted. These forward contracts do not qualify as hedges. the gain or loss is reclassified from other comprehensive income to management fees. The Company calculates the fair value of share-based awards on the date of grant. Changes in the fair value of the derivative instruments are classified in the same manner as the classification of the changes in the underlying assets or liabilities due to fluctuations in foreign currency exchange rates. and their change in fair value is recorded as a component of other comprehensive income. Restricted stock awards are valued based on the share price. The lattice valuation option pricing model requires the Company to estimate key assumptions such as expected life. Please refer to Note 23. The Company enters into forward contracts to hedge fluctuations in forecasted transactions based on foreign currencies that are billed in United States dollars. The Company periodically enters into interest rate swap agreements. Stock-Based Compensation.STARWOOD HOTELS & RESORTS WORLDWIDE. If the actual forfeitures differ from management estimates. These forward contracts have been designated as cash flow hedges. Foreign Currency Translation. The Company periodically enters into forward contracts to manage foreign exchange risk based on market conditions. a net gain of $6 million in 2009 and a net gain of $5 million in 2008. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. volatility. to manage interest rate exposure. Changes in these factors could materially impact the Company’s financial position or its results of operations. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. The Company provides for income taxes in accordance with ASC 740. The Company amortizes the share-based compensation expense over the period that the awards are expected to vest. INC. net of estimated forfeitures. Income Taxes. risk-free interest rates and dividend yield to determine the fair value of share-based awards. Balance sheet accounts are translated at the exchange rates in effect at each period end and income and expense accounts are translated at the average rates of exchange prevailing during the year. Derivative Financial Instruments. The Company enters into foreign currency hedging contracts to manage exposure to foreign currency fluctuations. The national currencies of foreign operations are generally the functional currencies. NOTES TO FINANCIAL STATEMENTS — (Continued) other factors. The Company has determined that a lattice valuation model would provide a better estimate of the fair value of options granted under its long-term incentive plans than a Black-Scholes model. franchise fees and other income. The net settlements paid or received under these agreements are accrued consistent with the terms of the agreements and are recognized in interest expense over the term of the related debt. As a forecasted transaction occurs. based on both historical information and management judgment regarding market factors and trends. F-11 . Stock-Based Compensation. the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Income Taxes. The Company does not enter into derivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties. based on market conditions. All foreign currency hedging instruments have an inverse correlation to the hedged assets or liabilities. additional adjustments to compensation expense are recorded. Gains and losses from foreign exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature are generally included in other comprehensive income. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature are reported currently in costs and expenses and amounted to a net gain of $39 million in 2010.

and (5) other revenues which are ancillary to the Company’s operations. (4) revenues from managed and franchised properties. usually under long-term contracts. property and general liability claims arising at hotel properties owned or managed by the Company through policies written directly and through reinsurance arrangements. historical experience and current cost trends. based on the analysis of third-party actuaries. all revenue and profit are initially deferred and recognized in earnings through the percentage-of-completion method. The fees from these arrangements are generally based on the gross sales revenue of the units sold. F-12 . exclusive of any termination fees due or payable. NOTES TO FINANCIAL STATEMENTS — (Continued) Revenue Recognition. Insurance Retention. Revenue is recognized when rooms are occupied and services have been rendered. from owned. leased or consolidated joint venture hotels and resorts. when the provisions of the management contracts allow receipt of incentive fees upon termination. • Revenues from Managed and Franchised Properties — These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. Through its captive insurance company. (2) vacation ownership and residential revenues. and an incentive fee. INC. Regis. St. termination fees and the amortization of deferred gains related to sold properties for which the Company has significant continuing involvement. the Company provides insurance coverage for workers’ compensation. Aloft and Element brand names. These costs relate primarily to payroll costs at managed properties where the Company is the employer.STARWOOD HOTELS & RESORTS WORLDWIDE. (3) management and franchise revenues. W. The Company’s revenues are primarily derived from the following sources: (1) hotel and resort revenues at the Company’s owned. which is generally based on a percentage of gross revenues. including the rental of rooms and food and beverage sales. Leased and Consolidated Joint Ventures — Represents revenue primarily derived from hotel operations. these revenues and corresponding expenses have no effect on the Company’s operating income or net income. Generally. The following is a description of the composition of revenues for the Company: • Owned. • Management and Franchise Revenues — Represents fees earned on hotels managed worldwide. Residential fee revenue is recorded in the period that a purchase and sales agreement exists. leased and consolidated joint venture properties. These estimates are based on the Company’s assessment of potential liability using an analysis of available information including pending claims. The amount of the ultimate liability may vary from these estimates. Estimated insurance claims payable represent expected settlement of outstanding claims and a provision for claims that have been incurred but not reported. Le Méridien. For sales that do not qualify for full revenue recognition as the project has progressed beyond the preliminary stages but has not yet reached completion. Since the reimbursements are made based upon the costs incurred with no added margin. revenues are recognized when the services have been rendered. Estimated costs of these self-insurance programs are accrued. incentive fees are recognized for the fees due and earned as if the contract was terminated at that date. the fee to the owner is deemed fixed and determinable and collectability of the fees is reasonably assured. franchise fees received in connection with the franchise of the Company’s Sheraton. Westin. the period of cancellation with refund has expired and receivables are deemed collectible. Management fees are comprised of a base fee. delivery of services and obligations has occurred. which is generally based on the property’s profitability. For any time during the year. Four Points by Sheraton. • Vacation Ownership and Residential — The Company recognizes sales when the buyer has demonstrated a sufficient level of initial and continuing investment. Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. Base fee revenues are recognized when earned in accordance with the terms of the contract. Franchise fees are generally based on a percentage of hotel room revenues and are recognized as the fees are earned and become due from the franchisee. The Company has also entered into licensing agreements with third-party developers to offer consumers branded condominiums or residences. Luxury Collection.

the Company charges the unrecoverable direct selling and marketing costs to expense and records forfeited deposits as income. The Company had Retained Interests of $25 million at December 31. Costs eligible for capitalization follow the guidelines of ASC 978. Development costs include both hard and soft construction costs and together with real estate costs are allocated to VOIs and residential units on the relative sales value method. Advertising Costs. VOI and Residential Inventory Costs. the Company had $56 million of notes retained after the 2009 note sales. as of December 31. Real estate and development costs are valued at the lower of cost or net realizable value. 2009. Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation Impact of Recently Issued Accounting Standards. During the years ended December 31. 2010-20. Adopted Accounting Standards In July 2010. Interest. The Company enters into multi-media ad campaigns. If a contract is cancelled. These retained interests were treated as “available-for-sale” transactions under the provisions of ASC 320 Investments — Debt and Equity Securities. a significant portion of which was reimbursed by managed and franchised hotels. 2009-16. which were accounted for as over-collateralizations and interest only strips. internet and print advertisements. 2011 (see Note 11). including television. The balance sheet related disclosures are required beginning at December 31. including communication and production costs. beginning for the three months ended March 31. Real Estate — Time Sharing Activities. The Company reported changes in the fair values of these Retained Interests considered temporary through the accompanying consolidated statement of comprehensive income. The Company periodically sells notes receivable originated by its vacation ownership business in connection with the sale of VOIs.STARWOOD HOTELS & RESORTS WORLDWIDE. $118 million and $146 million of advertising expense. Costs associated with these campaigns. the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010 and the statements of income disclosures are required. respectively. 2009 and 2008. Retained Interests. would retain interests in the assets transferred to qualified and non-qualified special purpose entities (“Retained Interests”). The Company. Use of Estimates. “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets” (formerly Statement of Financial Accounting Standards (“SFAS”) No. 2010. “Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. INC. and F-13 .” This topic requires disclosures of financing receivables and allowance for credit losses on a disaggregated basis. If it becomes apparent that the media campaign will not take place. NOTES TO FINANCIAL STATEMENTS — (Continued) Costs Incurred to Sell VOIs. 2010 and 2009. Such costs associated with completed VOI and residential units are expensed as incurred. and all such capitalized costs are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Selling and marketing costs capitalized under this methodology were approximately $3 million as of December 31. The Company capitalizes direct costs attributable to the sale of VOIs until the sales are recognized. In June 2009. respectively. Actual results could differ from those estimates. property taxes and certain other carrying costs incurred during the construction process are capitalized as incurred. the FASB issued ASU No. Additionally. A change in fair value determined to be other-than-temporary was recorded as a loss in the Company’s consolidated statement of income. 2009. Reclassifications. prior to the adoption of ASU 2009-17. the Company incurred approximately $132 million. radio. are aggregated and expensed the first time that the advertising takes place. 166). all costs are expensed at that time.

ASU No. Interest income and loan loss provisions associated with the securitized vacation ownership notes receivable are included in the vacation ownership and residential sales and services line item resulting in an increase of $52 million for the year ended December 31. 107-1 and APB No 28-1”). 2009-17 and any corresponding elimination of activity between the QSPEs and the Company resulting from the consolidation on January 1. In January 2009. 167). This topic requires disclosures about the fair value of financial instruments for annual and interim reporting periods of publicly traded companies and is effective in reporting periods ending after June 15. Under ASU No. included in the Codification as ASC 715-20-65-2. 2009 have not been retrospectively adjusted to reflect the adoption of ASU Nos. 107-1 and Accounting Principles Board (“APB”) No. a $444 million increase in total liabilities. 2009-16 and 2009-17. Interest expense of $27 million was recorded for the year ended December 31. current period results and balances will not be comparable to prior period amounts. 2010. included in the Codification as ASC 825-10-65-1.STARWOOD HOTELS & RESORTS WORLDWIDE. and interest expense. 28-1 “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS No. The F-14 . 2009. The cash flows from borrowings and repayments associated with the securitized vacation ownership debt are now presented as cash flows from financing activities. which did not have a material impact on its consolidated financial statements. ASU No. INC. This topic is effective for fiscal years ending after December 15. “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (formerly SFAS No. but instead reflects activity related to its securitized vacation ownership notes receivable and the corresponding securitized debt. The Company has additional VIEs whereby the Company was determined not to be the primary beneficiary (see Note 26). 2009-17 prescribes an ongoing assessment of the Company’s involvement in the activities of the QSPEs and the Company’s rights or obligations to receive benefits or absorb losses of the trusts that could be potentially significant in order to determine whether those variable interest entities (“VIEs”) will be required to be consolidated in the Company’s financial statements. 2009. The Company’s statement of income for the year ended December 31. 2009. 2010 (see Note 10). This topic provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. Beginning January 1. Therefore. 132(R)-1”). NOTES TO FINANCIAL STATEMENTS — (Continued) ASU No. the Company concluded it is the primary beneficiary of the QSPEs and accordingly. FAS No. the Company recorded a $417 million increase in total assets. the qualifying special purpose entities (“QSPEs”) used in the Company’s securitization transactions are no longer exempt from consolidation. 2009-16 amended the accounting for transfers of financial assets. including interest income. the Company began consolidating the QSPEs on January 1. 2010 as compared to the same period in 2009. On June 30. 2010. 2010. the Company’s balance sheet and statement of income no longer reflect activity related to its Retained Interests. 132(R)-1 “Employers Disclosures about Pensions and Other Postretirement Benefit Plan Assets” (“FSP FAS No. In accordance with ASU No. particularly with regards to: • Restricted cash • Other assets • Investments • Vacation ownership and residential sales and services • Interest expense In April 2009. 2009 and its balance sheet as of December 31. a $26 million (net of tax) decrease in beginning retained earnings and a $1 million decrease to stockholders equity. 2009-17. the Company adopted this topic. The Company does not expect to recognize gains or losses from future securitizations as a result of the adoption of this new guidance. Using the carrying amounts of the assets and liabilities of the QSPEs as prescribed by ASU No. 2009-16. 2009-17. the FASB issued FASB Staff Position (“FSP”) Financial Accounting Standard (“FAS”) No. loan loss provisions. the FASB issued FSP Issue No.

e. 2008. 161. 157. 2008. either directly or indirectly. 2009 and incorporated it into its Employee Benefit Plan disclosure (see Note 20). • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company adopted this topic on January 1. the FASB issued SFAS No. INC. • Level 2 — Inputs other than Level 1 that are observable. Note 3. See Note 24 for enhanced disclosures associated with the adoption. such as quoted prices for similar assets or liabilities. the FASB issued ASU 2009-13 which supersedes certain guidance in ASC 605-25. F-15 .” which was issued in February 2008. 2010. The standard describes a fair value hierarchy based on three levels of inputs. 157 for non-financial assets and non-financial liabilities as allowed by FSP No. The adoption of this statement did not have a material impact on the Company’s consolidated financial statements. Effective January 1. establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. that may be used to measure fair value as follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities.STARWOOD HOTELS & RESORTS WORLDWIDE. quoted prices in markets that are not active. Fair Value Measurements and Disclosures. 133” (“SFAS No. On January 1. SFAS 157-2 “Effective Date of FASB Statement No. This topic defines fair value. 161”). In March 2008. NOTES TO FINANCIAL STATEMENTS — (Continued) Company adopted this topic on December 31. This topic must be applied prospectively to all derivative instruments and non-derivative instruments that are designated and qualify as hedging instruments and related hedged items for all financial statements issued for fiscal years and interim periods beginning after November 15. Earnings (Losses) per Share Basic and diluted earnings (losses) per share are calculated using income (losses) from continuing operations attributable to Starwood’s common shareholders (i. Revenue Recognition — Multiple Element Arrangements. 2009. Future Adoption of Accounting Standards In October 2009. the Company adopted the provisions of this topic relating to non-financial assets and nonfinancial liabilities. The Company has evaluated this topic and determined that it will not have a material impact on its consolidated financial statements. This topic requires enhanced disclosure related to derivatives and hedging activities. excluding amounts attributable to noncontrolling interests). Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. This topic requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. 2009. of which the first two are considered observable and the last unobservable. or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. This topic is effective for annual reporting periods beginning after June 15. included in the Codification as ASC 815-10-65-1. the Company adopted SFAS No. 157 related to its financial assets and liabilities and elected to defer the option of SFAS No. included in the Codification as ASC 820. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

respectively. The acquisition took place after one of the Company’s former partners exercised its right to put its interest to the Company in accordance with the terms of the joint venture agreement. Note 5. $310 — $310 183 7 190 $1.00 $249 $1. These hotels were sold subject to long-term management contracts. These hotels were sold subject to long-term management contracts and the Company recorded deferred gains of $8 million and $27 million for the years ended December 31. and $99 million. 12 million shares and 7 million shares were excluded from the computation of diluted shares in 2010. 2010. respectively (see Note 13). . 2009 and 2008. $41 million and $64 million.STARWOOD HOTELS & RESORTS WORLDWIDE. 2009 and 2008. license and manage restaurant concepts. .63 $ (1) $0. These gains were partially offset by impairment charges of $7 million related to a vacation ownership property. comparative sales for similar assets and recent letters of intent to sell certain assets. Note 4. respectively. the Company received insurance proceeds related to an owned hotel that was damaged by a tornado. 2010 and 2009. when an acquirer obtains a controlling position as a result of a step acquisition. Significant Acquisitions During the year ended December 31. 2009 and 2008. during the year ended December 31. six.37 $1. . Asset Dispositions and Impairments During the years ended December 31. the Company paid approximately $23 million to acquire a controlling interest in a joint venture in which it had previously held a non-controlling interest. . the Company sold one wholly-owned hotel each year for $90 million. . relating to one. the Company reviewed the recoverability of its carrying values of its owned hotels and determined that certain hotels were impaired. the Company sold one wholly-owned hotel each year for cash proceeds of $70 million and $0 million. including the resulting goodwill of approximately $26 million. In accordance with ASC 805.34 Approximately 5 million shares. Business Combinations. . an investment in a hotel management contract. and recognized losses of $53 million and $4 million. The results of operations going forward from the acquisition date have been included in Starwood’s consolidated statements of income. Effect of dilutive securities: Employee options and restricted stock awards . The fair values of the hotels were estimated by using discounted cash flows. the Company sold certain non-hotel assets and recorded a gain of $4 million. During the years ended December 31. respectively.70 $ (1) — 180 — 180 $0. 2010. the acquirer is required to remeasure its previously held investment to fair value and record the difference between fair value and its carrying value in the statement of income. The fair values of the assets and liabilities acquired were recorded in Starwood’s consolidated balance sheet. 2010. Impairment charges of $2 million. . Diluted earnings (losses) from continuing operations . During the year ended December 31. net line item. except per share data): Year Ended December 31. .00 $249 — 181 4 185 $1. 2009 2008 Per Earnings Per Per Earnings Shares Share (Losses) Shares Share Earnings Shares Share 2010 Basic earnings (losses) from continuing operations . 2010. and the retirement of fixed assets as a result of a significant renovation of a wholly-owned hotel. . NOTES TO FINANCIAL STATEMENTS — (Continued) The following is a reconciliation of basic earnings (losses) per share to diluted earnings (losses) per share for income (losses) from continuing operations (in millions. During the years ended December 31. . Additionally. . 2009 and 2008. . as their impact would have been anti-dilutive. resulting in a gain of approximately $14 million. and three F-16 . The primary business of the joint venture is to develop. This acquisition resulted in a gain of approximately $5 million which was recorded in the gain (loss) on asset dispositions and impairments. INC. respectively.

.. . . . . Note 6. . Plant.. consisted of the following (in millions): December 31.. . . . ... .... . . prior to the adoption of ASU No. The fair value of the Company’s investment in these retained interests was determined by estimating the net present value of the expected future cash flows.. . ... .. ... .. . . .. Assets Held for Sale During the year ended December 31.. respectively.. $ 600 . . as a result of market conditions at the time and the impact on the timeshare industry. . .. .300 . .... 2010 2009 Land and improvements . property and equipment.. . . . .323 $ 597 3. . .350 The above balances include unamortized capitalized computer software costs of $132 million and $136 million at December 31. These assets. ... $36 million and $24 million for the years ended December 31. .. . Property and Equipment Plant. . based on expected default and prepayment rates (See Note 10. 3. 1. . These assets are reported in the hotels operating segment. .. 2009 and 2008... . . . During 2009 and 2008. primarily related to impairments of hotel management contracts.. .971 (2. . excluding assets held for sale.. ... . .. Furniture. the Company entered into purchase and sale agreements for the sale of one wholly owned hotel for total expected cash consideration of approximately $78 million.. respectively. F-17 . .648) $ 3.. . . related to these retained interests.. INC.. .. .. .. . Construction work in process ... . .. . certain technologyrelated fixed assets and an investment in which the Company holds a minority interest.. . . . . .. ... .. .901 .. .. .824 180 Less accumulated depreciation and amortization . 2009 and 2008. . 2009 and 2008 the Company recorded losses of $18 million and $11 million.... . Buildings and improvements.. .. . respectively. 2010. . .. . . . fixtures and equipment .473) $ 3. . 2010 and 2009 respectively. . During the years ended December 31. The Company classified this asset and the estimated goodwill to be allocated as assets held for sale. 2009-17. .STARWOOD HOTELS & RESORTS WORLDWIDE. .. . . were recorded in the years ended December 31.. ... . . . 2010.. 5. . ceased depreciating it and reclassified the operating results to discontinued operations. 2009.823 (2. . . NOTES TO FINANCIAL STATEMENTS — (Continued) hotels. .. .. ..) The Company recorded impairment charges of $22 million and $23 million in the years ended December 31. the Company reviewed the fair value of its economic interests in securitized VOI notes receivable and concluded these interests were impaired. .. 170 5.. .222 1.. . Note 7.. . were reported in the vacation ownership and residential operating segment. 2009 and 2008. . Amortization of capitalized computer software costs was $36 million. ... . The hotel was sold during the second quarter of 2010 (see Note 19). .

. . .. . . . Balance at December 31. INC. . . . . . . . . . . . . .. . . . .. .. 2010 exceeded its carrying value by approximately $237 million. . . . .332 $1. . . ... . . As a result of this review. . . . . . . .8% $ 55 5.. . . 2009 .. ..499 Balance at December 31. . .. . . .. . . . . 100 basis points-dollars . Cumulative translation adjustment . . .. . . . . Discount Rate Terminal Period Capitalization Rate 50 basis points-dollars . . . . . .. . . . . .. . .. . However. . .. . . . 2009. In 2009.. . . .. . . . . . . . . . .. . . . ... . The factors may not move independently of each either.. . . .. .. . Balance at January 1. the Company completed a comprehensive review of its vacation ownership business (see Note 14). . or 30%.. . . . . . .. ... . . . . . . The vacation ownership reporting unit’s fair value at October 31. . . ..332 26 (8) (10) 8 $1.. .. .. . The Company completed a sensitivity analysis on the fair value of the vacation ownership reporting unit to measure the change in value associated with independent changes in the two key assumptions. . . . . . . . .. . . ... 100 basis points-percentage .. .. . . .3% The Company performed its annual goodwill impairment test as of October 31. . . . ... . . Other . . . . . . . . . . . . 50 basis points-percentage . . .483 26 (8) (10) 8 $1... . . . . .... . . Asset dispositions . . . the fair value of the vacation ownership reporting unit was less than its carrying value. . . . which were 10% and 2%. . . .. . .. as such goodwill was F-18 ... . . the Company’s hotel reporting unit’s fair value exceeded its carrying value. . . .. . . . . . . . .. . . . . . . . . . .. . . . .. The two key assumptions used in the fair value calculation are the discount rate and the capitalization rate in the terminal period. . . . . . . . . Other . . . . . . . . . . . . . goodwill. . . .483 $1. .. .. . .. . . . 2010 . . . ... . The decreases in the fair value that would result from various changes in the key assumptions are shown in the chart below (in millions). . . . .. . 2009 . . . . . .... ..... . . resulting in a charge of $90 million ($90 million after-tax) to the restructuring. .. . . . . .. as discussed above. . .. . ... Cumulative translation adjustment . . . .. . . . . The Company performed its annual goodwill impairment test as of October 31. . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) Note 8. .5% $ 29 2. . . . . . . .. in which the underlying cash flows were derived from management’s current financial projections. $ 51 4. . . . . . . . . . . . . . . . . . Acquisitions . Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the year ended December 31.. . . . . ... . .. . 2010 for its hotel and vacation ownership reporting units and determined that there was no impairment of its goodwill. . . . . . . . . . . . . . . . The fair value was calculated using a discounted cash flow model. . .. . . .. . . . the Company decided not to develop certain vacation ownership sites and future phases of certain existing projects.. . . . . . . . . . . Impairment charge . .. . . . . . .. . .348 $241 — (90) — $151 $151 — — — — $151 $1... . . 2010 are as follows (in millions): Hotel Segment Vacation Ownership Segment Total Balance at January 1... . .. . .. . . . .. .. . ..565 7 (90) 1 $1.. . . . . .. .. .. . . . . . . .. . . .9% $ 98 9. .. . . .. . . .. ... .324 7 — 1 $1. . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE.. . . . impairment and other charges (credits) line item in the consolidated statements of income. .. .. respectively. . . . During the year ended December 31.. .. . $1. These actions reduced the future expected cash flows of the vacation ownership reporting unit which contributed to impairment of its goodwill... . . . . . . 2010 . 2009 for its hotel and vacation ownership reporting units and determined that the vacation ownership goodwill was impaired. . ..

. . ... . .. . .. . ....... the Company recorded amortization expense of $33 million... . . See Note 11 for discussion relating to VOI notes receivable..... . .... .... . ... . ... ... . . .. . . .. . .. ....... . . . . . .. . . . ... . ... .... . . ... .. This step resulted in an implied goodwill fair value of $151 million compared to an actual goodwill balance of $241 million. . .. .. . ... . . . ... ... . .. . ... . . . . .. ... . . . .. . .. . ..... NOTES TO FINANCIAL STATEMENTS — (Continued) deemed to be impaired. . . .... . ... .. . . . . .... . 764 (196) $ 568 $ 309 376 76 761 (181) $ 580 The intangible assets related to management and franchise agreements have finite lives.. .. ... . . . . ... . .. the Company primarily used the income and the market approaches. . . .. .. $35 million.. ... . . . ... . . . ... ..... ... . . . . . ..... Under the market approach. . ... ........... . . . . .. . ... . 2010.. . 2010 2009 Trademarks and trade names .. .. .. . . . .. . .. . .. . .. .. . .. . during the years ended December 31.. ... . $32 $30 $30 $30 $29 Note 9... . . . .. .... ... .. . .. . .. .. . . fair value was determined based on the estimated future cash flows of the reporting units taking into account assumptions such as REVPAR. ... . . . .. ... and step two of goodwill impairment test was performed. 2009 and 2008... .. ... .. . . . ... . . .. . .. . . .. . Amortization expense relating to intangible assets with finite lives for each of the years ended December 31... .... . . . .... . . . .. ... . .. Intangible assets consisted of the following (in millions): December 31... Prepaid taxes ... .. . . ... .. . .. respectively. In determining fair values associated with the goodwill impairment steps.. . . operating margins and sales pace of vacation ownership units and discounting these cash flows using a discount rate commensurate with the risk inherent in the calculations... and $32 million... ..STARWOOD HOTELS & RESORTS WORLDWIDE. .... . .. ... . . . .. . .. . .. . ... . . . . ... . Other Assets Other assets include the following (in millions): December 31. . ... . .. .. . Deposits and other ...... F-19 $132 88 161 $381 $222 103 113 $438 .. . . .. . . . . . ... .. and accordingly.. . . ... .. .. . .. . .. $ 309 Management and franchise agreements .. ... is expected to be as follows (in millions): 2011 2012 2013 2014 2015 .. . .. Under the income approach.. .. . . . . ..... . ... . . . .. .... .. .. . .. ... . . . . . . ... ... .. . . .. the fair value of the reporting units were determined based on market valuation techniques such as comparable revenue and EBITDA multiples of similar companies in the hospitality industry.. .. .. . .. ... .... net of allowance of $69 and $84 . .. .... . with the difference of $90 million representing the impairment charge. .. The other intangible assets noted above have indefinite lives. . .. .... .. .. . ... ... . ... . .. ... .. ... . .. .. . . .. .. . .. 78 Accumulated amortization . . ... .. .. ... .. Total . . . . ... . .. . . The vacation ownership goodwill had not been previously impaired. . . .. .. .... . . 377 Other . . ... . . . . .... . ... INC. . . . .. . .. ... . ... . . ... . .. .. . . ... 2010 2009 VOI notes receivable. .. . . . . .

the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the VIE creditors. to repurchase or replace VOI notes receivable. 2010. The Company also has the option. In making this determination. The net cash proceeds from the securitization after termination of the 2009 securitization and associated deal costs were approximately $180 million. During the year ended December 31. As a result. 2010. NOTES TO FINANCIAL STATEMENTS — (Continued) Note 10. Such activity totaled $38 million during the year end December 31. the Retained Interests are classified and accounted for as “available-for-sale” securities. respectively. including the management of the securitized notes receivable and any related non-performing loans. Approximately $93 million of proceeds from this transaction were used to terminate the securitization completed in June 2009 by repaying the outstanding principal and interest on the securitized debt.STARWOOD HOTELS & RESORTS WORLDWIDE. 2009. subject to certain limitations. The Company has been able to resell the VOIs underlying the VOI notes repurchased or replaced under these provisions without incurring significant losses. The Company’s replacement of the defaulted VOI notes receivable under the securitization agreements with new VOI notes receivable resulted in net gains of approximately $3 million and $4 million during 2009 and 2008. Such activity totaled $43 million during the year ended December 31. subject to certain limitations. The Company also evaluated its retention of the residual economic interests in the related VIEs. Upon transfer of vacation ownership notes receivable to the VIEs. the Company completed securitizations of its VOI notes receivables. accordingly. With respect to those transactions still outstanding at December 31. except for breaches of representations and warranties. the Company completed the securitization of approximately $300 million of vacation ownership notes receivable. after servicing and other related fees. As these securitizations consist of similar. which qualified for sales treatment. See Note 11 for disclosures and amounts related to the securitized vacation ownership notes receivable consolidated on the Company’s balance sheets as of December 31. no gain or loss was recognized. The Company is the servicer of the securitized mortgage receivables. 2010. 2010 and is classified in cash and cash equivalents when received. that are in default. homogenous loans they have been aggregated for disclosure purposes. the Company adopted ASU 2009-16 and ASU 2009 -17 on January 1. at their outstanding principal amounts. The Company is contractually obligated to receive the excess cash flows (spread between the collections on the notes and third party obligations defined in the securitization agreements) from the VIEs. F-20 . reported at fair value with credit losses recorded in the statement of income and other unrealized gains and losses reported in stockholders’ equity. In connection with the termination. the Company concluded it has variable interests in the entities associated with its five outstanding securitization transactions. Retained Interests cash flows are limited to the cash available from the related VOI notes receivable. The securitization transaction did not qualify as a sale for accounting purposes and. 2010. it intends to do so until the debt is extinguished to maintain the credit rating of the underlying notes. the Company evaluated the activities that significantly impact the economics of the VIEs. which are included in vacation ownership and residential sales and services in the Company’s consolidated statements of income. relating to the settlement of a balance guarantee interest rate swap and the write-off of deferred financing costs. The Company applied the variable interest model and determined it is the primary beneficiary of these VIEs. The Company’s interests in trust assets are subordinate to the interests of third-party investors and. The VIEs utilize trusts which have ownership of cash balances that also have restrictions. Based on the right of the Company to fund defaults at its option. as such. The securitization agreements are without recourse to the Company. the amounts of which are reported in restricted cash. a charge of $5 million was recorded to interest expense. INC. Transfers of Financial Assets As discussed in Note 2. absorbing 100% of any credit losses on the related VOI notes receivable and QSPE fixed rate interest expense. Prior to the adoption of ASU 2009-16 and 2009-17. may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts’ debt (see Note 17).

if necessary. The related loss on the 2009-A Securitization of $2 million is included in vacation ownership and residential sales and services in the Company’s consolidated statements of income. Although the notes effectively owned after the transfers were measured at fair value on the transfer date. The Company retained $44 million of interests in the QSPE. an average expected annual prepayment rate including defaults of 24. These key assumptions are based on the Company’s historical experience. the Company estimates the fair value of its Retained Interests using a discounted cash flow model. As of December 31. The discount rates used in measuring the fair value of the Retained Interests at the time of the 2009-A Amendment were 6. an average expected annual prepayment rate including defaults of 17. As the increase in the advance rate produced additional cash proceeds of $9 million. Key assumptions used in measuring the fair value of the Retained Interests at the time of the 2009-B Securitization were as follows: an average discount rate of 7. the 2009-B Securitization and the 2009-A Amendment was approximately $56 million. NOTES TO FINANCIAL STATEMENTS — (Continued) In June 2009. this resulted effectively in additional loans sold to the QSPE from the original over collateralization. they required prospective accounting treatment as the notes receivable were carried at the basis established at the date of transfer and accreted interest over time to return to the historical cost basis. The key assumptions used in measuring the fair value associated with its note securitizations as of December 31. the value of the notes that the Company effectively owned from the 2009-A Securitization. The resulting retained interest was $6 million and resulting loans effectively owned were $33 million. In December 2009. The amendment to the terms included a reduction of the coupon rate and an increase in the effective advance rate. and an expected weighted average remaining life of prepayable notes receivable of 69 months. In December 2009.5% for the interest only strip and 12. Key assumptions used in measuring the fair value of the Retained Interests at the time of the 2009-A Securitization were as follows: an average discount rate of 12.9%. respectively. 2009 was $25 million with amortized cost basis of $22 million.8% and an expected weighted average remaining life of prepayable notes receivable of 86 months. based on current trends and historical experience.8%. These key assumptions are based on the Company’s historical experience.8% for the remaining loans effectively not sold (unchanged from June 2009). The Company received aggregate cash proceeds of $21 million and $26 million from the Retained Interests during 2009 and 2008. The related gain on the 2009-B Securitization of $19 million is included in vacation ownership and residential sales and services in the Company’s consolidated statements of income. INC. The fair value of the Company’s Retained Interest as of December 31. the Company entered into an amendment with the third-party beneficial interest owner regarding the notes issued in the 2009-A Securitization (the 2009-A Amendment). The related gain on the 2009-A Amendment of $4 million is included in vacation ownership and residential sales and services in the Company’s consolidated statements of income. 2009 was as follows: an average discount rate of 7. an average expected annual prepayment rate including defaults of 15. the Company securitized approximately $200 million of VOI notes receivable (the “2009-B Securitization”) resulting in cash proceeds of approximately $166 million. During 2009. the Company securitized approximately $181 million of VOI notes receivable (the “2009-A Securitization”) resulting in cash proceeds of approximately $125 million. which included $43 million of notes the Company effectively owned after the transfer and $1 million related to the interest only strip.STARWOOD HOTELS & RESORTS WORLDWIDE. The Company received aggregate servicing fees of $4 million and $3 million related to these VOI notes receivable during 2009 and 2008. Temporary differences in the fair value of the retained interests recorded in other F-21 .8%. which included $22 million of notes the Company effectively owned after the transfer and $9 million related to the interest only strip. The Company retained $31 million of interests in the QSPE. which the Company classified as “Other assets” in its consolidated balance sheets.5%. At the time of each VOI notes receivable securitization and at the end of each financial reporting period. All assumptions used in the models are reviewed and updated. and an expected weighted average remaining life of prepayable notes receivable of 52 months. the Company recorded a reserve of $4 million related to these loans. respectively. 2009.4%.

. . . . . . . . . . . . . . . . . Total other-than-temporary impairments related to credit losses recorded in loss on asset dispositions and impairments totaled $22 million and $23 million during 2009 and 2008. . . . . . . . $467 152 619 (59) (20) $540 $ — 242 242 — (20) $222 The current and long-term maturities of unsecuritized VOI notes receivable are included in accounts receivable and other assets. . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) comprehensive income totaled a $3 million gain for the year ended December 31. . . . . . . . . . . . . . . . . . . Vacation ownership loans-unsecuritized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . 2013 . . . . . . . . . . . . . . . . . . . . 2009. . . . . . . . . . in the Company’s consolidated balance sheets. . . . . Note 11. Vacation ownership loans-unsecuritized . . . . . . . . . . . $66 21 $87 $— 48 $48 $— 57 $57 The following tables present future maturities of gross VOI notes receivable and interest rates (in millions): Securitized Unsecuritized Total 2011 . . . . . . . . . . . . . . . . . . . . . . . . the Company was required to consolidate certain entities associated with securitization transactions completed in prior years. . . . . . . . . . . . . . Balance at December 31. . . . . . . . . . . . . . . respectively. . . . . . . . . . . . . . . . . . . . . . . .71% 6 to 18% $ 30 21 21 20 139 231 12. . . INC. . . . . . Thereafter . . . beginning January 1. . . 2010 2009 2008 Vacation ownership loans-securitized . . . . . . . . . . . . . . . . .07% $ 99 93 96 95 397 780 12.49% 5 to 18% $ $ $ 5 to 18% . . Notes Receivable As discussed in Notes 2 and 10. . . . . . . . . 2010 2009 Vacation ownership loans-securitized . . . . . . . . . . . . . . . . . . . . . 2010. . . . . . . . . . . respectively. . . . . . . . . . . . . . . . F-22 $ 69 72 75 75 258 549 12. . . . . . . . . . . . . . . . . . . . . . . . . . Interest income related to the Company’s VOI notes receivable was as follows (in millions): Year Ended December 31. . . . . . . . . . . . . . . . . . . . . . Vacation ownership loans-unsecuritized . . . . . Range of interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Interest Rates . . . . . . . . . . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . Less: current portion Vacation ownership loans-securitized . . . . . . . . . . . . . . . . . . . The Company records interest income associated with VOI notes in its vacation ownership and residential sale and services line item in its consolidated statements of income. . . . . . Notes receivable (net of reserves) related to the Company’s vacation ownership loans consist of the following (in millions): December 31. . . .

. . 2008 . . 2010 . . . . Write-Offs . . . . . . . . . . . . . . . . . Upon reaching 120 days outstanding. . . . . . . . . Balance at December 31. . . . . . . . . . . . . . . . . . . . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) For the vacation ownership and residential segment. . . . . . . . . . Other . . As of December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31. . . . . . . INC. . . . . . the Company supplements the process by evaluating certain qualitative data. . . . . . . . . . . . . . . . . . . including the aging of the respective receivables. . . . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . the loan is considered to be in default and the Company commences the repossession process. . . . . . . . . . . . . . In estimating loss reserves. . . . . The Company considers a VOI note receivable delinquent when it is more than 30 days outstanding. . The activity and balances for the Company’s loan loss reserve are as follows (in millions): Securitized Unsecuritized Total Balance at December 31. . . . . . The Company generally does not modify vacation ownership notes that become delinquent or upon default. . . . . . . . . .0%. . . . . . . . . . . . . . All delinquent loans are placed on nonaccrual status and the Company does not resume interest accrual until payment is made. . . . . . . Balance at December 31. . . . . . . . . . . . . . . . . . . 2009-17 . . . . the Company uses a technique referred to as static pool analysis. . . . . . . . . . . In addition to quantitatively calculating the loan loss reserve based on its static pool analysis. . F-23 . and Other) as the Company believes there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. . 2010. which tracks uncollectible notes for each year’s sales over the life of the respective notes and projects an estimated default rate that is used in the determination of its loan loss reserve requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2007 . . . . . . . . . . . . . . . current default trends by brand and origination year. . . Other . . Provisions for loan losses . the average estimated default rate for the Company’s pools of receivables was 10. . . The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses uncollectibility based on pools of receivables. . . . . . . . Write-Offs . . . . . . . . Adoption of ASU No. . . . . a change in the projected default rate can have a significant impact to its loan loss reserve requirements. . Uncollectible VOI notes receivable are charged off when title to the unit is returned to the Company. . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . Given the significance of the Company’s respective pools of VOI notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . with a 0. . . . . . . . . . . . . . . . . . . . Westin. . . . . . . . . . . . . . . . . the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes profit on a timeshare sale. . . . . . . .1% change estimated to have an impact of approximately $3 million. . . . . . . . . Write-offs . . . . . and the FICO scores of the buyers. . . . . $— — — — — — — — — 14 — 77 (9) $82 $ 68 73 (50) — 91 64 (61) — 94 32 (52) (4) 9 $ 79 $ 68 73 (50) — 91 64 (61) — 94 46 (52) 73 — $161 The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton. . . . . . . . . . . . 2009 . . . . . . . Provisions for loan losses . .

. . . . 2010: Sheraton . . . . . . . . . . . . . . . . . . . INC. . . . Other . . Liabilities: Forward contracts. . . . . . . . which is considered Level 3. 2010 . . . . . . . . . . . . . . . . Westin . . . . . The interest rate swaps are valued using an income approach. .STARWOOD HOTELS & RESORTS WORLDWIDE. . 2010 (in millions): Level 1 Level 2 Level 3 Total Assets: Interest Rate Swaps . . . . . . . . . . . . . . . . . . . $— $— $— $16 $16 $ 9 $— $— $— $16 $16 $ 9 The forward contracts are over the counter contracts that do not trade on a public exchange. Westin . . . . . $ 3 3 2 $ 8 Note 12. . Other . . . . . . . . . . . . . . . . . . . . which is readily available on public markets. . 2009: Sheraton . . . . the Company estimated the fair value of its Retained Interests using a discounted cash flow model with unobservable inputs. . . . . . 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected future cash flows are converted to a present value amount based on market expectations of the yield curve on floating interest rates. . . . . . . . . . 2010 (in millions): Balance at January 1. . . . . . . . . . . . . Adoption of ASU No. . . . . . . . . . . . . . . . . . . . . . Fair Value The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31. . . . . . . The following table presents a reconciliation of the Company’s Retained Interests measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31. . . . . . . . . . . . . . . . . . . . . . . The fair values of the contracts are based on inputs such as foreign currency spot rates and forward points that are readily available on public markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior to ASU No. . . . . . . . . . . . . The Company considered both its credit risk. . . . . . . Balance at December 31. . . . NOTES TO FINANCIAL STATEMENTS — (Continued) Past due balances of VOI notes receivable by credit quality indicators are as follows (in millions): 30-59 Days Past Due 60-89 Days Past Due H90 Days Past Due Total Past Due Current Total Receivables As of December 31. and as such. . . . . . . . . . $ 6 5 1 $12 $4 3 1 $8 $2 3 2 $7 $30 33 4 $67 $25 27 2 $54 $40 41 6 $87 $30 33 6 $69 $314 342 37 $693 $ 97 128 42 $267 $354 383 43 $780 $127 161 48 $336 As of December 31. . . . . . . F-24 $ 25 (25) $— . . . . . . . . . . . See Note 10 for the assumptions used to calculate the estimated fair value and sensitivity analysis based on changes in assumptions. . . 2009-17. . 2009-17. . . . . . . . are classified as Level 2. . . . . . . . . . . . . . . . . as well as its counterparties’ credit risk in determining fair value and no adjustment was made as it was deemed insignificant based on the short duration of the contracts and the Company’s rate of short-term debt. . . . . . . .

. As a result of these decisions. . . . . . As of December 31. . . . . the Company completed a comprehensive review of its vacation ownership business. goodwill impairment. . . the Company recorded a primarily non-cash impairment charge of $255 million. . . . . . . 2010 2009 2008 Segment Hotel . included in accrued expenses and other liabilities in the Company’s consolidated balance sheets. . . . . $(74) (1) $(75) $ 21 358 $379 $ 41 100 $141 During the year ended December 31. a charge of $64 million for the reduction in inventory values at four properties. . . . . . . net of the reimbursement of legal costs of approximately $10 million incurred in connection with the litigation. . . . . . . . . associated with its ongoing initiative of rationalizing its cost structure. Vacation Ownership & Residential . the write-off of fixed assets of $21 million. . . 2010. . . . . Restructuring. . . the Company recorded a credit of $8 million to the restructuring. . Deferred Gains The Company defers gains realized in connection with the sale of a property for which the Company continues to manage the property through a long-term management agreement and recognizes the gains over the initial term of the related agreement. . . . . the Company recorded restructuring and other special charges of $34 million. . Under the income approach. the Company recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit (see Note 8). . . Goodwill Impairment and Other Special Charges (Credits) by operating segment are as follows (in millions): Year Ended December 31. . . . During the year ended December 31. Additionally.093 billion. Total . . . . . . . . . . . INC. . the Company received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. . During the year ended December 31. . Goodwill Impairment and Other Special Charges (Credits). . 2008. . including $62 million of severance and related charges associated with the start of its initiative of rationalizing the Company’s cost structure. respectively. franchise fees and other income in the Company’s consolidated statements of income and totaled approximately $81 million. . . . the Company recorded restructuring and other special charges of $141 million. . 2010 and 2009. . Additionally. . . . . . . . . in 2009. . . . . . . as a result of this decision and the current economic climate. . In determining the fair value associated with the impairment charges the Company primarily used the income and market approaches. . . . NOTES TO FINANCIAL STATEMENTS — (Continued) Note 13. . Note 14. . fair value was determined based on estimated future cash flows taking into consideration items such as operating margins and the sales pace of vacation ownership intervals. .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . primarily related to severance charges and costs to close vacation ownership sales galleries. . The impairment included a charge of approximately $148 million primarily related to land held for development. . . . The Company decided not to develop certain vacation ownership sites and future phases of certain existing projects. as a credit to restructuring. . . . . . . . . . . During the year ended December 31. . The Company recorded this settlement. . . . . . . respectively. . . goodwill impairment. . Amortization of deferred gains is included in management fees. . Net Restructuring. . 2009 and 2008. . and other special (credits) charges line item as a liability associated with an acquisition in 1998 that was no longer deemed necessary (see Note 26). . . 2010. . . . F-25 . .011 billion and $1. the Company had total deferred gains of $1. The Company also recorded impairment charges of approximately $79 million primarily related to the decision not to develop two vacation ownership projects as a result of the current economic climate and its impact on business conditions. facility exit costs of $15 million and $7 million in other costs. . 2009. . . . $82 million and $83 million in 2010. and other special charges (credits) line item. .

. . . . . .S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S. . . The Company had remaining restructuring accruals of $29 million as of December 31. . . . . . 2010 included payments of $3 million primarily related to the remaining severance accruals and a restructuring credit of $2 million associated with the reversal of previous restructuring accruals no longer deemed necessary. . 250 $335 Provision (benefit) for income tax Current: U. . . . . . . . . . . . . . . . . . . The activity in the restructuring and other special charges account for the year ended December 31. . . . . . . . . . . . .S. . . . . . . . . . . 2010 2009 2008 Pretax income U. . . . . . . . . . . . . . . . . taxes payable on undistributed foreign earnings amounting to approximately $2. federal . . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) discounted using a rate commensurate with the inherent risk of the project. . . . . . . . . . . . . . . . . . . which are primarily long-term in nature and recorded in other liabilities. . . . . . . . . . . . . Note 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010. . . . . . . . F-26 . . . .S. State and local . . . . . . . . . . . . . . . . . . federal . . 18 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 billion as of December 31. . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . 22 (7) 12 27 $ 27 $ (76) (220) $(296) $315 6 $321 $ (84) 12 38 (34) (117) (18) (124) (259) $(293) $ (15) 32 48 65 28 (23) 2 7 $ 72 No provision has been made for U. . . . Under the market approach. . . . . . . . . . . $ (61) State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fair value was determined with the comparable sales of similar assets and appraisals. . . . . . . . . . INC. . . . . . . . . 43 — Deferred: U. . . . . . 2010 since these amounts are permanently reinvested. . . . . . . . . . . . . . . Income Taxes Income tax data from continuing operations of the Company is as follows (in millions): Year Ended December 31. $ 85 Foreign . . . . . .

. . . . . . . . .. . . . . . .348 (397) $ (51) 104 197 359 (2) 43 36 126 591 87 (22) 1. . . 83 . . . . . . . . . .. . . . .. . . 178 . 25 . . . . . . . . .. . . . . . . . . . . . . . . . capital loss and tax credit carryforwards . . . . . . . . . . . . . . . . . . Intangibles . . . . . . . . . . .. . . . . . . .. . . The Company also had foreign net operating loss and tax credit carryforwards of approximately $210 million and $3 million. .468 (517) $ 951 Less valuation allowance . . . . . . . .. . . . . .. . $ (21) . . . . which expire at the end of 2011. . . 43 . . . . . F-27 . . . . . . . . . . . . . . . . . . 183 . . . . Prepaid income. . . . . . . . . . . . The Company had federal and state capital losses. . .. . 406 . The majority of foreign net operating loss and the tax credit carryforwards will fully expire by 2020. . . .. . Other . . . . . . . . . . . . of approximately $1 million and $2 billion. . . . . . Deferred income taxes . . .. . . . . . .. . . . . . . . . . . . .. . . . . respectively. . . . . . . Employee benefits . . .. . . . . . . . Accrued expenses . . . . Deferred tax assets (liabilities) include the following (in millions): December 31. . . . . . INC. . . . . . . . . . . . . . . ...STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . which expire at the end of 2026. . . . . . .. . . . . . . . . .. . . . . . . . The Company has established a valuation allowance against substantially all of the tax benefit for federal and state loss carryforwards as it is unlikely that the benefit will be realized prior to their expiration.. . . . . . . . . Inventories . . . . . . . . . . . of approximately $495 million and $842 million. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of $4 million. . . . . . the Company had federal and state net operating losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . $ 951 At December 31. . . . . . . . . .. . . . . . property and equipment . . . . . . Receivables (net of reserves) . . . . .. . . . . . . Other reserves . . . .. . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. . . . 2010 2009 Plant. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Company had state tax credit carryforwards. . . . . . . . . . 102 . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . ... . . . Deferred gains . . .. . . . ... .. . . . .. . . .. 2010.. . . .. . . .. which have varying expiration dates extending through 2028. .. . . . . 37 .. 346 . . . . . . . respectively. . . . . . . . . . . respectively. .. . . . . . . . . . . Net operating loss. . (34) 1. . . . . The Company is currently considering certain tax-planning strategies that may allow it to utilize these tax attributes within the statutory carryforward period. . .

. . . . . . . . . the Company entered into an Italian tax incentive program through which the tax basis of its Italian owned hotels were stepped up in exchange for paying $9 million of current tax over a three year period. . . . . . statutory rate to the provision for income tax as reported is as follows (in millions): Year Ended December 31. . the Company recognized goodwill impairments associated with the sale of a wholly-owned hotel and the overall value of its timeshare operations. . . . . the Company determined that it could realize the credits for the 2001 through 2004 tax years. . . . . . For tax purposes. . . . . . . . the Company was able to recognize a tax benefit of $129 million to establish the deferred tax asset related to the basis step up. . . . . As a result of this analysis. . . . . . the Company adjusted its deferred income tax balances by approximately $30 million for items related to prior periods. . the impairments are not deductible. . 70 Foreign tax rate differential . As a result. . . . . . . . . . . . . . . . . . .S. . . . . . . . . . . . . . . during 2010. . . . . F-28 . . — Nondeductible goodwill . . . . . . . . . . . . of approximately $245 million. . . The Company had not previously accrued this benefit since the realization of the benefit was determined to be unlikely. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Therefore. during 2010. . . INC. . . . . . . as a result of final negotiations during 2010 related to the tax settlement on the 1998 disposition of World Directories. . . . . . . net of incremental taxes and interest. . . . . As a result. . . . . . . which included a $92 million tax benefit primarily for interest on taxes previously paid offset by a $50 million tax charge to derecognize previously benefited foreign tax credits. . . . . . . . 2010 2009 2008 Tax provision at U. . . . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. 26 Provision for income tax (benefit). . . . the Company finalized the details of its settlement with the IRS with respect to the 1998 disposition of World Directories. . . . . . . . . . . . . foreign tax credits generated in prior years on its federal tax return. . . . . . . . . . . plus interest. (2) Tax on repatriation of foreign earnings .S. . . . . . . during 2009. . . . . . (42) Tax benefit on the deferred gain from asset sales . the Company obtained a refund of previously paid taxes. . . . . . . . . . . . . . . . . . . . . . . a $37 million tax benefit. 8 Change in valuation allowance . . The Company recognized a $42 million tax benefit in continuing operations. . . . . . . . . During 2010. . . . . . . . . . . . . respectively. . In addition. As discussed below. . . . . . . . . . . . . . . . . . During 2009. . the Company agreed to forgo foreign tax credits generated in tax years 2000 through 2002. . . . . . . . . . . $117 U. . . . . . . . . . . . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) A reconciliation of the tax provision of the Company at the U. (70) Italian incentive program . . . . . statutory rate . During 2009. . . . . . . . the Company did not recognize a tax benefit on the impairments and the provision for income tax was unfavorably impacted by a $3 million and $39 million charge in 2010 and 2009. the Company recognized goodwill impairments associated with the sale of a wholly-owned hotel. . . . . . . . . . . . . $ 27 $(104) (3) (45) (25) (120) 39 9 1 (3) (29) — (13) $(293) $112 8 (14) (20) — — — — (10) 16 (31) 11 $ 72 During 2009. . . . . . . . . . . . . . Therefore. This benefit was offset by a $9 million tax charge to accrue the current tax payable under the program. . . . . . . . . . . . . . . . . . . . . the Company recognized a $134 million tax benefit in discontinued operations primarily related to the portion of the tax no longer due. . . . . . . During 2010. . . . . . As a result of the settlement. . . . . . . . . . . . . . . . was recorded for these foreign tax credits. . . . state and local income taxes . . . . Final negotiations in 2010 resulted in the Company agreeing to forgo foreign tax credit claims for tax years 2000 through 2002. . . . 23 Tax settlements . . a portion of the 2009 tax benefit discussed in this paragraph was reversed. . . . . . the Company completed an evaluation of its ability to claim U. . . resulting in a net benefit of $120 million. . . (99) Other . . 3 Change in uncertain tax positions . . . . . . . . . . . . . . . . . . . .S. . . . . . . . Additionally.S. . . . (7) Basis difference on asset sales . . . . . . . . . . . . .

. 2010. . the Company establishes a deferred tax asset on the deferred gain and recognizes the related tax benefit through the tax provision. . . . . . 2010 2009 2008 Beginning of Year . federal jurisdiction. . . . F-29 . 2010 will reverse within the next twelve months. . the Company is required to accrue tax and associated interest and penalty on uncertain tax positions. . . . Additions based on tax positions related to the current year . . . and 2008. Reductions for tax positions in prior years . . . . . during 2010 and 2008. . respectively. . $3 million and $10 million. . . . . for the years ended December 31. . . As of December 31. . . 2010. . . . . . . . the pretax gain is deferred and is recognized over the life of the contract. . 2009. . . for the years ended December 31. . . the Company is no longer subject to examination by the relevant taxing authorities for any years prior to 2001. . . Therefore. . . . .S. . . . . . . .003 The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. . $ 999 29 18 (499) (5) (32) $ 510 $1. . . . . to establish the deferred tax assets on these types of dispositions. . the Company recorded tax benefits of $99 million and $31 million. . All subsequent periods remain eligible for examination. . . . . . tax purposes.STARWOOD HOTELS & RESORTS WORLDWIDE. . . . In the significant foreign jurisdictions in which the Company operates. . . . Settlements with tax authorities . . . . . . Reductions due to the lapse of applicable statutes of limitations . . 2009.S. the Company is no longer subject to examination by U. . . . . . . respectively. . . . . $9 million and $0 million. . . federal taxing authorities for years prior to 2004 and to examination by any U. . . . . . . .S. . A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in millions): Year Ended December 31. The Company had $92 million and $233 million accrued for the payment of interest and no accrued penalties as of December 31. . . . . The Company recorded benefits of $7 million. . . . . 2010. . . . . End of Year . . . . . . . . . 2010 and December 31. . Additions for tax positions of prior years . . When the Company sells a wholly-owned hotel subject to a long-term management contract. . state taxing authority prior to 1998. . . . the Company completed certain transactions that generated capital gains for U. . . . . . . . . It is reasonably possible that zero to substantially all of the Company’s unrecognized tax benefits as of December 31. of which $37 million would affect its effective tax rate if recognized. . . . During 2010 and 2008. . . As of December 31. . . . 2010. INC. . . . respectively. . In such instances. . . and 2008. 2009. The Company recorded charges of $23 million. . . . to reverse the capital loss valuation allowance. NOTES TO FINANCIAL STATEMENTS — (Continued) Pursuant to ASC 740. . The Company is subject to taxation in the U. These gains were offset by capital losses upon which the Company had not previously accrued a benefit since the realization was determined to be unlikely. .003 4 2 (7) (1) (2) $ 999 $ 968 41 2 (3) (4) (1) $1. as well as various state and foreign jurisdictions. primarily associated with interest due on existing uncertain tax positions. . Income Taxes. . . respectively. . .S. . . . . . the Company had approximately $510 million of total unrecognized tax benefits. .

. . . . . .. . . . . . . .. . .. .. . .. The Company had approximately $1. . . . . .. . .. . . . . . . . . . . . . . . .. . . ... ... . . .. . . . . . . . ... Thereafter . . ... . . ... . Senior Notes. . . . . . . . . .. .. . . 2010. limitations on incurring additional debt.. . . ..15% to 9. . . .. . Senior Notes. . . . In addition. . 2010. . . .. . . . ... . . . . . .. . . .. . . . . The Company had no borrowings under the senior credit facility and $159 million of letters of F-30 . . . .. .. . . .50% at December 31. . . .. various maturities. .. . .. . . interest at 7. among other restrictions. . ..... . . .. . . . . .... . . 2014 .. . .10% to 2. . Mortgages and other.. ... . .. . . .. . . . . . . . . .. .. . . .857 (9) $2.. . . . . . . . . .. . . .. . . The short-term borrowings at December 31. . . . . . . . .. . . . .. ... .. $ — — 609 504 490 450 400 245 159 $ — 114 608 498 485 449 400 244 162 2. . . . . .. . .. . ... .. .. . . . . . .375%. . INC. . . . . . . . .. . Less current maturities ..... . . .. . 2015 . ... . . .. . . . . . .00%. .25%. . . . .. . . . . .955 Aggregate debt maturities for each of the years ended December 31 are as follows (in millions): 2011 . . . . . . The new facility includes an accordion feature under which the Company may increase the revolving loan commitment by up to $375 million subject to certain conditions and bank commitments. . . . . .. capital expenditures.. . . .. . .. . . . .875%. . .. . . . . . . . . . . .. 2013 . . .. . .. 2010 and 2009 were insignificant.. . . . . . Senior Notes. . . . ... . NOTES TO FINANCIAL STATEMENTS — (Continued) Note 16.. . . maturing 2013 .. escrow account funding requirements for debt service. . .875%. . . . .. . . . the Company entered into a new $1. . . .. Senior Notes.848 2.. . . .. . . . . . . . . . .. . . . .. . . .. interest at 6. . .. . 2010. . . 2012 . .. . . . Senior Notes..... . . 2011.STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . .. . .. . . .. . . . .. ability to pay dividends. . . . .. . maturing 2012 .. . . . . . . . . . . . . . . . . . . . . . . .4 billion of available borrowing capacity under its domestic and foreign lines of credit as of December 31. .875 billion revolving credit agreement. . .. On April 20. . . terminated in 2010 . . . . . .. . $ 9 653 557 494 457 687 $2. . . . . . .. . . . . . . . . . . The Company is subject to certain restrictive debt covenants under its short-term borrowing and long-term debt obligations including defined financial covenants. . . .. .. .... . . . . .75%. .. . . . . . .. . smaller credit lines are maintained by the Company’s foreign subsidiaries. . .. ... . . . interest at 7. . . . Senior Notes.. . 2010 2009 Senior Credit Facilities: Revolving Credit Facility interest rates ranging from 1. . . .. . .. . interest at 7. which would have matured on February 11.. . . . . . interest rates ranging from 2... . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . ... . . . . .. . . . The multi-currency facility enhances the Company’s financial flexibility and is expected to be used for general corporate purposes. . . maturing 2013 .. . . . . ... interest at 6.. . . . .. . maturing 2014 .. . .. maturing 2018 ... . . The Company was in compliance with all of the short-term and long-term debt covenants at December 31.. . Revolving Credit Facility. . . .. maturing 2015 . .. . . .. . .. .15%. .. . . .. .5 billion senior credit facility. . . . .. . . . .. . . . . . tax payments and insurance premiums. . . . . .960 (5) $2. . .. . .. . . . . . . .857 The Company maintains lines of credit under which bank loans and other short-term debt are drawn. . . . . . .. . . . .. . . . . . . . .. . . Long-term debt . . . maturing 2019 .. . . . . .. . . . . .. . . . . .. .... .. . . . . . . . Debt Long-term debt and short-term borrowings consisted of the following (in millions): December 31... .. .. .. . . . . . . .. . .. . . . . . .. . . 2013 and replaces the previous $1.. . .. . . . . . . . . . . .. 2010... . .. ... . interest at 7. . . . The new facility matures on November 15.. .. . .

the Company recorded a $17 million charge to interest expense related to the tender premium and unamortized debt issue costs. The Company may redeem all or a portion of the 7. 2014. Upon a change in control of the Company.875% (the “7. the Company reduced debt by over $1 billion. the Company entered into six interest rate swap agreements with a notional amount of $500 million. issued at a discount price of 96.25x increments every six months. The Company received net proceeds of approximately $475 million which were used to reduce the outstanding borrowings under its previous revolving credit facility and for general purposes. under which the Company pays floating and receives fixed interest rates (see Note 24). The Company may redeem all or a portion of the 7.15% Notes at 101% of the principal amount plus accrued and unpaid interest.875% Notes at any time at the Company’s option at a discount rate of Treasury plus 50 basis points.875% Notes”) due October 15. mergers. NOTES TO FINANCIAL STATEMENTS — (Continued) credit outstanding as of December 31. 2011 and will thereafter step down in 0. 2010 and 2011 totaling $1. the Company completed a public offering of $500 million of senior notes with a coupon rate of 7. The 7. the holders of the 7.15% Notes at any time at the Company’s option at a price equal to the greater of (1) 100% of the aggregate principal plus accrued and unpaid interest and (2) the sum of the present values of the remaining scheduled payments of principal and interest discounted at the redemption rate on a semi-annual basis at the Treasury rate plus 50 basis points.15% Notes include restrictions on liens. 2009.875% Notes will rank parri passu with all other unsecured and unsubordinated obligations.50x will decrease to 5. 10 and 18. The Consolidated Leverage Ratio (as defined) maximum of 5. consolidations and sale of assets. The new credit agreement includes various customary covenants. INC. the holders of the 7.5x through the term of the agreement. reaching 4.15% Notes will have the right to require repurchase of the respective 7. 2013.875% Notes will have the right to require repurchase of the 7. F-31 . 2009. In connection with this tender offer.50x beginning on January 1.15% Notes is payable semi-annually on June 1 and December 1.285%. plus accrued and unpaid interest. as described in Notes 5. Interest on the 7. 2009. The Company issued new debt of $750 million and prepaid debt of $1. sale and leaseback transactions. On November 24. the Company completed a public offering of $250 million of Senior Notes (“the 7. The Company received net proceeds of approximately $241 million. Certain covenants on the 7.15% Notes rank parri passu with all other unsecured and unsubordinated obligations. On December 7. 2019. 2010. securitizations and a cobranding arrangement. During 2009. On April 30. together with other borrowings.675 billion including term loans maturing in 2009. mergers.25x beginning on July 1. the Company used the proceeds from a public offering of Senior Notes described below. Upon a change in control of the Company.STARWOOD HOTELS & RESORTS WORLDWIDE.875% Notes include restrictions on liens. The 7. sale and leaseback transactions.25% Senior Notes due 2013. Certain covenants on the 7.15% Notes”) due December 1. The Consolidated Coverage Ratio (as defined) minimum remains at 2. During 2009.875% Notes at 101% of the principal amount plus accrued and unpaid interest.875% Senior Notes due 2012 and $105 million of its 6. consolidations and sale of assets. including maintaining leverage and coverage ratios.875% Notes is payable semiannually on April 15 and October 15. to complete a tender offer to repurchase $195 million of the principal amount of its 7. which were used to repurchase a portion of outstanding Senior Notes (discussed above).375 billion. Interest on the 7. Additional sources of cash generated to pay down debt were proceeds from asset sales.

. . In accordance with the terms of the Amendment. . . . . . . 2015. . $ 930 . . . . . In connection with the Amendment in July 2009. . . . the liability associated with this financing arrangement is being reduced ratably over a five year period beginning in October 2009. . . . . . . . Note 18. SPG point liability(a) . . . .81%. . . . . . . . . Other . Long-term debt . . . . . . . . . . . . . . . maturing 2016 .. . . . . . . . Insurance reserves . . . . . . . . . . . . Deferred income including VOI and residential sales .. . . .. The Amendment requires a fixed amount of $50 million per year to be deducted from the $250 million advance over the five year period regardless of the total amount of points purchased. . . . . . . .. . . .29%.25% to 6. . . . . securitization. . . INC. . . . . . . . . .. . .. . . . .. . . . . . . . .009 634 33 65 46 116 $1. .96%. . . . long-term and short-term securitized vacation ownership debt consisted of the following (in millions): 2003 2005 2006 2009 2010 securitization. Benefit plan liabilities . . . . . . . . . . . . . . . . . . . . 702 .886 $1.5%. . . .. . . . . . . . . . . . . .95% to 6. . . . . 2009-16 and 2009-17. . Debt. . . . . . . . . . . . . . . . $ 367 During the year ended December 31. . . . 128 rates ranging from 3. . Other Liabilities Other liabilities consisted of the following (in millions): December 31. . As a result. . . . . .. 2010. . . . . . . . . maturing 2018 . . . . . . . . . . . . . securitization. . . 39 rate at 5. . . . . . . . . securitization. 127 $1. . . . . . . maturing 2018 . . . . . and. . . . . if the Company does not pay such liability. . . $ 17 rates ranging from 5. . . . . ..85%. 2009. . . interest expense associated with securitized vacation ownership debt was $27 million. . . . . . . . . F-32 . . As of December 31. . . NOTES TO FINANCIAL STATEMENTS — (Continued) Note 17. . . . . . . . . . . ... . . . . . 55 rates ranging from 5. . .. . . . . . . interest interest interest interest interest rates ranging from 3. . . . . . . if the Company fails to comply with certain financial covenants. . . . . . 2010 2009 Deferred gains on asset sales . .. . . the Company would have to repay the remaining balance of the liability. . . . . . . . . . . . the Company’s VIEs associated with the securitization of its vacation ownership notes receivable were consolidated following the adoption of ASU Nos. . . . . . . . . the Company entered into an amendment to its existing co-branded credit card agreement (“Amendment”) with American Express and extended the term of its co-branding agreement to June 15. . the Company received $250 million in cash toward the purchase of future SPG points by American Express. . the Company has recorded this transaction as a financing arrangement with an implicit interest rate of 4. . During the year ended December 31. . . . . . . . . . . . . . . maturing 2020 . . .65% to 4. . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . .903 (a) Includes the actuarially determined liability related to the SPG program and the liability associated with the American Express transaction discussed below. .. . . . . . . . . . . . . ... .. 61 . 20 . . maturing 2017 . 46 . . . . . . . . . . . . . . securitization. . . .75%. . . . the Company is required to pledge certain receivables as collateral for the remaining balance of the liability. . 255 494 (127) Less current maturities. In accordance with ASC 470. . . . . . . . . . .. . . . . . . .. . . 2010. . . . . . Securitized Vacation Ownership Debt As discussed in Note 10. . . .28% to 5. . . . . . . . .

. . 2009. . . . 2008. other non-core assets and three hotels. . The Company also sponsors the Starwood Hotels & Resorts Worldwide. 2010. . . . . Defined Benefit and Postretirement Benefit Plans. a component of other comprehensive income. resulting in a loss of $2 million.STARWOOD HOTELS & RESORTS WORLDWIDE. The operations from the Bliss spa business. . 2008. . . net of tax . . . . The Company has prefunded a portion of the health care and life insurance obligations through trust funds where such prefunding can be accomplished on a tax effective basis. For the year ended December 31. . All defined benefit plans covering U. 2010. The tax benefit on this hotel sale was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. . was reclassified to discontinued operations for the year ended December 31. 2010 was $1 million (net of tax). and the revenues and expenses from one hotel. . the Company recorded a gain of $134 million related to the final settlement with the IRS regarding the World Directories disposition (see Note 15) and a gain of approximately $36 million primarily related to a tax benefit in connection with the sale of one wholly-owned hotel for $78 million. employees remain active. .S. . the Company recorded net actuarial losses of $4 million (net of tax) related to various employee benefit plans. are included in discontinued operations. . which was in the process of being sold and was later sold in 2010. . These losses were recorded in other comprehensive income. This plan provides health care and life insurance benefits for certain eligible retired employees. net of tax. net of tax . the gain on dispositions includes a $124 million gain ($129 million pretax) on sale of three hotels which were sold unencumbered by management or franchise contracts partially offset by a $49 million tax charge as a result of a 2008 administrative tax ruling for an unrelated taxpayer that impacts the tax liability associated with the disposition of one of the Company’s businesses several years ago. . employees are frozen. The Company also funds this program on a pay-as-you-go basis. Employee Benefit Plan During the year ended December 31. 2011 is $1 million ($1 million. . . Inc. . for the year ended December 31. . 2010 2009 2008 Income Statement Data Gain on disposition. . . The amortization of actuarial loss. . . . . Note 20. net of tax) that have not yet been recognized in net periodic pension cost. Discontinued Operations Summary of financial information for discontinued operations is as follows (in millions): Year Ended December 31. F-33 . Additionally. NOTES TO FINANCIAL STATEMENTS — (Continued) Note 19. $5 million ($9 million pretax) of 2008 results from operations relating to Bliss and the one owned hotel that was in the process of being sold at December 31. Income (loss) from operations. . Included in accumulated other comprehensive (loss) income at December 31. Certain plans covering non-U.S. . . . $168 $ (1) $76 $ (2) $75 $ 5 During the year ended December 31. . 2010 are unrecognized net actuarial losses of $66 million ($56 million. the $76 million (net of tax) gain on dispositions includes the gains from the sale of the Company’s Bliss spa business. 2009. . INC. . . . . . Retiree Welfare Program. . . net of tax). . . The actuarial loss included in accumulated other comprehensive (loss) income and expected to be recognized in net periodic pension cost during the year ended December 31. . For the year ended December 31. The Company and its subsidiaries sponsor or previously sponsored numerous funded and unfunded domestic and international pension plans.

. . 2010 and 2009. . . . . . . . . . . . All domestic pension plans are frozen plans. . — Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . of which $59 million is in other liabilities and $3 million is in accrued expenses and $17 million is in other assets in the accompanying balance sheet. . . . . . . . . $ 19 Change in Plan Assets Fair value of plan assets at beginning of year . . . $ 19 Plans with Accumulated Benefit Obligations in Excess of Plan Assets Projected benefit obligation . . . . the projected benefit obligation is equal to the accumulated benefit obligation. . . . . . . . . . F-34 . . . . . . . . . . . . $ 19 Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Actuarial loss . . . . . . . at December 31. . . . . . . . . . . . — Interest cost . . Therefore. . . . . . . . . . . . . INC. . . . . . . . . . — Employer contribution . . . . . . . . . $ — Actual return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Settlements and curtailments . . . . . . . . . (1) Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the funded status and the accumulated benefit obligation of the Company’s defined benefit pension and postretirement benefit plans at December 31. . . . . . . . . . . . . . . 2010 and 2009 (in millions): Domestic Pension Benefits 2010 2009 Foreign Pension Benefits 2010 2009 Postretirement Benefits 2010 2009 Change in Benefit Obligation Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . — Benefits paid . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . fair value of plan assets. 1 Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Fair value of plan assets at end of year . . . . . . resulting in a $50 million reduction in the projected benefit obligation. . . . . . . . . . . . . . . . . . . . . . . $ 17 Service cost . . . 2010 was $45 million. . . — Plan participant contributions . . . . $ 19 Accumulated benefit obligation . . . . . . . . . . . . . . . $(19) Accumulated benefit obligation . . . . . . . . . . $ — Unfunded status . . . . the Company elected to freeze its Foreign Service pension plan and settled its defined benefit pension plans in Canada. . . . . In 2009. . . NOTES TO FINANCIAL STATEMENTS — (Continued) The following table sets forth the benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . where employees do not accrue additional benefits. . . . . . . . $ — $ 17 — 1 — — — — (1) — $ 17 $— — 1 — — — (1) $— $(17) $ 17 $178 — 10 5 — (3) — (7) — $183 $159 14 13 — (3) — (7) $176 $ (7) $182 $199 5 13 11 (50) 8 — (6) (2) $178 $132 28 21 — 9 (25) (6) $159 $ (19) $176 $ 19 — 1 2 — — 1 (3) — $ 20 $ 1 — 2 1 — — (3) $ 1 $(19) n/a $ 18 — 1 3 — — 1 (4) — $ 19 $ 2 — 2 1 — — (4) $ 1 $(18) n/a $ 17 $ 17 $— $121 $121 $ 97 $117 $115 $ 87 n/a n/a n/a n/a n/a n/a The net underfunded status of the plans at December 31. . . . . . . . . . . . — Benefit obligation at end of year. . . . — Effect of foreign exchange rates . . . . . . . . . . 2 Settlements and curtailments . . — Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. .93% 6. . . . . . . . . . . . . Settlement and curtailment (gain) loss. . .50% 7. .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . .34% 5. . . . . . Expected return on plan assets .51% 5. . . . .88% 5. . . . . . . . .50% 6. . . . Interest cost . . . .6 million effect on the postretirement obligation and a nominal impact on the total of service and interest cost components of net periodic benefit cost. . . . . . . .00% 5. . . . . . . . . ASC 715. Other . . . . . . A one-percentage point change in assumed health care cost trend rates would have approximately a $0. . . . . . n/a n/a 3. . . .50% A number of factors were considered in the determination of the expected return on plan assets. . . . .50% 3. .75% 5. . .89% n/a n/a n/a n/a n/a n/a 6. . . . . . .50% Rate of compensation increase . . . . . . .56% 6. . .00% 5. . . . . . . . . . . . INC. . . . . . . . . . .64% 3. . . . . . . Compensation . . . . . . . . 2010. . . . . . F-35 . . . . . . . .74% n/a n/a n/a 3. . . . . . These factors included current and expected allocation of plan assets. . 5.51% 5. . . . 5. . .25% 6. historical rates of return and Company and investment expert expectations for investment performance over approximately a ten year period. . . . . . . an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2011. . . . . . . . . . . . . . . . Rate of compensation increase .93% 4. 2009 and 2008 (in millions): Domestic Pension Benefits 2010 2009 2008 Foreign Pension Benefits 2010 2009 2008 Postretirement Benefits 2010 2009 2008 Service cost . . . . . . gradually decreasing to 5% in 2016. . . . .93% 3. The majority of participants in the Foreign Pension Plans are employees of managed hotels. . . Amortization of actuarial loss .38% 7. . . . . . . . . . Net periodic benefit cost. . . . . .75% 5. NOTES TO FINANCIAL STATEMENTS — (Continued) The following table presents the components of net periodic benefit cost and the impact of the plan curtailments and settlements for the years ended December 31. . . . . . . for which the Company is reimbursed for costs related to their benefits. . $— 1 — — — 1 — $ 1 $— 1 — — — 1 — $ 1 $— 1 — — — 1 — $ 1 $— 10 (10) 1 — 1 — $ 1 $ 5 13 (10) 5 — 13 (4) $ 9 $ 4 11 (10) 2 1 8 1 $ 9 $— 1 — — — 1 — $ 1 $— 1 — — — 1 — $ 1 $— 1 — — — 1 — $ 1 For measurement purposes. . .99% 5. Expected return on plan assets . . . . The weighted average assumptions used to determine benefit obligations at December 31 were as follows: Domestic Pension Benefits 2010 2009 Foreign Pension Benefits 2010 2009 Postretirement Benefits 2010 2009 Discount rate . . . .50% n/a n/a The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31 were as follows: Domestic Pension Benefits 2010 2009 2008 Foreign Pension Benefits 2010 2009 2008 Postretirement Benefits 2010 2009 2008 Discount rate . . . the investment strategy. . . . .19% 5.10% 7. . . The impact of these reimbursements is not reflected above.

. . . 2015 . .. . . . . . . . . and $16 million in 2008. . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) The following table presents the Company’s fair value hierarchy of the plan assets measured at fair value on a recurring basis as of December 31. . . .. . . . .. 2010 and 2009. . . . . . The mutual funds are valued using quoted market prices in active markets. .. . . . . 2009 (in millions): Level 1 Level 2 Level 3 Total Assets: Mutual Funds . Equity Index Funds . . Collective Trusts . ... . . . . . . Bond Index Funds . . 2014 . . . . which had a balance of $87 million and $59 million at December 31. .. . . . .. .. . . . .. .. Bond Index Funds . . . . . . ..... . . ... ... ... .. . . . . . .. . . . .. . . . . . The following table represents the Company’s expected pension and postretirement benefit plan payments for the next five years and the five years thereafter (in millions): Domestic Pension Benefits Foreign Pension Benefits Postretirement Benefits 2011 . . . . .. . . . . Each participant may contribute on a pretax basis between 1% and 50% of his or her compensation to the plan subject to certain maximum limits. . . .. .. . .. . . ..... .. . . .. . . . . . . . . . . . . . .. . . .. . .. .. . .. . . . .. . . . equity index funds and bond index funds are not publicly traded but are valued based on the underlying assets which are publicly traded. .. ... .. . . . respectively. The Company and its subsidiaries sponsor various defined contribution plans.. .. . . Savings and Retirement Plan. . . ... .. . . .. .. . .. . . . . . . . . . .. . . . . . . . .. which are based on a portion of a participant’s eligible compensation. . . The amount of expense for matching contributions totaled $13 million in 2010. $15 million in 2009. . ... . . . .. . . . . . . . . . .. .. . . . .. . . . . . F-36 . .. . 2012 .. . .. . . . . . . . . . . . . ... . . . . . . . . .. .. . . .. . . . . . . . . . . . . . . . . . .... . . . . . . . .. . . . . . . . 2016-2020 .. . $1 $1 $1 $1 $1 $7 $ 7 $ 7 $ 8 $ 8 $ 8 $44 $2 $2 $2 $2 $2 $7 Defined Contribution Plans. . .. . . . .. . . . . . . . . . . . .. INC. . . . . .... . .. payroll who meet certain age and service requirements. . . . . . . .. ... . . which is a voluntary defined contribution plan allowing participation by employees on U. . . .. .. . ...STARWOOD HOTELS & RESORTS WORLDWIDE.. . . . . . . .. . . . 2010 (in millions): Level 1 Level 2 Level 3 Total Assets: Mutual Funds . . . . .. . .. . .. .. .. . . . . . .. . including the Starwood Hotels & Resorts Worldwide.. . 2013 . . . . . . .. . . . . . . .. . . . The following table presents the Company’s fair value hierarchy of the plan assets measured at fair value on a recurring basis as of December 31. The plan also contains provisions for matching contributions to be made by the Company. .. . . . . . .. . . Collective Trusts . $44 — — — $44 $ — 5 72 56 $133 $— — — — $— $ 44 5 72 56 $177 Total .. . . . . . . . .. . . .. . . . . . $40 — — — $40 $ — 5 67 48 $120 $— — — — $— $ 40 5 67 48 $160 Total . . .S. ... . .. . ... . . Included as an investment choice is the Company’s publicly traded common stock. . . . . . . .. . . . . . . . Equity Index Funds . . . . . .. . . . . .. . .. . .... . . .. .. . . . . . . . ... . Inc. . .. The collective trusts. . .

. . .. . . .. The aggregate award pool for non-qualified or incentive stock options... .. .. . ... . . .... Rent expense under non-cancelable operating leases consisted of the following (in millions): Year Ended December 31. . The leases extend for varying periods through 2016 and generally are for a fixed amount each month. . contributions of $9 million in 2010. .. . . . .. .. . Contingent rent . As of December 31.. the Company’s 1999 Long-Term Incentive Compensation Plan or the Company’s 1995 Share Option Plan... . Pursuant to agreements between the Company and various unions. ... .. . ... . . . . .... . . ... . 2015 .. no repurchase capacity remained under the Share Repurchase Authorization. . ... . ... . ... .. .. .. . ........ . Note 23.. . .. ...STARWOOD HOTELS & RESORTS WORLDWIDE.... ... ... .. Thereafter.. .. .. 81 ... 2012 . .. . ... .. ... .... . .. Leases and Rentals The Company leases certain equipment for the hotels’ operations under various lease agreements.. . .. .. . 80 .... the Company adopted the 2004 Long-Term Incentive Compensation Plan (“2004 LTIP”).. F-37 . . . NOTES TO FINANCIAL STATEMENTS — (Continued) Multi-Employer Pension Plans. .. .. ..... . .. ... INC... . 2014 . ... ...... ... . 2010 and 2009. . . $ 96 .......... ...... .. . . Stock-Based Compensation In 2004. . Although no additional awards will be granted under the 2002 LTIP.. . . . 2010 was approximately 53 million. 2009 and 2008 were made by the Company and charged to expense.. . . performance shares. Stockholders’ Equity Share Repurchases. . 939 Minimum future rents have not been reduced by future minimum sublease income of approximately $13 million expected under non-cancelable subleases. ..... .. . .. .. . . The Company’s minimum future rents at December 31... ......... . . .......... Note 21. .... .... several of the Company’s hotels are subject to leases of land or building facilities from third parties. . . .. . . Sublease rent . .. .... .. . .. 2010. ... .... .... ...... .. .. ... ... . .. .. . . .. restricted stock and units or any combination of the foregoing which are available to be granted under the 2004 LTIP at December 31. the Company did not repurchase any Company common shares.. . . ... . ....... consultants and advisors. . .. .. Certain employees are covered by union sponsored multi-employer pension plans. . .... . .. ..... .. . ..... ... .... .... . .. . . 78 ... .. officers.. . ...... . which extend for varying periods through 2096 and generally contain fixed and variable components.. . ...... . . ... The variable components of leases of land or building facilities are primarily based on the operating profit or revenues of the related hotels.... In addition.. . .. .. .... . . ..... . employees.......... .. .. ......... .... . 71 . . . .... 2013 ... . .. . ..... .. ... . ... . . .. . 2010 2009 2008 Minimum rent . 2010 payable under non-cancelable operating leases with third parties are as follows (in millions): 2011 . .... .... the provisions under each of the previous plans will continue to govern awards that have been granted and remain outstanding under those plans. ............ During the year ended December 31.. ... ....... ... . ... . .. ... ... $90 6 (5) $91 $89 2 (3) $88 $93 10 (6) $97 Note 22. . .. .. which superseded the 2002 Long-Term Incentive Compensation Plan (“2002 LTIP”) and provides the terms of equity award grants to directors.

. . . .9) (0... . . Granted . . .... . . .0% 43. . . ... .73.. . ..50% 74. .72% 1. ... .... . ... . . . .. 1 year . . .. ..0% 45. . . .. . . . respectively. . .. . .. 5 year . .. . respectively.. . . .. . . .. . . .. ... .. .67 Outstanding at December 31.0% 6 yrs... . . ... The estimated volatility is based on a combination of historical share price volatility as well as implied volatility based on market analysis. . . . ... .32% 1.. . . ...... .. 2009 . .. .. .. .. . .. .. .69. . The weighted-average fair value per option for options granted during 2010. ... net of reimbursements during 2010. . . .... . . . Expected life . .. . ... .99% 3.30% 3. .. ... . 0... .. ..... ... . ..S.79% 3... 0. . ... ... . .40% 1. . .. .. and $17. . . ..7 4. . . . ...... . . . . . $21 million and $26 million. .. . . . ..... . .0% 36. . . The total intrinsic value of options exercised during 2010. .. .. The expected life represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on an actuarial calculation using historical experience.. . . .. . ... .3 million and $35 million.. The historical share price volatility was measured over an 8-year period..... NOTES TO FINANCIAL STATEMENTS — (Continued) Compensation expense. .. Canceled or Expired . .. .. .. 13. $53 million and $68 million.17% 2..... . . .. .. .. . .91% 2... .. .. . . . ...... .. ... . which is equal to the contractual term of the options. resulting in tax benefits of approximately $44 million.. . $0. 2009 and 2008 was approximately $115 million.. 3 year .. Treasury yield curve over the expected term of the option.... .. . The yield curve (risk-free interest rate) is based on the implied zero-coupon yield from the U. . . . Exercised .. .. .. . . .75% 37.. respectively. . .. $4. . . .. . Exercisable at December 31... . ... .. .1 0. .. . .. Forfeited.. . . . . .. . respectively.0% 6 yrs. . .. . .73% The dividend yield is estimated based on the current expected annualized dividend payment and the average expected price of the Company’s common shares during the same periods. .. .. .. . . 0.50% 38.. . . . F-38 . . Yield curve: 6 month . . . 1. Volatility: Near term . . ... . The weighted average volatility for 2010 grants was 40%. 2010 . . . .. giving consideration to the contractual terms of the stock-based awards and vesting schedules. .. . . ... . . .61% 3. .. . . . . ...1) 8. . . . ...36% 2. . . . . . As of December 31.6 (4... . .. . . 2010 2009 2008 Dividend yield .90% 1.. .2 $29. Long term . 2009 and 2008 was $14.... . ....13 $29. and the service period is typically four years.. ... . . . .0% 7 yrs. The Company utilizes the Lattice model to calculate the fair value option grants..02% 1. .... . .. ... 2010 .45% 0.24 28. .. .. ... . The following table summarizes the Company’s stock option activity during 2010: Options (In millions) Weighted Average Exercise Price Per Share Outstanding at December 31. 2009 and 2008 was approximately $72 million.... .80 45.. .. . . . . . ..... . .15 38.24. Weighted average assumptions used to determine the fair value of option grants were as follows: Year Ended December 31. . . ... .. ..... . 2010.. ... resulting in tax benefits of $28 million. . . .. . . . .. respectively. .. . . .19% 0. .72 $42. . 10 year . . . .. $1 million and $89 million..... INC. . . .. . .. . . ... .. .... .. . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . .. . . .. .. .

Approximately 265. . 2010 . . . .42. . 2010. payrolls are eligible to participate in the ESPP. .0 (1. . .5 $28. .. 2010. . Amounts withheld are applied at the end of every three month accumulation period to purchase shares. respectively. . F-39 .00. Lapse of restrictions . . . The weighted-average fair value per stock or unit granted during 2010. . . The following table summarizes the Company’s restricted stock and units activity during 2010: Number of Restricted Stock and Units (In millions) Weighted Average Grant Date Value Per Share Outstanding at December 31. . . . . . The fair value of restricted stock and units for which the restrictions lapsed during 2010. The purchase price to employees is equal to 95% of the fair market value of shares at the end of each period. .. . 2009 . the Board of Directors adopted (and in May 2002 the shareholders approved) the Company’s 2002 Employee Stock Purchase Plan (the “ESPP”) to provide employees of the Company with an opportunity to purchase shares through payroll deductions and reserved 11. .988.67 years for exercisable option as of December 31. . .08 years for restricted stock and units outstanding at December 31. . . .50 years for outstanding options and 2. . The aggregate intrinsic value of outstanding options as of December 31. ..00 27. . . . . The weighted-average contractual life was 4. . . . .33. . . . respectively.793 shares for issuance under the ESPP. . . . .000 shares were issued under the ESPP during the year ended December 31. . . The service period is typically three or four years except in the case of restricted stock and units issued in lieu of a portion of an annual cash bonus where the restriction lapse period is typically in equal installments over a two year period. Participants may withdraw their contributions at any time before shares are purchased. 2009 and 2008 was $37. .77 to $54. . . . INC. . . . Forfeited or Canceled .49. or in equal installments on the first. . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . 2010 was $272 million. . 2010 at purchase prices ranging from $36. . . . . . . . The weighted average remaining term was 1. The aggregate intrinsic value of exercisable options as of December 31. . . . . . . . . . . . . . . . . . . net of estimated forfeitures. Granted . . . . . . second and third fiscal year ends following grant date with distribution on the third fiscal year end. Eligible employees may contribute up to 20% of their total cash compensation to the ESPP. . .15 and $46. 2009 and 2008 was approximately $62 million. . . . 2010. . . .000 shares were issued under the ESPP during the year ended December 31. .01 to $30. . . .48 37. . 2009 at purchase prices ranging from $11.17 years on a straightline basis. . . . Approximately 117. . . All full-time employees who have completed 30 days of continuous service and who are employed by the Company on U. $33 million and $85 million. 2010 was $77 million. .82 $28. . The ESPP commenced in October 2002. . . . 2002 Employee Stock Purchase Plan In April 2002. . . NOTES TO FINANCIAL STATEMENTS — (Continued) there was approximately $21 million of unrecognized compensation cost.000. $11. 8.11 Outstanding at December 31. . . .. . . . . . . . .4) (0. . . . The Company recognizes compensation expense equal to the fair market value of the stock on the date of grant for restricted stock and unit grants over the service period. . . . . The value of the shares (determined as of the beginning of the offering period) that may be purchased by any participant in a calendar year is limited to $25. .33 43. related to nonvested options. . . . . which is expected to be recognized over a weighted-average period of 1. . .S.0 2.1) 8. At December 31. . . . there was approximately $68 million (net of estimated forfeitures) in unamortized compensation cost related to restricted stock and units.

the effect of derivative instruments on our Consolidated Statements of Comprehensive Income. . . INC. 2010 are $31 million and $6 million. . respectively. . 2013 and 2014. . 2009 Balance Sheet Location Fair Value Derivatives designated as hedging instruments Asset Derivatives Forward contracts . . designate and assess the effectiveness of the transactions that receive hedge accounting. . including the Euro. . with average exchange rates of 1. and their change in fair value is recorded in the Company’s consolidated statements of income during each reporting period. . The counterparties to the Company’s derivative financial instruments are major financial institutions. 2010 Balance Sheet Location Fair Value December 31. The Fair Value Swaps modify the Company’s interest rate exposure by effectively converting debt with a fixed rate to a floating rate. the Company needs to formally document. 2010. The following tables summarize the fair value of our derivative instruments. The Company also enters into forward contracts to manage foreign exchange risk on intercompany loans that are not deemed permanently invested. . enters into forward contracts to manage foreign exchange risk. $— 16 $16 Prepaid and other current assets Other assets $— 7 $ 7 F-40 . . . The notional dollar amounts of the outstanding Euro and Yen forward contracts at December 31. . Each of these hedges was highly effective in offsetting fluctuations in foreign currencies. . Prepaid and other current assets Interest rate swaps. The Company enters into interest rate swap agreements to manage interest expense. cash flows and the market value of the Company’s debt. Other assets Total assets . . . .7. the Company has six interest rate swap agreements with an aggregate notional amount of $500 million under which the Company pays floating rates and receives fixed rates of interest (“Fair Value Swaps”). Fair Value of Derivative Instruments (In millions) December 31. respectively. The Company enters into forward contracts to hedge forecasted transactions based in certain foreign currencies. and their change in fair value is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurs. . To qualify as a hedge. The Company evaluates the bond ratings of the financial institutions and believes that credit risk is at an acceptable level.3 and 83. The Company discontinues hedge accounting for any hedge that is no longer evaluated to be highly effective. . The Company reviews the effectiveness of its hedging instruments on a quarterly basis and records any ineffectiveness into earnings. Derivative Financial Instruments The Company. At December 31. From time to time.STARWOOD HOTELS & RESORTS WORLDWIDE. . based on market conditions. with terms of primarily less than one year. These interest rate swaps have been designated and qualify as fair value hedges. The Company’s objective is to manage the impact of interest rates on the results of operations. the Company may choose to de-designate portions of hedges when changes in estimates of forecasted transactions occur. . The Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2012. . the amounts reclassified from “Other comprehensive income” and the effect on the Consolidated Statements of Income during the year. NOTES TO FINANCIAL STATEMENTS — (Continued) Note 24. These forward contracts are not designated as hedges. . . . . Canadian Dollar and Yen. . These forward contracts have been designated and qualify as cash flow hedges.

. . franchise fees. $— Balance at December 31. . . . . . . . . . . . . . $— $— $ 9 $ 9 Prepaid and other current assets $— $— Accrued expenses $ 7 $ 7 Consolidated Statements of Income and Comprehensive Income For the Years Ended December 31. . . . . . Liability Derivatives Forward contracts . . . . . . . . . . . . . . . . . Total (loss) gain included in income . . . net $(45) $(45) $(15) $(15) $14 $14 F-41 . . . 2008 . . . . . . . . . . . . . . . . . . . . 2009 . . and other income . . . . . . — Reclassification of gain from OCI to management fees. . . . . . . . . . . . . 1 Reclassification of loss from OCI to management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense. . . . . . . . . . . 2010 . . . . . . . . . . . and other income . . $— Amount of Gain or (Loss) Recognized in Income on Derivative Year Ended December 31. . . . . . . . . (1) Balance at December 31. . . . . . . . . INC. . . . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) December 31. $ (6) Mark-to-market gain on forward exchange contracts . . . . . Accrued expenses Total liabilities . . . . . . . . . . . . . . 2009 Balance Sheet Location Fair Value Fair Value Derivatives not designated as hedging instruments Asset Derivatives Forward contracts . . . . . . . . . . . . . . . . . franchise fees. 2010 2009 2008 Derivatives Not Designated as Hedging Instruments Location of Gain or (Loss) Recognized in Income on Derivative Foreign forward exchange contracts . . . Prepaid and other current assets Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— Mark-to-market loss on forward exchange contracts . . . . . . . . . . . . . . . . . . . 2010 and 2009 (In millions) Balance at December 31. . . . . 2009 . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . 6 Balance at December 31. . . . 2010 Balance Sheet Location December 31. . . . . . . . .

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS — (Continued) Note 25. Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments (in millions):
December 31, 2010 Carrying Fair Amount Value December 31, 2009 Carrying Fair Amount Value

Assets: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VOI notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized vacation ownership notes receivable . . . . . . . Other notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities: Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt . . . . . . . . . . . . . . . . . . . . . . Other long-term debt liabilities . . . . . . . . . . . . . . . . . . . Total financial liabilities . . . . . . . . . . . . . . . . . . . . . . Off-Balance sheet: Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surety bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Off-Balance sheet . . . . . . . . . . . . . . . . . . . . . . .

$

10 132 408 19

$

10 153 492 19

$

7 222 — 14

$

7 253 — 14

$ 569 $2,848 367 — $3,215 $ $ — — —

$ 674 $3,120 373 — $3,493 $ 159 23 $ 182

$ 243 $2,955 — 8 $2,963 $ $ — — —

$ 274 $3,071 — 8 $3,079 $ 168 21 $ 189

The Company believes the carrying values of its financial instruments related to current assets and liabilities approximate fair value. The Company records its derivative assets and liabilities at fair value. See Note 12 for recorded amounts and the method and assumption used to estimate fair value. The carrying value of the Company’s restricted cash approximates its fair value. The Company estimates the fair value of its VOI notes receivable and securitized VOI notes receivable using assumptions related to current securitization market transactions. The amount is then compared to a discounted expected future cash flow model using a discount rate commensurate with the risk of the underlying notes, primarily determined by the credit worthiness of the borrowers based on their FICO scores. The results of these two methods are then evaluated to conclude on the estimated fair value. The fair value of other notes receivable is estimated based on terms of the instrument and current market conditions. These financial instrument assets are recorded in the other assets line item in the Company’s consolidated balance sheet. The Company estimates the fair value of its publicly traded debt based on the bid prices in the public debt markets. The carrying amount of its floating rate debt is a reasonable basis of fair value due to the variable nature of the interest rates. The Company’s non-public, securitized debt, and fixed rate debt fair value is determined based upon discounted cash flows for the debt rates deemed reasonable for the type of debt, prevailing market conditions and the length to maturity for the debt. Other long-term liabilities represent a financial guarantee. The carrying value of this liability approximates its fair value based on expected funding under the guarantee. The fair values of the Company’s letters of credit and surety bonds are estimated to be the same as the contract values based on the nature of the fee arrangements with the issuing financial institutions. F-42

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS — (Continued) Note 26. Commitments and Contingencies

The Company had the following contractual obligations outstanding as of December 31, 2010 (in millions):
Total Due in Less Than 1 Year Due in 1-3 Years Due in 3-5 Years Due After 5 Years

Unconditional purchase obligations(a) . . . . . . . . . . . . . Other long-term obligations . . . . . . . . . . . . . . . . . . . . Total contractual obligations . . . . . . . . . . . . . . . . . . .

$225 3 $228

$69 2 $71

$124 1 $125

$28 — $28

$ 4 — $ 4

(a) Included in these balances are commitments that may be reimbursed or satisfied by the Company’s managed and franchised properties. The Company had the following commercial commitments outstanding as of December 31, 2010 (in millions):
Amount of Commitment Expiration Per Period Less Than After 1 Year 1-3 Years 3-5 Years 5 Years

Total

Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . $159

$144

$12

$—

$3

Variable Interest Entities. The Company has evaluated hotels in which it has a variable interest, which is generally in the form of investments, loans, guarantees, or equity. The Company determines if it is the primary beneficiary of the hotel by primarily considering the qualitative factors. Qualitative factors include evaluating if the Company has the power to control the VIE and has the obligation to absorb the losses and rights to receive the benefits of the VIE, that could potentially be significant to the VIE. The Company has determined it is not the primary beneficiary of these VIEs and therefore these entities are not consolidated in the Company’s financial statements. See Note 10 for the VIEs in which the Company is deemed the primary beneficiary and has consolidated the entities. The 15 VIEs associated with the Company’s variable interests represent entities that own hotels for which the Company has entered into management or franchise agreements with the hotel owners. The Company is paid a fee primarily based on financial metrics of the hotel. The hotels are financed by the owners, generally in the form of working capital, equity, and debt. At December 31, 2010, the Company has approximately $68 million of investments and a loan balance of $9 million associated with 12 VIEs. As the Company is not obligated to fund future cash contributions under these agreements, the maximum loss equals the carrying value. In addition, the Company has not contributed amounts to the VIEs in excess of their contractual obligations. Additionally, the Company has approximately $6 million of investments and certain performance guarantees associated with three VIEs. During 2010, the Company recorded a $3 million charge to selling, general and administrative expenses, relating to one of these VIEs, for a performance guarantee relating to a hotel managed by the Company. The maximum remaining exposure of this guarantee is $1 million. The Company’s remaining performance guarantees have possible cash outlays of up to $68 million, $62 million of which, if required, would be funded over several years and would be largely offset by management fees received under these contracts. At December 31, 2009, the Company has approximately $81 million of investments associated with 18 VIEs, equity investments of $11 million associated with one VIE and a loan balance of $5 million associated with one VIE. Guaranteed Loans and Commitments. In limited cases, the Company has made loans to owners of or partners in hotel or resort ventures for which the Company has a management or franchise agreement. Loans outstanding under this program totaled $14 million at December 31, 2010. The Company evaluates these loans for impairment, and at December 31, 2010, believes these loans are collectible. Unfunded loan commitments F-43

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS — (Continued) aggregating $18 million were outstanding at December 31, 2010, $0 million of which is expected to be funded in 2011, with $1 million expected to be funded in total. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. The Company also has $56 million of equity and other potential contributions associated with managed or joint venture properties, $20 million of which is expected to be funded in 2011. Surety bonds issued on behalf of the Company at December 31, 2010 totaled $23 million, the majority of which were required by state or local governments relating to the Company’s vacation ownership operations and by its insurers to secure large deductible insurance programs. To secure management contracts, the Company may provide performance guarantees to third-party owners. Most of these performance guarantees allow the Company to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, the Company is obligated to fund shortfalls in performance levels through the issuance of loans. Many of the performance tests are multi-year tests, are tied to the results of a competitive set of hotels, and have exclusions for force majeure and acts of war and terrorism. The Company does not anticipate any significant funding under performance guarantees or losing a significant number of management or franchise contracts in 2011. In connection with the acquisition of the Le Méridien brand in November 2005, the Company assumed the obligation to guarantee certain performance levels at one Le Méridien managed hotel for the periods 2007 through 2014. During the year ended December 31, 2010, the Company reached an agreement with the owner of this property to fully release the Company of its performance guarantee obligation in return for a payment of approximately $1 million to the owner. Additionally, in connection with this settlement, the term of the management contract was extended by five years. As a result of this settlement, the Company recorded a credit to selling, general, administrative and other expenses of approximately $8 million for the difference between the carrying amount of the guarantee liability and the cash payment of $1 million. In connection with the purchase of the Le Méridien brand in November 2005, the Company was indemnified for certain of Le Méridien’s historical liabilities by the entity that bought Le Méridien’s owned and leased hotel portfolio. The indemnity is limited to the financial resources of that entity. However, at this time, the Company believes that it is unlikely that it will have to fund any of these liabilities. In connection with the sale of 33 hotels in 2006, the Company agreed to indemnify the buyer for certain liabilities, including operations and tax liabilities. At this time, the Company believes that it will not have to make any material payments under such indemnities. Litigation. The Company is involved in various legal matters that have arisen in the normal course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does not expect that the resolution of all legal matters will have a material adverse effect on its consolidated results of operations, financial position or cash flow. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period. Collective Bargaining Agreements. At December 31, 2010, approximately 34% of the Company’s U.S.-based employees were covered by various collective bargaining agreements, providing, generally, for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained in a normal and satisfactory manner, and management believes that the Company’s employee relations are satisfactory. F-44

licensing fees from branded condominiums and residences and the sale of residential units. The hotel segment generally represents a worldwide network of owned. Although the Company has incurred and expects to incur remediation and other environmental costs during the ordinary course of operations. Subsequent to the acquisition of ITT Corporation in 1998. F-45 . ITT Corporation. respectively. Sheraton». management does not believe that these matters would have a material impact on the Company’s consolidated results of operations. state and local environmental laws. ordinances and regulations. Aloft» and Element» as well as hotels and resorts which are managed or franchised under these brand names in exchange for fees. the presence of such hazardous or toxic substances. or was responsible for. 2010 and 2009 were $72 million and $74 million. For purposes of governing certain of the ongoing relationships between the Company and ITT Industries after the Distribution and spin-off of ITT Corporation and to provide for an orderly transition. 2010. Note 27. marketing and selling VOIs. INC. Inc. net of interest income. the former ITT Corporation. changed its name to ITT Corporation. then a wholly owned subsidiary of ITT Industries (the “Distribution”). general and administrative expense. distributed to its stockholders all of the outstanding shares of common stock of ITT Corporation. ITT Industries.. Employee Benefits Services and Liability Agreement. the Company changed the name of ITT Corporation to Sheraton Holding Corporation. The Company does not allocate these items to its segments. Inc. Captive Insurance Company. Le Méridien». interest expense. standby letters of credit amounting to $64 million and $83 million. W». Four Points» by Sheraton. restructuring and other special charges (credits) and income tax benefit (expense). 2010 and 2009. ownership and operation of vacation ownership resorts. had been issued to provide collateral for the estimated claims. At December 31. management anticipates that such costs will not have a material adverse effect on the operations or financial condition of the Company. The Company may be liable to or due reimbursement from ITT Industries relating to the resolution of certain pre-spinoff matters under these agreements. In 1995. Westin». The Luxury Collection». The vacation ownership and residential segment includes the development. renamed ITT Industries. Such laws often impose liability without regard to whether the current or previous owner or operator knew of. providing financing to customers who purchase such interests. NOTES TO FINANCIAL STATEMENTS — (Continued) Environmental Matters. financial position or cash flows. The letters of credit are guaranteed by the Company. the Company and ITT Industries have entered into various agreements including a spin-off agreement. leased and consolidated joint venture hotels and resorts operated primarily under the Company’s proprietary brand names including St. Regis». The Company is subject to certain requirements and potential liabilities under various federal. losses on asset dispositions and impairments. Estimated insurance claims payable at December 31. (“ITT Industries”). The performance of the hotels and vacation ownership and residential segments is evaluated primarily on operating profit before corporate selling. Tax Allocation Agreement and Intellectual Property Transfer and License Agreements.STARWOOD HOTELS & RESORTS WORLDWIDE. respectively. During the year ended December 31. Based on available information. In connection with this Distribution. Business Segment and Geographical Information The Company has two operating segments: hotels and vacation ownership and residential. the Company reversed a liability related to the 1998 acquisition (see Note 14). which was then named ITT Destinations.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Total segment operating income . . . . . . . . . . . . . . . . . . Loss on asset dispositions and impairments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .071 Operating income: Hotel . . . . . administrative and other . . . . . . . . . . . . . . . . . . . . . .696 $ 471 73 544 (139) (379) 26 (5) 1 (227) (91) $ (296) $ 229 27 53 $ 309 $5. . . . . . . . . . . $ 335 Depreciation and amortization: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . operating income. . . . . . . 27 Corporate . . . 42 Total(c) . . . . . $ 377 (a) Includes $285 million and $343 million of investments in unconsolidated joint ventures at December 31. . . .139 Corporate .STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . . . . . . . . . . . . . . . . . .197 Total . . . . . . . . . . . . . . . . . . . . . . . . $5. . . . . . . . . . . . . . 688 Total . . . . . . . . . . . . . net . . . . . .383 Vacation ownership and residential . . . . . . . . . assets and capital expenditures for the Company’s reportable segments (in millions): 2010 2009 2008 Revenues: Hotel . . . . . .440 Vacation ownership and residential(b) . . . . . . . . . . . .703 $ 344 389 84 $ 817 Income (loss) from continuing operations before taxes and noncontrolling interests . . . . . . . . . . . . . . . . 2. . . . . . . . $ 184 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .754 $ 776 136 912 (161) (141) 610 12 4 (207) (98) $ 321 $ 241 29 43 $ 313 $6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . .860 894 $5. . . . general. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net: Hotel . . . . . . . . . . . . . . . . $6. . . . . . . $ 571 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings and gains and losses from unconsolidated ventures. . . . . . . . . . . . . . . . . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) The following table presents revenues. . . . . . Selling. . . . . . . .776 Capital expenditures: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . $4.639 1. . . . . . goodwill impairment and other special charges. . . . . . . . . . . . . . . . . . .198 $8. .728 2. . . . . . . . . . . . . . . . . . . . 2010 and 2009. . . . . . . $9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .761 $ 171 145 27 $ 343 $4. $ 207 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .022 674 $4. . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285 Assets: Hotel(a) . . . . . . . . . . . . . 151 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Total . . . . . . . . . INC. . . . . . . . . . Restructuring. .183 792 $9. . . . . . . F-46 . . . . . . . . . . . . . . . . .924 1. . . . . . . . . . . . . . . . . . . net. . . . . . . . . 676 (151) 75 600 8 2 (236) (39) $4. . . . .

. . . 2009 or 2008. . . and 2008. Italy. . which comprised over 10% of the total revenues of the Company for the years ended December 2010. . . . .599 $5. . or 10% of the total long-lived assets of the Company as of December 31. . . . .326 $5. . . . . . . . $196 million.071 $3. . . . F-47 . . . . The following table presents revenues and long-lived assets by geographical region (in millions): 2010 Revenues 2009 2008 Long-Lived Assets 2010 2009 United States . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. (c) Includes $227 million. . . . 2009.186 324 1. . .058 370 1. . . . and $476 million of property. .754 $2. . Total . . respectively. NOTES TO FINANCIAL STATEMENTS — (Continued) (b) Includes $27 million and $25 million of investments in unconsolidated joint ventures at December 31. . . . .137 $4. . . . . . . .635 $2.312 160 1. . . . .056 $3. . plant. . . . . . . . . . . .334 399 1. . .387 172 1. . Additional expenditures included in the amounts above consist of vacation ownership inventory and investments in management contracts and hotel joint ventures. and equipment expenditures as of December 31. . . . . . . . . . . . . . . . .125 $3. . . . . . . . . $3. . . .696 $4. respectively. . . . . . . All other international . . . 2010. .789 Other than Italy. INC. . . there were no individual international countries. . 2010 and 2009. 2010 or 2009. . .

. . Earnings per share: Basic — Income (loss) from continuing operations. . .70 $ 1. .066 $ 7 $ (3) $ 4 $ 0. . . . . . . . . . . Quarterly Results (Unaudited) March 31 Three Months Ended June 30 September 30 December 31 (In millions. . . . . .41 Due to the dispositions in the fourth quarter of 2009 that were recorded as discontinued operations (see Note 19). .63 $ 0. . . . . .61 $1.289 $1.44 $ (0.51 $4. . . . . . . . . . . . . Net income.16 $1. .59) $ (1. . . $1. . . . . . . . .02 $ 0. . Discontinued operations . . .01) $ 0. . . . . . . 2009 Revenues . . . .04 $ (0. . . . .63 $ 0. . . . . . . . . .102 $ 28 $ — $ 28 $1. .696 $4. . . Net income . . . . . . . Diluted — Income (loss) from continuing operations. . .59) $ (0.133 $ (5) $ (1) $ (6) $1.78 $ (0. . . .03 $ 0.88 $ 2. . Income from continuing operations .78 $1. . . . . . . . . . . NOTES TO FINANCIAL STATEMENTS — (Continued) Note 28. Income from continuing operations . . .255 $1.20 $ 0. . .00 $ (0. . . . . . . . .00) $ 0. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . .16 $ — $ 0. . . . . . . .03) $ (0.44 $ (0. . . . . .246 $1. . . . . . . . . . . . Net income . . . .70 $ 0.79 $ (0. . Earnings per share: Basic — Income (loss) from continuing operations. . . .03) $ 0. . . Net income . Diluted — Income (loss) from continuing operations. . . . . .03 $ 0. . .61 $ 1. . . . . .00) $ 0. . . . . .00 $ (0. . Net income. . .19 $ 0. . . . . .187 $1. . . . . . .20 $ 0.16 $ — $ 0. . . . . . . .04 $ (0. . . . . . . . . . . . . . . . . . . . . . . . . .167 $1. . INC. . . . . . . .084 $ 206 $ 133 $ 339 $5.41 $ 0. . . . .08 $ 0. . . . . . . . . .466 $ (186) $ 79 $ (107) $ 1. . . .42 $ 0. . . Costs and expenses . .070 $ 36 $ 4 $ 40 $ 1. . . certain amounts in the table above have been reclassified to present comparable results for all periods presented. . . .02 $ 0. Discontinued operations . . .16 $ 0. . . F-48 . .22 $ (1. . . . . .127 $1. .01) $ 0. .670 $ (3) $ 74 $ 71 $ 0. . .340 $1. . . . . Discontinued operations . . . . . . . . . . . .85 $ 1.03) $ 0. .071 $4. . .03) $ 0. . . . . . . . . . . . . . . . . . .STARWOOD HOTELS & RESORTS WORLDWIDE. . .22 $ 0.44 $ 0. . . . . . .471 $ 308 $ 167 $ 475 $ 0. Net income . . . . . .75 $ 0. . . .04) $ 0. . . . . . .72 $ 1. . . .19 $ 0. .74 $ 0. . . . . . . . . . . .41 $ (0. . Discontinued operations . . .13 $ 0. . Costs and expenses . . . .156 $1.068 $ 140 $ (6) $ 134 $ (0. . . . . . .04) $ 0. . .152 $ 79 $ 35 $ 114 $1. . . .03) $1. . . . . . .03) $ 0. except per share data) Year 2010 Revenues . . . . . . Discontinued operations .41 $ 0. . . . . .91 $ 2. . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INC. . . . . Notes receivable — allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . Balance December 31. . Accrued expenses . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 Trade receivables — allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . APIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54 $118 $ 34 $ 49 $117 $ 41 $ 50 $ 94 $ 9 $ 9 $ 11 $ 64 $ $ 8 7 $(19) $(45) $ 62 $(10) $(60) $(54) $(12) $(32) $(26) $ 55 $179 $ 29 $ 54 $118 $ 34 $ 49 $117 $ 41 $ 42 $ (75) $ 8 $ 64 $379 $ 8 $ (3) $(332) $ 3 $ 55 $141 $ — $ (83) (a) Charged to/from other accounts: Description of Charged to/from Other Accounts 2010 Accrued expenses . Total charged to/from other accounts . . . . . . . . S-1 2 8 73 $ 83 $(178) (90) (61) (5) (1) 2 5 $(328) $ (7) (66) 3 (14) 4 $ $ (80) . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . Accrued salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009-17 (See Note 2) . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .SCHEDULE II STARWOOD HOTELS & RESORTS WORLDWIDE. . . . . . . . . Notes receivable — allowance for doubtful accounts . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . Plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . . . . . . . . . . . . . . property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . VALUATION AND QUALIFYING ACCOUNTS (In millions) Additions (Deductions) Charged to/reversed Charged from to/from Other Payments/ Expenses Accounts(a) Other Balance January 1. . . . . . . . . . . . . . . . . . . . . . . . . . wages and benefits . . . . . . . . . . . . . . . . Goodwill . . . . . . 2008 Trade receivables — allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . Impact of ASU No. . . . . . . . . . . . . . . . . . . . . property and equipment . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 Trade receivables — allowance for doubtful accounts . 2009 Plant. . . . Other assets . . . . . . . . . . . . . . . . . . Notes receivable — allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . 2008 Investments . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . . . . . . . . . . . . . . . . . . . . . . . . . .

(This page intentionally left blank) .

operating risks associated with the sale of residential units. White Plains. Inc. Four Points. May not be reproduced or distributed without written permission of Starwood Hotels & Resorts Worldwide. Further results. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions.com and by shareholders of record of Starwood Hotels & Resorts without charge by calling 914 640 8100 or upon written request to: Investor relatIons Starwood Hotels & Resorts Worldwide. the impact of war and terrorist activity. Inc. Inc. relationships with associates. Inc. and other circumstances and uncertainties.starwoodhotels. www. we can give no assurance that our expectations will be attained or that results will not materially differ. Inc. 1111 Westchester Avenue. New York 10604 914 640 8100. and their respective logos are the trademarks of Starwood Hotels & Resorts Worldwide. travelers’ fears of exposure to contagious diseases. risk associated with potential acquisitions and dispositions. New York. 1111 Westchester Avenue. our reliance on technology. All rights reserved. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. business and financing conditions. including the sale of residential units. Le Méridien. hotel and vacation ownership businesses. performance and achievements may be affected by general economic conditions including the timing and robustness of a recovery from the current global economic downturn. governmental and regulatory actions (including the impact of changes in U. W. Preferred Guest. Element. corporate offIces Starwood Hotels & Resorts Worldwide. (“Starwood”) or Form 10-K filed with the Securities and Exchange Commission may be obtained online at www. and the hotel and vacation ownership businesses. White Plains. New York. Sheraton.com Independent reGIstered publIc accountInG fIrM Ernst & Young LLP.The Luxury Collection. Aloft. www. foreign exchange fluctuations.starwoodhotels. risk associated with the level of our indebtedness. . New York 10604 Note: This Annual Report contains forward-looking statements within the meaning of federal securities regulations. dividend payments or stock transfers should contact our transfer agent at: American Stock Transfer & Trust Company 59 Maiden Lane.com forM 10-k and other Investor InforMatIon A copy of the Annual Report of Starwood Hotels & Resorts Worldwide. customers and property owners. New York 10038 800 350 6202. competition.amstock. whether as a result of new information.S. Inc. domestic and international political and geopolitical conditions. or its affiliates. Westin. We undertake no obligation to publicly update or revise any forward-looking statement. SPG. ©2011 Starwood Hotels & Resorts Worldwide.. CONFIDENTIAL & PROPRIETARY. New York stock reGIstrar & transfer aGent Registered shareholders with questions concerning stock certificates. and foreign tax laws and their interpretation). Regis. St. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. cyclicality of the real estate. Inc. future events or otherwise. account information.corporate information starwood hotels & resorts Worldwide. the impact of the internet reservation channels.

Dubai The Astor Hotel. Taiwan Sheraton Jiangyin Hotel . Regis Bahia Beach Resort. Costa Navarino The Westin Desert Willow Villas. New Delhi The Westin Hefei Baohe The Westin Mumbai Garden City The Westin Santa Fe. India. Costa Navarino Schloss Fuschl Resort & Spa. Tianjin The Romanos. the Middle east and africa largest 2010 neW openInGs The St. Regis Lhasa Resort The St.&emerging markets. Mexico City The Westin Sendai The Westin Shenzhen Nanshan The Westin Siray Bay Resort & Spa. five-star footprint in including china.china isoutside ofhotels & resorts’ largestin3 starwood hotel market the united states. and 1 new starwood hotels will debut there four. Phuket The Westin Tianjin The Westin Wall Centre. Valle Sagrado W Austin W Hollywood W New York – Downtown W Retreat Koh Samui Le Méridien Chambers Minneapolis Le Méridien Philadelphia Le Méridien Taipei Le Méridien Xiamen The Westin Austin at The Domain The Westin Resort. Fuschlsee-Salzburg Tambo del Inka Resort & Spa. Puerto Rico The St. Regis Osaka Al Maha Desert Resort & Spa. Palm Desert The Westin Fuzhou Minjiang The Westin Gurgaon. Vancouver Airport Sheraton Albuquerque Airport Hotel Sheraton Batumi Hotel Sheraton Bratislava Hotel Sheraton Brooklyn New York Hotel Sheraton Fuschlsee-Salzburg. Hotel Jagdhof Sheraton Hohhot Hotel Sheraton Hsinchu Hotel.

Sukhumvit 15 Four Points by Sheraton Biloxi Beach Boulevard Four Points by Sheraton Calgary Airport Four Points by Sheraton Galveston Four Points by Sheraton Lagos Four Points by Sheraton Lianyungang Four Points by Sheraton Niagara Falls Fallsview Four Points by Sheraton Oklahoma City Quail Springs Four Points by Sheraton San Jose Downtown Four Points by Sheraton Saskatoon Four Points by Sheraton Tai’an Four Points by Sheraton Taicang Four Points by Sheraton Tucson Airport . Starwood Hotels & to grow nearly 30% in the coming years Sheraton Miami Airport Hotel & Executive Meeting Center Sheraton Milan Malpensa Airport Hotel & Conference Centre Sheraton Nha Trang Hotel & Spa Sheraton Orlando Downtown Hotel Sheraton Qiandao Lake Resort Sheraton Rhodes Resort Sheraton Tianjin Binhai Hotel Sheraton Tribeca New York Hotel Sheraton Udaipur Palace Resort & Spa Sheraton Wenzhou Hotel Sheraton Wuxi Binhu Hotel Sheraton Zhongshan Hotel Aloft Bengaluru Whitefield Aloft Brussels Schuman Aloft Chapel Hill Aloft Chennai.000new roomsResorts is poised planned. OMR – IT Expressway Aloft Harlem Aloft Tulsa Aloft Winchester Element Ewing Hopewell Element Omaha Midtown Crossing Element New York Times Square West Four Points by Sheraton Bangkok.Starwood Hotels & Resorts is the world’s most hotel company global 350hotels in the pipeline— 84% of them outside of the United States with 85.

VALLE SAGRADO. UNITED ARAB EMIRATES W RETREAT KOH SAMUI.ALOFT ABU DHABI. THAILAND TAMBO DEL INKA RESORT & SPA. PERU .

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->