Balance Sheet Summary

Under our 2002 Comprehensive Stock and Cash Incentive Plan (the “Comprehensive Plan”), we award: (1) stock options to purchase our Class A Common Stock (“Stock Option Program”); (2) share appreciation rights (“SARs”) for our Class A Common Stock; (3) restricted stock units of our Class A Common Stock; and (4) deferred stock units. We grant awards at exercise prices or strike prices that are equal to the market price of our Class A Common Stock on the date of grant.

Restricted Stock Units

We granted 2.50.3 million restricted stock units during the first two quartersquarter of 20082009 to certain officers and key employees and those units vest generally over four years in equal annual installments commencing one year after the date of grant. The weighted average grant-date fair value of the restricted stock units granted in the first two quartersquarter of 20082009 was $35.$14.

SARs

We granted an additional 3.0 million restricted stock units during the 2008 third quarter to certain officers and key employees, and those units vest generally over four and a half years with one quarter of the units vesting one and a half years after the date of grant, and the remaining units vest in equal annual installments commencing one year after the first quarter vests. The weighted average grant-date fair value of these restricted stock units was $26.

In the first two quarters of 2008, we granted approximately 108,000 stock options that had a weighted average grant-date fair value of $13 and a weighted average exercise price of $36. The options are exercisable in cumulative installments of one quarter at the end of each of the first four years following the date of grant and expire 10 years after the date of grant.

We granted an additional 110,000 stock options during the 2008 third quarter that become exercisable generally over four and a half years, with one quarter becoming exercisable one and a half years after the date of grant, and the remaining options becoming exercisable in equal annual installments commencing one year after the first quarter become exercisable. The weighted average grant-date fair value of these

options was $10 and they have a weighted average exercise price of $27. These options expire 10 years after the date of grant.

During the first two quarters of 2008, we granted 1.70.5 million SARs to officers and key employees (“Employee SARs”) with a weighted average exercise price of $36 and a weighted average grant-date fair value of $13.during the 2009 first quarter. These SARs expire 10 years after the date of grant and both vest and are exercisable in cumulative installments of one quarter at the end of each of the first four years following the date of grant.

During the first two quarters of 2008, we also granted 3,800 SARs to a director (“Non-employee SARs”) with a weighted average exercise price of $36 and a weighted average grant-date fair value of $15. These Non-employee SARs expire 10 years after the date of grant and vest upon grant, but are generally not exercisable until one year after grant.

We granted an additional 0.9 million Employee SARs during the 2008 third quarter. These Employee SARs expire 10 years after the date of grant and vest generally over four and a half years with one quarter vesting one and a half years after the date of grant, and the remaining rights vesting in equal annual installments commencing one year after the first quarter vests. These Employee SARs are exercisable upon vesting. The weighted average grant-date fair value of these Employee SARs was $10$5, and the weighted average exercise price was $27.$15.

We also issued 18,000 deferred stock units with a weighted average grant-dateTo estimate the fair value of $36 to Non-employee directors during the first two quarters of 2008. These Non-employee director deferred stock units vest within one year and are distributed upon election.

For SARs and stock options,each SAR granted, we use a lattice-based valuation model that incorporates a range of assumptions for inputs. Historical data is used to estimate exercise behaviors for separate groups of retirement eligible and non-retirement eligible employees. The expected terms of stock options andthe SARs granted are derived from the outputs of the valuation model and represent the periods of time that stock options andthe SARs granted are expected to be outstanding.

The range of assumptions for the stock options and Employee SARs granted during the first three quartersquarter of 2008 are2009 is shown in the following table.

The risk-free rates are based on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant, converted to a continuously compounded rate. Non-employee SARs

Other Information

At the end of the 2009 first quarter, 55.9 million shares were valued using assumptions withinreserved under the ranges shown above for Employee SARs, except using an expected term of 10 years.Comprehensive Plan, including 38.4 million shares under the Stock Option Program and Stock Appreciation Right Program.

We adoptedIn accordance with FASB Staff Position No. FAS 157-2, which amended FAS No. 157 by delaying its effective date by one year to fiscal year 2009 for certain assets and liabilities, we adopted the provisions of FAS No. 157 to non-financial assets and non-financial liabilities measured at fair value on December 29, 2007,a non-recurring basis on January 3, 2009, the first day of our 2009 fiscal year 2008. year.

FAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FAS No. 157 details the disclosures that are required for items measured at fair value.

We have various financial instruments we must measure on a recurring basis under FAS No. 157 including:including certain marketable securities; derivatives; and servicing assetssecurities, derivatives, and residual interests related to our asset securitizations. NoneWe also apply the measurement provisions of FAS No. 157 to various non-recurring measurements for our current non-financial assets orand non-financial liabilities, must be measured at fair value onwhich included the impairment of a recurring basis.joint venture investment and two security deposits during the current quarter. See Footnote No. 17, “Restructuring Costs and Other Charges,” for further information. We measure our financial assets and liabilities using inputs from the following three levels of the fair value hierarchy. The three levels are as follows:hierarchy:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 includes unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.

In accordance with the fair value hierarchy, the following table shows the fair value as of September 5, 2008,March 27, 2009, of those financial assets and liabilities that we must measure at fair value on a recurring basis and that we classify as “Other current assets,” “Other assets,” “Other payables and accruals,” and “Other long-term liabilities”:

The following tables summarizetable summarizes the changes in fair value of our Level 3 assets and liabilities for both the twelve and thirty-six weeks ended September 5, 2008:March 27, 2009:

($ in millions)		Fair Value Measurements of Assets and Liabilities Using Level 3 Inputs
		Servicing Assets and Other Residual Interests			Derivative Instruments
Beginning balance at December 29, 2007		$	238		$	(5	)
Total gains (losses) (realized or unrealized)
Included in earnings			14			(10	)
Included in other comprehensive income			—			3
Transfers in or out of Level 3			—			—
Purchases, sales, issuances, and settlements			19			9
Ending balance at September 5, 2008		$	271		$	(3	)
Gains (losses) for the first three quarters of 2008 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date		$	14		$	(10	)

As discussed in more detail in Footnote No. 11, “Asset Securitizations,” we periodically sell notes receivable originated by our Timeshare segment. We continue to service the notes after the sale, and we retain servicing assets and other interests in the notes and account for these assets and interests as residual interests. At the dates of sale and at the end of each reporting period, we estimate the fair value of our residual interests, including servicing assets, using a discounted cash flow model. The implementation of FAS No. 157 did not result in material changes to the models or processes used to value these assets. These transactions may utilize interest rate swaps to protect the net interest margin associated with the beneficial interest. The discount rates we use in determining the fair values of the residual interests are based on both the general level of interest rates in the market for the weighted average life of each pool and the assumed credit risk of the interests retained. We adjust these discount rates quarterly as interest rates and credit spreads in the market vary.

During 2008 and 2007, we used the following key assumptions to measure the fair value of the residual interests, including servicing assets, at the date of sale: average discount rates of 9.23 percent and 9.22 percent, respectively; average expected annual prepayments, including defaults, of 24.01 percent and 25.18 percent, respectively; expected weighted average life of prepayable notes receivable, excluding prepayments and defaults, of 76 months and 75 months, respectively; and expected weighted average life of prepayable notes receivable, including prepayments and defaults, of 35 months and 34 months, respectively. Our key assumptions are based on experience with notes receivable and servicing assets.

We used the following key assumptions in measuring the fair value of the residual interests, including servicing assets, in our 12 outstanding Timeshare note sales as of September 5, 2008: an average discount rate of 10.13 percent; an average expected annual prepayment rate, including defaults, of 18.44 percent; an expected weighted average life of prepayable notes receivable, excluding prepayments and defaults, of 61 months; and an expected weighted average life of prepayable notes receivable, including prepayments and defaults, of 36 months. We treat the residual interests, including servicing assets, as trading securities under the provisions of FAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and accordingly, we recorded realized and unrealized gains or losses related to these assets in the “Timeshare sales and services” revenue caption in our Condensed Consolidated Statements of Income.

The most significant estimate involved in the measurement process is the loan repaymentdiscount rate, followed by the default rate and the discountloan repayment rate. Estimates of these rates are based on management’s expectations of future prepayment rates and default rates, reflecting our historical experience, industry trends, current market interest rates, expected future interest rates, and other considerations. Actual repayment rates, default rates, and discount rates could differ from those projected by management due to changes in a variety of economic factors, including prevailing interest rates and the availability of alternative financing sources to borrowers. If actual prepayments of the loans being serviced were to occur more slowly than had been projected, or if actual default rates or actual discount rates are lower than expected, the carrying value of servicing assets could increase and accretion and servicing income would exceed previously projected amounts. IfConversely, if actual prepayments occur at a faster than projected pace, or if actual default rates or actual discount rates are

lower higher than expected,we expect, the carrying value of retained interestsservicing assets could increasedecrease and accretion and servicing income would exceedbe below previously projected amounts. Accordingly, the retained interests, including servicing assets, actually realized, could differ from the amounts initially or currently recorded.

The discount rates we use in determining the fair values of our residual interests are based on the volatility characteristics (i.e., defaults and prepayments) of the residual assets. We assumed increases in the default and prepayment rates and discounted the resulting cash flows with a low risk rate to derive a stressed asset value. The low risk rate approximates credit spreads in the current market. Using our base case cash flows, we then determined the discount rate, which when applied to the base case cash flows, produced the stressed asset value, which we assume approximates an exit price for the residual assets. We adjust discount rates quarterly as interest rates, credit spreads and volatility characteristics in the market fluctuate.

We treat our residual interests, including servicing assets, as trading securities under the provisions of FAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and accordingly, we record realized and unrealized gains or losses related to these assets in the “Timeshare sales and services”

revenue caption in our Condensed Consolidated Statements of Income. During the first quarters of 2009 and 2008, we recorded trading losses of $4 million and gains of $9 million, respectively.

For our first quarter 2009 note sale, we used the following key assumptions to measure the fair value of the residual interests, including servicing assets, at the date of sale: average discount rate of 13.57 percent; average expected annual prepayments, including defaults, of 19.27 percent; expected weighted average life of prepayable notes receivable, excluding prepayments and defaults, of 73 months; and expected weighted average life of prepayable notes receivable, including prepayments and defaults, of 38 months. Our key assumptions are based on experience with notes receivable and servicing assets.

We used the following key assumptions in measuring the fair value of the residual interests, including servicing assets, in our 13 outstanding Timeshare note sales as of March 27, 2009: an average discount rate of 18.83 percent; an average expected annual prepayment rate, including defaults, of 15.73 percent; an expected weighted average life of prepayable notes receivable, excluding prepayments and defaults, of 60 months; and an expected weighted average life of prepayable notes receivable, including prepayments and defaults, of 38 months.

We completed a stress test on the fair value of the residual interests, including servicing assets, as of the end of the 2008 third2009 first quarter to measure the change in value associated with independent changes in individual key variables. This methodology applied unfavorable changes that would be statistically significant for the key variables of prepayment rate, discount rate, and weighted average remaining term. Before we applied any of these stress test changes, we determined that the fair value of the residual interests, including servicing assets, was $271$205 million as of September 5, 2008.March 27, 2009.

Applying the stress tests, we concluded that each change to a variable shown in the table below would have the following impact on the valuation of our residual interests at the end of the 2008 third2009 first quarter.

We value our Level 3 input derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observableunobservable inputs to the valuation model including interest rates and volatilities. We record realized and unrealized gains and losses on these derivative instruments in gains from the sale of timeshare notes receivable, which are recorded within the “Timeshare sales and services” revenue caption in our Condensed Consolidated Statements of Income.

In connection with the first quarter 2009 note sale, on the date of transfer, we recorded notes that we effectively owned after the transfer at a fair value of $81 million, which is classified as $5 million of “Loans to timeshare owners” and $76 million of “Other assets” in our Condensed Consolidated Balance Sheets. We used a discounted cash flow model, including Level 3 inputs, to determine the fair value of notes we effectively owned after the transfer. We based the discount rate we used in determining its fair value on the methodology described earlier in this footnote. Other assumptions, such as default and prepayment rates, are consistent with those used in determining the fair value of our retained interests. For additional information, see Footnote No. 11 “Asset Securitizations.”

During the first quarter of 2009 we recorded $79 million of impairment charges for two of our security deposits and one joint venture investment, prior to the application of an $11 million liability remaining

from 2008. These charges are reflected in our Condensed Consolidated Statements of Income as $49 million in the “General, administrative, and other” caption and $30 million in the “Equity in (losses) earnings” caption. For additional information, see the “Other Charges” caption of Footnote No. 17 “Restructuring Costs and Other Charges.”

The table below illustrates the reconciliation of the earnings (losses) and number of shares used in theour calculations of basic and diluted earnings per share calculations.attributable to Marriott shareholders. Losses from continuing operations attributable to Marriott for the twelve weeks ended March 27, 2009, of $23 million represent consolidated losses from continuing operations of $25 million plus the add-back for net losses attributable to noncontrolling interests of $2 million. Income from continuing operations attributable to Marriott for the twelve weeks ended March 21, 2008, of $122 million represents consolidated income from continuing operations of $121 million plus the add-back for net losses attributable to noncontrolling interests of $1 million.

		Twelve Weeks Ended
(in millions, except per share amounts)		March 27, 2009				March 21, 2008
Computation of Basic Earnings Per Share Attributable to Marriott Shareholders
(Losses) income from continuing operations attributable to Marriott shareholders		$	(23	)		$	122
Weighted average shares outstanding			350.6				354.3
Basic (losses) earnings per share from continuing operations attributable to Marriott shareholders		$	(0.06	)		$	0.34
Computation of Diluted Earnings Per Share Attributable to Marriott Shareholders
(Losses) income from continuing operations attributable to Marriott shareholders		$	(23	)		$	122
Weighted average shares outstanding			350.6				354.3
Effect of dilutive securities
Employee stock option and SARs plans			—				14.0
Deferred stock incentive plans			—				1.7
Restricted stock units			—				1.9
Shares for diluted earnings per share attributable to Marriott shareholders			350.6				371.9
Diluted (losses) earnings per share from continuing operations attributable to Marriott shareholders		$	(0.06	)		$	0.33

We compute the effect of dilutive securities using the treasury stock method and average market prices during the period. We determine dilution based on earnings from continuing operations.operations attributable to Marriott shareholders. As there was a loss from continuing operations for the 2009 first quarter, the “Effect of dilutive securities” caption in the preceding table does not include 3.9 million employee stock option and SARs plan shares, 1.7 million deferred stock incentive plans shares, or 0.5 million restricted stock units shares because to do so would have been antidilutive.

In

Additionally, in accordance with FAS No. 128, “Earnings per Share,” we have not included the following stock options and SARs in our calculation of diluted earnings per share attributable to Marriott shareholders because the exercise prices were greater than the average market prices for the applicable periods:

Inventory, totaling $1,892$1,994 million and $1,557$1,981 million as of September 5, 2008,March 27, 2009, and December 28, 2007,January 2, 2009, respectively, consists primarily of Timeshare segment interval, fractional ownership, and residential products totaling $1,869$1,973 million and $1,536$1,959 million as of September 5, 2008,March 27, 2009, and December 28, 2007,January 2, 2009, respectively. Inventory totaling $23$21 million and $21$22 million as of September 5, 2008,March 27, 2009, and December 28, 2007,January 2, 2009, respectively, primarily relates to hotel operating supplies for the limited number of properties we own or lease. We value Timeshare segment interval, fractional ownership, and residential products at the lower of cost or net realizable value, and generally value operating supplies at the lower of cost (using the first-in, first-out method) or market. Consistent with recognized industry practice, we classify Timeshare segment interval, fractional ownership, and residential products inventory, which has an operating cycle that exceeds 12 months, as a current asset.

We recorded a pretax charge of $22 million in the 2008 third quarter within the “Timeshare-direct” caption of our Condensed Consolidated Statements of Income related to the impairment of a fractional and whole ownership real estate project held for development by a joint venture that we consolidate. We recorded a pretax benefit of $12 million in the 2008 third quarter within the “Minority interest” caption of our Condensed Consolidated Statements of Income representing our joint venture partner’s pretax share of the $22 million impairment charge. Accordingly, the impact to our Timeshare segment was $10 million. The adjustment was made in accordance with FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” to adjust the carrying value of the real estate to its estimated fair value at September 5, 2008. The downturn in market conditions including contract cancellations and tightening in the credit markets, especially for jumbo mortgage loans, were the predominant items considered in our analysis. We estimated the fair value of the inventory utilizing a probability weighted cash flow model containing our expectations of future performance discounted at a 10-year risk-free interest rate determined from the yield curve for U.S. Treasury instruments (3.68 percent).

Assets held for sale totaled $129 million at the end of the 2008 third quarter and consisted of property and equipment. The $129 million total reflected the following segment composition: Luxury Lodging-$89 million; North American Full-Service Lodging-$22 million; and North American Limited-Service Lodging-$18 million. There were no liabilities of assets held for sale at the end of the 2008 third quarter.

Assets held for sale totaled $123 million at year-end 2007 and consisted of property and equipment. The $123 million total reflected the following segment composition: Luxury Lodging-$89 million; North

American Full-Service Lodging-$17 million; and North American Limited-Service Lodging-$17 million. There were no liabilities of assets held for sale at year-end 2007.

The following table details the composition of our property and equipment balances at September 5, 2008,March 27, 2009, and December 28, 2007.January 2, 2009.

2008 Acquisitions

At year-end 2007, we were party to a venture that developed and marketed fractional ownership and residential products. In the first quarter of 2008, we purchased our partner’s interest in that joint venture together with additional land. Cash consideration for this transaction totaled $37 million and we acquired assets and liabilities totaling $75 million and $38 million, respectively, on the date of purchase. In the 2008 second quarter, we closed on a transaction for the purchase of real estate for our timeshare operations. The total purchase price was approximately $62 million. Cash consideration totaled approximately $38 million, and non-current liabilities recorded as a result of this transaction were $24 million. In the 2008 third quarter, we closed on a transaction for the purchase of real estate for our timeshare operations for cash consideration of $47 million.

2008 Dispositions

In the 2008 second quarter, we sold our interest in an entity that leases four hotels. In conjunction with that transaction, we received cash proceeds totaling $5 million, and the sales price of the investment approximated its book value. In the 2008 first quarter, we sold two limited-service properties for cash proceeds of $14 million, which were approximately equal to the properties’ book values. We accounted for each of the sales under the full accrual method in accordance with FAS No. 66 and each property will continue to operate under our brands pursuant to franchise agreements.

The following table details the composition of our notes receivable balances at September 5, 2008,March 27, 2009, and December 28, 2007.January 2, 2009.

($ in millions)		March 27, 2009				January 2, 2009
Loans to timeshare owners		$	421			$	688
Lodging senior loans			2				2
Lodging mezzanine and other loans			197				236
			620				926
Less current portion			(81	)			(96	)
		$	539			$	830

We classify notes receivable due within one year as current assets in the caption “Accounts and notes receivable” in the accompanying Condensed Consolidated Balance Sheets, including $70$67 million and $68$81 million, at September 5, 2008,March 27, 2009, and December 28, 2007,January 2, 2009, respectively, related to “Loans to timeshare owners.”

In the first quarter of 2009, we fully reserved two notes receivable balances that we deemed uncollectible, one of which relates to a project that is in development. We recorded a total charge of $42 million in the first quarter of 2009 in the “Provision for loan losses” caption in our Condensed Consolidated Statements of Income related to these two notes receivable balances. See Footnote No. 17, “Restructuring Costs and Other Charges” for additional information.

As noted in Footnote No. 11,12, “Asset Securitization,Securitizations,” in our 20072008 Form 10-K, we periodically sell, without recourse, through special purpose entities, notes receivable originated by our Timeshare segment in connection with the sale of timeshare interval and fractional products. We continue to service the notes and transfer all proceeds collected to special purpose entities. We retain servicing assets and other interests in the notes and account for these assets and interests as residual interests. The interests are limited to the present value of cash available after paying financing expenses and program fees and absorbing credit losses.

At the end of the first quarter of 2009, $1,376 million of principal due from timeshare interval and fractional owners remained outstanding in 13 special purpose entities formed in connection with our timeshare note sales. Delinquencies of more than 90 days amounted to $22 million. The impact to us from delinquencies, and our maximum exposure to loss as a result of our involvement with these special purpose entities, is limited to our residual interests, which we value based on a discounted cash flow model, as discussed in Footnote No. 6, “Fair Value Measurements.” Please see the “Timeshare Residual Interests Valuation” caption within the “Restructuring Costs and Other Charges” section of the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section for additional information on the risks associated with our residual interests. Under the terms of our timeshare loan sales, we have the right, at our option, to repurchase a limited amount of defaulted mortgage loans at par. In Junecases where we have chosen to exercise this repurchase right, we have been able to resell the timeshare units underlying the defaulted loans without incurring material losses.

Cash flows between us and third-party purchasers during the first quarters of 2009 and 2008 were as follows: net proceeds to us from new timeshare note sales of $181 million and zero, respectively; voluntary repurchases by us of defaulted loans (over 150 days overdue) of $11 million and $12 million, respectively; servicing fees received by us of $1 million and $1 million, respectively; and cash flows received from our retained interests of $24 million and $23 million, respectively.

We earned contractually specified servicing fees for the first quarters of 2009 and 2008 totaling $1 million and $1 million, respectively, which we reflected within the changes in fair value to the servicing assets. We reflected contractually specified late and ancillary fees earned for the first quarters of 2009 and 2008 totalling $2 million in each year within the “Timeshare sales and services” line item on our Condensed Consolidated Statements of Income.

In March 2009, prior to the end of our secondfirst quarter, we sold tocompleted a newly formed trust $300private placement of approximately $205 million of floating-rate Timeshare Loan Backed Notes with a bank administered commercial paper conduit. We contributed approximately $284 million of notes receivable originated by our Timeshare segment in connection with the sale of timeshare interval and fractional ownership products.products to a newly formed special purpose entity. On the same day, the trustspecial purpose entity issued $246approximately $205 million of the trust’sentity’s notes. In connection with the saleprivate placement of notes receivable, we received net proceeds of $237 million. Weapproximately $181 million, net of costs, and retained $94 million of residual interests with ain the special purpose entity, which included $81 million of notes we effectively owned after the transfer and $13 million related to the servicing assets and interest only strip. We measured all residual interests at fair market value on the date of the transfer. Although the notes effectively owned after the transfer were measured at fair value on the daytransfer date, they will require prospective accounting treatment as notes receivable and will be carried at the basis established at

the date of sale of $93 million. We recordedtransfer unless we deem such amount to be non-recoverable in the future. If that occurs, we will record a valuation allowance.

In connection with the first quarter 2009 note sale, gains totaling $28we recorded a $1 million throughloss, which was included within the 2008 third quarter.“Timeshare sales and services” line item on our Condensed Consolidated Statements of Income. See Footnote No. 6, “Fair Value Measurements,” earlier in this report for additional information regarding our servicing assets and other residual interests. Also, see “Asset Securitizations” later in this report in Item 2.2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information regarding volatilitydisruption in the credit markets.

Our long-term debt at September 5, 2008,March 27, 2009, and December 28, 2007,January 2, 2009, consisted of the following:

AtAs of the end of our 2008 third2009 first quarter, all debt other than mortgage debt, was unsecured.

In the first quarter of 2009, we repurchased $122 million principal amount of our Senior Notes in the open market, across multiple series. We recorded a gain of $21 million for the debt extinguishment representing the difference between the acquired debt’s purchase price of $98 million and its carrying amount of $119 million.

WhileAs discussed in more detail in Footnote No. 13, “Long-term debt,” of our 2008 Form 10-K, we are predominantlyparty to a managermulticurrency revolving credit agreement (the “Credit Facility”) that provides for borrowings and franchisorletters of hotel properties, we depend on capital to buy, develop,credit and maintain hotels and also to develop timeshare properties. Events over the past several months, including recent failures and near failures of a number of large financial service companies, have made the capital markets increasingly volatile.

In response to historic events on Wall Street and the severe dislocationsupported our commercial paper program. The effective size of the capitalCredit Facility is approximately $2.4 billion.

Until the 2008 fourth quarter, we regularly issued short-term commercial paper primarily in the United States and, to a much lesser extent, in Europe. Disruptions in the financial markets beginning in September 2008 (our 2008 fourth quarter) we borrowed under our $2.5 billion multicurrency revolving bank credit facility (the “Credit Facility”) to supplement dramaticallysignificantly reduced liquidity fromin the commercial paper market. We made these borrowingsAccordingly, in September 2008 we borrowed under the Credit Facility to fund anticipated short-term commercial paper maturities and, to a lesser extent, other general corporate needs, including working capital and capital expenditures. Asexpenditures, and suspended issuing commercial paper. All of October 2,our previously issued commercial paper matured and was repaid in the 2008 fourth quarter.

Our Standard & Poor’s commercial paper rating at the end of the 2009 first quarter was A3 and the market for A3 commercial paper is currently very limited. It would be very difficult to rely on the use of this market as a meaningful source of liquidity, and we do not anticipate issuing commercial paper under these circumstances.

We classify any outstanding commercial paper as long-term debt based on our ability and intent to refinance it on a long-term basis. We reserve unused capacity under our Credit Facility to repay outstanding commercial paper borrowings totaling $908 million werein the event that the commercial paper market is not available to us for any reason when outstanding borrowings mature. Given our borrowing capacity under the Credit Facility, and currently bear interest atfluctuations in the London Interbank Offered Rate (LIBOR) plus a spread of 35 basis points (0.35 percent), which is based on our public debt rating. We expect to replace these Credit Facility borrowings with commercial paper as stability returns to that market andor the costs at which we can again issue commercial paper on favorable terms.

Lehman Commercial Paper Inc. (“LCPI”), a subsidiary of Lehman Brothers Holdings Inc., has $96 million (3.8 percent) of the $2.5 billion in commitments under the Credit Facility. Although LCPI, to date, hashave not filed for bankruptcy (toaffected our knowledge), LCPI has not funded its share of our fourth quarter 2008 draws under the Credit Facility,liquidity, and we have no reasondo not expect them to expect that LCPI will do so in the future. Accordingly, unless

Although we are predominantly a manager and franchisor of hotel properties, we depend on capital to buy, develop, and improve hotels, as well as to develop timeshare properties. Capital markets have been disrupted and largely frozen since early in the fourth quarter of 2008 due to the deepening worldwide financial crisis. See the “Cash Requirements and Our Credit Facilities” discussion in the “Liquidity and Capital Resources” section of this situation changes, the total effective size of thereport for additional information regarding our Credit Facility is approximately $2.4 billion.Facility.

For the twelve weeks ended September 5, 2008, and September 7, 2007, respectively, net income totaled $94 million and $131 million, whileThe following tables detail comprehensive income totaled $71 millionattributable to Marriott, comprehensive income attributable to noncontrolling interests, and $118 million. The principal difference between net income andconsolidated comprehensive income for the twelve weeks ended September 5, 2008, primarily relatesMarch 27, 2009, and March 21, 2008.

The following table details changes in shareholders’ equity, including changes in equity attributable to foreign currency translation adjustmentsMarriott shareholders and changes in equity attributable to a lesser extent, mark-to-market adjustments associated with both available-for-sale securities and cash flow hedges. The principal difference between net income and comprehensive income for the twelve weeks ended September 7, 2007, primarily relates to mark-to-market adjustments associated with available-for-sale securities.noncontrolling interests.

For the thirty-six weeks ended September 5, 2008, and September 7, 2007, respectively, net income totaled $372 million and $520 million, while comprehensive income totaled $369 million and $508 million. The principal difference between net income and comprehensive income for the thirty-six weeks ended September 5, 2008, primarily relates to mark-to-market adjustments associated with available-for-sale securities, partially offset by both mark-to-market adjustments associated with cash flow hedges and foreign currency translation adjustments. The principal difference between net income and comprehensive income for the thirty-six weeks ended September 7, 2007, primarily relates to mark-to-market adjustments associated with available-for-sale securities, partially offset by foreign currency translation adjustments.