2007 COMPARED TO 2006
The $12 million gain on forgiveness of debt for 2007 was associated with government incentives. The loans were forgiven in recognition of our contribution to job growth and economic development. Gain on sale/income on redemption of joint venture and other investments of $31 million in 2007 reflected an $18 million gain associated with the sale of stock we held and net gains totaling $13 million on the sale of joint venture investments. Gain on sale/income on redemption of joint venture and other investments of $68 million in 2006 comprised $43 million of net gains associated with the sale of joint venture investments and the redemption of preferred stock we held in one investee which generated a gain of $25 million.

2006 COMPARED TO 2005
Gain on sale/income on redemption of joint venture and other investments of $68 million in 2006 represents $43 million of net gains associated with the sale of joint venture and other investments and $25 million of income associated with the redemption of preferred stock we held in one investee. As further explained in the earlier "Revenues" discussion for 2006, Timeshare segment note sale gains of $77 million in 2006 are presented in the "Timeshare sales and services" revenue caption.

Interest Expense
2007 COMPARED TO 2006
Interest expense increased by $60 million (48 percent) to $184 million for 2007 from $124 million in 2006. Of the $60 million increase over 2006, $78 million was due to: $26 million of higher interest reflecting a higher outstanding commercial paper balance, primarily due to increased share repurchases and the ESOP settlement payments, and related interest rates; $25 million of interest associated with our Series H Senior Notes issuance which occurred late in 2006 and our Series I and Series J Senior Notes issuances which occurred in 2007; a charge of $13 million in 2007 related to the ESOP settlement; charges totaling $53 million and $46 million in 2007 and 2006, respectively, relating to interest on accumulated cash inflows in advance of our cash outflows for various programs that we operate on the owners' behalf including Marriott Rewards, gift certificates, and self-insurance programs; interest totaling $5 million associated with other additional debt; and the write off of $2 million of deferred financing costs associated with the refinancing of our revolving credit agreement in 2007. See Footnote No. 3, "Income Taxes," for additional information on the ESOP settlement. The increase in interest on the programs we operate on behalf of the owners over the year-ago period is attributable to higher liability balances and higher interest rates. Partially offsetting the $78 million interest expense increases over 2006 was an $18 million favorable variance to last year for higher capitalized interest associated with construction projects.

2006 COMPARED TO 2005
Interest expense increased by $18 million (17 percent) to $124 million in 2006 from $106 million in 2005. Included within interest expense for 2006 and 2005 are charges totaling $46 million and $29 million, respectively, relating to interest on accumulated cash inflows, in advance of our cash outflows for various programs that we operate on the owners' behalf. The increase in interest on these programs over 2005 is related to higher liability balances and higher interest rates. Interest expense also increased in 2006, due to our June 2005 Series F Notes issuance, our June 2006 Series H Notes issuance, and higher commercial paper balances coupled with higher rates. Partially offsetting these increases were interest expense declines associated with the payoff, at maturity, of both our Series D Notes in April 2005 and Series B Notes in November 2005, and the exchange of our Series C and Series E Notes for lower interest rate Series G Notes in 2005.

Interest Income, Provision for Loan Losses, and Income Tax
2007 COMPARED TO 2006
Interest income, before the provision for loan losses, decreased by $11 million (22 percent) to $38 million in 2007 from $49 million in 2006, primarily reflecting lower interest income associated with loans that have been repaid to us, partially offset by the impact associated with new loan fundings.

Loan loss provisions increased by $20 million versus the prior year primarily reflecting a $12 million charge associated with one property and a $5 million charge to write off our remaining exposure associated with our investment in a Delta Airlines, Inc. ("Delta") lease versus loan loss reversals of $3 million in 2006. For additional information regarding the Delta lease investment write-off, see the "Investment in Leveraged Lease" caption later in this report.

Our tax provision increased by $61 million (16 percent) from a tax provision of $380 million in 2006 to a tax provision of $441 million in 2007 and reflected higher pretax income from our Lodging segments as well as a higher tax rate in 2007, primarily reflecting both increased taxes associated with our international operations and a less favorable mix of taxable earnings between countries. Increased taxes also reflect a charge for a German legislative tax change in 2007, which had a one-time impact and $6 million of taxes in 2007 associated with additional interest on the ESOP settlement. See Footnote No. 3, "Income Taxes," for additional information on the ESOP settlement.

2006 COMPARED TO 2005
Interest income, before the provision for loan losses, decreased by $30 million (38 percent) to $49 million in 2006 from $79 million in 2005, primarily reflecting the impact of loans repaid to us in 2005. Loan loss provisions decreased by $31 million versus the prior year reflecting the reversal of loan loss provisions totaling $3 million in 2006 compared to a charge of $17 million in 2005 due to the impairment of our Delta lease, see the "Investment in Leveraged Lease" caption later in this report for additional information and an $11 million loan loss provision in 2005 associated with one property.

Our tax provision totaled $380 million in 2006 compared to a tax provision of $284 million in 2005. The difference of $96 million is attributable to higher taxes in 2006 associated with higher pretax income from our lodging operations.

Equity in Earnings
2007 COMPARED TO 2006
Equity in earnings increased by $12 million from $3 million in 2006 to $15 million in 2007 and reflected the mix of investments, compared to 2006, and stronger results at several joint ventures reflecting the strong lodging demand environment in 2007, for one joint venture, the reopening of a hotel, late in 2006, in Mexico, which had been closed following a hurricane in 2005 and strong demand in 2007 for our timeshare products in Hawaii.

2006 COMPARED TO 2005
The $33 million decline from earnings of $36 million in 2005 to earnings of $3 million in 2006, attributable to our equity investments, reflected the recognition in 2005 of $30 million of equity earnings from the sale of hotels by three equity joint ventures in which we had equity interests. In addition, since 2005 we have sold several equity joint ventures.

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