2. Summary of Significant Accounting Policies:

   Principles of Consolidation. The consolidated financial statements include the accounts of WHI and the Partnership. All significant inter-company balances and transactions have been eliminated.  

   Investment in Hotel Properties. Hotel properties are recorded at cost and are depreciated using the straight-line method over estimated useful lives of the assets of 5 and 30 years for furniture, fixtures and equipment, and buildings and improvements, respectively. Upon disposition, both the assets and accumulated depreciation accounts are relieved and the related gain or loss is credited or charged to the income statement. Repairs and maintenance costs of hotel properties are paid by the lessees.

   The Company evaluates long-lived assets for potential impairment by analyzing the operating results, trends and prospects for the Company and considering any other events and circumstances that might indicate potential impairment.

   Investment in Joint Venture Properties. Investment in joint venture properties consists of the Company’s direct cash or land contributions to the joint ventures as well as capitalized internal costs of services provided by the Company during the development stage. These internal costs are capitalized at 49%, which represents the Company’s ownership interest in each joint venture, with the remaining 51% expensed. The Company provides development, purchasing and, upon opening of the hotel, on-going asset management services to the joint ventures. The Company receives fees for these services, 49% of which are recognized as a reduction in the investment in joint venture properties, and 51% of which are recognized as revenue.

   Revenue Recognition and Impact of SAB 101. Staff Accounting Bulletin No. 101 ("SAB 101") was issued by the Securities and Exchange Commission in December 1999 and adopted by the Company effective January 1, 2000. SAB 101 requires that a lessor not recognize contingent rental income until annual specified hurdles have been achieved by the lessee. During 1999 and prior years, consistent with industry practice, the Company recognized contingent rentals throughout the year since it was considered probable that the lessee would exceed the annual specified hurdles. SAB 101 materially impacts the Company’s revenue recognition on an interim basis, effectively deferring the recognition of revenues from its leases from the first and second quarters of the calendar year to the third and fourth quarters. SAB 101 also impacts the Company’s revenue recognition on an annual basis, but to a much less degree as seven of the leases of the Company’s current 49 hotels have fiscal year ends which differ from the Company’s fiscal year end of December 31. The Company accounted for SAB 101 as a change in accounting principle effective January 1, 2000, and recognized the related deferred revenue during 2000. SAB 101 has no impact on the Company’s interim or annual cash flow from its third party lessees, and therefore, on its ability to pay dividends. In accordance with the provisions of SAB 101, the Company has not restated the 1999 or prior years’ financial statements.

   Recently Issued Accounting Standards. In June 1998, Financial Accounting Standard Board issued SFAS No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as amended, which is required to be adopted in years beginning after June 15, 2000. The Company adopted SFAS 133 effective January 1, 2001. SFAS 133 requires the Company to recognize all derivatives on the balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings and any derivatives that are not hedges must be adjusted to fair value through earnings. Based on the Company’s derivative positions at December 31, 2000, it will report a liability of $245 for the fair value of its interest rate swap and a corresponding offset in other comprehensive income upon its adoption of SFAS 133 effective January 1, 2001. The Company will also, upon adoption, report a reduction in an asset of $23 for the fair value of its interest rate cap and a corresponding offset in the Consolidated Statements of Income.

   Earnings from Joint Ventures. The Company uses the equity method to recognize its share of net income or loss of the joint ventures it has invested in.

   Deferred Expenses. Included in deferred expenses are franchise fees, loan costs, acquisition costs and disposition costs which are recorded at cost. Amortization of franchise fees is computed using the straight-line method over ten years. Amortization of loan costs is computed using the straight-line method over the period of the related debt facility. Acquisition costs are either capitalized to properties when purchased, or expensed. Disposition costs are netted against the proceeds from the sale of properties to determine gain or loss on the sale.

   Minority Interest in Partnership. Certain hotel properties have been acquired, in part, by the Partnership, through the issuance of limited partnership units of the Partnership. The equity interest in the Partnership created by these transactions represents the Company’s minority interest liability. The Company’s minority interest liability is: (i) increased or decreased by its pro-rata share of the net income or net loss, respectively, of the Partnership; (ii) decreased by distributions; (iii) decreased by redemption of partnership units for WHI’s Common Stock; and (iv) adjusted to equal the net equity of the Partnership multiplied by the limited partners’ ownership percentage immediately after each issuance of units of the Partnership and/or Common Stock of the Company through an adjustment to additional paid-in capital.

   Earnings Per Share. Net income per common share is computed by dividing net income applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Net income per common share assuming dilution is computed by dividing net income applicable to common shareholders plus income allocated to minority interest by the weighted average number of common shares assuming dilution during the period. Weighted average number of common shares assuming dilution includes common shares and dilutive common share equivalents, primarily redeemable limited partnership units and stock options (see Notes 6 and 8).

   Distributions. WHI’s ability to pay regular quarterly distributions is dependent upon receipt of distributions from the Partnership, which in turn is dependent upon the results of operations of the Company’s properties. Distributions declared on WHI’s Common Stock in 2000, 1999, and 1998 are considered to be approximately 20%, 10%, and 2% return of capital, respectively, for federal income tax purposes.

   Income Taxes. The Company qualifies as a REIT under Sections 856 to 860 of the Internal Revenue Code and therefore no provision for federal income taxes has been reflected in the financial statements.

   Earnings and profits, which determine the taxability of distributions to shareholders, differ from net income reported for financial reporting purposes due to the differences for federal tax purposes in the estimated useful lives used to compute depreciation and the carrying value (basis) of the investment in hotel properties. Additionally, certain costs associated with the Company’s equity offerings are treated differently for federal tax purposes than for financial reporting purposes. At December 31, 2000, the net tax basis of the Company’s assets and liabilities was approximately $7,338 less than the amounts reported in the accompanying consolidated financial statements.

    For federal income tax purposes, 2000 distributions amounted to $1.12 per common share, 20% of which is considered a return of capital.

   Note Receivable. Druing 2000, the Company provided $1,080 in mezzanine financing to Noble Investment Group, Ltd. ("Noble") to develop a Hilton Garden Inn in Atlanta (Sugarloaf), GA. The Company receives monthly interest income at annual rates based on 30-day LIBOR plus 7.36% until the earlier of (a) prepayment of the loan, ( b) the initial maturity date of December 5, 2001 , or (c) a period equal to the lesser of (1) the maturity date o f the borrower ’s qualified refinancing less 60 days , or (2) five years from June 30, 2000, the date of the loan.

   Concentration of Credit Risk. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, lease revenue receivable and note receivable. The Company places cash deposits at federally insured depository institutions. At December 31, 2000, bank account balances exceeded federal depository insurance limits by approximately $2,209.

   Estimates. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates.

   Reclassifications. Certain reclassifications have been made to the 1999 and 1998 financial statements to conform with the 2000 presentation. These reclassifications have no effect on net income or shareholders’ equity previously reported.