SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~JUNE~~MARCH 3031, ~~2004~~2006

¨	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 000-50731

APPLE HOSPITALITY FIVE, INC.

(Exact name of registrant as specified in its charter)

VIRGINIA		76-0713476
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
10 SOUTH THIRD STREET RICHMOND, VIRGINIA		23219
814 EAST MAIN STREET
RICHMOND, VIRGINIA		23219
(Address of principal executive offices)		(Zip Code)

(804) 344-8121

(Registrant’s telephone number, including area code)

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), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ~~(as~~or ~~defined~~a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule ~~12 b~~12b-2 of the Exchange Act). ~~Yes x No ¨~~ (Check one):

AtLarge ~~August~~accelerated 3,filer ¨ Accelerated ~~2004,~~filer x Non-accelerated ~~there~~filer ¨ ~~were 45,344,176 outstanding shares of common stock, no par value, of the registrant.~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At May 1, 2006, there were 45,248,677 outstanding shares of common stock, no par value, of the registrant.

APPLE HOSPITALITY FIVE, INC.

FORM 10-Q

INDEX

			Page Number
PART I. FINANCIAL INFORMATION
~~Item 1.~~	~~Financial~~Item ~~Statements (Unaudited)~~1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets -June 30, 2004 and December 31, 2003	3
		Consolidated Balance Sheets -March 31, 2006 and December 31, 2005	3
		Consolidated Statement of Operations -Three and six months ended June 30, 2004 andThree and six months ended June 30, 2003	4
		Consolidated Statements of Operations -Three months ended March 31, 2006 and Three months ended March 31, 2005	4
		Consolidated Statement of Cash Flows -Six months ended June 30, 2004 andSix months ended June 30, 2003	5
		Consolidated Statements of Cash Flows -Three months ended March 31, 2006 andThree months ended March 31, 2005	5
		Notes to Consolidated Financial Statements	6
~~Item 2.~~	~~Management’s~~Item ~~Discussion and Analysis of Financial Condition and Results of Operations~~2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	129
~~Item 3.~~	~~Quantitative~~Item ~~and Qualitative Disclosures about Market Risk~~3.	Quantitative and Qualitative Disclosures about Market Risk	1913
~~Item 4.~~	~~Controls~~Item ~~and Procedures~~4.	Controls and Procedures	1913
PART II. OTHER INFORMATION:
PART II. OTHER INFORMATION
~~Item 1.~~	~~Legal~~Item ~~Proceedings (not applicable)~~1.	Legal Proceedings (not applicable)
Item 2.	Changes in Securities and Use of Proceeds		20
	Item 1A.	Risk Factors (not applicable)
Item 3.	Defaults Upon Senior Securities (not applicable)
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 4.	Submission of Matters to a Vote of Security Holders		21
	Item 3.	Defaults Upon Senior Securities (not applicable)
Item 5.	Other Information (not applicable)
	Item 4.	Submission of Matters to a Vote of Security Holders (not applicable)
Item 6.	Exhibits and Reports on Form 8-K		22
	Item 5.	Other Information (not applicable)
Signatures			23
	Item 6.	Exhibits	15
Certifications
Signatures			16

This Quarterly report on Form 10-Q includes references to certain trademarks or service marks. SpringHill Suites^®, by Marriott, Courtyard^® by Marriott, Residence Inn^® by Marriott and Marriott Suites^® trademarks are the property of Marriott International, Inc. (“Marriott”) or one of its affiliates. The Homewood Suites^® and Hilton Garden Inn^® trademarks are the property of Hilton Hotels Corporation (“Hilton”) or one or more of its affiliates. For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above-referenced terms are used.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Apple Hospitality Five, Inc.

Consolidated Balance ~~Sheet~~Sheets (~~Unaudited~~unaudited)

(in thousands, except share data)

	June 30, 2004			December 31, 2003
	March 31, 2006			December 31, 2005
ASSETS
Investment in hotels, net of accumulated depreciation of $8,189 and $3,850, respectively	$	328,010		$	320,897
Investment in hotels, net of accumulated depreciation of $26,987 and $23,934, respectively	$	400,762		$	401,732
Cash and cash equivalents		~~96,062~~269			231,~~820~~082
Restricted cash-furniture, fixtures and other escrows		34,~~797~~589			34,~~385~~277
Due from third party manager, net		3,872			1,610
Due from third party managers, net		6,679			3,157
Other assets, net		62,~~070~~764			43,~~367~~199
TOTAL ASSETS	$	~~437~~415,~~811~~063		$	~~354~~413,~~079~~447
LIABILITIES
Notes payable-secured	$	4,678		$	4,705
Notes payable	$	8,805		$	4,575
Accounts payable and accrued expenses		~~798~~1,152			~~780~~1,986
TOTAL LIABILITIES		59,~~476~~957			56,~~485~~561
SHAREHOLDERS’ EQUITY
Series A preferred stock, no par value, authorized 200,000,000 shares; outstanding 45,525,169 and 36,299,595 shares, respectively		—			—
Preferred stock, authorized 15,000,000 shares; none issued and outstanding		—			—
Class B convertible stock, no par value, authorized 240,000 shares; issued and outstanding 240,000 shares		24			24
Series A preferred stock, no par value, authorized 200,000,000 shares; outstanding 45,161,687 and 45,226,571 shares, respectively		—			—
Common stock, no par value, authorized 200,000,000 shares; outstanding 45,525,169 and 36,299,595 shares, respectively		446,957			355,989
Series B convertible preferred stock, no par value, authorized 240,000 shares; issued and outstanding 240,000 shares		24			24
Distributions greater than net income		(14,646	)		(7,419	)
Common stock, no par value, authorized 200,000,000 shares; outstanding 45,161,687 and 45,226,571 shares, respectively		443,015			443,722
TOTAL SHAREHOLDERS’ EQUITY		432,335			348,594
Distributions greater than net income		(37,933	)		(36,860	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	437,811		$	354,079
TOTAL SHAREHOLDERS’ EQUITY		405,106			406,886
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	415,063		$	413,447

See notes to consolidated financial statements.

Apple Hospitality Five, Inc.

Consolidated ~~Statement~~Statements of Operations (unaudited)

(in thousands, except per share data)

Three months endedJune 30, 2004

Three months endedJune 30, 2003

Six months endedJune 30, 2004

Six months endedJune 30, 2003

Three months ended March 31, 2006

Three months ended March 31, 2005

Revenues:

Suite revenue

2029,~~840~~665

425,~~264~~051

~~40,769~~

~~6,416~~

Other revenue

1,~~466~~972

~~434~~1,858

~~3,205~~

~~230~~

Total revenue

2231,~~306~~637

426,~~698~~909

~~43,974~~

~~6,646~~

Expenses:

Operating expense

57,~~597~~246

~~893~~6,538

~~10,914~~

~~1,373~~

Hotel administrative expense

12,~~925~~567

~~341~~2,276

~~3,739~~

~~505~~

Sales and marketing

12,~~549~~046

~~329~~1,708

~~2,905~~

~~501~~

Utilities

~~951~~1,312

~~144~~1,118

~~1,925~~

~~245~~

Repair & maintenance

1,~~001~~297

~~170~~1,288

~~2,001~~

~~265~~

Franchise fees

~~307~~674

87426

~~586~~

~~150~~

Management fees

~~964~~1,693

~~159~~1,390

~~2,022~~

~~231~~

Taxes, insurance and other

12,~~537~~015

~~249~~1,664

~~2,965~~

~~358~~

General and administrative

~~524~~657

~~147~~609

~~888~~

~~252~~

Depreciation expense

23,~~276~~112

~~616~~2,642

~~4,481~~

~~870~~

Total expenses

1622,~~631~~619

319,~~135~~659

~~32,426~~

~~4,750~~

Operating income

59,~~675~~018

17,~~563~~250

~~11,548~~

~~1,896~~

Interest income

~~212~~37

~~146~~124

~~381~~

~~240~~

Interest expense

(~~101~~207

)

—(98

)

~~(202~~

)

—

Net income

58,~~786~~848

17,~~709~~276

~~11,727~~

~~2,136~~

Basic and diluted income per common share

0.1320

0.1516

~~0.27~~

~~0.22~~

Weighted average shares outstanding - basic and diluted

45,~~510~~097

1145,~~596~~283

~~43,488~~

~~9,606~~

Distributions declared per common share

0.22

~~0.44~~

See notes to consolidated financial statements.

Apple Hospitality Five, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Six months endedJune 30, 2004			Six months endedJune 30, 2003
	Three months ended March 31, 2006			Three months ended March 31, 2005
Cash flow from operating activities:
Net income	$	118,~~727~~848		$	27,~~136~~276
Adjustments to reconcile to cash provided by operating activities:
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		43,~~481~~112			~~870~~2,642
Changes in operating assets and liabilities, net of amounts acquired/assumed:
Changes in operating assets and liabilities:
Due from third party manager		(2,262	)		(1,813	)
Due from third party managers		(3,522	)		(2,632	)
Debt service and other escrows		~~103~~40			—57
Other assets		~~(888~~376	)		12(29	)
Accrued expenses		16(834	)		~~(242~~88	)
Net cash provided by operating activities		138,~~177~~020			~~963~~7,402
Cash flow from investing activities:
Cash flow used in investing activities:
Cash paid in acquisition of hotels		(10,727	)		(120,382	)
Capital improvements		(2,083	)		(584	)
Cash paid for future acquisitions		(958	)		—
Net increase in cash restricted for property improvements		(352	)		(369	)
Capital improvements		(723	)		(102	)
Net cash used in investing activities		(2,435	)		(953	)
Net increase in cash restricted for property improvements		(515	)		(583	)
Cash flow used in financing activities
Net cash used in investing activities		(12,923	)		(121,067	)
Net proceeds from issuance of common stock		2,898			2,919
Cash flow from financing activities
Redemptions of common stock		(3,605	)		(3,735	)
Net proceeds from issuance of common stock		92,950			178,113
Repayment of secured notes payable		(20	)		(19	)
Redemptions of common stock		(1,982	)		—
Net proceeds from line of credit		4,250			—
Repayment of secured notes payable		(27	)		—
Cash distributions paid to shareholders		(9,921	)		(9,962	)
Principal payments on line of credit		—			(218	)
Net cash used in financing activities		(6,398	)		(10,797	)
Cash distributions paid to shareholders		(18,953	)		(4,227	)
Decrease in cash and cash equivalents		(813	)		(4,348	)
Net cash provided by financing activities		71,988			173,668
Cash and cash equivalents, beginning of period		1,082			38,630
Increase in cash and cash equivalents		72,242			53,564
Cash and cash equivalents, end of period	$	269		$	34,282
Cash and cash equivalents, beginning of period		23,820			3
Cash and cash equivalents, end of period	$	96,062		$	53,567

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

Note 1

General Information and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financials should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s December 31, 2005 Annual Report on Form 10-K. Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

Organization

Apple Hospitality Five, Inc. (the “Company”), a Virginia corporation, was formed on September 20, 2002, and its first investor closing was on January 3, 2003. The Company completed its best-efforts offering on March 18, 2004. The accompanying consolidated financial statements include the accounts of the Company along with its subsidiaries. All significant intercompany transactions and balances have been eliminated.

The Company ~~intends~~owns to28 ~~elect~~hotels and is operated as and has annually elected to be ~~treated~~taxed as a real estate investment trust (“REIT”) ~~for federal income tax purposes~~. The REIT Modernization Act, effective January 1, 2001, permits ~~REITs~~a REIT to establish taxable businesses to conduct certain previously disallowed business activities. The Company has formed wholly-owned taxable REIT subsidiaries, and has ~~and~~leased ~~will continue to lease~~ all of its hotels to ~~those~~these subsidiaries (collectively, the “~~Lessee~~Lessees”). No federal income tax expense has been recorded in the Consolidated Statements of Operations as the Lessees had operating losses. No tax benefit has been recorded as realization of these benefits is uncertain.

Offering Costs

As of June 30, 2004, the Company had incurred approximately $51.5 million in costs related to its best-efforts offering of Units. Each Unit is equal to one common share, no par value and one Series A preferred share of the Company. As of the closing of the offering on March 18, 2004, the Company had closed on a total of 45,671,019 Units, with net proceeds totaling approximately $449 million.

Comprehensive Income

The Company recorded no comprehensive income for the three and six months ended June 30, 2004 or 2003.

Stock Incentive Plans

AsEffective January 1, 2006, the ~~exercise~~Company adopted Financial Accounting Standards Board (FASB) Statement ~~price~~No. 123 (revised 2004), Share-Based Payment, which is a revision of ~~the~~FASB ~~Company’s~~Statement ~~stock~~No. 123, ~~options~~Accounting ~~equals~~for Stock-Based Compensation and elected the ~~market~~modified ~~price~~prospective transition method. Accordingly, no prior year amounts have been restated. Statement 123 (R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of ~~the~~Cash ~~underlying~~Flows. ~~stock~~Generally, the ~~Company~~approach ~~has~~in ~~not~~Statement ~~recognized~~123 ~~any~~(R) is ~~stock~~similar ~~compensation~~to ~~expenses~~the approach ~~associated~~described ~~with~~in ~~its~~Statement 123. However, Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, ~~during~~to be recognized in the ~~six~~income ~~months~~statement ~~ended~~based ~~June~~on ~~30,~~their ~~2004~~fair ~~and~~values. ~~2003~~Pro forma disclosure is no longer an alternative. The adoption of this statement is not anticipated to have a material impact on the Company’s results of operations or financial position. No share-based expense was recorded during the three months ending March 31, 2006.

Earnings Per Common Share

Basic earnings per common share is computed based upon the weighted average number of shares outstanding during the ~~year~~period. Diluted earnings per share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the ~~year~~period. There ~~was~~were no ~~dilutive~~potential ~~impact to~~ common shares ~~for~~with ~~purposes~~a ofdilutive ~~computing earnings~~effect ~~per~~during ~~common~~the ~~share~~three ~~for~~months ~~the~~ended ~~periods~~March 31, ~~presented~~2006 and 2005. The Series B convertible preferred shares are not included in earnings per common share calculations until such time ~~it becomes probable~~ that such shares ~~can~~are be converted to common shares.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

~~Summary~~6 ~~of Significant Recent Accounting Pronouncements~~

InTable January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46) and subsequently revised FIN 46 in December 2003. Effective January 1, 2004, the Company adopted the provisions of FIN 46. The Company did not identify any variable interest entities (VIEs) of which the Company is the primary beneficiary, thus, the Company was not required to consolidate any VIEs. Contents

Note 2

~~Summary~~Investments ofin ~~Acquisitions~~Hotels

~~Effective March~~The ~~8, 2004, the~~ Company ~~closed~~owned on28 ~~the~~hotels ~~purchase~~as of aMarch 31, 2006. The Courtyard by Marriott in ~~Fort Worth~~Vienna, Virginia ~~Texas~~was ~~for~~purchased ain ~~gross~~August ~~purchase price of $10~~2005.5 ~~million.~~All ~~The~~other ~~hotel~~properties ~~contains~~were 92purchased ~~rooms~~prior ~~and~~to ~~offers amenities generally offered by upscale extended-stay hotels~~2005.

The purchase price for the hotel was funded by the Company’s best efforts offering of Units. The Company leased the hotel to a wholly-owned taxable REIT subsidiary under a master hotel lease agreement. The Company also used the proceeds of its ongoing offering to pay approximately 2% of the gross purchase price, or approximately $210,000, for these hotels, as a commission to Apple Suites Realty Group (ASRG), an entity wholly owned by the Company’s Chairman and Chief Executive Officer, Glade M. Knight..

No goodwill or intangible assets were recorded in connection with the acquisition.

Note 3

~~Shareholders’~~Notes ~~Equity~~payable

~~The~~In ~~Company~~January ~~completed~~2006, ~~its~~the Company ~~best-efforts~~entered ~~offering~~into ofa ~~Units~~$10 onmillion ~~March~~revolving ~~18,~~line ~~2004~~of credit. The ~~Company~~line ~~registered~~of ~~its~~credit, ~~Units~~which ~~(each~~terminates ~~Unit~~in ~~consists~~January of2007, ~~one~~currently ~~common~~bears ~~share~~interest ~~and~~based ~~one Series A preferred share)~~ on ~~Registration~~LIBOR ~~Statement~~which ~~Form~~was ~~S-11 (File No~~4.826% ~~333-100044)~~at ~~filed with the Securities and Exchange Commission on December 3~~March 31, ~~2002~~2006. ~~The~~As ~~Company began its best-efforts offering~~ of ~~its Units~~March 31, ~~no par value~~2006, ~~the~~there ~~same~~was ~~day~~$4.3 ~~the Registration~~million ~~Statement~~outstanding ~~was~~on ~~declared effective by~~ the ~~Securities~~line ~~and~~of ~~Exchange Commission~~credit. ~~The managing dealer was David Lerner Associates, Inc.~~

The Series A preferred shares have no voting rights and no conversion rights. In addition, the Series A preferred shares are not separately tradable from the common shares to which they relate. The Series A preferred shares have no distribution rights except a priority distribution upon the sale of the Company’s assets. The priority distribution will be equal to $11.00 per Series A preferred share, and no more, before any distribution will be made to the holders of any other shares. Upon that distribution, the Series A preferred shares will have no other distribution rights.

The Company currently has 240,000 Series B convertible preferred shares issued and outstanding. There are no dividends payable on the Series B convertible preferred shares. Holders of more than two-thirds of the Series B convertible preferred shares must approve any proposed amendment to the Articles of Incorporation that would adversely affect the Series B convertible preferred shares. Upon liquidation of the Company, the holder of the Series B convertible preferred shares is entitled to a priority liquidation payment. However, the priority liquidation payment of the holder of the Series B convertible preferred shares is junior to the holders of the Series A preferred shares distribution rights. The holder of a Series B convertible preferred share is entitled to a liquidation payment of $11 per number of common shares into which each Series B convertible preferred share would convert. In the event that the liquidation of the Company’s assets results in proceeds that exceed the distribution rights of the Series A preferred shares and the Series B convertible preferred shares, the remaining proceeds will be distributed between the common shares and the Series B convertible preferred shares, on an as converted basis. The Series B convertible preferred shares are convertible into Units upon and for 180 days following the occurrence of either of the following events: (1) substantially all of the Company’s assets, stock or business is transferred as a going concern, whether through exchange, merger, consolidation, lease, share exchange or otherwise, other than a sale of assets in liquidation, dissolution or winding up of the Company’s business; or (2) the Company’s common shares are listed on any securities exchange or quotation system or in any established market.

Upon the occurrence of either triggering event and for purposes of determining the liquidation payment due to each holder of a Series B convertible preferred share, each Series B convertible preferred share is convertible into 12.11423 Units.

No additional consideration is due upon the conversion of the Series B convertible preferred shares.

Compensation expense related to issuance of 240,000 Series B convertible preferred shares to Mr. Glade M. Knight, the Company’s Chief Executive Officer and Chairman of the Board of Directors and the sole shareholder of the Series B Convertible Preferred Shares, will be recognized at such time when the number of common shares to be issued for conversion of the Series B shares can be reasonably estimated and the event triggering the conversion of the Series B shares to common shares is probable. The expense will be measured as the difference between the fair value of the common stock for which the Series B shares can be converted and the amounts paid for the Series B shares. A conversion event is not considered probable at June 30, 2004. The beneficial conversion feature at June 30, 2004, assuming a conversion event is probable, would be approximately 2.9 million common shares, which based upon the sales price of the Company’s shares at $11 per share would result in approximately $32.0 million of compensation expense.

During 2004, the Company instituted a Unit Redemption Program to provide limited interim liquidity to its shareholders. Redemption of Units, when requested, is made quarterly on a first-come, first-served basis. Shareholders may request redemption of Units for a purchase price equal to the lesser of: (1) the purchase price per unit that the shareholder actually paid for the unit; or (2) $11.00 per unit. The Company reserves the right to change the purchase price of redemptions, reject any request for redemption, or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. During the six months ended 2004, the Company redeemed 183,918 Units in the amount of $1,982,284.

During 2004, the Company instituted a dividend reinvestment plan to its shareholders. The plan provides a convenient and cost effective way to increase shareholder investment in the Company by reinvesting dividends to purchase additional Units of the Company. The uses of the proceeds from this plan may include purchasing Units under the Company’s Unit Redemption Program, enhancing properties, satisfying financing obligations and other expenses, increasing working capital, funding various corporate operations, and acquiring extended-stay hotels. The Company has registered 7 million shares for potential issuance under the Program. As of June 30, 2004, 38,068 Units have been reinvested representing $418,749 in proceeds to the Company.

Note 4

~~Management~~Shareholders’ ~~Agreements~~Equity

~~Except~~During ~~for the Western managed hotels~~2004, the Company’s ~~Marriott~~instituted ~~brand~~a ~~hotels~~Unit ~~are~~Redemption ~~subject~~Program to ~~management~~provide ~~agreements~~limited ~~under~~interim liquidity ~~which~~to ~~Marriott~~its orshareholders. ~~its~~Redemption ~~affiliates~~of ~~(the~~Units, ~~“Manager”)~~when ~~manages~~requested, ~~the~~is ~~hotels~~made ~~and~~quarterly ~~provides~~on ~~access~~a tofirst-come, ~~the~~first-served ~~Company~~basis. toShareholders ~~Marriott’s intellectual~~may ~~property~~request ~~and~~redemption ~~proprietary~~of ~~sales~~Units ~~and~~for ~~reservation~~a ~~system,~~purchase ~~generally~~price ~~for~~equal anto ~~initial~~the ~~term~~lesser of: 30(1) the ~~years~~purchase ~~with~~price ~~renewal~~per ~~terms~~unit that at the ~~option~~shareholder ofactually ~~the~~paid ~~Manager~~for ~~and~~ the ~~Company~~unit; ofor up(2) $11.00 toper ~~an additional 30 years~~unit. The ~~agreements~~Company ~~generally~~reserves ~~provide~~the ~~for payment~~right ofto ~~base~~change ~~management~~the ~~fees,~~purchase ~~which~~price ~~are calculated annually and are a percentage~~ of ~~sales~~redemptions, ~~incentive~~reject ~~management~~any ~~fees~~request ~~over~~for aredemption, ~~priority~~or ~~return~~otherwise ~~(as~~amend ~~defined in~~ the ~~management~~terms ~~agreements)~~of, ~~system fees~~suspend, ~~marketing~~or ~~fees~~terminate ~~and chain services. Additionally,~~the ~~these~~Unit ~~agreements~~Redemption ~~have termination provisions for the Company if certain operating results are not achieved~~Program. During the ~~six~~three months ended ~~June 30~~March 31, ~~2004~~2006, the Company ~~incurred~~redeemed ~~approximately $469~~328,~~000~~333 Units in ~~incentive~~the ~~management~~amount ~~fees~~of $3.6 Nomillion ~~incentive~~under ~~management fees were incurred during~~ the ~~six months ended June 30, 2003~~program.

~~Western International~~During ~~Inc.~~2004, ~~(“Western”) manages three of~~ the Company’s ~~Residence~~instituted ~~Inn~~a ~~hotels~~dividend ~~and~~reinvestment ~~three~~plan ofto ~~the~~its ~~Company’s~~shareholders. ~~Courtyard~~The byplan ~~Marriott~~provides ~~hotels.~~a ~~These~~convenient ~~hotels~~and ~~are~~cost ~~given~~effective ~~access~~way to ~~Marriott’s~~increase ~~intellectual~~shareholder ~~property~~investment ~~and~~in ~~proprietary sales~~the ~~and~~Company ~~reservation~~by ~~system~~reinvesting ~~under~~dividends ~~franchise~~to ~~agreements~~purchase ~~with~~additional Units ~~Marriott.~~of ~~Western~~the ~~manages~~Company. ~~day-to-day~~The ~~operations~~uses of ~~these~~the ~~hotels~~proceeds ~~and~~from ~~charges~~this ~~management~~plan ~~fees~~may ~~for~~include ~~this~~purchasing ~~function,~~Units ~~which~~under ~~are~~the ~~calculated~~Company’s asUnit aRedemption ~~percent~~Program, ofenhancing ~~revenue.~~properties, ~~Each~~satisfying ~~hotel~~financing isobligations ~~also~~and ~~subject~~other ~~to incentive~~expenses, ~~management~~increasing ~~fees~~working capital, funding ifvarious ~~certain~~corporate ~~levels~~operations, ofand ~~operating~~acquiring ~~profit~~extended-stay ~~are reached~~hotels. ~~During~~The ~~the~~Company ~~six~~has ~~months~~registered ~~ended~~7 million ~~June~~shares ~~30,~~for ~~2004~~potential ~~and~~issuance ~~2003,~~under the ~~Company~~Program. ~~incurred~~As noof ~~incentive~~March 31, ~~management~~2006, ~~fees~~1.8 million ~~The~~Units ~~management~~have ~~agreements~~been ~~are~~reinvested, ~~for a term of five years and include a~~representing ~~provision~~$20.3 ~~for~~million ~~early~~in ~~termination~~proceeds ifto ~~certain~~the ~~results~~Company ~~and~~since ~~conditions~~the ~~are~~plan’s ~~not met~~inception.

~~Promus~~Expense ~~Hotels~~related ~~Inc. (“Promus”) manages day-~~to~~-day~~ ~~operations~~the issuance of the ~~Company’s~~240,000 ~~Homewood~~Series ~~Suites~~B ~~and~~convertible ~~Hilton~~preferred shares ~~Garden~~to ~~Inn hotels~~Mr. Knight ~~Promus~~will ~~charges~~be ~~fees~~recognized ~~for~~at ~~this~~such ~~function,~~time ~~which~~when ~~are~~the ~~calculated~~number asof acommon ~~percentage~~shares to be issued for conversion of ~~revenue.~~the ~~Incentive management~~Series ~~fees~~B ~~are~~shares ~~calculated,~~can ~~for~~be ~~certain~~reasonably ~~properties,~~estimated onand the ~~basis~~event oftriggering ~~operating~~the ~~profit~~conversion of the ~~hotels~~Series B shares to common shares occurs. NoThe ~~incentive~~expense ~~management~~will ~~fees~~be ~~were~~measured ~~incurred~~as ~~during~~the difference between the ~~six~~fair ~~months~~value ~~ended~~of ~~June~~the ~~30,~~common ~~2004~~stock orfor ~~2003.~~which ~~Promus~~the ~~also~~Series ~~charges~~B ashares ~~fee,~~can ~~calculated~~be asconverted ~~a percentage~~and ofthe ~~suite~~amounts ~~revenue,~~paid for ~~franchise~~the ~~licenses~~Series toB ~~operate~~shares. asAssuming a ~~Homewood~~conversion ~~Suites~~event byhad ~~Hilton~~occurred, orthere awould ~~Hilton~~be approximately ~~Garden~~2.9 million ~~Inn~~common ~~and~~shares, towhich ~~participate~~based inupon ~~its~~the ~~reservation~~sales ~~system.~~price ~~Each~~of ~~hotel~~the isCompany’s ~~also~~shares ~~subject~~at to$11 ~~incentive~~per ~~management~~share ~~fees,~~would ifresult ~~certain~~in ~~levels~~approximately ~~of operating~~$32 ~~profit~~million ~~are~~of ~~reached~~expense.

Total expenses incurred for management fees, system fees, and franchise fees during the three months ended June 30, 2004 and 2003 were approximately $1.3 million and $246,000, respectively, and for the six months ended June 30, 2004 and 2003 were approximately $2.6 million and $381,000, respectively. These expenses are included in franchise and management fees in the Consolidated Statements of Operations.

Note 5

Related Parties

The Company has ~~contracted~~significant transactions with ~~ASRG,~~related aparties. ~~company~~These ~~owned~~transactions bycannot ~~Glade~~be M.construed ~~Knight,~~ to ~~provide~~be ~~brokerage~~arm’s ~~services~~length ~~for~~and the ~~acquisition~~results ~~and disposition~~ of ~~real estate assets for~~ the Company~~. In accordance with the contract, ASRG~~’s isoperations tomay be ~~paid~~different aif ~~fee~~these oftransactions ~~approximately~~were 2%conducted ofwith ~~the~~non-related ~~gross purchase price of any acquisitions or sale price of any dispositions of real estate investments, subject to certain conditions~~parties. ~~As of June 30, 2004, ASRG had been paid cumulatively approximately $6.5 million by the Company under the agreement.~~

~~Effective~~7 January 3, 2003, the Company also contracted with Apple Hospitality Five Advisors, Inc. (“AFA”), who in turn subcontracted with Apple Suites Advisors, Inc. (“ASA”), a subsidiary of Apple Hospitality Two, Inc., to advise and provide day-to-day management services for the Company and due-diligence services on acquisitions. In accordance with the contract, the Company pays AFA a fee equal to .1% to .25% of total equity contributions received by the Company in addition to certain reimbursable expenses. AFA in turn pays that total amount to Apple Suites Advisors. During the six months ended June 30, 2004, the Company incurred and paid advisory expenses of approximately $356,000 under this agreement, which are included in general and administrative expense.

InTable Juneof 2004, the Company transferred its rights under a purchase contract for a hotel in Redmond, Washington to Apple REIT Six, Inc. This transaction was entered into to prevent the Company from incurring secured debt to complete its planned property acquisitions. The transfer was completed at no expense to the Company. Contents

The Company has contracted with Apple Suites Realty Group, Inc. (ASRG) to provide brokerage services for the acquisition and ~~AFA~~disposition ~~are~~of ~~100%~~the ~~owned~~Company’s byreal Mrestate assets. In accordance with the contract, ASRG is paid a fee of 2% of the gross purchase price of any acquisitions or gross sale price of any dispositions of real estate investments, subject to ~~Knight~~certain conditions. There were no acquisitions or dispositions during the periods reported; therefore, there were no costs incurred with ASRG.

~~Mr.~~Effective January 3, ~~Knight~~2003, ~~also~~the ~~serves~~Company ascontracted ~~the~~with ~~Chairman~~Apple ~~and~~Hospitality ~~Chief~~Five ~~Executive~~Advisors, ~~Officer~~Inc. ~~of Cornerstone~~(“AFA”), ~~Realty~~who ~~Income~~in ~~Trust~~turn subcontracts with Apple Suites Advisors, Inc. (“ASA”), ana ~~apartment~~subsidiary ~~REIT,~~of Apple Hospitality Two, Inc., to advise and provide day-to-day management services for the Company and due-diligence services on acquisitions. In accordance with the contract, the Company pays AFA a ~~hospitality~~fee ~~REIT~~equal to .1% to .25% of total equity contributions received by the Company in addition to certain reimbursable expenses. AFA in turn pays that total amount to ASA. During the three months ended March 31, 2006 and ~~Apple~~2005, ~~REIT~~the ~~Six~~Company incurred advisory and other reimbursable expenses of approximately $438,000 ~~Inc.~~and $380,000 aunder ~~diversified~~this agreement, ~~REIT~~which are included in general and administrative expense.

AFA and ASRG are 100% owned by Mr. Glade M. Knight, the Company’s Chairman and Chief Executive Officer. ASA is a wholly-owned subsidiary of Apple Hospitality Two, Inc. Mr. Knight also serves as the Chairman and Chief Executive Officer of Apple Hospitality Two, Inc., a hospitality REIT, Apple REIT Six, Inc., a diversified REIT, and Apple REIT Seven, Inc., (a newly organized company which is proposed to be a diversified REIT). The Company’s Board of Directors has members that are also on the Board of Directors of Apple Hospitality Two, Inc., Apple REIT Six, Inc. or Apple REIT Seven, Inc.

Note 6

Commitments

The Company is under contract for five additional hotels that are currently under development. The estimated purchase price upon completion of the hotels is approximately $81 million. The contracts are subject to normal due diligence and no assurances can be given that purchases will be consummated. Four of the properties are anticipated to close during the remainder of 2004 with the fifth to close in 2005. It is anticipated substantially all of the purchase price will be paid from cash on hand. The properties are located in Texas, Arizona and Virginia and will be similar to the properties currently owned by the Company.

Note 7

Subsequent Events

In ~~July~~April ~~2004~~2006, the Company declared and paid approximately $3.43 million, or $.073 per share, in distributions to its common shareholders of record on ~~June~~March 28, 302006, ~~2004~~of which $957,000 or 86,990 Units were reinvested under the Company’s Dividend Reinvestment Plan.

10In April 2006, the Company also redeemed 261,573 Units representing approximately $2.9 million, under the Company’s Unit redemption program.

In April 2006, the Company entered into a sale agreement for its Lear Jet with a net sales price of approximately $2.8 million, which approximates net book value. The transaction is planned to close in May 2006.

In Item 2. ~~July~~Management’s ~~2004,~~Discussion ~~the~~and ~~Company~~Analysis ~~also~~of ~~redeemed~~Financial ~~247,749~~Condition ~~Units~~and ~~representing~~Results ~~approximately~~Of ~~$2.7~~Operations ~~million, under the Company’s share redemption plan.~~

~~Note~~This 8quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the ability of the Company to implement its acquisition strategy and operating strategy; the Company’s ability to manage planned growth; changes in economic cycles and competition within the extended-stay hotel industry. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in the quarterly report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. In addition, the Company’s qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the Company’s financial statements and the notes thereto, as well as the risk factors described in the Company’s filings with the Securities and Exchange Commission.

~~Industry~~General ~~Segments~~

The Company owns primarily extended-stay and limited-service hotel properties throughout the United States that generate rental and other property related income. The Company separately evaluates the performance of each of its hotel properties. However, because each of the hotel properties has similar economic characteristics, facilities, and services, the properties have been aggregated into a single segment. All segment disclosure is included in or can be derived from the Company’s consolidated financial statements.

Item 2 Management’s Discussion And Analysis Of Financial Condition And Results Of Operation

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such Statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the ability of the Company to implement its acquisition strategy and operating strategy; the Company’s ability to manage planned growth; changes in economic cycles and competition within the extended-stay hotel industry. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in the quarterly report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. In addition, the Company’s qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the Company’s financial statements and the notes thereto, as well as the risk factors described in the Company’s filings with the Securities and Exchange Commission.

Overview

The Company was formed and initially capitalized on September 20, 2002, with its first investor closing on January 3, 2003. On March 18, 2004, the Company concluded its best-efforts offering. The Company owns 2328 hotels within different markets in the United States. The Company ~~intends~~has elected to be treated as a Real Estate Investment Trust (“REIT”) for federal income tax purposes. The Company’s first hotel was acquired in January 2003 with twenty-one additional hotels acquired throughout 2003, ~~and~~five ~~one~~hotels ~~hotel~~ acquired induring ~~the~~2004, ~~first~~and ~~quarter~~one ofacquired ~~2004~~in 2005. The performance of the Company’s hotels can be influenced by many factors, including local hotel competition, local and national economic conditions and the performance of the individual managers assigned to its hotels. In evaluating financial condition and operating performance, the most important matters on which the Company focuses are revenue measurements, such as average occupancy, average daily rate ~~and~~(ADR) and revenue per available room (RevPAR), and expenses, such as hotel operating expenses, general and administrative and other expenses described below. ~~During~~The ~~the first half of 2003 and 2004, the~~ performance of the ~~Company’s~~ hotels ~~met~~for the ~~Company’s~~periods ~~expectations.~~owned ~~The~~have ~~Company~~generally ~~will~~met ~~substantially complete its hotel acquisitions in 2004 and work to maximize cash from operations and in turn to maximize shareholder distributions~~expectations.

Hotels Owned


	Three months ended March 31, 2006 and 2005
(in thousands, except statistical data)	2006			POR		2005			POR		Percent change
Total revenues	$	31,637		100	%	$	26,909		100	%	18	%
Hotel direct expenses		16,835		53	%		14,744		55	%	14	%
Taxes, insurance and other expense		2,015		6	%		1,664		6	%	21	%
General and administrative		657		2	%		609		2	%	8	%
Depreciation		3,112		10	%		2,642		10	%	18	%
ADR	$	117				$	106				10	%
Occupancy		75	%				74	%			1	%
RevPAR	$	87				$	79				10	%

~~The~~9 ~~Company commenced operations in January 2003 upon the purchase of its first hotel property. As of June 30, 2004, the Company owned a total of 23 hotel properties, with a total of 3,011 suites.~~

~~The~~Hotels ~~following~~Owned ~~table summarizes the locations of and number of suites for the 23 hotels the Company owned at June 30, 2004:~~

City	State	Franchise/Brand	Date Acquired	# of Suites
Tucson	Arizona	Courtyard®	October 2003	153
Cypress	California	Residence Inn®	May 2003	155
Colorado Springs	Colorado	Homewood Suites®	February 2003	127
Danbury	Connecticut	Springhill Suites®	August 2003	106
Tampa	Florida	Hilton Garden Inn®	September 2003	95
Baton Rouge	Louisiana	Homewood Suites®	February 2003	115
Las Vegas	Nevada	Marriott Suites®	October 2003	278
Lebanon	New Jersey	Courtyard®	August 2003	125
Cranbury	New Jersey	Residence Inn®	May 2003	108
Somerset	New Jersey	Residence Inn®	May 2003	108
Albuquerque	New Mexico	Homewood Suites®	February 2003	151
Westbury	New York	Hilton Garden Inn®	December 2003	140
Hauppauge	New York	Residence Inn®	May 2003	100
Solon	Ohio	Homewood Suites®	September 2003	86
Nashville	Tennessee	Residence Inn®	June 2003	168
Addison	Texas	Courtyard®	October 2003	176
Harlingen	Texas	Courtyard®	October 2003	114
Houston	Texas	Courtyard®	October 2003	153
Fort Worth	Texas	Courtyard®	March 2004	92
Brownsville	Texas	Residence Inn®	October 2003	102
Dallas Fort Worth	Texas	Residence Inn®	October 2003	100
Houston Westchase	Texas	Residence Inn®	January 2003	120
Park Central	Texas	Residence Inn®	October 2003	139
				3,011

As of March 31, 2006, the Company owned the following 28 hotel properties:

The purchase price for all of the hotels was funded by the Company’s best efforts offering of Units. The Company leased all of its hotels to wholly-owned taxable REIT subsidiaries under master hotel lease agreements. The Company also used the proceeds of its offering to pay $6.5 million, approximately 2% of the gross purchase price for these hotels, as a brokerage commission to Apple Suites Realty Group, Inc. (ASRG, Inc.). This commission is capitalized as part of the purchase price of the hotels.


City	State	Franchise/Brand	Date Acquired	Gross Purchase Price		# of Suites
Tucson	Arizona	Courtyard	October 2003	$	12,500,000	153
Tucson	Arizona	Residence Inn	December 2004	$	12,000,000	120
Cypress	California	Residence Inn	May 2003	$	19,000,000	155
Colorado Springs	Colorado	Homewood Suites	February 2003	$	12,300,000	127
Danbury	Connecticut	SpringHill Suites	August 2003	$	11,500,000	106
Tampa	Florida	Hilton Garden Inn	September 2003	$	12,250,000	95
Baton Rouge	Louisiana	Homewood Suites	February 2003	$	7,000,000	115
Las Vegas	Nevada	Marriott Suites	October 2003	$	42,500,000	278
Lebanon	New Jersey	Courtyard	August 2003	$	15,000,000	125
Cranbury	New Jersey	Residence Inn	May 2003	$	11,000,000	108
Somerset	New Jersey	Residence Inn	May 2003	$	13,000,000	108
Albuquerque	New Mexico	Homewood Suites	February 2003	$	12,900,000	151
Westbury	New York	Hilton Garden Inn	December 2003	$	19,000,000	140
Hauppauge	New York	Residence Inn	May 2003	$	18,500,000	100
Solon	Ohio	Homewood Suites	September 2003	$	10,050,000	86
Nashville	Tennessee	Residence Inn	June 2003	$	8,800,000	168
Addison	Texas	Courtyard	October 2003	$	15,600,000	176
Harlingen	Texas	Courtyard	October 2003	$	10,000,000	114
Houston	Texas	Courtyard	October 2003	$	15,000,000	153
Houston	Texas	Courtyard	August 2004	$	11,000,000	100
Houston	Texas	Residence Inn	August 2004	$	13,200,000	120
Fort Worth	Texas	Courtyard	March 2004	$	10,500,000	92
Brownsville	Texas	Residence Inn	October 2003	$	11,300,000	102
Dallas Fort Worth	Texas	Residence Inn	October 2003	$	11,000,000	100
Houston Westchase	Texas	Residence Inn	January 2003	$	14,300,000	120
Dallas Park Central	Texas	Residence Inn	October 2003	$	13,900,000	139
Merrifield	Virginia	Courtyard	August 2005	$	27,925,005	206
Federal Way	Washington	Courtyard	September 2004	$	16,900,000	160

				$	407,925,005	3,717

No goodwill or intangible assets were recorded in connection with any of the acquisitions.

~~Management~~Related ~~Agreements~~Party Transactions

The Company’s ~~Marriott~~has ~~International~~significant ~~Inc.~~transactions ~~(“Marriott”)~~with ~~brand~~related ~~hotels (other than the six Marriott brand hotels managed by Western International, Inc~~parties., asThese ~~described~~transactions ~~below)~~cannot ~~are~~be ~~subject~~construed to ~~management~~be ~~agreements under which Marriott or its affiliates (the “Manager”) manages the hotels and provides the Company access to Marriott~~arm’s ~~intellectual~~length ~~property~~ and ~~proprietary sales and reservation system, generally for an initial term of 30 years with renewal terms at~~ the ~~option~~results of the ~~Manager and the~~ Company’s ofoperations upmay tobe andifferent ~~additional~~if 30 years. The agreements generally provide for payment of base management fees, which are calculated annually and are a percentage of sales, incentive management fees over a priority return (as defined in the management agreements), system fees, marketing fees and chain services. Additionally, these agreements have termination provisions for the Company if certain operating results are not achieved. During the six months ended June 30, 2004, the Company incurred approximately $469,000 in incentive management fees.transactions ~~No incentive management fees~~ were ~~incurred~~conducted ~~during~~with ~~the~~non-related ~~six months ended June 30, 2003~~parties.

13The Company has contracted with Apple Suites Realty Group, Inc. (“ASRG”) to provide brokerage services for the acquisition and disposition of the Company’s real estate assets. In accordance with the contract, ASRG is paid a fee of 2% of the gross purchase price of any acquisitions or gross sale price of any dispositions of real estate investments, subject to certain conditions. There were no acquisitions or dispositions during the periods reported; therefore, there were no costs incurred with ASRG.

Effective January 3, 2003, the Company contracted with Apple Hospitality Five Advisors, Inc. (“AFA”), who in turn subcontracts with Apple Suites Advisors, Inc. (“ASA”), a subsidiary of Apple Hospitality Two, Inc., to advise and provide day-to-day management services for the Company and due-diligence services on acquisitions. In accordance

~~Western~~with ~~International Inc. (“Western”) manages three of~~ the ~~Company’s~~contract, ~~Residence Inn hotels and three of~~ the Company’s ~~Courtyard~~pays byAFA ~~Marriott~~a ~~hotels.~~fee ~~These~~equal ~~hotels are given access~~ to ~~Marriott’s intellectual property and proprietary sales and reservation system under franchise agreements with Marriott~~.1% ~~Western manages day-~~to~~-day~~ ~~operations~~.25% of ~~these~~ ~~hotels~~total ~~and~~equity ~~charges~~contributions ~~management~~received ~~fees~~by ~~for~~the ~~this~~Company in ~~function,~~addition ~~which~~to ~~are~~certain ~~calculated~~reimbursable asexpenses. aAFA ~~percentage~~in ofturn ~~revenue.~~pays ~~Each~~that ~~hotel~~total isamount ~~also subject~~ to ~~incentive management fees, if certain levels of operating profit are reached~~ASA. During the ~~six~~three months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005, the Company incurred noadvisory ~~incentive~~and ~~management~~other ~~fees.~~reimbursable ~~The~~expenses ~~management agreements are for a term~~ of ~~five~~approximately ~~years~~$438,000 and ~~include~~$380,000 under athis ~~provision~~agreement, ~~for~~which ~~early~~are ~~termination~~included ifin ~~certain~~general ~~results~~ and ~~conditions~~administrative ~~are not met~~expense.

~~Promus~~AFA ~~Hotels~~and ~~Inc.~~ASRG ~~(“Promus”)~~are ~~manages~~100% ~~day-to-day~~owned ~~operations~~by ofMr. Glade M. ~~the~~Knight, the Company’s ~~Homewood~~ ~~Suites~~Chairman. ~~and~~ASA ~~Hilton~~is ~~Garden~~a ~~Inn~~wholly-owned ~~hotels.~~subsidiary ~~Promus~~of ~~charges~~Apple ~~fees~~Hospitality ~~for this function~~Two, ~~which~~Inc. ~~are calculated as a percentage of revenue~~Mr. Knight ~~Incentive~~also ~~management~~serves ~~fees~~as ~~are~~the ~~calculated,~~Chairman ~~for~~and ~~certain~~Chief ~~properties,~~Executive onOfficer ~~the basis~~ of ~~operating~~Apple ~~profit~~Hospitality ofTwo, ~~the hotels~~Inc. No, ~~incentive~~a ~~management~~hospitality ~~fees~~REIT, ~~were~~Apple ~~earned~~REIT ~~during the six months ended June 30~~Six, ~~2003 or 2004~~Inc., ~~Promus also charges~~ a ~~fee~~diversified REIT, ~~calculated~~and asApple aREIT ~~percentage~~Seven, ~~of suite revenue~~Inc., ~~for~~(a ~~franchise~~newly ~~licenses~~organized tocompany ~~operate~~which asis aproposed ~~Homewood~~to ~~Suites~~be ~~by Hilton or~~ a ~~Hilton~~diversified ~~Garden Inn~~REIT). ~~and~~The toCompany’s ~~participate~~Board inof ~~its~~Directors ~~reservation~~has ~~system.~~members ~~Each~~that ~~hotel~~are is also ~~subject~~on tothe ~~incentive~~Board ~~management~~of ~~fees,~~Directors ~~if certain levels~~ of ~~operating~~Apple ~~profit~~Hospitality ~~are~~Two, ~~reached~~Inc. ~~During the six months ended June 30~~, ~~2004~~Apple ~~and~~REIT ~~2003~~Six, ~~the~~Inc. or ~~Company~~Apple ~~incurred~~REIT noSeven, ~~incentive management fees~~Inc.

Results of Operations

~~Since~~The Company’s ~~operations~~financial ~~commenced~~results onfor ~~January~~the 3,first ~~2003,~~three ~~with~~months ~~the~~of ~~Company’s~~2006 ~~first~~have ~~acquisition,~~improved aas ~~comparison~~compared to ~~prior~~the ~~year~~first ~~results~~three ismonths ~~not~~of ~~meaningful~~2005. InThis ~~general,~~improvement reflects the ~~performance~~ increase in hotels owned as of ~~the~~March 31, ~~Company’s~~2006 ~~hotels~~as ~~have~~compared ~~met~~to ~~expectations~~prior ~~for~~year and the overall ~~short~~improvement ~~period~~in ~~held~~the hospitality industry. ~~Hotel~~The ~~performance~~Company iswill ~~impacted~~continue byto ~~many~~focus ~~factors~~on ~~including~~continuing ~~local~~to ~~hotel~~penetrate ~~competition~~markets and ~~local~~maximizing ADR and ~~national~~occupancy. ~~economic~~Although ~~conditions~~there incan ~~the~~be ~~United~~no ~~States.~~assurances Asof afuture ~~result, there~~results ~~can~~since bemany nofactors ~~assurance~~in ~~that~~the hotel industry are not controllable by the Company’s, ~~operating~~it ~~performance~~is anticipated this improvement will continue tothroughout ~~meet expectations~~2006.

Revenues

The Company’s principal source of revenue is hotel suites revenue and related other revenue. Hotel operations ~~stated~~ are for the Company’s ~~hotels~~28 ~~acquired~~hotels acquired through ~~June 30~~March 31, ~~2004~~2006 ~~and 2003 and~~ for ~~the~~their respective periods owned. For the three months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005, the Company ~~had~~earned ~~suite~~total revenue ~~and other revenue~~ of $2031.~~8 million and $4.3 million and $1.5 million and $434,000, respectively. For the six months ended June 30, 2004 and 2003, the Company had suite revenue and other revenue of $40.8 million and $~~6.4 million and $326.29 million ~~and $230,000, respectively~~. For ~~the~~these ~~three months ended June 30~~periods, ~~2004 and 2003,~~ the hotels achieved ~~average~~ average occupancy of 7675% and ~~84%, ADR of $100 and $89, and RevPAR of $76 and $75. For the six months ended June 30, 2004 and 2003, the hotels achieved average occupancy of~~ 74% ~~and 83%~~, ADR of $~~102~~117 and $89106, and RevPAR of $7687 and $7479. ADR, or average daily rate, is calculated as room revenue divided by the number of rooms sold, and RevPAR, or revenue per available room, is calculated as occupancy multiplied by ADR. The overall increase in ~~ADR~~revenue ~~and~~for ~~RevPAR~~these periods is due to ~~the~~an ~~acquisition~~additional ~~of a full service Marriott Suites~~ hotel ~~during~~owned ~~the~~in ~~fourth~~2006 ~~quarter~~as ofcompared ~~2003,~~to ~~which~~2005 ~~maintains~~and ~~a higher RevPAR than~~ the ~~other~~overall ~~brands~~improvement ~~owned~~in by the ~~Company~~hospitality industry. The ~~overall~~Company ~~revenue~~has ~~increase~~and inwill ~~revenue~~continue ~~is due~~ to ~~the~~aggressively ~~increase~~manage its inroom ~~the~~rates ~~number~~to ofmaximize ~~hotels owned~~revenue.

Expenses

Expenses for the three ~~and six~~ months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005 represented the expenses related to the Company’s hotels purchased for their respective periods owned. ~~The~~Expenses increased overall ~~increase~~due to the increased number of hotels owned in ~~expenses~~2006 isversus ~~due~~2005 and to the overall increase in ~~the number of hotels owned~~occupancy.

For the three months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005, ~~direct expenses of the hotels totaled approximately $12.3 million or 59% of suite revenue and $2.1 million or 50% of~~ ~~suite revenue, respectively. For the six months ended June 30, 2004 and 2003,~~ direct expenses of the hotels totaled approximately $2416.18 million or 5953% of ~~suite~~total revenue and $314.37 million or 5155% of ~~suite~~total revenue~~, respectively~~. This increase as a percentage of revenue is due to the mix of hotels owned in 2004 as compared to 2003. The company acquired a full service hotel and five Courtyard by Marriott hotels in late 2003 which have higher operating costs than traditional limited service hotels.

Taxes, insurance, and other expense for the three months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005 was approximately $12.50 million or ~~7% of suite revenue and $249,000 or~~ 6% of ~~suite~~total revenue, ~~respectively. For the six months ended June 30, 2004~~ and ~~2003, taxes, insurance and other expense was approximately~~ $31.07 million or ~~7% of suite revenue and $358,000 or~~ 6% of ~~suite~~total revenue~~, respectively~~.

General and administrative expense for the three months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005 was approximately $~~524~~657,000 or 32% of ~~suite~~total revenue and $~~147~~609,000 or ~~3% of suite revenue, respectively. For the six months ended June 30, 2004 and 2003, general and administrative expense was approximately $888,000 or~~ 2% of ~~suite~~total revenue ~~and $252,000 or 4% of suite revenue, respectively~~. ~~The Company anticipates this percentage will decrease as its asset base grows.~~

Depreciation expense for the three months ended ~~June 30~~March 31, ~~2004~~2006 and ~~2003~~2005 was approximately $2.3.1 million and $~~616,000, respectively~~2.6 ~~For the six months ended June 30, 2004 and 2003, depreciation expense was approximately $4.5~~ million ~~and $870,000, respectively~~. Depreciation expense represents expense of the Company’s hotels and related personal property for their respective periods owned. The increase is due to the additional property acquired in the third quarter of 2005.

~~Liquidity~~11 ~~and Capital Resources~~

The Company commenced operations effective January 3, 2003 with the Company’s first investor closing.

The cash flow generated from the properties owned and any short term investments is the Company’s principal source of liquidity. In addition, the Company may borrow funds, subject to limitations set forth in its by-laws.

The Company’s dividend distribution policy is at the discretion of the board of directors and depends on several factors. The distribution rate is currently at an annual rate of $.88 per Unit outstanding (or $.22 per quarter). The Company’s distributions currently include a return of capital based on the Company’s earnings and profits. Although the Company anticipates operating cash flow for a full year of operations to allow the Company to continue its current dividend payment policy, there can be no assurance that the Company will continue its current dividend amount or that it will be completely funded from operations.

In general, the Company expects capital resources to be adequate to meet its cash requirements in 2004.

As of June 30, 2004, the Company had cash on hand of $96 million. The Company intends to use the cash on hand to purchase hotel properties and pay distributions.

~~The~~Liquidity Company has on-going capital commitments to fund its capital improvements. The Company is required, under all of the Company’s management agreements, to make available, for the repair, replacement, refurbishing of furniture, fixtures, and ~~equipment,~~Capital anResources amount of approximately 5% of gross revenues provided that such amount may be used for the Company’s capital expenditures with respect to the hotels. The Company expects that this amount will be adequate to fund required repair, replacement, and refurbishments and to maintain the Company’s hotels in a competitive condition. As of June 30, 2004 and 2003, the Company held approximately $4 million and $582,000, respectively, in reserve.

~~The~~Capital ~~Company~~Requirements ~~anticipates that cash flow will be adequate to cover its operating expenses~~ and toResources ~~permit the Company to meet its anticipated liquidity requirements, including distribution requirements. Inflation may increase the Company’s operating costs.~~

The ~~Company~~cash isflow ~~under~~generated ~~contract~~from ~~for five~~the ~~additional~~properties ~~hotels~~owned ~~that~~is ~~are~~the ~~currently~~Company’s ~~under~~principal ~~development.~~source ~~The~~of ~~estimated~~liquidity. ~~purchase~~In ~~price~~addition, ~~upon completion of~~ the ~~hotels~~Company ismay ~~approximately~~borrow ~~$81~~funds, ~~million. The contracts are~~ subject to ~~normal~~limitations ~~due~~set ~~diligence~~forth ~~and~~in noits ~~assurances can be given that purchases will be consummated~~by-laws. ~~Four~~In ofJanuary 2006, the ~~properties~~Company ~~are~~entered ~~anticipated~~into toa $10 ~~close~~million ~~during~~revolving ~~the~~line ~~remainder~~ of ~~2004~~credit. ~~with~~The ~~the~~line ~~fifth~~of tocredit, ~~close~~which terminates in ~~early~~January ~~2005.~~2007, Itmay isbe ~~anticipated~~extended ~~substantially~~under ~~all~~certain ofconditions ~~the~~and ~~purchase~~bears ~~price~~interest ~~will~~based beon ~~paid~~LIBOR ~~from~~or ~~cash~~the onprime ~~hand~~rate. ~~The~~As ~~properties~~of ~~are located in Texas~~March 31, ~~Arizona~~2006, ~~and~~there ~~Virginia~~was ~~and~~$4.3 ~~will~~million beoutstanding on ~~similar to~~ the ~~properties~~line ~~currently~~of ~~owned by the Company~~credit.

~~Subsequent~~The ~~Events~~Company’s dividend distribution policy is at the discretion of the board of directors and depends on several factors. The distribution rate is currently at an annual rate of $.88 per Unit outstanding, which is paid monthly. The Company’s distributions currently include a return of capital based on the Company’s earnings and profits. Although cash from operations was less than distributions for the three months ended March 31, 2006 by $1.9 million, the Company anticipates operating cash flow for a full year of operations, from hotels owned, to allow the Company to continue its current dividend payment policy. However, there can be no assurance that the Company will continue its current dividend amount or that it will be completely funded from operations.

InThe ~~July~~Company ~~2004~~has on-going capital commitments to fund its capital improvements. The Company is required, under all of the Company’s ~~paid~~management ~~approximately~~agreements, ~~$3.4~~to ~~million~~make available for the repair, orreplacement, refurbishing $0of furniture, fixtures, and equipment of the hotels, an amount of approximately 5% of total revenues.~~073~~ ~~per~~The ~~share~~Company expects that this amount will be adequate to fund substantially all of the required repair, asreplacement, aand refurbishments ~~distribution~~and to ~~its~~maintain ~~common~~the ~~shareholders~~Company’s hotels in a competitive condition. As of March 31, 2006, the Company held approximately $4.4 million in reserve.

InThe ~~July~~Company ~~2004,~~anticipates ~~the~~that ~~Company~~cash ~~also~~flow ~~redeemed~~and ~~247,749~~available ~~Units~~capital ~~representing~~resources ~~approximately~~will ~~$2.7~~be ~~million under~~adequate to cover its operating expenses and to permit the Company’s ~~share~~to ~~redemption~~meet ~~plan~~its anticipated liquidity requirements, including distribution requirements.

In general, the Company expects capital resources to be adequate to meet its cash requirements in 2006.

Impact of Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, limit the operators’ ability to raise room rates. Currently the Company is not experiencing any material impact from inflation.

Seasonality

The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at its hotels may cause quarterly fluctuations in its revenues. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or to borrow on its line of credit to make distributions.

~~Related~~Business ~~Party Transactions~~Interruption

~~The~~Being ~~Company~~in ~~has~~the real ~~significant~~estate ~~transactions~~industry, ~~with~~the ~~related parties.~~Company ~~These~~is ~~transactions~~exposed ~~cannot~~to benatural ~~construed~~disasters toboth belocally ~~arms~~and ~~length~~nationally, and ~~the~~although ~~results~~management ofbelieves ~~the~~there ~~Company’s~~is ~~operations~~adequate ~~may~~insurance to cover this exposure, there can be ~~different~~no ifassurance ~~these~~that ~~transactions~~such ~~were~~events ~~conducted~~will ~~with~~not ~~non-related~~have ~~parties~~a material adverse effect on the Company’s financial position and results of operations.

~~The~~Subsequent ~~Company~~Events has contracted with ASRG to provide brokerage services for the acquisition and disposition of the Company’s real estate assets. In accordance with the contract, ASRG is paid a fee of approximately 2% of the gross purchase price of any acquisitions or gross sale price of any dispositions of real estate investments, subject to certain conditions. These amounts are capitalized as part of the purchase price of the hotels. Total payments to date to ASRG for services under the terms of this contract were approximately $6.5 million, which have been capitalized as a part of the purchase price of the hotels.

16In April 2006, the Company declared and paid approximately $3.3 million, or $.073 per share, in distributions to its common shareholders of record on March 28, 2006, of which $957,000 or 86,990 Units were reinvested under the Company’s Dividend Reinvestment Plan.

~~The~~In ~~Company~~April ~~also contracted with Apple Hospitality Five Advisors~~2006, ~~Inc. (“AFA”), which in turn subcontracts with Apple Suites Advisors, Inc. (“ASA”), a subsidiary of Apple Hospitality Two Inc., to advise and provide day-to-day management services for~~ the Company ~~and~~also ~~due-diligence~~redeemed ~~services on acquisitions. In accordance with the contract~~261,573 ~~the~~Units ~~Company pays~~representing ~~AFA~~approximately ~~a fee equal to~~ $2.1%9 tomillion, ~~.25%~~under ~~of total equity contributions received by~~ the Company ~~in addition to certain reimbursable expenses. In turn AFA pays that total amount to Apple Suites Advisors. During the six months ended June 30, 2004, the~~’s ~~Company~~Unit ~~incurred~~redemption ~~and paid advisory expenses of approximately $356,000 under this agreement, which are included in general and administrative expense~~program.

AsIn ofApril ~~December 31~~2006, ~~2002,~~the ~~AFA,~~Company ~~ASRG~~entered ~~and~~into ~~ASA~~a ~~were~~sale ~~100%~~agreement ~~owned~~for byits ~~Mr.~~Lear ~~Knight,~~Jet ~~the~~with ~~Company’s~~a ~~Chairman.~~net Assales ofprice ~~January 31, 2003, the outstanding shares~~ of ~~ASA~~approximately ~~owned by Mr~~$2.8 million, ~~Knight~~which ~~were~~approximates ~~purchased~~net bybook ~~Apple Hospitality Two, Inc~~value. ~~and~~The ~~ASA~~transaction is ~~now~~planned ato ~~wholly-owned~~close ~~subsidiary~~in ofMay ~~Apple Hospitality Two, Inc~~2006.

~~The Company issued 240,000 Series B convertible preferred shares to Mr. Knight. The Series B convertible preferred shares were issued in exchange for payment of $0.10 per~~ ~~Series B convertible preferred share, or an aggregate of $24,000~~Item 3. ~~There~~Quantitative is no dividend payable on the Series B convertible preferred shares. On liquidation, the holder of the Series B convertible preferred shares will be entitled to a liquidation payment of $11 per share before any distributions of liquidation proceeds to holders of the common shares. However, the priority liquidation payment of the holder of the Series B convertible preferred shares is junior to the holders of the Series A preferred shares distribution rights. In the event that the liquidation of the Company’s assets results in proceeds that exceed the distribution rights of the Series A preferred shares and ~~the~~Qualitative ~~Series~~Disclosures BAbout ~~convertible~~Market ~~preferred~~Risk ~~share, the remaining proceeds will be distributed between the common shares and the Series B convertible preferred shares on an as converted basis.~~

~~Each~~The ~~holder~~Company ofdoes ~~outstanding~~not ~~Series~~engage Bin ~~convertible~~transactions ~~preferred~~in derivative ~~shares~~financial ~~has~~instruments ~~the~~or ~~right~~derivative tocommodity ~~convert~~instruments. ~~any~~As of ~~such~~March 31, ~~shares~~2006, ~~into~~the ~~common~~Company’s ~~shares~~financial ~~upon~~instruments ~~and~~were ~~for~~not ~~180~~exposed ~~days~~to ~~following~~significant ~~the occurrence~~market ofrisk ~~any~~due ofto ~~the~~interest ~~following~~rate ~~conversion~~risk, ~~events:~~foreign currency exchange risk, commodity price risk or equity price risk.

(1) substantially all of the Company’s assets, stock or business, is transferred as a going concern, whether through exchange, merger, consolidation, lease, share exchange or otherwise, other than a sale of assets in liquidation, dissolution or winding up of the Company’s business; or

(2) the Company’s common shares are listed on any securities exchange or quotation system or in any established market (“Conversion Event”).

Upon the occurrence of any Conversion Event, the Series B convertible preferred shares may be converted into a maximum of 2,907,415 common shares. In addition, upon conversion of the Series B convertible preferred shares into common shares, the Series A preferred shares will terminate and the priority distribution in liquidation associated with the Series A preferred shares will disappear. If the Company terminates or fails to renew the Advisory Agreement with AFA, the Series B convertible preferred shares will be entitled to dividend distributions and voting rights on an as converted basis. In this event, the liquidation preference of the Series A preferred shares will continue.

No additional consideration is due upon the conversion of the Series B convertible preferred shares. Upon the probable occurrence of a conversion event, the Company will record expense for the difference between the fair value of its common stock and issue price of the Series B convertible preferred shares.

Compensation expense related to issuance of 240,000 Series B convertible preferred shares to Mr. Knight will be recognized at such time when the number of common shares to be issued for conversion of the Series B shares can be reasonably estimated and the event triggering the conversion of the Series B shares to common shares is probable. The expense will be measured as the difference between the fair value of the common stock for which the Series B shares can be converted and the amounts paid for the Series B shares. A conversion event is not considered probable at June 30, 2004. The beneficial conversion feature at June 30, 2004, assuming a conversion event is probable would be approximately 2.9 million common shares, which based upon the sales price of the Company’s shares at $11 per share would result in approximately $32 million of compensation expense.

In June 2004, the Company transferred its rights under a purchase contract for a hotel in Redmond, Washington to Apple REIT Six, Inc. Apple REIT Six, Inc. has the same Chairman and CEO as the Company. This transaction was entered into to prevent the Company from incurring secured debt to complete its planned property acquisitions. The transfer was completed at no expense to the Company.

Recent Account Pronouncements

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46) and subsequently revised FIN 46 in December 2003. Effective January 1, 2004, the Company adopted the provisions of FIN 46. The Company did not identify any variable interest entities (VIEs) of which the Company is the primary beneficiary, thus, the Company was not required to consolidate any VIEs.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company does not engage in transactions in derivative financial instruments or derivative commodity instruments. As of June 30, 2004, the Company’s financial instruments were not exposed to significant market risk due to interest rate risk, foreign currency exchange risk, commodity price risk or equity price risk.

Item 4. Controls and Procedures

Senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective and that there have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ~~Since that evaluation process was completed, there have been no significant changes in internal controls or in other factors that could significantly affect these controls.~~

1913

PART II. OTHER INFORMATION

Item 2. ~~Changes~~Unregistered inSales of Equity Securities and Use of Proceeds

~~Dividend~~Unit ~~Reinvestment~~Redemption ~~Plan~~Program

~~During~~With its initial offering the ~~first~~Company ~~quarter~~instituted a share redemption program to provide its shareholders who have held their Units for at least one year with the benefit of ~~2004~~limited interim liquidity, by presenting for redemption all or any portion of their Units at any time and in accordance with certain procedures. Once this time limitation has been met, the Company may, subject to certain conditions and limitations, redeem the Units presented for redemption for cash, to the extent that the Company ~~instituted~~has sufficient funds available to fund the redemption. If Units are held for the required one-year period, the Units may be redeemed for a ~~dividend~~purchase ~~reinvestment~~price equal ~~plan~~to the lesser of: (1) $11.00 per unit; or (2) the purchase price per Unit that was actually paid for the Units. The ~~purpose~~board of directors reserves the ~~plan~~right, isin its sole discretion, at any time and from time to ~~provide~~time, to waive the one-year holding period, reject any request for redemption, change the purchase price for redemptions or otherwise amend the terms of, suspend, or terminate the unit redemption program. Redemption of units, when requested, will be made quarterly on a first-come, first-served basis. The Company’s ~~shareholders~~board ~~with~~of adirectors, ~~convenient~~in ~~and~~its ~~inexpensive~~sole ~~way~~discretion, may choose to ~~increase~~suspend ~~their~~or ~~investment~~terminate inthe unit redemption program or reduce the ~~Company~~number byof ~~reinvesting~~Units ~~their~~purchased ~~dividends~~under tothe ~~purchase~~unit redemption program if it ~~additional~~determines ~~Units~~the funds otherwise available to fund the unit redemption program are needed for other purposes. These redemptions are primarily funded through the Company’s dividend reinvestment plan. The following is a summary of redemptions during the first quarter of 2006:

Share Redemption Program

The Company has instituted a share redemption program to provide its shareholders who have held their Units for at least one year with the benefit of limited interim liquidity, by presenting for redemption all or any portion of their Units at any time and in accordance with certain procedures. Once this time limitation has been met, the Company may, subject to certain conditions and limitations, redeem the Units presented for redemption for cash, to the extent that the Company has sufficient funds available to fund the redemption. If Units are held for the required one-year period, the Units may be redeemed for a purchase price equal to the lesser of: (1) $11.00 per unit; or (2) the purchase price per Unit that was actually paid for the Units. The board of directors reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period, reject any request for redemption, change the purchase price for redemptions or otherwise amend the terms of, suspend, or terminate the share redemption program. Redemption of units, when requested, will be made quarterly on a first-come, first-served basis. The Company’s board of directors, in its sole discretion, may choose to suspend or terminate the share redemption program or reduce the number of Units purchased under the share redemption program if it determines the funds otherwise available to fund the share redemption program are needed for other purposes. During the six months ended June 30, 2004, the Company redeemed $1,982,284, representing 183,918 Units. These redemptions were funded through the Company’s Additional Share Option plan which was available through the end of the Company’s best efforts offering of Units. Redemptions after June 30, 2004 will be funded primarily through the Company’s Dividend Reinvestment Program.

Issuer Purchases of Equity Securities

	(a)	(b)		(c)	(d)
Period	Total ~~Numberof~~Number ~~UnitsPurchased~~of Units Purchased	Average Price ~~Paidper~~Paid per Unit		Total Number of Units Purchased as Part of ~~PubliclyAnnounced~~Publicly Announced Plans or Programs	Maximum Number of Units that May Yet Be Purchased Under the Plans ~~orPrograms~~or Programs
January 1 through June 30, 2004	183,918	$	10.78	183,918		(1)
January 2006	328,333	$	10.98	2,355,824	(1	)

⁽¹⁾	The maximum number of Units that may be redeemed in the current calendar year is three percent (3.0%) of the weighted average number of Units outstanding at the end of the previous calendar year.

2014

Item 4 6. ~~Submission~~Exhibits ~~of Matters to a Vote of Security Holders.~~

On May 20, 2004, the Company held an Annual Meeting of Shareholders for the purpose of electing two directors to the Company’s Board of Directors. The two nominees to the Company’s Board of Directors were Lisa B. Kern and Michael S. Waters. Each nominee was a current director of the Company. Ms. Kern and Mr. Waters were nominated for an additional three-year term on the Board of Directors. The election of directors was uncontested, and all nominees were elected.


Exhibit Number		Description
3.1		Articles of Incorporation, as amended, of Apple Hospitality Five, Inc. (Incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the registrant’s registration statement on Form S-11 (SEC File No. 333-100044) filed December 3, 2002).

3.2		Bylaws of Apple Hospitality Five, Inc. (Incorporated herein by reference to Exhibit 3.2 to Form 10-Q filed on August 4, 2005; SEC File No. 000-50731).

31.1		Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH).

31.2		Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH).

32.1		Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH).

~~The~~15 ~~total number of votes represented at the Annual Meeting of Shareholders was 45,656,631. The voting results were as follows:~~

Lisa B. Kern		Votes For: 45,292,281
		Votes Withheld: 364,350
Michael S. Waters		Votes For: 45,277,700
		Votes Withheld: 378,931

The names of the other directors whose terms of office as directors continued after the Annual Meeting of Shareholders are Glade M. Knight, Bruce H. Matson and Robert M. Wiley.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

ExhibitNumber		Description
3.1		Articles of Incorporation, as amended, of Apple Hospitality Five, Inc. (Incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the registrant’s registration statement on Form S-11 (SEC File No. 333-100044) filed December 3, 2002).
3.2		Bylaws of Apple Hospitality Five, Inc. (Incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (SEC File No. 333-100044) filed January 17, 2003).
31.1		Certification of the registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH).
31.2		Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Action of 2002 (FILED HEREWITH).
32.1		Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH).
32.2		Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Action of 2002 (FILED HEREWITH).

(b) Reports on Form 8-K

None.

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, thereunto duly authorized.

Apple Hospitality Five, Inc.
By:	/s/ Glade M. Knight	Date: ~~August~~May 4, ~~2004~~2006
	Glade M. Knight,
	Chairman of the Board,
	Chief Executive Officer, and President
	Chief Executive Officer,
	and President
	(Principal Executive Officer)
By:	/s/ Bryan Peery	Date: ~~August~~May 4, ~~2004~~2006
	Bryan Peery,
	Chief Accounting Officer
	Chief Financial Officer
	(Principal Financial and Principal Accounting Officer)

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Filing Compare · APPLE HOSPITALITY FIVE INC