SIGNATURE RESORTS INC, 10-K, 1997-03-28

SIGNATURE RESORTS INC
10-K, 1997-03-28
HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 000-21193

SIGNATURE RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND 95-458215-7
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

5933 WEST CENTURY BOULEVARD, SUITE 210
LOS ANGELES, CALIFORNIA 90045
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 310-348-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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None N/A

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, $0.01 par value

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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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

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The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sales price of the Common Stock on March
24, 1997 as reported on the NASDAQ National Market, was approximately
$319,333,851. At March 24, 1997 there were 19,890,841 shares of the
Registrant's Common Stock outstanding.

Documents Incorporated by Reference: Certain portions of the Registrant's
Definitive Proxy Statement, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the close
of the Registrant's 1996 fiscal year, are incorporated by reference in Part
III of this Form 10-K and certain portions of the Registrant's Registration
Statement on Form S-1 (No. 333-18447) are incorporated by reference in Part II
of this Form 10-K.

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PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

OVERVIEW

Signature Resorts, Inc. (the "Company") is one of the largest developers and
operators of timeshare resorts in North America. The Company is devoted
exclusively to timeshare operations and, following the Company's February 7,
1997 acquisition (the "Merger") of AVCOM International, Inc. ("AVCOM"), the
parent company of All Seasons Resorts ("All Seasons"), the Company owns 19
timeshare resorts located in a variety of popular resort destinations, which
includes two resorts in which the Company holds a partial interest. The
Company's resorts existing prior to the Merger are located in Hilton Head
Island, South Carolina, Koloa, Kauai, Hawaii, Orlando, Florida (two resorts),
St. Maarten, Netherlands Antilles (two resorts), Branson, Missouri, South Lake
Tahoe, California, and Avila Beach, California (the "Existing Resorts"). The
resorts acquired by the Company in the Merger are located in Sedona, Arizona
(five resorts), South Lake Tahoe, California (two resorts), Lake Arrowhead,
California, Lake Conroe (near Houston), Texas and Scottsdale, Arizona (the
"All Seasons Resorts"). The Company currently sells Vacation Intervals at 15
of these 19 resorts; sales at three resorts have been substantially completed;
and sales at one resort have yet to commence. In addition, in December 1996
the Company announced plans for the acquisition and development of its 20th
resort to be located in St. John, U.S. Virgin Islands.

The Company's principal operations currently consist of (i) acquiring,
developing and operating timeshare resorts, (ii) marketing and selling
timeshare interests in its resorts, which typically entitle the buyer to use a
fully-furnished vacation residence, generally for a one-week period each year
("Vacation Intervals") and (iii) providing financing for the purchase of
Vacation Intervals at its resorts.

Unless the context otherwise indicates, the "Company" means Signature
Resorts, Inc. and includes its corporate and partnership predecessors and
wholly-owned subsidiaries and affiliates.

RECENT DEVELOPMENTS

On March 13, 1997 the Company announced the execution of a definitive
agreement for the acquisition of the Savoy Hotel, located on the beach in the
South Beach district of Miami Beach, Florida. Following the acquisition of the
Savoy Hotel, which is expected to close in the second quarter of 1997, the
Company intends to convert the existing 40 completed hotel units and the 28
partially completed units into approximately 68 studio, one and two bedroom
vacation ownership units. Following the closing and the receipt of necessary
governmental approvals, the Company intends to begin sales of vacation
intervals at the Savoy at South Beach during the third quarter of 1997. The
Company believes that following conversion, the Savoy at South Beach will be
the first vacation ownership resort of its size and quality in the historic
South Beach district of Miami Beach.

THE TIMESHARE INDUSTRY

The Market. The resort component of the leisure industry primarily is
serviced by two separate alternatives for overnight accommodations: commercial
lodging establishments and timeshare or "vacation ownership" resorts.
Commercial lodging consists of hotels and motels in which a room is rented on
a nightly, weekly or monthly basis for the duration of the visit and is
supplemented by rentals of privately-owned condominium units or homes. For
many vacationers, particularly those with families, a lengthy stay at a
quality commercial lodging establishment can be very expensive, and the space
provided to the guest relative to the cost (without renting multiple rooms) is
not economical for vacationers. Also, room rates and availability at such
establishments are subject to change periodically. In addition to providing
improved lifestyle benefits to owners, timeshare presents an economical
alternative to commercial lodging for vacationers.

1
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According to the American Resort Development Association ("ARDA"), the
timeshare industry experienced a record year in 1994 (the most recent year for
which statistics are available) with 384,000 new owners purchasing 560,000
Vacation Intervals with a sales volume of $4.76 billion. First introduced in
Europe in the mid-1960s, ownership of Vacation Intervals has been one of the
fastest growing segments of the hospitality industry over the past two
decades. As shown in the following charts, according to the ARDA the worldwide
timeshare industry has expanded significantly since 1980 both in Vacation
Interval sales volume and number of Vacation Interval owners.

[BAR CHARTS APPEAR HERE]

<TABLE>
<CAPTION>
[The following table is represented as a bar graph.]
Dollar Volume of Vacation Interval Sales
(in billions)

<S> <C> <C>
1 1980 0.49
2 1981 0.965
3 1982 1.165
4 1983 1.34
5 1984 1.735
6 1985 1.58
7 1986 1.61
8 1987 1.94
9 1988 2.39
10 1989 2.97
11 1990 3.24
12 1991 3.74
13 1992 4.25
14 1993 4.505
15 1994 4.76

</TABLE>

[The following table is represented as a bar graph.]
Number of Vacation Intervals Owners
(in millions)

Source: American Resort Development Association, The 1995 Worldwide Timeshare
Industry.

<PAGE>

The Company believes that, based on published industry data, the following
factors have contributed to the increased acceptance of the timeshare concept
among the general public and the substantial growth of the timeshare industry
over the past 15 years:

. Increased consumer confidence resulting from consumer protection
regulation of the timeshare industry and the entrance of brand name
national lodging companies to the industry;

. Increased flexibility of timeshare ownership due to the growth of
international exchange organizations;

. Improvement in the quality of both the facilities themselves and the
management of available timeshare resorts;

. Increased consumer awareness of the value and benefits of timeshare
ownership, including the cost savings relative to other lodging
alternatives; and

. Improved availability of financing for purchasers of Vacation Intervals.

The timeshare industry traditionally has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality.
The Company believes that one of the most significant factors contributing to
the current success of the timeshare industry is the entry into the market of
some of the world's major lodging, hospitality and entertainment companies.
Such major companies which now operate or are developing Vacation Interval
resorts include Marriott Ownership Resorts ("Marriott"), The Walt Disney
Company ("Disney"), Hilton Hotels Corporation ("Hilton"), Hyatt Corporation
("Hyatt"), Four Seasons Hotels & Resorts ("Four Seasons") and Inter-
Continental Hotels and Resorts ("Inter-Continental"), as well as Promus Hotel
Corporation ("Promus") and Westin Hotels & Resorts ("Westin"). Unlike the
Company, however, the timeshare operations of each of Marriott, Disney,
Hilton, Hyatt, Four Seasons and Inter-Continental comprise only a small
portion of such companies' overall operations.

The Economics. The Company believes that national lodging and hospitality
companies are attracted to the timeshare concept because of the industry's
rapid historic growth rate and high profit margins. In addition, such
companies recognize that Vacation Intervals provide an attractive alternative
to the traditional hotel-based vacation and allow the hotel companies to
leverage their brands into additional resort markets where demand exists for
accommodations beyond traditional hotels.

The Consumer. According to information compiled by the ARDA for the year
ended December 31, 1994 (the most recent year for which statistics are
available), the prime market for Vacation Intervals is customers in the 40-55
year age range who are reaching the peak of their earning power and are
rapidly gaining more leisure time. The median age of a Vacation Interval buyer
at the time of purchase is 46. The median annual household income of current
Vacation Interval owners in the United States is approximately $63,000, with
approximately 35% of all Vacation Interval owners having annual household
income greater than $75,000 and approximately 17% of such owners having annual
household income greater than $100,000. Despite the growth in the timeshare
industry as of December 31, 1994, Vacation Interval ownership has achieved
only an approximate 3.0% market penetration among United States households
with income above $35,000 per year and 3.9% market penetration among United
States households with income above $50,000 per year.

According to the ARDA study, the three primary reasons cited by consumers
for purchasing a Vacation Interval are (i) the ability to exchange the
Vacation Interval for accommodations at other resorts through exchange
networks (cited by 82% of Vacation Interval purchasers), (ii) the money
savings over traditional resort vacations (cited by 61% of purchasers) and
(iii) the quality and appeal of the resort at which they purchased a Vacation
Interval (cited by 54% of purchasers). According to the ARDA study, Vacation
Interval buyers have a high rate of repeat purchases: approximately 41% of all
Vacation Interval owners own more than one interval representing approximately
65% of the industry inventory and approximately 51% of all owners who bought
their first Vacation Interval before 1985 have since purchased a second
Vacation Interval. In addition, customer satisfaction increases with length of
ownership, age, income, multiple location ownership and accessibility to
Vacation Interval exchange networks.

3
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The Company believes it is well positioned to take advantage of these
demographics trends because of the quality of its resorts and locations, its
program to allow buyers to exchange intervals at several of the Company's
resorts and its participation in the RCI network. However, RCI is under no
obligation to continue to include the Company's resorts in its exchange
network. The Company expects the timeshare industry to continue to grow as the
baby-boom generation continues to enter the 40-55 year age bracket, the age
group which purchased the most Vacation Intervals in 1994.

BUSINESS STRATEGY

The Company's objective is to become North America's leading developer and
operator of timeshare resorts. To meet this objective, the Company intends to
(i) acquire, convert and develop additional resorts to be operated as Embassy
Vacation Resorts, Westin Vacation Club resorts and non-branded resorts,
capitalizing on the acquisition and marketing opportunities to be provided as
a result of its relationships with Promus, Westin, selected financial
institutions and its position in certain markets and the timeshare industry
generally, (ii) increase sales and financing of Vacation Intervals at the
Existing Resorts and the All Seasons Resorts through broader-based marketing
efforts and in certain instances through the construction of additional
Vacation Interval inventory, (iii) improve operating margins by reducing
borrowing costs and reducing its sales and marketing expenses as a percentage
of revenues over time and (iv) acquire additional Vacation Interval inventory,
operating companies, management contracts, Vacation Interval mortgage
portfolios and properties or other timeshare-related assets that may be
integrated into the Company's operations.

The key elements of the Company's strategy are described below.

Acquisition and Development of New Resorts. The Company intends to acquire
and develop additional resorts to be operated as branded Embassy Vacation
Resorts, Westin Vacation Club resorts and as non-branded resorts. To implement
its growth strategy, the Company intends to pursue resort acquisitions and
developments in a number of vacation destinations that will complement the
Company's operations, including the California and Hawaii markets, which are
subject to barriers to entry and in which the Company's founders have
extensive acquisition and development experience. The Company believes that
its relationships with Promus, Westin and selected financial institutions that
control resort properties located in Hawaii and California will provide it
with acquisition, development and hotel-to-timeshare conversion opportunities
and will allow it to take advantage of currently favorable market
opportunities to acquire resort and condominium properties to be operated as
timeshare resorts. Since the inception of the resort acquisition and
development business by the Company's predecessor in 1992, the Company
believes it has been able to purchase hotel, condominium and resort properties
and/or entitled land at less than either their initial development cost or
replacement cost and remodel or convert such properties for sale and use as
timeshare resorts. In addition to acquiring existing resort and hotel-to-
timeshare conversion properties, the Company also seeks to develop resorts
located in destinations where it discerns a strong demand, which the Company
anticipates will enable it to achieve attractive rates of return.

The Company considers the potential acquisition or development of timeshare
resorts in locations based on existing timeshare competition in the area as
well as existing overall demand for accommodations. In evaluating whether to
acquire, convert or develop a timeshare resort in a particular location, the
Company analyzes relevant demographic, economic and financial data.
Specifically, the Company considers the following factors, among others, in
determining the viability of a potential new timeshare resort in a particular
location: (i) supply/demand ratio for the purchase of Vacation Intervals in
the relevant market and for Vacation Interval exchanges into the relevant
market by other Vacation Interval owners, (ii) the market's growth as a
vacation destination, (iii) the ease of converting a hotel or condominium
property into a timeshare resort from a regulatory and construction point of
view, (iv) the availability of additional land at or nearby the property for
potential future development and expansion, (v) competitive accommodation
alternatives in the market, (vi) uniqueness of location, and (vii) barriers to
entry that would tend to limit competition.

4
<PAGE>

The Company believes that its relationships with Promus and Westin will
provide it with attractive acquisition, conversion, development and marketing
opportunities and uniquely position the Company to offer Vacation Intervals at
a variety of attractive resort destinations to multiple demographic groups in
the timeshare market. Capitalizing on two of the Company's founders'
relationship with Promus as a developer and owner of Embassy Suites hotels, in
1994 the Company and Promus established Embassy Vacation Resorts. However, the
Company has no ownership of or rights to the "Embassy Vacation Resorts" name
or servicemark, both of which are owned exclusively by Promus, except as set
forth in the Company's license agreements with Promus with respect to the
Company's Embassy Vacation Resorts. Under Promus's exclusive development
agreement with Vistana, Inc., Promus has identified the Company as the only
other licensee of the Embassy Vacation Resort name. On January 7, 1997, Promus
announced that it intended to expand its branded vacation ownership business
with only the Company and Vistana and that additional Embassy Vacation Resort
properties to be developed or acquired by the Company and licensed by Promus
are under discussion. However, there can be no assurance that Promus will
license the Embassy Vacation Resort name to the Company with respect to
possible future resorts.

Through its agreement with Westin, the Company has the exclusive right
through May 2001, to jointly acquire, develop and market with Westin "four-
star" and "five-star" timeshare resorts located in North America, Mexico and
the Caribbean (the "Westin Agreement"). The Company's rights also cover the
conversion of Westin hotels to timeshare resorts. In addition, pursuant to the
Westin Agreement, it is expected that Westin will provide the Company with
lead generation assistance and marketing support at the Westin Vacation Club
resorts and Promus currently provides such assistance at Embassy Vacation
Resorts. The Embassy Suites hotels owned by two of the Company's founders also
provide lead generation assistance and support to the Company with respect to
the marketing of the Company's resorts.

The Company's relationships with Promus and Westin also provide it with a
competitive advantage in the timeshare industry by allowing it to offer two
separate branded products in both the upscale and luxury market segments. The
Company believes that brand affiliation is becoming an important
characteristic in the timeshare industry as it provides the consumer an
important element of reliability and image in a fragmented and largely non-
branded industry. Through its Embassy Vacation Resorts and Westin Vacation
Club resorts, the Company believes it will be able to provide Vacation
Interval buyers with consistent quality in their timeshare purchases. In
addition, through its non-branded resorts the Company will be able to appeal
to the value-conscious consumer who seeks the best value for his or her money
and does not seek affiliation with brand-name lodging companies.

Sales and Expansion at the Company's Resorts. The Company intends to
continue sales of Vacation Intervals at the Existing Resorts and the All
Seasons Resorts by adding Vacation Interval inventory through the construction
of new development units and by broadening marketing efforts. The Company
believes it is well positioned to expand sales of Vacation Intervals at the
Existing Resorts and the All Seasons Resorts as a result of its existing
supply of Vacation Intervals in inventory as well as planned expansion.

Based on information received from the Company's customers and sales agents,
the Company believes that in addition to basic quality, expanded resort
amenities and larger, multi-purpose units, current and potential buyers want
enhanced flexibility in scheduling their vacations, a broader distribution of
quality exchange locations and the availability of other value-priced
services. As a major developer and operator of timeshare resorts in North
America, the Company believes that it has acquired skill and expertise both in
the development and operation of timeshare resorts and in the marketing and
sales of Vacation Intervals and that it has acquired the breadth of resorts
which give it a competitive advantage.

Improvement of Operating Margins. As the Company grows, management believes
that its larger number of resorts relative to its competitors will provide it
with additional revenue opportunities and economies of scale which will allow
it the potential for significant cost savings. The Company believes that
increased efficiency, reduction in on-site administrative requirements and a
multi-resort management system will reduce operating costs and allow the
Company to experience increased margins by spreading operating and corporate
overhead costs over a larger revenue base. In addition, operating margins at a
resort tend to improve over time as a greater percentage of Vacation Intervals
are sold, resulting in lower selling, marketing and advertising expenses. The

5
<PAGE>

Company also believes that it will reduce sales and marketing expenses as a
result of the lead generation assistance provided or to be provided by Westin
and Promus and by targeting potential buyers through Westin Vacation Club
resorts and Embassy Suites hotels.

Acquisition of Timeshare Assets, Management Contracts and Operating
Companies. As a result of the Company's relationships in the timeshare and
financial communities and the size and geographic diversity of its portfolio
of properties, the Company has access to a variety of acquisition
opportunities related to the Company's business. The Company's business
strategy includes pursuing growth by expanding or supplementing the Company's
existing timeshare business through acquisitions. The Company believes that
its record of acquiring resort properties gives the Company credibility and,
the Company's status as a public company may make the acquisition by the
Company of businesses or operations more attractive to potential sellers. The
Company believes that these collective factors will help the Company acquire
assets, operations and companies in the fragmented timeshare industry.
Acquisitions which the Company may consider, in addition to those disclosed
herein, include acquiring additional Vacation Interval inventory, operating
companies, management contracts, Vacation Interval mortgage portfolios and
properties or other timeshare-related assets which may be integrated into the
Company's operations. The recently completed acquisition of AVCOM is a recent
example of the implementation of the Company's acquisition strategy.

DESCRIPTION OF THE COMPANY'S RESORTS

The Company believes that, based on published industry data, it is the only
developer and operator of timeshare resorts in North America that will offer
Vacation Intervals in each of the three principal price segments of the market
(value, upscale and luxury). Since the inception of the timeshare development
and acquisition business of the Company's predecessors, the Company has
developed or acquired 19 timeshare resorts, of which 15 are currently in
sales. Of the Company's 19 resorts, two resorts are partially-owned by the
Company. The Company expects that its resorts will operate in the following
three general categories, each differentiated by price range, brand
affiliation and quality of accommodations:

Non-Branded Resorts. The Company's non-branded resorts, which are not
affiliated with any hotel chain, are positioned in the value price segment of
the market. Vacation Intervals at the Company's six non-branded resorts
generally sell for $6,000 to $15,000 and are targeted to buyers with annual
incomes ranging from $35,000 to $80,000. The Company believes its non-branded
resorts offer buyers an economical alternative to branded timeshare resorts
(such as Embassy Vacation Resorts and Westin Vacation Club resorts) or
traditional vacation lodging alternatives. Upon consummation of the proposed
Merger with AVCOM, the Company will acquire six additional resorts currently
in timeshare sales. Vacation Intervals at the All Seasons Resorts generally
sell for $9,000 to $18,000 and are targeted to buyers in the same non-branded
market segment.

Embassy Vacation Resorts. The Company's Embassy Vacation Resorts are
positioned in the upscale price segment of the market and are characterized by
high quality accommodations and service. Vacation Intervals at the Company's
three Embassy Vacation Resorts generally sell for $14,000 to $20,000 and are
targeted to buyers with annual incomes ranging from $60,000 to $150,000.
Embassy Vacation Resorts are designed to provide timeshare accommodations that
offer the high quality and value that is represented by the more than 135
Embassy Suites hotels throughout North America.

Westin Vacation Club Resorts. The Company's Westin Vacation Club resorts are
positioned in the luxury price segment of the market and are characterized by
elegant accommodations and personalized service. Through the Westin Agreement,
the Company has the exclusive right through May 2001 to jointly acquire,
develop and market with Westin "four-star" and "five-star" timeshare resorts
located in North America, Mexico and the Caribbean. The Company anticipates
that Vacation Intervals at Westin Vacation Club resorts generally will sell
for $16,000 to $25,000 and will be targeted to buyers with annual incomes
ranging from $80,000 to $250,000. The Westin Agreement represents Westin's
entry into the timeshare market. The Company and Westin recently announced
plans for the acquisition and development of the first Westin Vacation Club
resort to be located in St. John, U.S. Virgin Islands.

6
<PAGE>

Innovation in the design and quality of the resorts developed by the
Company, as well as the branded product image of its Embassy Vacation Resorts
and Westin Vacation Club resorts, has and will continue to result in
differentiation of the Company's resorts from those of its competitors. The
Company believes feedback from its Vacation Interval owners and property
management enhances the Company's product acquisition, development and design
process. The resorts designed and developed by the Company have been
recognized by major industry groups and publications for excellence in
architectural and landscape design and overall development quality. Each of
the Existing Resorts and nine of the All Seasons Resorts have been designated
a "Gold Crown" resort by Resort Condominiums International ("RCI"), a quality
ranking given to only the top 14% of resorts in the RCI exchange network.

The following table sets forth certain information as of December 31, 1996
regarding each of the Company's current resorts and the planned Westin
Vacation Club Resort at St. John, including location, date acquired or to be
acquired by the Company, the number of existing and total potential units at
the resort, the number of Vacation Intervals currently available for sale and
occupancy and additional expansion potential. Of the resorts set forth below,
the Embassy Vacation Resort Poipu Point and the North Bay Resort at Lake
Arrowhead are partially owned by the Company, and the Westin Vacation Club at
St. John will be partially owned by the Company when acquired. The exact
number of units and Vacation Intervals ultimately constructed may differ from
the following estimates based on future land planning and site layout
considerations.

<TABLE>
<CAPTION>
VACATION INTERVALS AT
UNITS AT RESORT RESORT
DATE ----------------------- -------------------------
ACQUIRED/TO BE TOTAL CURRENT POTENTIAL
RESORT LOCATION ACQUIRED(A) CURRENT(B) POTENTIAL(C) INVENTORY(D) EXPANSION(E)
------ -------- -------------- ---------- ------------ ------------ ------------
<C> <S> <C> <C> <C> <C> <C>
NON-BRANDED RESORTS:
Cypress Pointe Resort Lake Buena Vista, Florida November 1992 224 500(f) 2,703 14,076(f)
Plantation at Fall Creek Branson, Missouri July 1993 114 400(g) 1,124 14,586(g)
Royal Dunes Resort Hilton Head Island, South April 1994 40 55(h) 578 765(h)
Carolina
Royal Palm Beach Club St. Maarten, Netherlands July 1995 140 140(i) 1,729 --
Antilles
Flamingo Beach Club St. Maarten, Netherlands July 1995 172 257(j) 2,394 4,420(j)
Antilles
San Luis Bay Resort Avila Beach, California June 1996 68 130(k) 757 3,162(k)

EMBASSY VACATION RESORTS:
Poipu Point(l) Koloa, Kauai, Hawaii November 1994 219 219(m) 9,743 --
Grand Beach Orlando, Florida January 1995 126 370(n) 3,591 12,444(n)
Lake Tahoe South Lake Tahoe, California May 1996 -- 210(o) -- 10,710(o)
WESTIN VACATION CLUB:
St. John(p) St. John, U.S. Virgin Islands April 1997 48 96(q) 1,715 2,448(q)

ALL SEASONS RESORTS:
Scottsdale Villa Mirage Scottsdale, Arizona February 1997 -- 168(r) -- 8,568(r)
Resort
The Ridge on Sedona Sedona, Arizona February 1997 -- 120(s) -- 6,120(s)
Golf Resort
Sedona Springs Resort Sedona, Arizona February 1997 40 40 58 --
Sedona Summit Resort Sedona, Arizona February 1997 12 60(t) -- 2,448(t)
Villas of Poco Diablo Sedona, Arizona February 1997 33 33 92 --
Villas of Sedona Sedona, Arizona February 1997 40 40 134 --
North Bay Resort at Lake Lake Arrowhead, California February 1997 13 13(u) 210 --
Arrowhead
Tahoe Beach & Ski Club South Lake Tahoe, California February 1997 140 140 1,094 --
Tahoe Seasons Resort(v) South Lake Tahoe, California February 1997 21 21(v) 856 --
Villas on the Lake Lake Conroe, Texas February 1997 37 85(w) 1,687 2,448(w)
----- ----- ------ ------
TOTAL.................................................................. 1,487 3,097 28,465 82,195
===== ===== ====== ======
</TABLE>
- --------
(a) The dates listed with respect to the Existing Resorts and the All Seasons
Resorts represent the date of acquisition or, if later, the date of
completion of development of the first phase of the resort by the Company
and the date listed with respect to the Westin Vacation Club at St. John
represents the anticipated closing date of the pending acquisition by the
Company.

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<PAGE>

(b) Current units at each resort represents only those units that have
received their certificate of occupancy as of December 31, 1996. The
Company generally is able to sell 51 Vacation Intervals with respect to
each unit at its resorts.
(c) Total potential units at each resort includes, as of December 31, 1996,
(i) units which have received their certificate of occupancy, (ii) units
currently under construction that have not yet received their certificate
of occupancy and (iii) units planned to be developed on land currently
owned by the Company.
(d) Current inventory of Vacation Intervals at each resort represents only
those unsold intervals that have received their certificate of occupancy
as of December 31, 1996.
(e) Potential expansion of Vacation Intervals at each resort includes, as of
December 31, 1996, (i) intervals currently under development that have not
yet received their certificate of occupancy and (ii) intervals planned to
be developed on land currently owned by the Company.

(f) Includes an estimated 276 units which the Company plans to construct on
land which it owns at the Cypress Pointe Resort and for which all
necessary governmental approvals and permits (except building permits)
have been obtained. Should the Company elect to construct a higher
percentage of three bedroom units, rather than its current planned mix of
one, two and three bedroom units, the actual number of planned units will
be lower than is indicated above.

(g) Includes an estimated 286 units which the Company plans to construct on
land which it owns or is currently subject to a contract to purchase at
the Plantation at Fall Creek.

(h) Includes 15 units construction of which is planned to begin in the second
quarter of 1997 and for which all necessary governmental approvals and
permits have been received by the Company.

(i) The Company has not committed to any expansion of the Royal Palm Beach
Club. The Company is considering the acquisition of additional land
adjacent to the Royal Palm Beach Club for the addition of an estimated 60
units but has yet to enter into an agreement with respect to such
additional land or to obtain the necessary governmental approvals and
permits for such expansion.

(j) In May 1996 the Company acquired a five-acre parcel of land adjacent to
the Flamingo Beach Club on which the Company plans to develop
approximately 85 units. The Company is in the process of seeking to obtain
the necessary governmental approvals and permits for such proposed
expansion.

(k) Includes 62 units for which all necessary governmental approvals and
permits have been received by the Company. Construction of the first 31
units began in October 1996. In addition, the Company is considering the
acquisition of additional land near the San Luis Bay Resort for the
addition of an estimated 100 units, but has yet to enter into an agreement
with respect to such land or to obtain the necessary governmental
approvals and permits for such proposed expansion. The Company in June
1996 acquired approximately 130 Vacation Intervals at the San Luis Bay
Resort out of the bankruptcy estate of Glen Ivy Resorts, Inc. In addition,
the Company acquired promissory notes in default that are secured by
approximately 900 Vacation Intervals. The Company intends to foreclose
upon and acquire clear title to such Vacation Intervals and intends to
complete such foreclosure procedures (or deed-in-lieu procedures) during
the second quarter of 1997.

(l) The Company acquired a 30.43% partnership interest in the Embassy Vacation
Resort Poipu Point in November 1994. The Company owns, directly or
indirectly, 100% of the partnership interests in one of the two co-
managing general partners of Poipu Resort Partners L.P., a Hawaii limited
partnership ("Poipu Partnership"), the partnership which owns the Embassy
Vacation Resort Poipu Point. The managing general partner owned by the
Company holds a 0.5% partnership interest for purposes of distributions,
profits and losses. The Company also holds, directly or indirectly, a
29.93% limited partnership interest in the Poipu Partnership for purposes
of distributions, profits and losses, for a total partnership interest of
30.43%. In addition, following repayment of any outstanding partner loans,
the Company, directly or indirectly, is entitled to receive a 10% per
annum return on the Founders' and certain former limited partners' initial
capital investment of approximately $4.6 million in the Poipu Partnership.
After payment of such preferred return and the return of approximately
$4.6 million of capital to the Company, directly or indirectly, on a pari
passu basis with the other general partner in the partnership, the
Company, directly or indirectly, is entitled to receive approximately 50%
of the net profits of the Poipu Partnership. In the event certain internal

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rates of return specified in the Poipu Partnership agreement are achieved,
the Company, directly or indirectly, is entitled to receive approximately
55% of the net profits of the Poipu Partnership.

(m) Includes 179 units that the Company currently rents on a nightly basis,
pending their sale as Vacation Intervals.

(n) The Company has received all necessary discretionary governmental
approvals and permits to construct an additional estimated 244 units on
land which it owns at the Embassy Vacation Resort Grand Beach (excluding
building permits which have not yet been applied for by the Company). The
Company plans to apply for and obtain these building permits on a
building-by-building basis.

(o) Includes 62 units on which construction began in May 1996 and for which
all necessary discretionary governmental approvals and permits have been
received by the Company. The Company received a conditional occupancy
permit for these units on March 26, 1997, which will allow the Company to
begin pre-selling these units. Twenty-five units are scheduled for
completion in March 1997 and 37 units are scheduled for completion in
April 1997. The Company is obligated to convey four Vacation Intervals to
the former owners of the land on which the Embassy Vacation Resort Lake
Tahoe is being developed. Such conveyance will be made upon completion of
the first phase of development. The Company has also received all
necessary discretionary governmental approvals and permits to construct an
additional estimated 148 units (excluding building permits which have not
yet been applied for by the Company and which will be applied for and
obtained on a phase-by-phase basis) on land that it owns at the Embassy
Vacation Resort Lake Tahoe and, subject to market demand, currently plans
to construct 40 of such units commencing in May of each year from 1997
through 1999 and the remaining 28 units commencing in May 2000. The
Company commenced sales of Vacation Intervals at the Embassy Vacation
Resort Lake Tahoe in June 1996, although the Company will not be able to
close any of such sales until the completion of the first units. The
Company currently is pre-selling Vacation Intervals at the Embassy
Vacation Resort Lake Tahoe prior to receipt of certificates of occupancy.

(p) The Company will own 50% of the entity which will acquire the unsold
Vacation Intervals at this resort. The acquisition is anticipated to close
in April of 1997 and commencement of Vacation Interval sales is
anticipated to begin by the fourth quarter of 1997.

(q) Includes 48 units which are ready for immediate occupancy. With respect to
such 48 units, 36 of such units have received all necessary discretionary
governmental approvals and permits necessary to commence Vacation Interval
sales and, upon closing of the pending acquisition, the Company plans to
file the necessary documentation to receive such approvals with respect to
the remaining 12 of such units. Also includes an additional 48 units which
will require the installation of utilities, furniture, fixtures and
equipment and interior finishes before occupancy. Upon closing of the
pending acquisition, the Company currently anticipates completing the
renovation of such 48 additional units by the fourth quarter of 1997. Upon
closing of the pending acquisition, the Company also will have acquired
adjacent land at the St. John resort which will accommodate the
development of additional units but with respect to which no permits or
approvals have been obtained. The Company has not yet determined the
number of potential additional units which may be constructed on such
adjacent land or the timing of such potential development.

(r) Scottsdale Villa Mirage Resort is under construction with respect to 64
units which constitute Phase I of the resort. Such 64 units were completed
in the first quarter of 1997. The 40 units in Phase II and the 64 units in
Phase III are scheduled for completion in the first quarters of 1998 and
1999, respectively. All necessary discretionary approvals and permits have
been received for the Scottsdale Villa Mirage Resort. Prior to receipt of
its certificate of occupancy in February 1997, the Company was pre-selling
Vacation Intervals at the Scottsdale Villa Mirage Resort.

(s) Construction began in December 1996 on The Ridge on Sedona Golf Resort,
which upon completion will consist of 120 units. The first 12 units and
clubhouse are scheduled for completion in April 1997, for which all
necessary discretionary governmental approvals and permits have been
received. Governmental approvals and permits have not been received for
the additional planned 108 units.

(t) Sales and construction commenced in February 1996, and the Sedona Summit
Resort is currently completing construction of the final 48 units.
Construction of the final 48 units is scheduled for completion in the
second quarter of 1997. All necessary discretionary governmental approvals
and permits have been received. The Company currently is pre-selling
Vacation Intervals in the final 48 units at the Sedona Summit Resort. All
Vacation Intervals at the initial 12 units have been sold.

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(u) The Company owns or has the power to vote 80% of the partnership interests
of Trion Capital Corporation. Trion is the General Partner of Arrowhead
Capital Partners, L.P., which is the developer of North Bay Resort at Lake
Arrowhead. The General Partner is entitled to receive 1% of the profits of
Arrowhead Capital Partners, L.P., but under certain circumstances, is
entitled to receive substantially higher profits. All Seasons has an
exclusive sales and marketing contract for sales at North Bay, and is the
property manager of the resort. Although Arrowhead Capital Partners, L.P.
owns undeveloped land and buildings under construction at the North Bay
Resort at Lake Arrowhead, no definitive expansion plans have been made.

(v) Prior to being acquired by the Company, AVCOM purchased a portfolio of
1,057 defaulted consumer notes at the Tahoe Seasons Resort in March 1996
which are secured by Vacation Intervals. Of the notes purchased, 414 notes
have been converted to inventory of which 160 Vacation Intervals have been
sold by the Company and 41 of the notes have been reaffirmed by the
original buyers. The Company intends to foreclose on the remaining notes
and acquire clear title to the intervals.

(w) Villas on the Lake consists of 37 existing units purchased in February
1996 currently in the final phase of renovation. Land included in the
initial purchase is able to accommodate construction of an additional
48 units in phase II. The phase II construction start date has not yet
been determined, however all necessary discretionary governmental
approvals and permits (excluding building permits which have not yet been
applied for) have been received for such additional 48 units.

NON-BRANDED RESORTS

The Cypress Pointe Resort. Cypress Pointe Resort, the Company's first
timeshare resort, opened in November 1992 and is located in Lake Buena Vista,
Florida, approximately one-half mile from the entrance of Walt Disney World
and is an approximately 10 minute drive from all major Orlando attractions.
The resort is being developed in two phases. Phase I sits on 9.7 acres of land
and consists of nine buildings, eight of which currently are complete. Phase
II sits on 12.5 acres of land and will consist of seven buildings, the first
and second of which were completed in April and September 1996, respectively.

Styled with a Caribbean theme, upon completion of the nine buildings, Phase
I will contain 192 three bedroom 1,460 square foot units. Each unit
comfortably accommodates up to eight people with its two large master
bedrooms, three bathrooms, living room with sleeper sofa, and full kitchen.
The three bedroom units in Phase I also offer a jacuzzi tub, a roman tub,
three color televisions (including one 460 screen), a video cassette player, a
complete stereo system, a washer/dryer and elegant interior details such as
nine-foot ceilings, crown moldings, interior ceiling fans, imported ceramic
tile, oversized sliding-glass doors and rattan and pine furnishings. With the
completion of Phase II, the resort will be equipped with three pools including
a 4,000 gallon heated pool with a volcano, two spas, two poolside cafes, two
tennis courts, a sand volleyball court, a basketball court, an exercise
facility, a kiddie pool, a gift shop, a lakeside gazebo, a shuffleboard court,
a picnic area and a video arcade. The resort also contains a full children's
playground and a new 17,000 square foot clubhouse.

Upon completion of Phases I and II, the resort will contain approximately
500 units. Upon completion of seven buildings in Phase II, Phase II will
contain a total of approximately 308 units consisting of one, two and three
bedroom units of up to 1,850 square feet and accommodating up to ten people.
Phase I consists of 168 existing units, with an additional 24 units scheduled
to be built upon the completion of Phase II.

Vacation Intervals at the Cypress Pointe Resort are currently priced from
$6,000 to $16,000 for one-week Vacation Intervals. Vacation Intervals at the
resort can be exchanged for Vacation Intervals at other locations through RCI,
which awarded the resort its Gold Crown Resort Designation. The resort won the
ARDA National Award for its overall owner package in 1993.

The Plantation at Fall Creek. The Plantation at Fall Creek, which opened in
July 1993, is located on the shores of Lake Taneycomo, a fishing lake near the
heart of Branson, Missouri, the capital of country music theaters. The resort
currently contains 98 units each consisting of 2 bedrooms and 2 baths and up
to 1,417 square feet, built in a country style on approximately 130 acres of
land. The Company currently plans to continue to expand the resort to
accommodate a total of 400 units. Each unit features two large master
bedrooms/baths, queen

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sized sofa-sleeper, full kitchen, three color televisions, video cassette
player, washer/dryer, cherry wood furnishings, ceiling fans and jacuzzi or
roman tub. The resort is equipped with 4 swimming pools, a fishing dock, a
shuffleboard court, a game room, a children's playground, a health club, a
tennis court, a miniature golf course, a sand volleyball court, barbecue areas
and a basketball court.

Vacation Intervals at the Plantation at Fall Creek are currently priced from
$7,295 to $10,295 for one-week Vacation Intervals. Vacation Intervals at the
resort can be exchanged for Vacation Intervals at other locations through RCI,
which awarded the resort its Gold Crown Resort Designation.

The Royal Dunes Resort at Port Royal Plantation. The Royal Dunes Resort at
Port Royal Plantation opened in April 1994 and is located in Port Royal
Plantation on Hilton Head Island, South Carolina, only 400 yards from the
beach. The resort presently contains 40 units consisting of three bedrooms and
three bath units and upon completion scheduled for late 1997, will be expanded
to include a total of 55 units. The units can comfortably accommodate eight
people in their 1,460 square feet of living area with two master suites with
private bath, one guest bedroom with bath, a living room with a sofa sleeper,
a full kitchen and an outside deck. Each unit features a jacuzzi tub, a roman
tub, a washer/dryer, four color televisions, a video cassette player, an
entertainment center and elegant interior details such as nine-foot ceilings,
crown moldings, interior ceiling fans and rattan and pine furnishings. The
resort offers a heated swimming pool, outdoor whirlpool spa, kiddie pool, sand
volleyball court, barbecue grill and picnic area. The Royal Dunes is
conveniently located for golf, tennis, fishing, shopping, boating, biking and
croquet and adjacent to Royal Dunes is the Westin Hotel & Resort at Port
Royal, Hilton Head Island.

Vacation Intervals at the Royal Dunes are currently priced from $8,250 to
$13,250 for one-week Vacation Intervals. Vacation Intervals at the resort can
be exchanged for Vacation Intervals at other locations through RCI, which
awarded the resort its Gold Crown Resort Designation.

The Royal Palm Beach Club. The Royal Palm Beach Club, originally opened in
1990 and acquired by the Company in July 1995, is located at Simpson Bay in
St. Maarten, Netherlands Antilles. Located approximately one mile from the
island's major airport and ten minutes from local shopping and dining, the
resort is surrounded by the Caribbean on three sides. The resort contains 140
units consisting either of two bedrooms, two baths or three bedrooms, three
baths. Each unit is equipped with a full kitchen, complete with microwave and
dishwasher, color television, VCR and private lanai. The resort is equipped
with a private beach, an overflowing style pool located on the beach, a large
sun deck and a picnic area with barbecue grills. The Royal Palm Beach Club is
also conveniently located for water sports, boating, health club workouts and
tennis, and is located adjacent to a retail center, including an outdoor cafe,
dance clubs, market, hair salon, gift shop, mini-market and restaurants. Each
unit at the resort, as well as the resort grounds and common areas, recently
received a complete renovation in connection with repairs following the
September 1995 hurricane which damaged the resort.

Units at the Royal Palm Beach Club, are currently priced from $9,450 to
$12,900 for one-week Vacation Intervals. Vacation Intervals at the resort can
be exchanged for Vacation Intervals at other locations through RCI, which
awarded the resort its Gold Crown Resort Designation and through Interval
International, the other major exchange company in the industry, which awarded
the resort a "five-star" designation, the highest quality level in the II
system.

The Flamingo Beach Club. The Flamingo Beach Club, originally opened in
January 1991 and acquired by the Company in August 1995, is located on "the
Point" of the Pelican Key Peninsula in St. Maarten, Netherlands Antilles,
directly on the beach of the Caribbean. The resort is located approximately
two miles from the island's major airport and is within walking distance of
shopping and dining facilities. The resort is surrounded by the Caribbean
Ocean on three sides and contains 172 units consisting of beachfront studio
and one bedroom, one bath units. Each unit is equipped with two color
televisions, a video cassette player, air conditioning, a balcony suitable for
outside dining and a fully equipped kitchen complete with microwave oven and
dishwasher. The resort features water sports, a beach palapa bar and grill, a
mini-market, tennis facilities and a beach house bar. Each unit at the resort,
as well as the resort grounds and common areas, recently received a complete
renovation in connection with repairs following the September 1995 hurricanes
which damaged the resort.

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Vacation Intervals at the Flamingo Beach Club are currently priced from
$6,500 to $8,900 for one-week Vacation Intervals. Vacation Intervals at the
resort can be exchanged for Vacation Intervals at other locations through RCI,
which awarded the resort its Gold Crown Resort Designation.

The San Luis Bay Resort. The San Luis Bay Resort, located on 16 oceanview
acres in Avila Beach, California, near San Luis Obispo, was originally opened
in 1969 as a hotel club and in June 1996 was acquired by the Company from the
bankruptcy estate of Glen Ivy Resorts, Inc., which had converted the property
to a timeshare resort in 1989. The resort is adjacent to a championship golf
course and is well located for visiting local wineries and historical
attractions. At present, a total of 68 studio and one bedroom units are
completed at the resort. The Company has commenced construction of the phase I
addition of 30 units. Upon completion of the addition, units will be available
in one and two bedroom configurations (some with lock-off capability) and will
offer a king size bed, a queen size sofa sleeper, a porch, a full kitchen, two
color televisions, a video cassette player and a stereo. The phase II addition
of 32 units is scheduled to commence construction following the completion of
phase I. The resort features a swimming pool, a spa, four tennis courts,
exercise facilities, a full service salon, a video game room, a basketball
court and a barbecue area. The resort is also well located for windsurfing,
boating, fishing and surfing.

Vacation Intervals at the San Luis Bay Resort are currently priced from
$8,500 to $16,000 for one-week Vacation Intervals. Vacation Intervals at the
resort can be exchanged for Vacation Intervals at other locations through RCI.

EMBASSY VACATION RESORTS

The Embassy Vacation Resort Grand Beach. The Embassy Vacation Resort Grand
Beach opened in January 1995 and is located along nearly 2,000 feet of the
south shore of Lake Bryan, a 450-acre spring-fed lake in Lake Buena Vista,
Florida. The 1920's Florida architectural style resort sits on 18 acres and
upon its projected completion by the year 2000 will offer approximately 370
units in 14 four and five story buildings. Despite the resort's remote, lake
front ambiance, it is only minutes from International Drive which provides
access to Orlando, Florida's major attractions. All current units offer three
bedrooms and three bathrooms with approximately 1,550 square feet of living
area, including a large screened-in deck and a full-size, well-equipped
kitchen. With two master suites, a third bedroom, and a sleeper sofa in the
living room, units can comfortably accommodate four couples. Each unit
features air-conditioning, a whirlpool tub, a washer/dryer, three cable
televisions, a video cassette player, a stereo and elegant interior details
such as nine-foot ceilings, crown molding, wooden venetian blinds, imported
ceramic tile and slate flooring. Upon full completion, the Company expects
that the resort will include 5,000 square feet of sand beaches, four gazebo-
covered docks that stretch out over Lake Bryan and easy access to water
skiing, jetskiing, parasailing, sailboating, wind surfing and fishing on Lake
Bryan. The Grand Beach resort will provide two outdoor pools, two spas, two
kiddie pools, two lighted tennis courts, sand volleyball courts, shuffleboard
courts, a putting green, a children's playground, barbecue and picnic areas
and a fitness complex with two clubhouses containing exercise rooms, kitchens
and a video arcade. In 1995, the resort was featured in both RCI Perspective
Magazine and Resort Development and Operations Magazine.

Vacation Intervals at the Embassy Vacation Resort Grand Beach are currently
priced from $12,500 to $14,000 for one-week Vacation Intervals. Vacation
Intervals at the resort can be exchanged for Vacation Intervals at other
locations through RCI, which awarded the resort its Gold Crown Resort
Designation.

The Embassy Vacation Resort Poipu Point. The Embassy Vacation Resort Poipu
Point was reconstructed in 1993 after being substantially destroyed by
Hurricane Iniki and was acquired by the Company in November 1994. The resort
is located at the most southern point on the Poipu Sun Coast of Kauai, Hawaii,
offering a natural, open setting in an architectural style designed to blend
with the land. The resort spans 10 buildings on 22 acres with a total of 219
units. The units, one of which has one bedroom and one bathroom, 216 of which
have two bedrooms and two bathrooms and 2 of which have three bedrooms and
three bathrooms, range in size from 1,363 to 2,629 square feet. Each unit
either overlooks the ocean or one of the many gardens maintained on the
grounds. All units feature air-conditioning, two telephones with voice mail,
two cable televisions, video

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cassette player, stereo, washer/dryer, whirlpool tub, full kitchen and a
spacious lanai. Units can accommodate up to six people and are appointed with
designer furnishings, custom fabrics, and custom-designed ceramic tile. The
resort is equipped with a spectacular lagoon-like freshwater swimming pool
with a sandy beach entry and its own beach, waterfalls, fish ponds, lush
garden walkways, a kiddie pool and a health club with weight and aerobic
equipment, two hydrospas, sauna and steamroom. The property is adjacent to a
large sandy beach and is well located for scuba diving, wind surfing, golf,
tennis, surfing, horseback riding, fishing, boating and exploring the island's
rain forests, fern grottos and waterfalls.

Units at the Embassy Vacation Resort Poipu Point are currently priced from
$13,700 (one bedroom) to $25,600 (three bedrooms) for one-week Vacation
Intervals. Vacation Intervals at the resort can be exchanged for Vacation
Intervals at other locations through RCI, which featured the resort in RCI
Perspective Magazine in 1995 and awarded it the RCI, Gold Crown Resort
Designation.

The Embassy Vacation Resort Lake Tahoe. Construction began on the Embassy
Vacation Resort Lake Tahoe in May 1996. The resort is located in South Lake
Tahoe, California, and is situated on nine acres near the shores of Lake Tahoe
adjoining the Lake Tahoe Marina in one of the world's most beautiful resort
areas. The architectural design of the resort connotes the rustic elegance
known as "Old Tahoe." Approximately one mile from the casinos and 1/2 mile
from the base lift of Heavenly Ski Resort, upon completion the resort will
contain 210 two bedroom/two bath units offering lake and mountain views. The
resort will feature a restaurant, an indoor/outdoor heated swimming pool, a
spa, a sunning deck, lakefront activities, bike rentals, ski valet, sundry
shop, convenience store and delicatessen.

The Company plans to complete construction of the first phase of the resort
in March 1997. Vacation Intervals at the Embassy Vacation Resort Lake Tahoe
are priced from $17,000 to $25,000 for one-week Vacation Intervals. RCI has
indicated that Vacation Intervals at the resort may be exchanged for Vacation
Intervals at other locations through RCI.

WESTIN VACATION CLUB RESORTS

The Company and Westin have entered into the Westin Agreement pursuant to
which the Company has acquired the exclusive right to jointly acquire, develop
and sell with Westin "four-star" and "five-star" Westin Vacation Club resorts
in North America, Mexico and the Caribbean for a five year term expiring May
3, 2001. Pursuant to the Westin Agreement, Westin and the Company intend to
enter into detailed definitive agreements to implement the Westin Agreement,
including operating agreements. There can be no assurance that the parties
will be able to reach such definitive agreements. Pursuant to the Westin
Agreement, each of the Company and Westin will own a 50% equity interest in
the ventures that own such resorts and have an equal voice in the management
of such ventures. The primary focus of the Westin Agreement is (i) developing
vacation ownership villas surrounding existing Westin hotel resort properties
and (ii) acquiring or developing hotels which can be operated under the Westin
hotel brand while at the same time being converted to vacation ownership
properties. Pursuant to the Westin Agreement, each of the Company and Westin
has agreed that, subject to certain exceptions, including certain Embassy
Vacation Resort acquisition and development opportunities, it will present to
the other party all "four-star" and "five-star" hotel and resort acquisition
and development opportunities (e.g., properties that are flagged by brands
such as Disney, Marriott, Omni, Ritz Carlton, Four Seasons/Regent, Inter-
Continental and Meridien) that it has determined to pursue and such other
party has a right of first refusal to determine whether to jointly develop
such opportunities with the other party subject to the foregoing exclusions.
Pursuant to the Westin Agreement, Westin and the Company intend to form a
separate partnership, limited liability company or similar entity to develop
and operate each Westin Vacation Club resort, of which Westin and the Company
shall be co-general partners or co-managers, as applicable. Each of the
Company and Westin will contribute 50% of the equity needed to develop and
operate each Westin Vacation Club resort. Pursuant to the Westin Agreement,
Westin has the right to manage all Westin Vacation Club resorts and the
Company and Westin will share the profits from such management activity. In
addition, Westin will promote the Westin Vacation Club concept by utilizing
its customer base for sales and marketing programs, arranging for on-site
sales desks and other in-house marketing programs, in exchange for which the
Company has agreed to

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reimburse Westin predetermined marketing and advertising costs incurred by
Westin. Under certain circumstances, either party may terminate the Westin
Agreement upon failure to reach specified development goals.

Pursuant to the Westin Agreement, the Company has agreed to make available
to Westin one voting seat on the Company's Board of Directors and has agreed
to use maximum reasonable efforts to cause the nomination and election of
Westin's designee. Westin has agreed to make available to the Company one non-
voting seat on its Board of Directors which will be filled by one of the
Founders. Following any public offering of equity securities by Westin, the
Company's seat on Westin's board will become a voting seat, entitled to all
reciprocal provisions granted by the Company to Westin.

In December 1996, the Company and Westin announced plans to acquire and
develop the first Westin Vacation Club resort in St. John, U.S. Virgin
Islands. The "four-star" Westin Vacation Club at St. John will involve a
conversion of the existing St. John Villas, located adjacent to the Great Cruz
Bay Resort Hotel (formerly known as the Hyatt Regency St. John) which will be
operated as the St. John Hotel. Pursuant to a purchase and sale agreement with
subsidiaries of Skopbank, a Finnish corporation, Westin will acquire a 100%
interest in the St. John Hotel and the Company and Westin will form the Westin
Partnership owned 50% by each of the Company and Westin to acquire an interest
in the 96 units at the St. John Villas, representing 4,163 Vacation Intervals
(the number of unsold Vacation Intervals remaining at the St. John Villas),
which will be operated as the Westin Vacation Club resort at St. John. Of the
$10.5 million purchase price for the remaining unsold Vacation Intervals at
St. John Villas, each of the Company and Westin is obligated to contribute
approximately $2.5 million in cash, with the remaining $5.5 million of the
acquisition price to be paid by the Westin Partnership. In addition, the
Westin Partnership will borrow approximately $7.1 million to complete the
conversion of the St. John Villas to a Westin Vacation Club resort.

The acquisition of the St. John resort is anticipated to close during April
of 1997 and commencement of Vacation Interval sales is anticipated to begin by
the fourth quarter of 1997. Located adjacent to the beachfront hotel, the St.
John Villas consist of 96 studio, one bedroom, two bedroom and three bedroom
units located on 12.3 hillside acres, of which 48 units are completed and
ready for immediate occupancy. The additional 48 units currently require
construction of all interior finishes and installation of furniture, fixtures
and equipment prior to occupancy.

ALL SEASONS RESORTS

As a result of the Merger, the Company acquired an additional 10 timeshare
resorts. Of these resorts, six are currently in sales (including the
partially-owned North Bay Resort at Lake Arrowhead), one resort is under
development and the Company has completed sales at three resorts (Villas at
Poco Diablo, Villas of Sedona and Sedona Springs Resort) and the Company
provides homeowners' association management and resale services at these three
locations.

Resorts Currently in Sales

Tahoe Beach & Ski Club. The Tahoe Beach & Ski Club is a beach front resort
located in the City of South Lake Tahoe, California on approximately eight
acres at the end of Ski Run Boulevard which was purchased by AVCOM in March
1994. The project includes a total of 140 units, of which 110 were renovated
as timeshare units at the date acquired. Thirty units have since been
renovated for sale as timeshare units and are being marketed. At the time of
purchase, 4,533 Vacation Intervals related to the 110 renovated units of the
resort had been previously sold. The homeowners' association engaged RPM
Management, Inc., a wholly-owned subsidiary of All Seasons, to operate the
property.

Sedona Summit Resort. In May 1995, AVCOM purchased approximately three acres
in Sedona, Arizona for development of a 60 unit timeshare resort.
Additionally, in May 1996, AVCOM exercised an option to acquire an adjacent
parcel consisting of approximately four acres. Vacation Interval sales
commenced in February 1996. Upon completion of construction, the resort will
contain 60 units.

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Scottsdale Villa Mirage Resort. The Scottsdale Villa Mirage Resort is a 168
unit resort currently under construction located on 10 acres in Scottsdale,
Arizona. The units will be two bedroom condominium type units consisting of
approximately 1,200 square feet. Construction and sales of Phase I began in
March 1996, and Phase I received its certificate of occupancy in February
1997. Amenities are anticipated to include a clubhouse with an exercise
facility, swimming pool and spas and tennis and volleyball courts.

Villas on the Lake. AVCOM acquired an existing condominium project adjacent
to Lake Conroe in Montgomery County, Texas in April 1996. The project consists
of 37 completed units and existing approvals and land for the construction of
48 additional units. Prior to the Merger, AVCOM had contracted with the April
Sound Country Club for use of its facilities by the project's homeowner's
association. Renovation of existing units began in February 1996 and sales
began in June 1996.

Tahoe Seasons Resort. In February 1996, AVCOM acquired a portfolio of
approximately 1,057 non-performing receivables generated from the sale of
Vacation Intervals at Tahoe Seasons Resort in South Lake Tahoe, California for
a purchase price of approximately $1.5 million. Prior to the Merger, AVCOM had
also agreed to purchase other receivables generated from sales at Tahoe
Seasons Resort that subsequently become delinquent. The Company will convert
non-performing loans into Vacation Interval inventory which will be sold.

North Bay Resort at Lake Arrowhead (which is partially owned). The North Bay
Resort at Lake Arrowhead is located in San Bernardino County, California.
AVCOM entered into a series of agreements in January 1996 whereby AVCOM
provided guarantees for $12.7 million of the developer's financing in return
for a fee of $450,000 (evidenced by a note payable), a right of first refusal
to offer Vacation Interval receivable financing to the developer after
expiration of the developer's present $10.0 million financing commitment,
received an option to assume property management for the resort's homeowners
association and purchased a 40% equity position in Trion Capital Corporation,
the corporate general partner of Arrowhead Capital Partners L.P., the
developer of the resort. The general partner is entitled to receive 1% of the
profits of the developer partnership, but under certain circumstances is
entitled to receive substantially higher profits. The 40% equity position was
acquired for $600,000. The proposed resort contemplates the consolidation of
two adjacent developments. One development consists of two completed
condominium buildings converted to Vacation Interval and additional
undeveloped land. The second parcel consists of a combination of three
existing condominium buildings in various stages of construction and pads for
two additional condominium buildings. The developer has been provided with a
$2.7 million construction and operating loan commitment and a $10.0 million
commitment for Vacation Interval receivable financing from a financing
company, subject to operational involvement and financial guarantees of AVCOM.

Resorts Under Development

The Ridge on Sedona Golf Resort. Prior to the Merger, AVCOM had acquired an
approximate 12 acre parcel in Sedona, Arizona for approximately $5.5 million.
The facility comprising The Ridge Spa & Racquet Club has been acquired as a
portion of this development. The parcel is located on the 18th fairway of the
golf course at the Sedona Golf Resort. The Company plans to develop the
property into a 120 unit timeshare resort in phases. Amenities are anticipated
to include a 12,000 square foot club house, three swimming pools and six spas
in addition to privileges at The Ridge Spa and Racquet Club.

Resorts At Which Sales Have Been Completed

Prior to the Merger, AVCOM had substantially completed sales of Vacation
Intervals at the following three resorts. The Company provides homeowners'
association management and resale services at these locations.

Villas of Poco Diablo. The Villas of Poco Diablo resort is a 33 unit
condominium conversion of studios and one-bedroom units located in Sedona,
Arizona. The one-bedroom units have frontage to Oak Creek and the studio units
have frontage to the golf course owned by the Poco Diablo Resort. During the
period 1988 through 1992, the resort was renovated by AVCOM, and the units
were refurbished with new furniture, fixtures and equipment, new paint, new
roofs and interiors and a remodeled outdoor pool and spa area.

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Villas of Sedona. The Villas of Sedona resort is a 40 unit townhouse
conversion of one and two bedroom units located in west Sedona, Arizona. The
property was purchased in 1992 and has been remodeled by AVCOM. The resort has
new furniture, fixtures and equipment, new paint, a new outdoor pool and
custom spa area and major landscaping. In addition, a new building encloses an
outdoor pool which adjoins a 4,000 square foot clubhouse and fitness center.

Sedona Springs Resort. Sedona Springs is a 40-unit two bedroom suite resort
located in Sedona, Arizona on four acres adjacent to the Villas of Sedona
resort. Common areas include a 5,000 sq. ft. clubhouse, two outdoor spas, a
pool facility and spa area. This resort was the first "purpose built"
development construction by AVCOM. Construction of this project commenced in
the first quarter of 1994. Phase one consisted of 13 units and was completed
in the third quarter of 1994. Phase two, consisting of 14 units and common
areas, was completed in the second quarter of 1995. Phase three, consisting of
13 units was completed in November 1995. The clubhouse is completed and being
used temporarily as a sales center. Sales at this project were substantially
completed by January 1996.

CUSTOMER FINANCING

A typical Vacation Interval entitles the buyer to a one-week per year stay
at one of the Company's resorts and ranges in price from approximately $6,000
to $8,000 for a studio residence to approximately $12,000 to $26,000 for a
three bedroom residence. The Company offers financing to the purchasers of
Vacation Intervals in the Company's resort properties who make a down payment
generally equal to at least 10% of the purchase price. This financing
generally bears interest at fixed rates and is collateralized by a first
mortgage on the underlying Vacation Interval. A portion of the proceeds of
such financing is used to obtain releases of the Vacation Interval unit from
outstanding construction loans, if any. The Company has entered into
agreements with lenders for the financing of customer receivables. These
agreements provide an aggregate of up to approximately $175 million of
available financing to the Company bearing interest at variable rates tied to
either the prime rate or LIBOR of which the Company had, at December 31, 1996,
approximately $105 million of additional borrowing capacity available. Under
these arrangements, the Company pledges as security qualified purchaser
promissory notes to these lenders, who typically lend the Company 85% to 90%
of the principal amount of such notes. Payments under these promissory notes
are made by the Vacation Interval purchaser directly to a payment processing
center and such payments are credited against the Company's outstanding
balance with the respective lenders. These arrangements currently have varying
borrowing periods ranging from 18 to 20 months after the initial commitment
date. The Company does not presently have binding agreements to extend the
terms of such existing financing or for any replacement financing upon the
expiration of such funding commitments, and there can be no assurance that
alternative or additional arrangements can be made on terms that are
satisfactory to the Company. Accordingly, future sales of Vacation Intervals
may be limited by both the availability of funds to finance the initial
negative cash flow that results from sales that are financed by the Company
and by reduced demand which may result if the Company is unable to provide
financing to purchasers of Vacation Intervals.

In addition, following the Company's February 1997 offerings of 1.6 million
primary shares of Common Stock and $138 million principal amount of
convertible subordinated notes and the application of the net proceeds
therefrom, the Company currently has approximately $116 million available to
finance customer receivables and currently intends to use such funds to self-
finance customer receivables.

At December 31, 1996, the Company had a portfolio of approximately 13,800
loans to Vacation Interval buyers amounting to approximately $98.8 million
with respect to the Company's consolidated resorts (all of the Existing
Resorts with the exception of the partially-owned Embassy Vacation Resort
Poipu Point). The Company's consumer loans had a weighted average maturity of
approximately seven years and a weighted average interest rate of 15% compared
to a weighted average cost of funds of 10.25% on the Company's borrowings
secured by such customer loans. As of December 31, 1996, approximately 8.6% of
the Company's consumer loans were considered by the Company to be delinquent
(past due by 60 or more days) and the Company has completed or commenced
foreclosure or deed-in-lieu of foreclosure on approximately 2.3% of its
consumer loans. The Company has historically derived income from its financing
activities. Because the

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Company's borrowings bear interest at variable rates and the Company's loans
to purchasers of Vacation Intervals bear interest at fixed rates, the Company
bears the risk of increases in interest rates with respect to the loans it has
from its lenders. The Company may engage in interest rate hedging activities
from time to time in order to reduce the risk and impact of increases in
interest rates with respect to such loans, but there can be no assurance that
any such hedging activity will be adequate at any time to fully protect the
Company from any adverse changes in interest rates.

The Company also bears the risk of purchaser default. The Company's practice
has been to continue to accrue interest on its loans to purchasers of Vacation
Intervals until such loans are deemed to be uncollectible, at which point it
expenses the interest accrued on such loan, commences foreclosure proceedings
and, upon obtaining title, returns the Vacation Interval to the Company's
inventory for resale. As of December 31, 1995, 9.0% of the Company's loans
were considered delinquent. The Company closely monitors its loan accounts and
determines whether to foreclose on a case-by-case basis.

SALES AND MARKETING

As one of the leading developers and operators of timeshare resorts in North
America, the Company believes that it has acquired the skill and expertise in
the development, management and operation of timeshare resorts and in the
marketing of Vacation Intervals. The Company's primary means of selling
Vacation Intervals is through on-site sales forces at each of its resorts. A
variety of marketing programs are employed to generate prospects for these
sales efforts, which include targeted mailings, overnight mini-vacation
packages, gift certificates, seminars and various destination-specific local
marketing efforts. Additionally, incentive premiums are offered to guests to
encourage resort tours, in the form of entertainment tickets, hotel stays,
gift certificates or free meals. The Company's sales process is tailored to
each prospective buyer based upon the marketing program that brought the
prospective buyer to the resort for a sales presentation. Prospective target
customers are identified through various means of profiling, and either
include or will include Westin Vacation Club and Embassy Suites hotel guests
and current owners of timeshare. Cross-marketing targets current owners of
intervals at the Company's existing resorts, both to sell additional intervals
at the owner's home resort, or to sell an interval at another of the Company's
resorts. The Company also sells Vacation Intervals through off-site sales
centers.

The Company seeks to attract potential Vacation Interval buyers at its
Embassy Vacation Resorts by targeting past and present Embassy Suites' hotel
guests with in-hotel marketing and direct marketing programs. These marketing
efforts offer this target audience of Embassy Suites hotel guests value priced
vacation packages which include resort tours and the opportunity to purchase
complete vacations, including accommodations, airfare and other vacation
components such as car rental. Additionally, the Company has the ability to
generate resort tours through Embassy Suites' central reservation system by
offering a premium for a resort tour at the time a consumer books an Embassy
Suites hotel in the vicinity of an Embassy Vacation Resort property. The
Company believes its access to the Embassy Suites customer base allows it to
generate Vacation Interval sales from these prospective customers at a lower
cost than through other lead generation methods. Because a high percentage of
such customers already have a preference for the Embassy brand, the Company
believes it achieves relatively high sales closing percentages among these
customers. Pursuant to the Westin Agreement, the Company intends to use
similar marketing strategies at its Westin Vacation Club resorts. The
Company's non-branded resorts also provide it the opportunity to cross-market
customers among resorts and give owners and prospective buyers the ability to
visit and own Vacation Intervals in multiple destinations. These cross-
marketing programs may also help to create a meaningful identity for the non-
branded properties.

ACQUISITION PROCESS

The Company obtains information with respect to resort acquisition
opportunities through interaction by the Company's management team with resort
operators, real estate brokers, lodging companies or financial institutions
with which the Company has established business relationships. From time to
time the Company is also contacted by lenders and property owners who are
aware of the Company's development, management, operations and sales expertise
with respect to Vacation Interval properties.

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The Company has expertise in all areas of resort development including, but
not limited to, architecture, construction, finance, management, operations
and sales. With relatively little lead time, the Company is able to analyze
potential acquisition and development opportunities. After completing an
analysis of the prospective market and the general parameters of the property
or the site, the Company generates a conceptual design to determine the extent
of physical construction or renovation that can occur on the site in
accordance with the requirements of the local governing agencies. For most
properties, the predominant factors in determining the physical design of the
site include density of units, maximum construction height, land coverage and
parking requirements. Following the preparation of such a conceptual design,
the Company analyzes other aspects of the development process, such as
construction cost and phasing, to match the projected sales flow in the
relevant market. At this stage of analysis, the Company compares sales,
construction cost and phasing, debt and equity structure, cash flow, financing
and overall project cost to the acquisition cost. The Company's procedures
when considering a potential acquisition are set forth below.

Economic and Demographic Analysis. To evaluate the primary economic and
demographic indicators for the resort area, the Company considers the
following factors, among others, in determining the viability of a potential
new timeshare resort in a particular location: (i) supply/demand ratio for
Vacation Intervals in the relevant market, (ii) the market's growth as a
vacation destination, (iii) the ease of converting a hotel or condominium
property into a timeshare resort, (iv) the availability of additional land at
or nearby the property for future development and expansion, (v) competitive
accommodation alternatives in the market, (vi) uniqueness of location, and
(vii) barriers to entry that would limit competition. The Company examines the
competitive environment in which the proposed resort is located and all
existing or to-be-developed resorts. In addition, information respecting
characteristics, amenities and financial information at competitive resorts is
collected and organized. This information is used to assess the potential to
increase revenues at the resort by making capital improvements.

Pro Forma Operating Budget. The Company develops a comprehensive pro forma
budget for the resort, utilizing available financial information in addition
to the other information collected from a variety of sources. The estimated
sales of units are examined, including the management fees associated with
such unit. Finally, the potential for overall capital appreciation of the
resort is reviewed, including the prospects for liquidity through sale or
refinancing of the resort.

Environmental and Legal Review. In conjunction with each prospective
acquisition or development, the Company conducts real estate and legal due
diligence on the property. This due diligence includes an environmental
investigation and report by a reputable environmental consulting firm,
including tests on identified underground storage tanks. If recommended by the
environmental consulting firm, additional testing is generally conducted. The
Company also obtains a land survey of the property and inspection reports from
licensed engineers or contractors on the physical condition of the resort. In
addition, the Company conducts customary real estate due diligence, including
review of title documents, operating leases and contracts, zoning, and
governmental permits and licenses and a determination of whether the property
is in compliance with applicable laws.

OTHER OPERATIONS

Room Rental Operations. In order to generate additional revenue at certain
of its resorts that have rentable inventory of Vacation Intervals, the Company
rents units with respect to such unsold or unused Vacation Intervals for use
as a hotel. The Company offers these unoccupied units both through direct
consumer sales, travel agents or package vacation wholesalers. In addition to
providing the Company with supplemental revenue, the Company believes its
room-rental operations provide it with a good source of lead generation for
the sale of Vacation Intervals. As part of the management services provided by
the Company to Vacation Interval owners, the Company receives a fee for
services provided to rent an owner's Vacation Interval in the event the owner
is unable to use or exchange the Vacation Interval. In addition, the Embassy
Vacation Resort Poipu Point (acquired in November 1994) was acquired as a
traditional hotel with the intention of converting each such resort to a
timeshare property. Until such time as a unit at each resort is sold as
Vacation Intervals, the Company continues

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(or will continue) to rent such unit on a nightly basis. In the future, other
acquired resorts may be operated in this fashion during the start-up of
Vacation Interval sales.

Resort Management. The Company's resorts are (i) generally managed by the
Company pursuant to management agreements with homeowner associations with
respect to each of the Company's non-branded resorts, (ii) managed by Promus
pursuant to management agreements with the Company with respect to the
Company's Grand Beach and Lake Tahoe Embassy Vacation Resorts or (iii) managed
by Aston Hotels & Resorts ("Aston") with respect to the Embassy Vacation
Resort Poipu Point. The Company pays Promus a licensing fee of 2% of Vacation
Interval sales at the Embassy Vacation Resorts. Westin will manage Westin
Vacation Club resorts.

At each of the Company's non-branded resorts, the Company enters into a
management agreement with an association comprised of owners of Vacation
Intervals at the resort to provide for management and maintenance of the
resort. Pursuant to each such management agreement the Company is paid a
monthly management fee equal to 10% to 12% of monthly maintenance fees. The
management agreements are typically for a three year period, renewable
annually automatically unless notice of non-renewal is given by either party.
Pursuant to each management agreement the Company has sole responsibility and
exclusive authority for all activities necessary for the day-to-day operation
of the non-branded resorts, including administrative services, procurement of
inventories and supplies and promotion and publicity. With respect to each
resort the Company also obtains comprehensive and general public liability
insurance, all-risk property insurance, business interruption insurance and
such other insurance as is customarily obtained for similar properties. The
Company also provides all managerial and other employees necessary for the
non-branded resorts, including review of the operation and maintenance of the
resorts, preparation of reports, budgets and projections, employee training,
and the provision of certain in-house legal services. At the Company's Grand
Beach and Lake Tahoe Embassy Vacation Resorts, Promus provides these services.
At the Embassy Vacation Resort Poipu Point, Aston provides management and
maintenance services to the Company pursuant to a management agreement and
assumes responsibility of such day-to-day operation of the Embassy Vacation
Resorts.

VACATION INTERVAL OWNERSHIP

The purchase of a Vacation Interval typically entitles the buyer to use a
fully-furnished vacation residence, generally for a one-week period each year,
in perpetuity. Typically, the buyer acquires an ownership interest in the
vacation residence, which is often held as tenant in common with other buyers
of interests in the property.

The owners of Vacation Intervals manage the property through a non-profit
homeowners' association, which is governed by a Board consisting of
representatives of the developer and owners of Vacation Intervals at the
resort. The Board hires an agent, delegating many of the rights and
responsibilities of the homeowners' association to a management company, as
described above, including grounds landscaping, security, housekeeping and
operating supplies, garbage collection, utilities, insurance, laundry and
repair and maintenance.

Each Vacation Interval owner is required to pay the homeowners' association
a share of all costs of maintaining the property. These charges can consist of
an annual maintenance fee plus applicable real estate taxes (generally $300 to
$700 per interval) and special assessments, assessed on an as-needed basis. If
the owner does not pay such charges, the owner's use rights may be suspended
and the homeowners' association may foreclose on the owner's Vacation
Interval.

PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORKS

The Company believes that its Vacation Intervals are made more attractive by
the Company's participation in Vacation Interval exchange networks operated by
RCI and Interval International with respect to the Royal Palm Beach Club. In a
recent 1995 study sponsored by the Alliance for Timeshare Excellence and ARDA,
the exchange opportunity was cited by purchasers of Vacation Intervals as one
of the most significant factors in determining whether to purchase a Vacation
Interval. Participation in RCI allows the Company's customers to

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exchange in a particular year their occupancy right in the unit in which they
own a Vacation Interval for an occupancy right at the same time or a different
time in another participating resort, based upon availability and the payment
of a variable exchange fee. A member may exchange his Vacation Interval for an
occupancy right in another participating resort by listing his Vacation
Interval as available with the exchange organization and by requesting
occupancy at another participating resort, indicating the particular resort or
geographic area to which the member desires to travel, the size of the unit
desired and the period during which occupancy is desired. RCI assigns a rating
to each listed Vacation Interval, based upon a number of factors, including
the location and size of the unit, the quality of the resort and the period
during which the Vacation Interval is available, and attempts to satisfy the
exchange request by providing an occupancy right in another Vacation Interval
with a similar rating. If RCI is unable to meet the member's initial request,
it suggests alternative resorts based on availability.

Founded in 1974, RCI has grown to be the world's largest Vacation Interval
exchange organization, which has a total of more than 2,900 participating
resort facilities and over 2.0 million members worldwide. During 1995 RCI
processed over 1.5 million Vacation Interval exchanges. The cost of the annual
membership fee in RCI, which typically is at the option and expense of the
owner of the Vacation Interval, is $65 per year, plus an exchange fee of $89
and $119 for domestic and international exchanges, respectively. RCI has
assigned high ratings to the Vacation Intervals in the Company's resort
properties, and such Vacation Intervals have in the past been exchanged for
Vacation Intervals at other highly-rated member resorts. During 1995,
approximately 97% of all exchange requests were fulfilled by RCI, and
approximately 58% of all exchange requests are confirmed on the day of the
request. In November 1996, HFS Incorporated consummated the acquisition of RCI
for cash and securities.

FUTURE ACQUISITIONS

The Company intends to expand its timeshare business by acquiring or
developing resorts located in attractive resort destinations, including Hawaii
and California, and is in the process of evaluating strategic acquisitions in
a variety of locations. Such future acquisition and development of resorts
could have a substantial and material impact on the Company's operations and
prospects. The Company currently is evaluating possible acquisitions of
resorts and development opportunities, including opportunities located in
Southern and Northern California, the Hawaiian islands of Hawaii, Maui and
Oahu, the Caribbean, Mexico, the Western, Southwestern and Southeastern United
States (including Florida, Arizona and Utah) and in various Westin resorts
throughout North America. In addition, the Company has also explored the
acquisition of and may consider acquiring existing management companies,
timeshare developers and marketers, loan portfolios or other industry related
operations or assets in the fragmented timeshare development, marketing,
finance and management industry.

COMPETITION

Although major lodging and hospitality companies such as Marriott, Disney,
Hilton, Hyatt, Four Seasons and Inter-Continental, as well as Promus and
Westin, have established or declared an intention to establish timeshare
operations in the past decade, the industry remains largely unbranded and
highly fragmented, with a vast majority of North America's approximately 2,000
timeshare resorts being owned and operated by smaller, regional companies. Of
the Company's major brand name lodging company competitors, the Company
believes, based on published industry data and reports, that Marriott
currently sells Vacation Intervals at 10 resorts which it also owns and
operates and directly competes with the Company's Poipu Point, Hilton Head
Island and Orlando area resorts; Disney currently sells Vacation Intervals at
three resorts which it also owns and operates and directly competes with the
Company's Orlando area and Hilton Head Island resorts; Hilton currently sells
Vacation Intervals at two resorts which it also owns and operates and directly
competes with the Company's Orlando area resorts; Hyatt owns and operates one
resort in Key West, Florida but does not directly compete in any of the
Company's existing markets; Four Seasons currently is developing its first
timeshare resort in Carlsbad, California but is not yet in sales of Vacation
Intervals at any resorts; and Inter-Continental announced its entry into the
timeshare market in 1996. Many of these entities possess significantly greater
financial, marketing, personnel and other resources than those of the Company
and may be able to grow at a more rapid rate as result.

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The Company also competes with companies with unbranded resorts such as
Westgate, Vistana and Vacation Break, each of which competes with the
Company's Orlando area resorts, Fairfield, which competes with the Company's
Orlando area and Branson resorts and ILX Incorporated, which competes with the
Company's Sedona, Arizona resorts. Under the terms of a recently announced
exclusive five-year agreement, Promus and Vistana, Inc. will jointly acquire,
develop and manage and market vacation ownership resorts in North America
under Promus brand names. As part of the exclusive agreement, Promus and
Vistana, Inc. will designate selected markets for development (which markets
have yet to be announced). The Company has been identified by Promus as the
only other licensee to whom Promus will license the Embassy Vacation Resort
name. However, there can be no assurance that Promus will not grant other
entities a license to develop Embassy Vacation Resorts or that Promus will not
exercise its rights to terminate the Embassy Vacation Resort licenses.
Additionally, Vacation Break announced in November 1996 that it had agreed to
purchase the Berkley Group, another timeshare resort developer, for stock
worth $225.8 million at the time of the announcement. The transaction will
leave Berkley shareholders with control of the combined company. Vacation
Break markets and finances time-sharing interests in Florida and Bahamas
resorts, and the combined company will have resort properties in Virginia,
Florida and the Bahamas. Both are based in Fort Lauderdale, Florida.

In the event that the Westin Agreement becomes the subject of dispute
between the parties thereto, it is possible that the Company's interest in
pursuing acquisition and development opportunities at "four-star" and "five-
star" resorts located in North America, Mexico and the Caribbean through May
2001 could be barred pending the final resolution of such dispute.
Additionally, at the expiration or early termination of the Westin Agreement,
Westin could become a direct competitor with the Company in the timeshare
resort business, including in the markets most attractive to the Company. In
addition, the Embassy Suites hotels owned or controlled by affiliates of the
Company's founders may compete with certain of the Company's timeshare
resorts; however, the Company anticipates that such Embassy Suites hotels
could be a significant source of lead generation for its marketing activities.
Subject to the covenants not to compete (as described herein), the Company's
founders could acquire resort and other hotel properties that could compete
with the Company's timeshare business.

The Company believes, based on published industry data and reports, that its
experience and exclusive focus on the timeshare industry, together with its
portfolio of resorts located in a wide range of resort destinations and at a
variety of price points, distinguish it from each of its competitors and that
the Company is uniquely positioned for future growth.

GOVERNMENTAL REGULATION

General. The Company's Vacation Interval marketing and sales are subject to
extensive regulations by the federal government and the states and foreign
jurisdictions in which its resort properties are located and in which Vacation
Intervals are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may
be subject appears on the Truth-In-Lending Act and Regulation Z, the Equal
Credit Opportunity Act and Regulation B, the Interstate and Land Sales Full
Disclosure Act, Telephone Consumer Protection Act, Telemarketing and Consumer
Fraud and Abuse Prevention Act, Fair Housing Act and the Civil Rights Act of
1964 and 1968. In addition, many states have adopted specific laws and
regulations regarding the sale of interval ownerships programs. The laws of
most states, including Florida, South Carolina and Hawaii require the Company
to file with a designated state authority for its approval a detailed offering
statement describing the Company and all material aspects of the project and
sale of Vacation Intervals. The laws of California require the Company to file
numerous documents and supporting information with the California Department
of Real Estate, the agency responsible for the regulation of Vacation
Intervals. When the California Department of Real Estate determines that a
project has complied with California law, it will issue a public report for
the project. The Company is required to deliver an offering statement or
public report to all prospective purchaser of a Vacation Interval, together
with certain additional information concerning the terms of the purchase. The
laws of Illinois, Florida and Hawaii impose similar requirements. Laws in each
state where the Company sells Vacation Intervals generally grant the purchaser
of a

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Vacation Interval the right to cancel a contract of purchase at any time
within a period ranging from 3 to 15 calendar days following the earlier of
the date the contract was signed or the date the purchaser has received the
last of the documents required to be provided by the Company. Most states have
other laws which regulate the Company's activities such as real estate
licensure; sellers of travel licensure; anti-fraud laws; telemarketing laws;
price gift and sweepstakes laws; and labor laws. The Company believes that it
is in material compliance with all federal, state, local and foreign laws and
regulations to which it is currently or may be subject. However, no assurance
can be given that the cost of qualifying under interval ownership regulations
in all jurisdictions in which the Company desires to conduct sales will not be
significant. Any failure to comply with applicable laws or regulations could
have material adverse effect on the Company.

In addition, certain state and local laws may impose liability on property
developers with respect to construction defects discovered or repairs made by
future owners of such property. Pursuant to such laws, future owners may
recover from the Company amounts in connection with the repairs made to the
developed property.

Environmental Matters. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property, and may be held
liable to a governmental entity or to third parties for property damage and
for investigation and clean-up costs incurred by such parties in connection
with the contamination. Such laws typically impose clean-up responsibility and
liability without regard to whether the owner knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to properly remediate the contamination on such
property, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances at a disposal
or treatment facility also may be liable for the costs of removal or
remediation of a release of hazardous or toxic substances at such disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner of a site may be subject to common
law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with its
ownership and operation of its properties, the Company may be potentially
liable for such costs.

Certain Federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws
may impose liability for release of ACMs and may provide for third parties to
seek recovery from owners and operation of real properties for personal injury
associated with ACMs. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such costs.

In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no
state or federal requirements regarding the monitoring for, presence of, or
exposure to, radon in indoor air, the EPA and the Surgeon General recommend
testing residences for the presence of radon in indoor air, and the EPA
further recommends that concentrations of radon in indoor air be limited to
less than 4 picocuries per liter of air (Pci/L) (the "Recommended Action
Level"). The presence of radon in concentrations equal to or greater than the
Recommended Action Level in one or more of the Company's properties may
adversely affect the Company's ability to sell Vacation Intervals at such
properties and the market value of such property. Recently-enacted federal
legislation will eventually require the Company to disclose to potential
purchasers of Vacation Intervals at the Company's resorts that were
constructed prior to 1978 any known lead-paint hazards and will impose treble
damages for failure to so notify.

Electric transmission lines are located in the vicinity of the Company's
properties. Electric transmission lines are one of many sources of electro-
magnetic fields ("EMFs") to which people may be exposed. Research

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into potential health impacts associated with exposure to EMFs has produced
inconclusive results. Notwithstanding the lack of conclusive scientific
evidence, some states now regulate the strength of electric and magnetic
fields emanating from electric transmission lines, while others have required
transmission facilities to measure for levels of EMFs. In addition, the
Company understands that lawsuits have, on occasion, been filed (primarily
against electric utilities) alleging personal injuries resulting from exposure
as well as fear of adverse health effect. In addition, fear of adverse held
effects from transmission lines has been a factor considered in determining
property values in obtaining financing and in condemnation proceedings in
eminent domain brought by power companies seeking to construct transmission
lines. Therefore, there is a potential for the value of a property to be
adversely affected as a result of its proximity to a transmission line and for
the Company to be exposed to damage claims by person exposed to EMFs.

The Company has conducted Phase I assessments at each of its Existing
Resorts in order to identify potential environmental concerns. These Phase I
assessments have been carried out in accordance with accepted industry
practices and consisted of non-invasive investigations of environmental
conditions at the properties, including a preliminary investigation of the
sites and identification of publicly known conditions concerning properties in
the vicinity of the sites, physical site inspections, review of aerial
photographs and relevant governmental records where readily available,
interviews and knowledgeable parties, investigation for the presence of above
ground and underground storage tanks presently or formerly at the sites, a
visual inspection of potential lead-based paint and suspect friable ACMs where
appropriate, a radon survey, and the preparation and issuance of written
reports.

The Company's assessments of its properties have not revealed any
environmental liability that the Company believes would have a material
adverse effect on the Company's business, assets or results of operations, nor
is the Company aware of any such material environmental liability.
Nevertheless, it is possible that the Company's assessments do not reveal all
environmental liabilities or that there are material environmental liabilities
of which the Company is unaware. The Company does not believe that compliance
with applicable environmental laws or regulations will have a material adverse
effect on the Company or its financial condition or results of operations.

In connection with the acquisition and development of the Embassy Vacation
Resort Lake Tahoe and the San Luis Bay Resort, the Company's environmental
consultant has identified several areas of environmental concern. The areas of
concern at the Embassy Vacation Resort Lake Tahoe relate to possible
contamination that originated on the resort site due to prior uses and to
contamination that may migrate onto the resort site from upgradient sources.
California regulatory agencies have been monitoring the resort site and have
required or is in the process of requiring the responsible parties (presently
excluding the Company) to effect remediation action. The Company has been
indemnified by certain of the responsible parties for certain costs and
expenses in connection with contamination at the Embassy Vacation Resort Lake
Tahoe (including Chevron (USA), Inc.) and does not anticipate incurring
material costs in connection therewith, however, there is no assurance that
the indemnitor(s) will meet their obligations in a complete and timely manner.
In addition, the Company's San Luis Bay Resort is located in an area of Avila
Beach, California which has experienced underground contamination resulting
from leaking pipes at a nearby oil refinery. California regulatory agencies
have required the installation of groundwater monitoring wells on the beach
near the resort site, and no demand or claim in connection with such
contamination has been made on the Company, however, there is no assurance
that claims will not be asserted against the Company with respect to this
environmental condition.

The Company believes that its properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances. Except as described above with
respect to the Embassy Vacation Resort Lake Tahoe and the San Luis Bay Resort,
the Company has not been notified by any governmental authority or any third
party, and is not otherwise aware, of any material noncompliance, liability or
claim relating to hazardous or toxic substances or petroleum products in
connection with any of its present properties.

Other Regulations. Under various state and federal laws governing housing
and places of public accommodation the Company is required to meet certain
requirements related to access and use by disabled

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persons. Many of these requirements did not take effect until after January 1,
1991. Although management of the Company believes that its facilities are
substantially in compliance with present requirements of such laws, and the
Company may incur additional costs of compliance. Additional legislation may
impose further burdens or restriction on owners with respect to access by
disabled persons. The ultimate amount of the cost of compliance with such
legislation is not currently ascertainable, and, while such costs are not
expected to have a material effect on the Company, such costs could be
substantial. Limitations or restrictions on the completion of certain
renovations may limit application of the Company's growth strategy in certain
instances or reduce profit margins on the Company's operations.

EMPLOYEES

As of December 31, 1996, the Company employed approximately 650 full-time
employees. The Company believes that its employee relations are good. Except
for certain employees located in the St. Maarten, Netherlands Antilles
properties, none of the Company's employees is represented by a labor union.
The Company sells Vacation Intervals at its resorts through 376 independent
sales agents. Such independent sales agents provide services to the Company
under contract and are not employees of the Company.

As of December 31, 1996, AVCOM had approximately 430 full-time employees.
AVCOM's employees are not represented by a labor union and AVCOM has no
knowledge of any current organization activities. AVCOM has never suffered a
work stoppage and considers its relations with employees to be good.
Additionally, AVCOM primarily utilizes independent contractors as its sales
representatives. As of December 31, 1996, AVCOM engaged approximately 190
independent contractors in this capacity.

INSURANCE

The Company carries comprehensive liability, fire, hurricane, storm,
earthquake and business interruption insurance with respect to the Company's
resorts, with policy specifications, insured limits and deductibles
customarily carried for similar properties which the Company believes are
adequate. In September 1995 and July 1996, the Company's St. Maarten resorts
were damaged by a hurricane. With respect to such September 1995 damage, the
Company has recovered amounts from its insurance carriers sufficient to cover
100% of the property damage losses and is in the process of recovering amounts
for business interruption. The Company has agreed to provide approximately
2,700 replacement weeks to owners who were unable to use their Vacation
Interval as a result of such September 1995 hurricane. Such provision of
replacement Vacation Intervals will have the short term effect of reducing the
number of Vacation Intervals available for sale or alternative rental as hotel
rooms at the St. Maarten resorts. Additionally, the St. Maarten resorts
sustained relatively minor damage in 1996 as the result of Hurricane Bertha;
management estimates that such damage is approximately $100,000, which is less
than the applicable insurance deductibles and, accordingly, the expense to
repair the damage will be borne by the Company. There are, however, certain
types of losses (such as losses arising from acts of war) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose its capital invested in a resort, as well as the
anticipated future revenues from such resort and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss could have a material adverse effect on the Company.

TRADEMARKS AND COMPANY NAME

While the Company owns and controls a number of trade secrets, confidential
information, trademarks, trade names, copyrights and other intellectual
property rights which, in the aggregate, are of material importance to its
business, it is believed that the Company's business, as a whole, is not
materially dependent upon any one intellectual property or related group of
such properties. The Company is licensed to use certain technology and other
intellectual property rights owned and controlled by others, and, similarly,
other companies are licensed to use certain technology and other intellectual
property rights owned and controlled by the Company.

The Company is considering a proposal to change its corporate name.

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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Many of the following
important factors discussed below, as well as other factors set forth herein,
have been discussed in the Company's prior filings with the Securities and
Exchange Commission (the "Commission").

The Company wishes to caution readers that the following important factors,
as well as other factors set forth herein, among others, could in the future
cause the Company's actual results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, the Company.

ACQUISITION STRATEGY AND RISKS RELATED TO RAPID GROWTH

A principal component of the Company's strategy is to continue to grow by
acquiring additional resorts. The Company's future growth and financial
success will depend upon a number of factors, including its ability to
identify attractive resort acquisition opportunities, consummate the
acquisitions of such resorts on favorable terms, convert such resorts to use
as timeshare resorts and profitably sell Vacation Intervals at such resorts.
There can be no assurance that the Company will be successful with respect to
such factors. The Company's ability to execute its growth strategy depends to
a significant degree on the existence of attractive resort acquisition
opportunities (which, in the past, have included completed or nearly completed
resort properties), its ability both to consummate acquisitions on favorable
terms and to obtain additional debt and equity capital and to fund such
acquisitions and any necessary conversion and marketing expenditures.
Currently, there are numerous potential buyers of resort real estate which are
better capitalized than the Company competing to acquire resort properties
which the Company may consider attractive resort acquisition opportunities.
There can be no assurance that the Company will be able to compete against
such other buyers successfully or that the Company will be successful in
consummating any such future financing transactions or equity offerings on
terms favorable to the Company. The Company's ability to obtain and repay any
indebtedness at maturity may depend on refinancing, which could be adversely
affected if the Company cannot effect the sale of additional debt or equity
through public offerings or private placements on terms favorable to the
Company. Factors which could affect the Company's access to the capital
markets, or the cost of such capital, include changes in interest rates,
general economic conditions, the perception in the capital markets of the
timeshare industry and the Company's business, results of operations,
leverage, financial condition and business prospects.

In addition, an important part of the Company's growth strategy is to
acquire and develop additional Embassy Vacation Resorts and Westin Vacation
Club resorts. Westin has not previously been active in the timeshare market
and may not devote the corporate resources to such projects at levels which
will make the projects successful. Moreover, there can be no assurance that
Promus will elect to continue licensing the Embassy Vacation Resort name to
the Company with respect to possible future resorts. Under the terms of a
recently-announced exclusive five-year agreement, Promus and Vistana, Inc.
will jointly acquire, develop, manage and market vacation ownership resorts in
North America under Promus brand names. As part of the exclusive agreement,
Promus and Vistana, Inc. will designate selected markets for development
(which markets have yet to be announced). The Company has been identified by
Promus as the only other licensee to whom Promus will license the Embassy
Vacation Resort name. However, there can be no assurance that Promus will not
grant other entities a license to develop Embassy Vacation Resorts or that
Promus will not exercise its rights to terminate the Embassy Vacation Resort
licensees.

RISKS RELATED TO THE MERGER

Uncertainty as to Future Financial Results. The Company believes that the
Merger with AVCOM offers opportunities for long-term efficiencies in
operations that should positively affect future results of the combined
operations of the Company and AVCOM. However, the Merger may adversely affect
the Company's financial performance in 1997 and future years until such time
as the Company is able to realize the positive effect of

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<PAGE>

such long-term efficiencies. In addition, the combined companies are more
complex and diverse than the Company prior to the Merger, and the combination
and continued operation of their distinct business operations present
difficult challenges for the Company's management due to the increased time
and resources required in the management effort. While management and the
Board of Directors of the Company believe that the combination can be effected
in a manner which will realize the value of the two companies, management has
no experience in combinations of this size.

In order to maintain and increase profitability, the combined companies will
need to successfully integrate and streamline overlapping functions. There can
be no assurance that integration will be successfully accomplished. The
difficulties of such integration may be increased by the necessity of
coordinating geographically separate organizations. The integration of certain
operations following the Merger will require the dedication of management
resources which may temporarily distract attention from the day-to-day
business of the combined companies. Failure to effectively accomplish the
integration of the two companies' operations could have an adverse effect on
the Company's results of operations and financial condition.

Merger and Related Expenses. Transaction costs relating to the negotiation
of, preparation for, and consummation of the Merger and the anticipated
combination of certain operations of the Company and AVCOM will result in a
one-time charge to the Company's earnings of $1.6 million in the first quarter
of 1997. This charge will include the fees and expenses payable to financial
advisors, legal fees and other transaction expenses related to the Merger. In
addition, there can be no assurance that the Company will not incur additional
charges in subsequent quarters to reflect costs associated with the Merger and
the integration of the Company's and AVCOM's operations. Additionally,
transaction costs relating to the consummation of the Merger and the
anticipated combination of operations of the Company and AVCOM, along with
changes in AVCOM's accounting policies to conform to the Company's and the
write-down and write-off of certain AVCOM assets, resulted in a one-time
charge to AVCOM's earnings in 1996 of approximately $13.6 million. This charge
includes the estimated costs associated with workforce reductions, contractual
payment obligations and other restructuring activities.

Accounting Treatment. The Merger is expected to be accounted for by the
pooling-of-interests method of accounting. Under this method of accounting,
the recorded assets and liabilities of the Company and AVCOM will be carried
forward at their book values to the Company, income of the Company will
include the income (or loss) of the Company and AVCOM for the entire fiscal
year in which the Merger occurred, and the reported income of the Company and
AVCOM for prior periods will be combined and restated as income of the
Company. Although the Company received an opinion from its independent public
accountants that the Merger will qualify
for a pooling-of-interests accounting treatment, opinions of accountants are
not binding upon the Commission, and there can be no assurance that the
Commission will not successfully assert a contrary position. In such case, the
purchase method of accounting would be applicable. Under the purchase method,
the book value of AVCOM's assets would be increased to their fair values,
which could result in higher costs of sales, thereby adversely affecting the
Company's earnings. Additionally, the excess of the purchase price over the
fair value of AVCOM's assets would be amortized and expensed, which could also
adversely affect the Company's earnings.

VARIABILITY OF QUARTERLY RESULTS; POSSIBLE VOLATILITY OF STOCK PRICE

The Company's earnings may be impacted by the timing of the completion and
development of future resorts, and the potential impact of weather or other
natural disasters at the Company's resort locations (e.g., hurricanes in
Hawaii, St. Maarten and St. John and earthquakes in California). Furthermore,
the Company has historically experienced and expects to continue to experience
seasonal fluctuations in its gross revenues and net income from the sale of
Vacation Intervals. This seasonality may cause significant variations in
quarterly operating results. If sales of Vacation Intervals are below seasonal
norms during a particular period, the Company's annual operating results could
be materially adversely affected. In addition, the combination of (i) the
possible delay in generating revenue after the acquisition by the Company of
additional resorts prior to the commencement of Vacation Interval sales and
(ii) the expenses associated with start-up unit or room-rental operations,
interest expense, amortization and depreciation expenses from such
acquisitions may materially adversely impact earnings.

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<PAGE>

Due to the foregoing and other factors, the Company believes that its
quarterly and annual revenues, expenses and operating results could vary
significantly in the future and that period-to-period comparisons should not
be relied upon as indications of future performance. Because of the above
factors, it is possible that the Company's operating results will be below the
expectations of stock market analysts and investors, which could have a severe
adverse effect on the market value of the Company's Common Stock. Furthermore,
the market price for the Common Stock has been subject to significant
fluctuations. Numerous factors, including announcements of fluctuations in the
Company's or its competitors' operating results and market conditions for
hospitality and timeshare industry stocks in general, could have a significant
impact on the future price of the Common Stock. In addition, the stock market
in recent years has experienced significant price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
companies. These broad fluctuations may adversely affect the market price of
the Common Stock.

RISKS OF DEVELOPMENT AND CONSTRUCTION ACTIVITIES

The Company intends to actively continue development, construction,
redevelopment/conversion and expansion of timeshare resorts. There can be no
assurance that the Company will complete development, expansion and/or
conversion of its resorts currently under development or expansion, undertake
the additional expansion plans set forth herein or undertake to develop other
resorts or complete such development if undertaken. Risks associated with the
Company's development, construction and redevelopment/conversion activities,
and expansion activities may include the risks that: acquisition and/or
development opportunities may be abandoned; construction costs of a property
may exceed original estimates, possibly making the resort uneconomical or
unprofitable; sales of Vacation Intervals at a newly completed property may
not be sufficient to make the property profitable; financing may not be
available on favorable terms for development of, or the continued sales of
Vacation Intervals at, a property; and construction may not be completed on
schedule, resulting in decreased revenues and increased interest expense. In
addition, the Company's construction activities typically are performed by
third-party contractors, the timing, quality and completion of which cannot be
controlled by the Company. Nevertheless, construction claims may be asserted
against the Company for construction defects and such claims may give rise to
liabilities. New development activities, regardless of whether or not they are
ultimately successful, typically require a substantial portion of management's
time and attention. Development activities are also subject to risks relating
to the inability to obtain, or delays in obtaining, all necessary zoning,
land-use, building, occupancy and other required governmental permits and
authorizations, the ability of the Company to coordinate construction
activities with the process of obtaining such permits and authorizations, and
the ability of the Company to obtain the financing necessary to complete the
necessary acquisition, construction, and/or conversion work. The Company
currently does not have the financing available to complete all of its planned
expansion of the Existing Resorts and All Seasons Resorts. The ability of the
Company to expand its business to include new resorts will in part depend upon
the availability of suitable properties at reasonable prices and the
availability of financing for the acquisition and development of such
properties. In addition, certain states and local laws may impose liability on
property developers with respect to construction defects, discovered or
repairs made by future owners of such property. Pursuant to such laws, future
owners may recover from the Company amounts in connection with any repairs
made to the developed property.

RISKS OF THE ST. JOHN ACQUISITION

Although the Company and Westin have announced the signing of definitive
agreements for the acquisition of the St. John Villas and the St. John Hotel,
the closing of such acquisition is subject to the timely satisfaction of
certain conditions, including the execution by the Company and Westin of
mutually satisfactory agreements relating to the operation of the St. John
Villas. Although the Company expects such acquisition to be consummated during
April of 1997 and sales of Vacation Intervals to begin at the resort by the
fourth quarter of 1997, there can be no assurance that such acquisition and
commencement of timeshare sales will be consummated in such time period, if at
all. In the event that the closing of the St. John acquisition or the
commencement of timeshare sales is materially delayed or does not occur, the
Company could incur additional transaction and start-up costs, which may
result in an adverse effect on the results of the Company in 1997 or in future
years.

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RISK OF INCREASING LEVERAGE; RESTRICTIVE COVENANTS

The Company will have significant interest expense and principal repayment
obligations under its indebtedness. Future development by the Company at its
resorts will be financed with indebtedness obtained pursuant to the Company's
existing credit facilities or credit facilities obtained by the Company in the
future. The agreements with respect to such facilities do contain or in the
future could contain restrictive covenants, possibly including covenants
limiting capital expenditures, incurrence of debt and sales of assets and
requiring the Company to achieve certain financial ratios, some of which could
become more restrictive over time. Subsequent acquisition activities will be
financed primarily by new financing arrangements. Certain of the Company's
indebtedness will be secured by mortgages on the Company's resort properties
as well as other assets of the Company. Among other consequences, the leverage
of the Company and such restrictive covenants and other terms of the Company's
debt instruments could impair the Company's ability to obtain additional
financing in the future, to make acquisitions and to take advantage of
significant business opportunities that may arise. In addition, the Company's
leverage may increase its vulnerability to adverse general economic and
timeshare industry conditions and to increased competitive pressures.

RISKS ASSOCIATED WITH PARTNERSHIP INVESTMENT IN THE POIPU PARTNERSHIP

The Embassy Vacation Resort Poipu Point is owned by the Poipu Partnership
(as defined), which consists of the Company and a third party. Property
ownership through a partnership involves additional risks, including
requirements of partner consents for major decisions (including approval of
budgets), capital contributions and entry into material agreements. If the
Company and its partner are unable to agree on major decisions, either partner
may elect to invoke a buy/sell right, which could require the Company to
either sell its interest in the Embassy Vacation Resort Poipu Point or to buy
out the interest of its partner at a time when the Company is not prepared to
do so. In addition, under certain circumstances, the other partner can require
the Company to purchase such partner's interest or sell its interest to the
partner. If a dispute arises under this partnership, an adverse resolution
could have a material adverse effect on the operations of the Company. In
addition, as a general partner, the Company will be subject to certain
fiduciary obligations which may obligate it to act in a manner which is not
necessarily in the best interest of the Company. The Company may elect to
purchase interests in future resorts through similar partnership arrangements.

LIMITED OPERATING HISTORY

The Company was formed in May 1996. Although predecessors of the Company
have operating history in the timeshare and hospitality industries, the
Company has limited operating history as an integrated entity and limited
experience operating as a public company, which could have an adverse impact
on the Company's operations and future profitability. The Company has chosen
to conduct its management operations (i) in two locations in California
primarily with respect to acquisition, development and finance, (ii) in
Chicago, Illinois with respect to marketing, (iii) in Orlando, Florida
primarily with respect to sales, accounting and property management operations
and (iv) in Sedona, Arizona, primarily with respect to sales, marketing,
accounting and property management of the All Seasons Resorts. However, as the
Company grows and diversifies into additional geographic markets, no assurance
can be given as to management's ability to efficiently manage operations and
control functions without a centrally located management team.

GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN TIMESHARE INDUSTRY; GEOGRAPHIC
CONCENTRATION OF INVESTMENTS

Any downturn in economic conditions or any price increases (e.g., airfares)
related to the travel and tourism industry could depress discretionary
consumer spending and have a material adverse effect on the Company's
business. Any such economic conditions, including recession, may also
adversely affect the future availability of attractive financing rates for the
Company or its customers and may materially adversely affect the Company's
business. Furthermore, adverse changes in general economic conditions may
adversely affect the collectibility of the Company's loans to Vacation
Interval buyers. Because the Company's operations are conducted solely within

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the timeshare industry, any adverse changes affecting the timeshare industry
such as an oversupply of timeshare units, a reduction in demand for timeshare
units, changes in travel and vacation patterns, changes in governmental
regulations of the timeshare industry and increases in construction costs or
taxes, as well as negative publicity for the timeshare industry, could have a
material adverse effect on the Company's operations. Additionally, two of the
nine Existing Resorts are located in each of California, Florida and St.
Maarten, and six of the 10 All Seasons Resorts are located in Arizona and
three are located in California. The concentration of the Company's
investments in California, Florida, the Caribbean and Arizona could result in
adverse events or conditions which affect those areas in particular, such as
economic recessions and natural disasters, having a more significant negative
effect on the operations of the Company's resorts, than if the Company's
investments were more geographically diverse.

RISKS ASSOCIATED WITH CUSTOMER FINANCING

The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts who make a down payment generally equal to at least 10% of
the purchase price. This financing generally bears interest at fixed rates and
is collateralized by a first mortgage on the underlying Vacation Interval. The
Company has entered into agreements with lenders for the financing of these
customer receivables. These agreements provide an aggregate of up to
approximately $175 million of available financing to the Company bearing
interest at variable rates tied to either the prime rate or LIBOR, of which
the Company as of December 31, 1996, has approximately $105 million of
additional borrowing availability. Under these arrangements, the Company
pledges as security promissory notes to these lenders, who typically lend the
Company 85% to 90% of the principal amount of such notes. Payments under these
promissory notes are made by the buyer/borrowers directly to a payment
processing center and such payments are credited against the Company's
outstanding balance with the respective lenders. The Company does not
presently have binding agreements to extend the terms of such existing
financing or for any replacement financing upon the expiration of such funding
commitments (which have varying borrowing periods ranging from 18 to 20 months
after the initial commitment date), and there can be no assurance that
alternative or additional arrangements can be made on terms that are
satisfactory to the Company. Accordingly, future sales of Vacation Intervals
may be limited by both the availability of funds to finance the initial
negative cash flow that results from sales that are financed by the Company
and by reduced demand which may result if the Company is unable to provide
financing through unaffiliated lenders to buyers of Vacation Intervals. If the
Company is required to sell its customer receivables to lenders, discounts
from the face value of such receivables may be required by such lenders, if
lenders are available at all. The Company has historically derived income from
its financing activities. However, because the Company's borrowings bear
interest at variable rates and the Company's loans to buyers of Vacation
Intervals bear interest at fixed rates, the Company bears the risk of
increases in interest rates with respect to the loans it has from its lenders.
To the extent interest rates on the Company's borrowings decrease, the Company
faces an increased risk that customers will pre-pay their loans and reduce the
Company's income from financing activities.

RISKS OF HEDGING ACTIVITIES

To manage risks associated with the Company's borrowings bearing interest at
variable rates, the Company expects from time to time to purchase interest
rate caps, interest rate swaps or similar instruments. The nature and quantity
of the hedging transactions for the variable rate debt will be determined by
the management of the Company based on various factors, including market
conditions, and there have been no limitations placed on management's use of
certain instruments in such hedging transactions. No assurance can be given
that any such hedging transactions will offset the risks of changes in
interest rates, or that the costs associated with hedging activities will not
increase the Company's operating costs.

RISKS ASSOCIATED WITH CUSTOMER DEFAULT

The Company bears the risk of defaults by buyers who financed the purchase
of their Vacation Intervals. If a buyer of a Vacation Interval defaults on the
loan made by the Company to finance the purchase of such Vacation Interval
during the early part of the repayment schedule the Company generally must
take back the

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mortgage with respect to such Vacation Interval and replace it with a
performing mortgage. In connection with the Company taking back any such
Vacation Interval, the associated marketing costs other than certain sales
commissions will not have been recovered by the Company and they must be
incurred again after their Vacation Interval has been returned to the
Company's inventory for resale (commissions paid in connection with the sale
of Vacation Intervals may be recoverable from the Company's sales personnel
and from independent contractors upon default in accordance with contractual
arrangements with the Company, depending upon the amount of time that has
elapsed between the sale and the default and the number of payments made prior
to such default). Although private mortgage insurance or its equivalent is
available to cover Vacation Intervals, the Company has never purchased such
insurance. In addition, although the Company in many cases may have recourse
against Vacation Interval buyers, sales personnel and independent contractors
for the purchase price paid and for commissions paid, respectively, no
assurance can be given that the Vacation Interval purchase price or any
commissions will be fully or partially recovered in the event of buyer
defaults under such financing arrangements. The Company purchased defaulted
mortgage notes with respect to 900 Vacation Intervals at the San Luis Bay
Resort on which the Company is in the process of foreclosing. The Company will
be subject to the costs and delays associated with such foreclosure process
and no assurance can be given that the value of the underlying Vacation
Intervals being foreclosed upon at the time of resale will exceed the purchase
price of the defaulted loans, taking into consideration the costs of
foreclosure and resale. Similarly, in March 1996, AVCOM purchased defaulted
mortgage notes with respect to 1,057 Vacation Intervals at the Tahoe Seasons
Resort on which AVCOM was in the process of foreclosing. The Company continues
to be subject to the costs and delays associated with such foreclosure process
and no assurance can be given that the value of the underlying Vacation
Intervals being foreclosed upon at the time of resale will exceed the purchase
price of the defaulted loans, taking into consideration the costs of
foreclosure and resale.

COMPETITION

The Company is subject to significant competition at each of its resorts
from other entities engaged in the business of resort development, sales and
operation, including interval ownership, condominiums, hotels and motels. Many
of the world's most recognized lodging, hospitality and entertainment
companies have begun to develop and sell Vacation Intervals in resort
properties. Although the Company recently obtained the exclusive development
rights to Westin Vacation Clubs from Westin pursuant to the Westin Agreement,
other major companies that now operate or are developing or planning to
develop Vacation Interval resorts include Marriott, Disney, Hilton, Hyatt,
Four Seasons and Inter-Continental. Many of these entities possess
significantly greater financial, marketing, personnel and other resources than
those of the Company and may be able to grow at a more rapid rate or more
profitably as a result.

The Company also competes with companies with non-branded resorts such as
Westgate, Vistana, Inc., ILX Incorporated and Vacation Break. Under the terms
of a recently announced exclusive five-year agreement, Promus and Vistana,
Inc. will jointly acquire, develop and manage and market vacation ownership
resorts in North America under Promus brand names. As part of the exclusive
agreement, Promus and Vistana, Inc. will designate selected markets for
development (which markets have yet to be announced). The Company has been
identified by Promus as the only other licensee to whom Promus will license
the Embassy Vacation Resort name. However, there can be no assurance that
Promus will not grant other entities a license to develop Embassy Vacation
Resorts or that Promus will not exercise its rights to terminate the Embassy
Vacation Resort licenses. Additionally, Vacation Break announced in November
1996 that it had agreed to purchase the Berkley Group, another timeshare
resort developer, and following consummation of Vacation Breaks' acquisition
of the Berkley Group, such entity will possess greater resources as a
consolidated entity.

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<PAGE>

DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORKS; RISK OF INABILITY TO
QUALIFY RESORTS

The attractiveness of Vacation Interval ownership is enhanced significantly
by the availability of exchange certain networks that allow Vacation Interval
owners to exchange in a particular year the occupancy right in their Vacation
Interval for an occupancy right in another participating network resort.
According to the ARDA, the ability to exchange Vacation Intervals was cited by
buyers as a primary reason for purchasing a Vacation Interval. Several
companies, including RCI, provide broad-based Vacation Interval exchange
services, and the Company's Existing Resorts are currently qualified for
participation in the RCI exchange network. In November 1996, HFS Incorporated
consummated its acquisition of RCI.

No assurance can be given that the Company will continue to be able to
qualify the Existing Resorts or the All Seasons Resorts, or will be able to
qualify its future resorts, for participation in the RCI network or any other
exchange network. RCI is under no obligation to include the Existing Resorts
or the All Seasons Resorts in its exchange network. If such exchange networks
cease to function effectively, or if the Company's resorts are not accepted as
exchanges for other desirable resorts, the Company's sales of Vacation
Intervals could be materially adversely effected.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a large extent upon the experience and
abilities of Messrs. Kaneko, Gessow and Kenninger, who serve as the Company's
Chief Executive Officer, President, and Chief Operating Officer, respectively,
as well as the abilities of James E. Noyes and Michael A. Depatie, the
Company's Executive Vice President, and Executive Vice President and Chief
Financial Officer, respectively. The loss of the services of any one of these
individuals could have a material adverse effect on the Company, its
operations and its business prospects. The Company's success is also dependent
upon its ability to attract and maintain qualified development, acquisition,
marketing, management, administrative and sales personnel for which there is
keen competition among the Company's competitors. In addition, the cost of
retaining such key personnel could escalate over time. There can be no
assurance that the Company will be successful in attracting and/or retaining
such personnel.

Pursuant to the Poipu Partnership Agreement, the Company may be removed as
managing general partner if, under certain circumstances, two of the three
Company founders (Osamu Kaneko, Andrew J. Gessow and Steven C. Kenninger) are
no longer officers of the Company. In addition, the Poipu Partnership
Agreement provides that certain of the Company's founders will be actively
involved in the management of the Embassy Vacation Resort Poipu Point.

REGULATION OF MARKETING AND SALES OF VACATION INTERVALS; OTHER LAWS

The Company's marketing and sales of Vacation Intervals and other operations
are subject to extensive regulation by the federal government and the states
and foreign jurisdictions in which the Existing Resorts are located and in
which Vacation Intervals are marketed and sold. On a federal level, the
Federal Trade Commission has taken the most active regulatory role through the
Federal Trade Commission Act, which prohibits unfair or deceptive acts or
competition in interstate commerce. Other federal legislation to which the
Company is or may be subject appears in the Truth-in-Lending Act and
Regulation Z, the Equal Opportunity Credit Act and Regulation B, the
Interstate Land Sales Full Disclosure Act, Telephone Consumer Protection Act,
Telemarketing and Consumer Fraud and Abuse Prevention Act, Fair Housing Act
and the Civil Rights Acts of 1964 and 1968. In addition, many states have
adopted specific laws and regulations regarding the sale of interval ownership
programs. The laws of most states, including Florida, South Carolina and
Hawaii, require the Company to file with a designated state authority for its
approval a detailed offering statement describing the Company and all material
aspects of the project and sale of Vacation Intervals. The laws of California
and Arizona require the Company to file numerous documents and supporting
information with their respective Departments of Real Estate, the agencies
responsible for the regulation of Vacation Intervals. When such Departments
determine that a project has complied with applicable law, they will issue a
public report for the project. The Company is

31
<PAGE>

required to deliver an offering statement or public report to all prospective
purchasers of a Vacation Interval, together with certain additional
information concerning the terms of the purchase. The laws of Illinois,
Florida, Hawaii and Texas impose similar requirements. Laws in each state
where the Company sells Vacation Intervals generally grant the purchaser of a
Vacation Interval the right to cancel a contract of purchase at any time
within a period ranging from three to fifteen calendar days following the
earlier of the date the contract was signed or the date the purchaser has
received the last of the documents required to be provided by the Company.
Most states have other laws which regulate the Company's activities, such as
real estate licensure; seller's of travel licensure; anti-fraud laws;
telemarketing laws; price, gift and sweepstakes laws; and labor laws. The
Company believes that it is in material compliance with all federal, state,
local and foreign laws and regulations to which it is currently subject.
However, no assurance can be given that the cost of qualifying under Vacation
Interval ownership regulations in all jurisdictions in which the Company
desires to conduct sales will not be significant or that the Company is in
fact in compliance with all applicable federal, state, local and foreign laws
and regulations. Any failure to comply with applicable laws or regulations
could have a material adverse effect on the Company.

In connection with the All Seasons Resorts acquired in the Merger, the
California Department of Real Estate had conducted an audit with respect to
AVCOM's prior timeshare operations at the Tahoe Beach & Ski Club and had
informed AVCOM of several discrepancies it claimed to have discovered during
such audit. AVCOM had responded to the Department of Real Estate's request for
additional information and disputed the claimed discrepancies. The final
results of the audit are pending.

POSSIBLE ENVIRONMENTAL LIABILITIES

Under various federal, state and local laws, ordinances and regulations, the
owner of real property generally is liable for the costs of removal or
remediation of certain hazardous or toxic substances located on or in, or
emanating from, such property, as well as related costs of investigation and
property damage. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. The presence of such substances, or the failure
to properly remediate such substances, may adversely affect the owner's
ability to sell or lease a property or to borrow using such real property as
collateral. Other federal and state laws require the removal or encapsulation
of asbestos-containing material when such material is in poor condition or in
the event of construction, demolition, remodeling or renovation. Other
statutes may require the removal of underground storage tanks. Noncompliance
with these and other environmental, health or safety requirements may result
in the need to cease or alter operations at a property.

Phase I environmental reports (which typically involve inspection without
soil sampling or ground water analysis) have been prepared by independent
environmental consultants for each Existing Resort and for each All Seasons
Resort. In connection with the acquisition and development of the Embassy
Vacation Resort Lake Tahoe and the San Luis Bay Resort, the independent
environmental consultants have identified several areas of environmental
concern. The areas of concern at the Embassy Vacation Resort Lake Tahoe relate
to possible soil and water contamination that originated on the resort site
due to prior uses and to contamination that may migrate onto the resort site
from upgradient sources. California regulatory agencies have been monitoring
the resort site and have required or are in the process of requiring the
responsible parties (presently excluding the Company) to effect remediation
action. The Company has been indemnified by certain of such responsible
parties for certain costs and expenses in connection with contamination at the
Embassy Vacation Resort Lake Tahoe (including Chevron (USA), Inc.) and does
not anticipate incurring material costs in connection therewith; however,
there is no assurance that the indemnitor(s) will meet their obligations in a
complete and timely manner. In addition, the Company's San Luis Bay Resort is
located in an area of Avila Beach, California which has experienced
underground contamination resulting from leaking pipes at a

32
<PAGE>

nearby oil refinery. California regulatory agencies have required the
installation of groundwater monitoring wells on the beach near the resort
site, and no demand or claim in connection with such contamination has been
made on the Company, however, there is no assurance that claims will not be
asserted against the Company with respect to this environmental condition. In
addition, while remodeling the Carson Building at the Tahoe Beach & Ski Club,
AVCOM's contractor informed AVCOM of the possible presence of asbestos
containing materials. AVCOM has given governmental and private notification to
various agencies and persons whom AVCOM determined, after consulting with
counsel, should receive notice. Civil and criminal penalties could be assessed
in this matter, however, it is the present belief of the Company, after
conferring with counsel, that such penalties are unlikely. Civil liability for
personal injury is also possible, but the Company's consultants do not believe
that the asbestos posed a substantial health hazard and that the environmental
concern has been remediated. The total additional cost to AVCOM for the
asbestos remediation, including all professional fees, was $325,000.

With the exception of the above mentioned resorts, the Company is not aware
of any environmental liability that would have a material adverse effect on
the Company's business, assets or results of operations. No assurance,
however, can be given that these reports reveal all environmental liabilities
or that no prior owner created any material environmental condition not known
to the Company.

Certain environmental laws impose liability on a previous owner of property
to the extent that hazardous or toxic substances were present during the prior
ownership period. A transfer of the property does not relieve an owner of such
liability. Thus, the Company may have liability with respect to properties
previously sold by its predecessors.

The Company believes that it is in compliance in all material respects with
all federal, state and local ordinances and regulations regarding hazardous or
toxic substances and, except as described above with respect to the Embassy
Vacation Resort Lake Tahoe and the San Luis Bay Resort, the Company has not
been notified by any governmental authority or third party of any non-
compliance, liability or other claim in connection with any of its present or
former properties.

COSTS OF COMPLIANCE WITH LAWS GOVERNING ASSESSIBILITY OF FACILITIES TO
DISABLED PERSONS

A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act (the "ADA"), impose requirements related to
access and use by disabled persons on a variety of public accommodations and
facilities. These requirements did not become effective until after January 1,
1991. Although the Company believes that its Existing Resorts and the All
Seasons Resorts are substantially in compliance with laws governing the
accessibility of its facilities to disabled persons, a determination that the
Company is not in compliance with the ADA could result in a judicial order
requiring compliance, imposition of fines or an award of damages to private
litigants. The Company is likely to incur additional costs of complying with
the ADA; however, such costs are not expected to have a material adverse
effect on the Company's results of operations or financial condition.
Additional legislation may impose further burdens or restrictions on property
owners (including homeowner associations at the Existing Resorts and the All
Seasons Resorts) with respect to access by disabled persons. The ultimate
amount of the cost of compliance with such legislation is not currently
ascertainable, and, while such costs are not expected to have a material
effect on the Company, such costs could be substantial. Limitations or
restrictions on the completion of certain renovations may limit application of
the Company's growth strategy in certain instances or reduce profit margins on
the Company's operations. If a homeowners' association at a resort was
required to make significant improvements as a result of non-compliance with
the ADA, Vacation Interval owners may default on their mortgages and/or cease
making required homeowners' association assessment payments. The Company is
not aware of any non-compliance with the ADA, the Fair Housing Act or similar
laws that management believes would have a material adverse effect on the
Company's business, assets or results of operations.

33
<PAGE>

NATURAL DISASTERS; UNINSURED LOSS

In 1992, prior to the Company's purchase of an interest in the Embassy
Vacation Resort Poipu Point, the resort was substantially destroyed by
Hurricane Iniki. The resort was rebuilt with insurance proceeds before the
Company acquired its interest in the resort, but could suffer similar damage
in the future. In September 1995 and July 1996, the Company's St. Maarten
resorts were damaged by hurricanes and could suffer similar damage in the
future. In addition, the Company's other resorts which are or will be located
in Hawaii, Florida and the Caribbean (including the recently-announced St.
John resort which was damaged by Hurricane Marilyn in 1995) may be subject to
hurricanes and damaged as a result thereof. The Company's resorts located in
California and Hawaii may be subject to damage resulting from earthquakes.
There are certain types of losses (such as losses arising from acts of war)
that are not generally insured because they are either uninsurable or not
economically insurable and for which the Company does not have insurance
coverage. Should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose its capital invested in a resort, as well as the
anticipated future revenues from such resort and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss could have a material adverse effect on the Company.

EFFECTIVE VOTING CONTROL BY EXISTING STOCKHOLDERS; WESTIN DIRECTOR DESIGNATION

The Company's founders hold substantial amounts of shares of Common Stock
(Messrs. Kaneko, Gessow and Kenninger hold 13.4%, 15.4% and 6.9%,
respectively, as of the date hereof, but without giving effect to the possible
future conversion of the Convertible Notes) which may allow them,
collectively, to exert substantial influence over the election of directors
and the management and affairs of the Company. Accordingly, if such persons
vote their shares of Common Stock in the same manner, they may have sufficient
voting power to determine the outcome of various matters submitted to the
stockholders for approval, including mergers, consolidations and the sale of
substantially all of the Company's assets. Pursuant to the Westin Agreement,
during the term thereof Westin generally will have the right to designate one
member of the Company's Board of Directors, irrespective of its share
ownership in the Company. Such control may result in decisions which are not
in the best interest of the Company. In addition, under certain circumstances,
in the event that the Company's founders collectively own less than 75% of the
shares of Common Stock owned by them immediately following the closing of the
Initial Public Offering and the consummation of the Consolidation
Transactions, and the Common Stock they own thereafter is less than 75% of the
market value of the Common Stock issued to them in the Initial Public
Offering, then the Company's partner in the Poipu Partnership will be entitled
to require the Company to either dispose of its interest or purchase such
partner's interest in the Poipu Partnership pursuant to the terms and
conditions of the partnership agreement.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its Common Stock. The
Company currently intends to retain future earnings to finance its operations
and fund the growth of its business. Any payment of future dividends will be
in the discretion of the Company's Board of Directors and will depend upon,
among other things, the Company's earnings, financial condition, capital
requirements, level of indebtedness, contractual restrictions in respect of
the payment of dividends and other factors that the Company's Board of
Directors deems relevant.

RISK OF TAX RE-CLASSIFICATION OF INDEPENDENT CONTRACTORS AND RESULTING TAX
LIABILITY; COST OF COMPLIANCE WITH APPLICABLE LAWS

The Company sells Vacation Intervals at the Existing Resorts and the All
Seasons Resorts through independent sales agents. Such independent sales
agents provide services to the Company under contract and, the Company
believes, are not employees of the Company. Accordingly, the Company does not
withhold payroll taxes from the amounts paid to such independent contractors.
Although the Internal Revenue Service has made inquiries regarding the
Company's classification of its sales agents at its Branson, Missouri resort,
no formal action has been taken and the Company has requested that the inquiry
be closed. In the event the Internal

34
<PAGE>

Revenue Service or any state or local taxing authority were to successfully
classify such independent sales agents as employees of the Company, rather
than as independent contractors, and hold the Company liable for back payroll
taxes, such reclassification may have a material adverse effect on the
Company.

Additionally, from time to time, potential buyers of Vacation Intervals
assert claims with applicable regulatory agencies against Vacation Interval
salespersons for unlawful sales practices. Such claims could have adverse
implications for the Company in negative public relations and potential
litigation and regulatory sanctions.

LIMITED RESALE MARKET FOR VACATION INTERVALS

The Company sells the Vacation Intervals to buyers for leisure and not
investment purposes. The Company believes, based on experience at the Existing
Resorts and the All Seasons Resorts, that the market for resale of Vacation
Intervals by buyers is presently limited, and that any resales of Vacation
Intervals are typically at prices substantially less than the original
purchase price. These factors may make ownership of Vacation Intervals less
attractive to prospective buyers, and attempts by buyers to resell their
Vacation Intervals will compete with sales of Vacation Intervals by the
Company. In addition, the market price of Vacation Intervals sold by the
Company at a given resort or by its competitors in the market in which each
resort is located could be depressed by a substantial number of Vacation
Intervals offered for resale.

RISKS RELATED TO OPERATIONS IN ST. MAARTEN, NETHERLAND ANTILLES

Two of the Existing Resorts are located in St. Maarten, Netherlands
Antilles, both of which were acquired by the Company in a foreclosure sale.
There are a number of ongoing disputes with owners who owned units at the
Flamingo Beach Club, including certain claims respecting their obligations to
pay for annual maintenance expenses or whether there are certain entitlements
to guaranteed returns. If such claims are adversely determined against the
Company, such determination may have a material adverse impact on the
operation of this property.

In addition, a portion of the Company's Royal Palm Beach Club resort located
in St. Maarten, Netherlands Antilles, is operated by the Company pursuant to a
long-term ground lease that expires in 2050 and the types of tenant
protections, such as estoppel certificates, which would be provided in the
United States, are not available. Although the Company is unaware of any
circumstances that could cause the early termination of such ground lease
before its scheduled expiration date, any such early termination or
cancellation of the ground lease could have an adverse effect on the Company's
operations. In addition, title insurance is not available in the Netherlands
Antilles. Accordingly, title to the Company's real property and ground lease
with respect to the Flamingo Beach Club and Royal Palm Beach Club resorts are
not insured, may be subject to challenge, and, if successfully challenged,
could result in additional costs to operate these resorts.

POTENTIAL CONFLICTS OF INTEREST

Because affiliates of Messrs. Kaneko and Kenninger have operations in the
lodging industry other than those with respect to the development and
operation of timeshare resorts, potential conflicts of interest exist.
Affiliates of KOAR Group, Inc. ("KOAR"), which are owned by Messrs. Kaneko and
Kenninger, have developed and currently act as the managing general partner of
partnerships which own certain hotels that are franchised as Embassy Suites
hotels (one of which, the Embassy Suites Lake Tahoe, is located in a market
served by the Company) and a residential condominium project overlooking the
ocean in Long Beach, California (a market in which the Company may operate in
the future). Messrs. Kaneko and Kenninger will continue to devote a portion of
their time to KOAR's hotel business and to meeting their duties and
responsibilities to investors in such entities.

Additionally, notwithstanding their covenants not to compete, the Company's
founders have the right to pursue certain activities which could divert their
time and attention from the Company's business and result in conflicts with
the Company's business. The Company's founders are evaluating the acquisition
of other hotel properties in Hawaii, which at a future date may be converted
to accommodate timeshare operations.

35
<PAGE>

RISKS RELATED TO WESTIN AGREEMENT; LIMITED CONTROL OF RESORTS AND TERMINATION

The Westin Agreement may involve certain additional risks to the Company's
future operations. The Westin Agreement imposes certain restrictions on the
Company's ability to develop certain timeshare resorts in conjunction with
hotel operators other than Westin. Generally, the Company is required, subject
to certain exceptions involving Embassy Vacation Resorts and Promus, to submit
for Westin's consideration any "four-star" or "five-star" development
opportunity that the Company has determined to pursue in North America, Mexico
and the Caribbean. In the event Westin determines not to proceed with the
Company to develop such resort, the Company would be free only to develop the
resort as a "non-branded" property or as a property branded as an Embassy
Vacation Resort or in conjunction with certain other upscale operators, but
excluding specified operators of luxury hotels and resorts. In addition,
resorts acquired or developed pursuant to the Westin Agreement, including the
St. John resort, will be owned by partnerships, limited liability companies or
similar entities in which each of Westin and the Company will own a 50% equity
interest and have an equal voice in management. Accordingly, the Company will
not be able to control such resorts or the applicable entities. In addition,
the Westin Agreement will be terminable by either party if certain thresholds
relating to development or acquisitions of resorts are not met, in the event
of certain changes in management of Westin or the Company or in the event of
an acquisition or merger of either party. Pursuant to the Westin Agreement,
Westin and the Company intend to enter into detailed definitive agreements to
implement the Westin Agreement, including operating agreements. There can be
no assurance that the parties will be able to reach such definitive
agreements.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S
CHARTER AND BYLAWS

Certain provisions of the Company's articles of incorporation (the
"Charter") and bylaws (the "Bylaws"), as well as Maryland corporate law, may
be deemed to have anti-takeover effects and may delay, defer or prevent a
takeover attempt that a stockholder might consider to be in the stockholder's
best interest. For example, such provisions may (i) deter tender offers for
Common Stock, which offers may be beneficial to stockholders or (ii) deter
purchases of large blocks of Common Stock, thereby limiting the opportunity
for stockholders to receive a premium for their Common Stock over then-
prevailing market prices. These provisions include the following:

Preferred Shares. The Charter authorizes the Board of Directors to issue
preferred stock in one or more classes and to establish the preferences and
rights (including the right to vote and the right to convert into Common
Stock) of any class of preferred stock issued. No preferred stock is currently
issued or outstanding.

Staggered Board. The Board of Directors of the Company has three classes of
directors. The terms of the first, second and third classes will expire in
1997, 1998 and 1999, respectively. Directors for each class will be chosen for
a three-year term upon the expiration of the term of the current class,
beginning in 1997. The affirmative vote of two-thirds of the outstanding
Common Stock is required to remove a director.

Maryland Business Combination Statute. Under the Maryland General
Corporation Law ("MGCL"), certain "business combinations" (including the
issuance of equity securities) between a Maryland corporation and any person
who owns, directly or indirectly, 10% or more of the voting power of the
corporation's shares of capital stock (an "Interested Stockholder") must be
approved by a supermajority (i.e., 80%) of voting shares. In addition, an
Interested Stockholder may not engage in a business combination for five years
following the date he or she became an Interested Stockholder.

Maryland Control Share Acquisition. Maryland law provides that "Control
Shares" of a corporation acquired in a "Control Share Acquisition" have no
voting rights except to the extent approved by a vote of two-thirds of the
votes eligible under the statute to be cast on the matter. "Control Shares"
are voting shares of beneficial interest which, if aggregated with all other
such shares of beneficial interest previously acquired by the acquiror, would
entitle the acquiror directly or indirectly to exercise voting power in
electing directors within one of the following ranges of voting power: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority or (iii) a majority of all voting power. Control Shares do not
include shares of beneficial

36
<PAGE>

interest the acquiring person is then entitled to vote as a result of having
previously obtained stockholder approval. A "Control Share Acquisition" means
the acquisition of Control Shares, subject to certain exceptions.

If voting rights are not approved at a meeting of stockholders then, subject
to certain conditions and limitations, the issuer may redeem any or all of the
Control Shares (except those for which voting rights have previously been
approved) for fair value. If voting rights for Control Shares are approved at
a stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares of beneficial interest entitled to vote, all other stockholders may
exercise appraisal rights.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of Common Stock, or the potential for
such sales, could adversely affect prevailing market prices. Holders who
received their shares of Common Stock as a result of the consolidation of the
Company's predecessor partnerships, limited liability companies and affiliated
entities ("Consolidation Transactions") hold their shares subject to the
limitations of Rule 144 ("Rule 144") of the Securities Act of 1933, as amended
(the "Securities Act"). Such holders have been granted certain registration
rights pursuant to which the Company has agreed to file a shelf registration
statement with the Commission for the purpose of registering the sale of such
shares of Common Stock. The Company's founders have agreed, with certain
exceptions, not to offer, sell, contract to sell or otherwise dispose of any
Common Stock, for a period of one year after the closing of the Company's
Initial Public Offering, which occurred on August 20, 1996, without the
written consent of Montgomery Securities. In addition, the Company's founders
and each other stockholder who received shares as a result of the
Consolidation Transactions have agreed to refrain from any such offer, sale or
disposal of shares for 90 days after the closing of the Company's recently
completed stock offering (the "Stock Offering"), which occurred on February 3,
1997, without the prior written consent of Montgomery Securities. One of such
exceptions allows the Company's founders to pledge between $30 million and
$50 million of their Common Stock to secure a margin loan in a maximum amount
of $10 million and another exception allows the Company's founders to pledge
approximately $5.8 million of their Common Stock in connection with their
buyout of a former partner. The Company and the officers and directors of the
Company who did not receive shares in the Consolidation Transaction also
agreed to a similar 90-day lock-up period in the Stock Offering.

Sales of substantial amounts of Common Stock in the public market after the
consummation of the Merger could adversely affect prevailing market prices.
The 883,036 shares (subject to adjustment for certain contingencies) of Common
Stock issued in the Merger will be eligible for sale in the public market,
subject to certain limitations relating to pooling and relating to affiliates
of AVCOM under the Securities Act.

Additionally, as of March 1, 1997 there were (i) outstanding stock options
to purchase 1,769,000 shares of Common Stock which have been granted to
executive officers, other key employees, independent directors and a
consultant of the Company under the 1996 Equity Participation Plan (less than
20% of which are presently exercisable), (ii) up to 500,000 shares of Common
Stock that may be sold pursuant to the Company's Employee Stock Purchase Plan
(none of which have been sold to date) and (iii) 3,024,660 shares of Common
Stock initially issuable upon conversion of the Convertible Notes.

ITEM 3. LEGAL PROCEEDINGS

The Company is currently subject to litigation and claims respecting
employment, tort, contract, construction and commissions, disputes, among
others. In the judgment of the Company's management, none of such lawsuits or
claims against the Company is likely to have a material adverse effect on the
Company or its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Company's equity holders during
the fourth quarter of 1996.

37
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's initial public offering of Common Stock was consummated in
August 1996 (the "Initial Public Offering"), at an initial public offering
price of $14.00 per share. The Company's Common Stock is quoted on the Nasdaq
National Market under the symbol "SIGR." The following table sets forth, for
the periods indicated, the high and low sale prices for the Common Stock, as
quoted on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Third Quarter (commencing August 15, 1996)............... $24 5/8 $13 5/8
Fourth Quarter........................................... 39 1/8 25
</TABLE>

On March 1, 1997, there were approximately 73 holders of record of the
Company's Common Stock and the approximate number of beneficial stockholders
is 2,100.

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its Common Stock. The
Company currently intends to retain future earnings to finance its operations
and fund the growth of its business. Any payment of future dividends will be
at the discretion of the Board of Directors of the Company and will depend
upon, among other things, the Company's earnings, financial condition, capital
requirements level of indebtedness, contractual restrictions in respect of the
payment of dividends and other factors that the Company's Board of Directors
deems relevant.

In connection with the Consolidation Transactions in June 1996, investors in
the Company's predecessor property partnerships, limited liability companies
and corporations agreed to contribute their interests in such entities to the
Company in return for the issuance of 11,354,705 shares of the Company's
Common Stock. Such securities were issued by the Company in reliance upon an
exemption from the registration requirements of the Securities Act provided by
Section 4(2) thereof.

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<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION OF THE
COMPANY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table sets forth selected consolidated historical and pro
forma financial information of the Company. For the historical period ended
December 31, 1996, the financial information presented below includes the
effect of the Consolidation Transactions and the Initial Public Offering which
were consummated in August 1996, but excludes the acquisition of AVCOM, which
was consummated on February 7, 1997. For periods ending prior to December 31,
1996, the historical financial information presented below combines each of
the Company's predecessor limited partnerships, limited liability companies
and other affiliated corporations that were combined into the Company in the
Consolidation Transactions.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Vacation Interval sales.. $ 75,069 $ 59,071 $ 40,269 $ 22,238 $11,328
Interest income.......... 9,451 6,929 3,683 1,825 402
Other income............. 10,534 6,608 338 373 115
---------- ---------- -------- -------- -------
Total revenues........... 95,054 72,608 44,290 24,436 11,845
---------- ---------- -------- -------- -------
Costs and operating
expenses:
Vacation Interval cost of
sales................... 18,089 15,650 12,394 5,708 2,999
Advertising, sales, and
marketing............... 35,488 28,488 18,745 10,809 4,734
Loan portfolio:
Interest expense--
treasury............... 5,197 3,586 1,629 674 168
Other expenses.......... 1,465 1,189 851 208 50
Provision for doubtful
accounts............... 2,706 1,787 923 619 555
General and
administrative.......... 10,671 6,554 3,738 3,223 1,040
Depreciation and
amortization............ 2,378 1,675 489 384 209
---------- ---------- -------- -------- -------
Total costs and operating
expenses................ 75,994 58,929 38,769 21,625 9,755
---------- ---------- -------- -------- -------
Operating income.......... 19,060 13,679 5,521 2,811 2,090
Interest expense--other... 1,581 476 959 518 --
Equity loss on investment
in joint venture......... 236 1,649 271 -- --
---------- ---------- -------- -------- -------
Income before taxes....... 17,243 11,554 4,291 2,293 2,090
Income taxes.............. 3,063 641 -- -- --
---------- ---------- -------- -------- -------
Net income................ $ 14,180 $ 10,913 $ 4,291 $ 2,293 $ 2,090
========== ========== ======== ======== =======
Pro forma net income(a)... $ 10,691 $ 7,205 $ 2,673 $ 1,414 $ 1,301
Pro forma net income per
common and common
equivalent share(a)...... $ 0.77 $ 0.63 -- -- --
Pro forma weighted average
number of common and
common equivalent shares
outstanding.............. 13,847,232 11,354,705 -- -- --
OTHER DATA:
EBITDA(b)................. $ 26,399 $ 17,291 $ 7,368 $ 3,869 $ 2,467
Cash flows provided by
(used in)
Operating activities..... (28,607) 2,304 (10,964) (3,262) (6,166)
Investing activities..... (41,183) (36,919) (24,940) (10,776) (51)
Financing activities..... 69,195 37,102 36,134 15,341 5,146
Number of Existing Resorts
at period end............ 9 7 4 3 1
Number of Vacation
Intervals sold(c)........ 7,334 5,675 4,482 2,442 1,284
Numbers of Vacation
Intervals in
inventory(c)............. 24,334 20,270 2,401 1,233 1,164
Average price of Vacation
Intervals sold(c)........ $ 13,429 $ 11,353 $ 8,985 $ 9,106 $ 8,822
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash, including escrow.... $ 5,027 $ 6,288 $ 4,282 $ 2,567 $ 850
Total assets.............. 239,132 138,085 82,454 38,230 18,739
Long-term debt............ 97,644 84,379 44,415 22,931 9,696
Stockholders' equity...... 101,880 38,470 30,780 11,838 7,439
</TABLE>
- --------
(a) Reflects the effect on historical statement of operations data, assuming
the combined Company had been treated as a C corporation rather than as
individual limited partnerships and limited liability companies for
federal income tax purposes.

39
<PAGE>

(b) As shown below, EBITDA represents net income before interest expense,
income taxes and depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to service and/or incur indebtedness. However, EBITDA should not be
construed as an alternative to net income as a measure of the Company's
operating results or to operating cash flow as a measure of liquidity. The
following table reconciles EBITDA to net income:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994 1993 1992
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net income........................... $14,180 $10,913 $4,291 $2,293 $2,090
Interest expense--treasury........... 5,197 3,586 1,629 674 168
Interest expense--other.............. 1,581 476 959 518 --
Taxes................................ 3,063 641 -- -- --
Depreciation and amortization........ 2,378 1,675 489 384 209
EBITDA............................... $26,399 $17,291 $7,368 $3,869 $2,467
</TABLE>

(c) Includes the effect of sales or inventory of Vacation Intervals at the
Company's non-consolidated resort (the Embassy Vacation Resort Poipu
Point).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Signature Resorts, Inc. was formed in May 1996 to combine the ownership of
the Existing Resorts and the timeshare acquisition and development business of
the Company's predecessors. The Company generates revenues from the sale and
financing of Vacation Intervals in resorts, which typically entitle the buyer
to the use of a fully-furnished vacation resort in perpetuity, generally for a
one-week period each year. The Company generates additional revenues from room
rental operations, rentals of Vacation Intervals in Company inventory and from
fees associated with managing the resorts.

The Company recognizes sales of Vacation Intervals on an accrual basis after
a binding sales contract has been executed between the Company and the
proposed buyer, a 10% minimum down payment has been received, the rescission
period has expired, construction is substantially complete, and certain
minimum sales levels are achieved. If all the criteria are met, except that
construction is not substantially complete, revenues are recognized on the
percentage-of-completion basis. Costs associated with the acquisition and
development of timeshare resorts, including carrying costs such as interest
and taxes, are capitalized as real estate and development costs and allocated
as Vacation Interval cost of sales as the respective revenue is recognized.
The Company's investment in the Embassy Vacation Resort Poipu Point is
accounted for using the equity method and reflected on the balance sheet as
"Investment in joint venture" and on the income statement as "Equity loss on
investment in joint venture."

Comparison of the year ended December 31, 1996 to year ended December 31,
1995. For the year ended December 31, 1996, the Company achieved total revenue
of $95.1 million compared to $72.6 million for the year ended December 31,
1995, an increase of $22.5 million or 31%. Such increase was due to the growth
of intervals sold from 5,394 in 1995 to 6,188 in 1996, a 15% increase, coupled
with a 10.8% increase in the average sales price per interval. The growth in
vacation intervals sold was due to the commencement of sales at San Luis Bay
and Embassy Vacation Resort Lake Tahoe combined with a full year of sales at
Royal Palm and Flamingo Beach Club.

Interest income increased $2.5 million, or 36%, due to an increase in
mortgages receivable from $65.1 million in 1995 to $100.8 million in 1996.
Other income increased $3.9 million from $6.6 million in 1995 to $10.5 million
in 1996 as a result of a $0.9 million increase in rental income, $1.7 million
of income as a result of the settlement of certain receivables from the former
owners of the St. Maarten properties, and a $0.7 million increase in portfolio
income from the $10.2 million portfolio acquired with the two St. Maarten
resorts in 1995.

Total operating costs for the years ended 1995 and 1996 increased by
$17.1 million from $58.9 million, and $76.0 million, respectively. However, as
a percentage of total revenues, operating costs have remained relatively
flat, decreasing from 81% in 1995 to 80% in 1996. As a percentage of revenues,
interval costs of sales decreased to 24.1% in 1996 compared to 26.5% in 1995
as the Company was able to purchase and construct Vacation Intervals at a
discount to historical development costs, reducing the unit cost on average
for each Vacation Interval sold.

40
<PAGE>

Loan portfolio expenses consisting of interest expense, other expenses and
provision for doubtful accounts increased from $6.6 million during 1995 to
$9.4 million during 1996, an increase of $2.8 million or 42%. This increase
reflects the 69% increase in revolving lines of credit attributable to
mortgages payable due to increased hypothecation of mortgages receivable
related to Vacation Interval sales growth.

General and administrative expenses increased $4.1 million from $6.6 million
during 1995 to $10.7 million during 1996. As a percentage of revenues, general
and administrative expenses were lower during 1995 at 9% as compared to 11%
during 1996. The increase in general and administrative expenses was the
result of (i) the addition of a number of senior officers and key executives
in connection with building the Company's management and organizational
infrastructure necessary to efficiently manage the Company's future growth,
(ii) the Company's expenses and reporting obligations as a public company,
(iii) increased overhead due to the acquisition and development of additional
resorts, and (iv) added salary, travel, and office expenses attributable to
the current and planned growth of the Company.

Depreciation and amortization increased $0.7, or 41%, from $1.7 million in
1995 to $2.4 million, reflecting increased depreciation and amortization
resulting from an increase in capital expenditures and intangible assets.

Equity loss on investment in joint venture decreased to $0.2 million in 1996
from $1.6 million in 1995 due to increased Vacation Interval sales and higher
hotel occupancy at Embassy Vacation Poipu Point during 1996. In 1996, 1,146
vacation intervals were sold at the Embassy Vacation Poipu Point, while 281
vacation intervals were sold at the Embassy Vacation Poipu Point in 1995.

As a result of the factors discussed above, pre-tax income increased
$5.6 million, or 48%, during 1996 from $11.6 million, or 16% of total
revenues, in 1995 to $17.2 million, or 18% of total revenues, in 1996.

Income taxes increased $2.5 million from $0.6 million for 1995 to $3.1
million in 1996, as a result of the change in the Company's status to a C
corporation subsequent to the initial public offering in August 1996.
Previously, the Company's predecessor entities only incurred foreign income
taxes on their properties located in the St. Maarten, Netherlands Antilles.

Net income increased 30% from $10.9 million for 1995 to $14.2 million for
1996.

Comparison of the year ended December 31, 1995 to year ended December 31,
1994. For the year ended December 31, 1995 the Company achieved total revenue
of $72.6 million compared to $44.3 million for the year ended December 31,
1994, an increase of $28.3 million or 64%. Total revenue grew due to a 47%
increase in Vacation Interval sales from $40.3 million to $59.1 million, an
86% increase in interest income from $3.7 million to $6.9 million, and a $6.3
million increase in resort operations and other income. The commencement of
sales of Vacation Intervals at Royal Palm, Flamingo Beach Club, and Embassy
Vacation Resort Grand Beach drove Vacation Interval sales volume at the
consolidated resorts from 4,482 sold in 1994 to 5,394 sold in 1995, an
increase of 20%. These higher volumes, combined with price growth, drove the
47% increase in Vacation Interval sales revenue. Interest income increased due
to a $31.7 million increase in mortgage receivables, which grew from $33.4
million at the end of 1994 to $65.1 million at the end of 1995, an increase of
95%. Other income increased $6.3 million from $0.3 million in 1994 to $6.6
million in 1995. This increase was the result of rental income at the resorts
increasing from $0.2 million to $1.3 million from 1994 to 1995, and the
acquisition of a mortgage receivable portfolio of approximately $10.2 million
acquired with the two St. Maarten resorts on which the Company earned $2.2
million. In addition, the Company accrued $2.0 million of business
interruption insurance claims to compensate for loss revenues and profits
related to damages sustained from Hurricane Luis at the two St. Maarten
resorts.

While operating costs increased from $38.8 million for the year ended
December 31, 1994 to $58.9 million for the year ended December 31, 1995, an
increase of 52%, as a percentage of revenues operating costs decreased from
88% in 1994 to 81% in 1995. Relative decreases in Vacation Interval cost of
sales and other expenses, as a percentage of revenues were offset by relative
increases in interest expense-treasury, provision for doubtful

41
<PAGE>

accounts, depreciation and amortization and equity loss on investment in joint
venture. The Company was able to purchase and construct Vacation Intervals at
a relative discount to historical development costs, reducing the unit cost on
average of each Vacation Interval sold. This is reflected in a proportionate
decrease in cost of Vacation Intervals sold from 30.8% of Vacation Interval
sales in 1994 to 26.5% of Vacation Interval sales in 1995. Although
advertising, sales and marketing costs decreased as a percentage of total
revenues from 42.3% to 39.2%, these costs increased as a percentage of
Vacation Interval sales from 46.5% in 1994 to 48.2% in 1995. This was
primarily the result of $2.0 million in expenses in 1995 relating to research
and development associated with national marketing strategies and programs
related to "branded" and "non-branded" resorts. Excluding these expenses,
advertising, sales and marketing costs in 1995 were 44.8% of Vacation Interval
sales, slightly less than in 1994.

Loan portfolio expenses consisting of interest expense, other expenses and
provision for doubtful accounts increased from $3.4 million in total in 1994
to $6.6 million in total in 1995, an increase of 94%. This increase reflects
the 104% increase in mortgage receivables due to Vacation Interval sales
growth and acquisitions of resorts made by the Company in 1995.

General and administrative expenses increased 78% from $3.7 million in 1994
to $6.6 million in 1995. The increase in general and administrative expenses
was the result of increased salary expenses and overhead due to the
acquisition of additional resorts and growth in the size of the Company.
Relative to revenues, general and administrative expenses were slightly higher
in 1995 at 9.0% of revenues versus 8.4% of revenues in 1994.

Depreciation and amortization increased from $0.5 million in 1994 to $1.7
million in 1995, reflecting increased depreciation resulting from an increase
in capital expenditures of $1.8 million and acquisitions resulting in a $1.8
million increase in intangible assets.

The Company made its investment in the Embassy Vacation Resort Poipu Point
during the last quarter of 1994. The Embassy Vacation Resort Poipu Point has
experienced losses associated with the start-up operations of the related
resort, which is being converted to timeshare. Equity loss on joint venture
increased from $0.3 million in 1994 to $1.6 million in 1995 reflecting a full
year's operations at the resort in 1995.

Pre-tax income increased 170% to $11.6 million, or 15.9% of total revenue,
in 1995 from $4.3 million, or 9.7% of total revenues, in 1994.

Income taxes increased to $641,000 for the year ended December 31, 1995 from
zero for the year ended December 31, 1994 due to the acquisition of Royal Palm
Beach Club and Flamingo Beach Club in St. Maarten, Netherlands Antilles. In
July and August, the Company acquired Royal Palm and Flamingo, respectively,
incurring foreign taxes related to income earned for the remainder of fiscal
year 1995.

Net income increased $6.6 million to $10.9 for the twelve months ended
December 31, 1995 from $4.3 million for the twelve months ended December 31,
1994.

Comparison of the year ended December 31, 1994 to year ended December 31,
1993. For the year ended December 31, 1994 the Company generated total revenue
of $44.3 million compared to $24.4 million in 1993, an increase of 82%. This
increase was due to an 82% growth in Vacation Interval sales revenues from
$22.2 million in 1993 to $40.3 million in 1994. The first full year of sales
at the Plantation at Fall Creek Resort and the addition of the Royal Dunes
Resort drove higher volume Vacation Interval sales from 2,442 Vacation
Intervals sold in 1993 to 4,482 Vacation Intervals sold in 1994. This volume
growth of 84% more than offset the 1.3% decrease in the average price of
Vacation Intervals sold to drive the 81% increase in Vacation Interval sales
revenues. Interest income increased due to a $16.0 million increase in
mortgage receivables from $17.4 million at the end of 1993 to $33.4 million at
the end of 1994, an increase of 92%.

Operating costs increased from $21.6 million for the year ended December 31,
1993 to $38.8 million for the year ended December 31, 1993, an increase of
79.6%. However, as a percentage of revenues, operating costs

42
<PAGE>

decreased slightly from 88.5% in 1993 to 87.5% in 1994. Increases in Vacation
Interval cost of sales as a percentage of revenue from 23.4% in 1993 to 28.0%
in 1994 were more than offset by decreases in other operating costs. From 1993
to 1994, advertising, sales and marketing decreased from 44.2% of revenues to
42.3% of revenues, general and administrative decreased from 13.2% of revenues
to 8.4% of revenues, and depreciation and amortization decreased from 1.6% of
revenues to 1.1% of revenues. Vacation Interval cost of sales increased as a
percentage of revenues due to relatively higher Vacation Interval cost
associated with the first year of operations at Royal Dunes. Advertising,
sales and marketing costs decreased as a percentage of Vacation Interval sales
from 48.6% in 1993 to 46.5% in 1994. This reflects increased Vacation Interval
sales volume at Cypress Pointe, which increased from 1,784 Vacation Intervals
in 1993 to 2,061 Vacation Intervals in 1994. Although decreasing in terms of a
percentage of revenue, due to expansion in the administrative costs necessary
to support a growing business, general and administrative expenses increased
in absolute terms from $3.2 million in 1993 to $3.7 in 1994, a 16.0% increase.
Depreciation and amortization was approximately consistent between 1993 and
1994 at $0.4 million and $0.5 million respectively reflecting capital
expenditures of $0.2 million, and the recording of intangibles at Grand Beach
in late 1994 with no related amortization. Equity loss on investment in joint
venture of $0.3 million in 1994 reflects the Company's share of losses
associated with the start-up operations at the Embassy Vacation Resort Poipu
Point.

Loan portfolio expenses consisting of interest expense, loan portfolio and
provision for doubtful accounts increased from $1.5 million in 1993 to $3.4
million in 1994, an increase of 127%. This reflects the increase in Vacation
Intervals sold in 1994 and a relative increase in borrowings made by the
Company secured by interval inventory. While loan portfolio expenses were
consistent as a percentage of total revenue, interest expense treasury
increased from 36.9% of interest income to 44.2%. Provision for doubtful
accounts decreased slightly from 2.5% of revenues to 2.1% of revenues. Other
loan portfolio expenses increased from $0.2 million in 1993 (0.9% of revenues)
to $0.9 million in 1994 (1.9% of revenues) reflecting additional costs from
portfolio management services started in 1994.

Pre-tax income increased 87% from $2.3 million in 1993 to $4.3 million in
1994.

MERGER WITH AVCOM INTERNATIONAL, INC.

In February 1997, the Company consummated the Merger with AVCOM, acquiring
AVCOM for 883,036 shares (subject to adjustment for certain contingencies
relating to disputed stock options) of the Company's Common Stock, plus the
assumption of debt.

Transaction costs relating to the negotiation of, preparation for, and
consummation of the Merger and the anticipated combination of certain
operations of the Company and AVCOM will result in a one-time charge to the
Company's earnings of $1.6 million in the first quarter of 1997. This charge
is expected to include the fees and expenses payable to financial advisors,
legal fees and other transaction expenses related to the Merger. In addition,
there can be no assurance that the Company will not incur additional charges
in subsequent quarters to reflect costs associated with the Merger and the
integration of the Company's and AVCOM's operations. Additionally, transaction
costs relating to the consummation of the Merger and the anticipated
combination of operations of the Company and AVCOM, along with changes in
AVCOM's accounting policies to conform to the Company's and the write-down and
write-off of certain AVCOM assets, resulted in a one-time charge to AVCOM's
earnings of approximately $13.6 million. This charge includes the estimated
costs associated with workforce reductions, contractual payment obligations
and other restructuring activities.

LIQUIDITY AND CAPITAL RESOURCES

In February 1997, the Company consummated its offering (the "Convertible
Offering") of $138.0 million aggregate principal amount of its 5.75%
Convertible Subordinated Notes due 2007 (the "Convertible Notes") and its
offering (the "Stock Offering" and together with the Convertible Offering the
"Offerings") of 4.0 million shares of Common Stock (including 2.4 million
shares of Common Stock sold by certain selling stockholders).

43
<PAGE>

The net proceeds to the Company from the sale of the 1.6 million shares of
Common Stock offered by the Company in the Stock Offering, based on a public
offering price of $36.50 per share, and from the sale of the $138.0 million
aggregate principal amount of 5.75% Convertible Subordinated Notes due 2007
offered by the Company in the Convertible Offering, based on a public price of
100% of the principal amount thereof, in each case after deducting
underwriting discounts and estimated expenses of the Stock Offering and the
Convertible Offering, were approximately $53.3 million and $133.6 million,
respectively.

Of the $186.9 million in net proceeds, the Company has used net proceeds of
the Offerings as follows: (i) approximately $40.4 million to retire existing
indebtedness of the Company and (ii) approximately $21.1 million to retire the
indebtedness of AVCOM that was assumed by the Company in the Merger, and
intends to use the remaining proceeds as follows: (A) approximately
$2.5 million to finance acquisition costs related to St. John Villas, and (B)
the balance to complete construction and expansion at certain Existing Resorts
and All Season Resorts, to finance the acquisition and development of
additional resorts and timeshare-related assets, to finance sales of vacation
intervals, and for working capital and other general corporate purposes.
Pending any such additional uses, the Company will invest the excess proceeds
in commercial paper, bankers' acceptances, other short-term investment-grade
securities and money-market accounts.

The Company generates cash for operations from the sale of Vacation
Intervals, the financing of the sales of Vacation Intervals, the rental of
unsold Vacation Interval units, and the receipt of management fees. With
respect to the sale of Vacation Intervals, the Company generates cash for
operations from cash sales of Vacation Intervals, from the receipt of down
payments from customers acquiring Vacation Intervals, and from the
hypothecation of mortgage receivables from purchasers equal to 85% to 90% of
the amount borrowed by such purchasers. The Company generates cash related to
the financing of Vacation Interval sales on the difference between the
interest charged on the mortgage receivables, which averaged 14.0% in 1996,
and the interest paid on the notes payable secured by such mortgage
receivables.

During the years ended December 31, 1994, 1995, and 1996 cash (used in)
provided by operating activities was ($11.0) million, $2.3 million and ($28.6)
million, respectively. Cash generated from operating activities was higher for
the year ended December 31, 1995 when compared to the same period in the prior
year primarily due to higher net income, decreases in the amount spent on
acquisition and development activities, and increases in payables outstanding
at the end of 1995 when compared to at the end of 1994. Cash generated from
operating activities was lower in 1996 when compared to the comparable period
in 1995 primarily due to a $35.1 million increase in expenditures on
acquisition and development activities associated with the acquisition and
development of new resorts and the expansion of existing resorts during the
period.

Net cash used in investing activities for the years ended December 31, 1994,
1995 and 1996 was $24.9 million, $36.9 million, and $41.2 million,
respectively. Net cash used by investing activities was higher for the year
ended December 31, 1995 when compared to the same period in 1994 principally
due to increases in mortgage receivables which resulted from both higher sales
of Vacation Intervals and the purchase of a mortgage receivable portfolio with
a value of approximately $7.8 million related to the St. Maarten properties.
During 1996, the change in net mortgage receivables was $3.2 million higher
than during the comparable period in 1995 due an increase in the number of
vacation intervals sold and increased average sales price per vacation
interval sold. As of December 31, 1996, approximately 8.6% of the Company's
mortgages receivable were considered by the Company to be delinquent (past due
by 60 or more days) and the Company has completed or commenced foreclosure or
deed-in-lieu of foreclosure on approximately 2.3% of its mortgages receivable.
Of these delinquent loans, approximately 88% were originated by the Company
and the remaining 12% were acquired by the Company as delinquent loans. If
only the Company's originated loans were considered, approximately 8% of them
would be considered delinquent as of December 31, 1996.

For the years ended December 31, 1994, 1995 and 1996, net cash provided by
financing activities was $36.1 million, $37.1 million and $69.2 million,
respectively. These net cash figures were affected by the Company's increased
borrowings secured by mortgage receivables to fund operations and increased
payments on these borrowings due to amortizations on a larger portfolio. In
addition, year to year net cash provided by

44
<PAGE>

investing activities fluctuates as a result of borrowing activities for
acquisition and development, and from equity investments as a result of resort
acquisitions. During the 1996, the Company issued 6,037,500 shares of Common
Stock in the Initial Public Offering in August 1996 resulting in approximately
$74.0 million of net proceeds. The proceeds of the Initial Public Offering
were used by the Company to repay debt, to fund expansion, and for other
corporate purposes. In addition, period to period net cash provided by
investing activities fluctuates as a result of borrowing activities for
acquisition and development, and from equity investments as a result of resort
acquisitions.

The Company requires funds to finance the future acquisition and development
of timeshare resorts and properties and to finance customer purchases of
Vacation Intervals. Such capital has been provided by secured financings on
Vacation Interval inventory, secured financings on mortgage receivables and
partner loans generally funded by third party lenders and capital
contributions. As of December 31, 1996, the Company had $26.6 million
outstanding under its notes payable secured by Vacation Interval inventory or
land, and $71.0 million outstanding under its notes payable secured by
mortgage receivables.

During 1997, the Company anticipates spending approximately $56.5 million
for expansion and development activities at the Company's resorts. The Company
may also be required to expend additional amounts to fund certain AVCOM
guarantees relating to the North Bay Resort at Lake Arrowhead. The Company
plans to fund these expenditures primarily with the net proceeds of the
Offerings, available capacity on credit facilities and cash generated from
operations. In addition, during 1997, the Company anticipates spending
approximately $8.8 million to finance the acquisition, development and
conversion costs related to the St. John acquisition. These expenditures are
expected to be funded primarily with the net proceeds of the Offerings,
available borrowing capacity under lines of credit and cash generated from
operations.

In addition, the Company anticipates spending approximately $212.0 million
to complete its expansion plans at the Existing Resorts during the periods
following 1997. The Company also plans to spend $34.0 million to complete
expansion plans at the All Seasons Resorts during the periods following 1997.
The Company anticipates financing the expansion plans of the Company's resorts
through cash acquired from operations, future credit facilities and/or future
issuance of securities. While the Company has not entered into commitments
with respect to any new credit facilities or planned any additional issuances
of securities, it is not currently obligated to continue with the planned
expansion of the Existing Resorts and the All Seasons Resorts. There can be no
assurance that the Company will be able to obtain the financing necessary to
continue such expansion plans.

The Company intends to pursue a growth-oriented strategy. From time to time,
the Company may acquire, among other things, additional timeshare properties,
resorts and completed Vacation Intervals; land upon which additional timeshare
resorts may be built; management contracts; loan portfolios of Vacation
Interval mortgages; portfolios which include properties or assets which may be
integrated into the Company's operations; and operating companies providing or
possessing management, sales, marketing, development, administration and/or
other expertise with respect to the Company's operations in the timeshare
industry.

In the future, the Company may negotiate additional credit facilities, or
issue, in addition to the Convertible Notes, other corporate debt or equity
securities. Any debt incurred or issued by the Company may be secured or
unsecured, fixed or variable rate interest and may be subject to such terms as
management deems prudent.

The Company believes that, with respect to its current operations, the net
proceeds to the Company from the Offerings, together with cash generated from
operations and future borrowings, will be sufficient to meet the Company's
working capital and capital expenditure needs for the near future. However,
depending upon conditions in the capital and other financial markets and other
factors, the Company may from time to time consider the issuance of debt or
other securities, the proceeds of which would be used to finance acquisitions,
to refinance debt or for other general corporate purposes. The Company
believes that the Company's properties are adequately covered by insurance.

45
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the information set forth on Index to Financial Statements appearing on
page F-1 of this report on Form 10-K.

Pro forma financial information of the Company, including the effects of the
Merger, is incorporated herein by reference to the pro forma financial
information of the Company set forth in the Company's Registration Statement
on Form S-1 (No. 333-18447).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On September 12, 1996, Ernst & Young LLP advised the Company that it was
resigning as independent auditors for the Company. Ernst & Young LLP had been
retained since the Company's inception and there have been no disagreements
between the Company and Ernst & Young LLP with respect to accounting
principles or practices, financial statement disclosure, auditing scope or
procedures, which if not resolved to Ernst & Young LLP's satisfaction, would
have resulted in a reference to the subject matters of the disagreement in its
audit report. Since the Company's inception, Ernst & Young LLP's report on the
Company's financial statements did not contain an adverse opinion or a
disclaimer of opinion, nor were the opinions qualified or modified as to
uncertainty, audit scope, or accounting principles, nor were there any events
of the type requiring disclosure under Item 304(a)(l)(v) of Regulation S-K
under the Securities Act.

On September 17, 1996, the Company retained the accounting firm of Arthur
Andersen LLP as auditors for the fiscal year ending December 31, 1996
following Board of Directors approval, which was obtained on September 16,
1996. The decision to retain Arthur Andersen LLP was based upon the prior
relationship with a predecessor of the Company as auditors for the fiscal year
ending December 31, 1994 and Arthur Andersen LLP's experience in the Company's
industry, and was not motivated by any disagreements between the Company and
Ernst & Young LLP concerning any accounting principles and/or policy matters.
From the Company's inception to September 17, 1996, the Company did not
consult with Arthur Andersen LLP with respect to the matters described in Item
304(a)(2) of Regulation S-K.

46
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item will be set forth under "Directors
and Executive Officers" and "Proxy Statement--Compliance with Section 16(a)
Under the Securities Exchange Act of 1934" in the Company's Definitive Proxy
Statement and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item will be set forth under "Executive
Compensation" in the Company's Definitive Proxy Statement and reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item will be set forth under "Proxy
Statement--Share Ownership of Directors and Executive Officers," "Other
Information--Certain Stockholders" and "Proposal No. 1: Election of Class I
Directors--Compensation of Directors" in the Company's Definitive Proxy
Statement and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item will be set forth under "Certain
Transactions" in the Company's Definitive Proxy Statement, and reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.

47
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K

(a) The following documents are filed as part of this report:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2 Plan and Agreement of Merger as amended (incorporated by reference to
Exhibit 2 to Registrant's Registration Statement on Form S-4 (No.
333-16339))
3.1 Articles of Association, as amended, of Signature Resorts, Inc.
(incorporated by reference to Exhibit 3.1 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
*3.2 Bylaws of Signature Resorts, Inc., as amended
4 Form of Indenture by and between Signature Resorts, Inc. and Norwest
Bank Minnesota, National Association, as trustee, for the 5 3/4%
Convertible Subordinated Notes of Signature Resorts, Inc. due 2007
(incorporated by reference to Exhibit 4 to Registrant's Registration
Statement on Form S-1 (No. 333-18447))
10.1 Form of Registration Rights Agreement among Signature Resorts, Inc.
and the persons named therein (incorporated by reference to Exhibit
10.1 to Registrant's Registration Statement on Form S-1 (No. 333-
06027))
10.2.1 Form of Employment Agreements between Signature Resorts, Inc. and each
of Osamu Kaneko, Andrew J. Gessow and Steven C. Kenninger
(incorporated by reference to Exhibit 10.2.1 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.2.2 Employment Agreement between Signature Resorts, Inc. and James E.
Noyes (incorporated by reference to Exhibit 10.2.2 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.2.3 Form of Employment Agreement between Signature Resorts, Inc. and Gary
L. Hughes (incorporated by reference to Exhibit 10.2.3 to
Registrant's Registration Statement on Form S-4 (No. 333-16339))
10.2.4 Employment Agreement between Signature Resorts, Inc. and Michael A.
Depatie (incorporated by reference to Exhibit 10.2.5 to Registrant's
Registration Statement on Form S-4 (No. 333-16339))
10.2.5 Form of Option Agreement between Signature Resorts, Inc. and Gary L.
Hughes (incorporated by reference to Exhibit 10.2.6 to Registrant's
Registration Statement on Form S-4 (No. 333-16339))
10.3 1996 Equity Participation Plan of Signature Resorts, Inc.
(incorporated by reference to Exhibit 10.3 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.4 Agreement of Limited Partnership of Pointe Resort Partners, L.P.
(subsequently renamed Poipu Resort Partners L.P.) dated October 11,
1994 (incorporated by reference to Exhibit 10.4 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.5 Signature Resorts, Inc. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.5 to Registrant's Registration Statement on
Form S-1 (No. 333-06027))
10.6 Agreement between W&S Hotel L.L.C. and Argosy/KOAR Group, Inc. dated
as of May 3, 1996 (incorporated by reference to Exhibit 10.6 to
Registrant's Registration Statement on Form S-1 (No. 333-06027))
10.7 Conti-Trade Financial Warehouse Line Agreement (incorporated by
reference to Exhibit 10.7 to Registrant's Registration Statement on
Form S-4 (No. 333-16339))
10.8.1 Loan and Security Agreement between Port Royal Resort, L.P., and
Finova Capital Corporation (as successor in interest to Greyhound
Capital Corporation) dated as of October 7, 1993 and as amended by
the First Amendment to Loan and Security Agreement dated as of April
26, 1995 (incorporated by reference to Exhibit 10.8.1 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
</TABLE>

48
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.8.2 Loan and Security Agreement between Signature Resorts, Inc. (as
successor in interest to Cypress Pointe Resorts, L.P.), and Finova
Capital Corporation (as successor in interest to Greyhound Real
Estate Finance Company) dated as of December 19, 1991 and as amended
by (i) the First Amendment to Loan and Security Agreement and
Consent and Agreement of Guarantors dated as of November 9, 1992,
(ii) the Second Amendment to Loan and Security Agreement dated as of
January 13, 1993, (iii) the Third Amendment to Loan and Security
Agreement dated as of April 7, 1993, (iv) the Fourth Amendment to
Loan and Security Agreement dated as of December 16, 1993, (v) the
Fifth Amendment to Loan and Security Agreement dated as of June 28,
1994, (vi) the Sixth Amendment to Loan and Security Agreement dated
December 16, 1994, and (vii) the Seventh Amendment to Loan and
Security Agreement dated as of November 6, 1995 (incorporated by
reference to Exhibit 10.8.2 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
10.8.3 Loan and Security Agreement between Signature Resorts, Inc. (as
successor in interest to San Luis Resort Partners, LLC), and Finova
Capital Corporation dated as of June 6, 1996 (incorporated by
reference to Exhibit 10.8.3 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
10.8.4 Loan and Security Agreement between Grand Beach Resort, Limited
Partnership, and Finova Capital Corporation (as successor in
interest to Greyhound Financial Corporation) dated as of October 7,
1994 and as amended by the First Amendment to Loan and Security
Agreement dated as of July 5, 1995 (incorporated by reference to
Exhibit 10.8.4 to Registrant's Registration Statement on Form S-1
(No. 333-18447))
10.8.5 Loan and Security Agreement (Receivables) between Signature Resorts,
Inc. (as successor in interest to Fall Creek Resort, L.P.), and
Heller Financial, Inc., dated as of October 9, 1995 (incorporated by
reference to Exhibit 10.8.5 to Registrant's Registration Statement
on Form S-1
(No. 333-18447))
10.8.6 Loan and Security Agreement between AKGI-St. Maarten NV (as successor
in interest to AKGI-Royal Palm C.V.o.a.), and Finova Capital
Corporation dated as of July 12, 1995 (incorporated by reference to
Exhibit 10.8.6 to Registrant's Registration Statement on Form S-1
(No. 333-18447))
10.8.7 Loan and Security Agreement between Lake Tahoe Resort Partners, LLC,
and Finova Capital Corporation dated as of April 29, 1996
(incorporated by reference to Exhibit 10.8.7 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
10.8.8 Construction Loan Agreement between Lake Tahoe Resort Partners, LLC,
and Finova Capital Corporation dated as of April 29, 1996
(incorporated by reference to Exhibit 10.8.8 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
10.8.9 Lender's Certification and Consent from Resort Capital Corporation to
Signatures Resorts, Inc. dated as of August 15, 1996 (incorporated
by reference to Exhibit 10.8.1 to Registrant's Registration
Statement on Form S-4 (No. 333-16339))
10.8.10 Lender's Certification and Consent from FINOVA Capital Corporation to
Signature Resorts, Inc. dated as of August 15, 1996 (incorporated by
reference to Exhibit 10.8.2 to Registrant's Registration Statement
on Form S-4 (No. 333-16339))
10.8.11 Assumption Agreement between FINOVA Capital Corporation and Signature
Resorts, Inc. dated as of August 15, 1996 (incorporated by reference
to Exhibit 10.8.3 to Registrant's Registration Statement on Form S-4
(No. 333-16339))
10.8.12 Assumption Agreement between Resort Capital Corporation and Signature
Resorts, Inc. dated as of August 15, 1996 (incorporated by reference
to Exhibit 10.8.4 to Registrant's Registration Statement on Form S-4
(No. 333-16339))
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.8.13 Assumption Agreement between FINOVA Capital Corporation and AKGI-Sint
Maarten, N.V. dated as of August 15, 1996 (incorporated by reference
to Exhibit 10.8.5 to Registrant's Registration Statement on Form S-4
(No. 333-16339))
*11 Statement re Computation of Per Share Earnings
16.1 Letter from Ernst & Young LLP regarding change in certifying
accountant (incorporated by reference to Exhibit 16.1 to
Registrant's current report on Form 8-K filed with the Commission on
September 18, 1996)
*21 Subsidiaries of Signature Resorts, Inc.
*23 Consent of Arthur Andersen LLP
*27 Financial Data Schedule
</TABLE>
- --------
* Filed herewith

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Company during the three month
period ended December 31, 1996.

(d) Financial Statement Schedules

None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.

50
<PAGE>

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.

SIGNATURE RESORTS, INC.
(Registrant)

By: /s/ Andrew D. Hutton
-----------------------------------
Andrew D. Hutton
Vice President and General
Counsel
Dated: March 28, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the Registrant in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Osamu Kaneko Chairman of the Board and March 28, 1997
____________________________________ Chief Executive Officer
Osamu Kaneko (Principal Executive
Officer)

/s/ Andrew J. Gessow Director and President March 28, 1997
____________________________________
Andrew J. Gessow

/s/ Steven C. Kenninger Director, Chief Operating March 28, 1997
____________________________________ Officer and Secretary
Steven C. Kenninger

/s/ Charles C. Frey Senior Vice President and March 28, 1997
____________________________________ Chief Accounting Officer
Charles C. Frey (Principal Accounting
Officer)

/s/ Michael A. Depatie Executive Vice President and March 28, 1997
____________________________________ Chief Financial Officer
Michael A. Depatie (Principal Financial
Officer)

/s/ James E. Noyes Executive Vice President and March 28, 1997
____________________________________ Director
James E. Noyes

/s/ Juergen Bartels Director March 28, 1997
____________________________________
Juergen Bartels

/s/ Sanford R. Climan Director March 28, 1997
____________________________________
Sanford R. Climan

/s/ Joshua S. Friedman Director March 28, 1997
____________________________________
Joshua S. Friedman

/s/ W. Leo Kiely III Director March 28, 1997
____________________________________
W. Leo Kiely III
</TABLE>

51
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants....................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995............. F-3
Consolidated Statements of Income for each of the three years ended
December 31, 1996....................................................... F-4
Consolidated Statements of Equity for each of the three years ended
December 31, 1996....................................................... F-5
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1996....................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To Signature Resorts, Inc.:

We have audited the accompanying consolidated balance sheets of Signature
Resorts, Inc. (a Maryland Corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Signature Resorts, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

Arthur Andersen LLP

Orlando, Florida,
February 14, 1997

F-2
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 3,746,000 $ 4,342,000
Cash in escrow...................................... 1,281,000 1,946,000
Mortgages receivable, net of an allowance of
$6,644,000 and $5,590,000 at December 31, 1996 and
1995, respectively................................. 100,820,000 65,100,000
Due from related parties............................ 9,338,000 2,701,000
Other receivables, net.............................. 7,274,000 6,383,000
Prepaid expenses and other assets................... 7,668,000 2,125,000
Investment in joint venture......................... 7,397,000 2,644,000
Real estate and development costs................... 95,127,000 46,757,000
Property and equipment, net......................... 3,325,000 1,863,000
Intangible assets, net.............................. 3,156,000 4,224,000
------------ ------------
Total assets...................................... $239,132,000 $138,085,000
============ ============
LIABILITIES AND EQUITY
Accounts payable.................................... $ 9,165,000 $ 4,599,000
Accrued liabilities................................. 15,847,000 8,855,000
Due to related parties.............................. 1,587,000 1,422,000
Income taxes payable................................ 438,000 --
Deferred taxes...................................... 10,807,000 --
Notes payable to financial institutions............. 97,644,000 75,296,000
Notes payable to related parties.................... -- 9,443,000
------------ ------------
Total liabilities................................. $135,488,000 $ 99,615,000
------------ ------------
Commitments and contingencies (Note 10)

Stockholders Equity:
Preferred stock (10,000,000 shares authorized and
none issued or outstanding)...................... -- --
Common stock ($0.01 par value, 100,000,000 shares
authorized and 17,392,205 outstanding on December
31, 1996 and par value $100 on 200 shares
outstanding at December 31, 1995) ............... $ 174,000 $ 20,000
Additional paid in capital........................ 97,927,000 157,000
Retained earnings................................. 5,543,000 2,435,000
Members' deficit.................................. -- (1,432,000)
Partners' equity:
General partners' equity.......................... -- 4,176,000
Limited partners' equity.......................... -- 33,114,000
------------ ------------
Total equity...................................... $103,644,000 $ 38,470,000
------------ ------------
Total liabilities and equity...................... $239,132,000 $138,085,000
============ ============
</TABLE>

See accompanying notes to the consolidated financial statements.

F-3
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Vacation Interval sales.................. $75,069,000 $59,071,000 $40,269,000
Interest income.......................... 9,451,000 6,929,000 3,683,000
Other income............................. 10,534,000 6,608,000 338,000
----------- ----------- -----------
Total revenues......................... $95,054,000 $72,608,000 $44,290,000
----------- ----------- -----------
Costs and operating expenses:
Vacation Interval cost of sales........... $18,089,000 $15,650,000 $12,394,000
Advertising, sales, and marketing......... 35,488,000 28,488,000 18,745,000
Loan portfolio
Interest expense--treasury............... 5,197,000 3,586,000 1,629,000
Other expenses........................... 1,465,000 1,189,000 851,000
Provision for doubtful accounts.......... 2,706,000 1,787,000 923,000
General and administrative................ 10,671,000 6,554,000 3,738,000
Depreciation and amortization............. 2,378,000 1,675,000 489,000
----------- ----------- -----------
Total costs and operating expenses..... $75,994,000 $58,929,000 $38,769,000
----------- ----------- -----------
Income from operations..................... 19,060,000 13,679,000 5,521,000
Interest expense--other (net of capitalized
interest of
$5,268,000, $2,570,000, and $2,021,000 in
1996,
1995 and 1994, respectively)...... ....... 1,581,000 476,000 959,000
Equity loss on investment in joint venture. 236,000 1,649,000 271,000
----------- ----------- -----------
Income before taxes........................ 17,243,000 11,554,000 4,291,000
Provision for income taxes................. 3,063,000 641,000 --
----------- ----------- -----------
Net income................................. $14,180,000 $10,913,000 $ 4,291,000
=========== =========== ===========
PRO FORMA INCOME DATA (UNAUDITED)
Income before taxes........................ $17,243,000 $11,554,000 $ 4,291,000
Pro forma provision for income taxes....... 6,552,000 4,349,000 1,618,000
----------- ----------- -----------
Pro forma net income....................... $10,691,000 $ 7,205,000 $ 2,673,000
=========== =========== ===========
Pro forma net income per common and common
equivalent share.......................... $ 0.77 $ 0.63 $ --
Pro forma weighted average common and
common equivalent shares outstanding...... 13,847,232 11,354,705 --
</TABLE>

See accompanying notes to the consolidated financial statements.

F-4
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL RETAINED MEMBERS' GENERAL LIMITED
SHARES PAID-IN EARNINGS EQUITY PARTNERS' PARTNERS'
OUTSTANDING AMOUNT CAPITAL (DEFICIT) (DEFICIT) EQUITY EQUITY TOTAL
----------- --------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1993............ -- $ -- $ -- $ -- $ -- $ (59,000) $ 11,897,000 $ 11,838,000
Contributions........ -- -- -- -- -- 3,205,000 12,315,000 15,520,000
Distributions........ -- -- -- -- -- -- (870,000) (870,000)
Net (loss) income.... -- -- -- (271,000) -- 183,000 4,380,000 4,292,000
---------- --------- ----------- ----------- ----------- ----------- ------------ ------------
Balance at December
31, 1994............ -- -- -- (271,000) -- 3,329,000 27,722,000 30,780,000
Issuance of Common
Stock............... 200 20,000 157,000 -- -- -- -- 177,000
Contributions........ -- -- 655,000 1,000 374,000 -- 1,030,000
Distributions........ -- -- -- -- (2,437,000) (43,000) (1,950,000) (4,430,000)
Net income........... -- -- -- 2,051,000 1,004,000 516,000 7,342,000 10,913,000
---------- --------- ----------- ----------- ----------- ----------- ------------ ------------
Balance at December
31, 1995............ 200 20,000 157,000 2,435,000 (1,432,000) 4,176,000 33,114,000 38,470,000
Distributions of
partnership equity
and other equity
interests........... -- -- -- (2,543,000) (5,394,000) -- (1,633,000) (9,570,000)
Proceeds from the
sale of common stock
to the public, net
of offering costs .. 16,845,205 169,000 73,155,000 -- -- -- -- 73,324,000
Stock issued and
goodwill recorded in
connection with the
acquisition of
investment in Joint
Venture............. 547,000 5,000 4,983,000 -- -- -- -- 4,988,000
Acquisition of
minority limited
partners' interests. -- -- (7,464,000) -- -- -- -- (7,464,000)
Deferred taxes
recorded in
connection with the
Consolidation
Transactions........ -- -- (9,464,000) -- -- -- -- (9,464,000)
Interest accrued on
deferred installment
gains in connection
with the
Consolidation
Transactions........ -- -- (820,000) -- -- -- -- (820,000)
Net income (loss).... -- -- -- 7,021,000 3,568,000 (164,000) 3,755,000 14,180,000
Exchange of partners'
and members' equity
for stock in
connection with the
Consolidation
Transactions........ (200) (20,000) 37,380,000 (1,370,000) 3,258,000 (4,012,000) (35,236,000) --
---------- --------- ----------- ----------- ----------- ----------- ------------ ------------
Balance at December
31, 1996............ 17,392,205 $ 174,000 $97,927,000 $ 5,543,000 $ -- $ -- $ -- $103,644,000
========== ========= =========== =========== =========== =========== ============ ============
</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................... $ 14,180,000 $ 10,913,000 $ 4,291,000
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization....... 2,378,000 1,676,000 489,000
Provision for bad debt expense...... 2,706,000 1,787,000 923,000
Equity loss on investment in joint
venture............................ 236,000 1,649,000 271,000
Changes in operating assets and
liabilities:
Cash in escrow.................... 665,000 481,000 (1,484,000)
Due from related parties.......... (6,637,000) (2,701,000) --
Prepaid expenses and other assets. (5,543,000) (449,000) (1,034,000)
Real estate and development costs. (48,370,000) (13,305,000) (17,671,000)
Other receivables................. (905,000) (5,363,000) (549,000)
Accounts payable.................. 4,566,000 3,409,000 25,000
Accrued liabilities............... 6,171,000 2,923,000 3,682,000
Income taxes payable.............. 438,000 -- --
Deferred taxes.................... 1,343,000 -- --
Due to related parties............ 165,000 1,284,000 93,000
------------ ------------ ------------
Net cash (used in) provided by
operating activities................ (28,607,000) 2,304,000 (10,964,000)
------------ ------------ ------------
INVESTING ACTIVITIES
Expenditures for investment in joint
venture............................. -- -- (4,565,000)
Expenditures for property and
equipment........................... (1,865,000) (1,764,000) (221,000)
Expenditures for intangible assets... (907,000) (1,705,000) (3,147,000)
Mortgages receivable................. (38,412,000) (33,450,000) (17,007,000)
------------ ------------ ------------
Net cash used in investing
activities.......................... (41,184,000) (36,919,000) (24,940,000)
------------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from notes payable to
financial institutions.............. 103,815,000 71,062,000 35,266,000
Payments on notes payable to
financial institutions.............. (81,467,000) (33,106,000) (16,358,000)
Proceeds from notes payable to
related parties..................... 5,606,000 3,711,000 5,145,000
Payments on notes payable to related
parties............................. (15,049,000) (1,343,000) (2,569,000)
Equity contributions................. -- 1,208,000 15,520,000
Proceeds from Initial Public
Offering............................ 73,324,000 -- --
Acquisition of minority limited
partners' interests................. (7,464,000) -- --
Equity distributions................. (9,570,000) (4,430,000) (870,000)
------------ ------------ ------------
Net cash provided by financing
activities.......................... 69,195,000 37,102,000 36,134,000
------------ ------------ ------------
Net (decrease) increase in cash and
cash equivalents.................... (596,000) 2,487,000 230,000
Cash and cash equivalents, beginning
of period........................... 4,342,000 1,855,000 1,625,000
------------ ------------ ------------
Cash and cash equivalents, end of
period.............................. $ 3,746,000 $ 4,342,000 $ 1,855,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for
interest............................ $ 12,225,000 $ 5,414,000 $ 3,646,000
Cash paid during the period for
income taxes........................ $ 1,282,000 $ -- $ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INFORMATION
Goodwill recorded on Investment in
Joint Venture in connection with the
Consolidation Transactions.......... $ 4,988,000
Deferred taxes recorded in connection
with the Consolidation Transactions. $ 9,464,000
Interest accrued on deferred
installment gains recorded in
connection with the Consolidation
Transactions........................ $ 820,000
Net assets of predecessor
partnerships acquired in exchange
for 11,354,705 shares of common
stock in connection with the
Consolidation Transactions.......... $ 37,380,000
</TABLE>

See accompanying notes to the consolidated financial statements.

F-6
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996 AND 1995

1. NATURE OF BUSINESS

Signature Resorts, Inc. and its wholly-owned subsidiaries (the Company)
generate revenues from the sale and financing of timeshare interests in their
resorts, which typically entitle the owner to use a fully furnished vacation
resort in perpetuity, typically for a one-week period each year (each, a
Vacation Interval). The Company's principal operations consist of (i)
developing and acquiring vacation ownership resorts, (ii) marketing and
selling Vacation Intervals at its resorts, (iii) providing consumer financing
for the purchase of Vacation Intervals at its resorts, and (iv) managing the
operations of its resorts.

The Company was incorporated in May 1996. On August 20, 1996, the Company
consummated an initial public offering of a portion of its common stock (the
Initial Public Offering) by offering 6,037,500 shares to the public. The gross
proceeds from the public offering were $84,525,000. The Company incurred
$11,202,000 of expenses associated with this offering. Concurrent with the
Initial Public Offering, certain predecessor limited partnerships, limited
liability companies and corporations (the Entities) exchanged their direct or
indirect interest in, and obligations of the entities, for shares of the
Company's common stock (the Consolidation Transactions).

The accompanying consolidated financial statements reflect the financial
position and results of operations of the following subsidiaries since the
date they were acquired or formed:

<TABLE>
<CAPTION>
DATE RESORT ACQUIRED/
RESORT PROPERTY DATE OF FORMATION
--------------- ---------------------
<S> <C> <C>
Signature Resorts, Inc.
Cypress Pointe Resorts,
L.P. Cypress Pointe Resort November 1992
Vacation Ownership
Marketing Company Cypress Pointe Resort November 1992
Fall Creek Resort, L.P. Plantation at Fall Creek July 1993
Vacation Resort
Marketing of Missouri,
Inc. Plantation at Fall Creek July 1993
Port Royal Resort, L.P. Royal Dunes Resort April 1994
Grand Beach Resort,
Limited Partnership Embassy Vacation Resort Grand Beach January 1995
Resort Marketing
International-Orlando Embassy Vacation Resort Grand Beach January 1995
AKGI-Royal Palm,
C.V.O.A. Royal Palm Beach Club July 1995
AKGI-Flamingo, C.V.O.A. Flamingo Beach Club August 1995
San Luis Resort
Partners, LLC San Luis Bay Inn June 1996
Lake Tahoe Resort
Partners, LLC Embassy Vacation Resort Lake Tahoe May 1996
Premier Resort
Management, Inc.
Resort Telephone & Cable
of Orlando, Inc.
USA Vacation Investors,
L.P.
Kabushiki Gaisha Kei,
LLC
Argosy/KOAR Group, Inc.
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

For periods prior to August 20, 1996, the accompanying financial statements
include the combined accounts of Signature Resorts, Inc. and the companies
presented in Note 1 that were acquired or formed prior to August 20, 1996.
These companies became wholly-owned subsidiaries in connection with the
Consolidation Transactions. As a result, the combined accounts are now
referred to as consolidated financial statements for the historical periods
presented. All significant intercompany transactions and balances have been
eliminated from these consolidated financial statements.

F-7
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Consolidation Transactions have been accounted for as a reorganization
of entities under common control. Accordingly, the net assets of the
predecessor entities were recorded at the predecessor entities' basis. In
addition, the accompanying financial statements reflect the historical results
of operations of the predecessor partnerships on a combined basis.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, money market, and all highly
liquid investments purchased with an original maturity of three months or
less.

Cash in Escrow

Cash in escrow is restricted cash consisting of deposits received on sales
of Vacation Intervals that are held in escrow until a certificate of occupancy
is obtained or the legal recission period has expired.

Real Estate and Development Costs

Real estate is valued at the lower of cost or net realizable value.
Development costs include both hard and soft construction costs and together
with real estate costs are allocated to Vacation Intervals based upon their
relative sales values. Interest, taxes, and other carrying costs incurred
during the construction period are capitalized.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful life of 3 to 7 years.

Depreciation and amortization expense related to property and equipment was
$403,000, $338,000 and $60,000 in 1996, 1995, and 1994, respectively.

Intangible Assets

Organizational costs incurred in connection with the formation of the
Company have been capitalized and are being amortized on a straight-line basis
over a period of three to five years. Start-up costs relate to costs incurred
to develop a marketing program prior to receiving regulatory approval to
market the related property and are being amortized on a straight line basis
over a period of one year.

Financing and loan origination fees incurred in connection with obtaining
funding for the Company have been capitalized and are being amortized over the
life of the respective loans.

Goodwill recorded in connection with the acquisition of the Investment in
Joint Venture is being amortized by a fixed amount per Interval as Intervals
are sold.

Revenue Recognition

The Company recognizes sales of Vacation Intervals on an accrual basis after
a binding sales contract has been executed, a 10% minimum down payment has
been received, the recission period has expired, construction is substantially
complete, and certain minimum sales levels have been achieved. If all the
criteria are met except that construction is not substantially complete, then
revenues are recognized on the percentage-of-completion (cost to cost) basis.
For sales that do not qualify for either accrual or percentage-of-completion
accounting, all revenue is deferred using the deposit method.

F-8
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Revenues from resort management and maintenance services are recognized on
an accrual basis as earned.

Income Taxes

Prior to August 20, 1996, the predecessor entities were taxed either as a
corporation at the corporate level, as an S corporation taxable at the
shareholder level, or as a partnership taxable at the partner level. As a
result of the Consolidation Transactions, the Company became subject to
federal, state, and foreign income taxes from the effective date of the
Initial Public Offering. The pro forma net income per common and common
equivalent share uses the historical net income of the Company as adjusted by
the unaudited pro forma provision for income taxes to reflect the net income
per common and common equivalent share, as if the Company had been treated as
a C corporation rather than as individual limited partnerships and limited
liability companies for federal income tax purposes for the years ended
December 31, 1996, 1995 and 1994.

The Company accounts for income taxes using an asset and liability approach
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns.
Deferred tax assets and liabilities are measured by applying enacted statutory
tax rates applicable to the future years in which the related deferred tax
assets or liabilities are expected to be settled or realized. Income tax
expense consists of the taxes payable for the current period and the change
during the period in deferred tax assets and liabilities.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Newly Issued Accounting Standards

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123 was adopted
during the year ended December 31, 1996. SFAS 123 requires that the Company's
financial statements include certain disclosures about stock-based employee
compensation arrangements and permits the adoption of a change in accounting
for such arrangements. Changes in accounting for stock-based compensation are
optional and the Company has adopted the disclosure requirements.

In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of (SFAS 121), which requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS 121 also addresses the
accounting for the expected disposition of long-lived assets. The Company
adopted SFAS 121 in the first quarter of 1996 and there was no effect on the
Company's operations or financial position.

Reclassifications

Certain reclassifications were made to the 1995 and 1994 financial
statements to conform to the 1996 presentation.

F-9
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. ACCOUNTS RECEIVABLE

The Company has accrued insurance claims as a result of hurricane damage to
its Royal Palm and Flamingo properties located in St. Maarten, Netherlands
Antilles of $1.25 million and $3.8 million at December 31, 1996 and 1995,
respectively. The receivable at December 31, 1996 consists of business
interruption insurance claims. The Company has submitted additional claims
above the amounts accrued for business interruption insurance and is in
negotiations with its carriers regarding these claims. Subsequent to
December 31, 1996, the Company collected $650,000 in partial payment of this
receivable.

4. MORTGAGES RECEIVABLE

The Company provides financing to the purchasers of Vacation Intervals which
are collateralized by their interest in such Vacation Intervals. The mortgages
receivable generally bear interest at the time of issuance of between 12% and
17% and remain fixed over the term of the loan, which is five to ten years.
The weighted average rate of interest on outstanding mortgages receivable is
15% as of December 31, 1996.

At December 31, 1996 and 1995, approximately $3.7 million and $1.8 million,
respectively, of mortgages receivable are non-interest bearing. These
mortgages have not been discounted as management has determined that the
effect would not be material to the consolidated financial statements.

Additionally, the Company has accrued interest receivable related to
mortgages receivable of $1,452,000 and $861,000 at December 31, 1996 and 1995,
respectively. The accrued interest receivable at December 31, 1996 and 1995 is
net of an allowance for doubtful accounts of $165,000 and $145,000,
respectively, and is included in other receivables, net.

The following schedule reflects the principal maturities of mortgages
receivable:

<TABLE>
<S> <C>
Year ending December 31:
1997...................................................... $ 17,614,000
1998...................................................... 15,842,000
1999...................................................... 14,854,000
2000...................................................... 14,769,000
2001...................................................... 14,287,000
Thereafter................................................ 30,098,000
------------
Total principal maturities of mortgages receivable........ 107,464,000
Less allowance for doubtful accounts...................... (6,644,000)
------------
Net principal maturities of mortgages receivable.......... $100,820,000
============
</TABLE>

The Company considers all mortgages receivable past due more than 60 days to
be delinquent. At December 31, 1996, approximately $9.2 million of mortgages
receivable were delinquent.

F-10
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The activity in the mortgages receivable allowance for doubtful accounts is
as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Balance, beginning of the period................... $ 5,590,000 $1,571,000
Increase (decrease) in allowance for purchased
mortgage receivables.............................. (400,000) 3,156,000
Provision.......................................... 2,706,000 1,787,000
Receivables charged off............................ (1,252,000) (924,000)
----------- ----------
Balance, end of the period......................... $ 6,644,000 $5,590,000
=========== ==========
</TABLE>

During September 1995, the Company recorded an allowance for doubtful
accounts of $3,412,000 for certain mortgage portfolios acquired in conjunction
with the acquisition of the two properties in St. Maarten.

5. REAL ESTATE AND DEVELOPMENT COSTS

Real estate and development costs and accumulated cost of sales consist of
the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Land............................................ $ 32,923,000 $ 19,734,000
Development costs, excluding capitalized
interest....................................... 105,972,000 57,970,000
Capitalized interest............................ 10,568,000 5,300,000
------------ ------------
Total real estate and development costs......... 149,463,000 83,004,000
Less accumulated cost of sales.................. (54,336,000) (36,247,000)
------------ ------------
Net real estate and development costs........... $ 95,127,000 $ 46,757,000
============ ============
</TABLE>

6. INVESTMENT IN JOINT VENTURE

The Company owns partnership interests in the Embassy Vacation Resort at
Poipu Point, Koloa, Kauai, Hawaii (the "Poipu Partnership"). As co-managing
general partner, the Company holds a 0.5% partnership interest for purposes of
distributions, profits and losses. The Company is also a limited partner and
holds a 29.93% limited partnership interest for purposes of distributions,
profits and losses, for a total partnership interest of 30.43%. In addition,
following repayment of any outstanding partner loans, the Company is entitled
to receive a preferred 10% per annum return on the initial capital investment
of approximately $4.6 million. After payment of such preferred return and the
return of approximately $4.6 million of capital to the Company on a pari passu
basis with the other partner in the partnership, the Company is entitled to
receive approximately 50% of the net profits. In the event certain internal
rates of return specified under the partnership agreement are achieved, the
Company is entitled to receive approximately 55% of the net profits.

F-11
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Summarized financial information for the Poipu Partnership is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Mortgages receivable................................ $15,920,000 $ 3,474,000
Real estate and development costs................... 38,262,000 3,248,000
Net property and equipment.......................... 510,000 39,287,000
Total assets........................................ 60,474,000 50,696,000
Notes payable....................................... 40,903,000 35,494,000
Advances from partners.............................. 6,675,000 4,000,000
Partners' capital................................... 8,452,000 8,688,000
Revenues............................................ 23,904,000 10,119,000
Net loss............................................ 237,000 5,419,000
</TABLE>

Concurrent with the Initial Public Offering, the Company exchanged 547,000
shares of stock with the former holders of interests in the Poipu Partnership
for the 30.43% interest in the joint venture. As a result of this exchange,
$4,988,000 of goodwill was recorded as an increase in investment in joint
venture and is being amortized on a per Interval basis as Intervals are sold.
The amortization of such goodwill for the year ended December 31, 1996 was
$168,000 and is included in equity loss on investment in joint venture. The
Company also acquired a $2,547,000 note receivable from the partnership in
connection with the exchange. The principal balance and accrued interest
related to this note receivable was $2,031,000 and $291,000 respectively, and
is included in due from related parties as of December 31, 1996.

7. INTANGIBLE ASSETS

Intangible assets and accumulated amortization consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Organizational costs............................... $ 2,569,000 $ 2,547,000
Start-up costs..................................... 2,433,000 2,051,000
Loan origination fees.............................. 422,000 522,000
Financing fees..................................... 1,620,000 1,444,000
----------- -----------
Total intangible assets............................ 7,044,000 6,564,000
Less accumulated amortization...................... (3,888,000) (2,340,000)
----------- -----------
Net intangible assets.............................. $ 3,156,000 $ 4,224,000
=========== ===========
</TABLE>

Amortization expense related to intangible assets was $1,975,000, $1,338,000
and $429,000 in 1996, 1995 and 1994, respectively. In addition, $426,000 of
fully amortized intangibles were retired from the related asset and
accumulated amortization accounts.

F-12
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. NOTES PAYABLE

Notes payable to financial institutions consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Construction loans payable not to exceed $49.0
million in the
aggregate, interest payable monthly at prime plus
2% (10.65% at December 31, 1995)................. $ -- $ 9,268,000
Construction and acquisition loan payable, due
October 31,1998 with interest payable monthly at
LIBOR plus 4.25% (9.94% at December 31, 1995)
collateralized by land, improvements and
timeshare interests.............................. -- 1,898,000
Revolving lines of credit not to exceed $155.0
million in the aggregate (limited by eligible
collateral), with interest payable monthly at
prime plus 2% to prime plus 3% (10.25% to 11.25%
at December 31, 1996), payable in monthly
installments of principal and interest equal to
100% of all proceeds of the receivables
collateral collected during the month but not
less than the accrued interest, with any
remaining principal due seven to ten years after
the date of the last advance related to mortgages
receivable, collateralized by specific mortgages
receivable....................................... 58,767,000 41,917,000
Revolving line of credit of $10.0 million,
collateralized by certain mortgages receivable
with interest payable at LIBOR plus 4.25% (9.78%
at December 31, 1996), payable in monthly
installments of principal and interest equal to
100% of all proceeds of the receivables
collateral collected during the month but not
less than the accrued interest, with any
remaining principal due October 31, 2003......... 6,043,000 1,571,000
Revolving line of credit of $6.0 million, with
interest payable monthly at prime plus 3% (11.25%
at December 31, 1996), maturing seven years after
the date of the last advance, collateralized by
mortgages receivable............................. 2,523,000 3,874,000
Working capital note payable of $4.0 million, with
interest payable monthly at prime plus 2% (10.25%
at December 31, 1996), due in April 1999,
collateralized by certain mortgage receivables... 3,707,000 521,000
Acquisition loans payable of $5.45 million, with
interest payable monthly at prime plus 3% (11.25%
at December 31, 1996), due on dates ranging from
January 1998 to April 1998, payable with a
portion of the proceeds received on the sale of
Vacation Intervals, collateralized by specific
mortgages receivable............................. 2,459,000 5,998,000
Acquisition/construction loan payable of $9.0
million, with monthly interest payable at prime
plus 2% (10.25% at December 31, 1996), due by
June 13, 1999, payable with a portion of the
proceeds received on the sale of Vacation
Intervals, collateralized by specific mortgages
receivable....................................... 1,937,000 --
Construction loan payable of $28.0 million, with
monthly interest payable at plus prime plus 2%
(10.25% at December 31, 1996) principal payable
with a portion of the proceeds received on the
sale of Vacation Intervals, collateralized by
specific land and unsold interval inventory, due
by April 30, 2000................................ 11,792,000 --
</TABLE>

F-13
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Construction loan payable of $11.0 million with
monthly interest payable at prime plus 2% (10.25%
at December 31, 1996) principal payable with a
portion of the proceeds received on the sale of
Vacation Intervals, collateralized by specific
land and unsold interval inventory, due by May 19,
1998.............................................. $ 402,000 $ --
Construction loan payable of $3.0 million with
monthly interest payable at LIBOR plus 4.25%
(9.78% at December 31, 1996) principal payable
with a portion of the proceeds received on the
sale of Vacation Intervals, collateralized by
specific land and unsold interval inventory, due
by October 31, 1998............................... 419,000 --
Construction loan payable of $8.0 million with
monthly interest payable at prime plus 2% (10.25%
at December 31, 1996) principal payable with a
portion of the proceeds received on the sale of
Vacation Intervals, collateralized by specific
land and unsold interval inventory, due by January
14, 1998.......................................... 2,226,000 --
Non-interest bearing land purchase obligation (net
of a $335,000 discount for imputed interest at
8.5% in 1996) due October 1, 1997................. 2,165,000 1,500,000
Note payable of $3.0 million with monthly interest
payable at LIBOR plus 4.25% (9.78% at December 31,
1996) payable with a portion of the proceeds on
the sale of Vacation Intervals, collateralized by
specific land .................................... 516,000 --
Noninterest bearing land loan of $500,000 payable
at $54 per interval sold with remaining balance
due May 1, 1997................................... 500,000 --
Notes payable to certain investors and former
owners, with monthly principal payments of
$100,000, plus interest at 12%, with additional
interest of $325 per interval sold, due April 10,
1998.............................................. 1,655,000 2,900,000
Noninterest bearing purchase money mortgage note,
payable in annual installments of $2.0 million
with final payment due November 5, 1997 (net of a
discount of $670,000 for imputed interest at 8.5%
at December 31, 1996 collateralized by specific
land.............................................. 1,330,000 5,588,000
Other notes payable................................ 1,203,000 261,000
----------- -----------
Total notes payable................................ $97,644,000 $75,296,000
=========== ===========
</TABLE>

Under the terms of the revolving lines of credit agreements, totaling
approximately $175 million, the Company may typically borrow from 85% to 90%
of the balances of the pledged mortgages receivable. A total of $105 million
is available under these certain agreements at December 31, 1996, the
borrowing capacity expires seven to ten years after the date on which the last
advance related to mortgages receivable was executed.

The loans contain certain covenants, the most restrictive of which require
certain of the consolidated entities to maintain a minimum net worth and
require certain expenses to not exceed certain percentages of sales. At
December 31, 1996, the Company was in compliance with all covenants or had
received waivers with respect to these covenants.

F-14
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Subsequent to December 31, 1996, the Company paid $24,145,000 of the
$97,644,000 notes payable outstanding at December 31, 1996. The expected
maturities of the remaining notes payable, are as follows:

<TABLE>
<S> <C>
Due in fiscal year
1997........................................................ $22,282,000
1998........................................................ 15,592,000
1999........................................................ 13,529,000
2000........................................................ 12,698,000
2001........................................................ 8,316,000
2002 and thereafter......................................... 1,082,000
-----------
$73,499,000
===========
</TABLE>

9. RELATED-PARTY TRANSACTIONS

At December 31, 1996, the Company, had accrued $3,603,000 and $1,587,000 as
a receivable and payable, respectively, with the various homeowners'
associations at its resorts. The Company accrued $652,000 and $1,418,000 as a
receivable and payable, respectively, at December 31, 1995 with the
homeowners' associations at its resorts. The related party payable to the
homeowners' associations at December 31, 1995, included $1,030,000 of a
special assessment fee charged to the Company. The Company generally accrues
receivables from homeowners' associations for management fees and certain
other expenses. Payables to the homeowners' associations consist mostly of
maintenance fees for units owned by the Company. All of these amounts are
classified as due from and due to related parties in the accompanying
consolidated balance sheets.

The Company recorded a receivable of $1,154,000 and $121,000 from two of its
predecessor partnerships at December 31, 1995, for predevelopment costs
incurred by the Company at its Embassy Vacation Resort Lake Tahoe and San Luis
Bay Resorts. These receivables were included as due from related parties. Such
predecessor partnerships were consolidated into the Company on August 20,
1996, as a result of the Consolidation Transactions.

The Company also made payments of $295,000 during the twelve months ended
December 31, 1995, to an affiliate of the Company for construction consulting
and expense reimbursement. For the year ended December 31, 1996, no such
payments were made.

Notes payable to related parties as of December 31, 1995 consist of the
following:

<TABLE>
<S> <C>
Notes payable to CPI Securities, L.P., an affiliate of a limited
partner, with interest at 12%, payable monthly and the entire
principal balance and all accrued interest due on December 31,
1996........................................................... $2,722,000
Notes payable to Grace Investments, Ltd. one of the limited
partners, with interest at 12% payable monthly, due on December
31, 1996....................................................... 1,667,000
Notes payable to Dickstein & Company, L.P., an affiliate of a
limited partner, with interest payable monthly at 12%, due on
December 31, 1996.............................................. 1,111,000
Acquisition loan payable with interest payable at 12%, due on
December 31, 1996.............................................. 1,495,000
Notes payable to partners, with interest accrued at 16%, payable
on demand...................................................... 2,157,000
Other........................................................... 291,000
----------
Total notes payable to related parties.......................... $9,443,000
==========
</TABLE>

F-15
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During 1996, notes payable to related parties were satisfied as part of the
Consolidation Transactions.

10. COMMITMENTS AND CONTINGENCIES

The Company has license agreements with Embassy Vacation Resorts, a division
of The Promus Corporation ("Promus"), to franchise the Grand Beach and Lake
Tahoe properties. The agreements allow the resorts to be operated and marketed
as "Embassy Vacation Resorts." The agreements provide for Promus to be paid a
percentage of net sales of the Embassy Vacation Resort properties. Additional
terms are stated in the related license agreements.

The Company has an agreement with Westin Hotels & Resorts ("Westin") to
acquire, develop, and sell Vacational Intervals at four and five star Westin
Vacation Clubs. In December 1996, the Company announced plans to acquire the
first Westin Vacation Club. This property will be located in St. John, U. S.
Virgin Islands. The Company and Westin will form the Westin Partnership owned
50% each by the Company and Westin to acquire an interest in the St. John
Resort. Of the $10.5 million purchase price, each company is obligated to
contribute $2.5 million. The remaining $5.5 million of the acquisition price
will be paid by the Westin Partnership using debt financing. In addition, the
Westin Partnership will borrow approximately $7.1 million to complete the
conversion of the project to a Westin Vacation Club.

The Company is currently subject to litigation and claims regarding
employment, tort, contract, construction, and commission dispute, among
others. In the judgment of management, none of such lawsuits or claims against
the Company is likely to have a material adverse effect on the Company or its
business.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires that the Company disclose estimated fair values for its financial
instruments. The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

Cash and cash equivalents and cash in escrow: The carrying amount reported
in the balance sheet for cash and cash equivalents and cash in escrow
approximates their fair value because of the short maturity of these
instruments.

Mortgages receivable: The carrying amount reported in the balance sheet for
mortgages receivable approximates its fair value because the weighted average
interest rate on the portfolio of mortgages receivable approximates current
interest rates to be received on similar current mortgages receivable.

Notes payable to financial institutions: The carrying amount reported in the
balance sheet for notes payable approximates its fair value because the
interest rates on these instruments approximate current interest rates charged
on similar current borrowings.

Notes payable to related parties: The fair value of the notes payable to
related parties is not determinable since these financial instruments are not
readily marketable and are payable to related parties.

12. OTHER INCOME

Included in other income for the year ended December 31, 1996, is $3.5
million of income from the realization of purchased mortgages receivable, $1.7
million of income related to the settlement of certain receivables from the
former owners of the St. Maarten properties, $2.0 million of rental income,
$0.9 million of management fees, and $1.0 million of consulting and
development income related to certain joint marketing programs. Other income
for the year ended December 31, 1995, consists primarily of business
interruption insurance proceeds of $2.0 million, income from the realization
of purchased mortgages receivable of $2.2 million, rental income of
$1.3 million and management fees of $841,000.

F-16
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. SUBSEQUENT EVENTS

Subsequent to December 31, 1996, the Company completed an offering (the
"Convertible Offering") of $138.0 million of 5.75% convertible subordinated
notes due 2007, and an offering (the "Stock Offering") of 4,000,000 shares of
Common Stock, including 2,400,000 shares of Common Stock sold by certain
selling stockholders. The proceeds received by the Company, after deducting
underwriting discounts and estimated expenses of the Stock Offering and the
Convertible Offering, were approximately $53.3 million and $133.6 million,
respectively.

On September 23, 1996, the Company announced the signing of a merger
agreement to acquire AVCOM International Inc. for approximately $34.6 million
of the Company's common stock plus the assumption of net debt. AVCOM is the
parent company of All Seasons Resorts, Inc., a developer, marketer and
operator of timeshare resorts in Arizona, California and Texas. On February 7,
1997 this merger was consummated. Under the terms of the merger agreement, the
Company issued approximately 883,000 shares of its common stock in exchange
for all the outstanding capital stock of AVCOM. The merger will be treated as
a pooling of interests.

As of December 31, 1996, the Company recorded a receivable from AVCOM for
$3,025,000 and accrued interest of $89,000 in connection with advances made as
part of the merger agreement. These receivables are included in due from
related parties. In addition, the Company has also capitalized $1,600,000 of
merger costs that are to be expensed upon the consummation of the merger. The
Company had also accrued a receivable at $778,000 from AVCOM related to
certain expenditures made by the Company for the benefit of AVCOM. This
receivable is included in prepaid expenses and other assets.

The following table presents a summary of the proforma revenue, net income,
and earnings per share if the merger between the Company and AVCOM had taken
place on January 1, 1996:

<TABLE>
<S> <C>
Pro forma total revenue (unaudited)......................... $142,869,000
Pro forma net loss (unaudited).............................. $ (1,352,000)
Pro forma loss per share (unaudited)........................ $ (.09)
</TABLE>

The Pro forma net loss includes approximately $13.6 million related to
changes in accounting methods and the write-down and write-off of certain
AVCOM assets.

F-17
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14. STOCK OPTIONS

The Company issued 1,769,000 stock options during 1996 which were
outstanding at December 31, 1996. 19,000 of these options are subject to
stockholder approval at the 1997 Annual Stockholders Meeting. The Company
accounts for these options under APB Opinion No. 25, Accounting for Stock
Issued to Employees, under which no compensation cost has been recognized.
Under SFAS 123, the Company's net income and unaudited pro forma earnings per
share would have been $11,902,000 and $0.61, respectively, during the year
ended December 31, 1996. SFAS 123 would not have affected the Company's net
income and earnings per share for the years ended December 31, 1995 and 1994.
A summary of the Company's stock options for the year ended December 31, 1996
is presented below.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Outstanding options, beginning of year................. -- --
Granted................................................ 1,769,000 $15.44
Exercised.............................................. -- --
Forfeited.............................................. -- --
Expired................................................ -- --
--------- ------
Outstanding options, end of year....................... 1,769,000 $15.44
========= ======
Exercisable at end of year............................. 348,000 $15.27
Weighted average fair value of options granted......... $ 6.35
</TABLE>

The following is a summary of the exercise prices and terms of the 1,769,000
options granted during 1996.

<TABLE>
<CAPTION>
EXERCISE
PRICE OPTIONS TERM
-------- ------- -------
<S> <C> <C>
$12.00.................................................. 375,000 4 years
14.00.................................................. 529,000 5 years
14.00.................................................. 450,000 3 years
17.81.................................................. 40,000 5 years
18.125................................................. 110,000 4 years
24.125................................................. 265,000 4 years
</TABLE>

The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with the following assumptions:
risk free interest rate of 6.0%, expected dividend yield of zero, expected
volatility of 35%, and expected lives of 5 years.

15. EMPLOYEE BENEFIT PLANS

During 1996, the Company authorized 500,000 shares of Common Stock to be
issued in connection with its 1996 Equity Participation Plan and The Employee
Stock Purchase Plan (the "Plan"). The Plan allows employees that work at least
20 hours per week to purchase Common Stock of the Company at a 15% discount
from the lesser of the stock price on the date of grant or the date the stock
is purchased. Employees may purchase up to a maximum of 10% of their annual
compensation or $25,000. As of December 31, 1996, no shares were issued or
outstanding related to the Plan.

The Company also sponsors a 401(k) deferred savings plan (the "401(k) Plan")
in which employees can contribute up to 10% of their eligible compensation on
a pre-tax basis subject to certain maximum amounts. Under the terms of the
401(k) Plan, the Company can, at its option, match 50% of employee
contributions up to three percent of compensation. No contributions were made
to the 401(k) Plan by the Company during 1996.

F-18
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

16. INCOME TAXES

On August 20, 1996, the Company consummated a public offering which made it
subject to federal, state, and foreign income taxes from the effective date of
the Initial Public Offering. In addition, the Company is now required to
record a deferred tax liability for cumulative temporary differences between
financial reporting and tax reporting following the effective date of the
Initial Public Offering. For the year ended December 31, 1996, the Company
recorded approximately $1,720,000 of current income tax expense and
approximately $1,343,000 of deferred income tax expense. Additionally, the
Company recorded deferred taxes of $9,464,000 related to deferred taxes from
prior years that were assumed as part of the Initial Public Offering. The
total current tax liability and deferred tax liability at December 31, 1996
was $438,000 and $10,807,000, respectively.

The Company has recorded $820,000 of accrued interest related to deferred
installment gains from previous years that were assumed as part of the Initial
Public Offering. During the year ended December 31, 1996, the Company recorded
an additional $78,000 of expense related to these deferred installment gains.

Prior to August 20, 1996, the predecessor entities were taxed either as a
corporation at the corporate level, as an S corporation taxable at the
shareholder level, or as a partnership taxable at the partner level.
Accordingly, the table below summarizes the unaudited pro forma provision for
income taxes that would have been reported had the Company been treated as a C
corporation rather than as individual limited partnerships and limited
liability companies for federal income tax purposes for the years ended
December 31, 1996, 1995 and 1994. The Company's actual income tax provision is
presented for the period subsequent to August 20, 1996.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------
PRO FORMA UNAUDITED
----------------------------------
1996 1996 1995 1994
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Current:
Federal...................... $1,428,000 $2,644,000 $1,579,000 $ 361,000
State........................ 227,000 427,000 5,000 --
Foreign...................... 65,000 65,000 662,000 --
---------- ---------- ---------- -----------
1,720,000 3,136,000 2,246,000 361,000
Deferred:
Federal...................... $1,234,000 $3,056,000 $1,477,000 $ 1,018,000
State........................ 109,000 360,000 633,000 239,000
Foreign...................... -- -- (7,000) --
---------- ---------- ---------- -----------
1,343,000 3,416,000 2,103,000 1,257,000
---------- ---------- ---------- -----------
Provision for income taxes..... $3,063,000 $6,552,000 $4,349,000 $ 1,618,000
========== ========== ========== ===========
</TABLE>

The reconciliation between the statutory provision for income taxes and the
actual provision for income taxes is shown as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------
PRO FORMA UNAUDITED
---------------------------------
1996 1996 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income tax at federal
statutory rate............... $2,796,000 $5,863,000 $3,928,000 $1,459,000
State tax, net of federal
benefit...................... 222,000 563,000 422,000 156,000
Foreign tax, net of federal
benefit...................... -- -- (8,000) --
Other......................... 45,000 126,000 7,000 3,000
---------- ---------- ---------- ----------
Provision for income taxes.... $3,063,000 $6,552,000 $4,349,000 $1,618,000
========== ========== ========== ==========
</TABLE>

F-19
<PAGE>

SIGNATURE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the net deferred tax liabilities were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
PRO FORMA PRO FORMA
UNAUDITED UNAUDITED
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts...... $ 2,525,000 $ 1,356,000 $ 621,000
Fixed assets & inventory............. 2,546,000 (453,000) 57,000
Net operating loss carryforward...... 2,968,000 -- 1,048,000
Federal benefit of state deferred
tax................................. -- 364,000 149,000
Foreign tax credit carryover......... 332,000 632,000 --
Minimum tax credit carryover......... 1,570,000 2,502,000 923,000
------------ ----------- -----------
Total deferred tax assets.............. 9,941,000 4,401,000 2,798,000
------------ ----------- -----------
Deferred tax liabilities:
Installment sales.................... (20,557,000) (8,951,000) (4,581,000)
Other................................ (191,000) 388,000 (268,000)
------------ ----------- -----------
Total deferred tax liabilities......... (20,748,000) (8,563,000) (4,849,000)
------------ ----------- -----------
Net deferred tax liabilities........... (10,807,000) (4,162,000) (2,051,000)
============ =========== ===========
</TABLE>

Additionally, certain of the Company's consolidated affiliates include
foreign corporations which are taxed at a regular rate up to 45%. The Company
has filed a request for a tax holiday for AKGI-Royal Palm C.V.O.A. which
effectively reduces the tax to 2%. This 2% tax liability rate will be in
effect for the fiscal year ending December 31, 1997. Generally, a foreign tax
credit is allowed for any taxes paid on foreign income up to the amount of
U.S. tax.

F-20

<PAGE>

EXHIBIT 3.2

SIGNATURE RESORTS, INC.

BYLAWS
------

ARTICLE I
STOCKHOLDERS
------------

Section 1 - ANNUAL MEETING
--------------

The annual meeting of the stockholders of the Corporation shall be held at
such place (within or outside the state of Maryland), date and hour as shall be
determined by the Board of Directors and designated in the notice thereof. The
business to be transacted at the annual meeting shall include the election of
directors and any other corporate business as may properly come before the
meeting. Failure to hold an annual meeting of stockholders at such designated
time shall not invalidate the Corporation's existence or affect any otherwise
valid corporate act.

Section 2 - SPECIAL MEETING
---------------

At any time in the intervals between annual meetings, a special meeting of
the stockholders may be called by the President or by the Board of Directors,
and shall be called by the President at the request in writing of stockholders
owning twenty five percent (25%) in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. No business shall be
transacted at a special meeting save that specially named in the notice.

Section 3 - NOTICE OF MEETING
-----------------

Not less than ten (10) days nor more than ninety (90) days before the date
of every stockholders' meeting, the Secretary shall give to each stockholder
entitled to vote at such meeting, and to each stockholder not entitled to vote
who is entitled to notice by statute, written or printed notice stating the
date, time and place of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, either by presenting it to
him personally or by leaving it at his residence or usual place of business
or by mailing it to him at his address as it appears on the records of the
Corporation. Notice which is mailed in accordance with the preceding sentence
shall be deemed to be given at the time when the same shall be deposited in the
United States mail with postage thereon prepaid. Any stockholder may waive
notice of any meeting by written waiver filed with the records of the meeting,
either before or after the holding thereof. The attendance of a stockholder at a
meeting shall constitute a waiver of notice of such meeting, except where a
stockholder attends a meeting for the express purpose of objecting to the

<PAGE>

transaction of any business because the meeting is not lawfully called or
convened.

No business shall be transacted at a special meeting save that specially
named in the notice.

Section 4 - NOMINATION AND STOCKHOLDER BUSINESS
-----------------------------------

(a) Annual Meetings of Stockholders

(1) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by stockholders may be made at an
annual meeting of stockholders (i) pursuant to the Corporation's notice of the
meeting, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 4(a), who is entitled to vote at
the meeting and who has complied with the notice procedure set forth in this
Section 4(a).

(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1)
of this Section 4, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the
<PAGE>

nomination or proposal is made, (x) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (y) the
class and number of shares of stock of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.

(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 4 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholders' notice required by this Section 4(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Corporation.

(b) Special Meetings of Stockholders. Only such business shall be conducted
--------------------------------
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 4(b) who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section 4(b). In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be) for election to such
position as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this Section 4(b) shall be
delivered to the secretary at the principal executive offices of the Corporation
not earlier than the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th days prior to such special
meeting or the tenth day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting.

-3-
<PAGE>

(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 4 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 4. The presiding officer of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth in this
Section 4 and, if any proposed nomination of business is not in compliance with
this Section 4, to declare that such defective nomination or proposal be
disregarded.

(2) For purposes of this Section 4, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 4, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 4. Nothing in this Section 4 shall be deemed
to affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 5 - QUORUM
------

At any meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall constitute a
quorum; but this section shall not affect any requirement under any statute or
the Articles of Incorporation (the "Articles") of the Corporation for the vote
necessary for the adoption of any measure. A majority of the votes cast at a
meeting of stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting unless more than a majority of votes is required by statute,
by the Charter of the Corporation or by these Bylaws.

In the absence of a quorum a majority of the shares represented in person
or by proxy may adjourn the meeting from time to time not more than one hundred
twenty (120) days without further notice other than by announcement at such
meeting. At such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called. If the adjournment is for more than thirty (30)

-4-
<PAGE>

days, or if after adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.

Section 6 - VOTING
------

Each share of Voting Common Stock shall be entitled to one (1) vote.

Section 7 - VOTING OF STOCK BY CERTAIN HOLDERS
----------------------------------

Stock registered in the name of a corporation, partnership, trust or other
entity if entitled to be voted may be voted by the president or vice president,
a general partner, or trustee thereof as the case may be, or a proxy appointed
by any of the foregoing individual, unless some other person who has been
appointed to vote such stock pursuant to a bylaw or a resolution of the board of
directors of such corporation or other entity presents a certified copy of such
bylaw or resolution, in which case such person may vote such stock. Any
director or other fiduciary may vote stock registered in his name as such
fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time unless they
are held by it in a fiduciary capacity in which case they may be voted and shall
be counted in determining the total number of outstanding shares at any given
time.

The Board of Directors may adopt, by resolution, a procedure by which a
stockholder may certify, in writing, to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than a stockholder. The resolutions shall set forth:
the class of stockholders who may make the certification, the purpose for which
the certification may be made, the form of certification and the information to
be contained in it; if the certification is with respect to a record date of
closing of the stock transfer books, the time after the record date of the stock
transfer books within which the certification must be reviewed by the
Corporation; and any other provisions with respect to the procedure which the
Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes certificates.

Notwithstanding any provision of the Charter of the Corporation or these
Bylaws, Subtitle 7 of Title 3 of the Maryland

-5-
<PAGE>

General Corporation Law ("MGCL") (as the same be hereafter be amended from time
to time), and/or hereafter acquired or held by Osamu Kaneko, Andrew J. Gessow
and Steven C. Kenninger and/or any affiliates (as defined in Section 3-601 of
the MGCL) or associates (as defined in Section 3-701 of the MGCL) of any of the
foregoing.

Section 8 - PROXIES
-------

At all meetings of stockholders, a stockholder may vote the shares owned of
record by him either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.

Section 9 - PLACE OF MEETING
----------------

The Board of Directors may designate any place, either within or without
the State of Maryland, as the place of meeting for any annual or special meeting
of stockholders. If no designation is made, or if a special meeting be
otherwise called, the place of the meeting shall be the principal office of the
Corporation.

Section 10 - INFORMAL ACTION
---------------

Any action required or permitted to be taken at a meeting of stockholders
may be taken without a meeting if there is filed with the records of
stockholders meetings a unanimous written consent which sets forth the action
and is signed by each stockholder entitled to vote on the matter and a written
waiver of any right to dissent signed by each stockholder entitled to notice of
the meeting but not entitled to vote thereat.

ARTICLE II
DIRECTORS
---------

Section 1 - POWERS
------

The business and affairs of the Corporation shall be managed by its Board
of Directors, which may exercise all of the powers of the Corporation, except
such as are by statute or by the Charter or Bylaws of the Corporation expressly
conferred upon or reserved to the stockholders.

Section 2 - NUMBER AND TENURE
-----------------

At any regular meeting or at any special meeting called for that purpose, a
majority of the entire Board of Directors may establish, increase or decrease
the number of directors, provided

-6-
<PAGE>

that the number thereof shall not be less than seven (7), nor more than thirteen
(13), and further provided that the tenure of office of a director shall not be
affected by any decrease in the number of directors. Pursuant to the Articles,
the directors have been divided into classes with terms of three years with the
term of office of one class expiring at the Annual Meeting of Stockholders in
each year. Each director shall hold office for the term for which he is elected
and until his successor is elected and qualified, or until his resignation,
removal (in accordance with the Articles and these Bylaws) or death.

Section 3 - VACANCIES
---------

Any vacancy occurring on the Board of Directors shall be filled by the
election by the remaining directors at any regular or special meeting, except
that a vacancy resulting from an increase in the number of directors shall be
filled by a majority vote of the entire board of board directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, provided that a director elected to fill a vacancy
resulting from an increase in the number of directors shall be elected to serve
until the next annual meeting of stockholders and until his successor is elected
and qualifies.

Section 4 - REGULAR MEETINGS
----------------

The Board of Directors shall meet for the purpose of the election of
officers and the transaction of other business as soon as practicable after each
annual meeting of stockholders. Other regular meetings of the Board of
Directors shall be held at such times and such places, either within or without
the State of Maryland, as may be designated from time to time by the President
or by the Board of Directors.

Section 5 - SPECIAL MEETING
---------------

Special meetings of the Board of Directors may be called by the President
or by a majority of the directors. The person or persons authorized to call
special meetings of the Board of Directors may fix any place, either within or
without the State of Maryland, as the place for holding the special meeting of
the Board of Directors called by such person or persons.

Section 6 - NOTICE
------

Notice of every regular or special meeting of the Board shall be given to
each director at least two (2) days-prior thereto either by written notice
delivered personally or mailed or telegrammed to his last known business or
residence address or by personal telephone call. Notice which is mailed in
accordance with the preceding sentence shall be deemed to be given at the time
when

-7-
<PAGE>

the same shall be deposited in the United States mail with postage thereon
prepaid. Any director may waive notice of any meeting by written waiver filed
with the records of the meeting, either before or after the holding thereof.
The attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.

Section 7 - QUORUM
------

A majority of the Board of Directors shall constitute a quorum for the
transaction of business, but if less than such quorum is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present.

Section 8 - MANNER OF ACTING
----------------

The action of a majority of the directors present at a meeting at which a
quorum is present shall constitute action of the Board of Directors unless the
concurrence of a greater proportion is required for such action by statute, by
the Charter of the Corporation or by these Bylaws.

Section 9 - COMPENSATION
------------

By resolution of the Board of Directors a fixed sum and expenses, if any,
of attendance at each regular or special meeting of the Board of Directors or of
committees hereof, and other compensation for their services as such or on
committees of the Board of Directors, may be paid to the Directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor, pursuant to a resolution of the
Board of Directors.

Section 10 - INFORMAL ACTION
---------------

Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if a written consent to such action is
signed by all members of the Board of Directors and such written consent is
filed with the minutes of proceedings of the Board of Directors.

Section 11 - MEETING BY CONFERENCE TELEPHONE
-------------------------------

Members of the Board of Directors may participate in a meeting by means of
a conference telephone or similar communications

-8-
<PAGE>

equipment if all persons participating in the meeting can hear each other at the
same time. Participating in a meeting by such means constitutes presence in
person at a meeting.

Section 12 - REMOVAL
-------

A director may be removed, with or without cause, upon the affirmative vote
of not less than two-thirds (2/3) of the votes entitled to be cast in the
election of members of the Board of Directors and by the vote required to elect
a director, the stockholders may fill a vacancy on the Board of Directors
resulting from removal.

Section 13 - RESIGNATION
-----------

A director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon the receipt
thereof by the Board of Directors or such officer and the acceptance of such
resignation shall not be necessary to make it effective.

ARTICLE III
COMMITTEES
----------

Section 1 - COMMITTEES
----------

The Board of Directors may appoint from among its members an Executive
Committee and other committees composed of two (2) or more directors and
delegate to these committees in the intervals between meetings of the Board of
Directors any of the powers of the Board of Directors, except the power to
declare dividends or distributions on stock, approve any merger or share
exchange which does not require stockholder approval, amend the Bylaws, issue
stock other than as permitted by statute, or recommend to the stockholders any
action which requires stockholder approval. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of- a majority
of-those present at a meeting at which a quorum is present shall be the act of
the committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in place of an absent
member. The members of a committee may conduct any meeting thereof by conference
telephone in accordance with the provisions of Article II, Section 11.

Section 2 - MINUTES
-------

Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.

-9-
<PAGE>

Section 3 - INFORMAL ACTION
---------------

Any action required or permitted to be taken at any committee meeting may
be taken without a meeting if a written consent to such action is signed by all
of the members of the committee and such written consent is filed with the
minutes of proceedings of the Board of Directors.

ARTICLE IV
OFFICERS
--------

Section 1 - NUMBER
------

The officers of the Corporation shall include a Chief Executive Officer,
President, any number of Vice Presidents, a Secretary, any number of Assistant
Secretaries, a Treasurer, any number of Assistant Treasurers and may include a
Chairman of the Board (or one or more Chairmen of the Board), a Vice Chairman of
the Board, a Chief Operating Officer, a Chief Financial Officer and such other
officers as the Board of Directors may elect. Any two (2) offices may be held by
the same person, except those of President and Vice President, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required to be executed, acknowledged or verified by any
two (2) or more officers. In addition, the Board of Directors may from time to
time appoint such other officers with such powers and duties as they shall deem
necessary or desirable.

Section 2 - ELECTION AND TENURE
-------------------

The officers of the Corporation shall be elected by the Board of Directors
at the first meeting of the Board of Directors held after each annual meeting of
the stockholders, or as soon after such first meeting as may be convenient,
except that the Chief Executive Officer may appoint one or more vice presidents,
assistant secretaries and assistant treasurers. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified, or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.

The Board of Directors may, at any time, and from time to time, authorize
the making or adoption by the Corporation of special contracts with an officer
or officers for services of such officer or officers for a fixed period and on
such terms and conditions, and with such powers, duties and compensation, as may
be fixed by such contract, and may elect such officer or officers for such term
or terms as may be specified by such contract.

Section 3 - REMOVAL; RESIGNATION
--------------------

-10-
<PAGE>

Any officer or agent of the Corporation may be removed by the Board of
Directors whenever, in its Judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. An officer may resign at any time by
giving written notice to the Board of Directors, the President or the Secretary
of the Corporation. Unless otherwise specified in the notice, the resignation
shall take effect upon the receipt thereof by the Board of Directors or such
officer and the acceptance of such resignation shall not be necessary to make it
effective.

Section 4 - VACANCIES
---------

A vacancy in an office may be filled by the Board of Directors for the
unexpired portion of the term.

Section 5 - CHIEF EXECUTIVE OFFICER
-----------------------

The Board of Directors shall designate a Chief Executive Officer. In the
absence of such designation, the Chairman of the Board (or, if more than one,
the co-chairmen of the Board in the order designated at the time of their
election or, in the absence of any designation, then, in the order of their
election) shall be the Chief Executive Officer of the Corporation. The Chief
Executive Officer shall have general responsibility for implementation of the
policies of the Corporation, as determined by the Board of Directors, and for
the management of the business and affairs of the Corporation. In addition, the
Chief Executive Officer, together with the President, shall have the power to
determine the cash compensation of employees of the Corporation other than its
Senior Executive Officers.

Section 6 - CHIEF OPERATING OFFICER
-----------------------

The Board of Directors may designate a Chief Operating Officer. The Chief
Operating Officer shall have the responsibilities and duties as set forth by the
Board of Directors or the Chief Executive Officer.

Section 7 - CHIEF FINANCIAL OFFICER
-----------------------

The Board of Directors may designate a Chief Financial Officer. The Chief
Financial Officer shall have the responsibilities and duties as set forth by the
Board of Directors of the Chief Executive Officer.

Section 8 - CHAIRMAN OF THE BOARD
---------------------

The Board of Directors may designate a Chairman of the Board (or one or
more co-chairmen of the Board). The Chairman of the Board shall preside over the
meeting of the Board of Directors and

-11-
<PAGE>

of the stockholders at which he shall be present. If there be more than one, the
co-chairmen designated by the Board of Directors will perform such duties. The
Chairman of the Board shall perform such other duties as may be assigned to him
or them by the Board of Directors.

Section 9 - PRESIDENT
---------

The President shall preside at all meetings of the Board of Directors and
of the stockholders at which he is present. He shall be the chief executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall, in general, supervise and administer all of the business and
affairs of the Corporation. He may sign and execute all authorized bonds,
contracts or other obligations in the name of the Corporation. In general, the
President shall have all powers and shall perform all duties incident to the
office of President and such as may from time to time be prescribed by the
Board of Directors.

Section 10 - VICE PRESIDENT
--------------

In the absence or incapacity of the President, or in the event of a vacancy
in the office of President, the Vice President, if one (or in the event there be
more than one, the Vice Presidents in the order designated by the Board of
Directors, or, in the absence of such designation, then in the order of their
election) shall have the powers and perform the duties of President. A Vice
President shall also have such powers and perform such duties as may from time
to time be prescribed by the Board of Directors or by the President. A Vice
President may have such additional descriptive designations, if any, in his
title as may be assigned by the Board of Directors.

Section 11 - SECRETARY
---------

The Secretary shall attend all meetings of the Board of Directors and all
meetings of the stockholders and record all the proceedings of the meetings
thereof in a book to be kept for that purpose and shall perform like duties for
the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders of the Board of Directors, and shall
perform such other duties incident to the office of Secretary as from time to
time may be prescribed by the Board of Directors or by the President, under
whose supervision he shall be. He shall have general charge of the stock ledger
and custody of the corporate records and of the seal of the Corporation and he,
or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his signature
or by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer

-12-
<PAGE>

to affix the seal of the Corporation and to attest the affixing by his
signature.

Section 12 - ASSISTANT SECRETARY
-------------------

The Assistant Secretary, if one (1) (or if there be more than one (1), the
Assistant Secretaries in the order determined by the Board of Directors, or, in
the absence of such determination, then in the order of their election) shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.

Section 13 - TREASURER
---------
The Treasurer shall have general charge of the financial affairs of the
Corporation. He shall in general have all powers and perform all duties
incident to the office of Treasurer and such as may from time to time be
prescribed by the Board of Directors or by the President.

If required by the Board of Directors, he shall give the Corporation a bond
(which shall be renewed every six (6) years) in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.

Section 14 - ASSISTANT TREASURER
-------------------
The Assistant Treasurer, if one (1) (or if there shall be more than one
(1), the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such determination, then in the order of their election),
shall in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.

Section 15 - OTHER OFFICERS
--------------
Such other officers as may be elected by the Board of Directors shall have
such powers and perform such duties as the Board may from time to time
prescribe.

Section 16 - SALARIES
--------

-13-

<PAGE>

The salaries of the officers shall be fixed from time to time by the Board
of Directors, and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the Corporation.

Section 17 - SPECIAL APPOINTMENTS
--------------------

In the absence or incapacity of any officer, or in the event of a vacancy
in any office, the Board of Directors may designate any person to fill any such
office pro tempore or for any particular purpose.

ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------

Section 1 - CONTRACTS
---------

The Board of Directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Corporation, and such authority may be general or
confined to specific instances.

Section 2 - LOANS
-----

No loans shall be contracted on behalf of the Corporation and no evidence
of indebtedness shall be issued in its name unless authorized by a resolution of
the Board of Directors. Such authority may be general or confined to specific
instances.

Section 3 - CHECKS, DRAFTS, ETC.
--------------------

All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Corporation, shall be signed
by such officer or officers of the corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.

Section 4 - DEPOSITS
--------

All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board of Directors may select.

-14-
<PAGE>

ARTICLE VI
ISSUE AND TRANSFER OF STOCK
---------------------------

Section 1 - ISSUE
-----

Certificates representing shares of the Corporation shall be in such form
as shall be determined by the Board of Directors. Each certificate shall be
signed by the President or a Vice President and countersigned by the Secretary
or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and shall
be sealed with the corporate seal. The signatures may be either manual or
facsimile signatures; and the seal may be the actual corporate seal or a
facsimile of it or in any other form. All certificates surrendered to the
Corporation for transfer shall be canceled, and no new certificates shall be
issued until the former certificate or certificates for a like number of shares
shall have been surrendered and cancelled, except that in case of a lost,
stolen, destroyed or mutilated certificate, a new one may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe.

Section 2 - TRANSFER OF SHARES
------------------

Transfer of shares of the Corporation shall be made only on its stock
transfer books by the holder of record thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed to be the owner thereof for all purposes.

Section 3 - STOCK LEDGER
------------

The Corporation shall maintain a stock ledger which contains the name and
address of each stockholder and the number of shares of stock of each class
which the stockholder holds. The stock ledger may be in written form or in any
form which can be converted within a reasonable time into written form for
visual inspection. The original or a duplicate of the stock ledger shall be
kept at the principal office or the principal executive offices of the
Corporation in the State of Maryland.

ARTICLE VII
FIXING DATE FOR DETERMINATION
OF STOCKHOLDERS' RIGHTS
-----------------------

The Board of Directors may fix, in advance, a date as the record date for
the purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment of any
dividend or the

-15-
<PAGE>

allotment of any rights, or in order to make a determination of stockholders for
any other proper purpose. Only stockholders of record on such date shall be
entitled to notice of, and to vote at, such meeting or to receive such dividends
or rights, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after such record date fixed as aforesaid. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

ARTICLE VIII
AMENDMENTS
----------

Subject to applicable law and the Articles, by affirmative vote of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) of the
shares of stock entitled to vote, the stockholders shall have the right to
adopt, alter and repeal Bylaws. Subject to the right of the stockholders
provided in the preceding sentence, the Board of Directors shall have the power
to adopt, alter and repeal Bylaws.

ARTICLE IX
FISCAL YEAR
-----------

The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.

ARTICLE IX
INDEMNIFICATION
---------------

The Corporation shall indemnify, in the manner and to the fullest extent
permitted by law, any person who is or was a party to, or is threatened to be
made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Corporation and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of the Corporation, or
that such person, while an officer or director of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner or
trustee of another corporation, partnership, trust, employee benefit plan or
other enterprise. To the fullest extent permitted by law, the indemnification
provided herein shall include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement and any such expenses may be paid by the
Corporation in advance of the final disposition of any such action, suit or
proceeding. Upon authorization by the Board of Directors, the Corporation may
indemnify employees and/or agents of the Corporation to the same

-16-
<PAGE>

extent provided herein for directors and officers. Any repeal or modification
of any of the foregoing sentences of this Article IX, shall be prospective in
operation and effect only, and shall not adversely affect any right to
indemnification or advancement of expenses hereunder existing at the time of any
such repeal or modification.

The indemnification and reimbursement of expenses provided herein shall not
be deemed to limit the right of the Corporation to indemnify any other person
against any liability and expenses to the fullest extent permitted by law, nor
shall it be deemed exclusive of any other right to which any person seeking
indemnification from the Corporation may be entitled under any agreement, the
Article, a vote of the stockholders or disinterested directors, or otherwise,
both as to action in such person's official capacity as an officer or director
of the Corporation and as to action in another capacity, at the request of the
Corporation, while acting as an officer or director of the Corporation.

-17-

<PAGE>

EXHIBIT 11

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income:
As reported........................................ $14,180,000 $10,913,000
Pro forma adjustments (unaudited):
Pro forma provision for income taxes(a)............ (3,489,000) (3,708,000)
----------- -----------
Pro forma net income............................. $10,691,000 $ 7,205,000
----------- -----------
Applicable common shares:
Average outstanding common shares during the
period............................................ 13,539,568 11,354,705
Outstanding stock options(b)....................... 307,664 --
----------- -----------
Total primary weighted average number of common
and common share equivalents outstanding........ 13,847,232 11,354,705
----------- -----------
Pro forma net income per common and common equivalent
share............................................... $ 0.77 $ 0.63
=========== ===========
FULLY DILUTED EARNINGS PER SHARE:
Applicable common shares:
Average outstanding common shares during the
period............................................ 13,539,568 11,354,705
Outstanding stock options(b)....................... 395,063 --
----------- -----------
Total fully diluted weighted average number of
common and common share equivalents outstanding. 13,934,631 11,354,705
----------- -----------
Pro forma net income per common and common equivalent
share............................................... $ 0.77 $ 0.63
=========== ===========
</TABLE>
- --------
(a) Reflects the effect on historical operations data, assuming the combined
Company had been treated as a C corporation rather than as individual
limited partnerships and limited liability companies for federal income
tax purposes.
(b) Based on the treasury stock method.

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF SIGNATURE RESORTS, INC.

<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION
- ---- ----------------------------
<S> <C>
Premier Resort Management,
Inc. ..................... Georgia
KGI Port Royal, Inc. ...... California
Argosy Hilton Head, Inc. .. Georgia
Argosy/KGI Port Royal
Partners.................. South Carolina (general partnership)
Port Royal Resort, L.P. ... South Carolina
KGI Grand Beach
Investments, Inc. ........ California
Argosy Grand Beach, Inc. .. Georgia
Argosy Partners, Inc. ..... Georgia
Argosy/KGI Grand Beach
Investment Partnership.... California (general partnership)
Grand Beach Partners,
L.P. ..................... California
Grand Beach Resort, Limited
Partnership............... Georgia
AKGI Lake Tahoe
Investments, Inc. ........ California
KGK Lake Tahoe Development,
Inc. ..................... California
Lake Tahoe Resort Partners,
LLC....................... California
Resort Marketing
International, Inc. ...... California
AKGI--St. Maarten NV....... Delaware/Netherlands Antilles (dually incorporated)
Resort Management
International, Inc. ...... Georgia
Resort Management
International, Inc. ...... California
AKGI Poipu Investments,
Inc. ..................... California
Argosy/KGI Poipu Investment
Partners, L.P. ........... Hawaii
AVCOM International, Inc. . Delaware
All Seasons Resorts, Inc. . Washington
RPM Management, Inc. ...... Arizona
All Seasons Realty, Inc. .. Idaho
All Seasons Construction,
Inc. ..................... Pennsylvania
The Ridge Spa and Racquet
Club, Inc. ............... Arizona
</TABLE>

<PAGE>

Exhibit 23

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the
incorporation by reference of our report included in this Form 10-K, into
Signature Resorts, Inc.'s previously filed Registration Statement No. 333-15361.

March 27, 1997,
Orlando, Florida

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS AMENDED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM DECEMBER 31, 1995 AND DECEMBER 31, 1996 FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 6,288,000 5,027,000
<SECURITIES> 0 0
<RECEIVABLES> 70,690,000 107,464,000
<ALLOWANCES> 5,590,000 6,644,000
<INVENTORY> 46,757,000 95,127,000
<CURRENT-ASSETS> 0 0
<PP&E> 1,863,000 3,325,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 138,085,000 239,132,000
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 174,000
<OTHER-SE> 38,470,000 103,470,000
<TOTAL-LIABILITY-AND-EQUITY> 138,085,000 239,132,000
<SALES> 59,071,000 75,069,000
<TOTAL-REVENUES> 72,608,000 95,054,000
<CGS> 15,650,000 18,089,000
<TOTAL-COSTS> 45,327,000 55,042,000
<OTHER-EXPENSES> 9,878,000 13,285,000
<LOSS-PROVISION> 1,787,000 2,706,000
<INTEREST-EXPENSE> 4,062,000 6,778,000
<INCOME-PRETAX> 11,554,000 17,243,000
<INCOME-TAX> 641,000 3,063,000
<INCOME-CONTINUING> 10,913,000 14,180,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,913,000 14,180,000
<EPS-PRIMARY> .63 .77
<EPS-DILUTED> .63 .77

</TABLE>