TRENDWEST RESORTS INC, 424B4, 1997-08-15

TRENDWEST RESORTS INC
424B4, 1997-08-15
HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration Statement No. 333-26861

2,875,000 SHARES

[TRENDWEST RESORTS, INC. LOGO]

COMMON STOCK

Of the 2,875,000 shares of Common Stock ("Common Stock") of Trendwest
Resorts, Inc. (the "Company" or "Trendwest") offered hereby (the "Offering"),
2,745,000 shares are being sold by the Company and 130,000 shares are being sold
by the Selling Stockholder. See "Principal and Selling Stockholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholder. Prior to the Offering, there has been no public market for the
Common Stock. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol "TWRI."

Immediately following the Offering, JELD-WEN, inc. ("Jeld-Wen") will own
13,725,821 shares of Common Stock (79.98% of the outstanding shares of Common
Stock). Accordingly, Jeld-Wen will be able to elect all members of the Board of
Directors and will have sufficient voting power to determine the outcome of all
matters submitted to the stockholders for approval.

SEE "RISK FACTORS" COMMENCING ON PAGE 10 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================

<TABLE>
<S> <C> <C> <C> <C>
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholder
- --------------------------------------------------------------------------------------------------
Per Share..................... $18.00 $1.26 $16.74 $16.74
Total(3)...................... $51,750,000 $3,622,500 $45,951,300 $2,176,200
==================================================================================================
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $1,100,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 431,250 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $59,512,500, the Underwriting Discount will
total $4,165,875 and the Proceeds to Company will total $53,170,425. See
"Underwriting."

The shares of Common Stock are offered by the several Underwriters named
herein, when, as and if delivered and accepted by the Underwriters and subject
to their right to reject any order in whole or in part. It is expected that the
delivery of the certificates representing such shares will be made against
payment therefor at the office of Montgomery Securities on or about August 20,
1997.
------------------------

MONTGOMERY SECURITIES SALOMON BROTHERS INC
August 14, 1997
<PAGE> 2

The following graphics are depicted:

Map of western U.S., Hawaii, British Columbia and Baja Peninsula
denoting the locations of WorldMark's resorts and the Company's sales
offices and future resort locations.

Photographs of Worldmark's resorts at Whistler, B.C.; Palm Springs, CA;
Lake Chelan, WA; Gleneden Beach, OR; Los Cabos, Mexico; Ocean Shores, WA; Lake
Tahoe, NV; Pismo Beach, CA; Leavenworth, WA; and Valley Isle, Hawaii.
Photographs depicting various aspects of the Company's operations.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

THIS PROSPECTUS RELATES ONLY TO THE SALE OF THE COMMON STOCK OFFERED
HEREBY. PURCHASERS OF SHARES OF TRENDWEST RESORTS, INC. WILL NOT RECEIVE ANY
INTEREST IN THE WORLDMARK RESORTS SHOWN HEREIN AS A RESULT OF THEIR OWNERSHIP OF
COMMON STOCK.

TRENDWEST RESORTS(R) and WORLDMARK, THE CLUB(R) are registered trademarks
of the Company and WorldMark, the Club, respectively.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, included elsewhere in this
Prospectus. Except as otherwise noted, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option, (ii) gives
effect to the consummation of the Consolidation Transactions (as defined
herein), and (iii) reflects an adjustment for an approximately 513-for-1 stock
split effected in July 1997. Unless the context otherwise indicates, the
"Company" and "Trendwest" mean Trendwest Resorts, Inc. after giving effect to
the consummation of the Consolidation Transactions.

THE COMPANY

Trendwest Resorts, Inc. markets, sells and finances timeshare ownership
interests ("Vacation Ownership Interests") and acquires, develops and manages
timeshare resorts. In 1996, Trendwest was ranked as one of the largest timeshare
companies in the United States, according to published sales volume data in the
Vacation Ownership World trade magazine. The Company's timeshare resorts are
owned by and operated through WorldMark, the Club ("WorldMark"), a nonprofit
mutual benefit corporation organized by Trendwest in 1989 to provide an
innovative, flexible vacation ownership system. As of June 30, 1997, WorldMark
had in excess of 45,000 members ("Owners") and owned and maintained an aggregate
of 811 condominium-style units at 19 recreational resorts (the "WorldMark
Resorts") in the western United States, Hawaii, British Columbia and Mexico. The
Company presently sells Vacation Ownership Interests in Washington, Oregon and
California, primarily through eight off-site sales offices.

Trendwest sells Vacation Ownership Interests in the form of perpetual
timeshare credits ("Vacation Credits") which are created by the transfer to
WorldMark of resort units purchased or developed by the Company. Vacation
Credits can be used by Owners to reserve units at any of the WorldMark Resorts,
at any time during the year and in time increments as short as one day. The use
of Vacation Credits is not tied to any particular resort unit or time period as
is typical in the timeshare industry. The Company believes that the combination
of multiple resorts and its Vacation Credit system provides Owners with an
attractive range of vacation planning choices and values not generally available
within the timeshare industry. The Company's Vacation Credit system with
multiple WorldMark Resorts facilitates the sale of Vacation Credits at off-site
sales offices located in major metropolitan areas and reduces dependence on
on-site sales centers located at more remote resort locations.

According to the American Resort Development Association ("ARDA"), the
total annual sales volume for the timeshare industry increased from $490 million
in 1980 to $4.76 billion in 1994. Based on other industry information, the
Company believes that timeshare sales volume for the timeshare industry exceeded
$5 billion in 1995. The Company believes that, based on ARDA reports, the
timeshare industry has benefited recently from increased consumer acceptance of
the timeshare concept resulting from more effective governmental regulation of
the industry, the entry into the industry by national lodging and hospitality
companies and increased vacation flexibility resulting from the growth of
timeshare exchange networks. The Company expects the timeshare industry to
continue to grow as consumer awareness of the timeshare industry increases and
as the baby boom generation (currently ages 32-50) moves through the 40-55 year
age bracket, the age group of persons who purchased the most timeshare interests
in 1994.

The Company believes its operating strategy and vacation ownership system
provide the following advantages over other timeshare companies:

- Vacation Flexibility. The Company's Vacation Credit system allows Owners
access to multiple WorldMark Resorts, permitting them to tailor their
vacation according to their schedules, desired vacation length, location
preferences and space requirements. The 19 WorldMark Resort locations
provide access to a variety of vacation experiences, from skiing to golf,
and a variety of settings, from beaches to mountains. Vacation time is
reserved on a first come, first served basis. In 1996, based on information
provided by Owner comment cards, the Company believes that approximately
73% of Owners received their first choice of resort location when reserving
vacation time. To enhance Owner

3
<PAGE> 4

usage and facilitate weekend stays and stays shorter than one week, the
Company purchases and develops a large percentage of WorldMark Resort units
within a reasonable driving distance of the Company's primary metropolitan
sales markets.

- Appeal to Broad Consumer Base. The Company believes its Vacation Credit
system enables it to market more effectively to potential customers with a
broader range of income levels and vacation requirements than is addressed
by most timeshare companies. The Company provides prospective purchasers
with the opportunity to purchase varying increments of Vacation Credits
suitable for their financial position and vacation needs. The Company's
minimum purchase requirement of 6,000 Vacation Credits, which presently
costs $7,800, makes entry into WorldMark affordable for a significant
number of households. The Company also offers additional Vacation Credits
to existing Owners ("Upgrades") in smaller increments, which accounted for
approximately 12% of Vacation Credit sales in 1996.

- Marketing Through Off-Site Sales Offices. The Company's Vacation Credit
system facilitates marketing Vacation Ownership Interests effectively at
off-site sales offices. The Company believes the use of off-site sales
offices enables it to attract a larger number of prospective purchasers to
sales presentations than at sales offices at more remote resort locations.
In addition, the location of sales offices in metropolitan areas provides
the Company with the flexibility to establish sales offices in the most
demographically attractive areas within a geographic market and to relocate
sales offices quickly at a modest cost when conditions warrant.

- Inventory Control. The Company's sale of Vacation Credits, rather than
deeded interests with weekly intervals at individual resorts, enables it to
schedule its resort acquisition and development activities in accordance
with its anticipated sales volumes and to diversify the risk of its capital
commitments among several resorts. Since all Vacation Credits have the same
use rights and sell for the same price, the Company does not experience a
buildup of inventory of less desirable resort units or interval dates which
are difficult to sell. The Company can also develop resorts at desirable
remote locations since it does not depend on on-site sales offices to
generate sales.

- Owner Satisfaction. The Company places great importance on Owner
satisfaction. The Company believes that Owner satisfaction is achieved by
maintaining a high level of quality at WorldMark Resorts, by increasing the
number of resort locations and by satisfying Owners' first vacation
requests a high percentage of the time. Of the 19 WorldMark Resorts, 12
have the highest rating from Resort Condominiums International Inc.
("RCI"), the world's largest timeshare exchange network, four have the
second-highest rating from RCI, and three have been recently opened and
have not yet been rated. The Company has increased the number of WorldMark
Resorts from three in 1989 to its present 19 and intends to transfer two
additional WorldMark Resorts during the remainder of 1997 and 1998.
Although Owners have exchange privileges through the RCI network, the
Company believes that Owner satisfaction with the WorldMark Resorts is
demonstrated by the Owners' usage of approximately 74% of their Vacation
Credits at WorldMark Resorts in 1996. The satisfaction of existing Owners
with the WorldMark Resorts generates additional revenues to the Company
through the sale of Upgrades ("Upgrade Sales") and from Owner referrals of
new prospects.

The Company's growth strategy is to (i) expand existing WorldMark Resorts
and acquire and develop additional resorts primarily in the western United
States, Hawaii, British Columbia and Mexico to provide additional Vacation
Credits for sale by the Company and a wider range of WorldMark Resorts for use
by Owners; (ii) increase sales and financings of Vacation Credits to new
customers by expanding sales and marketing efforts, including opening additional
off-site sales offices; and (iii) increase Upgrade Sales by establishing and
maintaining long-term relationships with Owners through effective customer
service programs and innovative benefit programs and discount packages.

The Company's Vacation Ownership Interests are generally targeted to
purchasers in an age range from 35 to 60 with annual household incomes ranging
from $30,000 to $100,000. The average number of Vacation Credits purchased by a
new Owner in 1996 was approximately 6,600 at a cost of approximately $8,400. The
number of Vacation Credits purchased are available each year for use by an
Owner. Unused Vacation Credits can be carried forward for one year. The number
of Vacation Credits that is required to stay one day at the

4
<PAGE> 5

WorldMark Resorts varies, depending upon the resort location, the size of the
unit, the vacation season and the day of the week. For example, a Friday or
Saturday night stay at a one-bedroom unit may require 825 Vacation Credits per
night off-season and 1,450 Vacation Credits per night in peak season. WorldMark
Resort units are fully furnished, condominium style accommodations and range in
size from studios to three bedrooms. WorldMark's participation in RCI provides
Owners with access to over 3,000 resorts worldwide which participate in the RCI
network.

The Company sells Vacation Credits at its 11 sales offices, eight of which
are located off-site in metropolitan areas. The other sales offices are located
on-site at three of the WorldMark Resorts. The Company intends to establish an
additional off-site sales office in California in late 1997. The Company
transferred 224 resort units to WorldMark in 1996, 146 resort units in 1995 and
86 resort units in 1994. Revenues from Vacation Credit sales increased to
approximately $100.0 million in 1996 from approximately $77.8 million in 1995
and approximately $54.9 million in 1994. The Company transferred 61 resort units
to WorldMark during the first six months of 1997. As of June 30, 1997, the
Company had purchase agreements and developments in progress to obtain an
additional 150 units that are expected to be available during the remainder of
1997 and an additional 201 units that are expected to be available during 1998.
See "Business -- Growth Strategy."

Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, a significant portion of its sales of
Vacation Credits to new Owners is financed by the Company, thereby allowing
Owners to make monthly payments. In addition, existing Owners have the
opportunity to finance the purchase of Upgrades through the Company. At June 30,
1997, loans to Owners to finance the purchase of Vacation Credits ("Notes
Receivable") with an aggregate balance of $207.8 million were outstanding, of
which approximately $65.3 million with a weighted average interest rate of 14.1%
per annum had been retained by the Company. The remaining Notes Receivable
balance of approximately $142.5 million had been sold by the Company prior to
that date, although the Company retained limited recourse liability with respect
to these Notes Receivable. The Company may continue to sell a substantial amount
of its Notes Receivable. See "Business -- Customer Financing" and "-- Finance
Subsidiaries."

5
<PAGE> 6

THE WORLDMARK RESORTS

The following table sets forth certain information as of June 30, 1997
regarding each existing WorldMark Resort, planned expansion at existing
WorldMark Resorts through 1998, and planned new WorldMark Resorts through 1998.

<TABLE>
<CAPTION>
EXISTING
DATE UNITS
CONTRIBUTED IN PLANNED TOTAL UNITS
EXISTING RESORTS LOCATION TO WORLDMARK(a) SERVICE EXPANSION ANTICIPATED RCI RATING(b)
- ------------------------- ------------------ --------------- -------- --------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
BRITISH COLUMBIA
Sundance Whistler February 1992 25 -- 25 R.I.D.
CALIFORNIA
North Shore Estates Bass Lake October 1991 61 -- 61 Gold Crown
Beachcomber Pismo Beach April 1993 20 -- 20 Gold Crown
Palm Springs Palm Springs July 1995 64 -- 64 Gold Crown
Big Bear Big Bear Lake April 1996 25 45(c) 70 (d)
HAWAII
Valley Isle Maui April 1990 14 -- 14(e) Gold Crown
Kapaa Shores Kauai July 1991 42 -- 42(e) R.I.D.
NEVADA
Lake Tahoe Stateline January 1991 50 -- 50 Gold Crown/R.I.D.(f)
Las Vegas Las Vegas December 1996 42 -- 42 (d)
OREGON
Eagle Crest Redmond September 1989 62 --(g) 62(e) Gold Crown
Gleneden Beach Lincoln City March 1996 80 -- 80 Gold Crown
Running Y Ranch Klamath Falls February 1997 26 40(h) 66 (d)
WASHINGTON
Lake Chelan Shores Chelan August 1990 13 -- 13(e) R.I.D.
Surfside Long Beach September 1991 25 -- 25 R.I.D.
Discovery Bay Sequim January 1992 32 -- 32 Gold Crown
Park Village Leavenworth July 1992 72 -- 72 Gold Crown
Mariner Village Ocean Shores June 1994 32 -- 32 Gold Crown
Birch Bay Blaine January 1995 52 52(i) 104 Gold Crown
MEXICO
Coral Baja San Jose del Cabo November 1994 74 62(j) 136 Gold Crown
PLANNED RESORTS
- -------------------------
Clear Lake Nice, California (k) -- 88 88
Kona Hawaii, Hawaii (l) -- 64 64
--- --- ----
Total........ 811 351 1,162
=== === =====
</TABLE>

- ---------------

(a) The dates in this column indicate, for each resort, the month and year in
which the first completed units at such resort were transferred to
WorldMark. At certain resorts, additional units were transferred to
WorldMark at later dates.

(b) Gold Crown and Resort of International Distinction ("R.I.D.") are resort
ratings awarded annually by RCI. In 1996, approximately 13% of the resorts
reviewed by RCI received a Gold Crown rating, the highest rating awarded by
RCI, and approximately 14% of the resorts reviewed by RCI received an R.I.D.
rating, the second-highest rating awarded by RCI.

(c) Construction began on these units in January 1997. These units are expected
to be completed and transferred to WorldMark in the third quarter of 1997.

(d) This resort has recently become available to WorldMark and has not yet been
rated by RCI.

(e) These units represent less than one-half of the total number of units at
this resort.

(f) Consists of three locations totalling 50 units. The units at Tahoe I and II
(totalling 15 units) are rated R.I.D., and the units at Tahoe III
(totalling 35 units) are rated Gold Crown.

(g) The Company has an agreement with Eagle Crest, Inc. ("Eagle Crest") whereby
the Company has assigned to Eagle Crest the right to sell Vacation Credits
in WorldMark at the Eagle Crest Resort and to retain the gross proceeds from
such sales. In exchange for such sales, Eagle Crest must transfer
condominium units to WorldMark at no cost to either the Company or
WorldMark. In addition, commencing September 1997, the Company will receive
a fee from Eagle Crest equal to 3% of net sales of Vacation Credits
occurring at the Eagle Crest Resort. See "Certain
Transactions -- Relationship with Jeld-Wen." The number of additional units
to

6
<PAGE> 7

be deeded to WorldMark will depend on the number of Vacation Credits sold by
Eagle Crest, an estimate of which is not provided in this table.

(h) The Company is obligated to purchase 20 units in April 1998 and 20 units in
July 1998. Units will be transferred to WorldMark as they are purchased. The
Company has an agreement with Running Y Resort, Inc. ("Running Y") whereby
the Company has assigned to Running Y the right to sell Vacation Credits in
WorldMark at the Running Y Resort and to retain the gross proceeds from such
sales. In exchange for such sales, Running Y must transfer condominium units
to WorldMark at no cost to either the Company or WorldMark. In addition,
commencing September 1997, the Company will receive a fee from Running Y
equal to 3% of net sales of Vacation Credits occurring at the Running Y
Resort. See "Certain Transactions -- Relationship with Jeld-Wen." The number
of additional units to be deeded to WorldMark will depend on the number of
Vacation Credits sold by Running Y, an estimate of which is not provided in
this table.

(i) The Company expects to obtain all necessary permits for construction by the
end of the second quarter of 1998. All 52 units are expected to be
completed and transferred to WorldMark by the end of 1998.

(j) Construction on these units began in July 1996. The project is expected to
add 62 units, with five units transferred to WorldMark each month beginning
December 1997 and all units are expected to be transferred by the end of
1998.

(k) Construction on these units began in April 1997. Of these units, 56 are
expected to be completed and transferred to WorldMark in the third quarter
of 1997, and the remaining 32 units are expected to be completed and
transferred to WorldMark in the first quarter of 1998.

(l) Construction on these units began in February 1997. Of these units, 44 are
expected to be completed and transferred to WorldMark in the fourth quarter
of 1997 and the remaining 20 units are expected to be completed and
transferred to WorldMark in the first quarter of 1998.

SALES REGIONS

The Company's sales of Vacation Credits primarily occur at eight off-site
sales offices located in metropolitan areas in three regions. The remainder of
the Company's sales of Vacation Credits occur at three on-site sales offices.
The Company plans to open a new off-site sales office in California in late
1997. Certain information with respect to the Company's sales offices in the
three regions is provided below.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------------------------
1994 1995 1996
--------------------------------------- --------------------------------------- ---------------------------------------
(DOLLARS IN THOUSANDS)
AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER
OF SALES NUMBER OF OF SALES NUMBER OF OF SALES NUMBER OF
REGION REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3)
- ------- ------------------- --------- ------- ------------------- --------- ------- ------------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pacific
Northwest(4).. 61 11,414 $31,654 75 17,290 $43,926 86 23,979 $ 54,313
Northern
California(5).. 32 7,326 23,250 58 10,371 31,324 55 13,786 37,287
Southern
California(6).. -- -- -- 7 304 2,533 24 1,232 8,440
--
------ ------- --- ------ ------- --- ------ --------
Total... 93 18,740 $54,904 140 27,965 $77,783 165 38,997 $100,040
== ====== ======= === ====== ======= === ====== ========
</TABLE>

- ------------------------

(1) Represents the average number of sales representatives during the year. This
calculation is based on the number of sales representatives at the end of
each calendar quarter during the indicated year.

(2) Cumulative number of Owners at the end of the year, including Owners who
purchased Vacation Credits at Eagle Crest and Running Y.

(3) Includes Upgrade Sales.

(4) Comprised of three off-site sales offices (Kirkland, Washington, which
opened in October 1989 and moved to Seatac, Washington in February 1994;
Vancouver, Washington, which opened in February 1994; and Lynnwood,
Washington, which opened in June 1995) and three on-site sales offices
(Leavenworth, Washington, which opened in September 1994, Birch Bay,
Washington, which opened in June 1995, and Gleneden Beach, Oregon, which
opened in February 1996). These figures include an off-site sales office in
Bellingham, Washington, which opened in July 1990, and was consolidated into
the Lynnwood and Birch Bay offices in June 1995.

(5) Comprised of three off-site sales offices: Santa Clara, which opened in
April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened
in May 1995.

(6) Comprised of the Ontario off-site sales office which opened in April 1996.
These figures include sales from an on-site sales office at Palm Springs,
which opened in April 1995 and was consolidated into the Ontario sales
office in August 1996. The Company opened a new off-site sales office in
Costa Mesa in February 1997.

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<PAGE> 8

CORPORATE BACKGROUND AND CONSOLIDATION OF FINANCE SUBSIDIARIES

The Company commenced its timeshare business as a wholly-owned subsidiary
of JELD-WEN, inc. ("Jeld-Wen") in 1989 with three condominium units. Jeld-Wen is
currently the Company's principal stockholder. See "Principal and Selling
Stockholders." Jeld-Wen is a privately owned company that was founded in 1960
and is a major manufacturer of doors, windows and millwork products.
Headquartered in Klamath Falls, Oregon, Jeld-Wen has diversified operations
located throughout the United States and in nine foreign countries that include
manufacturing, hospitality and recreation, retail, financial services and real
estate. Along with its subsidiaries, Jeld-Wen employs approximately 12,000
people.

The Company raises capital for property acquisitions and working capital by
selling or securitizing Notes Receivable through two subsidiaries of Jeld-Wen
(the "Finance Subsidiaries"). Effective June 30, 1997, the Company acquired the
Finance Subsidiaries from Jeld-Wen for 5,193,693 shares of the Company's Common
Stock (the "Consolidation Transactions"). The value of the shares of the Finance
Subsidiaries and the value of the shares of the Company's Common Stock were
determined in negotiations between Jeld-Wen and the Company, based on a multiple
of the historical earnings of the respective companies. Based on the initial
offering price of $18.00 per share, the value of the shares of Common Stock
issued to Jeld-Wen for the Finance Subsidiaries was approximately $93.5 million.
The Company may continue its program of selling and securitizing Notes
Receivable through the Finance Subsidiaries or similar entities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions -- Acquisition of Finance Subsidiaries."

All of the WorldMark Resort units are owned by WorldMark, a California
nonprofit mutual benefit corporation that was formed by Trendwest in 1989 in
order to implement its Vacation Credit system and to protect the WorldMark
Resorts from claims of the Company's creditors. WorldMark's articles of
incorporation provide that the specific purpose for which it was formed is to
own, operate and manage the real property transferred to it by the Company. The
Company transfers properties to WorldMark, free from all monetary encumbrances,
which are then added to the inventory of WorldMark Resort units available for
use by Owners. In return for the transfer of property to WorldMark, Trendwest
has the exclusive right to market and sell Vacation Credits. Owners receive the
right to use all WorldMark Resort units at any available time and interval
selected by the Owner. Trendwest has a management agreement with WorldMark
whereby Trendwest acts as the exclusive manager and servicing agent of WorldMark
and the Vacation Ownership Interest program.

The Company was incorporated in Oregon in 1989. The Company's principal
executive offices are located at 12301 N.E. 10th Place, Bellevue, Washington
98005, and its telephone number is (425) 990-2300.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered:
By the Company.................................... 2,745,000 shares
By the Selling Stockholder........................ 130,000 shares
Common Stock to be outstanding after the Offering... 17,162,116 shares(1)
Use of proceeds..................................... To repay outstanding indebtedness, to
purchase and develop additional
resorts and for working capital and
other general corporate purposes.
Nasdaq National Market symbol....................... TWRI
</TABLE>

- ---------------

(1) Does not include approximately 858,000 shares of Common Stock authorized for
issuance under the Company's stock option plan. The Company has granted no
options under this plan. See "Management -- 1997 Stock Option Plan."

8
<PAGE> 9

SUMMARY COMBINED AND CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Vacation Credit sales, net................... $35,798 $38,743 $54,904 $77,783 $ 100,040 $48,540 $ 60,820
Finance income............................... 3,069 3,813 3,736 5,368 7,143 3,264 5,836
Gains on sales of notes receivable........... -- 1,558 1,635 3,222 5,673 2,850 3,164
Resort management services................... 219 1,102 2,805 1,579 1,501 575 1,278
Other........................................ 241 344 763 1,226 2,552 989 1,351
------- ------- ------- ------- -------- ------- -------
Total revenues................................. 39,327 45,560 63,843 89,178 116,909 56,218 72,449
------- ------- ------- ------- -------- ------- -------
Costs and operating expenses:
Vacation Credit cost of sales................ 9,083 8,743 15,070 20,484 27,400 12,922 16,225
Resort management services................... 301 959 2,613 1,283 859 416 529
Sales and marketing.......................... 17,954 19,523 25,615 36,374 47,810 23,432 28,539
General and administrative................... 3,253 4,056 6,588 8,391 10,904 5,062 6,266
Provision for doubtful accounts and recourse
liability.................................. 2,031 2,805 4,537 6,522 7,467 3,633 4,160
Interest..................................... 2,457 1,929 881 2,380 2,445 1,109 1,445
------- ------- ------- ------- -------- ------- -------
Total costs and operating expenses............. 35,079 38,015 55,304 75,434 96,885 46,574 57,164
------- ------- ------- ------- -------- ------- -------
Income before income taxes....................... 4,248 7,545 8,539 13,744 20,024 9,644 15,285
Income tax expense........................... 1,542 2,909 3,214 4,979 7,348 3,544 5,505
------- ------- ------- ------- -------- ------- -------
Net income....................................... $ 2,706 $ 4,636 $ 5,325 $ 8,765 $ 12,676 $ 6,100 $ 9,780
======= ======= ======= ======= ======== ======= =======
PRO FORMA DATA:
Pro forma net income per share of Common Stock... $ 0.88 $ 0.68
Shares used in computing pro forma net income per
share of Common Stock(1)....................... 14,417,116 14,417,116
Supplemental pro forma net income per share of
Common Stock(2)................................ $ 0.89 $ 0.66
Shares used in computing supplemental pro forma
net income per share of Common Stock(2)........ 16,019,268 16,019,268
OPERATING DATA:
Number of WorldMark Resorts (at end of period)
............................................... 11 12 14 16 19 18 19
Number of units (at end of period)............... 147 239 325 499 746 593 811
Number of Vacation Credits sold (in thousands)... 32,636 34,296 47,025 65,308 82,270 40,206 46,768
Average price per Vacation Credit sold........... $ 1.11 $ 1.14 $ 1.18 $ 1.21 $ 1.24 $ 1.23 $ 1.27
Average cost per Vacation Credit sold............ $ 0.28 $ 0.25 $ 0.32 $ 0.31 $ 0.33 $ 0.32 $ 0.35
Number of Owners (at end of period).............. 8,252 12,732 18,740 27,965 38,997 33,475 45,197
Average purchase price for new Owners............ $ 7,693 $ 7,879 $ 8,141 $ 8,325 $ 8,432 $ 8,457 $ 8,548
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, including restricted cash........................................................ $ 1,197 $ 19,870
Total assets........................................................................... 103,599 122,272
Indebtedness(4)........................................................................ 26,574 396
Stockholders' equity................................................................... 59,524 104,375
</TABLE>

- ---------------

(1) Includes the 5,193,693 shares to be issued to Jeld-Wen in connection with
the Consolidation Transactions.

(2) Includes the 5,193,693 shares to be issued to Jeld-Wen in connection with
the Consolidation Transactions; the 1,602,152 shares offered by the Company
to be used to retire $26.2 million in debt; and the elimination of interest
expense related to the retirement of $26.2 million in debt.

(3) Adjusted to give effect to (i) the sale of 2,745,000 shares of Common Stock
offered by the Company hereby less the underwriting discount and the payment
by the Company of the estimated offering expenses and (ii) the retirement of
$26.2 million of debt. See "Use of Proceeds."

(4) Indebtedness is comprised of notes payable to Jeld-Wen and others.

9
<PAGE> 10

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing any of the shares of Common Stock offered
hereby. The Company cautions the reader that this list of risk factors may not
be exhaustive. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results and the timing of certain
events could differ materially from those anticipated by such forward-looking
statements as a result of certain factors, including the factors set forth below
and in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.

DEPENDENCE ON ACQUISITIONS OF ADDITIONAL RESORT UNITS FOR GROWTH; NEED FOR
ADDITIONAL CAPITAL

The Company purchases or develops resort units for WorldMark in exchange
for the exclusive right to sell the Vacation Credits assigned to these units.
The Company can only sell additional Vacation Credits to the extent that it
acquires or develops additional resort units for WorldMark. The Company's future
growth and financial success therefore will depend to a significant degree on
the availability of attractive resort locations and the Company's ability to
acquire and develop additional resort units on favorable terms and to obtain
additional debt and equity capital to fund such acquisitions and development.
There can be no assurance that the Company will be successful in this regard. As
of June 30, 1997, the Company had purchase agreements and developments in
progress to obtain 351 additional resort units by the end of 1998. No assurance
can be given that all of such units will be acquired or completed on a timely
basis or at all. There are numerous potential buyers of resort real estate
competing to acquire resort properties which the Company may consider attractive
resort acquisition opportunities, and many of these potential buyers are better
capitalized than the Company. There can be no assurance that the Company will be
able to compete against such other buyers successfully.

When the Company purchases or develops a new resort or additional units at
an existing WorldMark Resort, the Company causes the units to be conveyed
directly to WorldMark free of any monetary encumbrances, and therefore must
purchase its properties without any financing secured by the properties. Since
the Company generally finances at least 85% of the aggregate purchase price of
Vacation Credits sold to new Owners, it does not generate sufficient cash from
sales to provide the necessary capital to acquire or develop additional resort
units. Accordingly, the Company has a continuous need for capital to purchase
additional resort units. Historically, the Company's primary source of capital
has been the sale of Notes Receivable to a group of banks and a securitization,
through one of the Finance Subsidiaries, of Notes Receivable to institutional
investors. Effective June 30, 1997, Jeld-Wen transferred the ownership of the
Finance Subsidiaries to the Company in exchange for 5,193,693 shares of the
Company's Common Stock. See "Summary -- Corporate Background and Consolidation
of Finance Subsidiaries." The Finance Subsidiaries' relationship with the
participating banks is expected to continue following the Consolidation
Transactions. No assurance can be given, however, that the Company will be able
to obtain adequate debt or equity capital through the sale or securitization of
its Notes Receivables, or otherwise, in order to continue to acquire additional
properties or that such future financing can be obtained on terms favorable to
the Company. See "Business -- Finance Subsidiaries" and "Certain
Transactions -- Acquisition of Finance Subsidiaries."

RISKS ASSOCIATED WITH DEVELOPMENT AND CONSTRUCTION ACTIVITIES

The Company intends to expand its acquisition, development, construction
and expansion of timeshare resorts. There can be no assurance that the Company
will complete current or future development or expansion projects. Risks
associated with these activities include the risks that (i) acquisition or
development opportunities may be abandoned; (ii) construction costs may exceed
original estimates, possibly making the development or expansion uneconomical or
unprofitable; (iii) financing may not be available on favorable terms or at all;
and (iv) construction may not be completed on schedule, resulting in increased
interest expense and delays in the availability for sale of Vacation Credits.
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

10
<PAGE> 11

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 conversion
work. In addition, the Company's construction activities are generally performed
by third-party contractors. These third-party contractors generally control the
timing, quality and completion of the construction activities. 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. 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 the future, the Company may undertake the development of larger
resort complexes. No assurance can be given that any such larger resort
complexes will be developed in a profitable manner, if at all.

FACTORS AFFECTING SALES VOLUME

As the number of potential customers in the geographic area of a sales
office who have attended a sales presentation increases, the Company may have
increasing difficulty in attracting additional potential customers to a sales
presentation at that office and it may become increasingly difficult for the
Company to maintain current sales levels at its existing sales offices.
Accordingly, the Company anticipates that a substantial portion of its future
sales growth will depend on the opening of additional off-site sales offices.
The Company intends to open an additional off-site sales office in California in
late 1997. No assurance can be given, however, that sales from existing or new
off-site sales offices will meet management's expectations. If the Company does
not open additional sales offices or if existing or new sales offices do not
perform as expected, the Company's business, results of operations and financial
condition could be materially adversely affected.

GEOGRAPHIC CONCENTRATION ON WEST COAST

The Company presently sells Vacation Credits in Washington, Oregon and
California, primarily to residents of those states and of British Columbia. The
Company intends to continue to sell Vacation Credits in these three states and
to increase the number of its off-site sales offices in California. Since all of
the Company's sales offices are in the western United States, any economic
downturn in this area of the country could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the appeal of becoming an Owner may decrease if residents of Washington, Oregon,
California and British Columbia do not continue to view the locations of
WorldMark's Resorts (which are primarily located in these areas) as attractive
vacation destinations.

GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN TIMESHARE INDUSTRY

Any downturn in economic conditions or significant price increases or
adverse events related to the travel and tourism industry, such as the cost and
availability of fuel, could depress discretionary consumer spending and have a
material adverse effect on the Company's business, results of operations and
financial condition. 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 Notes Receivable. Because the
Company's operations are conducted solely within the timeshare industry, any
adverse changes affecting the timeshare industry, such as a reduction in demand
for timeshare units, changes in travel and vacation patterns, an increase of
governmental regulation 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 business, results of operations
and financial condition.

RISKS ASSOCIATED WITH CUSTOMER FINANCING

In 1996, the Company provided financing for approximately 87% of the
aggregate purchase price of Vacation Credits sold to new Owners, with an average
new Note Receivable of approximately $7,500. The

11
<PAGE> 12

Company also allows existing Owners the opportunity to finance the purchase of
Upgrades. The Company obtains a security interest in the purchased Vacation
Credits and it does not verify a prospective Owner's credit history. At June 30,
1997, an aggregate of $207.8 million of Notes Receivable were outstanding, of
which approximately $65.3 million had been retained by the Company. The
remaining balance of approximately $142.5 million of Notes Receivable had been
sold by the Company prior to that date, although the Company retained limited
recourse liability with respect to these Notes Receivable. See Notes 4, 5 and
15(a) of Notes to Combined and Consolidated Financial Statements.

Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At June 30, 1997, approximately $3.8 million of
Notes Receivable, including Notes Receivable previously sold by the Company,
were past due 60 days or more. The Notes Receivable are secured by a security
interest in the related Vacation Credits. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records an expense for any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits to inventory available for resale. However, the associated marketing
costs and sales commissions are not recovered by the Company and these expenses
must be incurred again to resell the Vacation Credits.

The Company maintains a reserve for doubtful accounts in respect of the
Notes Receivable owned by the Company and a reserve for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these reserves at December 31, 1995 and 1996, and June 30,
1997 were $8.0 million, $11.2 million and $13.3 million, respectively,
representing approximately 6.3%, 6.2% and 6.4%, respectively, of the total
portfolio of Notes Receivable at those dates, including the Notes Receivable
that had been sold by the Company. These reserves are estimates and if the
amount of the Notes Receivable that is ultimately uncollectible materially
exceeds the related reserves, the Company's business, results of operations and
financial condition could be materially adversely affected. See
"Business -- Customer Financing."

INTEREST RATE RISK

The Company generally provides financing for a significant portion of the
aggregate purchase price of Vacation Credits sold at a fixed interest rate. In
order to provide liquidity, the Company, through the Finance Subsidiaries, sells
or securitizes its Notes Receivable. Although a significant portion of the
existing financing of the Notes Receivable through the Finance Subsidiaries is
at a fixed rate or at a variable rate with a cap on the maximum rate, if
interest rates were to increase significantly, the Company's future cost of
funds would also likely increase significantly. The Company has the ability to
respond to rising interest rates by increasing the interest rate offered to
finance Vacation Credit purchases. However, such an increase could have a
material adverse effect on sales of Vacation Credits or on the percentage of
Owners who finance their Vacation Credit purchases through the Company, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business -- Customer Financing" and "--
Finance Subsidiaries."

COMPETITION

The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Some of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
interval resorts include Marriott International, Inc. ("Marriott"), The Walt
Disney Company ("Disney"), Hilton Hotels Corporation ("Hilton"), Hyatt
Corporation ("Hyatt"), Four Seasons Hotels & Resorts, Inc. ("Four Seasons"),
InterContinental Hotels and Resorts, Inc. ("Inter-Continental"), Westin Hotels &
Resorts ("Westin") and Promus Hotels, Inc. ("Promus"). In addition, other
publicly-traded companies in the timeshare industry, such as Signature Resorts,
Inc. ("Signature"), Fairfield Communities, Inc. ("Fairfield") and Vistana, Inc.
("Vistana"), currently compete, or may in the future compete, with the Company.
Many of these entities possess significantly greater financial, marketing and
other

12
<PAGE> 13

resources than those of the Company. Management believes that industry
competition will be increased by recent and potential future consolidation in
the timeshare industry.

The Company has entered into marketing agreements with affiliates of its
parent, Jeld-Wen, pursuant to which these affiliates may market Vacation Credits
for their own account at Eagle Crest Resort in Redmond, Oregon and Running Y
Resort in Klamath Falls, Oregon in exchange for their transfer to WorldMark of
condominium units at those resorts. These sales activities are competitive with
the Company's marketing activities, particularly in the Oregon and northern
California markets. See "Certain Transactions -- Relationship with Jeld-Wen."

Resales of Vacation Credits by Owners may compete with sales of Vacation
Credits by the Company and may inhibit the Company's ability to increase the
market price of Vacation Credits it sells.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a large extent upon the experience and
abilities of William F. Peare, the Company's President and Chief Executive
Officer, Jeffery P. Sites, the Company's Executive Vice President and Chief
Operating Officer, and Gary A. Florence, the Company's Vice President, Chief
Financial Officer and Treasurer. The loss of the services of any one of these
individuals could have a material adverse effect on the Company's business,
results of operations and financial condition. Prior to the closing of the
Offering, the Company intends to enter into employment agreements with Messrs.
Peare and Sites. The Company's success is also dependent upon its ability to
attract and retain qualified development, acquisition, marketing, management,
administrative and sales personnel for which there is keen competition. 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
retaining such personnel. See "Management -- Employment Agreements."

APPLICABILITY OF FEDERAL SECURITIES LAWS TO THE SALE OF VACATION CREDITS

It is possible that the Vacation Credits may be deemed to be a security as
defined in Section 2(1) of the Securities Act of 1933, as amended (the
"Securities Act"). If the Vacation Credits were determined to be a security for
such purpose, their sale would require registration under the Securities Act.
The Company has not registered the sale of the Vacation Credits under the
Securities Act and does not intend to do so in the future. If the sale of the
Vacation Credits were found to have violated the registration provisions of the
Securities Act, purchasers of the Vacation Credits would have the right to
rescind their purchases of Vacation Credits. If a substantial number of
purchasers sought rescission and were successful, the Company's business,
results of operations and financial condition could be materially adversely
affected. The Company has been advised by its counsel, Foster Pepper & Shefelman
PLLC, that in the opinion of such counsel, based on its review of the Company's
Vacation Credit program and the sales practices utilized in such program, the
Vacation Credits do not constitute a security within the meaning of Section 2(1)
of the Securities Act.

REGULATION OF MARKETING AND SALES OF VACATION CREDITS; OTHER LAWS

The Company's marketing and sales of Vacation Credits and certain of its
other operations are subject to extensive regulation by the states and foreign
jurisdictions in which the WorldMark Resorts are located and in which Vacation
Credits are marketed and sold and also by the federal government.

13
<PAGE> 14

purchase. Hawaii imposes particularly stringent and broad regulation
requirements for the sale of interests in interval ownership programs that have
resort units located in Hawaii. The Company has incurred substantial
expenditures over an extended period of time in the registration process in
Hawaii and still has not completed this process. Hawaii has allowed the use of
WorldMark units in Hawaii, provided that the Company continues in good faith to
pursue registration in Hawaii. Laws in each state where the Company sells
Vacation Credits grant the purchaser of Vacation Credits the right to cancel a
contract of purchase at any time within a period ranging from three to seven
calendar days following the later of the date the contract was signed or the
date the purchaser 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 laws, laws relating to the use of
public accommodations and facilities by disabled persons, sellers of travel
licensure laws, anti-fraud laws, advertising laws and labor laws.

Federal Regulations. The Federal Trade Commission has taken an active
regulatory role in the interval ownership industry 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 includes the Truth-In-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Standards Practices Act, the Telephone Consumer
Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act,
the Civil Rights Act of 1964 and 1968, the Fair Housing Act and the Americans
with Disabilities Act.

Although 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, there can be no assurance that it is in fact in compliance. Any failure
by the Company to comply with applicable laws or regulations could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company will continue to incur significant
costs to remain in compliance with applicable laws and regulations, and such
costs could increase substantially in the future.

DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORK; NO ASSURANCE OF CONTINUED
PARTICIPATION

The attractiveness of purchasing Vacation Credits is enhanced by the
ability of Owners to exchange Vacation Credits for an occupancy right in a
resort participating in the RCI network. RCI provides broad-based vacation
interval exchange services, and, subject to payment of a fee to RCI, Owners are
permitted to exchange their Vacation Credits for vacation use among the resorts
which participate in the RCI network. However, no assurance can be given that
the Company will continue to be able to ensure that Owners will be eligible to
participate in the RCI network or that the weekly RCI exchange value for
Vacation Credits will not become less favorable to Owners. Moreover, if the RCI
exchange network ceases to function effectively, or if Vacation Credits are not
accepted as exchanges for other desirable resorts, the Company's sales of
Vacation Credits could be materially adversely affected. See
"Business -- Participation in Vacation Interval Exchange Network."

POSSIBLE ENVIRONMENTAL LIABILITIES

Under various federal, state, local and foreign laws, ordinances and
regulations, the owner or operator 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 or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. 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. Although the Company conducts an environmental assessment with respect
to the properties it acquires for WorldMark, the Company has not received a
Phase I environmental report for any WorldMark Resort. There can be no assurance
that any environmental assessments undertaken by the Company with respect to the
WorldMark Resorts have revealed all potential environmental liabilities, or that
an environmental condition does not otherwise exist as to any one

14
<PAGE> 15

or more of the WorldMark Resorts that could have a material adverse effect on
the Company's business, results of operations and financial condition.

NATURAL DISASTERS; UNINSURED LOSS

WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from
earthquakes, floods or acts of war, are generally excluded from WorldMark's
insurance coverage. Should an uninsured loss or loss in excess of insured limits
occur, WorldMark has the option to either (i) remove such units from the
Vacation Credit system, which would result in a proportionate dilution of
vacation time available for the Vacation Credits which have been sold, or (ii)
pay the related costs of replacement. Although WorldMark's board of directors
may impose a limited amount of special assessments to pay for capital
improvements or major repairs, there can be no assurance that WorldMark would be
able to increase assessments to provide sufficient funds to pay for all possible
capital improvements and major repairs of the units at the WorldMark Resorts. In
such an event, the Company may need to advance funds to WorldMark in order to
maintain the quality of the WorldMark Resorts or WorldMark may be required to
defer certain improvements or repairs. In addition, the Company may advance
funds to WorldMark if WorldMark does not have sufficient funds to pay its
obligations in a timely manner. See "Business -- Insurance; Legal Proceedings."

EFFECTIVE VOTING CONTROL BY EXISTING STOCKHOLDER; ANTITAKEOVER PROVISIONS

Upon closing of the Offering, Jeld-Wen will own 79.98% of the outstanding
shares of Common Stock. This concentration of ownership will give Jeld-Wen
control of the election of directors and the management and affairs of the
Company and sufficient voting power to determine the outcome of all matters
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all, or substantially all, of the Company's assets. In addition,
certain provisions of Oregon law and of the Company's Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws could have the effect
of making it more difficult or more expensive for a third party to acquire, or
of discouraging a third party from attempting to acquire, control of the
Company. In addition, the Company is authorized to issue Preferred Stock with
rights senior to, and that may adversely affect, the Common Stock, with such
rights, preferences and privileges as the Company's Board of Directors may
determine, without the necessity of stockholder approval. The Company, however,
has no present plans to issue any shares of Preferred Stock. See "Principal and
Selling Stockholders," "Description of Capital Stock" and "Certain Provisions of
Oregon Law and of Trendwest's Articles of Incorporation and Bylaws."

SHARES ELIGIBLE FOR FUTURE SALE

Upon closing of the Offering, all of the shares of Common Stock offered
hereby will be eligible for public sale without restriction. Holders of the
other 14,287,116 shares of Common Stock hold their shares subject to the
limitations of Rule 144 of the Securities Act. All holders of these shares have
entered into lock-up agreements with the Underwriters not to offer, sell or
otherwise dispose of any equity securities of the Company for 360 days after the
date of this Prospectus, in the case of Jeld-Wen and the Selling Stockholder,
and 180 days after the date of this Prospectus in the case of all other holders,
without the prior written consent of Montgomery Securities. Montgomery
Securities may, in its sole discretion, at any time without notice, release all
or any portion of the shares subject to the lock-up agreements during the
respective lock-up periods. Future sales of substantial amounts of Common Stock,
or the potential for such sales, could adversely affect prevailing market
prices. See "Shares Eligible for Future Sale" and "Underwriting."

IMMEDIATE AND SUBSTANTIAL DILUTION; NO ANTICIPATED DIVIDENDS

Purchasers of Common Stock in the Offering will experience immediate
dilution in pro forma net tangible book value per share of Common Stock of
$11.92 from the initial public offering price per share. See "Dilution." In
addition, the Company does not anticipate that it will pay any cash dividends on
its Common Stock in the foreseeable future. See "Dividend Policy."

15
<PAGE> 16

ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

There has been no prior public market for the Company's Common Stock.
Although the Common Stock has been approved for quotation on the Nasdaq National
Market, there can be no assurance that a viable public market for the Common
Stock will develop or be sustained after the Offering or that purchasers of the
Common Stock will be able to resell their Common Stock at prices equal to or
greater than the initial public offering price. The initial public offering
price was determined by negotiations among the Company, the Selling Stockholder
and the representatives of the Underwriters and may not be indicative of the
prices that may prevail in the public market after the Offering is completed.
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. These fluctuations
have had a substantial effect on the market prices for many growth companies,
and have often been unrelated or disproportionate to the operating performance
of these specific companies. These broad fluctuations may adversely affect the
market price of the Common Stock. See "Underwriting."

16
<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,745,000 shares of
Common Stock offered by the Company hereby, after deducting the underwriting
discount and estimated expenses of the Offering, are estimated to be $44.9
million ($52.1 million if the Underwriters' over-allotment option is exercised
in full). The Company intends to use approximately $37.0 million of the
estimated net proceeds to repay all of the outstanding indebtedness and accrued
interest owed to Jeld-Wen. The balance of the net proceeds of approximately $7.9
million will be used for working capital and general corporate purposes,
including the acquisition and development of additional resort properties. See
"Summary -- The WorldMark Resorts" and "Business -- Growth Strategy" for a
discussion of the projects which are currently under development or subject to
acquisition agreements. Pending application as described above, the net proceeds
to the Company will be invested in short-term, investment grade, interest
bearing securities.

Indebtedness to be repaid out of the net proceeds from the Offering bears
interest at the prime rate plus 1% (currently 9.50%) per annum and is payable on
demand. Indebtedness to be repaid that was incurred within the last year was
incurred for the acquisition and development of timeshare resorts and for
general corporate purposes.

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholder.

DIVIDEND POLICY

Trendwest Resorts, Inc. has never declared or paid any cash dividends on
its capital stock and does not anticipate paying cash dividends on its Common
Stock in the foreseeable future. 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.

17
<PAGE> 18

CAPITALIZATION

The following table sets forth, as of June 30, 1997, the debt and total
capitalization of the Company on an actual basis and as adjusted to give effect
to the sale of Common Stock offered by the Company and the application of the
estimated net proceeds to the Company therefrom. This table should be read in
conjunction with the historical financial statements of the Company and the
related notes thereto included elsewhere in this Prospectus. See "Use of
Proceeds" and "Selected Combined and Consolidated Financial and Operating Data."

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Notes payable........................................ $ 396 $ 396
Due to parent company................................ 26,178 --
------- -------
Total debt(1)................................ 26,574 396
Stockholders' equity:
Preferred Stock, no par value; 10,000,000 shares
authorized; no shares issued and outstanding...... -- --
------- -------
Common Stock, no par value; 90,000,000 shares
authorized; 9,223,423 shares outstanding,
5,193,693 shares subscribed; 17,162,116 shares
issued and outstanding as adjusted(2)............. 14,970 59,821
Retained earnings.................................... 44,554 44,554
------- -------
Total stockholders' equity........................... 59,524 104,375
------- -------
Total capitalization......................... $ 86,098 $104,771
======== ========
</TABLE>

- ---------------

(1) See Notes 5, 6 and 9 of Notes to Combined and Consolidated Financial
Statements.

(2) Does not include approximately 858,000 shares of Common Stock authorized for
issuance under the Company's stock option plan. The Company has granted no
options under this plan. See "Management -- 1997 Stock Option Plan."

18
<PAGE> 19

DILUTION

The net tangible book value of the Company at June 30, 1997 was
approximately $59.5 million, or $4.13 per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less its
total liabilities, divided by the total number of outstanding and subscribed
shares of Common Stock. After giving effect to the sale of 2,745,000 shares of
Common Stock offered by the Company hereby and the application of the estimated
net proceeds therefrom, the pro forma net tangible book value of the Company at
June 30, 1997 would have been approximately $104.4 million or $6.08 per share of
Common Stock. This represents an immediate increase in such net tangible book
value of $1.95 per share to the existing stockholders of the Company and an
immediate dilution in pro forma net tangible book value of $11.92 per share to
purchasers of Common Stock in the Offering. The following table illustrates this
dilution on a per share basis:

<TABLE>
<S> <C> <C>
Initial public offering price per share...................... $18.00
Net tangible book value per share before the Offering...... $4.13
Increase per share attributable to new investors........... 1.95
------
Pro forma net tangible book value per share after the
Offering................................................... 6.08
------
Dilution per share to new investors.......................... $11.92
======
</TABLE>

The following table sets forth, as of June 30, 1997, the number of shares
of Common Stock purchased, the total consideration paid therefor and the average
price paid per share by the existing stockholders of the Company and the
purchasers of Common Stock in the Offering (before deducting the estimated
underwriting discount and offering expenses payable by the Company). The
following table does not include 431,250 shares of Common Stock which the
Underwriters may purchase pursuant to their over-allotment option. See
"Underwriting."

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 14,417,116 84.0 $14,970,000 23.3 $ 1.04
New investors(2)............ 2,745,000 16.0 49,410,000 76.7 18.00
---------- ----- ----------- -----
Total............. 17,162,116 100.0 $64,380,000 100.0
========== ===== =========== =====
</TABLE>

- ---------------

(1) Sales of Common Stock by the Selling Stockholder in the Offering will cause
the number of shares of Common Stock held by the existing stockholders to be
reduced to 14,287,116 shares, or 83.2% of the total number of shares of
Common Stock to be outstanding after the Offering, and will increase the
number of shares of Common Stock held by new investors to 2,875,000 shares,
or 16.8% of the total number of shares to be outstanding after the Offering.
See "Principal and Selling Stockholders."

(2) Purchasers of Common Stock in the Offering.

19
<PAGE> 20

SELECTED COMBINED AND CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of December 31, 1995 and 1996 and
for each of the years in the three-year period ended December 31, 1996 are
derived from the combined financial statements of Trendwest Resorts, Inc. and
certain affiliates, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such combined financial
statements and the report thereon are included elsewhere in this Prospectus. The
information as of December 31, 1994 and 1993 and for the year ended December 31,
1993 has been derived from the financial statements of Trendwest Resorts, Inc.
and the financial statements of TW Holdings, Inc., which have been audited by a
predecessor auditor as adjusted for certain prior period adjustments. The
information as of and for the year ended December 31, 1992 has been derived from
the financial statements of Trendwest Resorts, Inc., which have been audited by
a predecessor auditor as adjusted for certain prior period adjustments. The
following selected historical financial information at or for the six months
ended June 30, 1996 and 1997 has been derived from unaudited financial
statements that, in the opinion of management of the Company, reflect all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the financial information for such periods and as of such dates. The
combined and consolidated historical results for the six months ended June 30,
1997 are not necessarily indicative of results for the full year. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the combined and consolidated financial information for the Company and the
notes thereto which are contained elsewhere herein. The information presented
below under the captions "Pro Forma Data" and "Operating Data" is unaudited.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Vacation Credit sales, net.................... $35,798 $38,743 $54,904 $77,783 $ 100,040 $48,540 $ 60,820
Finance income................................ 3,069 3,813 3,736 5,368 7,143 3,264 5,836
Gains on sales of notes receivable............ -- 1,558 1,635 3,222 5,673 2,850 3,164
Resort management services.................... 219 1,102 2,805 1,579 1,501 575 1,278
Other......................................... 241 344 763 1,226 2,552 989 1,351
------- ------- ------- ------- -------- ------- --------
Total revenues.......................... 39,327 45,560 63,843 89,178 116,909 56,218 72,449
Costs and operating expenses:
Vacation Credit cost of sales................. 9,083 8,743 15,070 20,484 27,400 12,922 16,225
Resort management services.................... 301 959 2,613 1,283 859 416 529
Sales and marketing........................... 17,954 19,523 25,615 36,374 47,810 23,432 28,539
General and administrative.................... 3,253 4,056 6,588 8,391 10,904 5,062 6,266
Provision for doubtful accounts and recourse
liability................................... 2,031 2,805 4,537 6,522 7,467 3,633 4,160
Interest...................................... 2,457 1,929 881 2,380 2,445 1,109 1,445
------- ------- ------- ------- -------- ------- --------
Total costs and operating expenses...... 35,079 38,015 55,304 75,434 96,885 46,574 57,164
------- ------- ------- ------- -------- ------- --------
Income before income taxes...................... 4,248 7,545 8,539 13,744 20,024 9,644 15,285
Income tax expense............................ 1,542 2,909 3,214 4,979 7,348 3,544 5,505
------- ------- ------- ------- -------- ------- --------
Net income...................................... $ 2,706 $ 4,636 $ 5,325 $ 8,765 $ 12,676 $ 6,100 $ 9,780
======= ======= ======= ======= ======== ======= ========
PRO FORMA DATA:
Pro forma net income per share of Common
Stock......................................... $ 0.88 $ 0.68
Shares used in computing pro forma net income
per share of Common Stock(1).................. 14,417,116 14,417,116
Supplemental pro forma net income per share of
Common Stock(2)............................... $ 0.89 $ 0.66
Shares used in computing supplemental pro forma
net income per share of Common Stock(2)....... 16,019,268 16,019,268
OPERATING DATA:
Number of WorldMark Resorts (at end of
period)....................................... 11 12 14 16 19 18 19
Number of units (at end of period).............. 147 239 325 499 746 593 811
Number of Vacation Credits sold (in
thousands).................................... 32,636 34,296 47,025 65,308 82,270 40,206 46,768
Average price per Vacation Credit sold.......... $ 1.11 $ 1.14 $ 1.18 $ 1.21 $ 1.24 $ 1.23 $ 1.27
Average cost per Vacation Credit sold........... $ 0.28 $ 0.25 $ 0.32 $ 0.31 $ 0.33 $ 0.32 $ 0.35
Number of Owners (at end of period)............. 8,252 12,732 18,740 27,965 38,997 33,475 45,197
Average purchase price for new Owners........... $ 7,693 $ 7,879 $ 8,141 $ 8,325 $ 8,432 $ 8,457 $ 8,548
BALANCE SHEET DATA:
Cash, including restricted cash................. $ 758 $ 528 $ 375 $ 516 $ 802 $ 758 $ 1,197
Total assets.................................... 27,205 36,007 51,143 71,289 89,330 73,983 103,599
Indebtedness(3)................................. 18,254 4,809 10,378 24,826 22,371 17,267 26,574
Stockholders' equity............................ 5,412 22,308 27,456 36,753 49,744 42,878 59,524
</TABLE>

- ---------------

(1) Includes the 5,193,693 shares to be issued to Jeld-Wen in connection with
the Consolidation Transactions.

(3) Indebtedness is comprised of notes payable to Jeld-Wen and others.

20
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Trendwest markets, sells and finances timeshare ownership interests in the
form of Vacation Credits and acquires, develops and manages the WorldMark
Resorts. The Company derives revenues primarily from the sale of Vacation
Credits and, to a lesser extent, from the financing of Vacation Credits and from
management fees generated from its management agreement with WorldMark.

Vacation Credit sales and Upgrade Sales are recognized on the accrual basis
after the Company has received an executed sales contract and a minimum 10% down
payment, and the rescission period (generally three to seven days) has passed.
In instances where the Company finances an Upgrade Sale and the customer does
not make an additional cash down payment of at least 10% of the Upgrade Sale
amount, the Company uses the installment method to recognize revenue. Under the
installment method, gross profit on such Upgrade Sale is deferred and thereafter
recognized in relation to each principal payment received. Revenue is fully
recognized on the Upgrade Sales when the cash collected related to the Upgrade
Sale totals 10% of the amount of the Upgrade Sale. Commencing in the first
quarter of 1997, the Company modified its Upgrade Sales marketing practices so
as to encourage an additional cash down payment of at least 10% of the Upgrade
Sale amount. In the first six months of 1997, 54.4% of Upgrade Sales had the
additional 10% cash down payment, as compared to 13.0% in the first six months
of 1996.

The Company acquires or develops additional resort units for WorldMark and
contributes those units to WorldMark free of monetary encumbrances, thereby
creating additional Vacation Credits for sale by the Company. The Company
assigns each WorldMark Resort unit a specific number of Vacation Credits based
on its vacation use value relative to existing WorldMark Resort units.
Acquisition and construction costs associated with the WorldMark Resort units
are recorded as inventory. Vacation Credit cost of sales are allocated as
Vacation Credit sales are recognized.

Financing of Vacation Credits is provided to Owners by Trendwest at an
interest rate of 13.9% or 14.9% per annum for a term of up to seven years. The
Company routinely sells Notes Receivable to financial institutions and other
investors to generate liquidity to acquire or develop new resort units and for
working capital. The Company recognizes a gain on the sale of Notes Receivable
at the time of sale equal to the present value of the estimated net future cash
flow of the payment streams. This gain is recorded as a residual interest in
Notes Receivable sold on the Company's balance sheet and is amortized over the
term of the Notes Receivable using the interest method.

RESULTS OF OPERATIONS

The following discussion of the results of operations relates to entities
comprising the Company on a combined historical basis.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Vacation Credit sales, net....................... 86.0% 87.2% 85.5% 86.3% 83.9%
Finance income................................... 5.8 6.0 6.1 5.8 8.1
Gains on sales of notes receivable............... 2.6 3.6 4.9 5.1 4.4
Resort management services....................... 4.4 1.8 1.3 1.0 1.8
Other............................................ 1.2 1.4 2.2 1.8 1.8
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

21
<PAGE> 22

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF VACATION CREDIT SALES, NET:
Vacation Credit cost of sales.................... 27.4% 26.3% 27.4% 26.6% 26.7%
Sales and marketing.............................. 46.7 46.8 47.8 48.3 46.9
Provision for doubtful accounts and recourse
liability..................................... 8.3 8.4 7.5 7.5 6.8
AS A PERCENTAGE OF RESORT MANAGEMENT REVENUES:
Cost of resort management services............... 93.2% 81.3% 57.2% 72.3% 41.4%
AS A PERCENTAGE OF TOTAL REVENUES:
General and administrative....................... 10.3% 9.4% 9.3% 9.0% 8.6%
Total costs and operating expenses............... 86.6 84.6 82.9 82.8 78.9
</TABLE>

Comparison of the six months ended June 30, 1997 to the six months ended June
30, 1996

For the six months ended June 30, 1997, the Company achieved total revenues
of $72.4 million compared to $56.2 million for the six months ended June 30,
1996, an increase of 28.8%. The principal reason for the overall improvement was
a 25.4% increase in Vacation Credit sales from $48.5 million for the first six
months of 1996 to $60.8 million for the first six months of 1997. The increase
in Vacation Credit sales was primarily the result of a 16.4% increase in the
number of Vacation Credits sold from 40.2 million in the first six months of
1996 to 46.8 million in the first six months of 1997, which increase was largely
attributable to the opening of two new off-site sales offices (one in April 1996
and one in February 1997), one new on-site sales office in February 1996 and
increased Upgrade Sales. Revenues from Upgrade Sales increased 65.5% from $5.5
million in the first six months of 1996 to $9.1 million in the first six months
of 1997 due primarily to the increase in the number of Owners who made the
necessary 10% cash down payment to allow full revenue recognition at the time of
the sale. The number of Vacation Credits sold as Upgrades increased by
approximately 10% in the first six months of 1997 compared to the first six
months of 1996. The average price per Vacation Credit sold increased from $1.23
for the first six months of 1996 to $1.27 for the first six months of 1997, an
increase of 3.3%, which was due primarily to a 4.5% increase in the sales price
of Upgrade credits.

Finance income increased 75.8% from $3.3 million in the first six months of
1996 to $5.8 million in the first six months of 1997 due to increased carrying
balances of Notes Receivable and the recognition of the unrealized gain on
residual interest in the Notes Receivable sold of $1.2 million. Gains on sales
of Notes Receivable increased 10.3% from $2.9 million in the first six months of
1996 to $3.2 million in the first six months of 1997 due to a higher net
interest spread. Revenues from resort management services increased 122.3% from
$575,000 in the first six months of 1996 to $1,278,000 in the first six months
of 1997 due to an increase in WorldMark's revenue resulting from the growth in
the number of Owners, increased income from use of Bonus Time and increased
developer dues. Other revenues increased from $989,000 in the first six months
of 1996 to $1,351,000 in the first six months of 1997 due principally to
increased servicing fees on Notes Receivable sold.

Vacation Credit cost of sales increased from $12.9 million in the first six
months of 1996 to $16.2 million in the first six months of 1997, an increase of
25.6%, primarily reflecting the increase in sales of Vacation Credits. As a
percentage of Vacation Credit sales, Vacation Credit cost of sales increased
slightly from 26.6% in the first six months of 1996 to 26.7% in the first six
months of 1997. The Company believes that the increase in Vacation Credit cost
of sales as a percentage of Vacation Credit sales would have been slightly
greater in the first six months of 1997 as compared with the first six months of
1996 absent the increase in the percentage of Owners who made a 10% cash down
payment on Upgrade Sales.

Sales and marketing costs increased 21.8% from $23.4 million in the first
six months of 1996 to $28.5 million in the first six months of 1997. As a
percentage of Vacation Credit sales, sales and marketing costs decreased from
48.3% in the first six months of 1996 to 46.9% in the first six months of 1997
primarily due to the substantially higher percentage of Upgrade Sales in the
first six months of 1997 that were entitled to full revenue recognition at the
time of sale. The Company believes that sales and marketing costs as a

22
<PAGE> 23

percentage of Vacation Credit sales would have increased slightly in the first
six months of 1997 as compared with the first six months of 1996 absent the
increase in the percentage of Owners who made a 10% cash down payment on Upgrade
Sales. This increase reflects an increase in expenses due to the opening of
additional sales offices and marketing costs incurred to generate prospective
customers in new market areas.

General and administrative expenses increased 23.5% from $5.1 million in
the first six months of 1996 to $6.3 million in the first six months of 1997,
primarily reflecting the increased sales growth and increased administration
costs at regional sales offices. As a percentage of total revenues, general and
administrative expenses decreased from 9.0% in the first six months of 1996 to
8.6% in the first six months of 1997, due primarily to reduced office service
charges from Jeld-Wen and to the substantially higher percentage of Upgrade
Sales in the first six months of 1997 that were entitled to full revenue
recognition at the time of sale. The Company believes that general and
administrative expenses as a percentage of total revenues would have remained
relatively constant in the first six months of 1997 as compared with the first
six months of 1996 absent the increase in the percentage of Owners who made a
10% cash down payment on Upgrade Sales.

Provision for doubtful accounts and recourse liability increased 16.7% from
$3.6 million in the first six months of 1996 to $4.2 million in the first six
months of 1997. As a percentage of Vacation Credit sales, the provision declined
from 7.5% in the first six months of 1996 to 6.8% in the first six months of
1997 due to continued growth in the amount of Notes Receivable from Upgrade
Sales. Owners who Upgrade have a historically lower default rate than new
Owners.

Comparison of the year ended December 31, 1996 to the year ended December 31,
1995

For 1996, the Company achieved total revenue of $116.9 million compared to
$89.2 million for 1995, an increase of 31.1%. This increase was primarily due to
a 28.5% increase in Vacation Credit sales, from $77.8 million to $100.0 million,
and a 31.5% increase in finance income, from $5.4 million to $7.1 million. The
increase in Vacation Credit sales was primarily the result of a 26.0% increase
in the number of Vacation Credits sold from 65.3 million in 1995 to 82.3 million
in 1996 due to the opening of two new off-site sales offices (one in May 1995
and one in April 1996) and three new on-site sales offices (one in April 1995,
one in June 1995 and one in February 1996). Revenues from Upgrade Sales,
increased from $6.6 million for 1995 to $12.4 million for 1996, due to the
increased number of Owners and more effective sales programs. The average price
per Vacation Credit sold increased slightly from $1.21 for 1995 to $1.24 for
1996, an increase of 2.5%. The increase in finance income was primarily due to
increased carrying balances of Notes Receivable related to higher Vacation
Credit sales in 1996 compared to 1995. Gains on sales of Notes Receivable
increased 78.1% from $3.2 million for 1995 to $5.7 million for 1996. This
increase was due to a greater amount of Notes Receivable sales, which increased
from $38.6 million for 1995 to $72.2 million for 1996.

Vacation Credit cost of sales increased from $20.5 million for 1995 to
$27.4 million for 1996, an increase of 33.7%, primarily reflecting the increase
in sales of Vacation Credits. As a percentage of Vacation Credit sales, Vacation
Credit cost of sales increased to 27.4% in 1996 from 26.3% in 1995. This
increase was due to the relatively higher cost of developing and constructing
the Gleneden Beach resort in Oregon compared to other WorldMark Resorts and the
reduction of revenue resulting from an increase in net deferred gross profit on
Upgrade Sales.

Cost of resort management services decreased 30.8% from $1.3 million in
1995 to $0.9 million in 1996, primarily as a result of the shift in the
management responsibility for WorldMark's resort level operations from Trendwest
to WorldMark which occurred in the second quarter of 1995.

For 1996, sales and marketing costs increased 31.3% from $36.4 million in
1995 to $47.8 million in 1996. As a percentage of Vacation Credit sales, sales
and marketing costs increased slightly from 46.8% in 1995 to 47.8% in 1996. The
growth in sales and marketing costs reflects the increase in Vacation Credit
sales and the opening of two new sales offices.

General and administrative expenses increased 29.8% from $8.4 million in
1995 to $10.9 million in 1996, primarily reflecting the growth in the overall
business of Trendwest. General and administrative expenses decreased as a
percentage of total revenues from 9.4% in 1995 to 9.3% in 1996, primarily
reflecting the

23
<PAGE> 24

realization of certain economies of scale causing administrative expenses to
increase at a lower rate than total revenues.

Interest expense remained consistent at $2.4 million, as lower average
interest rates offset the effect of somewhat higher average loan balances.

Provision for doubtful accounts and recourse liability increased 15.4% from
$6.5 million in 1995 to $7.5 million in 1996. As a percentage of Vacation Credit
sales, the provision declined from 8.4% in 1995 to 7.5% in 1996. Reserve
strengthening contributed to the higher percentage in 1995 and a higher
percentage of the Company's Notes Receivable being held by Upgrade Owners at the
end of 1996 contributed to the lower percentage in 1996.

Comparison of the year ended December 31, 1995 to the year ended December 31,
1994

For the year ended December 31, 1995, the Company achieved total revenues
of $89.2 million compared to $63.8 million for 1994, an increase of 39.8%. This
increase was primarily due to a 41.7% increase in Vacation Credit sales, from
$54.9 million in 1994 to $77.8 million in 1995, a 45.9% increase in finance
income, from $3.7 million in 1994 to $5.4 million in 1995, and a 100.0% increase
in gains on sales of Notes Receivable, from $1.6 million in 1994 to $3.2 million
in 1995. These increases were partially offset by a decrease in resort
management service revenues from $2.8 million in 1994 to $1.6 million in 1995.
The increase in Vacation Credit sales was primarily the result of a 38.9%
increase in the number of Vacation Credits sold from 47.0 million in 1994 to
65.3 million in 1995, primarily due to the addition of one new off-site sales
office (in May 1995) and three new on-site sales offices (one in September 1994,
one in April 1995 and one in June 1995). In addition, the growth in Upgrade
Sales contributed to the increase in Vacation Credit sales. The average price
per Vacation Credit sold in 1995 increased 2.5% from $1.18 in 1994 to $1.21 in
1995. Finance income increased as a result of a higher average balance of Notes
Receivable outstanding due to financing associated with the increased Vacation
Credit sales. Gains on sales of notes receivable increased from $1.6 million in
1994 to $3.2 million in 1995 reflecting the increase in the amount of Notes
Receivable sold from $23.9 million in 1994 to $38.6 million in 1995 and improved
interest rate spread on the Notes Receivable sold. The decrease in resort
management service revenues was attributable to the shift in Worldmark's
resort-level operations from Trendwest to WorldMark which occurred in the second
quarter of 1995.

Vacation Credit cost of sales increased 35.8% from $15.1 million in 1994 to
$20.5 million in 1995. The increase in Vacation Credit costs of sales reflects
the increase in the number of Vacation Credits sold in 1995. As a percentage of
Vacation Credit sales, Vacation Credit cost of sales declined from 27.4% in 1994
to 26.3% in 1995 due to favorable product costs and economies of scale
associated with developing and acquiring larger projects.

Cost of resort management services decreased 50.0% from $2.6 million in
1994 to $1.3 million in 1995, primarily as a result of the shift in the
management responsibility for WorldMark's resort-level operations from Trendwest
to WorldMark.

Sales and marketing costs increased 42.2% from $25.6 million in 1994 to
$36.4 million in 1995, primarily as a result of increased Vacation Credit sales.
As a percentage of Vacation Credit sales, sales and marketing costs increased
from 46.7% in 1994 to 46.8% in 1995, primarily as a result of the increased
costs associated with opening the three new sales offices in 1995.

General and administrative expenses increased 27.3% from $6.6 million in
1994 to $8.4 million in 1995, reflecting the growth in the overall business of
Trendwest. General and administrative expenses decreased as a percentage of
total revenues from 10.3% in 1994 to 9.4% in 1995, reflecting the realization of
certain economies of scale causing a lower rate of growth in administrative
expenses compared to the increase in total revenues.

Interest expense increased from $0.9 million in 1994 to $2.4 million in
1995. The increase in interest expense reflects the higher average loan balance
associated with carrying a higher average Notes Receivable balance.

24
<PAGE> 25

Provision for doubtful accounts and recourse liability increased 44.4% from
$4.5 million in 1994 to $6.5 million in 1995 reflecting the increase in Vacation
Credit sales. As a percentage of Vacation Credit sales, provision for doubtful
accounts and recourse liability increased from 8.3% in 1994 to 8.4% in 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company generates cash from operations from down payments on sales of
Vacation Credits which are financed, cash sales of Vacation Credits, principal
and interest on Notes Receivable, and proceeds from sales and borrowings
collateralized by Notes Receivable. The Company also generates cash on the
interest differential between the interest charged on the Notes Receivable and
the interest paid on loans collateralized by Notes Receivable.

During the six months ended June 30, 1996 and 1997, and the years ended
December 31, 1994, 1995 and 1996, cash flow provided by (used in) operating
activities was ($7.9) million, ($20.2) million, ($11.6) million, ($14.2) million
and $3.5 million, respectively. While net income was higher for the six months
ended June 30, 1997 compared to the same period in the prior year, cash
generated from operating activities decreased principally due to the increased
issuance of Notes Receivable to finance the purchase of Vacation Credits and
reduced proceeds from sales of Notes Receivable. For the first six months of
1997, cash flows from operating activities resulted primarily from sales and
repayments of Notes Receivable of $23.9 million and net income of $9.8 million,
and cash flow used in operating activities was principally for the issuance of
Notes Receivable of $53.9 million to finance the purchase of Vacation Credits by
Owners. For 1996, cash flows from operating activities resulted primarily from
the sale and repayment of Notes Receivable of $88.6 million and net income of
$12.7 million. Cash flow used in operating activities in 1996 was principally
due to an increase in Notes Receivable of $91.6 million to finance the purchase
of Vacation Credits by Owners and an increase in inventory of $5.7 million due
to the increasing sales of Vacation Credits. In 1994 and 1995, the cash flow
used in operating activities was primarily due to an increase in Notes
Receivable of $50.3 million and $71.1 million, respectively, partially offset by
cash received from the sale and repayment of Notes Receivable of $42.9 million
and $57.7 million, respectively, and net income of $5.3 million and $8.8
million, respectively.

Net cash used in investing activities for the six months ended June 30,
1996 and 1997, and the years ended December 31, 1994, 1995 and 1996 was
$450,000, $876,000, $229,000, $93,000 and $1.4 million, respectively. Cash used
in the acquisition of property, plant and equipment was primarily used to
acquire furniture and fixtures and data processing equipment required to meet
the growth of the Company. In 1995, cash of $4.2 million was provided from the
sale of marketable securities, while $4.3 million was used to purchase property
and equipment, primarily the Company's corporate office facility in Bellevue,
Washington.

Net cash provided by (used in) financing activities for the six months
ended June 30, 1996 and 1997, and the years ended December 31, 1994, 1995 and
1996 was ($7.5) million, $21.0 million, $11.5 million, $14.4 million and ($2.1)
million, respectively. For the six months ended June 30, 1997, the Company
borrowed $16.8 million from a group of banks led by Seattle-First National Bank
(the "Bank Group") secured by Notes Receivable to meet working capital needs.
Other net cash provided by (used in) financing activities primarily related to
net loan repayments or borrowings from Jeld-Wen.

Since completed units at various resort properties are acquired or
developed in advance and a significant portion of the purchase price of Vacation
Credits is financed by the Company, the Company continually needs funds to
acquire and develop property, to carry Notes Receivable contracts and to provide
working capital. The Company has historically secured additional funds through
loans from Jeld-Wen and the sale of Notes Receivable through the Finance
Subsidiaries. See "Risk Factors -- Dependence on Acquisitions of Additional
Resort Units for Growth; Need for Additional Capital."

The Company has an open line of credit with Jeld-Wen which bears interest
at prime plus 1% (currently 9.50%) per annum. The limit on the amount of the
credit line has not been set by Jeld-Wen and the amount outstanding on the line
of credit is payable on demand. As of June 30, 1997, the outstanding
indebtedness to Jeld-Wen was $26.2 million, and the income taxes payable to
Jeld-Wen were $4.0 million. Upon consummation of the Offering, the Company
intends to repay the indebtedness to Jeld-Wen.

25
<PAGE> 26

Financing of Notes Receivable has been accomplished by use of a $93.0
million purchase commitment from the Bank Group. As of June 30, 1997, Notes
Receivable totaling $77.0 million had been transferred to the Bank Group. As
discussed in note 5 to the accompanying combined and consolidated financial
statements, subsequent to January 1, 1997 and prior to the Consolidation
Transactions, the Company's transfer of Notes Receivable to the Bank Group did
not qualify for sale treatment under SFAS No. 125 and were treated as secured
borrowings. In conjunction with the Consolidation Transactions, the bylaws and
articles of incorporation of TW Holdings were amended such that the transfer of
Notes Receivable from Trendwest to TW Holdings met the sales recognition
criteria of SFAS No. 125, resulting in the transferred Notes Receivable no
longer being assets of Trendwest. At June 30, 1997, Notes Receivable previously
transferred and treated as secured borrowings aggregating $16.8 million were
accounted for as sales of Notes Receivable. The Company has purchased a three
year, 30-day LIBOR interest rate cap at 10.125% per annum on $31.8 million. The
interest rate cap expires on April 10, 1998. The agreement with the Bank Group
is subject to annual renewal on June 30 of each year. The interest rate on
borrowings under the agreement with the Bank Group is currently LIBOR plus 125
basis points. In the future, the Company may hypothecate its Notes Receivable.

The Company also has a $5.0 million line of credit with FINOVA Capital
Corporation. At June 30, 1997, the outstanding balance on this line was
$396,000. Notes Receivable are assigned to the lender and principal payments are
applied to the line of credit as received. The line of credit bears interest at
10.5% per annum. The loan agreement requires the Company to maintain minimum
financial ratios, restricts certain expenses and limits cash distributions. At
June 30, 1997, the Company was in compliance with all covenants under this line
of credit. The line of credit matures in 2000, but it is anticipated that
principal payments on the assigned Notes Receivable will fully repay the line of
credit in December 1997. The Company does not anticipate renewing this line of
credit.

Through the end of 1998, the Company anticipates spending approximately
$68.0 million for acquisitions and development of new resort properties and for
expansion and development activities at the existing WorldMark Resorts. The
Company plans to fund these expenditures with the net proceeds of the Offering
(after reduction of debt) and cash generated from operations, including further
sales or securitizations of Notes Receivable. The Company believes that, with
respect to its current operations, the net proceeds to the Company from the
Offering, together with cash generated from operations and future borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the end of 1998.

WorldMark maintains a replacement reserve for the WorldMark Resorts which
is funded from the annual assessments of the Owners. At June 30, 1997, the
amount of such reserve was approximately $4.2 million. The replacement reserve
is utilized to refurbish and replace the interiors and furnishings of the
condominium units and to maintain the exteriors and common areas in WorldMark
Resorts in which all units are owned by WorldMark. The Company may advance funds
to WorldMark from time to time.

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

26
<PAGE> 27

BUSINESS

OVERVIEW

Trendwest Resorts, Inc. markets, sells and finances timeshare Vacation
Ownership Interests and acquires, develops and manages timeshare resorts. In
1996, Trendwest was ranked as one of the largest timeshare companies in the
United States, according to published sales volume data in the Vacation
Ownership World trade magazine. The Company's timeshare resorts are owned by and
operated through WorldMark, a non-profit mutual benefit corporation organized by
Trendwest in 1989 to provide an innovative, flexible vacation ownership system.
As of June 30, 1997, WorldMark had in excess of 45,000 Owners and owned and
maintained an aggregate of 811 condominium-style units at 19 WorldMark Resorts
in the western United States, Hawaii, British Columbia and Mexico. The Company
presently sells Vacation Ownership Interests in Washington, Oregon and
California, primarily through eight off-site sales offices.

Trendwest sells Vacation Ownership Interests in the form of Vacation
Credits which are created by the transfer to WorldMark of resort units purchased
or developed by the Company. Vacation Credits can be used by Owners to reserve
units at any of the WorldMark Resorts, at any time during the year and in time
increments as short as one day. The use of Vacation Credits is not tied to any
particular resort unit or time period as is typical in the timeshare industry.
The Company believes that the combination of multiple WorldMark Resorts and the
Company's Vacation Credit system provides Owners with an attractive range of
vacation planning choices and values not generally available within the
timeshare industry. The Company's Vacation Credit system with multiple WorldMark
Resorts facilitates the sale of Vacation Credits at off-site sales offices
located in major metropolitan areas and reduces dependence on on-site sales
centers located at more remote resort locations.

The Company sells Vacation Credits at its 11 sales offices, eight of which
are located off-site in metropolitan areas. The other sales offices are located
on-site at three of the WorldMark Resorts. The Company intends to establish an
additional off-site sales office in California in late 1997. The Company
transferred 224 resort units to WorldMark in 1996, 146 resort units in 1995 and
86 resort units in 1994. Revenues from Vacation Credit sales increased to
approximately $100.0 million in 1996 from $77.8 million in 1995 and
approximately $54.9 million in 1994. The Company transferred 61 resort units to
WorldMark during the first six months of 1997. As of June 30, 1997, the Company
had purchase agreements and developments in progress to obtain an additional 351
resort units during the remainder of 1997 and 1998, of which 150 units are
expected to be available in 1997, and the remaining 201 resort units are
expected to be available during 1998.

OPERATING STRATEGY

The Company believes its operating strategy and vacation ownership system
provide the following advantages over other timeshare companies:

- Appeal to Broad Consumer Base. The Company believes its Vacation Credit
system enables it to market effectively to potential customers with a
broader range of income levels and vacation requirements than is addressed
by most timeshare companies. The Company provides prospective purchasers
with the opportunity to purchase varying increments of Vacation Credits
suitable for their financial position and vacation needs. The Company's
minimum purchase requirement of 6,000 Vacation Credits, which

27
<PAGE> 28

presently costs $7,800, makes entry into WorldMark affordable for a
significant number of households. The Company also markets Upgrades to
existing Owners in smaller increments, which accounted for approximately
12% of Vacation Credit sales in 1996.

- Inventory Control. The Company's sale of Vacation Credits rather than
deeded interests with weekly intervals at individual resorts enables it to
schedule its resort acquisition and development activities in accordance
with its anticipated sales volumes and to diversify the risk of its capital
commitments among several resorts. Since all Vacation Credits have the same
use rights and sell for the same price, the Company does not experience a
buildup of inventory of less desirable resort units or interval dates which
are difficult to sell. The Company can also develop resorts at desirable
remote locations since it does not depend on on-site sales offices to
generate sales.

- Owner Satisfaction. The Company places great importance on Owner
satisfaction. The Company believes that Owner satisfaction is achieved by
maintaining a high level of quality at the WorldMark Resorts, by increasing
the number of resort locations and by satisfying Owners' first vacation
requests a high percentage of the time. Of the 19 WorldMark Resorts, 12
have the highest rating from Resort Condominiums International Inc.
("RCI"), the world's largest timeshare exchange network, four have the
second-highest rating from RCI and three have been recently opened and have
not yet been rated. The Company has increased the number of WorldMark
Resorts from three in 1989 to its present 19 and intends to add two
additional WorldMark Resorts during the remainder of 1997 and 1998.
Although Owners have exchange privileges through the RCI network, the
Company believes that Owner satisfaction with the WorldMark Resorts is
demonstrated by the Owners' usage of approximately 74% of their Vacation
Credits at WorldMark Resorts in 1996. The satisfaction of existing Owners
with WorldMark and the WorldMark Resorts generates additional revenues to
the Company through Upgrade Sales and from Owner referrals of new
prospects.

GROWTH STRATEGY

Acquisition and Development of Additional Resorts. The Company acquires and
develops additional resort units for WorldMark, thereby providing additional
Vacation Credits for sale by the Company and a greater variety of resort
locations for the Owners. The Company acquires and develops properties in
attractive vacation areas that are either within a reasonable driving distance
(generally two to five hours) from an off-site sales office or are easily
accessible by air travel. The Company's goal is to obtain a mix of resort
locations that can accommodate purchasers of approximately 70% of the Vacation
Credits sold in a particular geographic market within a reasonable driving
distance of that market. The Company intends to acquire new resort locations in
the western United States (west of the Rocky Mountains) and in Hawaii, British
Columbia and Mexico. The Company seeks properties that have on-site resort
amenities, or are located close to such amenities, such as ski lifts, golf
courses, tennis courts, swimming pools, rivers, lakes and beaches. As of June
30, 1997, the Company had an existing inventory of 6.7 million Vacation Credits
and had purchase

28
<PAGE> 29

agreements and developments in progress to add 150 units that are expected to be
available during the remainder of 1997, and an additional 201 units that are
expected to be available during 1998. These new units are expected to provide an
aggregate of approximately 162.6 million Vacation Credits.

Sales and Financings of Vacation Credits. The Company plans to increase the
sales and financings of Vacation Credits to new customers primarily through the
opening of additional off-site sales offices. The Company opened a new off-site
sales office in Costa Mesa, California in February 1997 and anticipates opening
an additional off-site sales office in late 1997 in California. While sales at
existing sales offices have generally experienced annual increases, the Company
believes that a substantial portion of its sales growth will come from recently
established and new off-site sales offices. The Company believes that the
success of its owner referral program will also be a significant factor to
increase sales. The Company's owner referral program, where existing Owners
refer prospective new Owners to the Company, was the source for approximately
16% of sales of Vacation Credits during 1996.

Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales of Vacation Credits will continue to be financed by the
Company. In 1996, the Company provided financing for approximately 87% of the
aggregate purchase price of Vacation Credits sold to new Owners. During 1996,
the average new Note Receivable had a principal amount of approximately $7,500,
and the aggregate amount of Notes Receivable generated in connection with the
sale of Vacation Credits to new Owners was approximately $79.1 million. The
Company has sold, and expects in the future to sell, a substantial amount of its
Notes Receivable. See "-- Customer Financing," "-- Finance Subsidiaries" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Sales of Additional Vacation Credits to Existing Owners. The Company places
significant emphasis on Upgrade Sales to existing Owners. Upgrade Sales
accounted for approximately 8% and 12% of the Company's sales of Vacation
Credits during 1995 and 1996, respectively. With an increasing number of Owners,
the Company believes that Upgrade Sales will continue to increase. Since a new
Owner may purchase as few as 6,000 Vacation Credits to become an Owner, Owners
often are interested in purchasing Upgrades in order to expand their ability to
use the WorldMark Resorts. Upgrades are offered in increments of 1,000 Vacation
Credits and generally may be purchased at a discount from the then current
price. Owners have the opportunity to finance the purchase of Upgrades through
the Company. Upgrade Sales to existing Owners provide a higher gross margin to
the Company due to substantially lower marketing costs and lower sales
commissions associated with such sales. The Company has a segment of its sales
group which concentrates on Upgrade Sales. See "-- Customer Financing."

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, motels, privately owned condominiums and houses
rented on a nightly, weekly or monthly basis. For many vacationers, particularly
those with families, a lengthy stay at a quality commercial lodging
establishment is above the available budget, and the space provided relative to
the cost is not adequate. The Company believes that vacation ownership programs
present an economical alternative to commercial lodging for vacationers.

29
<PAGE> 30

According to ARDA, a nonprofit industry organization, the timeshare
industry experienced a record year in 1994 with 384,000 new owners purchasing
560,000 vacation intervals generating sales 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 the worldwide timeshare industry has expanded
significantly since 1980 both in vacation interval sales volume and number of
vacation interval owners.

DOLLAR VOLUME OF VACATION INTERVAL SALES
(IN BILLIONS)

NUMBER OF VACATION INTERVAL OWNERS
(IN THOUSANDS)

- ---------------

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

30
<PAGE> 31

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 entry of brand name national
lodging companies into the industry;

- Increased flexibility of timeshare ownership due to the growth of
exchange organizations such as RCI and Interval International;

- 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, most with relatively small resort portfolios consisting of units with
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 or
franchising vacation interval resorts include Marriott, Disney, Hilton, Hyatt,
Four Seasons, InterContinental, Westin and Promus. Unlike the Company, however,
the timeshare operations of each of these companies comprise only a relatively
small portion of such company's overall operations. Moreover, brand name lodging
companies are believed by the Company to have had less than 10% of the worldwide
vacation interval market in 1995. The timeshare products offered by most
companies are limited to the use of one resort in weekly intervals and only
provide use of the resort for a fixed period of time. Vacation Credits can be
used by Owners at any WorldMark Resort, at any time during the year and for any
number of days. Unlike the typical requirements imposed by other timeshare
companies, the use of Vacation Credits is not related to any specific resort,
fixed usage period, or time of year. The Company believes that the combination
of its system of Vacation Credits and numerous WorldMark Resorts provides its
customers with a range of vacation choices not offered by any other timeshare
company. See "-- Competition."

The Consumer. According to 1995 information compiled by ARDA, (i) the prime
market for vacation intervals is customers in the 40-55 year age range who are
reaching the peak of their earning power, (ii) the median age of a vacation
interval buyer was 50, and (iii) the median annual household income of vacation
interval owners in the United States was approximately $63,000, with
approximately 35% of all vacation interval owners having an annual household
income greater than $75,000 and approximately 17% of such owners having an
annual household income greater than $100,000. Despite the growth in the
timeshare industry, vacation interval ownership as of December 31, 1994 had
achieved only a 3.0% market penetration among United States households with
income above $35,000 per year and a 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 such as
RCI (cited by 82% of vacation interval purchasers), (ii) the savings as compared
to traditional resort vacations (cited by 61% of such purchasers), and (iii) the
quality and appeal of the resort at which they purchased a vacation interval
(cited by 54% of such 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, and approximately 51% of
all owners who bought their first vacation interval before 1985 subsequently
purchased a second vacation interval. In addition, the ARDA study suggests that
customer satisfaction increases with length of ownership, age, income, multiple
location ownership and accessibility to vacation interval exchange networks.

31
<PAGE> 32

The Company believes it is well positioned to take advantage of these
trends because its vacation ownership program provides (i) an increasing number
of high quality resorts, (ii) the flexibility to stay at any of the WorldMark
Resorts, (iii) the opportunity to participate in the RCI network, (iv) the
relative affordability of becoming an Owner compared to alternative vacation
interval programs, and (v) an innovative combination of features that provides
Owners with a more flexible timeshare product than those presently offered in
the timeshare industry. The Company expects the timeshare industry to continue
to grow as the baby-boom generation (currently ages 32 to 50) moves through the
40-55 year age bracket, the age group which purchased the most vacation
intervals in 1994.

DESCRIPTION OF THE WORLDMARK RESORTS

The following table sets forth certain information with respect to the
WorldMark Resorts as of June 30, 1997. All of the units are fully-furnished,
including telephones, televisions, VCRs and stereos, and all but the studio
units feature full kitchens. Most of the units contain a washer and dryer,
fireplace, microwave and private outdoor barbecue grill. Many units also include
a private deck.

<TABLE>
<CAPTION>
SIZE OF UNITS(1) WORLDMARK RESORT AMENITIES
------------------ --------------------------------------
SWIMMING WHIRLPOOL/ RESTAURANT/
EXISTING RESORTS LOCATION S 1BR 2BR 3BR TENNIS POOL JACUZZI LOUNGE NEARBY AMENITIES
- ------------------- ----------------- --- --- --- --- ------ -------- ---------- ----------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRITISH COLUMBIA
Sundance Whistler 0 10 9 6 -- Golf, Skiing
CALIFORNIA
North Shore Bass Lake 0 0 61 0 -- -- -- Water Activities, Yosemite
Estates National Park
Beachcomber Pismo Beach 0 20 0 0 -- Beaches
Palm Springs Palm Springs 10 12 35 7 -- -- -- Golf
Big Bear Big Bear Lake 1 16 8 0 -- -- Skiing, Water Activities
HAWAII
Valley Isle Maui 2 6 6 0 -- -- Golf, Beaches
Kapaa Shores Kauai 0 25 17 0 -- -- -- Golf, Beaches
NEVADA
Lake Tahoe Stateline 0 23 21 6 -- -- Skiing, Golf, Water
Activities, Gaming
Las Vegas Las Vegas 0 22 20 0 -- Gaming, Golf
OREGON
Eagle Crest Redmond 1 28 21 12 -- -- -- -- Golf, Equestrian Center,
Fitness Center
Gleneden Beach Lincoln City 0 35 41 4 -- -- -- Golf, Beaches, Gaming
Running Y Resort Klamath Falls 0 12 13 1 -- -- -- Golf, Water Activities
WASHINGTON
Lake Chelan Shores Chelan 0 5 8 0 -- -- -- Water Activities
Surfside Long Beach 0 20 5 0 -- -- Beaches
Discovery Bay Sequim 0 0 32 0 -- -- -- -- Water Activities
Park Village Leavenworth 0 0 72 0 -- -- Golf, Skiing
Mariner Village Ocean Shores 0 8 24 0 -- -- Beaches
Birch Bay Blaine 0 16 36 0 -- -- Beaches, Gaming

MEXICO
Coral Baja San Jose del Cabo 0 50 23 1 -- -- -- -- Beaches, Golf

PLANNED RESORTS
Lake(2) Nice, California Golf, Water Activities
Kona(2) Hawaii, Hawaii Golf, Beaches
</TABLE>
- ---------------

(1) S indicates studio; 1BR indicates one bedroom; 2BR indicates two bedrooms;
and 3BR indicates three bedrooms. Units with the same number of bedrooms may
vary in size and amenities.

(2) These units are expected to be contributed to WorldMark in 1997 and 1998.

32
<PAGE> 33

In addition to the planned additions of Clear Lake and Kona as WorldMark
Resorts, the Company currently has several other resorts in the permitting stage
and several more in the advanced planning stage. One potential development is
the MountainStar project which initially would involve an 1,100 acre parcel in
central Washington owned by Jeld-Wen. On behalf of Jeld-Wen, the Company is
currently pursuing the necessary regulatory approvals. Should the required
approvals be obtained in a timely manner, active development of this project
could commence as early as the summer of 1998, and the Company anticipates that
it would purchase a portion of the real estate involved in the project and
construct condominium units for its own account and for transfer to WorldMark.
In addition, the Company may be retained by Jeld-Wen to act as project manager
for the overall development of MountainStar.

The WorldMark Resorts are owned by WorldMark free and clear of all monetary
encumbrances. WorldMark maintains a replacement reserve for the WorldMark
Resorts which is funded from the annual assessments of the Owners. At June 30,
1997, the amount of such reserve was approximately $4.2 million. The replacement
reserve is utilized to refurbish and replace the interiors and furnishings of
the condominium units and to maintain the exteriors and common areas in
WorldMark Resorts in which all units are owned by WorldMark.

WORLDMARK

WorldMark is a California nonprofit mutual benefit corporation that was
formed by Trendwest in 1989. WorldMark's articles of incorporation provide that
the specific purpose for which it was formed is to own, operate and manage the
real property conveyed to it by the Company. Owners receive the right to use all
WorldMark Resort units at any available time and interval selected by the Owner,
and the right to vote to elect WorldMark's board members and with respect to
certain major WorldMark matters. The number of votes that each Owner has is
based on the number of Vacation Credits owned.

Compared to other timeshare arrangements, the WorldMark concept provides
Owners significant flexibility in planning vacations. Depending on how many
Vacation Credits an Owner has purchased, the Owner may use the Vacation Credits
for one or more vacations annually. The number of Vacation Credits that are
required to stay one day at WorldMark's units varies, depending upon the resort
location, the size of the unit, the vacation season and the day of the week. For
example, a Friday or Saturday night stay at a one-bedroom unit may require 825
Vacation Credits per night off-season and 1,450 Vacation Credits per night in
peak season. A midweek stay at the same one-bedroom unit would require less
Vacation Credits. This range of Vacation Credits that is required to stay one
day enables an Owner to receive a varying number of days at the WorldMark
Resorts depending on the vacation choices made by the Owner. Under this system,
Owners can select vacations according to their schedules, space needs and
available Vacation Credits. Vacation Credits are reissued on an anniversary date
basis and any unused Vacation Credits may be carried over for one year. An Owner
may also borrow Vacation Credits from the Owner's succeeding year's allotment.

An Owner may also purchase bonus time ("Bonus Time") from WorldMark for use
when space is available. Bonus Time can only be reserved within two weeks of
use. Bonus Time gives Owners the opportunity to use available units on short
notice at a reduced rate (generally from $20 to $50 per night for a two bedroom
unit, mid-week in the off-season) and to obtain usage beyond their Vacation
Credit allotment.

WorldMark collects maintenance dues from Owners based on the number of
Vacation Credits owned. Currently, the annual dues are $237 for the first 5,000
Vacation Credits owned, plus $72 for each additional increment of 2,500 Vacation
Credits owned. These dues are intended to cover WorldMark's operating costs,
including condominium association dues at the WorldMark Resorts. Trendwest pays
WorldMark the dues on all unsold Vacation Credits. Such payments totaled
$137,000, $512,000 and $273,000 in 1994, 1995 and 1996, respectively.

WorldMark has a five member board of directors that manages its business
and affairs. Three of the directors and principal executive officers of
WorldMark are also officers of the Company. The Board must obtain the approval
of a majority of the voting power of the Owners represented (excluding
Trendwest) to take certain actions, including (i) incurrence of capital
expenditures exceeding 5% of WorldMark's budgeted gross

33
<PAGE> 34

expenses during any fiscal year and (ii) selling property of WorldMark during
any fiscal year with an aggregate fair market value in excess of 5% of
WorldMark's budgeted gross expenses for such year.

Trendwest has a Management Agreement with WorldMark whereby Trendwest acts
as the exclusive manager and servicing agent of WorldMark and the vacation owner
program. Trendwest's responsibilities under the Management Agreement include
general management of WorldMark, overseeing the property management and service
levels of the resorts, and preparing financial forecasts and budgets for
WorldMark. The Management Agreement provides for automatic one-year renewals
unless such renewal is denied by a majority of the voting power of the Owners
(excluding Trendwest). As compensation for its services, Trendwest receives the
portion of total revenues received by WorldMark remaining after WorldMark pays
or reserves for its expenses plus reserves for repair and replacement of
WorldMark Resorts. This amount is subject to a ceiling equal to 15% of the
budgeted annual expenses and reserves of WorldMark (exclusive of Trendwest's
fee). Trendwest's management revenues from WorldMark during 1994, 1995 and 1996
were approximately $173,000, $747,000 and $1,103,000, respectively.

SALES AND MARKETING

The Company's sales of Vacation Credits primarily occur at eight off-site
sales offices located in metropolitan areas in three regions. The remainder of
the Company's sales of Vacation Credits occur at three on-site sales offices in
these regions. The Company plans to open a new off-site sales office in
California in late 1997. Certain information with respect to the Company's sales
offices in the three regions is provided below.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------
1994 1995 1996
-------------------------------------- ----------------------------------------- --------------------------------------
AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER
OF SALES NUMBER OF OF SALES NUMBER OF OF SALES NUMBER OF
REGION REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3)
- --------- ------------------ --------- ------- ------------------ --------- ------- ------------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pacific
Northwest(4)... 61 11,414 $31,654 75 17,290 $43,926 86 23,979 $ 54,313
Northern
California(5).. 32 7,326 23,250 58 10,371 31,324 55 13,786 37,287
Southern
California(6).. -- -- -- 7 304 2,533 24 1,232 8,440
--
------ ------- --- ------ ------- --- ------ --------
Total... 93 18,740 $54,904 140 27,965 $77,783 165 38,997 $100,040
== ====== ======= === ====== ======= === ====== ========
</TABLE>

- ---------------

(2) Cumulative number of Owners at the end of the year, including Owners who
purchased Vacation Credits at Eagle Crest and Running Y.

(3) Includes Upgrade Sales.

(4) Comprised of three off-site sales offices (Kirkland, Washington, which
opened in October 1989 and moved to Seatac, Washington in February 1994;
Vancouver, Washington, which opened in February 1994; and Lynnwood,
Washington, which opened in June 1995) and three on-site sales offices
(Leavenworth, Washington, which opened in September 1994, Birch Bay,
Washington, which opened in June 1995, and Gleneden Beach, Oregon, which
opened in February 1996). Those figures include an off-site sales office in
Bellingham, Washington, which opened in July 1990, and was consolidated into
the Lynnwood and Birch Bay offices in June 1995.

(5) Comprised of three off-site sales offices: Santa Clara, which opened in
April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened
in May 1995.

The Company believes the advantages of using off-site sales offices
compared to sales offices located at more remote resorts include (i) access to
larger numbers of potential customers, (ii) convenience for prospective
customers to attend a sales presentation, (iii) access to a wider group of
qualified sales personnel due to more convenient work locations, (iv) ability to
open new sales offices quickly and without significant capital expenditures and
(v) lower marketing costs to attract prospective customers to visit a sales
office.

The Company's off-site sales offices are approximately 5,000 square feet
and include a theater, sales area and reception area. Each off-site sales center
is staffed by a sales manager, an office administrator, approximately 10 to 25
salespeople, two verification representatives, and additional staff for guest
registration

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and clerical assistance. The on-site sales offices are approximately 2,500
square feet and generally include similar facilities and a smaller number of
staff compared to the off-site sales offices.

The Company uses a variety of marketing programs to attract prospective
Owners, including sponsored promotional contests offering vacation packages or
gifts, targeted mailings and telemarketing efforts, and various other
promotional programs. The Company also co-sponsors sweepstakes, giveaways and
other promotional programs with professional teams at major sporting events
(such as Portland Trail Blazers basketball games and Seattle Mariners baseball
games) and with supermarkets. Management believes that a variety of marketing
programs supplemented with the use of independent marketing agents is the most
effective strategy to reach different segments of the population. The Company
continually monitors and adjusts its marketing programs to improve efficiency
and recently established a website on the Internet. Trendwest targets
prospective Owners through an analysis of age, income and travel interests. The
Company delivers targeted prospective Owners a notice related to the specific
promotion, inviting the prospective Owner to call the Company's toll-free voice
mail system to leave a return phone number. Those persons who call the Company
and leave their phone number receive a call from the Company to invite them to
visit an off-site sales office and attend a sales presentation. As an incentive
to attend the presentation, the Company offers gifts, such as an overnight trip
or electronic equipment. The Company believes that its non-obtrusive method of
marketing helps maintain the quality image of the Company with its prospective
Owners and the public.

When prospective Owners visit a sales facility, they are greeted by a host
or hostess and are shown to the theater to view a 30-minute, multi-media
presentation describing the benefits of timeshares in general, and WorldMark
specifically. After the presentation, all prospective owners are introduced to
WorldMark and the benefits of becoming an Owner by a representative of
Trendwest. The speaker introduces the guests to their salesperson, who provides
more specific information, answers questions and invites the guest to join
WorldMark. Audience size is limited to about 20 prospects per presentation. Each
sales office generally conducts three or four presentations per day, five days a
week.

Printed information regarding Trendwest and its properties, as well as the
rights and obligations of Owners, is provided to each prospective member before
Vacation Ownership Interests are sold. Prior to finalizing a sale, each new
Owner meets with one of the Company's verification representatives to discuss
the new Owner's reasons for joining and to review the rights and obligations of
Owners. The purpose of this meeting is to allow prospective Owners to review
their proposed commitment in an environment separate from the sales process.

Under the laws of each state where the Company sells Vacation Ownership
Interests, each purchaser has a right to rescind the purchase of Vacation
Credits for a period ranging from three to seven calendar days following the
later of the date the contract was signed or the date the purchaser received the
last of the documents required to be provided by the Company, depending on the
state. The Company's current practice is to allow all purchasers a seven day
rescission period, even if state law allows a shorter period. During 1995 and
1996, the Company had a rescission rate of 19.0% and 17.7%, respectively, which
is consistent with the Company's historical experience.

The Company's salespeople are trained to use a soft sales approach. The
salespeople emphasize the advantages of becoming an Owner, including
convenience, flexibility, ownership and affordability. The Company believes the
success of its sales approach is reflected not only by the amount of sales of
Vacation Credits to new Owners, but also by the amount of sales of Vacation
Credits to "non-Owner" referrals. Sales to non-Owner referrals, who are persons
referred to the Company by those who have attended a sales presentation but who
did not purchase Vacation Credits themselves, accounted for $2.3 million and
$4.0 million of the Company's net sales of Vacation Credits during 1995 and
1996, respectively.

Trendwest offers existing Owners cash awards for referrals of new Owners.
The Company maintains a staff of marketing individuals who specialize in
promoting referrals by existing Owners. In addition, as part of the Company's
ongoing marketing efforts, it offers existing Owners the opportunity to purchase
additional Vacation Credits generally at a discount from the current price.
Owners may purchase additional Vacation Credits in increments of 1,000.
Trendwest currently employs 20 sales representatives who specialize in Upgrade
Sales. Sales of Vacation Credits from the Company's owner referral program and
Upgrade Sales

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<PAGE> 36

contributed in the aggregate approximately 25.3% and 29.0% of the Company's net
sales in 1995 and 1996, respectively.

CUSTOMER FINANCING

Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales of Vacation Credits will continue to be financed by the
Company. In 1996, the average new Owner purchased approximately 6,600 Vacation
Credits for a purchase price of approximately $8,400 and the Company financed
approximately 87% of the aggregate purchase price of Vacation Credits sold to
new Owners with an average new Note Receivable of approximately $7,500. During
1996, the aggregate amount of Notes Receivable generated in connection with the
sale of Vacation Credits to new Owners was approximately $79.1 million. The
Company requires a down payment of at least 10% of the purchase price and
provides a term of up to seven years and an interest rate of 13.9% or 14.9% per
annum, depending on the method of payment selected. Because the Company offers a
discount if the full purchase price for Vacation Credits is received within 90
days after the purchase is completed, the Company received full payment in 1996
for approximately 21% of Vacation Credit sales to new Owners during this 90 day
period.

Existing Owners purchasing additional Vacation Credits must either make a
down payment of 10% of the price of the Upgrade Sales or have sufficient equity
in their existing Vacation Credits to provide at least 10% of the value of all
Vacation Credits, including the Upgrade. The amount of the existing receivable
is combined with the purchase price of the additional Vacation Credits purchased
and the interest rate and the term of the Note Receivable may be modified,
subject to a maximum term of ten years.

At June 30, 1997, an aggregate of $207.8 million of Notes Receivable were
outstanding, of which approximately $65.3 million with a weighted average
interest rate of 14.1% per annum had been retained by the Company. The balance
of approximately $142.5 million of Notes Receivable had been sold by the Company
prior to that date, although the Company retained limited recourse liability
with respect to these Notes Receivable. See Notes 4, 5 and 15(a) to Notes to
Combined and Consolidated Financial Statements. The Company may continue to sell
a substantial amount of its Notes Receivable. See "-- Finance Subsidiaries" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At June 30, 1997, approximately $3.8 million of
Notes Receivable, including Notes Receivable previously sold by the Company,
were past due 60 days or more. The Notes Receivable are secured by a security
interest in the related Vacation Credits. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records as an expense any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits to inventory available for resale.

The Company maintains a reserve for doubtful accounts in respect of the
Notes Receivable owned by the Company and a reserve for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these reserves at December 31, 1995 and 1996 and June 30,
1997 were $8.0 million, $11.2 million and $13.3 million, respectively,
representing approximately 6.3%, 6.2% and 6.4%, respectively, of the total
portfolio of Notes Receivable at those dates, including the Notes Receivable
that had been sold by the Company. No assurance can be given that these reserves
will be adequate, and if the amount of the Notes Receivable that is ultimately
written off materially exceeds the related reserves, the Company's business,
results of operations and financial condition could be materially adversely
affected.

Sage Systems, Inc. ("Sage"), a licensed escrow company, services the
Company's entire portfolio of Notes Receivable under an Escrow Agreement with
the Company. Under the Escrow Agreement, contracts for the sale of Vacation
Credits by the Company, and the funds received from such sales, are placed in
escrow with Sage. The escrowed funds and documents are released to the Company
when the Company certifies that it has sufficient Vacation Credits available for
sale, the applicable state-mandated cancellation period (under

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<PAGE> 37

which a purchaser may rescind his purchase) has expired, and Sage receives
notice from the Company that a rescission notice has not been received from the
purchaser. The Company pays Sage a fee of $35 to $40 per account serviced under
the Escrow Agreement. The Company and Sage are also parties to a Service
Agreement under which Sage is responsible for maintaining a data processing
system to process bills and receive monthly receivable payments. The Company
pays Sage a monthly fee of $1.70 per account under the Service Agreement. The
Company handles billing inquiries and all other personal interaction with the
Owners, including collections on its Notes Receivable. Collections of delinquent
installment accounts are administered by 22 collection representatives. See
"Certain Transactions -- Relationship with Sage Systems."

FINANCE SUBSIDIARIES

TW Holdings, Inc. ("TW") was organized in 1993 to purchase Notes Receivable
at face value plus accrued interest. TW transfers these Notes Receivable to a
group of banks led by Seattle-First National Bank (the "Bank Group") pursuant to
a receivables transfer agreement. Through TW, the Company transferred eligible
Notes Receivable of $23.9 million in 1994, $38.6 million in 1995 and $42.1
million in 1996 to the Bank Group. The transfers are subject to recourse for
defaults and the Company maintains a reserve for recourse liability. See Note 5
of Notes to Combined and Consolidated Financial Statements.

The present commitment of the Bank Group is $93.0 million and it is subject
to an overcollateralization pool of 25% of the balance of outstanding Notes
Receivable sold to the Bank Group. At June 30, 1997, the Bank Group held Notes
Receivable with a remaining principal balance of $77.0 million. TW's agreement
with the Bank Group is subject to annual renewals on June 30 of each year, with
the present commitment expiring on June 30, 1998. In the event of nonrenewal of
the commitment, the Company would not be able to transfer additional Notes
Receivable to the Bank Group.

In April 1996, the Company sold $30.1 million of Notes Receivable to a
special purpose company, Trendwest Funding I, Inc. ("TFI"). In addition, the
Bank Group sold $47.1 million of Notes Receivable purchased from TW to another
special purpose company. The special purpose companies sold the receivables to
TRI Funding Company I, L.L.C. ("TFL"), a special purpose limited liability
company, and TFL issued $70.0 million of 7.42% fixed rate senior notes, series
1996-1 to private institutional investors. The notes were rated 'A' by Fitch
Investors and are secured by the Notes Receivable owned by TFL. The rating
reflects credit enhancements of a 10% overcollateralization and a 2% minimum
reserve account. The notes have a stated maturity of May 15, 2004.

Both TW and TFI are wholly owned by Jeld-Wen. Effective June 30, 1997, the
Company acquired TW and TFI from Jeld-Wen in exchange for 5,193,693 shares of
the Company's Common Stock. See "Certain Transactions -- Acquisition of Finance
Subsidiaries."

PROPERTY OWNERSHIP

Unlike many "right-to-use" timeshare operations in which a developer sells
timeshare interests in properties it owns, the Company does not own the
properties designated for timeshare use. Rather, when the Company purchases
resort property, it vests in WorldMark title to the property free and clear of
any debt encumbrance. With respect to property developed by the Company, the
Company may initially obtain title in the undeveloped property and then deed the
developed resort property to WorldMark. At the time the Company vests title to
the property in WorldMark, a "Declaration of Vacation Owner Program" is recorded
on the property. This declaration establishes the usage rights of Owners as a
covenant on title, thus protecting those rights against the effect of any future
blanket encumbrance. This ownership structure is designed to protect the
timeshare usage rights of the Owners and complies with statutory regulations.

The Company's only consideration for paying for the properties and for
arranging for the seller of the property to transfer title of the property
directly to WorldMark is the exclusive right to sell Vacation Credits and to add
new properties and additional units at the Company's discretion. The Company's
rights to sell Vacation Credits against the deeded properties are protected by a
security interest in the unsold inventory of Vacation Credits. This lien
prevents WorldMark from revoking such rights or transferring them to another
party.

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Vacation Credits are allocated to each unit based on its vacation use value
relative to existing properties. Vacation Credits are assigned for weeks of
peak, shoulder and off-peak use, reserving time for Bonus Time, repairs and
maintenance. The aggregate Vacation Credits assigned to each unit may not be
changed in the future, and the actual number of Credits assigned are contained
in the recorded declaration. This system of irrevocable allocation and
registration with the state protects the Owners by preventing dilution in the
usage value of the Owner's Vacation Credits.

As of June 30, 1997, WorldMark had a reserve for replacement costs of
approximately $4.2 million for all depreciable assets (e.g., furniture,
appliances, carpeting, roofs and decks) of the WorldMark Resorts. In those
WorldMark Resorts where WorldMark owns only a small percentage of the units in a
complex and belongs to an independent homeowners' association, the dues paid to
such association by WorldMark are partially used to provide adequate reserves
for replacement costs relating to such properties.

PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORK

The Company believes that sale of Vacation Credits is made more attractive
by the Company's participation in the vacation interval exchange network
operated by RCI. In a 1995 study sponsored by the Alliance for Timeshare
Excellence and ARDA, the exchange opportunity was cited by purchasers of
vacation intervals as the most significant factor in determining whether to
purchase a vacation interval. For an annual membership fee (currently $67),
Owners may participate in RCI, which allows Owners to exchange Vacation Credits
for an occupancy right at a participating resort in RCI based upon availability
and the payment of an additional exchange fee (currently $90 to $100). WorldMark
pays the RCI annual membership fee for the Owner's first year. An Owner may
exchange Vacation Credits for an occupancy right in a resort participating in
the RCI network by requesting occupancy and specifying the desired unit size and
time period. RCI provides an Owner hotline with direct phone access to
representatives who are knowledgeable about WorldMark and are responsible for
assisting Owners with an exchange. RCI assigns a weekly exchange value for
Vacation Credits. This exchange value is based upon a number of factors. If RCI
is unable to meet the Owner's initial request, it suggests alternative resorts
based on availability.

Founded in 1974, RCI, which was recently acquired by HFS Incorporated, has
grown to be the world's largest vacation interval exchange organization. As of
March 20, 1997, RCI had a total of 3,109 participating resort facilities and
over 2.2 million members worldwide. During 1995, RCI processed approximately 1.7
million vacation interval exchanges. During 1995, approximately 97% of all
exchange requests were ultimately fulfilled by RCI, and approximately 58% of all
exchange requests were confirmed on the day of the request.

COMPETITION

The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Some of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
interval resorts include Marriott, Disney, Hilton, Hyatt, Four Seasons, Inter-
Continental, Westin and Promus. In addition, other publicly-traded companies in
the timeshare industry, such as Signature, Fairfield and Vistana, currently
compete, or may in the future compete, with the Company. Many of these entities
possess significantly greater financial, marketing and other resources than
those of the Company. Management believes that industry competition will be
increased by recent and potential future consolidation in the timeshare
industry.

The Company has entered into marketing agreements with affiliates of its
parent, Jeld-Wen, pursuant to which these affiliates may market Vacation
Ownership Interests for their own account at Eagle Crest Resort in Redmond,
Oregon and Running Y Resort in Klamath Falls, Oregon in exchange for their
contribution to WorldMark of condominium units at those resorts. These sales
activities are competitive with the Company's marketing activities, particularly
in the Oregon and northern California markets. See "Certain Transactions --
Relationship with Jeld-Wen."

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GOVERNMENTAL REGULATION

General. The Company's marketing and sales of Vacation Credits and certain
of its other operations are subject to extensive regulation by the states and
foreign jurisdictions in which the WorldMark Resorts are located and in which
Vacation Credits are marketed and sold and also by the federal government.

State and Provincial Regulations. Most U.S. states and Canadian provinces
have adopted specific laws and regulations regarding the sale of vacation
interval ownership programs. Washington, Oregon, California, Hawaii and British
Columbia require the Company to register WorldMark Resorts, the Company's
vacation program and the number of Vacation Credits available for sale in such
state or province with a designated state or provincial authority. The Company
must amend its registration if it desires to increase the number of Vacation
Credits registered for sale in that state or province. Either the Company or the
state or provincial authority assembles a detailed offering statement describing
the Company and all material aspects of the project and sale of Vacation
Credits. The Company is required to deliver the offering statement to all new
purchasers of Vacation Credits, together with certain additional information
concerning the terms of the purchase. Hawaii imposes particularly stringent and
broad regulation requirements for the sale of interests in interval ownership
programs that have resort units located in Hawaii. The Company has incurred
substantial expenditures over an extended period of time in the registration
process in Hawaii and still has not completed this process. Hawaii has allowed
the use of WorldMark units in Hawaii, provided that the Company continues in
good faith to pursue registration in Hawaii. Laws in each state where the
Company sells Vacation Credits grant the purchaser of Vacation Credits the right
to cancel a contract of purchase at any time within a period ranging from three
to seven calendar days following the later of the date the contract was signed
or the date the purchaser 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 laws, laws relating to the
use of public accommodations and facilities by disabled persons, sellers of
travel licensure laws, anti-fraud laws, advertising laws, and labor laws.

Environmental Matters. Under various federal, state, local and foreign
laws, ordinances and regulations, the owner or operator 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 or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. 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. Although the Company conducts an
environmental assessment with respect to the properties it acquires for
WorldMark, the Company has not received a Phase I environmental report for any
WorldMark Resort. There can be no assurance that any environmental assessments
undertaken by the Company with respect to the WorldMark Resorts have revealed
all potential environmental liabilities, or that an environmental condition does
not otherwise exist as

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<PAGE> 40

to any one or more of the WorldMark Resorts that could have a material adverse
effect on the Company's business, financial condition and results of operations.

EMPLOYEES

As of June 30, 1997, Trendwest had 684 full-time employees, with 389 in
sales, 129 in marketing and 166 in administration. The Company believes that its
employee relations are good. None of the Company's employees is represented by a
labor union.

The Company enforces a stringent drug policy with all employees. All
prospective employees are tested for the presence of impairing substances before
being hired by the Company. Employees of the Company are tested periodically for
the presence of impairing substances and, in addition, any Company employee may
be tested for such substances for cause. Any employee who is found to be under
the influence of an impairing substance is subject to appropriate disciplinary
action, including termination.

INSURANCE; LEGAL PROCEEDINGS

WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from
earthquakes, floods, or acts of war, are generally excluded from WorldMark's
insurance coverage. Should an uninsured loss or loss in excess of insured limits
occur, WorldMark has the option to either (i) remove such units from the
Vacation Credit system, which would result in a proportionate dilution of
vacation time available for the Vacation Credits which have been sold, or (ii)
pay for the related costs of replacement. Although WorldMark's board of
directors may impose a limited amount of special assessments to pay for capital
improvements or major repairs, there can be no assurance that WorldMark would be
able to increase assessments to provide sufficient funds to pay for all possible
capital improvements and major repairs of the units at the WorldMark Resorts. In
such an event, the Company may be required to advance funds to WorldMark in
order to maintain the quality of the WorldMark Resorts or WorldMark may need to
defer certain improvements or repairs, which could have an adverse effect on the
Company's liquidity and the sale of Vacation Credits. See "Risk
Factors -- Natural Disasters; Uninsured Loss."

The Company is not aware of any material legal proceedings pending against
it. The Company may be subject to claims and legal proceedings from time to time
in the ordinary course of business.

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MANAGEMENT

DIRECTORS, PROPOSED DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of the
Company's directors, proposed directors and executive officers, as well as
certain other key employees of the Company. The Company intends to add the three
proposed directors named below to its Board of Directors after consummation of
the Offering.

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Directors and Executive Officers:
William F. Peare...................... 59 President, Chief Executive Officer and Director
Jeffery P. Sites...................... 41 Executive Vice President, Chief Operating Officer,
Secretary and Director
Gary A. Florence...................... 55 Vice President, Chief Financial Officer and Treasurer
J. Michael Moyer...................... 60 Senior Vice President
Ronald A. Buzard...................... 66 Vice President -- Sales
Gene F. Hensley....................... 45 Vice President -- Operations
Alice R. Heuple....................... 52 Vice President -- Product Development
Gerald T. Lynch....................... 54 Vice President -- Marketing
Alan B. Schriber...................... 45 Vice President -- Administration
Dan Stearns........................... 52 Vice President -- Corporate Communications
Jerol E. Andres....................... 54 Director
Douglas P. Kintzinger................. 37 Director
Roderick C. Wendt..................... 44 Director
Harry L. Demorest..................... 55 Proposed Director
Michael P. Hollern.................... 58 Proposed Director
Linda M. Tubbs........................ 50 Proposed Director
</TABLE>

WILLIAM F. PEARE has served as its President and Chief Executive Officer,
and as a director, since 1989. Mr. Peare also serves as a director and as
President of WorldMark. Mr. Peare developed the WorldMark concept and attracted
key management personnel to the Company. From 1987 to 1989, Mr. Peare served as
a management consultant for Eagle Crest Resort in Redmond, Oregon and for
Elkhorn Resort in Sun Valley, Idaho. From 1985 to 1987, Mr. Peare was a Senior
Vice President of Horizon Airlines. From 1983 to 1985, Mr. Peare served as Chief
Executive Officer of All Seasons Resorts, Inc. ("All Seasons"), a
publicly-traded membership campground company. From 1975 to 1982, Mr. Peare
served as President of Thousand Trails Inc. ("Thousand Trails"), the nation's
largest membership campground company.

JEFFERY P. SITES has served as Executive Vice President, Chief Operating
Officer, Secretary of the Company since 1989, and served as Treasurer from 1989
to January 1997. Mr. Sites has been a director of the Company since 1991. Mr.
Sites also serves as a director and as Treasurer of WorldMark. Mr. Sites
oversees the day-to-day operations of the Company. From 1987 to 1989, Mr. Sites
was Chief Financial Officer of OMT, Inc., a holding company with a variety of
businesses including an interval ownership project in Sun Valley, Idaho. From
1985 to 1987, Mr. Sites was Executive Vice President and co-founder of Venture
Out Resorts, a regional membership campground company. From 1983 to 1985, Mr.
Sites was the Controller for All Seasons.

GARY A. FLORENCE has served as Vice President, Chief Financial Officer and
Treasurer of the Company since January 1997. Prior to that time, he served as
Treasurer of Jeld-Wen, a position he held since July 1991. From 1973 to 1991,
Mr. Florence served as Jeld-Wen's Corporate Controller. Mr. Florence has been
responsible for establishing the Finance Subsidiaries and structuring the Notes
Receivable sales transactions.

J. MICHAEL MOYER has served as Senior Vice President of the Company since
1989. Mr. Moyer also serves as a director and as Secretary of WorldMark. Mr.
Moyer oversees the Company's legal affairs, including property closings,
registration of the Company's product under state timeshare laws, permitting of
new

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developments, managing the governance of WorldMark, and directing outside legal
counsel. From 1978 to 1986, Mr. Moyer served in a similar capacity at Thousand
Trails and All Seasons.

RONALD A. BUZARD has served as Vice President -- Sales since August 1993
and has overall responsibility for the Company's sales activities. Mr. Buzard
joined the Company in 1990, serving in various sales management positions. From
1987 to 1990, Mr. Buzard was a consultant in the timeshare and development
business. From 1984 to 1986, Mr. Buzard served as Vice President -- Sales for
All Seasons.

GENE F. HENSLEY has served as Vice President -- Operations since December
1995 and has been employed by the Company in various managerial and sales
positions since 1990. Mr. Hensley is responsible for the day to day operations
of the WorldMark Resorts as well as the Company's reservation, exchange and
owner service departments and travel. From 1979 to 1988, Mr. Hensley worked for
Thousand Trails, ultimately assuming regional management responsibilities.

ALICE R. HEUPLE has served as Vice President -- Product Development since
March 1993 and has been employed by the Company in product development since
February 1992. Ms. Heuple is responsible for the development of the WorldMark
Resorts, managing site development, construction, specifications and design, and
purchasing. From 1980 to 1992, Ms. Heuple worked for Vacation Internationale, a
vacation interval company, serving in various management positions.

GERALD T. LYNCH has served as Vice President -- Marketing of the Company
since 1991. From 1984 to 1991, Mr. Lynch served as Director and President of
Omni Concepts, a contract sales, marketing and business management company
serving the direct sales industry. From 1983 to 1984, Mr. Lynch served as Vice
President of sales and marketing for National American Corporation, a national
developer of resort communities. From 1973 to 1983, Mr. Lynch served as Vice
President of Sweet Water Corporation ("Sweet Water"), an interval ownership
company, and as President of Time Share Realty, a wholly-owned subsidiary of
Sweet Water, responsible for all sales and marketing activities.

ALAN B. SCHRIBER has served as Vice President -- Administration of the
Company since June 1996, and served as Director -- Administration and Finance
from September 1994 to June 1996. Mr. Schriber is responsible for the accounts
receivable, data processing, contract processing, and human resources functions
for the Company. From 1987 to 1994, Mr. Schriber was Senior Vice President of
Gulf American Financial Services, which specialized in the development,
implementation, and project management of consumer credit and accounts
receivable operations and systems. From 1981 to 1987, Mr. Schriber was Vice
President of Administration for Thousand Trails.

DAN STEARNS has served as Vice President -- Corporate Communications since
December 1995 and has been employed by the Company in corporate communications
since January 1990. Mr. Stearns oversees the Company's audio visual, design and
printing needs, and oversees the production of monthly communications to both
Owners and Company employees. From 1988 to 1990, Mr. Stearns worked with Harmon
& Associates Real Estate as Director of Corporate Communications. From 1980 to
1988, Mr. Stearns served as President of the Stearns Group, an audio visual and
video production services company serving the vacation interval industry.

JEROL E. ANDRES has served as a director of the Company since 1989. Since
1988, Mr. Andres has served as Chief Executive Officer and President of Eagle
Crest. From 1984 to 1988, Mr. Andres founded and was Chief Executive Officer and
President of Happy Trails Resort. Since 1993, Mr. Andres has served as a
director of Bank of the Cascades, a publicly-traded bank company. Mr. Andres
served on the board of ARDA for 11 years, serving as Chairman from 1984 to 1986.
From 1978 to 1984, Mr. Andres served as a Vice President of Thousand Trails.

DOUGLAS P. KINTZINGER has been a director of the Company since 1994. Mr.
Kintzinger has been Vice President of Administration and Corporate Development
of Jeld-Wen since 1994 and is responsible for the accounting, data processing,
legal, employee benefits, risk management, insurance, corporate services,
treasury and corporate development of Jeld-Wen. Mr. Kintzinger was first
employed by Jeld-Wen in 1987 and served as special projects manager, corporate
counsel and manager of corporate development prior to becoming Vice President.
He has been a director of Jeld-Wen since 1994 and Jeld-Wen's corporate secretary
since 1992.

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Mr. Kintzinger has also been an officer/director of various Jeld-Wen affiliates
and subsidiaries, including Eagle Crest G.P. Inc., Running Y Resort, Inc., West
One Automotive Group, Inc. and Brooks Resources Corporation. Mr. Kintzinger also
has served as a director of South Valley State Bank since 1991 and as a Regent
of Luther College since 1990.

RODERICK C. WENDT has been a director of the Company since 1993. Mr. Wendt
has been President of Jeld-Wen since 1992 and is responsible for the overall
day-to-day performance of Jeld-Wen. Mr. Wendt was first employed by Jeld-Wen in
1980 and served as corporate counsel, Vice President and Senior Vice President
prior to becoming President. He has been a director of Jeld-Wen since 1985. Mr.
Wendt has also been an officer and/or director of various Jeld-Wen affiliates
and subsidiaries, including Eagle Crest G.P., Inc., Running Y Resort, Inc.,
Windmill Inns of America, Inc., West One Automotive Group, Inc., Frank Paxton
Company and Brooks Resources Corporation. Mr. Wendt also served as a director of
South Valley State Bank from 1983 to 1994 and has served as a director of the
High Desert Museum since 1994.

HARRY L. DEMOREST has served as Chief Executive Officer of Columbia Forest
Products, Inc. since March 1996. He served as President of Columbia Forest
Products, Inc. from March 1994 to April 1996, and as Executive Vice President
from April 1992 to February 1994. Prior to his employment by Columbia Forest
Products, Inc., Mr. Demorest was a partner with Arthur Andersen & Co., serving
as Office Managing Partner of the Portland, Oregon office from 1981 to 1991 and
as Partner-in-Charge of the tax division of the Portland office from 1979 to
1985. Mr. Demorest also serves on the boards of directors of several civic and
charitable organizations.

MICHAEL P. HOLLERN has served as Chairman of the Board of Directors of
Brooks Resources Corporation since 1970, and has served as President of Brooks
Resources since 1983. Mr. Hollern served as President of Brooks-Scanlon, Inc.
from 1970 until its sale to Diamond International in June 1980. Mr. Hollern also
serves on the boards of directors of several corporate, civic and charitable
organizations.

LINDA M. TUBBS is an Executive Vice President of Wells Fargo Bank, serving
as its Division Manager for the Northwest Commercial Banking Group since Wells
Fargo's merger with First Interstate Bank in April 1996. Prior to the merger,
Ms. Tubbs served as Senior Vice President and Manager of First Interstate's
Portland, Oregon Commercial Banking Administration and served in various other
capacities at First Interstate since 1972, including her appointment in March
1990 as Senior Vice President and Manager of the Oregon head office. Ms. Tubbs
also serves on the boards of directors of several civic and charitable
organizations.

CLASSIFIED BOARD OF DIRECTORS

Upon the closing of the Offering, the Company's board of directors will be
divided into three classes. The directors in Class I will be Messrs. Andres and
Wendt and Ms. Tubbs, whose terms will expire at the annual stockholders meeting
in 1998. The directors in Class II will be Messrs. Sites, Hollern and
Kintzinger, whose terms will expire at the annual stockholders meeting in 1999.
The directors in Class III will be Messrs. Peare and Demorest, whose terms will
expire at the annual stockholders meeting in 2000. Commencing with the annual
stockholders meeting in 1998 and thereafter, each director will serve for a term
of three years following the annual stockholders meeting at which such director
was elected. See "Certain Provisions of Oregon Law and of Trendwest's Articles
of Incorporation and Bylaws -- Classification of the Board of Directors."

COMMITTEES OF THE BOARD OF DIRECTORS

The Board has authorized an Audit Committee and a Compensation Committee.
Upon consummation of the Offering, the Audit Committee will be comprised of
Messrs. Sites, Demorest and Kintzinger, and will recommend the selection of the
Company's independent auditors and consult with the independent auditors on the
Company's internal accounting controls. Upon consummation of the Offering, the
Compensation Committee will be comprised of Messrs. Hollern and Kintzinger and
Ms. Tubbs and will recommend to the Board salaries and bonuses for the Company's
executive officers and administer the Company's stock option plan.

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<PAGE> 44

DIRECTOR FEES

Directors who are not employees of the Company or Jeld-Wen will receive a
fee of $1,000 for each Board meeting attended. All non-employee directors will
be reimbursed for out of pocket expenses for each Board meeting attended.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Articles of Incorporation provide that the liability of the
directors of the Company for monetary damages will be eliminated to the fullest
extent permissible under Oregon law. This is intended to eliminate the personal
liability of a director for monetary damages in an action brought by or in the
right of the Company for breach of a director's duties to the Company or its
stockholders except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any unlawful distribution to stockholders, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision does not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's duty of care. This provision also does not
affect the director's responsibilities under any other laws, such as the federal
or state securities or environmental laws.

The Articles of Incorporation and the Bylaws also provide that the Company
shall indemnify, to the fullest extent permitted under Oregon law, any person
who has been made, or is threatened to be made, a party to an action, suit or
legal proceeding by reason of the fact that the person is or was a director or
officer of the Corporation. The Company intends to enter into separate
indemnification agreements with each of its directors. These agreements will
require the Company to indemnify its directors to the fullest extent permitted
by law, including circumstances in which indemnification would otherwise be
discretionary. Among other things, the agreements require the Company to
indemnify directors against certain liabilities that may arise by reason of
their status or service as a director and to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified.
The Company also intends to obtain insurance on behalf of it executive officers
and directors for certain liabilities arising out of their actions in such
capacities. The Company believes that these contractual arrangements, the
provisions in its Articles of Incorporation and Bylaws and insurance coverage
are necessary to attract and retain qualified persons as directors and officers.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the annual
compensation during 1996 for Trendwest's chief executive officer and each of the
Company's other four most highly compensated executive officers (the "Named
Executive Officers").

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION(1)
- ------------------------------------------- ------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
William F. Peare........................... $96,000 $192,013 $7,660 $10,500
President and Chief Executive Officer
Jeffery P. Sites........................... 70,000 139,991 5,953 10,500
Executive Vice President and Chief
Operating Officer
J. Michael Moyer........................... 90,000 58,159 -- 10,371
Senior Vice President
Ronald A. Buzard........................... 50,000 198,544 -- 10,500
Vice President -- Sales
Gerald T. Lynch............................ 50,000 170,005 -- 10,500
Vice President -- Marketing
</TABLE>

- ---------------

(1) These amounts were paid by the Company under the Company's retirement plan.

44
<PAGE> 45

No options or other equity-based compensation were granted to or exercised
by any of the Named Executive Officers in 1996 and none of the Named Executive
officers beneficially owned any options at December 31, 1996.

EMPLOYMENT AGREEMENTS

Messrs. Peare and Sites will enter into employment agreements with the
Company prior to the Offering. Under the employment agreements, Mr. Peare will
receive a base annual salary of $100,000, and Mr. Sites will receive a base
annual salary of $75,000, and each will have the opportunity to receive
performance bonuses. The agreements will contain a covenant not to compete for a
period of two years in the event of termination of employment for any reason. If
employment is terminated by the Company without cause, the employee will receive
his base salary for a period of one year following the date of termination plus
the amount of bonus earned during the preceding twelve months.

1997 STOCK OPTION PLAN

In May 1997, the Board of Directors adopted the Company's 1997 Stock Option
Plan (the "1997 Plan") and authorized up to 5% of the number of shares of Common
Stock outstanding from time to time for issuance thereunder. Under the 1997
Plan, options may be granted to the Company's employees, directors, consultant
and independent contractors. Only employees may receive "incentive stock
options," which are intended to qualify for certain tax treatment; employees and
nonemployees, including nonemployee directors, may receive "nonqualified stock
options," which do not qualify for such treatment. The exercise price of all
stock options under the 1997 Plan must at least equal the fair market value of
the Common Stock on the date of grant. All incentive stock options granted under
the 1997 Plan will expire ten years from the date of grant unless terminated
sooner pursuant to the provisions of the 1997 Plan. Nonqualified stock options
may have a term which exceeds ten years at the discretion of the Board of
Directors. In the event of a change of control of the Company, including a
merger or sale of substantially all of the Company's assets, outstanding options
must be assumed by any successor corporation, or equivalent options must be
substituted, or they will become fully vested and exercisable.

45
<PAGE> 46

CERTAIN TRANSACTIONS

RELATIONSHIP WITH JELD-WEN

Background. Prior to the Offering, Jeld-Wen owned 95.21% of the outstanding
shares of Common Stock, and following completion of the Offering will own 79.98%
of the outstanding shares of Common Stock. Roderick Wendt and Douglas Kintzinger
are directors of the Company and Richard Wendt was a director of the Company
until March 1997. Richard Wendt, Roderick Wendt and Douglas Kintzinger are all
directors of Jeld-Wen. In addition, Richard Wendt, Roderick Wendt and Douglas
Kintzinger own 38.2%, 1.4% and 0.5%, respectively, of the outstanding shares of
Jeld-Wen. Jeld-Wen has established the Jeld-Wen Foundation, which is a
charitable foundation of which Richard Wendt, Roderick Wendt and William Early,
an officer and director of Jeld-Wen, are members of the Foundation's Board of
Directors. Eagle Crest GP, Inc. ("Eagle Crest"), a wholly-owned subsidiary of
Jeld-Wen, is developing the Eagle Crest Resort. Running Y Resort, Inc. ("Running
Y"), a wholly-owned subsidiary of Eagle Crest, is developing the Running Y
Resort.

Administrative Services. Jeld-Wen has provided certain administrative
services to the Company, including management services, payroll and accounting
services. The Company paid Jeld-Wen approximately $544,000, $723,000 and
$913,000 in 1994, 1995 and 1996, respectively, for such services. Jeld-Wen
provides a self-insured health, life and disability benefits plan to its
employees, in which the Company participated. The Company paid Jeld-Wen
approximately $608,000, $834,000 and $1,157,000 in 1994, 1995 and 1996,
respectively, to include the Company's employees within the Jeld-Wen plan.
Jeld-Wen also self-insures its workmen's compensation liability and the Company
also participates in that plan. The Company paid Jeld-Wen approximately
$178,000, $45,000 and $147,000 in 1994, 1995 and 1996, respectively, to include
the Company's employees within the Jeld-Wen plan. The Company did not
participate in the foregoing plans prior to January 1, 1994. The Company intends
to maintain its relationship with Jeld-Wen for certain of these administrative
services after consummation of the Offering. Jeld-Wen charges the Company for
these services on the same basis that it charges its other subsidiaries and
divisions. The Company believes that the terms are no less favorable than could
be obtained from an unaffiliated third party.

Credit Facility. The Company maintains an unsecured, open, revolving credit
line with Jeld-Wen. The credit line has no stated maximum balance restriction
and is payable on demand. The Company pays Jeld-Wen interest at prime plus one
percent. The maximum month-end balance of the line outstanding to Jeld-Wen
during 1994, 1995 and 1996 was approximately $5,767,000, $30,651,000 and
$27,954,000, respectively. At June 30, 1997, the Company owed Jeld-Wen
approximately $26,178,000 under the line of credit. The terms of the line of
credit are the same as Jeld-Wen provides to its other subsidiaries and
divisions. The Company believes that the terms of the line of credit as a whole
are no less favorable than could be obtained from an unaffiliated third party.
The Company intends to repay the entire principal amount of the line of credit
from the net proceeds of the Offering. See "Use of Proceeds."

Agreement with Eagle Crest. The Company has an agreement with Eagle Crest
whereby the Company has assigned to Eagle Crest the nonexclusive right to sell
Vacation Credits in WorldMark at Eagle Crest's resort in Redmond, Oregon and to
retain the gross proceeds from such sales. Eagle Crest must transfer condominium
units to WorldMark at no cost to WorldMark. Eagle Crest cannot sell more
Vacation Credits than has been allocated to the condominium units transferred to
WorldMark. Trendwest determines the number of Vacation Credits allocated to
those condominium units transferred to WorldMark using the same bases as other
resort units transferred by Trendwest to WorldMark. Effective September 1, 1997,
the agreement will require Eagle Crest to pay the Company a fee equal to 3% of
net sales of Vacation Credits sold at Eagle Crest. In addition, the Company
purchases Notes Receivable from Eagle Crest at face value plus accrued interest.
During 1994, 1995 and 1996, the Company purchased Notes Receivable in the
principal amount of approximately $6,005,000, $11,305,000 and $8,993,000,
respectively. The terms of the agreement with Eagle Crest were negotiated
between the managements of the Company and Eagle Crest.

Agreement with Running Y. The Company and Running Y are parties to an
agreement under which Running Y will develop at its expense condominium units at
the Running Y Resort. The Company will pay Running Y a purchase price for each
such unit equal to the number of Vacation Credits attributable to such

46
<PAGE> 47

unit (as determined by the Company), multiplied by the then-current price per
Vacation Credit, multiplied by 26%. The Company has purchased 20 units through
June 30, 1997 at a cost of $2,680,000, and is required to purchase an additional
80 units prior to April 2000. Effective September 1, 1997, the agreement will
require Running Y to pay the Company a fee equal to 3% of net sales of Vacation
Credits sold at Running Y. In addition, the Company purchased Notes Receivable
from Running Y in the principal amount of approximately $2,157,000 in 1996. The
terms of the agreement with Running Y were negotiated between the managements of
the Company and Running Y.

Purchase of Notes Receivable. I&I Holdings, Ltd., a wholly-owned subsidiary
of Jeld-Wen, has purchased Notes Receivable from the Company at face value plus
accrued interest on a full recourse basis. During 1994, 1995 and 1996, I&I
Holdings, Ltd. purchased Notes Receivables with outstanding balances of
approximately $13,000, $1,321,000 and $232,000, respectively.

R & R Vista, an Oregon general partnership comprised of Richard L. Wendt
and Roderick C. Wendt, has purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1994, 1995 and
1996, R & R Vista purchased Notes Receivable with outstanding balances of
approximately $9,714,000, $3,905,000 and $3,350,000, respectively.

The Jeld-Wen Foundation purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1994, 1995 and
1996, the Foundation purchased Notes Receivable with outstanding balances of
approximately $297,000, $191,000 and $211,000, respectively.

The terms of the purchase of the Notes Receivable by the affiliated parties
were negotiated between the Company and the principals of R&R Vista. The Company
believes that the terms of such financing are no less favorable than could have
been obtained from an unaffiliated third party.

Indebtedness of Management. The Company entered into a Stock Purchase
Agreement in 1995 with each of William Peare and Jerol Andres for the purchase
of 449,060 shares of Common Stock from the Company. As full consideration for
each such sale, Messrs. Peare and Andres executed a promissory note to the
Company in the amount of $303,210 bearing interest at 9% per annum. Mr. Andres
sold his shares to the Company and repaid his promissory note in December 1995,
and Mr. Peare repaid his promissory note in November 1996.

ACQUISITION OF FINANCE SUBSIDIARIES

Prior to June 30, 1997, TW Holdings, Inc. ("TW") and Trendwest Funding I,
Inc. ("TFI") were wholly-owned subsidiaries of Jeld-Wen. TW and TFI (the
"Finance Subsidiaries") were formed to enable the Company to sell Notes
Receivable. In 1994, 1995 and 1996, TW and TFI purchased $22,031,000,
$45,195,000 and $75,522,000, respectively, of Notes Receivable from the Company
at face value plus accrued interest. See "Business -- Finance Subsidiaries."

Effective June 30, 1997, the Company acquired all of the shares of common
stock of the Finance Subsidiaries in exchange for 5,193,693 shares of the
Company's Common Stock. The value of the shares of the Finance Subsidiaries and
the value of the shares of Common Stock were determined in negotiations between
Jeld-Wen and the Company, based on a multiple of the historical earnings of the
respective companies. Based on the initial offering price of $18.00 per share,
the value of the shares of Common Stock issued to Jeld-Wen for the Finance
Subsidiaries was approximately $93.5 million. As a result of this acquisition,
the Finance Subsidiaries are wholly-owned subsidiaries of the Company. See Note
1(b) of Notes to Combined and Consolidated Financial Statements.

RELATIONSHIP WITH WORLDMARK

WorldMark is a California nonprofit mutual benefit corporation that was
formed by Trendwest for the specific purposes of owning, operating and
maintaining the real property conveyed to it by Trendwest. Trendwest has the
exclusive, non-terminable right to contribute properties to WorldMark. The
Company contributes properties to WorldMark, free from all monetary
encumbrances, which are then added to the

47
<PAGE> 48

inventory of WorldMark Resort units available for use by Owners. In return for
the contribution of property to WorldMark, Trendwest has the exclusive right to
market and sell Vacation Credits.

WorldMark is managed by a Board of Directors elected by the Owners, who
vote in proportion to the number of Vacation Credits owned. At present, three of
WorldMark's five Board members are executive officers of Trendwest, Mr. William
F. Peare, Mr. Jeffery P. Sites and Mr. J. Michael Moyer. In addition, Mr. Peare
is the President of WorldMark.

Trendwest has a Management Agreement with WorldMark whereby Trendwest acts
as the exclusive manager and servicing agent of WorldMark and the vacation owner
program. Trendwest's responsibilities under the Management Agreement include
general management of WorldMark, overseeing the property management and service
levels of the WorldMark Resorts, and preparing financial forecasts and budgets
for WorldMark. The Management Agreement provides for automatic one-year renewals
unless such renewal is denied by a majority of the Owners (excluding Trendwest).
As compensation for its services, Trendwest receives the portion of total
revenues received by WorldMark remaining after WorldMark pays or reserves for
its expenses plus reserves for repair and replacement of WorldMark Resorts. This
amount is subject to a ceiling equal to 15% of the budgeted annual expenses and
reserves of WorldMark (exclusive of Trendwest's fee). Trendwest's management
revenues from WorldMark during 1994, 1995 and 1996 were approximately $173,000,
$747,000 and $1,103,000, respectively.

RELATIONSHIP WITH SAGE SYSTEMS

Background. The Company and Sage, a licensed escrow company, are parties to
several administrative agreements. See "Business -- Customer Financing." Woodrow
O'Rourke, the President of Sage, is the brother-in-law of William F. Peare, a
director and the President and Chief Executive Officer of the Company.

Escrow. The Company and Sage are parties to an Escrow Agreement under which
contracts for the sale of Vacation Credits by the Company, and the funds
received from such sales, must be placed in escrow with Sage. The Company pays
Sage a fee of $35 to $40 per account for which Sage holds escrowed funds. Under
the Escrow Agreement, the Company paid Sage approximately $104,000 in 1996.

Servicing of Accounts. The Company and Sage are parties to a Service
Agreement under which Sage is responsible for maintaining a data processing
system to bill and receive monthly receivable payments. The Company pays Sage a
monthly fee of $1.70 per account serviced by Sage. Under the Service Agreement,
the Company paid Sage approximately $274,000, $387,000 and $555,000 in 1994,
1995 and 1996, respectively.

Software. The Company, Sage and James McBride, Sr., an employee of Sage,
entered into a Software Transfer Agreement in August 1994, under which Sage and
Mr. McBride granted the Company an irrevocable, royalty-free license to use
certain computer software programs. Concurrently with the Software Transfer
Agreement, the Company and Sage entered into a Software Support and Maintenance
Agreement (the "Maintenance Agreement"), under which Sage provides
modifications, improvements and customer service to the Company in connection
with the licensed computer software programs. Under the Maintenance Agreement,
the Company paid Sage an initial fee of $12,000, a retainer of $2,000 per month
and labor charges of $50 per hour for services in excess of ten hours per month.
Under the Maintenance Agreement, the Company has paid Sage approximately
$47,000, $35,000 and $35,000 in 1994, 1995 and 1996, respectively.

The terms of the various agreements with Sage were negotiated between the
managements of the Company and Sage. The Company believes that the terms of such
agreements are no less favorable than could have been obtained from an unrelated
third party.

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<PAGE> 49

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company and as adjusted to reflect the sale
of shares offered hereby, with respect to (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each person who is a director or Named Executive Officer of the Company and
(iii) all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1) AFTER THE OFFERING
NAME AND ADDRESS ------------------------- SHARES TO BE SOLD -------------------------
OF BENEFICIAL OWNER SHARES PERCENTAGE IN THE OFFERING SHARES PERCENTAGE
- ---------------------------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jeld-Wen(2)................. 13,725,821 95.21 -- 13,725,821 79.98
William F. Peare............ 449,060 3.11 130,000 319,060 1.86
Jeffery P. Sites............ 89,812 * -- 89,812 *
J. Michael Moyer............ 53,887 * -- 53,887 *
Ronald A. Buzard............ 23,095 * -- 23,095 *
Gerald T. Lynch............. 25,147 * -- 25,147 *
Jerol E. Andres............. -- -- -- -- --
Douglas P. Kintzinger....... -- -- -- -- --
Roderick C. Wendt........... -- -- -- -- --
All directors and executive
officers as a group (11
persons).................. 641,001 4.45 130,000 511,001 2.98
</TABLE>

- ---------------

* Less than 1%.

(1) Each beneficial owner has the sole power to vote and to dispose of all
shares of Common Stock owned by such beneficial owner.

(2) The address of this stockholder is 3250 Lakeport Blvd., Klamath Falls,
Oregon 97601.

DESCRIPTION OF CAPITAL STOCK

The following descriptions of the Company's capital stock and of certain
provisions of the Articles of Incorporation and Bylaws are summaries of the
material terms thereof and do not purport to be complete and are subject to, and
qualified in their entirety by reference to, the Articles of Incorporation and
Bylaws, forms of which are filed as exhibits to the Registration Statement of
which this Prospectus is a part. Reference is made to such exhibits for a
detailed description of the provisions summarized below.

The Company's authorized capital stock consists of 90,000,000 shares of
Common Stock, no par value per share, and 10,000,000 shares of preferred stock,
no par value per share (the "Preferred Stock").

On the date of this Prospectus, there were 14,417,116 shares of Common
Stock and no shares of Preferred Stock issued and outstanding. Upon the closing
of the Offering, there will be 17,162,116 shares of Common Stock and no shares
of Preferred Stock issued and outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by the stockholders. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. In the event of
the liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of the
Company's liabilities. The right of holders of the Common Stock to elect all of
the Company's directors, to receive dividends and to share ratably in assets
upon a liquidation of the Company may be subject to the rights of holders of
shares of Preferred Stock, if any such shares are issued.

49
<PAGE> 50

PREFERRED STOCK

Pursuant to the Articles of Incorporation, the Company is authorized to
issue "blank check" Preferred Stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the stockholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of the
Preferred Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, among other
things, could adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium to the prevailing market price or otherwise adversely affect the market
price of the Common Stock. Currently, the Company has no plans to issue shares
of Preferred Stock.

TRANSFER AGENT AND REGISTRAR

The Company has appointed American Stock Transfer & Trust Company, New
York, New York as its transfer agent and registrar.

CERTAIN PROVISIONS OF OREGON LAW
AND OF TRENDWEST'S ARTICLES OF INCORPORATION AND BYLAWS

The following paragraphs summarize certain provisions of Oregon law and the
Company's Articles of Incorporation and Bylaws. The summary does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Articles of Incorporation and Bylaws, forms of which are filed as exhibits
to the Registration Statement of which this Prospectus is a part, and to Oregon
law.

CONTROL SHARE ACQUISITIONS

Upon completion of the Offering, the Company will become subject to the
Oregon Control Share Act (Oregon Revised Statutes Sections 60.801 - 60.816). The
Oregon Control Share Act generally provides that a person (the "Acquiring
Person") who acquires voting stock of an Oregon corporation in a transaction
which results in such Acquiring Person holding more than 20%, 33 1/3% or 50% of
the total voting power of such corporation (a "Control Share Acquisition")
cannot vote the shares it acquires in the Control Share Acquisition ("control
shares") unless voting rights are accorded to such control shares by the holders
of a majority of the outstanding voting shares, excluding the control shares
held by the Acquiring Person and shares held by the Company's officers and
inside directors ("interested shares"), and by the holders of a majority of the
outstanding voting shares, including interested shares. This vote would be
required at the time an Acquiring Person's holdings exceed 20% of the total
voting power of a company, and again at the time the Acquiring Person's holdings
exceed 33 1/3% and 50%, respectively. The term "Acquiring Person" is broadly
defined to include persons acting as a group. A transaction in which voting
power is acquired solely by receipt of an immediately revocable proxy does not
constitute a "Control Share Acquisition."

The Acquiring Person may, but is not required to, submit to the Company an
"Acquiring Person Statement" setting forth certain information about the
Acquiring Person and its plans with respect to the Company. The Acquiring Person
Statement may also request that the Company call a special meeting of
stockholders to determine whether the control shares will be allowed to retain
voting rights. If the Acquiring Person does not request a special meeting of
stockholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of stockholders that is held more
than 60 days after the date of the Control Share Acquisition. If the Acquiring
Person's control shares are accorded voting rights and represent a majority or
more of all voting power, stockholders who do not vote in favor of the
restoration of such voting rights will have the right to receive the appraised
"fair value" of their shares, which may not be less than the highest price paid
per share by the Acquiring Person for the control shares.

50
<PAGE> 51

The Oregon Control Share Act will have the effect of encouraging any
potential acquiror to negotiate with the Company's Board of Directors and will
also discourage certain potential acquirors unwilling to comply with the
provisions of this law. A corporation may provide in its articles of
incorporation or bylaws that this law does not apply to its shares. The Company
has not adopted such a provision and does not currently intend to do so. This
law may make the Company less attractive for takeover, and thus stockholders may
not benefit from a rise in the price of the Common Stock that a takeover could
cause.

BUSINESS COMBINATIONS

Upon completion of the Offering, the Company will become subject to the
Oregon Business Combination Act (Oregon Revised Statutes Sections
60.825 - 60.845). The Oregon Business Combination Act generally provides that in
the event a person or entity acquires 15% or more of the voting stock of an
Oregon corporation (an "Interested Stockholder"), the corporation and the
Interested Stockholder, or any affiliated entity, may not engage in certain
business combination transactions for a period of three years following the date
the person became an Interested Stockholder. Business combination transactions
for this purpose include (a) a merger or plan of share exchange, (b) any sale,
lease, mortgage or other disposition of the assets of the corporation where the
assets have an aggregate market value equal to 10% or more of the aggregate
market value of the corporation's assets or outstanding capital stock, and (c)
certain transactions that result in the issuance of capital stock of the
corporation to the Interested Stockholder. These restrictions do not apply if
(i) the Interested Stockholder, as a result of the transaction in which such
person became an Interested Stockholder, owns at least 85% of the outstanding
voting stock of the corporation (disregarding shares owned by directors who are
also officers and certain employee benefit plans), (ii) the Board of Directors
approves the share acquisition or business combination before the Interested
Stockholder acquired 15% or more of the corporation's voting stock, or (iii) the
Board of Directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Stockholder) approve the transaction after the Interested Stockholder acquires
15% or more of the corporation's voting stock.

The Oregon Business Combination Act will have the effect of encouraging any
potential acquiror to negotiate with the Company's Board of Directors and will
also discourage certain potential acquirors unwilling to comply with the
provisions of this law. A corporation may provide in its articles of
incorporation or bylaws that this law does not apply to its shares. The Company
has not adopted such a provision and does not currently intend to do so. This
law may make the Company less attractive for takeover, and thus stockholders may
not benefit from a rise in the price of the Common Stock that a takeover could
cause.

CLASSIFICATION OF THE BOARD OF DIRECTORS

The Articles provide for a Board of Directors with three classes (Class I,
Class II and Class III), each class consisting as nearly as possible of
one-third of the directors. A classified Board of Directors makes it more
difficult for stockholders, including those holding a majority of the
outstanding shares, to effect an immediate change in a majority of the members
of the Board of Directors. At least two annual meetings of stockholders may be
required for the stockholders to change a majority of the members of the Board
of Directors, whether or not a change in the Board of Directors would be
beneficial to the Company and its stockholders and whether or not a majority of
the Company's stockholders believe that such a change would be beneficial.

SPECIAL STOCKHOLDER MEETINGS

In order for stockholders to call special meetings, the Bylaws require the
written request of holders of shares entitled to cast at least 10% of all votes
entitled to be cast at such meeting. This provision could preclude stockholders
owning small percentages of the Company's Common Stock from calling a special
meeting to elect new directors or to take other major corporate actions, even if
such elections or other actions would be beneficial to the Company or its
stockholders. Special stockholder meetings may also be called by the President
of the Company or the Board of Directors.

51
<PAGE> 52

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 17,162,116 shares of
Common Stock outstanding. The 2,875,000 shares sold in the Offering (3,306,250
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradable on the public market without restriction or further registration
under the Securities Act, except to the extent that such shares are held by an
affiliate of the Company. The remaining outstanding shares of Common Stock were
issued and sold by the Company in private transactions, and public sale thereof
will be restricted except to the extent such shares are registered under the
Securities Act or sold in accordance with an exemption from such registration.
The 14,287,116 restricted shares of Common Stock will be eligible for public
sale pursuant to Rule 144 under the Securities Act commencing 90 days after the
date of this Prospectus. The holders of these shares have entered into
agreements with the Underwriters not to offer, sell or otherwise dispose of any
equity securities of the Company ("Lock-up Agreements") for 360 days after the
date of this Prospectus in the case of Jeld-Wen and the Selling Stockholder, and
180 days in the case of the remaining stockholders, without the prior written
consent of Montgomery Securities. Montgomery Securities may, in its sole
discretion, at any time without notice, release all or any part of the shares
subject to the Lock-Up Agreements during the respective lock-up periods.

In general, Rule 144, as currently in effect, provides that any person who
has beneficially owned shares for at least one year, including an "affiliate"
(as defined in Rule 144), is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) the average weekly
trading volume during the four calendar weeks preceding the sale or (ii) 1% of
the shares of Common Stock then outstanding. Sales under Rule 144 are subject to
certain manner of sale restrictions, notice requirements and availability of
current public information concerning the Company. A person who is not an
affiliate of the Company, and who has not been an affiliate within three months
prior to the sale, generally may sell shares without regard to the limitations
of Rule 144 provided that the person has held such shares for a period of at
least two years.

Any employee, director or officer of the Company holding shares purchased
pursuant to a written compensatory plan or contract (including options) entered
into prior to the Offering is entitled to rely on the resale provisions of Rule
701, which permit nonaffiliates to sell such shares without having to comply
with the public information, holding period, volume limitations or notice
requirements of Rule 144 and permit affiliates to sell their Rule 701 shares
without having to comply with the holding period restrictions of Rule 144, in
each case commencing 90 days after the date of this Prospectus.

Prior to the Offering, there has been no public market for the Common Stock
and no prediction can be made of the effect, if any, that the sale or
availability for sale of shares of Common Stock will have on the market price of
the Common Stock. Nevertheless, sales of substantial amounts of such shares in
the public market could adversely affect the market price of the Common Stock.

52
<PAGE> 53

UNDERWRITING

The Underwriters named below (the "Underwriters"), represented by
Montgomery Securities and Salomon Brothers Inc (the "Representatives"), have
severally agreed, subject to the terms and conditions of the underwriting
agreement (the "Underwriting Agreement") by and among the Company, the Selling
Stockholder, Jeld-Wen and the Underwriters, to purchase from the Company and the
Selling Stockholder the number of shares of Common Stock indicated below
opposite their respective names, at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of the shares of Common Stock if they purchase any.

<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE
UNDERWRITER PURCHASED
----------------------------------------------------------------- ------------
<S> <C>
Montgomery Securities............................................ 987,500
Salomon Brothers Inc............................................. 987,500
Donaldson, Lufkin & Jenrette Securities Corporation.............. 100,000
Goldman, Sachs & Co.............................................. 100,000
Morgan Stanley & Co. Incorporated................................ 100,000
Schroder & Co. Inc............................................... 100,000
Smith Barney Inc................................................. 100,000
Cruttenden Roth Incorporated..................................... 50,000
Hampshire Securities Corporation................................. 50,000
Josephthal Lyon & Ross Incorporated.............................. 50,000
McDonald & Company Securities, Inc............................... 50,000
Principal Financial Securities, Inc.............................. 50,000
Ragen Mackenzie Incorporated..................................... 50,000
Stephens Inc..................................................... 50,000
H.C. Wainwright & Co., Inc....................................... 50,000
---------
Total.................................................. 2,875,000
=========
</TABLE>

The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover of this Prospectus
and to certain dealers at such price less a concession not in excess of $0.70
per share, and that the Underwriters and such selected dealers may reallow a
concession to other dealers not in excess of $0.10 per share. After the public
offering of the Common Stock, the public offering price, the concessions to
selected dealers and reallowance to other dealers may be changed by the
Representatives.

The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to an additional
431,250 shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. To the extent the
Underwriters exercise such option, each of the Underwriters will become
obligated, subject to certain conditions, to purchase such percentage of such
additional shares of Common Stock as is approximately equal to the percentage of
shares of Common Stock that it is obligated to purchase as shown in the table
set forth above. The Underwriters may exercise such option only to cover
over-allotments, if any, incurred in the sales of shares of Common Stock.

The Company, Jeld-Wen and the Selling Stockholder have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

Jeld-Wen and the Selling Stockholder have agreed that, for a period of 360
days from the date of this Prospectus, they will not sell, offer to sell,
contract to sell, or otherwise sell or dispose of any shares of the Common
Stock, or options or warrants to acquire shares of Common Stock, without the
prior written consent of Montgomery Securities. All of the remaining existing
stockholders of the Company have agreed that, for a

53
<PAGE> 54

period of 180 days from the date of this Prospectus, they will not sell, offer
to sell, contract to sell, or otherwise sell or dispose of any shares of the
Common Stock, or options or warrants to acquire shares of Common Stock, without
the prior written consent of Montgomery Securities. The Company has agreed not
to sell any shares of Common Stock for a period of 180 days from the date of
this Prospectus without the prior written consent of Montgomery Securities.
Montgomery Securities may, in its sole discretion at any time without notice,
release all or any part of the shares subject to the Lock-Up Agreements during
the respective lock-up periods.

The Representatives have informed the Company that they do not intend to
confirm sales to accounts over which they exercise discretionary authority in
excess of 5% of the number of shares of Common Stock offered hereby.

Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price was determined through
negotiations among the Company, the Selling Stockholder and the Representatives.
Among the factors considered in determining the initial public offering price,
in addition to prevailing market conditions, were certain financial information
of the Company, the history of, and the prospects for, the Company and the
industry in which it competes, an assessment of the Company's management, its
past and present operations, the prospects for, and timing of, future revenues
of the Company, the present state of the Company's development, and the above
factors in relation to market values and various valuation measures of other
companies engaged in activities similar to the Company. The initial public
offering price should not, however, be considered an indication of the actual
value of the Common Stock. Such price is subject to change as a result of market
conditions and other factors. There can be no assurance that an active trading
market will develop for the Common Stock or that the Common Stock will trade in
the public market subsequent to the Offering at or above the initial public
offering price.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the Offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the Offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefor not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholder by Foster Pepper & Shefelman PLLC, Seattle,
Washington. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California.

EXPERTS

The combined financial statements of Trendwest Resorts, Inc. and certain
affiliates as of December 31, 1995 and 1996 and for each of the years in the
three year period ended December 31, 1996 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

The financial statements of WorldMark, The Club as of December 31, 1995 and
1996 and for each of the years in the three year period ended December 31, 1996
have been included herein and in the registration

54
<PAGE> 55

statement in reliance upon the report of Molatore, Peugh, McDaniel, Scroggin &
Co. LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

The Company engaged KPMG Peat Marwick LLP ("KPMG") on March 12, 1997 as the
Company's independent accountants to report on the Company's balance sheets as
of December 31, 1996 and 1995, and the related combined statements of income,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1996. The decision to appoint KPMG was approved by the
Company's Board of Directors.

Molatore, Peugh, McDaniel, Scroggin & Co. LLP ("MPMS") had acted as the
Company's independent accountants since 1992. None of such accountant's reports
on the Company's financial statements for any of the years reported on contained
an adverse opinion or disclaimer of opinion, nor were the opinions modified as
to uncertainty, audit scope or accounting principles, nor were there any events
of the type requiring disclosure under Item 304(a)(1)(v) of Regulation S-K under
the Securities Act. There were no disagreements with MPMS, resolved or
unresolved, on any matter of accounting principles or practices, financial
disclosure, or auditing scope or procedure, which, if not resolved to MPMS's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports. MPMS was not retained to report
on the Company's 1996 financial statements.

In August 1996, the Company engaged Coopers & Lybrand LLP ("C&L") as the
Company's independent accountants to report on the Company's balance sheet as of
December 31, 1995 and 1994, and the related statements of income, stockholders'
equity and cash flow for each of the years in the three year period ended
December 31, 1995. C&L did not render any report on the Company's financial
statements and was dismissed as the Company's independent accountants on
February 10, 1997. The decision to retain and subsequently to dismiss C&L was
approved by the Company's Board of Directors.

During the period of C&L's engagement, disagreements arose over the
accounting treatment of the sales of additional Vacation Credits to existing
Owners ("Upgrade Sales"). The Company contended that Upgrade Sales could be
fully recognized as income under Financial Accounting Standards Board Statement
No. 66 ("SFAS 66") without an additional 10% cash down payment, provided that
the Owner had sufficient equity in previously purchased Vacation Credits
(including prior principal payments on the Note Receivable from the previous
purchases) and additional cash down payments, if any, at the time of the Upgrade
Sale, to satisfy the 10% down payment requirement for full accrual profit
recognition under SFAS 66. C&L's position was that SFAS 66 and Emerging Issues
Task Force Issue No. 88-12 required each Upgrade Sale to have a separate 10%
cash down payment (without consideration of equity from previously purchased
Vacation Credits) before the full accrual of revenue could be recognized on such
sale. Prior to C&L's dismissal, the Company agreed to modify its revenue
recognition policies in accordance with C&L's position.

Upon an Upgrade Sale, any existing Note Receivable is cancelled and a new
Note Receivable with a seven year term is executed for the balance of the
existing Note Receivable and the financed amount of the Upgrade Sale. The
Company and C&L discussed the allocation of payments on the new Note Receivable
for the purpose of profit recognition on the Upgrade Sale. The Company's view,
as reflected in the financial statements included herein, is that the payment
due on the new Note Receivable could be bifurcated between the amount
attributable to the Upgrade Sale and the amount attributable to the extended
balance of the previous Note Receivable, and that the excess of the payment due
under the new Note Receivable over the part of the bifurcated payment
attributable to the extended balance of the previous Note Receivable could be
allocated to the financed portion of the Upgrade Sale without affecting the
accounting for the previous sale. Profit on the Upgrade Sale would be recognized
on the installment method until allocated principal payments equal to 10% of the
Upgrade Sale are received. Profit would then be recognized on the accrual
method. C&L recommended that the concurrence of the Securities and Exchange
Commission ("Commission") staff with this methodology be obtained prior to the
filing of this Registration Statement. C&L was prepared to accept the Company's
view, provided that the Commission staff concurred. Accordingly, at the time of
C&L's

55
<PAGE> 56

dismissal, with the exception of the issue of profit recognition on the new Note
Receivable and the effect of the allocation of principal payments on the new
Note Receivable on the recognition of profit on the previous sale, the Company
does not believe that there were any unresolved disagreements with C&L on any
matter of accounting principles or practices, financial disclosure, or auditing
scope or procedure, which, if not resolved to C&L's satisfaction, would have
caused it to make reference to the subject matter of the disagreements in
connection with its reports. C&L discussed each of these issues with members of
the Board of Directors of the Company and of the board of directors of the
Company's parent, Jeld-Wen. The Company has authorized C&L to respond fully to
the inquiries of KPMG concerning each of the disagreements.

In addition, C&L advised the Company of two matters that, if further
considered in connection with its audit of the financial statements, could
materially impact the fairness of the financial statements. The matters relate
to the adequacy of the Company's allowance for doubtful accounts for receivables
from the sale of Vacation Credits and the method of calculating gains on the
sale of such receivables. Due to their dismissal, C&L did not complete the audit
procedures and inquiries necessary to conclude on these matters.

Prior to the engagement of KPMG, the Company met with representatives of
KPMG at a meeting on January 22, 1997 to discuss KPMG's experience in the
Company's industry and industry accounting practices in connection with Upgrade
Sales. At that meeting, the disagreements between the Company and C&L were
discussed. KPMG orally advised the Company that they believed that C&L's view on
the revenue recognition principles applicable to the required down payment on
Upgrade Sales was the correct interpretation of SFAS 66. KPMG did not express
any views on the other area of discussion between the Company and C&L, the
recognition of revenue from Upgrade Sales based on an allocation of principal
payments on Notes Receivable. The Company did not request, nor did it receive,
any oral or written reports from KPMG concerning the subject of the unresolved
disagreements with C&L. The Company did not consult C&L regarding the issues
which were the subject of the disagreement following the date of dismissal. KPMG
did discuss with C&L the subject matter of the disagreements and other matters
relevant to the audit of the Company's financial statements prior to KPMG's
agreement to the engagement as the Company's auditors. The Company has requested
KPMG to review the disclosure contained herein and has provided KPMG the
opportunity to furnish the Company with a letter addressed to the Commission
containing any new information, clarification of the Company's expression of
KPMG's views or the respects in which KPMG does not agree with the statements
contained herein. KPMG has reviewed the disclosure contained herein and has
advised the Company that it does not intend to deliver such a letter to the
Company.

As previously discussed, C&L was prepared to accept the Company's view
regarding revenue recognition for Upgrade Sales, provided that the Commission
staff concurred. In addition, due to their dismissal, C&L did not complete the
audit procedures and inquiries necessary to conclude on certain other matters.
The Company believes that, if C&L were allowed to complete their engagement and
if pre-filing acceptance by the Commission staff were obtained with regard to
revenue recognition for Upgrade Sales, the resolution of the aforementioned
issues and matters would have been treated no differently than as presently
treated in the Company's combined financial statements, and therefore there
would not have been any effect on the combined financial statements of the
Company as presented herein.

56
<PAGE> 57

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to Trendwest and
the Common Stock offered hereby, reference is hereby made to such Registration
Statement and the exhibits thereto. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete,
and in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Copies of the Registration
Statement may be obtained from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission at its
Washington address upon payment of the fees prescribed by the Commission or may
be examined without charge at the offices of the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.

57
<PAGE> 58

(This page intentionally left blank)
<PAGE> 59

INDEX TO FINANCIAL STATEMENTS

TRENDWEST RESORTS, INC. AND CERTAIN AFFILIATES

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Combined and Consolidated Balance Sheets.............................................. F-3
Combined and Consolidated Statements of Income........................................ F-4
Combined and Consolidated Statements of Stockholders' Equity.......................... F-5
Combined and Consolidated Statements of Cash Flows.................................... F-6
Notes to Combined and Consolidated Financial Statements............................... F-7
</TABLE>

WORLDMARK, THE CLUB

<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... F-21
Balance Sheets........................................................................ F-22
Statements of Revenues, Expenses and Changes in Fund Balances......................... F-23
Statements of Cash Flows.............................................................. F-24
Notes to Financial Statements......................................................... F-26
Supplementary Information............................................................. F-30
</TABLE>

F-1
<PAGE> 60

INDEPENDENT AUDITORS' REPORT

The Stockholders
Trendwest Resorts, Inc.
TW Holdings, Inc.
Trendwest Funding I, Inc.:

We have audited the accompanying combined balance sheets of Trendwest Resorts,
Inc. and certain affiliates as of December 31, 1995 and 1996, and the related
combined statements of income, stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1996. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Trendwest Resorts,
Inc. and certain affiliates as of December 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Seattle, Washington
May 2, 1997, except for note 17
to the combined financial statements,
which is as of July 2, 1997

F-2
<PAGE> 61

TRENDWEST RESORTS, INC.

COMBINED AND CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Assets:
Cash...................................................... $ 135 $ 93 $ 35
Restricted cash........................................... 381 709 1,162
Notes receivable, net of allowance for doubtful accounts,
sales returns and deferred gross profit................ 40,643 45,448 56,361
Accrued interest and other receivables.................... 4,184 4,606 4,570
Residual interest in notes receivable sold................ 6,451 10,839 13,830
Inventories............................................... 10,594 16,247 14,453
Property and equipment, net............................... 4,834 5,912 6,535
Deferred income taxes..................................... 1,938 2,360 1,835
Other assets.............................................. 2,129 3,116 4,818
------- ------- --------
Total assets...................................... $71,289 $89,330 $ 103,599
======= ======= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Accounts payable.......................................... $ 1,057 $ 1,037 $ 691
Accrued liabilities....................................... 1,490 2,100 3,383
Accrued construction in progress.......................... 950 2,089 100
Due to Parent............................................. 22,284 21,316 26,178
Allowance for recourse liability and deferred gross profit
on notes sold.......................................... 5,017 10,080 9,313
Income taxes payable to Parent............................ 1,196 1,909 4,014
Notes payable............................................. 2,542 1,055 396
------- ------- --------
Total liabilities................................. 34,536 39,586 44,075
------- ------- --------
Stockholders' equity:
Common stock, 9,223,423 shares outstanding, 5,193,693
shares subscribed at June 30, 1997..................... 14,969 14,970 14,970
Employee notes receivable for common stock................ (314) -- --
Retained earnings......................................... 22,098 34,774 44,554
------- ------- --------
Total stockholders' equity........................ 36,753 49,744 59,524
Commitments and contingencies
------- ------- --------
Total liabilities and stockholders' equity........ $71,289 $89,330 $ 103,599
======= ======= ========
</TABLE>

See accompanying notes to combined and consolidated financial statements.

F-3
<PAGE> 62

TRENDWEST RESORTS, INC.

COMBINED AND CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Vacation Credit sales, net.... $ 54,904 $ 77,783 $ 100,040 $ 48,540 $ 60,820
Finance income................ 3,736 5,368 7,143 3,264 5,836
Gains on sales of notes
receivable................. 1,635 3,222 5,673 2,850 3,164
Resort management services.... 2,805 1,579 1,501 575 1,278
Other......................... 763 1,226 2,552 989 1,351
------- ------- -------- ------- -------
Total revenues........ 63,843 89,178 116,909 56,218 72,449
------- ------- -------- ------- -------
Costs and operating expenses:
Vacation Credit cost of
sales...................... 15,070 20,484 27,400 12,922 16,225
Resort management services.... 2,613 1,283 859 416 529
Sales and marketing........... 25,615 36,374 47,810 23,432 28,539
General and administrative.... 6,588 8,391 10,904 5,062 6,266
Provision for doubtful
accounts and recourse
liability.................. 4,537 6,522 7,467 3,633 4,160
Interest...................... 881 2,380 2,445 1,109 1,445
------- ------- -------- ------- -------
Total costs and
operating
expenses............ 55,304 75,434 96,885 46,574 57,164
------- ------- -------- ------- -------
Income before income
taxes............... 8,539 13,744 20,024 9,644 15,285
Income tax expense.............. 3,214 4,979 7,348 3,544 5,505
------- ------- -------- ------- -------
Net income............ $ 5,325 $ 8,765 $ 12,676 $ 6,100 $ 9,780
======= ======= ======== ======= =======
Unaudited pro forma net income
per share of common stock..... $ 0.88 $ .68
Shares used in computing
unaudited pro forma net income
per share of common stock..... 14,417,116 14,417,116
</TABLE>

See accompanying notes to combined and consolidated financial statements.

F-4
<PAGE> 63

TRENDWEST RESORTS, INC.

COMBINED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
EMPLOYEE
CLASS A CLASS B NOTES TOTAL
COMMON STOCK COMMON STOCK RECEIVABLE STOCK-
------------------- --------------- FOR COMMON RETAINED HOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCK EARNINGS EQUITY
--------- -------- ------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993........................... 7,185,150 $5,200 100 $8,500 $ -- $ 8,608 $22,308
Issuance of Trendwest common stock to employees for
notes................................................ 1,347,178 910 -- -- (910) -- --
Issuance of Trendwest common stock to Parent........... 449,060 303 -- -- -- -- 303
Dividends declared and paid by TW Holdings............. -- -- -- -- -- (480) (480)
Net Income............................................. -- -- -- -- -- 5,325 5,325
--------- ------- --- ------ ------ ------- -------
Balance at December 31, 1994........................... 8,981,388 6,413 100 8,500 (910) 13,453 27,456
Exchanges for parent company stock..................... -- -- -- -- 607 -- 607
Issuance of Trendwest common stock to employees for
notes................................................ 242,235 56 -- -- (41) -- 15
Note payments.......................................... -- -- -- -- 30 -- 30
Dividends declared and paid by TW Holdings............. -- -- -- -- -- (120) (120)
Net income............................................. -- -- -- -- -- 8,765 8,765
--------- ------- --- ------ ------ ------- -------
Balance at December 31, 1995........................... 9,223,623 6,469 100 8,500 (314) 22,098 36,753
Issuance of common stock, Trendwest Funding............ 1,000 1 -- -- -- -- 1
Note payments.......................................... -- -- -- -- 314 -- 314
Net income............................................. -- -- -- -- -- 12,676 12,676
--------- ------- --- ------ ------ ------ -------
Balance at December 31, 1996........................... 9,224,623 6,470 100 8,500 -- 34,774 49,744
Net income for six months ended June 30, 1997
(unaudited).......................................... -- -- -- -- -- 9,780 9,780
Consolidation transactions (5,193,693 shares of
Trendwest common stock subscribed for in exchange for
all of the outstanding shares of TW Holdings and
Trendwest Funding)................................... (1,200) 8,500 (100) (8,500) -- -- --
--------- ------- --- ------ ------ ------- -------
Balance at June 30, 1997 (unaudited)................... 9,223,423 $14,970 -- -- $ -- $44,554 $59,524
========= ======= === ====== ====== ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
JUNE 30, 1997 JUNE 30, 1997
1995 1996 (UNAUDITED) PRO FORMA (UNAUDITED)
----------------------- ----------------------- ----------------------------------- -----------------------
ISSUED AND ISSUED AND ISSUED AND ISSUED AND
AUTHORIZED OUTSTANDING AUTHORIZED OUTSTANDING AUTHORIZED OUTSTANDING SUBSCRIBED AUTHORIZED OUTSTANDING
---------- ----------- ---------- ----------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Trendwest:
Common stock,
voting no par
value......... 10,264,215 9,223,423 10,264,215 9,223,423 10,264,215 9,223,423 5,193,693 90,000,000 14,417,116
Preferred stock,
no par
value......... -- -- -- -- -- -- -- 10,000,000 --
TW Holdings:
Class A, voting,
no par
value......... 200 200 200 200 -- -- -- -- --
Class B,
nonvoting, no
par value..... 200 100 200 100 -- -- -- -- --
Trendwest Funding
common stock,
voting, no par
value........... -- -- 1,000 1,000 -- -- -- -- --
</TABLE>

See accompanying notes to combined and consolidated financial statements.

F-5
<PAGE> 64

TRENDWEST RESORTS, INC.

COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 5,325 $ 8,765 $ 12,676 $ 6,100 $ 9,780
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization........................ 302 330 502 258 319
Amortization of excess servicing asset............... 883 1,481 2,735 1,377 1,841
Provision for doubtful accounts, recourse liability
and sales reversals................................ 5,500 7,655 10,078 4,946 6,198
Recoveries of notes receivable charged off........... 138 113 72 14 127
Excess servicing spread on notes receivables sold.... (2,174) (3,258) (5,674) (2,850) (3,249)
Unrealized gain on residual interest in notes
receivable sold.................................... -- -- -- -- (1,156)
Change in deferred gross profit...................... 711 1,480 2,737 1,523 (755)
Deferred income tax (benefit) expense................ (1,000) (364) (422) (491) 525
Issuance of notes receivable......................... (50,278) (71,052) (91,593) (44,343) (53,851)
Proceeds from sale of notes receivable............... 34,969 46,665 67,257 35,015 11,434
Proceeds from repayment of notes receivable.......... 7,915 11,084 21,388 12,697 12,451
Purchase of notes receivable......................... (6,005) (11,305) (11,150) (4,769) (4,459)
Changes in certain assets and liabilities:
Increase in restricted cash........................ (161) (110) (328) (348) (453)
Inventories........................................ (9,576) 1,493 (5,653) (1,913) 1,794
Accounts payable and accrued liabilities........... 3,928 (3,279) 1,729 430 (1,052)
Income taxes payable to Parent..................... (134) (2,207) 713 809 2,105
Other assets....................................... (1,951) (1,740) (1,540) (577) (1,788)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities.................................... (11,608) (14,249) 3,527 (7,878) (20,189)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment..................... (229) (4,312) (1,429) (450) (876)
Proceeds from sale of marketable equity securities..... -- 4,219 -- -- --
-------- -------- -------- -------- --------
Net cash used in investing activities........... (229) (93) (1,429) (450) (876)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable............................ 5,366 100 -- -- 16,803
Payments on notes payable.............................. (6,203) (1,529) (1,487) (836) (658)
Net change in due to Parent............................ 12,538 15,877 (968) (6,723) 4,862
Dividends paid......................................... (480) (120) -- -- --
Issuance of common stock............................... 303 15 1 1 --
Payments on notes receivable for stock................. -- 30 314 24 --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities.................................... 11,524 14,373 (2,140) (7,534) 21,007
-------- -------- -------- -------- --------
Net increase (decrease) in cash................. (313) 31 (42) (106) (58)
Cash at beginning of period.............................. 417 104 135 135 93
-------- -------- -------- -------- --------
Cash at end of period.................................... $ 104 $ 135 $ 93 $ 29 $ 35
======== ======== ======== ======== ========
Supplemental disclosures of cash flow information -- cash
paid during the period for:
Interest............................................. $ 905 $ 2,091 $ 2,579 $ 1,156 $ 1,504
Income taxes......................................... 5,111 7,547 7,056 2,822 2,877
Supplemental schedule of noncash investing and financing
activities:
Issuance of common stock for notes receivable.......... $ 910 $ 41 $ -- $ -- $ --
Reduction of notes payable through transfer of notes
receivable........................................... $ -- $ -- $ -- $ -- $ 16,803
</TABLE>

See accompanying notes to combined and consolidated financial statements.

F-6
<PAGE> 65

TRENDWEST RESORTS, INC.

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996 AND JUNE 30, 1996 AND 1997
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

(A) DESCRIPTION OF BUSINESS

Trendwest Resorts, Inc. (Trendwest), TW Holdings, Inc. (TW Holdings) and
Trendwest Funding I Inc. (Trendwest Funding) (Company) generate revenues from
the sale and financing of Vacation Credits in WorldMark, The Club (WorldMark),
which entitle the owner to use a fully furnished vacation resort based on the
number of Vacation Credits purchased. Vacation Credits are created through the
transfer to WorldMark of resort units developed or purchased by the Company. The
Company also manages resort properties under a management agreement with
WorldMark (see note 15(b)). WorldMark is a separate entity which owns the
transferred properties for the benefit of Vacation Credit owners (Members).

The Company sells Vacation Credits to individuals principally in the
Western United States. Sales to new owners are financed by the Company after
requiring a minimum 10% down payment. Sales to existing owners (Upgrades) are
financed by the Company and require down payments to the extent that the owner's
equity interest in Vacation Credits owned, including the Upgrade, is less than
10% (see note 2(d)(i)). The resulting note balances are secured by the Vacation
Credits sold.

(B) BASIS OF PRESENTATION

For periods prior to June 30, 1997, the financial statements are presented
on a combined basis and include the accounts of Trendwest, TW Holdings and
Trendwest Funding. Trendwest Funding is included in the financial statements
from April 19, 1996 (inception). The financial statements of these three
entities have been combined as they are entities under the common control of
JELD-WEN, inc. (Parent).

Trendwest is a majority owned subsidiary of Parent and prior to June 30,
1997, TW Holdings and Trendwest Funding were wholly-owned subsidiaries of the
Parent. As described in note 17, effective June 30, 1997, the Parent transferred
to Trendwest all of the outstanding common stock of TW Holdings and Trendwest
Funding in exchange for 5,193,693 shares of Trendwest common stock
(Consolidation Transactions). Effective June 30, 1997, TW Holdings and Trendwest
Funding are wholly-owned subsidiaries of Trendwest. The financial statements for
periods beginning June 30, 1997 are presented on a consolidated basis and
continue to include the accounts of Trendwest, TW Holdings and Trendwest
Funding.

The Consolidation Transactions are considered a reorganization of entities
under common control and have been accounted for in a manner similar to a
pooling of interests. The assets and liabilities of the combining entities
continue to be recorded at their historical cost basis and the results of
operations continue to include the same components in consolidation as were
included in combination.

All intercompany balances and transactions have been eliminated in
combination and consolidation.

Unaudited pro forma net income per share for 1996 and the six months ended
June 30, 1997 has been computed based on the number of shares of Trendwest
common stock outstanding at December 31, 1996 and June 30, 1997, respectively,
increased by the 5,193,693 additional shares subsequently issued to the Parent
in connection with the Consolidation Transactions described in note 1(b). Due to
the significant impact of the Consolidation Transactions on the number of
outstanding shares of Trendwest common stock, historical net income per share is
not meaningful and is therefore not presented. No common stock equivalents were

F-7
<PAGE> 66

TRENDWEST RESORTS, INC.

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND JUNE 30, 1996 AND 1997
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

outstanding at December 31, 1996. At June 30, 1997 common stock equivalents
consisted of the 5,193,693 shares subscribed resulting from the Consolidation
Transactions.

(D) PRIOR PERIOD ADJUSTMENTS

The accompanying combined financial statements were prepared in connection
with the proposed offering and present for the first time the combined results
of Trendwest, TW Holdings and Trendwest Fundings. Certain adjustments were made
to conform accounting policies and to record certain prior period adjustments to
the individual entities. Prior period adjustments were made to the allowance for
doubtful accounts, gains on sales of notes receivable and recognition of revenue
on Upgrade sales.

(E) INTERIM FINANCIAL DATA

The unaudited interim combined and consolidated financial statements have
been prepared on the same basis as the audited combined financial statements
and, in the opinion of management, include all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial
information set forth therein in accordance with generally accepted accounting
principles. The Company's interim results may be subject to fluctuations. As a
result, the Company believes the results of operations for the interim periods
are not necessarily indicative of the results to be expected for any future
period.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) RESTRICTED CASH

Restricted cash consists primarily of deposits received on sales of
Vacation Credits that are held in escrow until the applicable statutory
rescission period has expired and the related customer note receivable has been
recorded and amounts received prior to the attainment of the required 10% down
payment.

(B) ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RECOURSE LIABILITY

The Company provides for estimated future losses to be incurred related to
uncollectible notes receivable and notes receivable sold with recourse. The
provision for credit losses is charged to income in amounts sufficient to
maintain the allowance and the recourse liability at levels considered adequate
to cover anticipated losses resulting from liquidation of notes receivable and
notes receivable sold with recourse. The allowance for doubtful accounts and
recourse liability are based on the collection history of the receivables and
are net of anticipated cost recoveries of the underlying Vacation Credits.
Management believes that all such allowances and estimated liabilities are
adequate; however, such amounts are based on estimates and there is no assurance
that the actual amounts incurred will not be more or less than the amount
recorded.

The Company charges off notes receivable when deemed to be uncollectible.
Interest income previously accrued and unpaid is reversed. Vacation credits
recovered are recorded at the weighted average cost of credits at the time of
recovery.

F-8
<PAGE> 67

TRENDWEST RESORTS, INC.

(D) INVENTORIES

Inventories consist of Vacation Credits and construction in progress as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- ------- ---------
<S> <C> <C> <C>
Vacation Credits.............................. $ -- $ 7,784 $ 2,084
Construction in progress...................... 10,594 8,463 12,369
------- ------- -------
Total inventories................... $10,594 $16,247 $14,453
======= ======= =======
</TABLE>

Vacation Credits represent the costs of unsold ownership interests in
WorldMark. Resort properties are completed and ownership is transferred by the
Company to WorldMark in return for the right to sell Vacation Credits in these
properties based on the number of credits available for the properties. Credits
available are determined using a formula based on the number of user days
available as well as the relative value of each property. Vacation Credits are
carried at the lower of cost, based on the moving weighted average of property
cost per Vacation Credit established, or net realizable value.

Construction in progress is valued at the lower of cost or net realizable
value. Interest, taxes and other carrying costs incurred during the construction
period are capitalized. The amount of interest capitalized during the years
ended December 31, 1994, 1995 and 1996 amounted to $0, $0 and $343,
respectively.

(D) REVENUE RECOGNITION

(i) Vacation Credits

Substantially all Vacation Credits sold by the Company generate installment
notes receivable secured by an interest in the related Vacation Credits. These
notes receivable are payable in monthly installments, including interest, with
maturities up to seven years. Sales are included in revenues when at least a 10%
down payment requirement has been met and any rescission period has expired.

Vacation Credit cost of sales and direct selling expenses related to a
Vacation Credit sale are recorded at the time the sale is recognized. Vacation
Credit costs include the cost of land, improvements to the property, including
costs of amenities constructed for the use and benefit of the Vacation Credit
owners, and other direct acquisition costs. Direct selling expenses are recorded
as sales and marketing expenses.

The Company also finances sales of Upgrades which result in the
cancellation of any existing note receivable and the issuance of a new
seven-year note secured by an interest in all Vacation Credits owned. No
additional down payment is required by the Company as long as the owner's equity
interest in the original Vacation Credits is equal to 10% of the value of all
Vacation Credits, including those from the Upgrade sale, and the customer is not
delinquent in his payments on his existing note receivable. When the Company
finances an Upgrade sale and the customer does not make an additional cash down
payment of at least 10% of the Upgrade sale amount, the Company uses the
installment method to recognize revenue whereby profit is recognized as a
portion of each principal payment received on the Upgrade. Revenue is fully
recognized on the Upgrade sale when the cash collected relating to the Upgrade
sale totals 10% of the Upgrade sale. Cash collected relating to a financed
Upgrade sale is measured as the sum of any additional down payment received at
the time of the Upgrade sale and the principal repayment of the new note
receivable which is allocable to the Upgrade sale. Principal repayments are
allocated to the Upgrade sale component of the new note receivable and the
pre-Upgrade sale component of the new note receivable based on the ratio of such
components at the time of the Upgrade sale.

F-9
<PAGE> 68

TRENDWEST RESORTS, INC.

Management fees are recognized using the accrual method as earned.

(ii) Sales of Notes Receivable

The Company sells notes receivable to outside investors and to a limited
liability company (LLC) which is controlled and 99% owned by an independent
third party who has made a substantial capital investment and has substantial
risks and rewards of the assets of the limited liability company LLC.

Gains on sales of notes receivable represent the present value of the
differential between contractual interest rates charged to borrowers on notes
receivable sold by the Company and the interest rates to be received by the
purchasers of such notes receivable, after considering the effects of estimated
prepayments and the costs of servicing, net of transaction costs. The Company
recognizes such gains on sales of notes receivable on the settlement date. Gains
on the sale of a portion of notes receivable are based on the relative fair
market value of the note receivable portions sold and retained.

The Company discounts cash flows on its notes receivable sold at a rate of
12.25% which it believes a purchaser would require as a rate of return. The
Company has developed its assumptions based on experience with its own
portfolio, available market data and ongoing consultation with its investment
bankers.

Income from the differential retained is recorded in finance income using
the interest method. In addition, finance income includes interest income on
notes receivable retained by the Company. Prior to January 1, 1997, the residual
interest in notes receivable sold was classified as an excess servicing asset
and carried at the lower of amortized cost or net realizable value. As further
described in note 2(i), beginning January 1, 1997, the residual interest in
notes receivable sold is classified as a trading security in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting for
Certain Investments in Debt or Equity Securities" and is carried at market
value. Also, beginning January 1, 1997, changes in the fair market value of the
residual interest in notes receivable sold will be recognized as finance income.

Prior to January 1, 1997, the carrying value of the excess servicing asset
was analyzed quarterly by the Company on a disaggregated basis to determine
whether prepayment experience had an impact on carrying value. Expected cash
flows of the underlying notes receivable sold were reviewed based upon current
economic conditions and the type of notes receivable originated and revised as
necessary using the original discount rate used in calculating the gain on sale.
Losses arising from adverse prepayment experience were recognized as a charge to
earnings while favorable experience was not recognized until realized (see note
2(i)).

(E) PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the
straight-line method over the following assets' estimated useful lives:

<TABLE>
<S> <C>
Building and improvements............................. 20 to 45 years
Equipment, furniture and fixtures..................... 3 to 12 years
Leasehold improvements................................ 2 to 5 years
</TABLE>

(F) ADVERTISING

Advertising costs, included in sales and marketing expenses in the
accompanying combined statements of income, are expensed as incurred and
amounted to $1,783, $2,012 and $4,036 for the years ended December 31, 1994,
1995 and 1996, respectively.

F-10
<PAGE> 69

TRENDWEST RESORTS, INC.

(G) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

The Company is included in the consolidated tax return of the Parent. TW
Holdings filed a separate tax return for 1994. The Parent allocates the combined
current and deferred tax expense to the Company as if the Company had filed on a
stand-alone basis.

(H) USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the combined financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these combined financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates and assumptions.

(I) EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of 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 No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS No. 121 in the first quarter of 1996 and there was no
material impact on the Company's operations or financial position upon adoption.

In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are based
on consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. SFAS No. 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively.

The adoption of SFAS No. 125 on January 1, 1997 resulted in an increase in
the carrying value of the Company's residual interest in notes receivable sold
at December 31, 1996 of $755 and $111 related to the sales of notes receivable
to Investors and to the LLC, respectively, (see note 5); and a corresponding
increase in finance income for the six months ended June 30, 1997 as the Company
classifies the residual interest in notes receivable sold as a trading security
under SFAS No. 115.

Beginning January 1, 1997, changes in the fair market value of the residual
interest in notes receivable sold will be recognized as finance income. For the
six months ended June 30, 1997, there was an increase in

F-11
<PAGE> 70

TRENDWEST RESORTS, INC.

such fair market value in the amount of $290 recorded as finance income related
to the Company's residual interest in notes receivable sold to Investors and to
the LLC.

In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. SFAS
No. 128 establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential common
stock. This statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. The Company does not anticipate a material impact upon
adoption of this standard.

(3) MARKETABLE SECURITIES

In 1995, the Company sold marketable equity securities to the Parent. No
gain or loss was realized on this transaction.

(4) NOTES RECEIVABLE

The Company provides financing to the purchasers of Vacation Credits. The
notes resulting from sales of Vacation Credits in 1995 and 1996 bear interest at
13.9% or 14.9%, depending on method of payment, and are written with initial
terms of up to 84 months. Once a 10% down payment has been received, the Company
has no obligation under the notes to refund monies or provide further services
to Owners in the event membership is terminated for nonpayment of contract
obligations.

Maturities of notes receivable at December 31, 1996 are as follows during
the next five years and thereafter:

<TABLE>
<S> <C>
1997....................................... $ 6,369
1998....................................... 7,116
1999....................................... 7,796
2000....................................... 8,326
2001....................................... 8,477
Thereafter................................. 14,364
-------
$52,448
=======
</TABLE>

Customers over 60 days past due on monthly payments are considered
delinquent. Delinquent notes receivable represent 3.78% and 4.17% of notes
receivable at December 31, 1995 and 1996, respectively.

F-12
<PAGE> 71

TRENDWEST RESORTS, INC.

The activity in the allowance for doubtful accounts, recourse liability and
sales returns is as follows for the years ended December 31:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balances at beginning of period............... $ 2,930 $ 5,284 $ 7,964
Provision for doubtful accounts, recourse
liability and sales returns................. 5,500 7,655 10,078
Notes receivable charged-off and sales returns
net of Vacation Credits recovered........... (3,284) (5,088) (6,873)
Recoveries.................................... 138 113 72
------- ------- -------
Balances at end of period..................... $ 5,284 $ 7,964 $11,241
======= ======= =======
Allowance for doubtful accounts and sales
returns..................................... 3,584 5,429 5,832
Allowance for recourse liability on notes
receivable sold............................. 1,700 2,535 5,409
------- ------- -------
$ 5,284 $ 7,964 $11,241
======= ======= =======
</TABLE>

At June 30, 1997, the allowance for doubtful accounts and sales returns is
$8,056 and the allowance for recourse liability on notes receivable sold is
$5,209.

Total notes receivable outstanding, including notes receivable sold (see
note 5), amounted to $127,335 and $180,323 at December 31, 1995 and 1996,
respectively.

(5) SALES OF NOTES RECEIVABLE

(i) TW HOLDINGS

The Company sells through TW Holdings, an 80% interest in certain notes
receivable to outside investors primarily through an agreement, as amended on
June 30, 1997, expiring June 30, 1998 (Agreement) with Seattle-First National
Bank and other purchasers (Investors). Under the terms of the Agreement, up to
$93,000 of receivables can be sold to the Investors and proceeds from the
collection of sold note receivables can be used to purchase additional notes
receivable. The notes receivable have stated rates of 13.9%-14.9% and are sold
at par to yield LIBOR plus 1.25% per annum to the Investors. The 20% retained
interest is recorded as notes receivable whereas the residual interest in the
excess cash flows of notes receivable sold is classified as residual interest in
notes receivable sold, and beginning January 1, 1997 is measured at fair value
under SFAS No. 125.

Total notes receivable sold and outstanding under this Agreement amounted
to $68,000 and $55,000 at December 31, 1995 and 1996, respectively.

The Investors have recourse to the Company's retained interest in notes
receivable sold under certain default provisions related primarily to the
delinquency status of the notes receivable sold. The Company's retained interest
included in notes receivable in the accompanying combined balance sheets
amounted to $17,000 and $13,750 at December 31, 1995 and 1996, respectively.

Subsequent to January 1, 1997 and prior to the Consolidation Transactions,
the Company's transfer of notes receivable under the Agreement did not qualify
for sales treatment under SFAS No. 125 and were treated as secured borrowings.

F-13
<PAGE> 72

TRENDWEST RESORTS, INC.

In conjunction with the Consolidation Transactions, the bylaws and articles
of incorporation of TW Holdings were amended such that the transfer of notes
receivable from Trendwest to TW Holdings met the sales recognition criteria of
SFAS No. 125 resulting in the transferred notes receivable no longer being
assets of Trendwest. At June 30, 1997 notes receivable previously transferred
and treated as secured borrowings aggregating $16.8 million were accounted for
as sales of notes receivable.

(ii) TRENDWEST FUNDING

In 1996 the Company sold through Trendwest Funding, certain notes
receivable to the LLC in exchange for cash, a subordinated note payable from the
LLC and a residual interest in the excess cash flows of the LLC. The
subordinated note payable from the LLC represents the Company's retained
interest in notes receivable which provide collateral to holders of notes issued
by the LLC (the LLC noteholders) and is classified as notes receivable in the
accompanying combined balance sheet. The residual interest in the excess cash
flows of the LLC is classified as residual interest in notes receivable sold,
and beginning January 1, 1997 is measured at fair value under SFAS No. 125.

The LLC noteholders and the LLC outside investor have recourse to the
Company's retained interest in notes receivable sold under certain default
provisions related primarily to the delinquency status of the notes receivable
sold. The Company's retained interest is included in notes receivable in the
accompanying combined balance sheets, and amounted to approximately $12,600 at
December 31, 1996.

(6) DUE TO PARENT

The Company has an open revolving credit line with its Parent to meet
operating needs and invest excess funds. The Parent has not set a limit on the
credit line, which line is payable on demand. It bears interest at the prime
rate plus 1% per annum (9.25% at December 31, 1996).

(7) PROPERTY AND EQUIPMENT

Property and equipment, net, consists primarily of the Company's corporate
headquarters and leased sales offices as follows at December 31:

<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Land....................................................... $ 877 $ 877
Building and improvements.................................. 3,005 3,586
Equipment, furniture and fixtures.......................... 1,807 2,504
Leasehold improvements..................................... 185 336
------ ------
5,874 7,303
Less accumulated depreciation and amortization............. 1,040 1,391
------ ------
$4,834 $5,912
====== ======
</TABLE>

F-14
<PAGE> 73

TRENDWEST RESORTS, INC.

(8) DEFERRED GROSS PROFIT

The Company accounts for certain Upgrade sales on the installment method
prior to satisfaction of minimum down payment requirements. Information for
those transactions follows for the years ended December 31:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Gross sales value............................... $4,229 $8,266 $15,618
====== ====== =======
Gross profit deferred........................... $1,958 $3,826 $ 7,328
Gross profit recognized......................... 1,247 2,346 4,591
------ ------ -------
Net gross profit deferred during period......... $ 711 $1,480 $ 2,737
====== ====== =======
</TABLE>

Notes receivable is presented net of deferred gross profit in the
accompanying combined balance sheets. Such deferred amounts aggregated $620 and
$1,168 at December 31, 1995 and 1996, respectively.

Deferred gross profit related to notes receivable sold is combined with
allowance for recourse liability on notes receivable sold in the accompanying
combined balance sheets. Such deferred amounts aggregated $2,482 and $4,671 at
December 31, 1995 and 1996, respectively.

(9) NOTES PAYABLE

The Company has a line of credit of $5,000 with FINOVA Capital Corporation.
The outstanding balance at December 31, 1995 and 1996 was $2,443 and $1,054,
respectively. Notes receivable are assigned to the lender and as principal
payments are received, they are applied to this loan. The agreement requires
replacement of notes that become 60 days past due and bears interest at 10.5%
per annum. The agreement also requires the Company to maintain minimum financial
ratios, restricts certain expenses and limits cash distributions. The line of
credit matures in 2000.

(10) INCOME TAXES

The provision for income taxes consists of the following for the years
ended December 31:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Federal:
Current........................................ $4,141 $5,218 $7,426
Deferred....................................... (936) (308) (450)
------ ------ ------
3,205 4,910 6,976
------ ------ ------
State:
Current........................................ 73 125 344
Deferred....................................... (64) (56) 28
------ ------ ------
9 69 372
------ ------ ------
Total.................................. $3,214 $4,979 $7,348
====== ====== ======
</TABLE>

F-15
<PAGE> 74

TRENDWEST RESORTS, INC.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below at December 31:

<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Allowance for credit losses.............................. $2,980 $4,206
Deferred gross profit.................................... 1,161 2,185
Other.................................................... 516 571
------ ------
Total deferred tax assets........................ 4,657 6,962
------ ------
Deferred tax liability:
Residual interest in notes receivable sold............... 1,807 3,375
Other assets............................................. 253 196
Property and equipment................................... 59 120
Other.................................................... 600 911
------ ------
Total deferred tax liability..................... 2,719 4,602
------ ------
Net deferred tax asset........................... $1,938 $2,360
====== ======
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company will
realize the benefits of these deferred tax assets.

Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to pretax income as a result of the following for
the years ended December 31:

<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Income tax at Federal statutory rate............... 35.0% 35.0% 35.0%
State tax, net of Federal benefit.................. 2.0 2.0 2.4
Other.............................................. 0.6 (0.8) (0.7)
---- ---- ----
37.6% 36.2% 36.7%
==== ==== ====
</TABLE>

(11) EMPLOYEE NOTES FOR COMMON STOCK

Notes accepted upon the purchase of Company common stock are secured by the
stock, bear interest at 9% per annum and are included as a reduction to
stockholders' equity. In 1995, certain individuals exchanged their Company
common stock for common stock of the Parent and the notes were repaid.

F-16
<PAGE> 75

TRENDWEST RESORTS, INC.

(12) PARENT 401(k) Plan

The Company participates in the Parent 401(k) plan. Company contributions,
which are invested in Parent common stock, are at the discretion of the Board of
Directors of the Parent and totaled $945, $1,283 and $1,686 for the years ended
December 31, 1994, 1995 and 1996, respectively.

(13) INTEREST RATE CAP AGREEMENT

In March 1995, the Company entered into an interest rate cap agreement at a
cost of $92 to reduce the impact of changes in interest rates on its notes
receivable sold. The interest rate cap agreement has a 30-day notional principal
amount of $31,800 on which the Company receives interest payments to the extent
that LIBOR exceeds an annualized rate of 10.125%.

The interest rate cap agreement expires in April 1998. The Company is
exposed to credit loss in the event of nonperformance by the other party to the
interest rate cap agreement. However, the Company believes the risk of incurring
losses related to credit risk is remote and any losses would be immaterial. No
payments have been received by the Company under the terms of the agreement.

(14) FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Fair values
are based on estimates using present value or other valuation techniques in
cases where quoted market prices are not available. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.

Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments are set forth below at
December 31:

<TABLE>
<CAPTION>
1995 1996
-------------------- --------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash(a)........................... $ 135 $ 135 $ 93 $ 93
Restricted cash(a)................ 381 381 709 709
Notes receivable(a)............... 41,263 41,263 46,616 46,616
Residual interest in notes
receivable sold(b)............. 6,451 7,323 10,839 11,705
Financial liabilities:
Due to Parent(c).................. 22,284 22,284 21,316 21,316
Recourse liability on notes
sold(a)........................ 2,535 2,535 5,409 5,409
Notes payable(c).................. 2,542 2,542 1,055 1,055
</TABLE>

F-17
<PAGE> 76

TRENDWEST RESORTS, INC.

- ---------------

(a) The carrying value, prior to consideration of deferred gross profit in the
case of notes receivable, is considered to be a reasonable estimate of fair
value.

(b) Fair value is determined using estimated discounted future cash flows taking
into consideration anticipated prepayment rates.

Because no market exists for a portion of the financial instruments, fair
value estimates may be based on judgments regarding future instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

The fair market value of the interest rate cap agreement is based on
current interest rates and is estimated to be $0 at December 31, 1995 and 1996.

(15) RELATED PARTY TRANSACTIONS

(a) NOTES RECEIVABLE

The Company, on an ongoing basis, acquires from and sells notes receivable
to related parties. A summary of these transactions follows for the years ended
December 31:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------- ------
<S> <C> <C> <C>
Sales of notes receivable:
Members of the Board of Directors of the
Parent (at face value, full recourse)...... $9,714 $ 3,905 $3,350
I&I Holdings, a subsidiary of the Parent (at
face value, full recourse)................. 13 1,321 232
Parent Foundation (at face value, full
recourse).................................. 297 191 211
Purchases of notes receivable:
Eagle Crest Partners, Ltd., a subsidiary of
the Parent (at face value, full
recourse).................................. 6,005 11,305 8,993
Running Y Resorts, Ltd., a subsidiary of the
Parent (at face value, full recourse)...... -- -- 2,157
</TABLE>

With respect to notes receivable sold to members of the Board of Directors
of the Parent and I&I Holdings of the Parent, the Company services such
receivables without compensation.

The outstanding balance of notes receivable sold with full recourse to
related parties amounted to $18,747 and $18,512 at December 31, 1995 and 1996,
respectively.

F-18
<PAGE> 77

TRENDWEST RESORTS, INC.

(b) WORLDMARK

The Company manages the resort properties transferred to WorldMark under
the terms of a management agreement which is subject to annual approval by the
Members. Under the terms of the management agreement, the Company receives a
management fee equal to the lesser of 15% of WorldMark's budgeted expenditures
or net profit of WorldMark and is reimbursed for certain expenses. In addition,
the Company is responsible for paying annual dues on Vacation Credits which it
owns prior to their sale to customers. A summary of these transactions follows
for the years ended December 31:

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
WorldMark:
Management fee income.......................... $ 173 $ 747 $1,103
Dues expense incurred by Trendwest............. 137 512 273
Reimbursed salaries............................ 528 1,533 3,103
Resort operations, maid and key service
income...................................... 1,034 332 --
Other reimbursed expenses...................... 170 297 323
</TABLE>

In addition to the note payable to Parent described in note 6, the Company
reimburses the Parent for administrative services received and its share of
insurance expenses. Also, the Parent is named as the master servicer under the
terms of certain sales of notes receivable and receives a servicing fee of 1.75%
per annum of the sold receivables to service the receivable. The Parent
subcontracts the servicing to Trendwest for a servicing fee of 1.25% per annum
of the sold receivable balance. Trendwest also received a servicing fee from TRI
Funding Company I, LLC of 1.75% per annum of the sold receivables' balance.
Trendwest, in turn, subcontracts components of the servicing to a third-party
servicer, SAGE. A summary of these transactions follows for the years ended
December 31:

<TABLE>
<CAPTION>
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Parent:
Interest income.................................. $167 $ -- $ 451
Interest expense................................. 114 1,993 2,564
Insurance expense................................ 786 879 1,304
Administrative service expense................... 544 723 913
Servicing fee expense, net....................... 604 1,163 1,008
TRI Funding Company I, LLC -- servicing fee
income........................................... -- -- 925
</TABLE>

(16) COMMITMENTS AND CONTINGENCIES

(a) PURCHASE COMMITMENTS

The Company routinely enters into purchase agreements with various
developers to acquire and build resort properties. At December 31, 1996 and June
30, 1997, the Company had outstanding purchase commitments of $28,077 and
$23,089, respectively, related to properties under development.

F-19
<PAGE> 78

TRENDWEST RESORTS, INC.

(b) TAX CONTINGENCY

The Internal Revenue Service (IRS) is currently auditing the 1991, 1992 and
1993 tax returns of Trendwest, Inc., the former parent of the Company. The
Company is a party to this matter. The IRS has issued a letter to Trendwest,
Inc. setting forth the adjustments proposed by the examining agent. The letter
recommends a finding for tax and interest totaling approximately $9,300. The
finding relates primarily to the disallowance of all resort property costs.
Trendwest, Inc. has appealed the letter and the Company believes that this
matter is close to resolution and that the amount of any actual deficiency will
not be material to the Company's financial position, results of operations or
liquidity.

The Company is involved in various claims and lawsuits arising in the
ordinary course of business. Management believes the outcome of these matters
will not have a material adverse effect on the Company's financial position,
results of operations or liquidity.

(d) LEASE COMMITMENTS

The Company has various operating lease agreements, primarily for sales
offices. These obligations generally have remaining noncancelable terms of five
years or less. Future minimum lease payments are as follows for the years ending
December 31:

Rental expense amounted to $877, $1,126 and $1,426 for the years ended
December 31, 1994, 1995 and 1996, respectively.

(17) SUBSEQUENT EVENTS

On May 8, 1997, the Board of Directors of Trendwest (Board) authorized the
filing of a registration statement with the Securities and Exchange Commission
and the issuance of 5,193,693 shares of common stock (post-stock split) to
Parent in conjunction with the Consolidation Transactions. The Consolidation
Transactions occurred on June 30, 1997. The Board also authorized the pricing
committee of the Board to declare a stock split in contemplation of the
Company's initial public offering, and amended the Company's articles of
incorporation, subject to stockholder approval, to increase the number of
authorized shares of common stock to 90,000,000 and to establish preferred stock
with 10,000,000 shares authorized and terms to be determined by the Board.

The Board also adopted the 1997 Stock Option Plan (the "1997 Plan") and
authorized up to 5% of the number of shares of common stock outstanding from
time to time for issuance thereunder.

As authorized, the pricing committee of the Board declared a 513.211 for 1
stock split effective July 2, 1997, the date of the filing of the amended
articles of incorporation. The accompanying combined financial statements have
been retroactively restated to give effect to this stock split. The 5,193,693
shares of common stock which were subscribed as of the June 30, 1997 effective
date of the Consolidation Transactions, were issued as of July 2, 1997.

F-20
<PAGE> 79

INDEPENDENT AUDITORS' REPORT

Board of Directors
WorldMark, The Club

We have audited the accompanying balance sheets of WorldMark, The Club (the
Club) as of December 31, 1995 and 1996 and the related statements of revenues,
expenses and changes in fund balances and cash flows for each of the years in
the three year period ended December 31, 1996. These financial statements are
the responsibility of the Club's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying information on future
major repairs and replacements is not a required part of the basic financial
statements but is supplementary information required by the American Institute
of Certified Public Accountants. The information on condominiums owned is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of
measurement and presentation of the supplementary information. However, we did
not audit the information and express no opinion on it.

Molatore, Peugh, McDaniel, Scroggin & Co. LLP
CERTIFIED PUBLIC ACCOUNTANTS
Klamath Falls, Oregon
March 31, 1997

F-21
<PAGE> 80

WORLDMARK, THE CLUB

BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1997
DECEMBER 31, 1995 DECEMBER 31, 1996 (UNAUDITED)
------------------------------------- -------------------------------------- ------------------------
OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT
FUND FUND ALL FUNDS FUND FUND ALL FUNDS FUND FUND
---------- ----------- ---------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents..... $ 437,748 $ -- $ 437,748 $ 261,864 $ 158,429 $ 420,293 $ 590,805 $ 559,530
Member dues
receivable...... 4,796,433 -- 4,796,433 6,693,880 -- 6,693,880 7,014,267 --
Other
receivables..... 68,556 -- 68,556 261,968 -- 261,968 478,741 --
Marketable
securities held
to maturity..... 563,807 1,960,237 2,524,044 592,479 3,153,098 3,745,577 299,490 3,636,950
Property and
equipment,
net............. 71,764 -- 71,764 188,357 -- 188,357 270,176 --
Prepaids and other
assets.......... 227,585 -- 227,585 458,079 -- 458,079 890,104 --
---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Total
Assets...... $6,165,893 $1,960,237 $8,126,130 $8,456,627 $3,311,527 $11,768,154 $9,543,583 $4,196,480
========== ========== ========== ========== ========== =========== ========== ===========
LIABILITIES AND FUND EQUITY
Liabilities
Accounts payable
and accrued
expenses........ $ 533,427 $ -- $ 533,427 $ 393,172 $ -- $ 393,172 $ 698,240 $ --
Accounts payable
to Developer.... 500,698 -- 500,698 622,370 -- 622,370 708,129 --
Deferred
revenue......... 5,131,768 -- 5,131,768 7,441,085 -- 7,441,085 8,137,214 --
---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Total
Liabilities... 6,165,893 -- 6,165,893 8,456,627 -- 8,456,627 9,543,583 --
Fund Balance
Reserve for
replacements.... -- 1,960,237 1,960,237 -- 3,311,527 3,311,527 -- 4,196,480
---------- ---------- ---------- ---------- ---------- ----------- ---------- -----------
Total
Liabilities
and Fund
Balance..... $6,165,893 $1,960,237 $8,126,130 $8,456,627 $3,311,527 $11,768,154 $9,543,583 $4,196,480
========== ========== ========== ========== ========== =========== ========== ===========

TOTAL
ALL FUNDS
-----------
<S> <C>
Cash and cash
equivalents..... $ 1,150,335
Member dues
receivable...... 7,014,267
Other
receivables..... 478,741
Marketable
securities held
to maturity..... 3,936,440
Property and
equipment,
net............. 270,176
Prepaids and other
assets.......... 890,104
-----------
Total
Assets...... $13,740,063
===========

Liabilities
Accounts payable
and accrued
expenses........ $ 698,240
Accounts payable
to Developer.... 708,129
Deferred
revenue......... 8,137,214
-----------
Total
Liabilities... 9,543,583
Fund Balance
Reserve for
replacements.... 4,196,480
-----------
Total
Liabilities
and Fund
Balance..... $13,740,063
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-22
<PAGE> 81

WORLDMARK, THE CLUB

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1995 1996
-------------------------------------- -------------------------------------- -------------------------
OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT
FUND FUND ALL FUNDS FUND FUND ALL FUNDS FUND FUND
---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Member
assessments..... $4,327,421 $ -- $ 4,327,421 $ 7,216,611 $ -- $7,216,611 $10,733,308 $ --
Interest income... 13,763 27,292 41,055 15,366 86,630 101,996 20,558 177,421
Other income...... 700,538 -- 700,538 1,459,503 -- 1,459,503 2,090,532 --
---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Total
income.... 5,041,722 27,292 5,069,014 8,691,480 86,630 8,778,110 12,844,398 177,421
---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Expenses
Property operating
expenses........ 3,100,576 350,910 3,451,486 5,287,309 410,897 5,698,206 7,665,860 576,555
General and
administrative.. 1,008,679 -- 1,008,679 1,502,570 -- 1,502,570 2,325,160 --
Management fees
paid to
developer....... 172,531 -- 172,531 746,672 -- 746,672 1,102,954 --
---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Total
expenses... 4,281,786 350,910 4,632,696 7,536,551 410,897 7,947,448 11,093,974 576,555
---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Excess (Deficit) of
Revenues Over
Expenses.......... 759,936 (323,618) 436,318 1,154,929 (324,267) 830,662 1,750,424 (399,134)
Fund Balance,
Beginning of
Year.............. 3,324 689,933 693,257 -- 1,129,575 1,129,575 -- 1,960,237
Transfer to
Replacement
Fund.............. (763,260) 763,260 -- (1,154,929) 1,154,929 -- (1,750,424) 1,750,424
---------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Fund Balance, End of
Year................ $ -- $1,129,575 $ 1,129,575 $ -- $1,960,237 $1,960,237 $ -- $3,311,527
========== ========== ========== =========== ========== ========== =========== ==========

TOTAL
ALL FUNDS
-----------
<S> <<C>
Revenues
Member
assessments..... $10,733,308
Interest income... 197,979
Other income...... 2,090,532
-----------
Total
income.... 13,021,819
-----------
Expenses
Property operating
expenses........ 8,242,415
General and
administrative.. 2,325,160
Management fees
paid to
developer....... 1,102,954
-----------
Total
expenses... 11,670,529
-----------
Excess (Deficit) of
Revenues Over
Expenses.......... 1,351,290
Fund Balance,
Beginning of
Year.............. 1,960,237
Transfer to
Replacement
Fund.............. --
-----------
Fund Balance, End of
Year................ $ 3,311,527
===========
</TABLE>

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996 FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED) (UNAUDITED)
------------------------------------------ ------------------------------------------
OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT TOTAL
FUND FUND ALL FUNDS FUND FUND ALL FUNDS
---------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Member assessments.................... $4,804,305 $ -- $ 4,804,305 $ 7,180,492 $ -- $7,180,492
Interest income....................... 12,970 79,673 92,643 10,760 123,742 134,502
Other income.......................... 1,021,801 -- 1,021,801 1,466,035 -- 1,466,035
---------- ---------- ---------- ---------- ---------- ----------
Total income.................... 5,839,076 79,673 5,918,749 8,657,287 123,742 8,781,029
---------- ---------- ---------- ---------- ---------- ----------
Expenses
Property operating expenses........... 3,502,322 278,449 3,780,771 4,899,641 372,437 5,272,078
General and administrative............ 1,195,826 -- 1,195,826 1,627,648 -- 1,627,648
Management fees paid to Developer..... 377,943 -- 377,943 996,350 -- 996,350
---------- ---------- ---------- ---------- ---------- ----------
Total expenses.................. 5,076,091 278,449 5,354,540 7,523,639 372,437 7,896,076
---------- ---------- ---------- ---------- ---------- ----------
Excess (Deficit) of Revenues Over
Expenses.............................. 762,985 (198,776) 564,209 1,133,648 (248,695) 884,953
Fund Balance, Beginning of Period....... -- 1,960,237 1,960,237 -- 3,311,527 3,311,527
Transfer to Replacement Fund............ (762,985) 762,985 -- (1,133,648) 1,133,648 --
---------- ---------- ---------- ---------- ---------- ----------
Fund Balance, End of Period............. $ -- $2,524,446 $ 2,524,446 $ -- $4,196,480 $4,196,480
========== ========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-23
<PAGE> 82

WORLDMARK, THE CLUB

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1995 1996
------------------------------------- ------------------------------------- ------------------------
OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT
FUND FUND ALL FUNDS FUND FUND ALL FUNDS FUND FUND
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities
Excess (deficit) of
revenues over
expenses......... $ 759,936 $(323,618) $ 436,318 $ 1,154,929 $ (324,267) $ 830,662 $ 1,750,424 $ (399,134)
Add non-cash items
included in
excess (deficit)
of revenues over
expenses
Depreciation..... 12,698 -- 12,698 13,538 -- 13,538 33,206 --
Amortization of
premium and
discount on
marketable
securities..... 2,752 -- 2,752 452 -- 452 -- --
Changes in assets
and liabilities
Transfer to
replacement
fund............. (763,260) 763,260 -- (1,154,929) 1,154,929 -- (1,750,424) 1,750,424
(Increase) in
member dues
receivable..... (1,098,738) -- (1,098,738) (1,722,150) -- (1,722,150) (1,897,447) --
(Increase)
decrease in
other
receivables.... 5,900 -- 5,900 (63,986) -- (63,986) (193,412) --
(Increase) in
prepaids and
other assets... (61,408) -- (61,408) (82,596) -- (82,596) (230,494) --
Increase
(decrease) in
accounts
payable and
accrued
expenses....... 85,123 -- 85,123 252,264 -- 252,264 (140,255) --
Increase in
accounts
payable to
Developer...... 46,132 -- 46,132 454,204 -- 454,204 121,672 --
Increase in
deferred
revenue........ 1,090,183 -- 1,090,183 1,985,299 -- 1,985,299 2,309,317 --
----------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Net Cash Provided
From Operating
Activities..... 79,318 439,642 518,960 837,025 830,662 1,667,687 2,587 1,351,290
----------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Cash Flows From
Investing
Activities
Provided by
maturity of
marketable
securities......... 99,000 -- 99,000 -- 275,000 275,000 100,000 254,000
Used for
investments in
marketable
securities....... (255,774) (567,936) (823,710) (347,257) (1,236,456) (1,583,713) (136,107) (1,446,861)
Used for purchases
of property and
equipment........ (5,971) -- (5,971) (73,412) -- (73,412) (142,364) --
----------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Net Cash Used For
Investing
Activities..... (162,745) (567,936) (730,681) (420,669) (961,456) (1,382,125) (178,471) (1,192,861)
----------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Net Increase
(Decrease) in
Cash and Cash
Equivalents.... (83,427) (128,294) (211,721) 416,356 (130,794) 285,562 (175,884) 158,429
Cash and Cash
Equivalents,
Beginning of
Year............... 104,819 259,088 363,907 21,392 130,794 152,186 437,748 --
----------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Cash and Cash
Equivalents, End of
Year............... $ 21,392 $ 130,794 $ 152,186 $ 437,748 $ -- $ 437,748 $ 261,864 $ 158,429
=========== ========= =========== =========== =========== =========== =========== ===========

TOTAL
ALL FUNDS
-----------
<S> <C>
Cash Flows From Oper
Activities
Excess (deficit) of
revenues over
expenses......... $ 1,351,290
Add non-cash items
included in
excess (deficit)
of revenues over
expenses
Depreciation..... 33,206
Amortization of
premium and
discount on
marketable
securities..... --
Changes in assets
and liabilities
Transfer to
replacement
fund............. --
(Increase) in
member dues
receivable..... (1,897,447)
(Increase)
decrease in
other
receivables.... (193,412)
(Increase) in
prepaids and
other assets... (230,494)
Increase
(decrease) in
accounts
payable and
accrued
expenses....... (140,255)
Increase in
accounts
payable to
Developer...... 121,672
Increase in
deferred
revenue........ 2,309,317
-----------
Net Cash Provided
From Operating
Activities..... 1,353,877
-----------
Cash Flows From
Investing
Activities
Provided by
maturity of
marketable
securities......... 354,000
Used for
investments in
marketable
securities....... (1,582,968)
Used for purchases
of property and
equipment........ (142,364)
-----------
Net Cash Used For
Investing
Activities..... (1,371,332)
-----------
Net Increase
(Decrease) in
Cash and Cash
Equivalents.... (17,455)
Cash and Cash
Equivalents,
Beginning of
Year............... 437,748
-----------
Cash and Cash
Equivalents, End of
Year............... $ 420,293
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-24
<PAGE> 83

WORLDMARK, THE CLUB

STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE SIX MONTHS ENDED JUNE 30, 1996 FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED) (UNAUDITED)
--------------------------------------- --------------------------------------
OPERATING REPLACEMENT TOTAL OPERATING REPLACEMENT TOTAL
FUND FUND ALL FUNDS FUND FUND ALL FUNDS
--------- ----------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Excess (deficit) of revenues over
expenses............................... $ 762,985 $(198,776) $ 564,209 $ 1,133,648 $ (248,695) $ 884,953
Add non-cash items included in excess
(deficit) of revenues over expenses
Depreciation........................... 13,029 -- 13,029 30,057 -- 30,057
Amortization of premium and discount on
marketable securities................ -- 3,715 3,715 -- 747 747
Changes in assets and liabilities........
Transfer to replacement fund........... (762,985) 762,985 -- (1,133,648) 1,133,648 --
Decrease in member dues receivable..... (378,135) -- (378,135) (320,387) -- (320,387)
(Increase) decrease in other
receivables.......................... (81,177) -- (81,177) (216,773) -- (216,773)
(Increase) decrease in prepaids and
other assets......................... (183,891) -- (183,891) (432,025) -- (432,025)
Increase in accounts payable and
accrued expenses..................... (23,147) -- (23,147) 305,068 -- 305,068
(Decrease) in accounts payable to
Developer............................ 75,689 -- 75,689 85,759 -- 85,759
Increase (decrease) in deferred
revenue.............................. 702,616 -- 702,616 696,129 -- 696,129
--------- --------- --------- ----------- ---------- ----------
Net Cash Provided From Operating
Activities...................... 124,984 567,924 692,908 147,828 885,700 1,033,528
--------- --------- --------- ----------- ---------- ----------
Cash Flows From Investing Activities
Provided by maturity of marketable
securities............................. 299,470 98,346 397,816 292,989 -- 292,989
Used for investments in marketable
securities............................. (192,930) (666,270) (859,200) -- (484,599) (484,599)
Used for purchases of property and
equipment.............................. (92,421) -- (92,421) (111,876) -- (111,876)
--------- --------- --------- ----------- ---------- ----------
Net Cash Used For Investing
Activities...................... 14,119 (567,924) (553,805) 181,113 (484,599) (303,486)
--------- --------- --------- ----------- ---------- ----------
Net Increase (Decrease) in Cash
and Cash Equivalents............ 139,103 -- 139,103 328,941 401,101 730,042
Cash and Cash Equivalents, Beginning of
Period................................... 437,748 -- 437,748 261,864 158,429 420,293
--------- --------- --------- ----------- ---------- ----------
Cash and Cash Equivalents, End of Period... $ 576,851 $ -- $ 576,851 $ 590,805 $ 559,530 $1,150,335
========= ========= ========= =========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-25
<PAGE> 84

WORLDMARK, THE CLUB

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996 AND JUNE 30, 1996 AND 1997
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1997 IS UNAUDITED)

NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business -- The Club is organized as a nonprofit mutual
benefit corporation and is engaged in the business of operating and maintaining
resort properties for use by its members. The Club has entered into a vacation
timeshare program with Trendwest Resorts, Inc. (the Developer) whereby the
Developer acquires or develops condominium resort properties and transfers
ownership of completed units free and clear of any liens or encumbrances to the
Club in exchange for the exclusive right to sell vacation timeshare credits
assigned to those units.

Parties purchasing timeshare credits from the Developer become members of
the Club and have the right to use any resort condominium in the system subject
to availability and the number of credits the member has available for use.

The Club has entered into a management agreement with the Developer to
manage and operate the resort properties. The Club pays for all operating,
maintenance and replacement costs.

Member Assessments -- Members pay dues and special assessments to the Club
to cover operating costs and to provide funds for estimated future replacements
of the resort properties. Members are billed annually on their membership date
for their total annual dues which are due and payable on a quarterly basis.
Revenue is recognized on member dues as it is earned on a monthly basis.

Member dues receivable at the balance sheet date represent the total annual
dues billed to the members less the amount of quarterly dues paid. Deferred
revenue at the balance sheet date represents dues billed but not yet earned.

To encourage prompt payment of member dues, the Club's policy is to suspend
the member's right to use the Club facilities when members become thirty days or
more delinquent in payment of their dues. The Club has the right to foreclose
vacation credits for the nonpayment of dues and allow the Developer to resell
the vacation credits subject to the Developer paying any outstanding membership
dues associated with the credits repossessed. Since the Developer desires to
resell the credits, delinquent dues are generally paid by the Developer
resulting in no loss to the Club.

Unsold vacation timeshare credits are held by the Developer and any dues
assessed against those credits are paid by the Developer.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Vacation credits........................ 212,120,790 304,713,004 351,404,000
Vacation credits held by the
Developer............................. 3,215,790 8,085,004 5,589,970
</TABLE>

Basis of Presentation -- The Club follows the financial reporting practices
of Common Interest Realty Associations (CIRAs) as presented in the AICPA Audit
and Accounting Guide for CIRAs (AICPA Guide). The Guide defines as common
property, property such as the Club's, wherein title or other evidence of
ownership is held directly by a CIRA.

Fund Accounting -- The Club uses fund accounting to observe the limitations
and restrictions placed on its financial resources by its governing documents.
Financial resources are classified for accounting and reporting purposes in the
following funds established according to their nature and purpose:

Operating Fund -- This fund is used to account for financial resources
available for the general operations of the Club.

F-26
<PAGE> 85

WORLDMARK, THE CLUB

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND JUNE 30, 1996 AND 1997
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1997 IS UNAUDITED)

NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Replacement Fund -- This fund is used to accumulate financial
resources designated for future major repairs and replacements.

Other Income -- Consists primarily of fees paid by members (bonus time) for
additional usage of condominiums not in use by members subject to availability
which primarily covers operating costs.

Cash And Cash Equivalents -- The Club considers all highly liquid
investments purchased with an original maturity date of 90 days or less to be
cash equivalents.

Reserve for Replacements -- An annual provision for replacements, based on
management's study of useful lives, is made to the extent required for the
estimated cost of refurbishing and replacing the interiors and furnishings of
the condominium units owned by the Club and maintaining the exteriors and common
areas of properties wholly owned by the Club. Actual expenditures may vary from
estimated future expenditures and the variations may be material. Actual
expenditures for replacements and renovations are charged to the replacement
fund.

Reserve funds for replacement are held in separate savings accounts and
investments and are generally not available for expenditures for normal
operations.

Estimates Required for Financial Reporting -- The preparation of financial
statements in conformity with generally accepted accounting principles requires
the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

Interim Financial Data -- The unaudited interim financial statements have
been prepared on the same basis as the audited financial statements and, in the
opinion of management, include all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial information set
forth therein, in accordance with generally accepted accounting principles. The
Club's interim results may be subject to fluctuations. As a result the Club
believes the results of operations for the interim periods are not necessarily
indicative of the results to be expected for any future period.

NOTE 2. FINANCIAL INSTRUMENTS

Financial Instruments -- The Company's recorded financial instruments
consist of cash, cash equivalents, member dues receivable, marketable securities
and accounts payable. The fair value of these financial instruments (except
marketable securities) approximate their recorded values.

Marketable securities consist entirely of long-term U.S. Treasury Notes
that management intends to hold to maturity.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Amortized cost...................... $2,524,044 $3,745,577
Fair market value................... 2,551,361 3,714,530
Gross unrealized gains.............. 34,638 11,697
Gross unrealized losses............. 7,321 42,744
</TABLE>

F-27
<PAGE> 86

WORLDMARK, THE CLUB

NOTE 2. FINANCIAL INSTRUMENTS (CONTINUED)
Marketable securities held to maturity will mature at face value without
regard to market gains or losses. Maturities as of December 31, 1996 were as
follows:

<TABLE>
<S> <C>
Within 1 year.................................... $ 908,000
1-5 years........................................ 1,892,000
6-10 years....................................... 917,000
----------
Total.................................. $3,717,000
==========
</TABLE>

NOTE 3 -- PROPERTY AND EQUIPMENT

Major classifications of property and equipment include the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
Office equipment....................... $115,323 $264,224
Building improvements.................. 650 1,726
-------- --------
115,973 265,950
Accumulated depreciation............... 44,209 77,593
-------- --------
$ 71,764 $188,357
======== ========
</TABLE>

In conformity with industry practice, as stated in the AICPA Guide, the
Club's policy for recognizing common property as assets in its balance sheet is
to recognize (a) common personal property and (b) real property to which it has
title and that it can dispose of for cash while retaining the proceeds or that
is used to generate significant cash flows from members on the basis of usage or
from nonmembers. The AICPA Guide defines as common property, property such as
the Club's, wherein title or other evidence of ownership is held directly by a
CIRA. All condominium units in the WorldMark system are held by the Club
directly because the Developer transfers the real property directly to the Club
when it is placed in service. The primary purpose of the properties is for use
by members. The properties are not held for sale, nor do they generate
significant cash flows on the basis of usage. Accordingly, condominium units
transferred from the Developer, and the related furnishings of such properties,
are not recorded in the Club's financial statements because of the restrictions
imposed by the by-laws on the board of directors' right to dispose of common
properties. The by-laws specify that the Board of Directors may exchange one
unit for another within the project provided that the properties are comparable
and there is no dilution of owner's rights. The by-laws also specify that the
Board of Directors may not sell assets of the Club with a fair value of more
than five percent of the Club's budgeted expenses for the fiscal year in which
the assets are sold. This restriction can only be overridden by a majority of
the voting power of the Members, excluding the Developer.

Common personal property used to operate and maintain the units and office
equipment are recorded at cost and depreciated using the straight-line method
over the estimated useful life. Depreciation expense for the years ended
December 31, 1994, 1995 and 1996 totaled $12,698, $13,538 and $33,206,
respectively.

The Club held title to 499 and 746 condominium units at December 31, 1995
and 1996, respectively. The condominium units are located in Washington, Oregon,
Hawaii, Nevada, California, British Columbia and Mexico.

F-28
<PAGE> 87

WORLDMARK, THE CLUB

NOTE 4 -- INCOME TAXES

The Club is taxed as a corporation under Section 277 of the Internal
Revenue Code. No provision for current or deferred income taxes has been
included in these financial statements as net income for the operating fund is
zero and taxable income is insignificant. The Club treats a portion of the dues
paid by members as a nontaxable contribution to capital for future capital
improvements under Section 118 of the Internal Revenue Code.

NOTE 5 -- COMMITMENTS

The Club holds title to condominiums in Hawaii on land subject to
noncancelable operating leases which expire in the years 2024 and 2029.

Future minimum rental payments for years ending December 31 are:

<TABLE>
<S> <C>
1997............................................. $ 30,284
1998............................................. 30,284
1999............................................. 30,284
2000............................................. 30,284
2001............................................. 30,284
Thereafter....................................... 906,210
----------
$1,057,630
==========
</TABLE>

Total rental expense for operating leases amounted to $15,090, $24,485 and
$25,337 for the years ended December 31, 1994, 1995 and 1996, respectively.

NOTE 6 -- RELATED PARTY TRANSACTIONS

The Club has entered into a management agreement with the Developer which
is subject to annual approval by the members. Under the terms of the management
agreement, the Club pays a management fee equal to the lesser of 15% of the
Club's budgeted expenditures or net profit of the Club. In addition, the
Developer is responsible for paying annual dues on vacation credits which it
owns prior to their sale to members. The Club reimburses the Developer for
certain direct expenses including payroll and payroll taxes, rent, telephone and
postage. A summary of these transactions follows for the years ended December
31:

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Dues on unsold vacation credits held in
inventory.................................... $ 136,546 $ 512,353 $ 273,234
Management fee expense......................... 172,531 746,672 1,102,954
Reimbursed wages............................... 528,321 1,533,074 3,102,717
Other reimbursed expenses...................... 170,276 296,755 323,495
Resort operations, maid and key services....... 1,033,975 331,729 --
</TABLE>

NOTE 7 -- CONCENTRATIONS OF CREDIT RISK

Member assessments receivable are due from economically diverse individuals
principally in the Western United States; the Developer has indicated that as
long as it is financially capable it would purchase all foreclosed vacation
credits for the unpaid dues recorded on the books of the Club and the Club is
secured by a collateral position in the vacation memberships sold.

Marketable securities consist entirely of obligations of the U.S.
Government.

The Club regularly has demand accounts on hand in financial institutions
which exceed depositors' insurance provided by the applicable guarantee agency.

F-29
<PAGE> 88

SUPPLEMENTARY INFORMATION

F-30
<PAGE> 89

WORLDMARK, THE CLUB

SCHEDULE OF CONDOMINIUMS OWNED
DECEMBER 31, 1996

<TABLE>
<CAPTION>
DEVELOPER'S
NUMBER OF ACQUISITION COST OF
NAME/LOCATION UNITS DATES ACQUISITION
- ----------------------------------------------- --------- ----------------- -----------
<S> <C> <C> <C>
Northshore Estates............................. 57 10/1/91-11/25/96 $ 7,082,210
Bass Lake, California
Palm Springs................................... 64 7/14/95-8/12/96 8,244,535
Palm Springs, California
Discovery Bay.................................. 32 1/24/92-12/21/95 4,546,791
Sequim, Washington
Eagle Crest.................................... 55 9/14/89-12/31/96 6,082,962
Redmond, Oregon
Birch Bay...................................... 52 11/6/95-7/21/95 7,305,114
Blaine, Washington
Kapaa Shores................................... 42 7/22/91-7/31/96 7,060,943
Kapaa, Kauai, Hawaii
Lake Chelan Shores............................. 13 8/2/90-3/25/94 1,545,937
Chelan, Washington
Mariner Village................................ 32 6/30/94-10/27/94 4,282,346
Ocean Shores, Washington
Otter Crest.................................... 9 9/12/89-5/10/91 698,170
Otter Rock, Oregon
Park Village................................... 48 7/8/92-11/13/96 6,512,717
Leavenworth, Washington
Sundance on the Edge........................... 25 2/28/92-12/21/94 4,088,792
Whistler, BC Canada
Surfside Inn................................... 25 9/20/91-11/6/92 1,441,659
Long Beach, Washington
Tahoe Summit Village........................... 50 1/25/91-9/10/93 5,055,088
Stateline, Nevada
Valley Isle.................................... 14 4/12/90-8/29/94 2,595,247
Lahaina, Maui, Hawaii
Beachcomber.................................... 20 4/30/93 2,783,686
Pismo Beach, California
Coral Baja..................................... 74 11/16/94-9/20/96 13,106,817
San Jose del Cabo, Mexico
Gleneden Beach................................. 80 3/13/96-9/16/96 12,532,945
Lincoln City, Oregon
Big Bear....................................... 12 4/5/96 1,160,844
Big Bear Lake, California
Las Vegas...................................... 42 12/16/96 2,698,863
Las Vegas, Nevada
--- -----------
Total..................................... 746 $98,825,666
=== ===========
</TABLE>

F-31
<PAGE> 90

WORLDMARK, THE CLUB

SUPPLEMENTAL INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS
DECEMBER 31, 1996

<TABLE>
<CAPTION>
ESTIMATED ESTIMATED COMPONENTS
REMAINING CURRENT OF
USEFUL LIVES REPLACEMENT RESERVE
(YEARS) COSTS BALANCE
------------ ----------- ----------
<S> <C> <C> <C>
Roofs, decks and exteriors................................. 2.5 to 19.5 $ 1,349,480 $ 187,894
Cabinets, counters, furnaces, water heaters, tile, vinyl... 5.5 to 14.5 3,415,893 1,468,834
Furnishing and equipment................................... 1.5 to 9.5 4,528,045 1,654,799
---------- ----------
Total............................................ $ 9,293,418 $3,311,527
========== ==========
</TABLE>

F-32
<PAGE> 91

=========================================================

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, by the Selling
Stockholder or by any of the Underwriters. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any security other than
the registered securities to which this Prospectus relates or any offer to any
person in any jurisdiction where such an offer would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof.
--------------------------

TABLE OF CONTENTS
--------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 10
Use of Proceeds......................... 17
Dividend Policy......................... 17
Capitalization.......................... 18
Dilution................................ 19
Selected Combined and Consolidated
Financial and Operating Data.......... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 21
Business................................ 27
Management.............................. 41
Certain Transactions.................... 46
Principal and Selling Stockholders...... 49
Description of Capital Stock............ 49
Certain Provisions of Oregon Law and of
Trendwest's Articles of Incorporation
and Bylaws............................ 50
Shares Eligible For Future Sale......... 52
Underwriting............................ 53
Legal Matters........................... 54
Experts................................. 54
Change in Accountants................... 55
Additional Information.................. 57
Index to Financial Statements........... F-1
</TABLE>

Until September 8, 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotment or
subscriptions.
=========================================================
=========================================================

2,875,000 SHARES

[TRENDWEST RESORTS, INC. LOGO]

COMMON STOCK

---------------------------

PROSPECTUS
---------------------------

MONTGOMERY SECURITIES
SALOMON BROTHERS INC
August 14, 1997
=========================================================