AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1996

REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

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

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

FLORIDA 6552 59-3415620
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
8801 VISTANA CENTRE DRIVE
ORLANDO, FLORIDA 32821
(407) 239-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S EXECUTIVE OFFICES)

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

RAYMOND L. GELLEIN, JR.
CHAIRMAN OF THE BOARD
VISTANA, INC.
8801 VISTANA CENTRE DRIVE
ORLANDO, FLORIDA 32821
(407) 239-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

WITH COPIES TO:
MARSHALL E. EISENBERG, ESQ. PETER T. HEALY, ESQ.
NEAL, GERBER & EISENBERG O'MELVENY & MYERS LLP
TWO NORTH LASALLE STREET 275 BATTERY STREET
SUITE 2200 EMBARCADERO CENTER WEST
CHICAGO, ILLINOIS 60602 SAN FRANCISCO, CALIFORNIA 94111
(312) 269-8000 (415) 984-8833

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ---------------------------------------------------------------------------------

Common Stock, par value
$0.01 per share........ 6,382,500 shares $14 $89,355,000 $27,077

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 832,500 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2)Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 31, 1996

5,550,000 SHARES

[LOGO]

VISTANA, INC.

COMMON STOCK

Of the 5,550,000 shares of common stock, par value $0.01 per share ("Common
Stock"), of Vistana, Inc. (the "Company"), offered hereby (the "Offering"),
4,625,000 shares are being sold by the Company and 925,000 shares are being
sold by the Selling Shareholders named herein. The Company will not receive any
of the proceeds from the sale of shares of Common Stock by the Selling
Shareholders. Prior to the Offering, there has been no public market for the
Common Stock of the Company. It is currently anticipated that the initial
public offering price will be between $12.00 and $14.00 per share of Common
Stock. See "Underwriting" for a discussion of factors considered in determining
the initial public offering price. The Common Stock has been approved for
quotation on the Nasdaq National Market, subject to official notice of
issuance, under the symbol "VSTN."

SEE "RISK FACTORS" COMMENCING ON PAGE 11 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.

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

Underwriting Discounts Proceeds to Proceeds to Selling
Price to Public and Commissions(1) Company(2) Shareholders
- -----------------------------------------------------------------------------------------------

Per Share............... $ $ $ $
Total(3)................ $ $ $ $
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $2,150,000.
The Company has agreed to pay the expenses of the Selling Shareholders,
other than Underwriting Discounts and Commissions.
(3) The Company and the Selling Shareholders have collectively granted the
Underwriters a 30-day option to purchase up to an additional 832,500 shares
of Common Stock (which option is currently contemplated to be satisfied
solely by the Selling Shareholders). If the Underwriters exercise this
option in full (and all shares of Common Stock subject thereto are sold
solely by the Selling Shareholders), the Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Shareholders will total $ , $ , $ and $ , respectively. See
"Principal and Selling Shareholders" and "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 of Common Stock will be
made against payment therefor at the office of Montgomery Securities on or
about , 1997.

-----------

Montgomery Securities Smith Barney Inc.

, 1997

[OUTSIDE COVER OF GATEFOLD--GRAPHICS TO FOLLOW]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, ON THE OPEN MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

EMBASSY VACATION RESORT(R), EMBASSY SUITES(R), HAMPTON VACATION RESORT SM
HAMPTON INN(R), HOMEWOOD VACATION RESORT SM AND HOMEWOOD SUITES(R) ARE
TRADEMARKS AND SERVICE MARKS OF PROMUS HOTELS, INC. AND OTHER WHOLLY-OWNED
SUBSIDIARIES OF PROMUS HOTEL CORPORATION.

PGA(R) IS A TRADEMARK OF THE PROFESSIONAL GOLFERS' ASSOCIATION OF AMERICA.

WORLD GOLF VILLAGESM IS A SERVICE MARK OF WORLD GOLF VILLAGE, INC.

[INSIDE OF GATEFOLD--GRAPHICS TO FOLLOW]

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Combined Financial
Statements of Vistana, Inc. included elsewhere in this Prospectus. Except where
otherwise indicated, the information contained in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option; (ii) assumes that any
outstanding options to purchase Common Stock (as defined herein) have not been
exercised; (iii) gives effect to the consummation of the Formation Transactions
(as defined herein), which will occur concurrently with the completion of the
Offering (as defined herein); and (iv) assumes Vacation Ownership Interests (as
defined herein) are presented on an annual, as opposed to an alternate-year,
basis. Unless the context otherwise requires, the "Company" means Vistana, Inc.
and its consolidated subsidiaries following the consummation of the Formation
Transactions and includes its corporate and partnership predecessors and
partnerships in which the Company owns a controlling interest. Unless otherwise
indicated, all vacation ownership industry data contained herein is derived
from information prepared by the American Resort Development Association
("ARDA"), the industry's principal trade association. This Prospectus contains
certain statements of a forward-looking nature relating to future events or the
future financial performance of the Company. Prospective investors are
cautioned that such statements are predictions only and that actual events or
results may differ materially. In evaluating such statements, prospective
investors should specifically consider the various factors identified in this
Prospectus, including the matters set forth under the caption "Risk Factors,"
which could cause actual results to differ materially from those indicated in
such forward-looking statements.

THE COMPANY

Founded in 1980, the Company is a leading developer and operator of timeshare
resorts in the United States. The Company's principal operations consist of (i)
acquiring, developing and operating timeshare resorts, also known as vacation
ownership resorts; (ii) marketing and selling vacation ownership interests in
its resorts, which typically entitle the buyer to ownership of a fully-
furnished unit for a one-week period on either an annual or alternate-year
basis ("Vacation Ownership Interests"); and (iii) providing financing for the
purchase of Vacation Ownership Interests at its resorts. The Company currently
operates three vacation ownership resorts in Florida with a total of 1,378
units, or 70,278 Vacation Ownership Interests, and is currently constructing a
fourth resort at World Golf Village, a destination golf resort and future home
of the World Golf Hall of Fame currently under development near St. Augustine,
Florida. In addition, the Company has entered into an exclusive joint venture
agreement with Promus Hotels, Inc. ("Promus"), a leading hotel company in the
United States, for the joint development and operation of vacation ownership
resorts in selected North American markets. The Company has also entered into a
letter of intent with The Professional Golfers' Association of America ("PGA of
America") for the development of golf-oriented vacation ownership resorts.

The Company opened the first vacation ownership resort in Orlando, Florida,
which has become one of the largest vacation ownership markets in the world.
During its 16-year history, the Company has sold in excess of $550 million of
Vacation Ownership Interests and has an ownership base of over 49,000 owners
residing in more than 100 countries. Raymond L. Gellein, Jr., the Chairman and
Co-Chief Executive Officer, and Jeffrey A. Adler, the President and Co-Chief
Executive Officer, have been employed by the Company since 1980 and 1983,
respectively. Under their direction, the Company has focused on creating a
values-driven business culture that emphasizes excellence and quality
relationships with its employees, customers and business partners. Management
believes that these philosophies have been instrumental to the Company's
success.

Each of the Company's operating resorts is rated as a Gold Crown resort by
Resort Condominiums International ("RCI"), the operator of the world's largest
Vacation Ownership Interest exchange network, which was recently acquired by
HFS Incorporated. The Gold Crown distinction is reserved for approximately the
top 14% of the more than 3,000 vacation ownership resorts in the RCI network.

The vacation ownership industry has experienced substantial growth since
1980. Annual worldwide vacation ownership sales have increased from
approximately $490 million in 1980 to approximately $4.76 billion in 1994 (the
latest period for which ARDA information is available), with approximately 75%
of such sales growth occurring since 1990. Based on other industry information,
the Company believes that vacation ownership sales exceeded $5.0 billion in
1995. The Company believes that the growth in the worldwide vacation ownership
industry is the result of a number of factors, including (i) increased consumer
confidence in the vacation ownership concept resulting from the improved
quality of vacation ownership resorts and more effective governmental
regulation of the industry; (ii) the entry into the industry by national
lodging and hospitality companies; (iii) increased vacation flexibility
resulting from the growth of the Vacation Ownership Interest exchange networks;
and (iv) consumer recognition of the relative economic benefits of vacation
ownership. Approximately 52% of all owners of Vacation Ownership Interests
reside in the United States. Still, less than 2% of all United States
households own a Vacation Ownership Interest. Approximately 41% of all Vacation
Ownership Interest buyers own more than one Vacation Ownership Interest. See
"Business--The Vacation Ownership Industry."

The Company's goal is to maintain and expand its position as a leading
developer and operator of vacation ownership resorts in the United States by
(i) continuing sales of Vacation Ownership Interests at the Company's two
Orlando-area resorts; (ii) acquiring, developing and selling additional
vacation ownership resorts; and (iii) improving operating margins by reducing
borrowing costs and reducing general and administrative expenses as a
percentage of revenues. In achieving this goal, the Company intends to adhere
to its core operating strategies of obtaining extensive access to qualified
buyers, promoting sales excellence and delivering memorable vacation
experiences to its owners and guests.

Continuing Sales at the Company's Orlando-Area Resorts. With over 36 million
visitors annually, Orlando is one of the most popular vacation destinations in
the United States. The Company intends to maintain its position as a leader in
the Orlando vacation ownership market by developing and selling an additional
479 units at Vistana Resort, representing an additional 24,429 Vacation
Ownership Interests. In addition, the Company plans to continue sales at Oak
Plantation Villas by Vistana, a 242-unit former apartment complex located in
the Orlando market, which the Company is converting in phases into a vacation
ownership resort and which is owned by a partnership in which the Company holds
an approximately 67% controlling ownership interest. As of September 30, 1996,
Oak Plantation Villas by Vistana had an unsold inventory of approximately
12,342 Vacation Ownership Interests. Current prices for Vacation Ownership
Interests at Vistana Resort and Oak Plantation Villas by Vistana range from
$7,250 to $16,000, and from $5,800 to $8,500, respectively.

Acquiring and Developing Additional Resorts. The Company intends to rely on
its operating knowledge and new strategic relationships to acquire and develop
additional vacation ownership resorts, including the following opportunities:

. Promus. The Company and Promus have entered into an exclusive five-year
agreement (the "Promus Agreement") to jointly acquire, develop, market
and operate vacation ownership resorts in North America under Promus'
Embassy Vacation Resort, Hampton Vacation Resort and Homewood Vacation
Resort brands. Under the Promus Agreement, the Company will be Promus'
exclusive joint venture partner for the acquisition, development and
operation of vacation ownership resorts in North America and will also
have the option of operating vacation ownership resorts on a franchise
basis. Promus has agreed that the Company will be the sole franchisee in
North America of the Hampton Vacation Resort and Homewood Vacation
Resort brands, and one of only two franchisees in North America of the

Embassy Vacation Resort brand. The Promus Agreement precludes the Company
from acquiring or developing vacation ownership resorts with any other
multi-hotel brand, but preserves its ability to develop vacation ownership
resorts in combination with non-hotel brands (such as PGA of America), to
acquire or develop vacation ownership resorts under the Vistana name
(other than in certain selected markets agreed to by the parties), and to
develop vacation ownership resorts with unique, non-multi-hotel brand
hotel properties. Although the Company and Promus are evaluating new
resort development opportunities for the joint venture, no commitments
have been made for a specific development at this time. However, the
parties have agreed to franchise two of the Company's properties subject
to the execution of definitive franchise agreements: (i) Oak Plantation
Villas by Vistana, which is intended to become the first vacation
ownership resort to operate under the Hampton Vacation Resort brand; and
(ii) a 550-unit resort in Myrtle Beach, South Carolina, which the Company
intends to develop on a 40-acre site (the first parcel of which was
acquired by the Company in December 1996) and to operate under the Embassy
Vacation Resort brand (the "Myrtle Beach Resort"). The Company believes it
will benefit from Promus' strong brand recognition, large customer base,
marketing capabilities and hospitality management expertise.

. World Golf Village. In the fall of 1996, the Company commenced
construction of the first phase of a 408-unit vacation ownership resort
at World Golf Village. Constituting the centerpiece of a planned
community under development near St. Augustine, Florida, World Golf
Village is a destination resort which will contain the World Golf Hall
of Fame, a championship golf course, a golf academy, a hotel and
convention center, restaurants, retail facilities and other amenities.
The Company holds a 37.5% controlling ownership interest in a limited
partnership which has the exclusive rights to develop and market
Vacation Ownership Interests at World Golf Village. The Company
anticipates that sales of Vacation Ownership Interests at World Golf
Village will commence in the spring of 1998 for between $7,500 and
$16,000. The Company believes that World Golf Village and the golf
industry in general represent attractive opportunities for Company
expansion and the development of future vacation ownership resorts.

. PGA of America. Under a letter of intent with PGA of America, which
contemplates a long-term affiliation for the development of future
vacation ownership resorts, the Company intends to acquire 25 acres of
land adjacent to an existing 36-hole championship golf facility owned by
a subsidiary of PGA of America in Port St. Lucie, Florida, for the
development of the first PGA Vacation Resort by Vistana. The property,
located approximately 40 miles north of Palm Beach Gardens, Florida, is
planned to contain approximately 250 units, representing a total of
12,750 Vacation Ownership Interests with an expected price range of
$6,000 to $12,000. The Company intends to commence construction of the
first phase of this resort during 1997. The Company believes that PGA of
America, through its approximately 20,000 golf professionals, will
provide strategic marketing opportunities for this resort and any future
PGA Vacation Resorts developed by the Company.

. Vistana Branded Resorts and Acquisition Opportunities. To capitalize on
the Vistana brand and reputation, the Company intends to seek other
vacation ownership resort development opportunities in selected vacation
markets where, among other things, it believes it can obtain effective
marketing access to potential customers. In addition, the Company from
time to time evaluates opportunities to acquire vacation ownership
assets and operating companies that may be integrated into the Company's
existing operations. However, the Company currently has no contracts or
capital commitments relating to any such acquisitions.

Improving Operating Margins. The Company intends to improve operating margins
by reducing (i) its financing costs by entering into more favorable borrowing
agreements and (ii) its general and administrative costs as a percentage of
revenues.

The Company has historically provided financing for approximately 93% of its
customers, who are required to make a down payment of at least 10% of the
Vacation Ownership Interest's sales price and generally pay the balance of the
sales price over a period of seven years. The Company typically borrows from
third-party

lending institutions in order to finance its loans to Vacation Ownership
Interest buyers. As of September 30, 1996, the Company had a portfolio of
approximately 21,000 loans to customers totaling approximately $114.2 million
($9.5 million of which were off-balance sheet at September 30, 1996), with an
average yield of 14.4% per annum (compared to the Company's weighted average
cost of funds of 10.4% per annum). As of September 30, 1996 (i) approximately
3.0% of the Company's customer mortgages receivable were 60 to 120 days past
due; and (ii) approximately 5.5% of the Company's customer mortgages receivable
were more than 120 days past due and the subject of legal proceedings.

The Company also provides hospitality management, operations, maintenance and
telecommunications services at its resorts. Pursuant to management agreements
between the Company and the homeowners' associations at its existing resorts,
the Company has sole responsibility and exclusive authority for the day-to-day
operation of these resorts. In addition, the Company also provides
telecommunications design and installation services for third parties on a
limited basis.

THE RESORTS

The following table sets forth certain information as of September 30, 1996
regarding each of the Company's existing and planned resorts, including
location, the date sales of Vacation Ownership Interests commenced (or are
expected to commence), the number of existing and total planned units, the
number of Vacation Ownership Interests sold at each existing resort since its
development by the Company and the number of Vacation Ownership Interests sold
in 1996, the average sales price of Vacation Ownership Interests sold in 1996
and the number of Vacation Ownership Interests available for sale currently and
after giving effect to planned expansion. The exact number of units ultimately
constructed and Vacation Ownership Interests available for sale at each resort
may differ from the following planned estimates based on future land use,
project development, site layout considerations and customer demand.

VACATION
OWNERSHIP VACATION OWNERSHIP
INTERESTS AVERAGE INTERESTS AT
DATE SALES UNITS AT RESORT SOLD(A) SALES RESORTS(A)
COMMENCED/ --------------- ------------ PRICE -------------------
EXPECTED TO TOTAL IN CURRENT PLANNED
RESORT LOCATION COMMENCE(B) CURRENT PLANNED TOTAL 1996 1996(A) INVENTORY EXPANSION
- ----------------------- ------------------ ----------- ------- ------- ------ ----- ------- --------- ---------

Vistana Resort (c) Orlando, Florida 1980 1,060 1,539 54,314 4,160(d) $10,418(d) 1,648 24,429
Vistana's Beach Hutchinson Island,
Club (e) Florida 1989 76 76 3,864 339 $ 8,331 12 0
Oak Plantation Kissimmee, Florida
Villas by Vistana (f) 1996 242 242 0 0 0 12,342 0
Vistana Resort at St. Augustine,
World Golf Village (g) Florida 1998 -- 408 -- -- -- -- 20,808
PGA Vacation Port St. Lucie,
Resort by Vistana (h) Florida 1998 -- 250 -- -- -- -- 12,750
Myrtle Beach Resort (i) Myrtle Beach,
South Carolina 1998 -- 550 -- -- -- -- 28,050
----- ----- ------ ----- ------ ------
TOTAL 1,378 3,065 58,178 4,499 14,002 86,037
===== ===== ====== ===== ====== ======

Interests on an annual basis only. To the extent these Vacation Ownership
Interests are sold on an alternate-year basis, the actual number of Vacation
Ownership Interests at Resorts would be increased. The Company sells 51
annual Vacation Ownership Interests (or 102 alternate-year Vacation
Ownership Interests) per unit with respect to each calendar year, with one
week reserved each year for maintenance of the unit.
(b) Dates listed represent the dates the Company began recording (or expects
to begin recording) sales of Vacation Ownership Interests for financial
reporting purposes.
(c) Vistana Resort consists of seven development phases, six of which have
been completed and one of which is currently under construction. The
number of Units at Resort includes (i) 1,060 current existing units; and
(ii) 479 additional units, some of which are currently under construction
and scheduled for completion at various times beginning in the fourth
quarter of 1996, representing an additional 24,429 Vacation Ownership
Interests (of which no Vacation Ownership Interests have been sold).
Figures with respect to this property assume that all units to be
constructed will consist of one- and two-bedroom units; however, the
actual number of additional Vacation Ownership Interests resulting from
planned construction could vary depending upon the configuration of these
units.
(d) Includes 1,365 alternate-year Vacation Ownership Interests with an average
sales price of $7,419 and 2,795 annual Vacation Ownership Interests with an
average sales price of $11,882.
(e) Vistana's Beach Club consists of two buildings containing a total of 76
current existing units, which represent 3,876 Vacation Ownership
Interests. The Company's Current Inventory of 12 Vacation Ownership
Interests at this resort consists primarily of previously-sold Vacation
Ownership Interests that the Company has since reacquired in connection
with defaults under customer mortgages. The Company has no plans to build
any additional units at this resort.
(f) Oak Plantation Villas by Vistana consists of 242 current existing units,
representing 12,342 annual Vacation Ownership Interests. Prior to its
acquisition by the Company in June 1996, this property was operated by a
third party as a rental apartment complex. The Company commenced
conversion of the property into a vacation ownership resort in July 1996.
As of December 15, 1996, the conversion of 61 units had been completed.
Conversion of the remaining units is anticipated to be completed at
various times as the sales pace warrants. The Company currently has no
plans to build any additional units at this resort. It is anticipated that
Oak Plantation Villas by Vistana will be operated on a franchise basis as
the first Hampton Vacation Resort pursuant to the Promus Agreement.
(g) Vistana Resort at World Golf Village will consist of an estimated 408
units, representing an estimated 20,808 Vacation Ownership Interests, of
which 102 units, representing 5,202 Vacation Ownership Interests, are
currently under construction and scheduled for completion in the spring of
1998. Construction of the remaining 306 additional estimated units,
representing an additional estimated 15,606 Vacation Ownership Interests,
is expected to commence at various times.
(h) PGA Vacation Resort by Vistana will consist of approximately 250 units,
representing an estimated 12,750 Vacation Ownership Interests, and will be
constructed by the Company on 25 acres of land which it intends to acquire
in approximately three stages. In October 1996, the Company entered into a
letter of intent with PGA of America pursuant to which it has agreed
(subject to execution of definitive documentation and customary due
diligence) to purchase a minimum of 10 acres prior to March 21, 1997 and a
total of 25 acres prior to December 31, 2000. The Company anticipates that
it will commence construction of this resort during 1997.
(i) In December 1996, the Company acquired the initial 14 acres of unimproved
land in Myrtle Beach, South Carolina for the development of the Myrtle
Beach Resort. The Company also has an option until December 31, 2003 to
acquire up to 26 additional acres of contiguous property for phased
expansion of the resort. It is anticipated that the Myrtle Beach Resort
will be operated as an Embassy Vacation Resort franchise pursuant to the
terms of the Promus Agreement.

CORPORATE BACKGROUND AND THE FORMATION TRANSACTIONS

The business of the Company is currently conducted through entities (the
"Affiliated Companies") owned and controlled by the Existing Shareholders (as
defined below) and through partnerships controlled by the Company having third
party partners (the "Related Partnerships"). Each of Vistana Resort and
Vistana's Beach Club is operated by Affiliated Companies, the Myrtle Beach
Resort is being developed by an Affiliated Company, Oak Plantation Villas by
Vistana is operated by a Related Partnership, in which Affiliated Companies own
an approximately 67% controlling interest, and Vistana Resort at World Golf
Village is being developed by a Related Partnership, in which Affiliated
Companies own a 37.5% controlling interest. Concurrently with the completion of
the Offering, in exchange for the issuance of Common Stock, the Existing
Shareholders will transfer to the Company all of the outstanding capital stock
or partnership interests in certain of the Affiliated Companies and in each of
the Related Partnerships (collectively, the "Formation Transactions"). As a
result, following the consummation of the Formation Transactions, all of the
interests in the Affiliated Companies and the Related Partnerships currently
held by the Company's predecessors and the Existing Shareholders will be owned
by the Company. All financial and share information presented in this
Prospectus assumes the consummation of the Formation Transactions and reflects
the issuance of 14,174,980 shares of Common Stock to the Existing Shareholders.
See "Principal and Selling Shareholders."

The Company was incorporated in the State of Florida in December 1996 to
effect the Formation Transactions and the Offering. The Company's principal
executive offices are located at 8801 Vistana Centre Drive, Orlando, Florida
32821, and its telephone number at that address is (407) 239-3000. Following
completion of the Offering, Jeffrey A. Adler, Raymond L. Gellein, Jr. and JGG
Holdings Trust (together with their respective family members and certain
trusts primarily for the benefit of their respective family members, the
"Existing Shareholders") will beneficially own in the aggregate approximately
70.5% of the outstanding Common Stock. JGG Holdings Trust is a trust for the
benefit of Mr. Gellein's former wife. Mr. Gellein, who serves as trustee of JGG
Holdings Trust, has exclusive authority to vote all shares of stock, including
the Common Stock, held by the trust.

THE OFFERING

Common Stock offered by the
Company...................... 4,625,000 shares(1)
Common Stock offered by the
Selling Shareholders......... 925,000 shares(1)
Common Stock to be outstanding
after the Offering........... 18,800,000 shares(1)(2)
Use of proceeds to the To repay a portion of the Company's outstanding
Company...................... indebtedness, to fund a portion of the cost of
the acquisition, development and expansion of
existing and future vacation ownership resorts
and for working capital and other general
corporate purposes.
Proposed Nasdaq National
Market symbol................ VSTN

- --------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(2) Does not include 535,000 shares of Common Stock issuable upon exercise of
options outstanding as of December 27, 1996 under the Company's 1996 Stock
Plan (the "Stock Plan") or additional shares of Common Stock issuable upon
exercise of options which may be granted concurrently with the completion
of the Offering. See "Management--Stock Plan."

SUMMARY COMBINED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION(A)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AND AVERAGE PRICE DATA)

HISTORICAL PRO FORMA(B)
------------------------------------------------------------ ----------------------------------
YEAR ENDED NINE MONTHS ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------- ------------ ---------------------
1992 1993 1994 1995 1995 1996 1995 1995 1996
-------- -------- -------- -------- -------- ---------- ------------ ---------- ----------

STATEMENT OF
OPERATIONS:
Revenues:
Vacation Ownership
Interest sales...... $ 48,503 $55,658 $54,186 $50,156 $ 38,478 $46,161 $ 50,156 $ 38,478 $46,161
Interest income...... 4,662 5,096 7,654 12,886 9,102 10,727 12,886 9,102 10,727
Resort revenue....... 9,977 10,877 11,834 12,613 9,641 10,584 12,613 9,641 10,584
Telecommunications... 1,703 1,980 3,378 4,802 3,688 5,257 4,802 3,688 5,257
Other................ 489 551 584 652 410 373 652 410 373
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Total revenues........ 65,334 74,162 77,636 81,109 61,319 73,102 81,109 61,319 73,102
COSTS AND OPERATING
EXPENSES:
Vacation Ownership
Interest cost of
sales............... 10,254 11,521 11,391 12,053 9,215 11,329 12,053 9,215 11,329
Sales and marketing.. 17,689 21,866 22,872 22,318 16,728 20,094 22,318 16,728 20,094
Loan portfolio
Interest expense--
treasury............ 1,556 2,070 3,605 6,516 4,678 5,026 4,149 2,903 4,305
Provision for
doubtful accounts... 3,405 3,903 3,803 3,522 2,700 3,272 3,522 2,700 3,272
Resort expenses...... 8,594 9,493 10,037 10,585 8,145 8,847 10,585 8,145 8,847
Telecommunications
expenses............ 1,358 1,537 2,520 3,654 2,852 4,114 3,654 2,852 4,114
General and
administrative...... 6,628 7,419 7,988 6,979 5,141 5,343 6,979 5,141 5,343
Depreciation and
amortization........ 875 875 1,392 2,215 1,565 1,815 2,034 1,429 1,557
Interest expense--
other............... 2,523 2,269 2,106 3,168 2,186 2,972 1,592 1,004 580
Other................ 1,688 1,318 1,241 1,020 903 567 1,020 903 567
Deferred executive
incentive
compensation........ 402 380 332 3,448 2,586 914 3,448 2,586 914
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Total costs and
operating expenses... 54,972 62,651 67,287 75,478 56,699 64,293 71,354 53,606 60,922
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Operating income...... 10,362 11,511 10,349 5,631 4,620 8,809 9,755 7,713 12,180
Excess value
recognized.......... 1,151 701 365 219 164 105 219 164 105
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Pretax income......... 11,513 12,212 10,714 5,850 4,784 8,914 9,974 7,877 12,285
Provision for taxes.. -- -- -- -- -- -- 3,678 2,904 4,538
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Net income............ $ 11,513 $ 12,212 $ 10,714 $ 5,850 $ 4,784 $ 8,914 $ 6,296 $ 4,973 $ 7,747
======== ======== ======== ======== ======== ========== ========== ========== ==========
Pro forma net
income(c)............ $ 6,907 $ 7,780 $ 6,730 $ 3,724 $ 3,044 $ 5,644
Pro forma net income
per share of Common
Stock................ $ 0.40 $ 0.33 $ 0.26 $ 0.41
Pro forma weighted
average shares of
Common Stock
outstanding.......... 14,175,000 18,800,000 18,800,000 18,800,000
CASH FLOW DATA:
EBITDA(d)............. $ 15,316 $ 16,725 $ 17,452 $ 17,530 $ 13,049 $ 18,622
Cash flow provided by
(used in):
Operating
activities.......... $ 17,604 $ 10,880 $ 13,571 $ 13,433 $ 7,076 $ 9,040
Investing
activities.......... $(20,621) $(20,530) $(20,434) $(22,639) $(15,772) $ (19,995)
Financing
activities.......... $ 3,410 $ 11,085 $ 6,512 $ 15,131 $ 13,725 $ 10,339
OPERATING DATA:
Number of resorts at
end of period........ 2 2 2 2 2 3
Number of Vacation
Ownership Interests
sold(e).............. 4,980 5,679 5,582 5,190 3,947 4,499
Number of Vacation
Ownership Interests
in inventory at end
of period(f)......... 1,967 3,781 3,822 3,054 3,808 14,002
Average price of
Vacation Ownership
Interests sold....... $ 9,740 $ 9,801 $ 9,707 $ 9,664 $ 9,749 $ 10,260

SEPTEMBER 30, 1996
-----------------------
ACTUAL AS ADJUSTED(G)
-------- --------------

BALANCE SHEET DATA (AT END OF PERIOD):
Cash (including restricted cash)........................ $ 10,172 $ 22,150
Total assets............................................ $163,501 $174,600
Notes and mortgages payable............................. $110,284 $ 71,313
Shareholders' equity.................................... $ 25,814 $ 65,584

- --------
(a) The Summary Financial Information was derived from the "Selected Combined
Historical Financial Information" and the Company's Combined Financial
Statements and related Notes thereto appearing elsewhere in this
Prospectus. The information set forth in this table should be read in
conjunction with "Selected Combined Historical Financial Information,"
"Pro Forma Combined Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the
Combined Financial Statements and related Notes thereto appearing
elsewhere in this Prospectus.
(b) Pro Forma Financial Information gives effect to the Formation
Transactions, the Offering, the retirement of $39.0 million of debt,
elimination of interest expense related to the retired debt, elimination
of amortization related to prepaid financing fees on the retired debt and
the treatment of the combined Company as a C corporation rather than as S
corporations and limited partnerships for federal income tax purposes.
(c) Reflects the effect on historical statements, assuming the Company had
been treated as a C corporation rather than as S corporations and limited
partnerships for federal income tax purposes.
(d) As shown below, EBITDA represents net income before interest expense,
income taxes, depreciation and amortization and excess value recognized
which reflects the amortization of the difference between the fair value
of the Company at the time of its purchase by Messrs. Gellein and Adler
and a third individual, less the purchase price paid to acquire the
Company. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness.
However, EBITDA should not be construed as an alternative to net income as
a measure of the Company's operating results or to operating cash flow as
a measure of liquidity. The following table reconciles EBITDA to net
income:

NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30
---------------------------------- ----------------
1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------

Net Income.............. $11,513 $12,212 $10,714 $ 5,850 $ 4,784 $ 8,914
Interest expense--
treasury............... 1,556 2,070 3,605 6,516 4,678 5,026
Interest expense--
other.................. 2,523 2,269 2,106 3,168 2,186 2,972
Taxes................... 0 0 0 0 0 0
Depreciation and
amortization........... 875 875 1,392 2,215 1,565 1,815
Excess value
recognized............. (1,151) (701) (365) (219) (164) (105)
------- ------- ------- ------- ------- -------
EBITDA.................. $15,316 $16,725 $17,452 $17,530 $13,049 $18,622
======= ======= ======= ======= ======= =======

(e) Includes both annual and alternate-year Vacation Ownership Interests.
(f) Inventory classified as annual Vacation Ownership Interests.
(g) Adjusted to give effect to (i) the sale of 4,625,000 shares of Common
Stock offered hereby at an offering price of $13.00 per share less the
underwriting discounts and commissions and expenses of the Offering; (ii)
the retirement of $39.0 million of debt; (iii) the write-off of prepaid
financing fees associated with the retired debt; and (iv) the treatment of
the Company as a C corporation resulting in a deferred tax liability of
$10.3 million.

RISK FACTORS

Prospective investors should carefully consider the following information in
conjunction with the other information contained in this Prospectus before
purchasing any of the shares of Common Stock offered hereby. Certain
statements in this Prospectus that are not historical fact constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Discussions containing such forward-looking statements may be found in the
material set forth in "Prospectus Summary," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources," and "Business," as well as within this
Prospectus generally. In addition, when used in this Prospectus, the words
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to a number
of risks and uncertainties. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors
set forth below and the matters set forth in this Prospectus generally. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances. The Company cautions the reader that this list
of risk factors may not be exhaustive.

RAPID GROWTH; EXPANSION INTO NEW MARKETS

A principal component of the Company's growth strategy is to acquire
additional unimproved real estate for the construction and development of new
vacation ownership resorts. The Company's ability to execute its growth
strategy depends on a number of factors, including (i) the availability of
attractive resort development opportunities; (ii) the Company's ability to
acquire unimproved real estate relating to such opportunities on economically
feasible terms; (iii) the Company's ability to obtain the capital necessary to
finance the acquisition of unimproved real estate and develop vacation
ownership resorts thereon, as well as to cover any necessary sales, marketing
and resort operation expenditures; (iv) the Company's ability to market and
sell Vacation Ownership Interests at newly-developed vacation ownership
resorts; and (v) the Company's ability to manage newly-developed vacation
ownership resorts cost-effectively and in a manner which results in
significant customer satisfaction. There can be no assurance that the Company
will be successful with respect to any or all of these factors.

In addition, because the Company's pending resort developments near St.
Augustine, Florida, Port St. Lucie, Florida and Myrtle Beach, South Carolina
are outside the Company's historical geographical area of operation, the
Company's resort development and operation experience in the Orlando, Florida
area does not ensure the success of the development or operation of these
properties or the marketing of Vacation Ownership Interests at such locations.
Accordingly, in connection with such pending developments, the Company may be
exposed to a number of risks, including risks associated with (i) the lack of
local market knowledge and experience; (ii) the inability to hire, train and
retain sales, marketing and resort staff at such locations; (iii) the
inability to obtain, or obtain in a timely manner, necessary permits and
approvals from state and local government agencies; (iv) the inability to
secure sufficient marketing relationships with local hospitality, retail and
tourist attraction operators; (v) the inability to capitalize on the new
marketing relationships and development agreements associated with certain of
the Company's growth strategies; and (vi) the uncertainty involved in, and
additional costs which may be associated with, selling Vacation Ownership
Interests prior to completion of the related unit.

Moreover, the success of the Company's golf-oriented vacation ownership
resorts is substantially dependent upon the continued popularity of golf in
general, as well as the desirability of the golf courses and golf-related
facilities that will be associated with the Company's resorts. Linking the
success of the Company's resorts to related golf course operations is a new
strategy for the Company and may require the Company to adopt new sales and
marketing approaches and enter into new business relationships. In addition,
there are numerous other factors that affect the golf industry, including
seasonality, adverse weather conditions, competition and the supply of
alternative golf-related destinations, and the popularity of the sport of
golf, any of which may adversely affect the Company's results of operations at
these resorts. Accordingly, there can be no assurance that this aspect of the
Company's growth strategy will be successful or that the Company will be able
to implement this strategy effectively.

Another important part of the Company's growth strategy is to acquire,
develop, market and operate vacation ownership resorts with Promus pursuant to
the Promus Agreement, which imposes capital requirements and allocates profits
and losses of all joint developments on an equal basis. In the event that the
Company and Promus are unable to agree on an initial development plan and
related agreements within the period provided in the Promus Agreement, or to
develop jointly a vacation ownership resort within the first three years of
the term of the Promus Agreement, either party will be entitled to terminate
the Promus Agreement. These timetables may cause the Company to overcommit its
resources to the Promus Agreement and the development of vacation ownership
resorts thereunder at the expense of other opportunities or the Company's
existing business operations. Moreover, although the Promus Agreement contains
mutual exclusivity provisions that the Company believes will be beneficial to
the growth of its business, the Promus Agreement prevents (or significantly
restricts) the Company's ability to develop vacation ownership resorts with
other partners in the hotel industry or under its own name in certain markets.
There can be no assurance that Promus will be a favorable partner for the
Company, or that the Promus Agreement will not prevent the Company from
developing resorts under its own name or entering into similar agreements with
another hotel company, even where such developments or agreements would be in
the Company's best interests. See "Business--Affiliation with Promus."

PENDING DEVELOPMENTS

The Company has entered into a letter of intent to acquire unimproved real
estate near Port St. Lucie, Florida and to develop a vacation ownership resort
at this location. Completion of this transaction remains subject to certain
conditions precedent. If any of these conditions are not satisfied, the
Company may be unable to complete this transaction, in which case the Company
may be unable to develop a vacation ownership resort at this location. See
"Business--Description of the Company's Resorts."

COMPETITION

The Company is subject to significant competition from other entities
engaged in the leisure and vacation industry, including vacation ownership
resorts, hotels, motels and other accommodation alternatives. Many of the
world's most widely-recognized lodging, hospitality and entertainment
companies have begun to develop and sell Vacation Ownership Interests under
their brand names, including, Marriott Corporation ("Marriott"), The Walt
Disney Company ("Disney"), Hilton Hotels Corporation ("Hilton"), Hyatt
Corporation ("Hyatt"), Four Seasons Hotels & Resorts, Inc. ("Four Seasons"),
Inter-Continental Hotels and Resorts, Inc. ("Inter-Continental") and Promus.
In addition, other publicly-traded companies focussed on the vacation
ownership industry, such as Signature Resorts, Inc. ("Signature"), Fairfield
Communities, Inc. ("Fairfield") and Vacation Break U.S.A., Inc. ("Vacation
Break"), currently compete, or may in the future compete, with the Company.
Moreover, competition in the Orlando market is particularly intense and
includes many nationally recognized lodging, hospitality and entertainment
companies, as well as active privately-owned local operators of vacation
ownership resorts such as Central Florida Investments, Inc. ("CFI") and Orange
Lake Country Club ("Orange Lake"). Furthermore, significant competition exists
in Myrtle Beach, South Carolina, a destination in which the Company expects to
commence sales of Vacation Ownership Interests in 1998. Many of these entities
possess significantly greater financial, sales and marketing, personnel and
other resources than those of the Company and may be able to grow at a more
rapid rate or more profitably as a result. Management of the Company believes
that industry competition will be increased by recent and possibly future
consolidation in the vacation ownership industry.

CONCENTRATION OF ACTIVITIES IN ORLANDO AND FLORIDA MARKETS

As of December 31, 1996, substantially all of the Company's operations were
located in Florida and substantially all of the Company's historical revenues
have been generated from this market. Although the Company has conducted the
majority of its resort operations in the Orlando area since 1980, there can be
no assurance that the Company will be able to continue to compete effectively
in the Orlando market. The failure to compete effectively in the Orlando
market could have a material adverse effect on the Company's results of
operations. Moreover, all three of the Company's operating resorts are located
in Florida and, following the

completion of certain pending developments, five out of six of the Company's
resorts will be located in Florida. See "Business--Description of the Company's
Resorts." The concentration of the Company's resorts in these areas could make
the Company more susceptible to adverse events or conditions which affect these
areas in particular, such as hurricanes, windstorms, economic recessions and
changes in tourism or vacation patterns and could result in a material adverse
effect on the Company's operations.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant extent upon the experience and
abilities of Raymond L. Gellein, Jr., the Chairman of the Board, Co-Chief
Executive Officer and a director of the Company, and Jeffrey A. Adler, the
President, Co-Chief Executive Officer and a director of the Company. The loss
of the services of one or both of these individuals could have a material
adverse effect on the Company and its business prospects. The Company's
continued success is also dependent upon its ability to hire, train and retain
qualified marketing, sales, hospitality, development, acquisition, finance,
management and administrative personnel. Such personnel are in substantial
demand and the cost of attracting or retaining such key personnel could
escalate over time. There can be no assurance that the Company will be
successful in attracting or retaining such personnel. See "Management--
Employment Agreements."

GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN THE VACATION OWNERSHIP INDUSTRY

Any adverse change 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 have a material adverse effect on the Company's
business. Such conditions or increases may also adversely affect the future
availability and cost of financing for the Company or its customers and result
in a material adverse effect on the Company's business. In addition, changes in
general economic conditions may adversely affect the Company's ability to
collect on its customer mortgages receivable outstanding to its Vacation
Ownership Interest buyers. Moreover, because the Company's operations are
conducted principally within the vacation ownership industry, any adverse
changes affecting the vacation ownership industry such as (i) an oversupply of
Vacation Ownership Interests; (ii) a reduction in demand for Vacation Ownership
Interests; (iii) changes in travel and vacation patterns; (iv) changes in
governmental regulation of the vacation ownership industry; (v) increases in
construction costs or taxes; (vi) changes in the deductibility of mortgage
interest payments for federal or state income tax purposes; or (vii) negative
publicity with respect to the vacation ownership industry, could have a
material adverse effect on the Company.

DEVELOPMENT AND CONSTRUCTION ACTIVITIES

The Company intends to actively continue acquisition, development,
construction, conversion and expansion of vacation ownership resorts. Risks
associated with such activities include risks that (i) acquisition or
development opportunities may be abandoned; (ii) construction costs may exceed
original estimates, possibly making the development, expansion or conversion
uneconomical or unprofitable; (iii) construction or conversion may not be
completed on schedule, possibly resulting in delayed recognition of revenues
and increased interest expense; (iv) zoning, land-use, construction, occupancy
and other required governmental permits and authorizations may not be obtained
or may be delayed; and (v) financing necessary to complete the necessary
acquisition, development, construction, conversion or expansion activities may
not be obtained or may not be available on favorable terms. Upon the completion
of the Offering, the Company will not have the financing available to complete
all of the planned expansion and development activities described in
"Business--Description of the Company's Resorts." In addition, certain state
and local laws may impose liability on property developers with respect to
construction defects discovered or repairs made by future owners of such
property, and, as a result, owners may be able to recover from the Company
amounts in connection with such defects or repairs related to the property.
Accordingly, there can be no assurance that the Company will (i) complete
conversion of Oak Plantation Villas by Vistana; (ii) complete development of
Vistana Resort at World Golf Village; (iii) complete expansion projects
currently under development at Vistana Resort; (iv) undertake or complete the
development of the Myrtle Beach Resort (or acquire the additional 26 acres at
such location); or (v) undertake to develop other resorts or complete any such
development if undertaken. As a result of these risks, the Company's revenues
and net operating income may be adversely impacted.

In addition, the success of the Company's development of Vistana Resort at
World Golf Village is dependent upon the concurrent development by third
parties of the surrounding properties and related component facilities
comprising the World Golf Village project and the planned community of Saint
Johns in which it is located. Although the Company has entered into agreements
with such third parties respecting such matters, there can be no assurance
that such third parties will fulfill their obligations under such agreements.
In addition, the Company is contingently liable for 15% of annual debt service
shortfalls on certain taxable revenue bonds (the "County Bonds") issued to
finance the convention center at World Golf Village. If the surrounding
properties and related facilities comprising the World Golf Village project
are not developed, not developed on a timely basis, are of an inferior
quality, or if the annual pledged revenues from the World Golf Village
component facilities are not adequate to support the required debt service on
the County Bonds, the Company's results of operations at Vistana Resort at
World Golf Village may be materially adversely impacted.

FINANCING

Customer Mortgages Receivable. The Company extends financing to purchasers
of its Vacation Ownership Interests at its resorts. These purchasers generally
make a down payment equal to at least 10% of the sales price and borrow the
remaining sales price from the Company. These borrowings bear interest at
fixed rates, are secured by first mortgages on the underlying Vacation
Ownership Interests and amortize over periods ranging up to seven years. The
Company funds its customer mortgages receivable by borrowing up to 90% of the
aggregate principal amount of its customer mortgages receivable under its
existing credit facilities. As of September 30, 1996, the Company's existing
credit facilities provide for an aggregate of up to approximately $109.2
million of available customer mortgages receivable financing to the Company
bearing interest at fixed rates and variable rates based on the prime rate. As
of September 30, 1996, the Company had approximately $65.7 million of
indebtedness outstanding under its existing customer mortgages receivable
credit facilities at a weighted average interest rate of 10.4% per annum. As
of September 30, 1996 the Company's obligations under these credit facilities
were secured by the Company's pledge of a portion of its customer mortgages
receivable. The Company does not presently have existing credit facilities or
binding lender commitments to supply all of the financing the Company
anticipates that it will need to construct and develop all of the resorts it
plans to develop or market and sell all of the Vacation Ownership Interests at
such resorts, and there can be no assurance that alternative or additional
credit arrangements can be obtained on terms that are satisfactory to the
Company. Accordingly, future sales of Vacation Ownership Interests may be
limited by the availability of funds to finance the initial negative cash flow
attributable to Vacation Ownership Interest sales financed by the Company
(i.e., the amount by which the Company's product cost and marketing, sales and
general administrative expenses per Vacation Ownership Interest exceeds the
customer's down payment). In addition, if the Company were required to sell
its customer mortgages receivable in order to satisfy its cash flow needs, the
Company would cease to be eligible to report income attributable to sales of
Vacation Ownership Interests on the installment sales method for federal
income tax purposes and, as a result, the Company would be required to
accelerate the payment of a substantial federal income tax liability with
respect to the customer mortgages receivable sold. Such an event could have a
material adverse effect on the Company's cash flow from operations.

Customer Default. The Company bears the risk of defaults under its customer
mortgages on Vacation Ownership Interests. As of September 30, 1996 (i)
approximately 3.0% of the Company's customer mortgages receivable were 60 to
120 days past due; and (ii) approximately 5.5% of the Company's customer
mortgages receivable were more than 120 days past due and the subject of legal
proceedings. If a purchaser of a Vacation Ownership Interest defaults on the
mortgage during the early part of the loan amortization period, the Company
will not have recovered its marketing, selling (other than certain sales
commissions), and general and administrative costs per Vacation Ownership
Interest, and such costs will again be incurred in connection with the
subsequent resale of the Vacation Ownership Interest. As is sometimes the
practice in the vacation ownership industry, the Company does not verify the
credit history of its customers. In addition, although in certain
jurisdictions the Company may have recourse against a defaulting customer for
the sales price of the Vacation Ownership Interest, the Company has not
historically pursued such a remedy. Accordingly, no assurance can be given
that the sales price will be fully or partially recovered from a defaulting
customer. The Company intends to begin offering customer mortgages with a ten-
year term in the near future. Although the increased term will

be introduced on a limited basis, there can be no assurance that the inclusion
of customer mortgages with a ten-year maturity will not have an adverse effect
on the performance of the Company's portfolio of customer mortgages receivable.

Leverage. It is likely that the Company's future business activities will be
financed, in whole or in part, with indebtedness obtained pursuant to
additional borrowings under the Company's existing credit facilities or under
credit facilities to be obtained by the Company in the future. The definitive
agreements with respect to these credit facilities could contain restrictive
covenants which limit the Company's ability to, among other things, make
capital expenditures, incur additional indebtedness and dispose of assets, or
which require the Company to maintain certain financial ratios. The
indebtedness incurred under these credit facilities may be secured by mortgages
on a portion of the Company's resort properties, customer mortgages receivable
and other assets of the Company. In the event of a default by the Company under
one or more or these credit facilities, the lenders could foreclose on the
resort properties secured by a mortgage or take possession of other assets
pledged as collateral. In addition, the extent of the Company's leverage and
the terms of the Company's indebtedness could impair the Company's ability to
obtain additional financing in the future, to make acquisitions or to take
advantage of significant business opportunities that may arise. Furthermore,
the Company's indebtedness and related debt service obligations may increase
its vulnerability to adverse general economic and vacation ownership industry
conditions and to increased competitive pressures.

Hedging Activities. The Company has historically derived net interest income
from its financing activities as a result of the difference between the
interest rates it charges its customers who finance their purchase of a
Vacation Ownership Interest and the interest rates it pays its lenders. There
can be no assurance of a continued positive difference between fixed rate debt
on the Company's customer mortgages receivable and the rates on the Company's
variable rate indebtedness. Because the Company's indebtedness bears interest
at variable rates and the Company's customer mortgages receivable bear interest
at fixed rates, the Company bears the risk of increases in interest rates with
respect to its indebtedness. The Company engages in interest rate hedging
activities from time to time in order to reduce the risk and impact of
increases in interest rates with respect to such indebtedness; however, there
can be no assurance that any such interest rate hedging activity will be
adequate at any time to protect the Company fully from any adverse changes in
interest rates. In addition, to the extent that interest rates decrease, the
Company faces an increased risk that customers will pre-pay their mortgage
loans, an event which would decrease the Company's income from financing
activities.

BENEFITS TO EXISTING SHAREHOLDERS AND EXECUTIVE OFFICERS

The Existing Shareholders and certain senior executive officers and other
employees of the Company will receive material benefits in connection with the
completion of the Offering that will not be received generally by purchasers of
Common Stock in the Offering. The Existing Shareholders will receive net
proceeds from the Offering, after deduction of underwriting discounts and
commissions, aggregating approximately $11.2 million in connection with the
sale of an aggregate of 925,000 shares of Common Stock ($21.2 million if the
Underwriter's over-allotment option is exercised in full and all shares of
Common Stock subject thereto are sold solely by the Selling Shareholders). The
Existing Shareholders will receive distributions aggregating approximately $2.5
million immediately prior to the completion of the Offering in connection with
the termination of the S corporation election by certain of the Company's
predecessors. This amount represents approximately $2.2 million of
undistributed S corporation earnings and a distribution of approximately $0.3
million to permit the Existing Shareholders to pay their respective federal
income taxes attributable to the Company's operations prior to the completion
of the Offering. Certain senior executive officers and other employees of the
Company will also (i) execute new employment agreements with the Company; (ii)
receive options to purchase an aggregate of 535,000 shares of Common Stock
pursuant to the Stock Plan; and (iii) receive options to purchase an additional
1,350,000 shares of Common Stock granted by the Existing Shareholders. See
"Prior Income Tax Status and Planned Distributions," "Management--Executive
Compensation" and "Principal and Selling Shareholders."

LIMITED RESALE MARKET FOR VACATION OWNERSHIP INTERESTS

The Company sells Vacation Ownership Interests to buyers for leisure and not
investment purposes. The Company believes that the market for resale of
Vacation Ownership Interests by such buyers is presently limited and that any
resales of Vacation Ownership Interests are typically at prices substantially
less than the original

purchase price. These factors may make ownership of Vacation Ownership
Interests less attractive to prospective buyers. In addition, attempts by
buyers to resell their Vacation Ownership Interests may compete with sales of
Vacation Ownership Interests by the Company. Moreover, the market price of
Vacation Ownership Interests sold by the Company could be depressed by a
substantial number of Vacation Ownership Interests offered for resale by the
Company's customers.

VACATION OWNERSHIP INTEREST EXCHANGE NETWORKS

The attractiveness of Vacation Ownership Interests is enhanced significantly
by the availability of exchange networks that allow owners of Vacation
Ownership Interests to exchange their occupancy right granted by their Vacation
Ownership Interest during a particular year for an occupancy right granted at
another participating network resort. Several companies, including RCI, provide
broad-based Vacation Ownership Interest exchange services, and each of the
Company's operating resorts is currently qualified for participation in the RCI
exchange network. No assurance can be given that the Company will continue to
be able to qualify its existing resorts, or will be able to qualify its future
resorts, for participation in the RCI network or any other exchange network, or
that the Company's customers will continue to be satisfied with RCI's exchange
network. If such exchange networks cease to function effectively, if the
Company's resorts are not accepted as exchanges for other desirable resorts, or
if RCI ceases to be a leading Vacation Ownership Interest exchange network, the
Company's sales of Vacation Ownership Interests could be materially adversely
affected. Moreover, the Company's agreement with RCI provides that until May
2001, the RCI exchange program will be the only exchange program permitted at
resorts owned and controlled by the Company. In addition, each of the Company,
and Messrs. Gellein and Adler have agreed that, until May 2001, each vacation
ownership resort owned, developed or managed by an entity in which Messrs.
Gellein or Adler have a controlling interest will execute an affiliation
agreement with RCI with an initial six-year term. HFS Incorporated recently
acquired RCI and there can be no assurance that the Company's relationship with
RCI will continue in the manner historically maintained. See "Business--
Participation in Vacation Ownership Interest Exchange Networks."

GOVERNMENTAL REGULATION

The Company's marketing and sales of Vacation Ownership Interests and other
resort operations are subject to extensive regulation by the federal government
and the states in which the Company's resorts are located and in which its
Vacation Ownership Interests are marketed and sold. Federal legislation to
which the Company is or may be subject includes the Federal Trade Commission
Act, the Fair Housing Act, the Truth-in-Lending Act, the Real Estate Settlement
Procedures Act, the Equal Credit Opportunity Act, the Interstate Land Sales
Full Disclosure Act, the Telephone Consumer Protection Act, the Telemarketing
and Consumer Fraud and Abuse Prevention Act and the Civil Rights Acts of 1964
and 1968. In addition, many states have adopted similar legislation as well as
specific laws and regulations regarding the sale of Vacation Ownership
Interests. The laws of most states, including Florida and South Carolina,
require a designated state authority to approve a detailed offering statement
describing the Company and all material aspects of the resort and sale of
Vacation Ownership Interests at such resort. In addition, the laws of most
states in which the Company sells Vacation Ownership Interests grant the
purchaser of a Vacation Ownership Interest the right to rescind a contract of
purchase at any time within a specified recission period provided by law
following the earlier 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. Furthermore, most states have other laws which regulate the Company's
activities, such as real estate licensure laws, travel sales licensure laws,
anti-fraud laws, telemarketing laws, price, gift and sweepstakes laws, and
labor laws. The Company believes that it is in material compliance with all
applicable federal, state, local and foreign laws and regulations to which it
is currently subject. However, there can be no assurance that the cost of
compliance with such laws and regulations will not be significant or that the
Company is in fact in compliance with such laws and regulations. In addition,
there can be no assurance that laws and regulations applicable to the Company
in any specific jurisdiction will not be revised or that other laws or
regulations will not be adopted which could increase the Company's cost of
compliance or prevent the Company from selling Vacation Ownership Interests or
conducting other operations in such jurisdiction. Any failure to comply with
any applicable law or regulation, or any increases in the costs of compliance
could have a material adverse effect on the Company. See "Business--
Governmental Regulation."

Under various federal, state and local laws, the owner or operator of real
property may be liable for the costs required to remove or remediate certain
hazardous or toxic substances located on or in, or emanating from, such
property. 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. Noncompliance by the Company with these and
other environmental, health or safety requirements may result in the need to
cease or alter operations at one or more of its resorts. Phase I assessment
environmental reports (which typically involve inspection without soil
sampling or ground water analysis) have recently been prepared by independent
environmental consultants for each of the Company's existing resorts and
properties subject to acquisition. None of these reports indicate that any
environmental conditions exist at any of these resorts which would have a
material adverse effect on the Company.

VARIABILITY OF QUARTERLY RESULTS

The Company has historically experienced, and expects to continue to
experience, quarterly fluctuations in its gross revenues and net income from
the sale of its Vacation Ownership Interests. The Company's revenues are
moderately seasonal with owner and guest activity the greatest from February
through April and June through August. In addition, earnings may be adversely
impacted by the timing of the completion of the development of future resorts,
changes in travel and vacation patterns, and weather or other natural
disasters at the Company's resort locations. As the Company enters new
markets, it may experience increased or different seasonality when compared
with its previous operating history. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

RESORT MANAGEMENT

The Company currently provides both hospitality and homeowners' association
management services at its existing vacation ownership resorts and intends to
provide the same services at its future vacation ownership resorts pursuant to
management agreements with the associations at such resorts. These agreements
are generally for three-year terms which automatically renew unless terminated
by the homeowners' association. If the Company is unable to manage a resort in
a manner which maintains satisfaction among its owners, applicable law may
give the homeowners' association rights to terminate the management agreement.
There can be no assurance that a homeowners' association will not terminate
its management agreement with the Company. Any such termination could have a
material adverse effect on the results of the Company's resort management
operations and revenues.

TELECOMMUNICATIONS OPERATIONS

The Company provides telecommunications services at its resorts pursuant to
contractual arrangements with each of the homeowners' associations at its
resorts, as well as limited telecommunications design and installation
services for third parties. Risks associated with this aspect of the Company's
business include cost overruns on design or installation contracts,
liabilities in connection with products or services provided by the Company,
increased competitive and regulatory pressures particularly with respect to
long-distance rate pricing, and non-renewal or termination of the Company's
telecommunications service contracts by a homeowners' association. In
addition, there can be no assurance that the Company can continue to provide
limited telecommunications design and installation services on a competitive
or profitable basis.

CONTROL BY EXISTING SHAREHOLDERS FOLLOWING THE OFFERING; SHAREHOLDERS'
AGREEMENT

After the completion of the Offering, the Existing Shareholders will own
and/or have voting control of approximately 70.5% of the outstanding shares of
Common Stock (approximately 66.1% if the Underwriters' over-allotment option
is exercised in full and all shares of Common Stock subject thereto are sold
solely by the Selling Shareholders). As a result, by maintaining their
ownership of Common Stock, the Existing Shareholders will have the power to
elect the entire Board of Directors, determine the policies of the Company,
appoint the persons constituting the Company's management and determine the
outcome of corporate actions requiring

shareholder approval. In addition, pursuant to the Shareholders' Agreement (as
defined herein), the Existing Shareholders have agreed to vote their shares of
Common Stock in favor of proxies solicited by the Board of Directors, unless
Messrs. Gellein and Adler both disagree with the position taken by the Board of
Directors. See "Certain Relationships and Related Transactions," "Principal and
Selling Shareholders" and "Description of Capital Stock."

UNINSURED LOSS; NATURAL DISASTERS

There are certain types of losses that are not generally insured because they
are either uninsurable or not economically feasible to insure and for which the
Company does not have insurance coverage. Should an uninsured loss or a loss in
excess of insured limits occur, the Company could lose its investment in a
resort as well as the anticipated future revenues from such resort, and would
continue to be obligated on any mortgage indebtedness or other obligations
related to the resort. Moreover, if a homeowners' association fails to
adequately insure the property committed to the condominium form of ownership
(typically, all units, common areas, facilities and amenities), any uninsured
or under-insured casualty may affect the Company's ability to collect customer
mortgages receivable related to such condominium property. In addition, the
Company's vacation ownership resorts are located in areas that are susceptible
to tropical storms and hurricanes. The Company's resorts could suffer
significant damage as a result of wind storms, hurricanes, floods and other
natural disasters. Any such damage, as well as adverse weather conditions
generally, could impair the Company's ability to sell Vacation Ownership
Interests at its resorts and adversely affect the Company's results of
operation.

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, subject to official notice of issuance, there can be no
assurance that a viable public market for the Common Stock will develop or be
sustained after the completion of 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 Price to Public. The Price to Public will be determined by
negotiations among the Company and representatives of the Underwriters and may
not be indicative of the prices that prevail in the public market after the
completion of the Offering. Numerous factors, including announcements of
fluctuations in the Company's or its competitors' operating results, and market
conditions for hospitality and vacation ownership industry stocks in general,
could have a significant impact on the future price of the Common Stock. In
addition, the stock market in recent periods has experienced significant price
and volume fluctuations that often have been unrelated or disproportionate to
the operating performance of listed companies. These broad fluctuations may
adversely affect the market price of the Common Stock. See "Underwriting."

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Articles of Incorporation and By-Laws, as
well as provisions of the Florida Business Corporation Act (the "FBCA"), may be
deemed to have anti-takeover effects and may delay, defer or prevent a takeover
attempt that a shareholder might consider to be in the shareholder's best
interest. For example, such provisions may deter tender offers for shares of
Common Stock, or deter purchases of large blocks of shares of Common Stock,
thereby limiting the opportunity for the Company's shareholders to receive a
premium for their shares of Common Stock over then-prevailing market prices.
These provisions include the following:

Staggered Board of Directors. The Board of Directors of the Company will
consist of three classes of directors. The initial terms of the first,
second and third classes of directors will expire in 1998, 1999 and 2000,
respectively, and directors for each class will be elected for a three-year
term upon expiration of the term of the directors in such class. In
addition, the affirmative vote of two-thirds of the outstanding shares of
Common Stock is required to remove a director. These provisions may have
the effect of increasing the difficulty of one or more shareholders of the
Company to elect directors of their choice to the Board of Directors of the
Company or to remove a director.

Preferred Stock. Upon completion of the Offering, the Board of Directors
will have the authority to issue up to 5,000,000 shares of preferred stock
and to determine the price, rights (including voting rights), preferences,
privileges and restrictions of those shares without any vote of or action
by the shareholders. The rights of the holders of the Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future. The issuance of the
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could make it more
difficult for a party to acquire a majority of the outstanding voting stock
of the Company. The Company has no present plan to issue any shares of
preferred stock. See "Description of Capital Stock."

Florida Business Corporation Act. Florida law contains provisions that
may have the effect of delaying, deferring or preventing a non-negotiated
merger or other business combination involving the Company. These
provisions are intended to encourage any person interested in acquiring the
Company to negotiate with and obtain the approval of the Company's Board of
Directors in connection with the proposed transaction. Certain of these
provisions may, however, discourage a future acquisition of the Company not
approved by the Board of Directors in which shareholders might receive an
enhanced value for their shares, even though a substantial number or
majority of the Company's shareholders might believe the acquisition is in
their best interest. As a result, shareholders who desire to participate in
such a transaction may not have the opportunity to do so. Such provisions
could also discourage bids for the shares of Common Stock at a premium as
well as create a depressive effect on the market price of the shares of
Common Stock. See "Description of Capital Stock."

DILUTION; DIVIDENDS

Purchasers of Common Stock in the Offering will experience immediate
dilution in net tangible book value per share of Common Stock of $9.54 from
the Price to Public. See "Dilution." In addition, the Company does not
anticipate that it will pay any dividends on its Common Stock in the
foreseeable future. See "Dividend Policy."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon completion of the Offering, the Company will have outstanding an
aggregate of 18,800,000 shares of Common Stock, excluding shares of Common
Stock issuable upon exercise of options. The shares of Common Stock offered
hereby will be freely tradeable (other than by an "affiliate" of the Company
as such term is defined in the Securities Act) without restriction or
registration under the Securities Act. The sale of a substantial number of
shares of Common Stock, or the perception that such a sale might occur, could
adversely affect prevailing market prices of the Common Stock. The Company is
unable to make any prediction as to the effect, if any, that future sales of
Common Stock or the availability of shares of Common Stock for sale may have
on the market price of the Common Stock prevailing from time to time. In
addition, any such sale or such perception could make it more difficult for
the Company to sell equity securities or equity-related securities in the
future at such time and price as the Company deems appropriate. All remaining
outstanding shares of Common Stock may be sold under Rule 144 promulgated
under the Securities Act, subject to holding period, volume, manner of sale,
and other restrictions of Rule 144 and, in certain cases, subject to a one-
year lock-up agreement between the holder of such shares and the Underwriters.
See "Description of Capital Stock," "Shares Eligible for Future Sale" and
"Underwriting." In addition, at certain times commencing two years following
the completion of the Offering, certain shares of Common Stock (i) held by the
Existing Shareholders and (ii) purchased by certain employees of the Company
pursuant to the exercise of options granted to such employees by the Existing
Shareholders may be sold in the public market pursuant to certain registration
statements which the Company is obligated to file with respect to such shares,
or pursuant to an exemption from registration. See "Shares Available for
Future Sale."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 4,625,000 shares of
Common Stock offered by the Company hereby, based on an estimated Price to
Public of $13.00 per share, after deducting underwriting discounts and
commissions and anticipated expenses of the Offering, are estimated to be $53.8
million ($63.8 million, if the Underwriters' over-allotment option is exercised
in full and the shares of Common Stock sold pursuant thereto are not sold by
the Selling Shareholders). The Company will not receive any of the proceeds
from the sale of Common Stock by the Selling Shareholders. The Company intends
to use approximately (i) $39.3 million of the proceeds to repay outstanding
indebtedness and accrued interest (including $0.4 million of prepayment
penalties); and (ii) $14.5 million of the proceeds to pay for the acquisition,
development and expansion of existing and future vacation ownership resorts and
for working capital and general corporate purposes. Pending such uses, the
Company will invest the proceeds in commercial paper, bankers' acceptances,
other short-term investment-grade securities and money-market accounts.

Indebtedness to be repaid out of the proceeds to the Company from the
Offering bears interest at rates currently ranging between approximately 10.3%
and 11.1% per annum and will mature at various times over the next five years
(except for indebtedness incurred to finance customer mortgages receivable,
which amortizes based upon the collection of the underlying customer mortgages
receivable and finally matures seven years from the date of the Company's last
borrowing under such facility). Indebtedness to be repaid that was incurred
within the last year was incurred for financing of customer mortgages
receivable, development of vacation ownership resorts and general corporate
purposes. None of the net proceeds from the Offering will be used to pay any
delinquent indebtedness.

DIVIDEND POLICY

Although certain of the Affiliated Companies have paid dividends in the past
and will make a tax-related distribution to the Existing Shareholders
immediately prior to the consummation of the Formation Transactions, the
Company has never declared or paid any dividends on its capital stock. See
"Prior Income Tax Status and Planned Distributions." The Company does not
anticipate declaring or paying cash dividends on its Common Stock in 1997 or 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.

CAPITALIZATION

The following table sets forth, as of September 30, 1996, the consolidated
capitalization of the Company on an actual basis and as adjusted to give
effect to (i) the payment of the $2.5 million distribution described in "Prior
Income Tax Status and Planned Distributions;" (ii) the consummation of the
Formation Transactions; (iii) the sale of the Common Stock offered by the
Company hereby; and (iv) 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," "Selected
Combined Historical Financial Information" and "Pro Forma Combined Financial
Information."

AS OF SEPTEMBER 30, 1996
--------------------------------
ACTUAL AS ADJUSTED
-------------- -----------------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

Debt:
Notes and mortgages payable to financial
institutions(1).............................. $ 110,284 $ 71,313
-------------- --------------
Total....................................... 110,284 71,313
-------------- --------------
Shareholders' Equity:
Preferred Stock, $.01 par value, 5,000,000
shares authorized, none issued and outstand-
ing.......................................... -- --
Common Stock, $.01 par value, 100,000,000
shares authorized, none issued and
outstanding and 18,800,000 shares issued and
outstanding, respectively(2)................. -- 188
Additional paid-in capital.................... 268 65,396
Retained earnings............................. 25,546 --
-------------- --------------
Total shareholders' equity.................... 25,814 65,584
-------------- --------------
Total capitalization........................ $ 136,098 $ 136,897
============== ==============

- --------
(1) Includes notes collateralized by customer mortgages receivable.
(2) Does not include an aggregate of 535,000 shares of Common Stock issuable
pursuant to existing options granted pursuant to the Stock Plan,
additional shares of Common Stock issuable upon exercise of options which
may be granted under the Stock Plan concurrently with completion of the
Offering and up to 832,500 shares of Common Stock which the Underwriters
may purchase from the Company pursuant to an exercise of their over-
allotment option (in the event that the shares of Common Stock subject
thereto are not sold by the Selling Shareholders). See "Management--Stock
Plan" and "Underwriting."

PRIOR INCOME TAX STATUS AND PLANNED DISTRIBUTIONS

Prior to the consummation of the Formation Transactions, each of the
Affiliated Companies which is a corporation elected to be taxed pursuant to
Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"),
and each of the Affiliated Companies which is a partnership was taxable
pursuant to Subchapter J of the Code. Accordingly, as of the date of this
Prospectus, none of such Affiliated Companies was subject to federal or state
income taxes, and all taxable income of such Affiliated Companies was taxed
directly at the shareholder or partner level. Prior to the consummation of the
Formation Transactions, the practice of each of such Affiliated Companies has
been to pay cash distributions to its owners, consisting of the Existing
Shareholders, to enable such owners to pay federal and state taxes on the
taxable income of the Affiliated Company. Consistent with this past practice,
immediately prior to the consummation of the Formation Transactions, the
Affiliated Companies intend to pay aggregate distributions to their owners of
approximately $0.3 million, representing the balance of such owners' federal
and state income tax liability attributable to taxable income of the
Affiliated Companies for the year ended December 31, 1996 and the aggregate
estimated federal and state income taxes payable by such owners in respect of
the Affiliated Companies' income from January 1, 1997 through the consummation
of the Formation Transactions. In addition, immediately prior to the
consummation of the Formation Transactions, the Affiliated Companies intend to
pay aggregate distributions of approximately $2.2 million, representing
retained earnings of the Affiliated Companies for which the owners thereof
have previously paid income tax.

Following the consummation of the Formation Transactions, none of the
Affiliated Companies which is a corporation will be eligible to be taxed
pursuant to Subchapter S of the Code and the Subchapter S status of each of
such Affiliate Companies will terminate. Accordingly, the Company will be
liable for income taxes relating primarily to the Company's historical use of
the installment method of reporting for income tax purposes with respect to
the sale of Vacation Ownership Interests and other timing differences, which
will be reflected as deferred taxes on the Company's consolidated balance
sheet. Assuming the Formation Transactions had occurred on January 1, 1996,
such deferred tax liability would have been approximately $9.7 million
resulting from the use of the installment method of reporting for income tax
purposes and other timing differences. Such liability would not have been
payable until the installment payments on customer mortgages receivable from
customers are received by the Company. See "Pro Forma Combined Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

DILUTION

After giving effect to the payment of the $2.5 million distribution
described in "Prior Income Tax Status and Planned Distribution;" and the
consummation of the Formation Transactions, the pro forma net tangible book
value of the Company at September 30, 1996 was approximately $12.6 million, or
$0.67 per share of Common Stock. Pro forma net tangible book value per share
of Common Stock represents the Company's total tangible assets less its total
liabilities, divided by the total number of outstanding shares of Common
Stock. Without taking into account any other changes in net tangible book
value after September 30, 1996, other than the sale by the Company of the
4,625,000 shares of Common Stock offered hereby (and the deduction of the
underwriting discounts and commissions) and other estimated offering expenses,
the application of the estimated net proceeds therefrom and the distribution
referred to above, the net tangible book value of the Company at September 30,
1996, would have been approximately $65.1 million, or $3.46 per share of
Common Stock. This represents an immediate increase in net tangible book value
of $2.79 per share to the Existing Shareholders and an immediate dilution in
net tangible book value of $9.54 per share to purchasers of Common Stock in
the Offering. The following table illustrates this dilution on a per share
basis:

Assumed initial public offering price per share of Common
Stock (at the mid-point of the estimated pricing range)... $13.00(1)
Pro forma net tangible book value per share of Common
Stock as of
September 30, 1996...................................... $0.67
Increase in net tangible book value per share of Common
Stock attributable to the Offering...................... $2.79
-----
Pro forma net tangible book value per share of Common Stock
after the Offering........................................ $ 3.46
------
Dilution per share of Common Stock to purchasers of Common
Stock in the Offering..................................... $ 9.54
======

- --------
(1) Before deduction of estimated underwriting discounts and commissions, and
expenses of the Offering to be paid by the Company.

The following table sets forth, as of September 30, 1996, after giving
effect to the Formation Transactions and the Offering, the number of shares of
Common Stock purchased, the total consideration paid therefor and the average
price paid per share of Common Stock by the Existing Shareholders and the
purchasers of Common Stock in the Offering, respectively. The following table
does not give effect to an aggregate of 535,000 shares of Common Stock
issuable pursuant to existing options and does not include up to 832,500
shares of Common Stock which the Underwriters may purchase from the Company
and/or the Selling Shareholders pursuant to an exercise of their over-
allotment option. To the extent that any of such options are exercised, there
will be further dilution to purchasers of Common Stock in the Offering. See
"Management--Stock Plan" and "Underwriting."

SHARES PURCHASED TOTAL CONSIDERATION
--------------------- -------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------

Existing
Shareholders(1)........ 14,175,000(2) 75.4% $ 268,300 -- % $ 0.02
New investors(3)........ 4,625,000 24.6% $60,125,000 100.0% $13.00
---------- ----- ----------- -----
Total................. 18,800,000 100.0% $60,393,300 100.0%
========== ===== =========== =====

- --------
(1) Existing Shareholders of the Company who received shares of Common Stock
pursuant to the Formation Transactions.
(2) Sales of Common Stock by the Existing Shareholders in the Offering will
cause the number of shares of Common Stock held by the Existing
Shareholders to be reduced to 13,250,000 shares, or 70.5% of the total
shares of Common Stock to be outstanding after the Offering, and will
increase the number of shares held by new investors to 5,550,000 shares,
or 29.5% of the total number of shares to be outstanding after the
Offering. See "Principal and Selling Shareholders."
(3) Purchasers of Common Stock in the Offering.

SELECTED COMBINED HISTORICAL FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AND AVERAGE PRICE DATA)

The following table sets forth selected combined historical financial
information for the years ended December 31, 1992, 1993, 1994 and 1995 and for
the nine months ended September 30, 1995 and 1996. The selected combined
historical financial information (excluding "Operating Data") for the three
years ended December 31, 1995 was derived from the Company's Combined
Financial Statements, which were audited by KPMG Peat Marwick LLP, independent
auditors, whose report with respect to the three-year period ended December
31, 1995, together with such combined financial statements appears elsewhere
herein. The selected combined historical financial information for the year
ended December 31, 1992 have been derived from unaudited financial statements
prepared by the Company. The selected combined historical financial
information presented below as of and for the nine months ended September 30,
1995 and 1996 is unaudited. In the opinion of the management of the Company,
the unaudited financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
information included herein. Results for interim periods are not necessarily
indicative of results to be expected during the remainder of the current year
or for any future period.

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 historical combined financial statements of the Company
and Notes thereto appearing elsewhere in this Prospectus.

HISTORICAL
------------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------------------------- --------------------
1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ----------

STATEMENT OF OPERATIONS:
REVENUES:
Vacation Ownership
Interest sales........ $ 48,503 $ 55,658 $ 54,186 $ 50,156 $ 38,478 $ 46,161
Interest income........ 4,662 5,096 7,654 12,886 9,102 10,727
Resort revenue......... 9,977 10,877 11,834 12,613 9,641 10,584
Telecommunications..... 1,703 1,980 3,378 4,802 3,688 5,257
Other.................. 489 551 584 652 410 373
-------- -------- -------- -------- -------- ----------
Total revenues.......... 65,334 74,162 77,636 81,109 61,319 73,102
COSTS AND OPERATING
EXPENSES:
Vacation Ownership
Interest cost of
sales................. 10,254 11,521 11,391 12,053 9,215 11,329
Sales and marketing.... 17,689 21,866 22,872 22,318 16,728 20,094
Loan portfolio
Interest expense--
treasury............ 1,556 2,070 3,605 6,516 4,678 5,026
Provision for
doubtful accounts... 3,405 3,903 3,803 3,522 2,700 3,272
Resort expenses........ 8,594 9,493 10,037 10,585 8,145 8,847
Telecommunications
expenses.............. 1,358 1,537 2,520 3,654 2,852 4,114
General and
administrative........ 6,628 7,419 7,988 6,979 5,141 5,343
Depreciation and
amortization.......... 875 875 1,392 2,215 1,565 1,815
Interest expense--
other................. 2,523 2,269 2,106 3,168 2,186 2,972
Other.................. 1,688 1,318 1,241 1,020 903 567
Deferred executive
incentive
compensation.......... 402 380 332 3,448 2,586 914
-------- -------- -------- -------- -------- ----------
Total costs and
operating expenses..... 54,972 62,651 67,287 75,478 56,699 64,293
-------- -------- -------- -------- -------- ----------
Operating income........ 10,362 11,511 10,349 5,631 4,620 8,809
Excess value
recognized............ 1,151 701 365 219 164 105
-------- -------- -------- -------- -------- ----------
Pretax income........... 11,513 12,212 10,714 5,850 4,784 8,914
Provision for taxes.... -- -- -- -- -- --
-------- -------- -------- -------- -------- ----------
Net income.............. $ 11,513 $ 12,212 $ 10,714 $ 5,850 $ 4,784 $ 8,914
======== ======== ======== ======== ======== ==========
CASH FLOW DATA:
EBITDA(a)............... $ 15,316 $ 16,725 $ 17,452 $ 17,530 $ 13,049 $ 18,622
Cash flow provided by
(used in):
Operating activities... $ 17,604 $ 10,880 $ 13,571 $ 13,433 $ 7,076 $ 9,040
Investing activities... $(20,621) $(20,530) $(20,434) $(22,639) $(15,772) $ (19,995)
Financing activities... $ 3,410 $ 11,085 $ 6,512 $ 15,131 $ 13,725 $ 10,339

HISTORICAL
---------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------- -----------------
1992 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- --------

OPERATING DATA:
Number of resorts at end of
period.................... 2 2 2 2 2 3
Number of Vacation
Ownership Interests
sold(b)................... 4,980 5,679 5,582 5,190 3,947 4,499
Number of Vacation
Ownership Interests in
inventory at end of
period(c)................. 1,967 3,781 3,822 3,054 3,808 14,002
Average price of Vacation
Ownership Interest sold... $ 9,740 $ 9,801 $ 9,707 $ 9,664 $ 9,749 $ 10,260
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash (including restricted
cash)..................... $ 3,779 $ 5,215 $ 4,864 $ 10,788 $ 9,893 $ 10,172
Total assets............... $73,827 $99,431 $117,989 $140,651 $137,374 $163,501
Long-term debt............. $45,650 $57,474 $ 64,769 $101,504 $100,098 $110,284
Shareholders' equity....... $12,254 $23,726 $ 33,658 $ 17,904 $ 16,838 $ 25,814

- --------
(a) As shown below, EBITDA represents net income before interest expense,
income taxes, depreciation and amortization and excess value recognized
which reflects the amortization of the difference between the fair value
of the Company at the time of its purchase by Messrs. Gellein and Adler
and a third individual, less the purchase price paid to acquire the
Company. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness.
However, EBITDA should not be construed as an alternative to net income as
a measure of the Company's operating results or to operating cash flow as
a measure of liquidity. The following table reconciles EBITDA to net
income:

NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30
---------------------------------- ----------------
1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------

(b) Includes both annual and alternate-year Vacation Ownership Interests.
(c) Inventory classified as annual Vacation Ownership Interests.

PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information is based on
the historical financial statements of the Company and has been prepared to
illustrate the effect of the consummation of the Formation Transactions, the
application of the proceeds of the Offering to the Company as set forth under
"Use of Proceeds" and planned distributions to Existing Shareholders prior to
the Formation Transactions as if they had occurred at the beginning of the
periods presented for the pro forma combined statements of operations for the
year ended December 31, 1995 and for the nine months ended September 30, 1995
and 1996 and as of September 30, 1996 with respect to the pro forma balance
sheet. The pro forma combined financial information does not purport to
represent what the Company's financial position and results of operations
would actually have been if such transactions had in fact occurred on such
dates. The pro forma adjustments are based on currently available information
and upon certain assumptions that management believes are reasonable under
current circumstances. The pro forma combined financial information and
accompanying notes should be read in conjunction with the Combined Financial
Statements and related Notes thereto, and other financial information
pertaining to the Company included in "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

DECEMBER 31, 1995
------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------

STATEMENT OF OPERATIONS:
Revenues:
Vacation Ownership Interest sales...... $ 50,156 $ -- $ 50,156
Interest income........................ 12,886 -- 12,886
Resort revenue......................... 12,613 -- 12,613
Telecommunications..................... 4,802 -- 4,802
Other.................................. 652 -- 652
---------- --------- ----------
Total revenues......................... 81,109 -- 81,109
Costs and operating expenses:
Costs of Vacation Ownership Interests
sold.................................. 12,053 -- 12,053
Sales and marketing.................... 22,318 -- 22,318
Loan portfolio:
Interest expense--treasury........... 6,516 (2,367)(a) 4,149
Provision for doubtful accounts...... 3,522 -- 3,522
Resort expenses........................ 10,585 -- 10,585
Telecommunications expenses............ 3,654 -- 3,654
General and administrative............. 6,979 -- 6,979
Depreciation and amortization.......... 2,215 (181)(a) 2,034
Interest expense--other................ 3,168 (1,576)(a) 1,592
Other.................................. 1,020 -- 1,020
Deferred executive incentive
compensation.......................... 3,448 -- 3,448
---------- --------- ----------
Total costs and operating
expenses.......................... 75,478 (4,124) 71,354
---------- --------- ----------
Operating income................... 5,631 4,124 9,755
Excess value recognized.................. 219 -- 219
---------- --------- ----------
Pretax income............................ 5,850 4,124 9,974
Pro forma provision for income taxes... -- 3,678 (b) 3,678
---------- --------- ----------
Net income(c)............................ $ 5,850 $ 446 $ 6,296
========== ========= ==========
Pro forma net income per share of Common
Stock................................... $ 0.41 -- $ 0.33
Pro forma weighted average shares of
Common Stock outstanding................ 14,175,000 4,625,000 (d) 18,800,000

- --------
(a) Reflects the effect on 1995 historical statement of operations data of
the issuance of common stock on January 1, 1995, and the reduction of
interest expense and elimination of related amortization of prepaid
financing fees, with the expected early retirement of $39.0 million of
term debt.
(b) Reflects the effect on 1995 historical statement of operations data
referred to in note (a) and assumes the combined Company had been treated
as a C corporation rather than as S corporations and limited partnerships
for federal income tax purposes.
(c) For financial reporting purposes, the Company will incur an extraordinary
loss relating to the early termination of debt aggregating $0.8 million
net of pro forma income taxes of $0.5 million. Such amount is not included
in the above pro forma adjustments.
(d) Reflects the Offering of 4,625,000 shares of Common Stock by the Company.

PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------------------------------ ------------------------------------
PRO FORMA PRO PRO FORMA PRO
ACTUAL ADJUSTMENTS FORMA ACTUAL ADJUSTMENTS FORMA
---------- ----------- ---------- ---------- ----------- ----------

STATEMENT OF OPERATIONS:
Revenues:
Vacation Ownership
Interest sales........ $ 38,478 -- $ 38,478 $ 46,161 -- $ 46,161
Interest income........ 9,102 -- 9,102 10,727 -- 10,727
Resort revenues........ 9,641 -- 9,641 10,584 -- 10,584
Telecommunications..... 3,688 -- 3,688 5,257 -- 5,257
Other.................. 410 -- 410 373 -- 373
---------- --------- ---------- ---------- --------- ----------
Total revenues......... 61,319 -- 61,319 73,102 -- 73,102
Costs And Operating
Expenses:
Costs of Vacation
Ownership
Interests sold........ 9,215 -- 9,215 11,329 -- 11,329
Sales and marketing.... 16,728 -- 16,728 20,094 -- 20,094
Loan portfolio:
Interest expense--
treasury............ 4,678 (1,775)(a) 2,903 5,026 (721)(a) 4,305
Provision for
doubtful accounts... 2,700 -- 2,700 3,272 -- 3,272
Resort expenses........ 8,145 -- 8,145 8,847 -- 8,847
Telecommunications
expenses.............. 2,852 -- 2,852 4,114 -- 4,114
General and
administrative........ 5,141 -- 5,141 5,343 -- 5,343
Depreciation and
amortization.......... 1,565 (136)(a) 1,429 1,815 (258)(a) 1,557
Interest expense--
other................. 2,186 (1,182)(a) 1,004 2,972 (2,392)(a) 580
Other.................. 903 -- 903 567 -- 567
Deferred executive
incentive
compensation.......... 2,586 -- 2,586 914 -- 914
---------- --------- ---------- ---------- --------- ----------
Total costs and
operating expenses.... 56,699 (3,093) 53,606 64,293 (3,371) 60,922
---------- --------- ---------- ---------- --------- ----------
Operating income........ 4,620 3,093 7,713 8,809 3,371 12,180
Excess value
recognized............ 164 -- 164 105 -- 105
---------- --------- ---------- ---------- --------- ----------
Pretax income........... 4,784 3,093 7,877 8,914 3,371 12,285
Pro forma provision
for taxes............. -- 2,904 (b) 2,904 -- 4,538 (b) 4,538
---------- --------- ---------- ---------- --------- ----------
Net income(c)........... $ 4,784 $ 189 $ 4,973 $ 8,914 $ (1,167) $ 7,747
========== ========= ========== ========== ========= ==========
Pro forma net income per
share of Common Stock.. $ 0.34 -- $ 0.26 $ 0.63 -- $ 0.41
Pro forma weighted
average shares of
Common Stock
outstanding............ 14,175,000 4,625,000 (d) 18,800,000 14,175,000 4,625,000 (d) 18,800,000

- --------
(a) Reflects the effect on September 30, 1995 and 1996 historical statements
of operations data of the issuance of common stock at the beginning of the
respective period and the reduction of interest expense and elimination of
related amortization of prepaid financing fees associated with the
expected early retirement of $39.0 million of term debt.
(b) Reflects the effect on September 30, 1995 and 1996 historical statement of
operations data referred to in note (a) and assumes the combined Company
had been treated as a C corporation rather than as S corporations and
limited partnerships for federal income tax purposes.
(c) For financial reporting purposes, the Company will incur an extraordinary
loss relating to the early termination of debt aggregating $0.8 million net
of pro forma income taxes of $0.5 million. Such amounts are not included in
the above pro forma adjustments.
(d) Reflects the offering of 4,625,000 shares of Common Stock by the Company.

The selected combined pro forma balance sheet data set forth below as of
September 30, 1996 give effect to the Formation Transaction, the Offering and
the planned distribution to existing shareholders prior to the Formation
Transactions, as if each had occurred on September 30, 1996. The pro forma
adjustments are based upon currently available information and certain
assumptions that management of the Company believes are reasonable under
current circumstances.

COMBINED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
(DOLLAR AMOUNTS IN THOUSANDS)

SEPTEMBER 30, 1996
--------------------------------
PRO FORMA AS
ACTUAL ADJUSTMENTS ADJUSTED
-------- ----------- --------

ASSETS:
Cash.......................................... $ 6,707 $ 53,766 (a) $ 18,685
(38,971)(b)
(317)(c)
(2,500)(d)
Restricted cash............................... 3,465 -- 3,465
Customer mortgages receivable, net............ 93,239 -- 93,239
Other receivables, net........................ 2,927 -- 2,927
Inventory of Vacation Ownership Interests..... 6,139 -- 6,139
Construction in progress...................... 14,360 -- 14,360
-------- --------
Total Vacation Ownership Interests........ 20,499 -- 20,499
-------- --------
Prepaid expenses and other assets............. 13,383 (879)(e) 12,504
Investment in limited partnerships............ 5,059 5,059
Land held for development..................... 6,328 -- 6,328
Property and equipment, net................... 11,894 -- 11,894
-------- -------- --------
Total assets.............................. $163,501 $ 11,099 $174,600
======== ======== ========
LIABILITIES:
Accounts payable and accrued liabilities...... $ 3,000 -- $ 3,000
Accrued compensation and benefits............. 9,420 -- 9,420
Customer deposits............................. 3,840 -- 3,840
Repurchase obligations........................ 2,463 -- 2,463
Other liabilities............................. 6,117 -- 6,117
Deferred tax liability........................ -- 10,300 (f) 10,300
Notes and mortgages payable................... 110,284 (38,971)(b) 71,313
-------- -------- --------
Total liabilities......................... 135,124 (28,671) 106,453
-------- -------- --------
Minority interest............................. 2,563 -- 2,563
Equity........................................ 25,814 53,766 (a) 65,584
-------- --------
(317)(c)
(879)(e)
(10,300)(f)
(2,500)(d)
--------
Total liabilities and equity.............. $163,501 $ 11,099 $174,600
======== ======== ========

- --------
(a) Reflects proceeds of $60,125 from the Offering net of related expenses of
$6,359.
(b) Represents repayment of notes and mortgages payable to financial
institutions.
(c) Represents penalties associated with the prepayment of certain notes
payable retired with a portion of the proceeds of the offering.
(d) Reflects anticipated $2,500 in distributions to Existing Shareholders
prior to the Formation Transactions.
(e) Reflects the write-off of prepaid financing fees related to be the notes
and mortgages payable to financial institutions.
(f) Reflects the establishment of deferred tax liability due to the change in
the Company's tax status to a C corporation.

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

The Company was organized in December 1996 to combine the ownership of the
vacation ownership resort acquisition, development and management businesses
conducted by the Company's corporate and partnership predecessors. The Company
generates revenues from the sale and financing of Vacation Ownership Interests
at its resorts, which typically entitle the purchaser to ownership of a fully-
furnished unit for a one-week period, on either an annual or alternate-year
basis. For purposes of the following discussion, sales of Vacation Ownership
Interests reflect both annual and alternate year sales each as a sale of a
single Vacation Ownership Interest. The Company generates additional revenues
from resort operations, which include room rental operations and auxiliary
resort operations such as food and beverage sales, and from management fees
and telecommunications services provided by the Company at its resorts and
limited telecommunications design and installation services provided for third
parties.

The Company recognizes revenues attributable to sales of Vacation Ownership
Interests on an accrual basis after the execution of a binding sales contract
between the Company and the purchaser, receipt by the Company of a down
payment of at least 10% of the sales price and the expiration of any
applicable statutory rescission period. The Company has not traditionally sold
Vacation Ownership Interests prior to completion of construction; however, if
the Company sells Vacation Ownership Interests prior to completion of
construction in the future, the Company intends to recognize such sales in
accordance with the percentage of completion method in addition to the factors
identified above. Costs associated with the acquisition and development of
vacation ownership resorts, including carrying costs such as interest and
taxes, are generally capitalized and subsequently recorded as a cost of sales
as the related revenues are recognized.

The Company, through its predecessor corporations and partnerships, has
operated in the vacation ownership industry since 1980. In December 1986, the
Company was sold to a corporate acquiror. In November 1991, Messrs. Gellein
and Adler, together with a third individual, acquired the Company from the
corporate acquiror. In May 1995, the Company purchased (the "Executive
Repurchase") the entire interest in the Company held by the third individual,
who was a shareholder/executive of the Company. Also in May and September
1995, the Company redeemed options (the "Option Redemption") to purchase
interests in the partnerships which operate Vistana Resort and Vistana's Beach
Club, which were held by two institutions who had purchased receivables from
the Company. Together, the Executive Repurchase and the Option Redemption
affected the financial results in that the Company incurred additional debt to
finance the Executive Repurchase and the Option Redemption. Additionally, in
connection with the Executive Repurchase, the Company paid its former
shareholder/executive for a five-year covenant-not-to-compete which is being
amortized through April 2000.

Results of Operations.

The following discussion of results of operations relates to entities
comprising the Company on a combined historical basis. Results of operations
only reflect operations of entities in existence for each respective reporting
year. The following table sets forth certain combined operating information for
the entities comprising the Company for the years ended December 31, 1993, 1994
and 1995 and the nine months ended September 30, 1995 and 1996.

NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31 SEPTEMBER 30
---------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ------ -------

STATEMENT OF OPERATIONS:
AS A PERCENTAGE OF TOTAL REVENUES
Vacation Ownership Interest sales.... 75.0% 69.8% 61.8% 62.8% 63.1%
Interest income...................... 6.9% 9.9% 15.9% 14.8% 14.7%
Resort revenues...................... 14.7% 15.2% 15.6% 15.7% 14.5%
Telecommunications revenues.......... 2.7% 4.4% 5.9% 6.0% 7.2%
Other................................ 0.7% 0.7% 0.8% 0.7% 0.5%
------ ------ ------ ------ -------
Total revenues..................... 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== =======
AS A PERCENTAGE OF VACATION OWNERSHIP
INTEREST SALES
Vacation Ownership Interest cost of
sales............................... 20.7% 21.0% 24.0% 24.0% 24.5%
Sales and marketing.................. 39.3% 42.2% 44.5% 43.5% 43.5%
Provision for doubtful accounts...... 7.0% 7.0% 7.0% 7.0% 7.1%
AS A PERCENTAGE OF INTEREST INCOME
Interest expense--treasury........... 40.6% 47.1% 50.6% 51.4% 46.9%
AS A PERCENTAGE OF TOTAL REVENUES
General and administrative........... 10.0% 10.3% 8.6% 8.4% 7.3%
Depreciation and amortization........ 1.2% 1.8% 2.7% 2.5% 2.5%
Interest expense--other.............. 3.1% 2.7% 3.9% 3.6% 4.1%
Other................................ 1.8% 1.6% 1.3% 1.5% 0.8%
Total costs and operating expenses... 84.5% 86.7% 93.1% 92.5% 88.0%
AS A PERCENTAGE OF RESORT REVENUES
Resort expenses(1)................... 87.3% 84.8% 83.9% 84.5% 83.6%
AS A PERCENTAGE OF TELECOMMUNICATIONS
REVENUES
Telecommunications expenses(1)....... 77.6% 74.6% 76.1% 77.3% 78.3%
SELECTED OPERATING DATA:
Number of resorts at end of period... 2 2 2 2 3
Number of Vacation Ownership
Interests sold(2)................... 5,679 5,582 5,190 3,947 4,499
Number of Vacation Ownership
Interests in inventory at end of
period(3)........................... 3,781 3,822 3,054 3,808 14,002
Average price of Vacation Ownership
Interests sold...................... $9,801 $9,707 $9,664 $9,749 $10,260

- --------
(1) Does not include interest and depreciation expenses.
(2) Includes both sales of annual and alternate-year Vacation Ownership
Interests.
(3) Inventory classified as annual Vacation Ownership Interests.

Comparison of Nine Months Ended September 30, 1996 to Nine Months Ended
September 30, 1995.

For the nine months ended September 30, 1996, the Company recognized total
revenues of $73.1 million compared to $61.3 million for the nine months ended
September 30, 1995, an increase of $11.8 million, or 19.2%. This increase is
primarily the result of a $7.7 million increase in sales of Vacation Ownership
Interests from $38.5 million during 1995 to $46.2 million during 1996, an
increase of 20%. Sales of Vacation Ownership Interests increased primarily as a
result of (i) a 5.2% increase in the average sales price of Vacation Ownership
Interests, and (ii) a 14.0% increase in the number of Vacation Ownership
Interests sold from 3,947 to 4,499. The increase in Vacation Ownership
Interests sold was the result of the Company's marketing activities in central
Florida and a more than two-fold increase in sales generated by the Company's
internationally-based marketing efforts which grew from $3.1 million in 1995 to
$6.9 million in 1996.

Interest income increased 17.9% from $9.1 million to $10.7 million due to an
18.7% increase in the principal amount of net customer mortgages receivable
from $78.5 million to $93.2 million, and an increased average yield on the
Company's customer mortgages receivable portfolio from 14.1% to 14.4%. Also
included

in interest income, discount amortization recognized on customer mortgages
receivable increased 23.2% from $1.3 million to $1.6 million as the Company
recognized discount amortization for the full period in 1996, as compared to a
portion of the period in 1995. This discount resulted from a 1995 transaction
in which the Company re-acquired customer mortgages receivable (pursuant to a
related clean-up call provision pertaining to the original transaction) which
had been previously sold in 1991. As of September 30, 1996, $2.1 million of
the unamortized discount remained and is expected to be amortized over the
next two years.

Resort revenues increased 9.8%, from $9.6 million to $10.6 million, as a
result of increased room rentals at Vistana Resort, as well as increased
revenues from Vistana Resort's retail operations. Telecommunications revenues
(guest telephone charges relating to the existing resorts and revenues from
contracting services provided to third parties) increased 42.5%, from $3.7
million to $5.3 million, due to increased telephone usage by resort guests and
an increase in contracting revenues from $2.7 million to $4.1 million.

Operating costs and expenses increased 13.4% from $56.7 million to $64.3
million, although, as a percentage of total revenues, operating costs and
expenses decreased from 92.5% in 1995 to 88.0% in 1996. Product costs, sales
and marketing costs and resort expenses increased at a rate commensurate with
or in excess of that of related revenues. Loan portfolio costs, general and
administrative expenses, and depreciation increased at rates less than the
rate by which revenues increased. Provision for doubtful accounts remained
constant at 7.0% of revenues in 1995 and 1996. The Company annually monitors
its provision for doubtful accounts to provide for future losses associated
with any defaults on customer mortgages receivable and provides for additions
to the reserve as a percentage of Vacation Ownership Interests sold in the
applicable period. Management believes that the provision is adequate for such
future losses. Interest expense-treasury increased due to increased borrowings
secured by customer mortgages receivable. Depreciation and amortization
increased at a rate lower than that of total revenues reflecting the
leveraging of these costs and assets over a larger revenue base. In addition,
operating costs and expenses decreased by $1.6 million as a result of a
decrease in the amount of deferred executive incentive compensation.

Costs of sales as a percentage of Vacation Ownership Interest sales
increased from 24.0% in 1995 to 24.5% in 1996 reflecting a larger percentage
of Vacation Ownership Interests sold in 1996 compared to 1995 from a more
expensive phase at Vistana Resort in Orlando, resulting from a relatively
greater per unit cost for land and amenities than prior phases. The Company
expects to complete sales from this higher-cost phase in mid-1997 and in
future periods the Company expects later phases to have relatively lower costs
for land and amenities. Sales and marketing costs as a percentage of such
sales remained constant at 43.5%.

General and administrative expenses increased 3.9% from $5.1 million to $5.3
million. However, as a percentage of total revenues, these costs decreased
from 8.4% to 7.3%. Resort expenses as a percentage of resort revenues remained
relatively constant at approximately 84% as did telecommunications expenses as
a percentage of telecommunications revenues at 77% and 78%, respectively.

Interest expense-treasury (consisting of interest paid on borrowings secured
by customer mortgages receivable) increased 7.4% from $4.7 million to $5.0
million. However, as a percentage of interest income, interest expense-
treasury decreased from 51.4% to 46.9%. This increase reflects higher
borrowings secured by customer mortgages receivable to fund growth in the
Company's operations and the relatively higher interest income described
above. Interest expense-other increased $0.8 million, or 36.0%, to $3.0
million in 1996 as a result of the impact for the full nine months of the debt
associated with the Executive Repurchase and Option Redemption.

During 1995, the Company amended certain senior executives' employment
agreements, which increased deferred executive incentive compensation, on a
cumulative basis, from 1991 through 1995. As a result, deferred executive
incentive compensation decreased by 64.7% to $0.9 million in 1996 from $2.6
million in 1995. The Company intends to enter into new employment agreements
with its senior executives effective upon completion of the Offering and, as a
result, anticipates that there will be no equivalent expense after 1996. See
"Management--Employment Agreements."

Pre-tax income increased 86.3% from $4.8 million to $8.9 million.

Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994.

For the year ended December 31, 1995, the Company recognized total revenues
of $81.1 million compared to $77.6 million for the year ended December 31,
1994, an increase of $3.5 million or 4.5%. Such increase is primarily due to
higher interest income, telecommunications revenues and resort revenues, which
offset a 7.4% decrease in revenues from sales of Vacation Ownership Interests
from $54.2 million to $50.2 million. The decrease in Vacation Ownership
Interests sold is primarily the result of a $4.8 million decrease in sales
from the Company's marketing activities in central Florida.

Interest income increased 68.4%, from $7.7 million to $12.9 million, due to
a 25.7% increase in the principal amount of net customer mortgages receivable
from $64.0 million to $80.5 million. The year-end weighted average interest
rate on the customer mortgages receivable portfolio increased from 13.67% to
13.95% per annum. The Company also recognized additional interest income of
$2.1 million in 1995 as a result of the recognition of a discount amortization
on certain customer mortgages receivable repurchased (pursuant to a related
clean up call provision pertaining to the original transaction) from an
investment partnership.

Resort revenues increased 6.6%, from $11.8 million to $12.6 million, as a
result of the increased number of rooms rented. Telecommunications revenues
increased by 42.2% from $3.4 million to $4.8 million. This increase is
primarily due to a $1.2 million increase in revenues derived from contracting
services provided to third parties.

Operating costs and expenses increased by 12.2% from $67.3 million to $75.5
million. As a percentage of total revenues, operating costs and expenses
increased from 86.7% to 93.1%. This increase is primarily attributable to a
$3.1 million increase in deferred executive incentive compensation expense
resulting from an amendment to certain senior executives' employment
agreements. Additionally, there was an increase in cost of sales of Vacation
Ownership Interests as a percentage of Vacation Ownership Interest sales from
21.0% to 24.0% due to (i) the commencement of sales of Vacation Ownership
Interests at a new phase at Vistana Resort, which had a corresponding greater
per unit land and amenity cost than prior phases, and (ii) an increased
percentage of sales of Vacation Ownership Interests at Vistana's Beach Club
(which have a lower average sales price per unit than those at Vistana Resort
and a higher product cost as a result of the high-rise nature of the
construction), from 8.5% of all Vacation Ownership Interests sold in 1994 to
16.1% in 1995 which carried a higher product cost.

Sales and marketing costs as a percentage of Vacation Ownership Interest
sales increased from 42.2% in 1994 to 44.5% in 1995, reflecting decreased
efficiencies of the Company's marketing activities in central Florida and
increased sales costs.

General and administrative costs decreased 12.6%, from $8.0 million to $7.0
million, due principally to a decrease in aggregate executive compensation and
related costs payable by the Company as a result of the Executive Repurchase.

Interest expense-treasury increased 80.7%, from $3.6 million to $6.5
million, due to an increase in hypothecation activities pursuant to which the
total amount of notes payable secured by customer mortgages receivable
increased from a year-end balance of $44.5 million in 1994 to a year-end
balance of $65.9 million in 1995. This increased borrowing funded a 14.9%
increase in inventory and units under construction during 1995, from $15.9
million at December 31, 1994 to $18.3 million at December 31, 1995. The
Company's interest expense-other increased 50.4% from $2.1 million to $3.2
million. The increase in interest expense-other is attributable to
indebtedness incurred in connection with the Executive Repurchase and the
Option Redemption. Both interest expense-treasury and interest expense-other
increased in 1995 in part due to the full-year effect in 1995 of higher
interest rates which rose during 1994 and were sustained at higher levels
throughout 1995.

Resort expenses increased 5.5% from $10.0 million in 1994 to $10.6 million
in 1995. Telecommunications expenses increased 45.0% from $2.5 million in 1994
to $3.7 million in 1995, primarily as a result of an increase in the
percentage of costs attributable to contracting services provided to third
parties. These increases were consistent with the increases in resort and
telecommunications revenues, respectively.

Pre-tax income decreased 45.4%, from $10.7 million to $5.9 million.

Comparison of Year Ended December 31, 1994 to Year Ended December 31, 1993.

For the year ended December 31, 1994, the Company recognized total revenues
of $77.6 million compared to $74.2 million for the year ended December 31,
1993, an increase of 4.7%. This increase is primarily due to a 50.2% increase
in interest income and a 70.6% increase in telecommunications revenues, and
offset a 2.6% decrease in revenues from sales of Vacation Ownership Interests
resulting from reduced effectiveness of the Company's marketing activities in
central Florida.

Interest income increased by 50.2%, from $5.1 million to $7.7 million, due
to an increase in the amount of hypothecation financing activity (versus sales
of customer mortgages receivable in prior periods), which correspondingly
increased the amount of net customer mortgages receivable. Net customer
mortgages receivable increased 27.6% from $50.2 million to $64.0 million.
Additionally, the weighted average yield on the portfolio of customer
mortgages receivable increased from 13.5% at the end of 1993 to 13.7% at the
end of 1994. Telecommunications revenues increased as a result of higher
percentage volume of contracting services provided to third parties and an
increase in guest telephone usage at the Company's resorts.

Operating costs and expenses increased 7.4% from $62.7 million to $67.3
million. As a percentage of total revenues, operating costs and expenses
increased from 84.5% in 1993 to 86.7% in 1994. This increase in operating
costs is primarily due to an increase in total sales and marketing costs as a
percentage of Vacation Ownership Interest revenues from 39.3% in 1993 to 42.2%
in 1994. This increase is due to increased marketing activities in response to
greater competition in the Orlando, Florida market during the summer of 1994
in which two new competitors commencing sales operations. Telecommunications
expenses increased 64.0%, from $1.5 million in 1993 to $2.5 million in 1994
primarily as a result of an increase in the percentage of the costs
attributable to contracting services provided to third parties consistent with
the corresponding percentage increase in telecommunications revenues. Resort
expenses increased 5.7% from $9.5 million in 1994 to $10.0 million in 1993,
consistent with the increased resort revenues.

Cost of sales with respect to Vacation Ownership Interests revenues
increased from 20.7% in 1993 of Vacation Ownership Interest revenues to 21.0%
in 1994. This increase is attributable to a higher percentage of sales at
Vistana's Beach Club which had a higher cost of sales than those at Vistana
Resort. General and administrative expenses increased 7.7% from $7.4 million
in 1993 to $8.0 million in 1994. As a percentage of total revenues, general
and administrative expenses increased from 10.0% in 1993 to 10.3% in 1994 due
to higher labor costs and expanded development and training programs.
Depreciation and amortization expenses increased 59.0% from 1994 to 1993
primarily as a result of the acquisition of a building currently leased to a
third party as a retail facility, as well as the purchase of
telecommunications equipment.

Interest expense-treasury increased 74.2%, to $3.6 million in 1994 from $2.1
million in 1993, as a result of (i) increased hypothecation financing activity
to fund the Company's operations and acquisition and development activities;
and (ii) a 2.5% rise in the prime rate to 8.5%, which affected a portion of
the Company's debt. Total notes payable on all borrowings increased 12.7% from
$57.5 million at year-end 1993 to $64.8 million at year-end of 1994.

Pre-tax income decreased 12.3% from $12.2 million in 1993 to $10.7 million
in 1994.

Liquidity and Capital Resources.

The Company generates cash for operations from the sale and financing of
Vacation Ownership Interests, resort operations, management activities and
telecommunications services. With respect to the sale of Vacation

Ownership Interests, the Company generates cash for operations from customer
down payments and third party financing of customer mortgages receivable in
amounts typically equal to 90% of the related customer mortgage receivable.
The Company generates additional cash from the financing of Vacation Ownership
Interests equal to the difference between the interest charged on the customer
mortgages receivable (which averaged 14.4% at September 30, 1996) and the
interest paid on the notes payable secured by the Company's pledge of such
customer mortgages receivable (which averaged 10.4% at September 30, 1996).

During the nine months ended September 30, 1996 and 1995 and the years ended
December 31, 1995, 1994 and 1993, cash provided by operating activities was
$9.0 million, $7.1 million, $13.4 million, $13.6 million and $10.9 million,
respectively. Cash generated from operating activities was higher in 1996
resulting from an increase in net income. Cash generated from operating
activities was comparable between 1995 and 1994. Cash generated from operating
activities was higher in 1994 than 1993 due to decreased levels of
construction expenditures in 1994.

Net cash used in investing activities for the nine months ended September
30, 1996 and 1995, and the years ended December 31, 1995, 1994 and 1993 was
$20.0 million, $15.8 million, $22.6 million, $20.4 million and $20.5 million,
respectively. Pursuant to a 1992 agreement wherein the Company agreed to sell
to third parties a stipulated volume of its customer mortgages receivable, the
Company completed such sales during 1993 and 1994. The Company has not entered
into any similar agreement since the 1992 agreement and does not anticipate
entering into any such agreement in the future. For the nine months ended
September 30, 1996, the increase in customer mortgages receivable was due to
increased sales of Vacation Ownership Interests in 1996. The growth in
customer mortgages receivable in 1994 compared to 1993 was generally
comparable, as was the overall volume of Vacation Ownership Interest sales for
1994 compared to 1993.

For the nine months ended September 30, 1996 and 1995, and for the years
ended December 31, 1995, 1994, and 1993, net cash provided by financing
activities was $10.3 million, $13.7 million, $15.1 million, $6.5 million and
$11.1 million, respectively. The increase in proceeds from notes payable in
1995 funded the increased level of equity distributions attributable to the
Executive Repurchase and the Option Redemption. The net cash figures for 1996
were comparable with 1995. In addition, year-to-year net cash provided from
investing activities fluctuates as a result of the Company's borrowing
activities and its relative investment in land and related Vacation Ownership
Interest inventory.

The Company requires funds to finance the acquisition and development of
vacation ownership resorts and related inventory, and to finance customer
purchases of Vacation Ownership Interests. Historically, these funds have been
provided by indebtedness secured by a portion of the Company's inventory of
unsold Vacation Ownership Interests, customer mortgages receivable and other
assets. In addition, the Company incurred additional indebtedness in
connection with the Executive Repurchase and Option Redemptions. As of
September 30, 1996, the Company had $14.8 million outstanding under its notes
payable secured by its land and Vacation Ownership Interest inventory, and
$65.7 million outstanding under its notes payable secured by customer
mortgages receivable. Upon completion of the Offering and the application of
proceeds therefrom, the Company anticipates that $20.0 million of the notes
payable secured by customer mortgages receivable will be repaid, as well as
$18.9 million in other indebtedness. As of September 30, 1996, the Company's
scheduled principal payments on its pro-forma long-term indebtedness through
2001 (excluding payments on revolving credit facilities) are $1.4 million in
1996 (last three months), $2.0 million in 1997, $1.4 million in 1998, $1.4
million in 1999, $1.1 million in 2000 and $0.7 million in 2001.

Over the next 12 months, the Company anticipates spending approximately $35
million for expansion and development activities at Vistana Resort, Oak
Plantation Villas by Vistana and Vistana Resort at World Golf Village. In
addition, the Company anticipates expenditures in connection with the
development of the Myrtle Beach Resort and the PGA Vacation Resort by Vistana,
the amount of which will be dependent upon the size and timing of the initial
phases of such resorts. The Company expects to fund its operations and
development activities at its existing resorts and the acquisition of new
resorts with (i) cash flow from operations; (ii) borrowings under existing
credit facilities; (iii) the net proceeds to the Company of the Offering
(after repayment

of certain outstanding indebtedness); and (iv) borrowings under new credit
facilities which the Company intends to secure. As of September 30, 1996, the
Company's existing credit facilities had an available capacity of approximately
$62.6 million, including credit facilities to fund customer financing, working
capital, and construction and development activities. The Company believes that
its available capacity under its existing credit facilities is sufficient to
meet such capital needs for at least the next 12 months.

The Company intends to pursue a growth-oriented strategy; accordingly, the
Company may, from time to time acquire, among other things, additional vacation
ownership resorts and additional land upon which vacation ownership resorts may
be developed, and operating companies providing or possessing quality resorts,
vacation ownership assets, or management, sales or marketing expertise
applicable to the Company's operations in the vacation ownership industry. In
this regard, the Company is currently considering the acquisition of several
additional land parcels for the development of additional resorts, either under
a non-multi-hotel brand, under the Vistana brand, one of Promus' brands or the
PGA Vacation Resort brand. See "Business--Affiliation with Promus." The Company
may also evaluate asset and operating company acquisitions, but presently has
no contracts or capital commitments relating to any such potential acquisition.

In the future, the Company may negotiate additional credit facilities, or
issue debt or additional equity securities. Any debt incurred or issued by the
Company may be secured or unsecured, fixed or variable rate interest, and may
be subject to terms and conditions approved by management. The Company has
historically enjoyed good credit relationships and has been successful in
establishing new relationships and expanding existing credit facilities as its
growth and opportunities have necessitated. Management believes it will
continue to be able to borrow in this manner.

The Company believes that 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
for the next 12 months. However, depending upon conditions in the capital and
other financial markets, and other factors, the Company may from time to time
consider the issuance of debt or other securities, the proceeds of which may be
used to finance acquisitions, to refinance debt or for general corporate
purposes. The Company believes that the Company's properties are adequately
covered by insurance. See "Business--Insurance."

Inflation.

Inflation and changing prices have not had a material impact on the Company's
revenues, operating income and net income during any of the Company's three
most recent fiscal years. Due to the current economic climate, the Company does
not expect that inflation and changing prices will have a material impact on
the Company revenues, operating income or net income. To the extent
inflationary trends affect short-term interest rates, a portion of the
Company's debt service costs may be affected as well as the rates the Company
charges on its customer mortgages.

Seasonality.

The Company's revenues are moderately seasonal with owner and guest activity
the greatest from February through April and June through August. As the
Company expands into new markets and geographic locations it may experience new
seasonality dynamics creating fluctuations in operating results.

BUSINESS

COMPANY HISTORY

Founded in 1980, the Company is a leading developer and operator of
timeshare resorts in the United States. The Company's principal operations
consist of (i) acquiring, developing and operating vacation ownership resorts;
(ii) marketing and selling Vacation Ownership Interests in its resorts, either
on an annual or alternate-year basis; and (iii) providing financing for the
purchase of Vacation Ownership Interests at its resorts. The Company currently
operates three vacation ownership resorts in Florida with a total of 1,378
units, or 70,278 Vacation Ownership Interests, and is currently constructing a
fourth resort at World Golf Village, a destination golf resort and future home
of the World Golf Hall of Fame currently under development near St. Augustine,
Florida. In addition, the Company has entered into an exclusive joint venture
agreement with Promus, a leading hotel company in the United States, for the
joint development and operation of vacation ownership resorts in selected
North American markets. The Company has also entered into a letter of intent
with PGA of America for the development of golf-oriented vacation ownership
resorts.

The quality and customer appeal of the Company's resorts have been
recognized through industry awards and by several leading travel publications.
The Company's flagship resort, Vistana Resort in Orlando, contains 1,060 units
developed in seven phases on a 135-acre landscaped complex featuring swimming
pools, tennis courts, restaurants and other recreational amenities. In 1995
and 1996, Conde Nast Traveler magazine selected Vistana Resort as a "Gold
List" resort, the only vacation ownership resort to be included as one of the
top 500 resorts in the world. Similarly, the most recent Zagat Survey of U.S.
Hotels, Resorts & Spas ranked Vistana Resort as one of the top resorts in
Orlando, commenting that it contains the "most luxurious villas in Orlando."
Each of the Company's operating resorts is rated as a Gold Crown resort by
Resort Condominiums International ("RCI"), the operator of the world's largest
Vacation Ownership Interest exchange network, which was recently acquired by
HFS Incorporated. The Gold Crown distinction is reserved for approximately the
top 14% of the more than 3,000 vacation ownership resorts in the RCI network.

THE VACATION OWNERSHIP INDUSTRY

The Market. The resort component of the leisure industry is primarily
serviced by two alternatives for overnight accommodations: commercial lodging
establishments and vacation ownership resorts. Commercial lodging consists
principally of hotels and motels in which a room is rented on a nightly,
weekly or monthly basis for the duration of the visit and is supplemented by
rentals of privately-owned condominium units or homes. For many vacationers,
particularly those with families, a lengthy stay at a quality commercial
lodging establishment can be expensive and the space provided relative to the
cost is not economical. In addition, room rates at such establishments are
subject to change periodically and availability is often uncertain. For these
and other reasons, vacation ownership presents an economical and reliable
alternative to commercial lodging for many vacationers.

First introduced in Europe in the mid-1960s, vacation ownership has been one
of the fastest-growing segments of the hospitality industry during the past
two decades. In 1994 (the latest period for which ARDA information is
available), the industry experienced a record year, with 384,000 new owners
and purchases of 560,000 Vacation Ownership Interests resulting in a sales
volume of $4.76 billion (up from approximately $490 million in 1980). Based on
other industry information, the Company believes that vacation ownership sales

exceeded $5.0 billion in 1995. As shown in the following charts, the worldwide
vacation ownership industry has expanded significantly since 1980 both in
terms of the number of Vacation Ownership Interests sold and total sales
volume:

LOGO

[The following tables are represented as bar graphs]

Dollar Volume of Vacation Ownership Interest Sales
(in billions)

1 1980 $0.490
2 1981 $0.965
3 1982 $1.165
4 1983 $1.340
5 1984 $1.735
6 1985 $1.580
7 1986 $1.610
8 1987 $1.940
9 1988 $2.390
10 1989 $2.970
11 1990 $3.240
12 1991 $3.740
13 1992 $4.250
14 1993 $4.505
15 1994 $4.760

Number of Vacation Ownership Interest Owners
(in millions)

1 1980 0.155
2 1981 0.220
3 1982 0.335
4 1983 0.470
5 1984 0.620
6 1985 0.805
7 1986 0.970
8 1987 1.125
9 1988 1.310
10 1989 1.530
11 1990 1.800
12 1991 2.070
13 1992 2.363
14 1993 2.760
15 1994 3.144

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

In addition, the vacation ownership industry has experienced consistent and
steady growth from 1990 through 1994, achieving average annual growth rates of
approximately 10.2% in sales volume, 14.6% in number of owners and 8.4% in
number of Vacation Ownership Interests sold per year.

The Economics. The Company believes that national lodging and hospitality
companies are attracted to the vacation ownership concept because of the
industry's relatively low product cost and high profit margins and the
recognition that vacation ownership resorts provide an attractive alternative
to the traditional hotel-based vacation and allow the hotel companies to
leverage their brands into additional resort markets where demand exists for
accommodations beyond traditional rental-based lodging operations.

The Consumer. According to information compiled by ARDA for the year ended
December 31, 1994, the prime market for Vacation Ownership Interests consists
of individuals in the 40-55 year age range who are reaching the peak of their
earning power and are rapidly gaining more leisure time. The median age of a
Vacation Ownership Interest buyer at the time of purchase is 46. The median
annual household income of current Vacation Ownership Interest owners in the
United States is approximately $63,000, with approximately 35.0% of all
Vacation Ownership Interest owners having annual household income greater than
$75,000 and approximately 17.0% of such owners having annual household income
greater than $100,000. Despite the growth in the vacation ownership industry,
less than 2% of all United States households own a Vacation Ownership
Interest. As of December 31, 1994, Vacation Ownership Interest ownership had
achieved only an approximate 3.0% market penetration among United States
households with income above $35,000 per year and 3.9% market penetration
among United States households with income above $50,000 per year.
Approximately 52% of all owners of Vacation Ownership Interests reside in the
United States.

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

The Company believes it is well-positioned to take advantage of these
demographic trends because of the location and quality of its resorts, the
average sales price of its Vacation Ownership Interests and the participation
of its resorts in RCI. The Company expects the vacation ownership industry to
continue to grow as the baby-boom generation continues to enter the 40-55 year
age bracket, the age group which contained the most Vacation Ownership
Interest purchasers in 1994.

GROWTH STRATEGIES

Continuing Sales at the Company's Orlando-Area Resorts. With over 36 million
visitors annually, Orlando is one of the most popular vacation destinations in
the United States. The Company intends to maintain its position as a leader in
the Orlando vacation ownership resort market by developing and selling an
additional 479 units at Vistana Resort, representing an additional 24,429
Vacation Ownership Interests. In addition, the Company plans to continue sales
at Oak Plantation Villas by Vistana, a 242-unit former apartment complex
located in the Orlando market, which the Company is converting in phases into
a vacation ownership resort and which is owned by a Related Partnership in
which the Company holds an approximately 67% controlling interest. As of
September 30, 1996, Oak Plantation Villas by Vistana had an unsold inventory
of approximately 12,342 Vacation Ownership Interests. Current prices for
Vacation Ownership Interests at Vistana Resort and Oak Plantation Villas by
Vistana range from $7,250 to $16,000, and from $5,800 to $8,500, respectively.

The Company believes that the Orlando market continues to offer significant
growth opportunities in terms of the development of vacation ownership resorts
and sales of Vacation Ownership Interests. Although the Orlando market is
highly competitive, the Company believes that the combination of its 16 years
of experience in the market and industry, its reputation and its established
marketing arrangements with hotels and other tourist venues provide the
Company with a competitive advantage in the Orlando market.

Promus. The Company and Promus have entered into the Promus Agreement, an
exclusive five-year agreement to jointly acquire, develop, market and
operate vacation ownership resorts in North America under Promus' Embassy
Vacation Resort, Hampton Vacation Resort and Homewood Vacation Resort
brands. Promus is a wholly-owned operating subsidiary of Promus Hotel
Corporation, a New York Stock Exchange company, which is one of the largest
companies in the hotel industry. As of December 31, 1995, Promus Hotel
Corporation had over 9,000 employees system-wide and owned, managed and/or
franchised more than 680 hotels, containing over 90,000 rooms and suites.

Under the Promus Agreement, the Company will be Promus' exclusive joint
venture partner for the development and operation of vacation ownership
resorts in North America and will also have the option of operating
vacation ownership resorts on a franchise basis. Promus has agreed that the
Company will be the sole franchisee in North America of the Hampton
Vacation Resort and Homewood Vacation Resort brands, and one of only two
franchisees in North America of the Embassy Vacation Resort brand. The
Promus Agreement precludes the Company from acquiring or developing
vacation ownership resorts with any other multi-hotel brand, but preserves
its ability to develop vacation ownership resorts in combination with non-
hotel brands (such as PGA of America), to acquire or develop vacation
ownership resorts under the Vistana name (other than in certain selected
markets agreed to by the parties), and to develop vacation ownership
resorts with unique, non-multi-hotel brand hotel properties. Although the
Company and Promus are evaluating new resort development opportunities for
the joint venture, no commitments have been made for a specific development
at this time. However, the parties have agreed to franchise two of the
Company's properties subject to execution of definitive franchise
agreements: (i) Oak Plantation Villas by Vistana, which is intended to
become the first vacation ownership resort to operate under the Hampton
Vacation Resort brand; and (ii) the Myrtle Beach Resort, which the Company
intends to operate under the Embassy Vacation Resort brand.

The Company believes that its strategic relationship with Promus will
offer growth opportunities with respect to the development and operation of
vacation ownership resorts by enhancing its sales and marketing of Vacation
Ownership Interests and providing further management expertise. The Company
anticipates that such growth opportunities will occur as a result of
Promus' strong brand recognition, large customer base and extensive product
development, marketing, management and information technology capabilities.
Moreover, the Company believes that its strategic relationship with Promus
will offer the Company access to a target market of prospective customers
who, because of their favorable demographics and, in the case of Promus'
Embassy Suites and Homewood Suites hotel brands, preference for suite
accommodations, will respond favorably to the Company's resorts. The
Company believes that the Embassy Vacation Resort, the

Hampton Vacation Resort and the Homewood Vacation Resort brands will
generally (i) conform to the relative price points, (ii) target similar
customers, and (iii) effect similar brand segmentation, as applicable to
Promus' Embassy Suites, Hampton Inn and Homewood Suites hotel brands,
respectively. See "Business--Affiliation with Promus."

World Golf Village. In the fall of 1996, the Company commenced
construction of the first phase of a 408-unit vacation ownership resort at
World Golf Village. Constituting the centerpiece of a planned community
under development near St. Augustine, Florida, World Golf Village is a
destination resort which will contain the World Golf Hall of Fame, a
championship golf course, a golf academy, a hotel and convention center,
restaurants, retail facilities and other amenities. The Company holds a
37.5% controlling ownership interest in a limited partnership, which has
the exclusive rights to develop and market Vacation Ownership Interests at
World Golf Village, and has exclusive multi-year marketing agreements for
solicitation at key locations throughout World Golf Village, including the
hotel/conference center, golf course, Walk of Champions and retail
facilities. The Company also has entered into an agreement with PGA Tour
Golf Course Properties, Inc. that allows the Company access to PGA Tour
databases for marketing purposes. The Company anticipates that sales of
Vacation Ownership Interests at World Golf Village will commence in the
spring of 1998 for between $7,500 and $16,000. See "--Description of the
Company's Resorts."

The Company believes that World Golf Village and the golf industry in
general represent attractive opportunities for expansion and the
development of future vacation ownership resorts by the Company. The
Company views the World Golf Village project as a unique, high-profile
opportunity to expand its vacation ownership resort business through the
golf market in a manner that will facilitate access to qualified customers
and maintain and enhance the Company's reputation. In addition, by
developing a vacation ownership resort at World Golf Village under the
Vistana name and through a Related Partnership in which the Company has a
minority, but controlling, interest, the Company believes it has adopted a
strategy which allows for risk diversification without sacrificing
operational control or the opportunity to build its brand awareness.

PGA of America. Under a letter of intent with PGA of America, which
contemplates a long-term affiliation for the development of future vacation
ownership resorts, the Company intends to acquire 25 acres of land adjacent
to an existing 36-hole championship golf facility owned by a subsidiary of
PGA of America in Port St. Lucie, Florida, for the development of the first
PGA Vacation Resort by Vistana. The property, located approximately 40
miles north of Palm Beach Gardens, Florida, is planned to contain
approximately 250 units, representing a total of 12,750 Vacation Ownership
Interests with an expected price range of $6,000 to $12,000. The Company
intends to commence construction of the first phase of this resort during
1997. The Company believes that PGA of America, through its approximately
20,000 golf professionals, will provide strategic marketing opportunities
for this resort and any future PGA Vacation Resorts developed by the
Company. With members at approximately 9,000 of the nation's leading golf
facilities, PGA of America, which recently celebrated its 80th anniversary,
administers several professional golf tournaments, including the PGA
Championship, the Ryder Cup matches, the PGA Seniors' Championship, the
MasterCard PGA Grand Slam and the PGA Club Professional Championship.
Together with Vistana Resort at World Golf Village, the Company's
affiliation with PGA of America provides it with high-profile relationships
in the golf industry. See "--Description of the Company's Resorts."

Vistana Branded Resorts and Acquisition Opportunities. To capitalize on
the Vistana brand and reputation, the Company intends to seek other
vacation ownership resort development opportunities in selected vacation
markets where, among other things, it believes it can obtain effective
marketing access to potential customers. In addition, the Company from time
to time evaluates opportunities to acquire vacation ownership assets and
operating companies that may be integrated into the Company's existing
operations. However, the Company currently has no contracts or capital
commitments relating to any such acquisitions.

Improving Operating Margins. The Company intends to improve operating
margins by reducing (i) its financing costs by entering into more favorable
borrowing agreements and (ii) its general and administrative costs

as a percentage of revenues. The Company anticipates that as a public company
with a strengthened balance sheet and increased access to the capital markets,
it will be able lower its borrowing costs. In addition, the Company has
developed a comprehensive administrative, operations and loan servicing
infrastructure. The Company believes it can further improve operating margins
by spreading the cost of these resources over an increasing revenue base.

DESCRIPTION OF THE COMPANY'S RESORTS

VACATION
OWNERSHIP VACATION OWNERSHIP
INTERESTS INTERESTS AT
DATE SALES UNITS AT RESORT SOLD(A) AVERAGE RESORTS (A)
COMMENCED/ --------------- ------------ SALES -------------------
EXPECTED TO TOTAL PRICE IN CURRENT PLANNED
RESORT LOCATION COMMENCE(B) CURRENT PLANNED TOTAL 1996 1996 (A) INVENTORY EXPANSION
- ----------------------- ------------------ ----------- ------- ------- ------ ----- -------- --------- ---------

Vistana Resort (c) Orlando, Florida 1980 1,060 1,539 54,314 4,160(d) $10,418(d) 1,648 24,429
Vistana's Beach Hutchinson Island,
Club (e) Florida 1989 76 76 3,864 339 $ 8,331 12 0
Oak Plantation Kissimmee, Florida
Villas by Vistana (f) 1996 242 242 0 0 0 12,342 0
Vistana Resort at World St. Augustine,
Golf Village (g) Florida 1998 -- 408 -- -- -- -- 20,808
PGA Vacation Port St. Lucie,
Resort by Vistana (h) Florida 1998 -- 250 -- -- -- -- 12,750
Myrtle Beach Resort (i) Myrtle Beach,
South Carolina 1998 -- 550 -- -- -- -- 28,050
----- ----- ------ ----- ------ ------
TOTAL 1,378 3,065 58,178 4,499 14,002 86,037
===== ===== ====== ===== ====== ======

- --------
(a) For purposes of calculating Vacation Ownership Interests Sold and Average
Sales Price in 1996, data with respect to Vacation Ownership Interests
reflects each alternate-year Vacation Ownership Interest Sold as a single
Vacation Ownership Interest. For purposes of calculating Vacation
Ownership Interests at Resorts, both the Current Inventory and Planned
Expansion amounts are based on sales of Vacation Ownership Interests on an
annual basis only. To the extent these interests are sold on an alternate-
year basis, the actual number of Vacation Ownership Interests at Resorts
would be increased. The Company sells 51 annual Vacation Ownership
Interests (or 102 alternate-year Vacation Ownership Interests) per unit
with respect to each calendar year, with one week reserved each year for
maintenance of the unit.
(b) Dates listed represent the dates the Company began recording (or expects
to begin recording) sales of Vacation Ownership Interests for financial
reporting purposes.
(c) Vistana Resort consists of seven development phases, six of which have
been completed and one of which is currently under construction. The
number of Units at Resort includes (i) 1,060 current existing units; and
(ii) 479 additional units, some of which are currently under construction
and scheduled for completion at various times beginning in the fourth
quarter of 1996, representing an additional 24,429 Vacation Ownership
Interests (of which no Vacation Ownership Interests have been sold).
Figures with respect to this property assume that all additional units to
be constructed will consist of one- and two-bedroom units;

however, the actual number of additional Vacation Ownership Interests
resulting from planned construction could vary depending upon the
configuration of these units.
(d) Includes 1,365 alternate-year Vacation Ownership Interests with an average
sales price of $7,419 and 2,295 annual Vacation Ownership Interest with an
average sales price of $11,882.
(e) Vistana's Beach Club consists of two buildings containing a total of 76
current existing units, which represent 3,876 annual Vacation Ownership
Interests. The Company's Current Inventory of 12 Vacation Ownership
Interests at this resort consists primarily of previously-sold Vacation
Ownership Interests that the Company has since reacquired in connection
with defaults under customer mortgages. The Company has no plans to build
any additional units at this resort.
(f) Oak Plantation Villas by Vistana consists of 242 current existing units,
representing 12,342 annual Vacation Ownership Interests. Prior to its
acquisition by the Company in June 1996, this property was operated by a
third party as a rental apartment complex. The Company commenced
conversion of the property into a vacation ownership resort in July 1996.
As of December 15, 1996, the conversion of 61 units had been completed.
Conversion of the remaining units is anticipated to be completed at
various times as the sales pace warrants. The Company currently has no
plans to build any additional units at this resort. It is anticipated
that Oak Plantation Villas by Vistana will be operated on a franchise
basis as the first Hampton Vacation Resort pursuant to the Promus
Agreement.
(g) Vistana Resort at World Golf Village will consist of an estimated 408
units, representing an estimated 20,808 Vacation Ownership Interests, of
which 102 units, representing 5,202 Vacation Ownership Interests, are
currently under construction and scheduled for completion in the spring
of 1998. Construction of the remaining 306 additional estimated units,
representing an additional estimated 15,606 Vacation Ownership Interests,
is expected to commence at various times.
(h) PGA Vacation Resort by Vistana will consist of approximately 250 units,
representing an estimated 12,750 Vacation Ownership Interests, and will
be constructed by the Company on 25 acres of land which it intends to
acquire in approximately three stages. In October 1996, the Company
entered into a letter of intent with PGA of America pursuant to which it
has agreed (subject to execution of definitive documentation and
customary due diligence) to purchase a minimum of 10 acres prior to March
21, 1997 and a total of 25 acres prior to December 31, 2000. The Company
anticipates that it will commence construction of this resort during
1997.
(i) In December 1996, the Company acquired the initial 14 acres of unimproved
land in Myrtle Beach, South Carolina for the development of the Myrtle
Beach Resort. The Company also has an option until December 31, 2003 to
acquire up to 26 additional acres of contiguous property for phased
expansion of the resort. It is anticipated that the Myrtle Beach Resort
will be operated as an Embassy Vacation Resort franchise pursuant to the
terms of the Promus Agreement.

Vistana Resort (Orlando, Florida). Vistana Resort, the Company's flagship
property, is an award-winning vacation ownership destination property located
less than one mile from the Walt Disney World(R) Resort Complex. Vistana
Resort was the first vacation ownership resort in Orlando and is the only
vacation ownership resort to have been named in Conde Nast Traveler magazine's
Gold List of the "top 500 best places to stay in the whole world" for 1995 and
1996. The resort was ranked as one of the top resorts (second in unit quality)
in the Orlando area by the most recent Zagat Survey of U.S. Hotels, Resorts &
Spas, which commented that it contains "the most luxurious villas in Orlando."
In addition, Vistana Resort has received the RCI Gold Crown designation since
the inception of the designation by RCI.

Vistana Resort opened as a timeshare resort in July 1980 with an initial
phase, known as the Courts Villas, containing 98 units on a 25-acre parcel. In
November 1980, the Company purchased an additional 100 acres of surrounding
unimproved land, in 1987 the Company purchased 15 acres of contiguous land
and, in January 1993, it acquired the last available contiguous parcel to
Vistana Resort, consisting of 10 acres. Since 1980, the Company has
constructed six additional phases at Vistana Resort: (i) the Falls Villas
(1982), consisting of 112 units; (ii) the Spas Villas (1984), consisting of
104 units; (iii) the Palms Villas (1987), consisting of 372 units; (iv) the
Springs Villas (1988), consisting of 102 units; (v) the Fountains Villas
(1990), consisting of 372 units; and (vi) the Lakes Villas (1995), consisting
of 156 units. In addition, 56 units are currently under construction and the
Company plans to build an additional 423 units.

Vistana Resort is one of the foremost Orlando resorts in terms of
facilities, amenities and guest services. The gated-access resort consists of
a 135-acre complex that features tropical landscaping, lakes, waterfalls,
fountains, walking paths, scenic bridges and gazebos. The resort's athletic
facilities include six recreation centers, 13 championship lighted tennis
courts, a full-service tennis pro shop, six outdoor temperature-controlled
swimming pools, seven outdoor whirlpools, five children's pools, an 18-hole
miniature golf course, lighted basketball courts, sand volleyball pits,
shuffleboard courts and other recreational amenities. Other guest-oriented
amenities at Vistana Resort include two restaurants and a general store
containing a Pizza Hut facility. As of September 30, 1996, accommodations at
Vistana Resort consisted of 1,060 two-bedroom units, divided into seven
villages--Courts, Falls, Spas, Palms, Springs, Fountains and Lakes. The units
at Vistana Resort sleep from four to eight people (depending upon floorplan)
and include amenities such as a fully-equipped kitchen, washer/dryer, three
color televisions with cable service, a videocassette player, and an outdoor
terrace or balcony. Most units have master bathrooms that include a whirlpool
tub or feature screened terraces or balconies with water views. In addition,
the Company recently introduced units with an optional two-bedroom lockoff
floor plan, a special feature that allows the lockoff unit to be divided into
two separate one-bedroom units or a studio and a one-bedroom unit, depending
upon floor plan. Owners of the lockoff units have increased flexibility
regarding the use of their Vacation Ownership Interest, including splitting
the unit and using each portion for separate one-week vacations.

Vistana's Beach Club (Hutchinson Island, Florida). Vistana's Beach Club on
Hutchinson Island is located on Florida's Treasure Coast, approximately 40
miles north of West Palm Beach and approximately a two hour drive from
Orlando. Vistana's Beach Club is located on 3.5-acre parcel and was purchased
by the Company in January 1989. The Resort consists of one nine-story building
containing 48 units and one eight-story building containing 28 units. The
resort contains numerous recreational amenities, including a freshwater
swimming pool, outdoor whirlpool, children's pool, elevated sun deck and two
tennis courts. Vistana's Beach Club contains 76 fully-equipped two-bedroom,
two-bathroom oceanfront units, each of which includes a terrace with a view of
the Atlantic Ocean. The units at Vistana's Beach Club sleep up to six people
(depending upon floorplan) and include amenities such as a fully-equipped
kitchen, washer/dryer, color televisions with cable service and a
videocassette player. The Company continues to manage and operate the
property, which is no longer in active sales. RCI has awarded the resort its
Gold Crown designation.

Oak Plantation Villas by Vistana (Kissimmee, Florida). In June 1996, the
Company acquired, through a Related Partnership, a 242-unit multifamily rental
apartment complex located in Kissimmee, Florida, approximately ten miles from
Walt Disney World(R) Resort, which it is converting in phases into a vacation
ownership resort. Sales of the first phase containing 32 units commenced in
October 1996. The gated-access 16-acre resort contains one- and two-bedroom
units, each of which offers a fully-equipped kitchen. The resort is fully
landscaped and includes a scenic lake with a lighted fountain, swimming pools
and other recreational amenities. Oak Plantation Villas by Vistana has
received the Gold Crown designation from RCI. Pursuant to the Promus
Agreement, the Company intends to operate the resort on a franchise basis as
the first Hampton Vacation Resort.

Vistana Resort at World Golf Village (St. Augustine, Florida). In September
1996, through a Related Partnership, the Company commenced construction of the
first phase of a 408-unit vacation ownership resort at World Golf Village.
Constituting the centerpiece of an approximately 6,000-acre planned community
under development near St. Augustine, Florida, World Golf Village is a
destination resort which will contain the World Golf Hall of Fame,
championship golf courses and other amenities. The units at Vistana Resort at
World Golf Village, which will consist of one- and two-bedroom units, will
sleep from four to eight people (depending upon floorplan) and include
features such as a fully-equipped kitchen, washer/dryer, color televisions
with cable service, a videocassette player and an outdoor terrace or balcony.
The Company anticipates that sales of Vacation Ownership Interests at Vistana
Resort at World Golf Village will sell for between $7,500 and $16,000. The
Company's resort is scheduled to open in the spring of 1998. The resort will
be located adjacent to the 17th and 18th fairways of the first golf course at
World Golf Village. Resort guests and owners will have preferred access to up
to 40% of the daily tee times on the course.

World Golf Village is being developed in conjunction with World Golf
Village, Inc., a collaboration of the world's leading golf organizations
formed to build and operate the World Golf Hall of Fame. The member
organizations of World Golf Village, Inc. include the PGA Tour, PGA of
America, Ladies Professional Golf Association, Augusta National Golf Club,
Royal Canadian Golf Association, Royal & Ancient Golf Club of St. Andrews, PGA
European Tour, PGA Tour of Japan and FNB Tour of Southern Africa. The 75,000
square foot World Golf Hall of Fame and Museum has been designed by the
prominent museum architect E. Verner Johnson & Associates of Boston and will
feature interactive displays and exhibits developed in conjunction with Ralph
Appelbaum Associates of New York, a leading exhibit designer whose credits
include the National Holocaust Museum in Washington, D.C. World Golf Village,
Inc. estimates first year attendance at approximately 500,000 visitors.

In addition to the World Golf Hall of Fame and the Company's vacation
ownership resort, the World Golf Village resort complex will also include a
championship golf course named in honor of Sam Snead and Gene Sarazen, a PGA
Tour licensed golf academy, the International Golf Library and Resource
Center, the 300-room World Golf Village Resort Hotel and 80,000-square foot
St. Johns County Conference Center (which, upon completion, will be the
largest conference center between Atlanta and Orlando), 80,000-square feet of
themed retail space, the headquarters and television production studios for
PGA Tour Productions and a large format, high definition theater. The
component facilities within World Golf Village will be linked by the Walk of
Champions honoring each member of the World Golf Hall of Fame.

PGA Vacation Resort by Vistana (Port St. Lucie, Florida). In October 1996,
the Company entered into a letter of intent with the PGA of America to
develop, market and operate a vacation ownership resort at The Reserve
community in Port St. Lucie, Florida. Subject to the execution of definitive
agreements, it is expected that the resort will be developed as a PGA Vacation
Resort by Vistana and will be located on a 25-acre parcel which the Company
will purchase from PGA of America in multiple phases. The resort will be
contiguous to the South Course of the PGA Golf Club at The Reserve, a
nationally-acclaimed $15 million golf course complex that opened in early
1996. The South Course, designed by Tom Fazio, was named the best new course
in its price category by Golf Digest magazine in December 1996. PGA of America
has announced its intention to open a golf learning center and build a third
golf course at the facility. In addition to resort amenities and services
comparable to the Company's other resorts, the PGA Vacation Resort by Vistana
will also offer its owners and renters preferential access to the PGA Golf
Club and other PGA golf courses in St. Lucie County. Owners and renters at the
resort will be able to book tee times through a centralized reservation system
that is anticipated to be developed jointly by the Company and PGA of America.
The Company currently expects that the resort will contain approximately 250
units constructed in phases. The Company anticipates commencing sales in 1998,
and has not determined estimated sales prices of Vacation Ownership Interests
at this resort.

Myrtle Beach Resort (Myrtle Beach, South Carolina). In December 1996, the
Company acquired an initial 14-acre parcel of unimproved land on a 40-acre
site in Myrtle Beach, South Carolina, on which the Company intends to
construct a 550-unit vacation ownership resort. The Company has options to
acquire the remaining 26 acres of land in multiple phases through December 31,
2003. Pursuant to the Promus Agreement, the Company expects to operate the
resort on a franchise basis as an Embassy Vacation Resort. To date, the
Company's primary efforts have focused on acquiring the unimproved land and
securing marketing opportunities with tourist venues in the Myrtle Beach area.
The Company expects to commence construction of the first phase of the resort
in the spring of 1997, with completion estimated in February 1998.

The Company believes Myrtle Beach represents an attractive, growing market
for the expansion of its portfolio of vacation resorts. Similar to Orlando,
Myrtle Beach has a large number of visitors annually (estimated at 12 million
in 1994) whose length of stay averages approximately five days. Following its
key operating strategies, the Company has procured substantial marketing
affiliations with significant tourist venues in the Myrtle Beach area.
Moreover, the Myrtle Beach Resort will be centrally located in Myrtle Beach,
adjacent to Broadway at the Beach, a large entertainment and specialty retail
complex, which includes a Hard Rock Cafe and a Planet Hollywood restaurant.

AFFILIATION WITH PROMUS

The Company and Promus have entered into the Promus Agreement, an exclusive
five-year agreement to jointly acquire, develop, market and operate vacation
ownership resorts in North America under Promus' Embassy Vacation Resort,
Hampton Vacation Resort and Homewood Vacation Resort brands. Promus is a
wholly-owned operating subsidiary of Promus Hotel Corporation, a New York Stock
Exchange company, which is one of the largest companies in the hotel industry.
As of December 31, 1995, Promus Hotel Corporation had over 9,000 employees
system-wide and owned, managed and/or franchised more than 680 hotels,
containing over 90,000 rooms and suites. Under the Promus Agreement, the
Company will be Promus' exclusive joint venture partner for the development and
operation of vacation ownership resorts in North America and will also have the
option of operating vacation ownership resorts on a franchise basis. Promus has
agreed that the Company will be the sole franchisee in North America of the
Hampton Vacation Resort and Homewood Vacation Resort brand, and one of only two
franchisees in North America of the Embassy Vacation Resort brand. The Promus
Agreement precludes the Company from acquiring or developing vacation ownership
resorts with any other multi-hotel brand, but preserves its ability to develop
vacation ownership resorts in combination with non-hotel brands (such as PGA of
America), to acquire or develop vacation ownership resorts under the Vistana
name (other than in certain selected markets agreed to by the parties), and to
develop vacation ownership resorts with unique, non-multi-hotel brand hotel
properties.

Each vacation ownership resort jointly developed under the Promus Agreement
will be acquired, developed and operated by a newly-formed entity that will be
owned equally by Promus and the Company and will be managed by the Company. The
parties have agreed that each of these entities will enter in a Sales and
Marketing Agreement with the Company, pursuant to which the Company will be
responsible for marketing and sales of Vacation Ownership Interests at the
resort, and a Franchise and Management Agreement with Promus, pursuant to which
Promus will license the applicable brand name and provide other hospitality-
related services at the resort. The Promus Agreement provides that both
partners must first offer vacation ownership resort development opportunities
in the selected markets to the joint venture (with certain exceptions for
development of the Company's non-multi-hotel branded resorts). In the event
that one party elects not to pursue the opportunity, the other party has
certain rights to develop the resort independently or, in the case of Promus,
franchise an Embassy Vacation Resort to its existing franchisee. Moreover, if
Promus elects not to pursue an opportunity through the joint venture, the
Company may elect to develop the resort as a Promus franchisee, subject to
Promus' standard franchise approval, on pre-agreed terms, conditions and fees.
The Promus Agreement may be terminated by either party in the event that the
parties have not jointly developed a resort during the first three years of the
Promus Agreement.

Although the Company and Promus are currently evaluating new resort
development opportunities for the joint venture, no commitments have been made
for a specific development at this time. However, the Promus Agreement
contemplates that Oak Plantation Villas by Vistana will operate as the first
Hampton Vacation Resort and the Myrtle Beach Resort will operate as an Embassy
Vacation Resort, in each case on a franchise basis. See "Risk Factors--Rapid
Growth; Expansion into New Markets" and "--Description of the Company's
Resorts."

SALES AND MARKETING

General. During its 16-year history as a leading innovator, developer and
operator of vacation ownership resorts, the Company has developed skills and
expertise necessary for the cost-effective marketing and selling of Vacation
Ownership Interests at its resorts. In addition to building regional expertise
in the competitive Orlando market, the Company believes that it is positioned
to enter other regional destination resort markets and to develop marketing and
sales programs specifically targeted towards popular markets segments such as
golf. In the Company's view, its unique marketing strategies and integrated
sales programs have allowed it to succeed in the highly-specialized field of
Vacation Ownership Interest sales and have proven to be critical components of
the Company's continued competitiveness and profitability.

Marketing Programs. The Company's current marketing efforts center on three
principal programs--the Vistana Preview Coordinator program (the "VPC
Program"), the VIP/In-House Program and international brokerage operations. In
addition to these programs, the Company also utilizes a variety of other
marketing

approaches, including vacation sampler programs (designed to allow a
prospective purchaser to be a guest at the resort and to experience vacation
ownership prior to making a decision to buy), direct mail and telemarketing
campaigns, and, more recently, strategic alliances with travel, lodging and
recreational partners, such as Promus and PGA of America. Each of the Company's
marketing programs seeks to provide consistent access to qualified prospective
buyers and involves specific target marketing to leisure industry customers. In
the Company's view, these strategies, which often include one-to-one contact,
have proven to be more effective and cost-efficient than conventional broad-
based advertising.

The VPC Program consists of public contact marketing by an employee of the
Company who provides concierge-type services in the lobby of a hotel or
condominium vacation property, or at other attractions near one of the
Company's resorts. The goal of the VPC Program is to generate a regular flow of
qualified potential Vacation Ownership Interest purchasers to visit the on-site
sales centers at the Company's resorts. To encourage interest in the Company's
resorts, the VPC Program representative offers interested potential buyers
visitor information and assistance with their vacation plans and invites them
to tour one of the Company's resorts, often providing additional incentives
such as tickets to local attractions. The majority of the Company's VPC Program
representatives are located at facilities and properties with which the Company
has an exclusive solicitation arrangement. The Company seeks to ensure that its
VPC Program representatives are placed only at facilities frequented by
potential customers and that each representative is thoroughly trained and
courteous. Since 1980, the VPC Program has attracted approximately 400,000
families to tour the Company's properties.

The Company's VIP/In-House Program focuses on guests staying at the Company's
vacation ownership resorts, whether they are owners, renters or exchangers.
Through a combination of guest services and telephone contact, these guests are
invited to a VIP tour of the vacation ownership resort. The Company is
continually identifying cross-marketing opportunities within its existing
customer base and new vacation ownership products that will be attractive to
this segment of the market. The Company's marketing approach towards these
individuals is specifically tailored to take into account the fact that they
are already familiar with the resort and the vacation ownership concept, and
are experiencing the amenities and guest services first-hand. The Company
believes that its marketing efforts in this area are greatly enhanced by the
perceived quality and value of its resorts, amenities and guest services, and
its ability to consistently deliver an enjoyable vacation experience. With more
than 1,060 units operating at Vistana Resort at an approximately 88% occupancy
rate, the VIP/In-House program has been a key component of the Company's growth
and, in the Company's view, will continue to play an important role in the
Company's marketing efforts as its portfolio of vacation ownership resorts
continues to grow.

In addition to the Company's domestic operations, the Company manages and
coordinates a network of independent brokers to sell Vacation Ownership
Interests abroad. In light of the increasing popularity of central Florida
among overseas visitors and the overall rise in vacation ownership worldwide,
the Company believes that the international market presents significant growth
opportunities. However, international interest in the Company's future resorts
is expected to vary depending upon the location of the project. Through
September 30, 1996, approximately 30% of the Company's sales have been to
foreign purchasers (with over one-half of such sales made through brokers in
other countries and all sales made in United States dollars), many of whom buy
the Vacation Ownership Interest "sight unseen" based on the Company's
reputation for delivering a high-quality experience. This segment of the
Company's sales more than doubled for the nine months ended September 30, 1996
as compared to the nine months ended September 30, 1995. The Company is
currently enhancing its existing international brokerage operations, with a
particular focus on the South and Central American markets of Argentina,
Guatemala and Chile, where the Company maintains its only direct foreign sales
office in Santiago. The Company anticipates that the international market may
offer opportunities to market multiple property sites as the Company continues
to expand.

Sales Focus. The Company's marketing efforts are supported by an experienced
and highly-trained resort-based sales operation, which, in the Company's view,
has been the foundation of the Company's successful performance during its 16-
year history. Prospective purchasers are given a personalized on-site tour of
the Company's resort and provided information about vacation ownership and
available financing options.

Presentations to potential buyers, which typically last between two and one-
half and four hours, are individually tailored to take into account the
guest's particular needs and background, such as vacationing habits and
familiarity with the vacation ownership concept. Prior to closing, each sale
is verified by a settlement manager who reviews all documents and pertinent
facts of the sale with the purchaser and is available to answer any questions
that the new owner may have.
Because the most critical component of the Company's sales effort is its
sales personnel, the Company continually strives to attract, train and retain
a superior sales force. The Company's policy is for each of its sales
representatives to be a licensed real estate professional and undergo
intensive instruction and training. In addition, each sales representative is
an employee of the Company and receives full employment benefits. The Company
is continually reviewing and improving its selling, recruiting and training
processes to achieve high levels of customer and employee satisfaction. The
Company currently employs more than 160 sales representatives at its two
Orlando resorts presently selling Vacation Ownership Interests. See "--
Governmental Regulation."

CUSTOMER FINANCING

The Company extends financing to purchasers of its Vacation Ownership
Interests at its resorts. These purchasers generally make a down payment equal
to at least 10% of the sales price and borrow the remaining sales price from
the Company. These borrowings bear interest at fixed rates, are secured by
first mortgages on the underlying Vacation Ownership Interests and amortize
over periods ranging up to seven years. The Company funds its customer
mortgages receivable by borrowing up to 90% of the aggregate principal amount
of its customer mortgages receivable under its existing credit facilities. As
of September 30, 1996, the Company's existing credit facilities provide for an
aggregate of up to approximately $109.2 million of available customer
mortgages receivable financing to the Company bearing interest at variable
rates based on the prime rate. As of September 30, 1996, the Company had
approximately $65.7 million of indebtedness outstanding under its existing
customer mortgages receivable credit facilities at a weighted average interest
rate of 10.4% per annum and were secured by the Company's pledge of a portion
of its customer mortgages receivable. As of September 30, 1996, the Company
had a portfolio of approximately 21,000 loans to customers totalling
approximately $114.2 million, with an average yield of 14.4% per annum. As of
September 30, 1996 (i) approximately 3.0% of the Company's customer mortgages
receivable were 60 to 120 days past due; and (ii) approximately 5.5% of the
Company's customer mortgages receivable were more than 120 days past due and
the subject of legal proceedings. See "Risk Factors--Financing--Customer
Mortgages Receivable."

The Company has historically derived net interest income from its financing
activities as a result of the positive difference between the interest rates
it charges its customers who finance their purchase of a Vacation Ownership
Interest and the interest rates it pays its lenders. Because the Company's
indebtedness bears interest at fixed and variable rates and the Company's
customer mortgages receivable bear interest at fixed rates, the Company bears
the risk of increases in interest rates with respect to its indebtedness. The
Company engages in interest rate hedging activities from time to time in order
to reduce the risk and impact of increases in interest rates with respect to
such indebtedness. See "Risk Factors--Financing--Hedging Activities."

The Company bears the risk of defaults under its customer mortgages on
Vacation Ownership Interests. If a purchaser of a Vacation Ownership Interest
defaults on the mortgage during the early part of the loan amortization
period, the Company will not have recovered its marketing, selling (other than
certain sales commissions), and general and administrative costs per Vacation
Ownership Interest, and such costs will again be incurred in connection with
the subsequent resale of the Vacation Ownership Interest. As is sometimes the
practice in the vacation ownership industry, the Company does not verify the
credit history of its customers. In addition, although in certain
jurisdictions the Company may have recourse against a defaulting customer for
the sales price of the Vacation Ownership Interest, the Company has not
historically pursued such a remedy. See "Risk Factors--Financing--Customer
Default."
The Company has historically provided customer mortgages receivable
financing for up to seven years, as had been typical for the industry. Over
the past several years, industry trends have been to lengthen the term of such
financing to up to ten years. The Company anticipates offering ten-year
financing in the future with respect to some portion of its customer mortgages
receivable.

OTHER OPERATIONS

Room Rental Operations. In order to generate additional revenues at its
resorts that have an inventory of unused or unsold Vacation Ownership
Interests, the Company rents units with respect to such Vacation Ownership
Interests on a nightly or weekly basis. The Company offers these unoccupied
units through direct consumer sales, travel agents and package vacation
wholesalers. In addition to providing the Company with supplemental revenues,
the Company believes its room rental operations provide it with a good source
of lead generation for the sale of Vacation Ownership Interests. As part of
the management services provided by the Company to its Vacation Ownership
Interest owners, the Company receives a fee equal to 50% of a unit's rental
rate, net of commissions, for services provided to rent an owner's Vacation
Ownership Interest in the event the owner is unable to use or exchange the
Vacation Ownership Interest. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Resort Management. The Company currently provides both hospitality and
homeowners' association management services at its existing vacation ownership
resorts, and intends to provide the same services at its future vacation
ownership resorts pursuant to management agreements with the homeowners'
associations present at such resorts (which are comprised of owners of
Vacation Ownership Interests at the resort or, in the case of Vistana Resort,
a particular phase of the resort). Pursuant to each such management agreement
the Company is paid by the homeowners' association an annual management fee
ranging from $33.65 to $44.09 per Vacation Ownership Interest, which fee is
equal to approximately 10% of aggregate gross assessment fees payable by the
owners of the Vacation Ownership Interests. The Company is solely responsible
for, and has exclusive authority over, all activities necessary for the day-
to-day operation of the resorts, including administrative services,
procurement of inventories and supplies, and promotion and publicity.
Management agreements between the Company and the homeowners' associations
typically provide for an initial term of three years, which automatically
renews for additional three-year terms. The homeowners' association may remove
the Company as manager upon obtaining the requisite owner vote. The Company
also provides all managerial and other employees necessary for the operation
of its resorts, whose duties include, among other things, review of the
maintenance of the resorts, preparation of reports, budgets and projections
and employee training. See "Risk Factors--Resort Management."

Telecommunications Services. The Company's telecommunications business
generates revenues from the installation of telephone, data and cable
television equipment and infrastructure at its resorts, the rental of
telephone and related cable and equipment to the homeowners' associations, and
the provision of ongoing long-distance telephone and cable television service
at its resorts pursuant to contracts with the homeowners' associations. The
Company also derives revenues from providing telecommunications design and
installation services to third parties, including hotels, universities,
hospitals and airports as a contractor or subcontractor. See "Risk Factors--
Telecommunications Operations."

PARTICIPATION IN VACATION OWNERSHIP INTEREST EXCHANGE NETWORKS

The Company believes that consumers are more likely to purchase its Vacation
Ownership Interests as a result of the Company's participation in the Vacation
Ownership Interest exchange network operated by RCI, a leading exchange
network operator which was recently acquired by HFS Incorporated. In a 1995
study sponsored by the Alliance for Timeshare Excellence and ARDA, exchange
opportunity was cited by purchasers of Vacation Ownership Interests as one of
the most significant factors in their decision to purchase a Vacation
Ownership Interest. Membership in RCI allows the Company's customers to
exchange in a particular year their occupancy right in the unit in which they
own a Vacation Ownership Interest for an occupancy right at the same time or a
different time in another participating resort, based upon availability and
the payment of a variable exchange fee. A member may exchange his or her
Vacation Ownership Interest for an occupancy right in another participating
resort by listing the Vacation Ownership Interest as available with the
exchange network operator and by requesting occupancy at another participating
resort, indicating the particular resort or geographic area to which the
member desires to travel, the size of the unit desired and the period during
which occupancy is desired. RCI assigns a rating to each listed Vacation
Ownership Interest, based upon a number of factors, including the location and
size of the unit, the quality of the resort and the period of the year during
which the Vacation

Ownership Interest is available, and attempts to satisfy the exchange request
by providing an occupancy right in another Vacation Ownership Interest with a
similar rating. If RCI is unable to meet the member's initial request, it
suggests alternative resorts based on availability.

Founded in 1974, RCI has grown to be the world's largest Vacation Ownership
Interest exchange network operator, with a total of more than 3,000
participating resort facilities and over two million members worldwide. During
1995 RCI processed over 1.5 million exchanges. The cost of the annual
membership fee in RCI, which is typically at the option and expense of the
owner of the Vacation Ownership Interest, is approximately $65 per year. RCI
has assigned high ratings to the Vacation Ownership Interests in each of the
Company's three operating resorts, and such Vacation Ownership Interests have
in the past been exchanged for Vacation Ownership Interests at other highly-
rated RCI-listed resorts. During 1995, approximately 97% of all exchange
requests were fulfilled by RCI, and approximately 58% of all exchange requests
are confirmed on the day of the request.

Each of the Company's operating resorts is currently qualified for
participation in the RCI exchange network. The Company's agreement with RCI
provides that, until May 2001, the RCI exchange program will be the only
exchange program permitted at resorts owned and controlled by the Company. In
addition, each of the Company and Messrs. Gellein and Adler have agreed that
until May 2001, each vacation ownership resort owned, developed or managed by
an entity in which Messrs. Gellein or Adler have a controlling interest will
execute an affiliation agreement with RCI having a six-year initial term. See
"Risk Factors--Vacation Ownership Exchange Networks."

COMPETITION

The vacation ownership industry historically has been highly fragmented and
dominated by a very large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality.
More recently, many of the world's most widely-recognized lodging, hospitality
and entertainment companies have begun to develop and sell Vacation Ownership
Interests under their brand names, including Marriott, Disney, Hilton, Hyatt,
Four Seasons, Inter-Continental and Promus. In addition, other publicly-traded
companies focussed on the vacation ownership industry, such as Signature,
Fairfield, and Vacation Break have, currently compete, or may in the future
compete, with the Company. Moreover, competition in the Orlando market is
particularly intense, and includes many nationally recognized lodging,
hospitality and entertainment companies, as well as active privately-owned
local operators of vacation ownership resorts such as CFI and Orange Lake.
Furthermore, significant competition exists in Myrtle Beach, South Carolina, a
destination in which the Company expects to commence sales of Vacation
Ownership Interests in 1998. Many of these entities possess significantly
greater financial, sales and marketing, personnel and other resources than
those of the Company and may be able to grow at a more rapid rate or more
profitably as a result. Management believes that industry competition will be
increased by recent and possibly future consolidation in the vacation
ownership industry.

Of the Company's major brand name lodging company competitors, the Company
believes that: (i) Marriott entered the vacation ownership market in 1985 and
currently sells Vacation Ownership Interests at eight resorts which it also
owns and operates and directly competes with the Company's Orlando area
resorts; (ii) Disney entered the market in 1991, currently sells Vacation
Ownership Interests at three locations which it also owns and operates and
directly competes with the Company's Orlando area resorts; (iii) Hilton
entered the market in 1993, currently sells Vacation Ownership Interests at
two resorts which it owns and operates and directly competes with the
Company's Orlando area resorts; (iv) Promus entered the market through a
franchise relationship in 1994 and directly competes with the Company's
Orlando area resorts; (v) Hyatt entered the market in 1995, owns and operates
one resort in Key West, Florida but does not directly compete in any of the
Company's existing markets (although Hyatt has announced an intention to
develop a vacation ownership resort

in Orlando); (vi) Four Seasons is developing its first vacation ownership
resort in Carlsbad, California, but does not currently directly compete in any
of the Company's existing markets; and (vii) Inter-Continental announced its
entry into the market in 1996, but has yet to announce any specific projects.
See "Risk Factors--Competition."

GOVERNMENTAL REGULATION

General. The Company's marketing and sales of Vacation Ownership Interests
and other resort operations are subject to extensive regulation by the federal
government and the states in which the Company's resorts are located and in
which its Vacation Ownership Interests are marketed and sold. Federal
legislation to which the Company is or may be subject includes the Federal
Trade Commission Act, the Fair Housing Act, the Truth-in-Lending Act, the Real
Estate Settlement Procedures Act, the Equal Credit Opportunity Act, the
Interstate Land Sales Full Disclosure Act, the Telephone Consumer Protection
Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act and the
Civil Rights Acts of 1964 and 1968. In addition, many states have adopted
similar legislation as well as specific laws and regulations regarding the sale
of Vacation Ownership Interests. The laws of most states, including Florida and
South Carolina, require a designated state authority to approve a detailed
offering statement describing the Company and all material aspects of the
resort and sale of Vacation Ownership Interests at such resort. In addition,
the laws of most states in which the Company sells Vacation Ownership Interests
grant the purchaser of a Vacation Ownership Interest the right to rescind a
contract of purchase at any time within a statutory rescission period.
Furthermore, most states have other laws which regulate the Company's
activities, such as real estate licensure laws, travel sales licensure laws,
anti-fraud laws, telemarketing laws, price, gift and sweepstakes laws, and
labor laws. The Company believes that it is in material compliance with all
applicable federal, state, local and foreign laws and regulations to which it
is currently subject. See "Risk Factors--Governmental Regulation."

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

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

of written reports. The Company's assessments of its properties have not
revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets, financial condition
or results of operations, nor is the Company aware of any such material
environmental liability. See "Risk Factors--Governmental Regulation."

The Company believes that its properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances. The Company has not been notified by
any governmental authority or any third party, and is not otherwise aware, of
any material noncompliance, liability or claim relating to hazardous or toxic
substances or petroleum products in connection with any of its present
properties.

Other Regulations. Under various state and federal laws governing housing and
places of public accommodation, the Company is required to meet certain
requirements related to access and use by disabled persons. Many of these
requirements did not take effect until after January 1, 1991. Although
management believes that the Company's resorts are substantially in compliance
with present requirements of such laws, the Company may incur additional costs
of compliance in connection with the development of new resorts, or conversion
or renovation of existing resorts. Additional legislation may impose further
burdens or restriction on owners with respect to access by disabled persons.
The ultimate amount of the cost of compliance with such legislation is not
currently ascertainable, and, while such costs are not expected to have a
material effect on the Company, such costs could be substantial. Limitations or
restrictions on the completion of certain renovations may limit application of
the Company's growth strategy in certain instances or reduce profit margins on
the Company's operations.

OTHER PROPERTIES

The Company's other properties include an office plaza consisting of two
three-story buildings (totalling approximately 67,000-square feet), which
headquarters the Company's administrative operations, a 27,000-square foot two-
story reception center and resort operations complex, maintenance and laundry
facilities, a freestanding general store (including a Pizza Hut facility) and a
gift shop leased to an unaffiliated entity. All of these other properties are
located within or adjacent to Vistana Resort in Orlando.

EMPLOYEES

As of September 30, 1996, the Company had approximately 1,200 full-time
employees. The Company believes that its employee relations are good. None of
the Company's employees are represented by a labor union.

INSURANCE

The Company carries comprehensive liability, fire, windstorm, tropical storm
and business interruption insurance with respect to its properties and
interests in its resorts (i.e., its inventory of unsold Vacation Ownership
Interests) with policy specifications, insured limits and deductibles
customarily carried for similar properties which the Company believes are
adequate. There are, however, certain types of losses (such as losses arising
from acts of war) that are not generally insured because they are either
uninsurable or not economically insurable. Should an uninsured loss or a loss
in excess of insured limits occur, the Company could lose its capital invested
in a resort, as well as the anticipated future revenues from such resort and
would continue to be obligated on any mortgage indebtedness or other
obligations related to the property. Any such loss could have a material
adverse effect on the Company. See "Risk Factors--Uninsured Loss; Natural
Disasters."

LEGAL PROCEEDINGS

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

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each person
who is a director or an executive officer of the Company or upon the
completion of the Offering will become a director of the Company. Positions
with the Company include positions with the Company's predecessors.

NAME AGE POSITION
- ---- --- --------

Raymond L. Gellein, 49 Chairman of the Board, Co-Chief Executive Officer
Jr..................... and Director
Jeffrey A. Adler........ 44 President, Co-Chief Executive Officer and Director
Matthew E. Avril........ 36 Executive Vice President, Chief Operating Officer
and Chief Financial Officer
Susan Werth............. 48 Senior Vice President, General Counsel and Secretary
Carol Lytle............. 36 Vice President
Laurence S. Geller...... 49 Proposed Director
Charles E. Harris....... 50 Proposed Director
......... Proposed Director

Raymond L. Gellein, Jr., has served as Chairman of the Board, Co-Chief
Executive Officer and a Director since December 1996. Mr. Gellein served as
Chairman of the Board and a Director since November 1991 and served as Chief
Executive Officer from 1981 to November 1991. Prior to joining the Company,
Mr. Gellein served as Vice President and Division Manager in Real Estate for
the Continental Illinois National Bank and Trust Company of Chicago. Mr.
Gellein has been the Chairman of the Florida Chapter of ARDA since such
chapter's inception, and is a member of ARDA's Legislative Committee. Mr.
Gellein is also a member of the Board of Overseers of the Roy E. Crummer
Graduate School of Business Education at Rollins College. Mr. Gellein received
an M.M.A. degree from Northwestern University's Kellogg School of Management
and a B.A. degree from Denison University.

Jeffrey A. Adler has served as President, Co-Chief Executive Officer and a
Director since December 1996. Mr. Adler served as President and a Director
since November 1991 and served as Executive Vice President from 1983 to
November 1991. Prior thereto, Mr. Adler served as Second Vice President and
Real Estate Lending Officer for the Continental Illinois National Bank and
Trust Company of Chicago. Mr. Adler is a member of the board of directors of
ARDA, a member of ARDA's Strategic Planning Committee and Alliance for
Timeshare Excellence. Mr. Adler received an M.M.A. degree from Northwestern
University's Kellogg School of Management and a B.A. degree from Ohio State
University.

Matthew E. Avril has served as Executive Vice President, Chief Operating
Officer and Chief Financial Officer since November 1996. From February 1994
until November 1996, Mr. Avril served as Senior Vice President and Chief
Financial Officer and from January 1992 until November 1994, Mr. Avril served
as Senior Vice President and Treasurer. From March 1989 to December 1991, Mr.
Avril served as Vice President and Controller. Mr. Avril is a certified public
accountant and a member of the Florida Institute of Certified Public
Accountants. Mr. Avril received a B.B.A. degree from the University of Miami
located in Florida.

Susan Werth has served as Senior Vice President, General Counsel and
Secretary since December 1996. Ms. Werth served as Senior Vice President--Law
from May 1996 to December 1996. Prior thereto Ms. Werth represented the
Company as outside counsel for approximately 10 years. From January 1990 until
May 1996, Ms. Werth was a partner of the law firm of Weil, Gotshal & Manges,
LLP, in Miami, Florida. Ms. Werth received an A.B. degree from Barnard College
and a J.D. degree from Columbia Law School, and is a member of the Florida
Bar.

Carol Lytle has served as Vice President and President of Vistana-Orlando,
in charge of overseeing the entire sales and marketing responsibility for the
Company's central Florida operations, since December 1996. Ms. Lytle joined
the Company in its marketing area in 1980, was promoted to a Manager of
Marketing in 1981, a Director of Marketing in 1983, a Vice President of
Marketing in 1984, and a Senior Vice President of Marketing in 1989.

Laurence S. Geller has consented to become a Director of the Company upon
completion of the Offering. Mr. Geller has served as the Chairman of Geller &
Co., a real estate, gaming and tourism, and lodging consulting company, since
December 1989. From 1984 through December 1989, Mr. Geller served as the
Executive Vice President and Chief Operating Officer of Hyatt Development
Corporation, a developer of domestic and international hotels and resorts.
From 1976 to 1981, Mr. Geller served as a Senior Vice President of Holiday
Inns, Inc. Mr. Geller is a director of Sunstone Hotel Investors, Inc., a
publicly traded lodging real estate investment trust, and Sky Games
International Limited, a publicly traded gaming technology company. Mr. Geller
is the Immediate Past Co-Chairman of the Industry Real Estate Financing
Advisory Council of the American Hotel and Motel Association, and Past Vice
Chairman and current member of the Commercial & Retail Council of Urban Land
Institute. Mr. Geller received a National Diploma from Ealing Technical
College (U.K.).

Charles E. Harris has consented to become a Director of the Company upon
consummation of the Offering. Mr. Harris has served as President and Chief
Executive Officer of Synagen Capital Partners, Inc., a private merchant
banking firm ("Synagen"), since 1989, and as President and Chief Executive
Officer of Allen C. Ewing & Co. ("Ewing"), an investment banking firm, since
1995 and 1994, respectively. Mr. Harris was Vice President--Corporate Finance
of Ewing from 1992 to 1994. Mr. Harris also served as Chairman and Chief
Executive Officer of First Commerce Banks of Florida, Inc. from September 1995
to July 1996. From 1987 to 1993, Mr. Harris was Chairman (and from 1988 to
1993, Chief Executive Officer) of Mid-State Federal Savings Bank. Prior
thereto, Mr. Harris was engaged in the private practice of law and served as
an Assistant Professor of Law at the University of Florida and as Senior Vice
President and General Counsel of Sun Banks, Inc. Mr. Harris received a B.A.
degree from the University of Florida and a J.D. degree from Harvard Law
School.

COMMITTEES OF THE BOARD OF DIRECTORS

Executive Committee. Promptly following the completion of the Offering, the
Board of Directors will establish an executive committee (the "Executive
Committee"), which will be granted such authority as may be determined from
time to time by a majority of the Board of Directors. The Company expects that
the Executive Committee will consist of Messrs. Gellein and Adler and at least
one independent director.

Audit Committee. Promptly following the completion of the Offering, the
Board of Directors will establish an audit committee (the "Audit Committee"),
which will consist of two or more independent directors. The Audit Committee
will be established to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the plans and results of the audit engagement, approve professional services
provided by the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit
fees, and review the adequacy of the Company's internal accounting controls.

Compensation Committee. Promptly following the completion of the Offering,
the Board of Directors will establish a compensation committee (the
"Compensation Committee"), which will consist of two or more non-employee or
independent directors to the extent required by Rule 16b-3 under the Exchange
Act, to determine compensation for the Company's senior executive officers.

Nominating Committee. Promptly following the completion of the Offering, the
Board of Directors will establish a nominating committee (the "Nominating
Committee"), which will initially consist of Messrs. Gellein and Adler. The
function of the Nominating Committee will be to recommend to the full board of
Directors nominees for election as directors of the Company and the
composition of committees of the Board of Directors. The Nominating Committee
will name the respective initial members of the Executive Committee, the Audit
Committee and the Compensation Committee.

The Board of Directors of the Company initially will not have any other
committee. Except as otherwise described above, the membership of the
committees of the Board of Directors will be established after the completion
of the Offering.

CLASSIFIED BOARD OF DIRECTORS

The Company's Articles of Incorporation provide for the Company's Board of
Directors to be divided into three classes serving staggered terms so that
directors' initial terms will expire either at the 1998, 1999 or 2000 annual
meeting of shareholders. Mr. Geller and will constitute the class of
directors having a term expiring at the 1998 annual meeting of shareholders,
Mr. Gellein will constitute the class of directors having a term expiring at
the 1999 annual meeting of shareholders, and Messrs. Adler and Harris will
constitute the class of directors having a term expiring at the 2000 annual
meeting of shareholders. Starting with the 1998 annual meeting of shareholders,
one class of directors will be elected each year for three-year terms. The
classifications of directors makes it more difficult for a significant
shareholder to change the composition of the Board of Directors in a relatively
short period of time and, accordingly, provides the Board of Directors and
shareholders time to review any proposal that a significant shareholder may
make and to pursue alternative courses of action which are fair to all of the
shareholders of the Company.

DIRECTOR COMPENSATION

Upon completion of the Offering, each initial director of the Company who is
not an employee of the Company or the beneficial owner of 5% or more of the
outstanding Common Stock ("Eligible Director") will be granted options to
purchase 45,000 shares of Common Stock at the Price to Public. Of such options,
options to purchase 15,000 shares of Common Stock will be exercisable
immediately upon grant, options to purchase 15,000 shares of Common Stock will
be exercisable immediately following the date of the 1998 annual meeting of the
Company's shareholders, and options to purchase the remaining 15,000 shares of
Common Stock will be exercisable immediately following the date of the 1999
annual meeting of the Company's shareholders. It is the intention of the
Company that (i) each initial director of the Company who is an Eligible
Director will also be granted options to purchase 5,000 shares of Common Stock
on the date of each scheduled annual meeting of the Company's shareholders
commencing immediately following the 2000 annual meeting of the Company's
shareholders and (ii) each new director of the Company who is an Eligible
Director, will be granted options to purchase 5,000 shares of Common Stock on
the date of each scheduled annual meeting of the Company's shareholders. See
"Management--Stock Plan."

In addition, each Eligible Director will be paid an annual fee of $18,000,
payable in equal quarterly installments.

DIRECTORS' AND OFFICERS' INSURANCE

The Company has applied for a directors' and officers' liability insurance
policy with coverage typical for a public company similar to the Company, which
policy will become effective upon the effectiveness of the registration
statement of which this Prospectus is a part. The directors' and officers'
liability insurance policy will insure (i) the officers and directors of the
Company from any claim arising out of an alleged wrongful act by such person
while acting as officers and directors of the Company; (ii) the Company to the
extent it has indemnified the officers and directors for such loss; and (iii)
the Company for losses incurred in connection with claims made against the
Company for covered wrongful acts.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Articles of Incorporation that, to
the fullest extent provided under Florida law, limit the liability of its
directors and officers for monetary damages arising from a breach of their
fiduciary duties as directors or officers. Such limitation of liability does
not affect the availability of equitable remedies, such as injunctive relief or
rescission, nor does it limit liability for acts of fraud, knowing violation of
law, unlawful payment of distributions. Furthermore, equitable remedies may
not, as a practical matter, be effective for various reasons. The Company's
Articles of Incorporation and By-Laws also provide that the Company shall
indemnify its directors and officers to the fullest extent permitted by Florida
law, including circumstances in which indemnification is otherwise
discretionary to the Company under Florida law. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and

controlling persons of the Company pursuant to the foregoing provisions or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.

The Company has also agreed to indemnify each director and officer pursuant
to an Indemnity Agreement from and against any and all expenses, losses,
claims, damages and liabilities incurred by such director or officer for or as
a result of actions taken or not taken while such director or officer was
acting in his or her capacity as a director, officer, employee or agent of the
Company. In addition, the Company will maintain officers' and directors'
liability insurance which insures against liabilities that officers and
directors of the Company may incur in such capacities. See "--Directors' and
Officers' Insurance." The Company believes that these provisions are necessary
to attract and retain qualified persons to serve as directors and officers.

There is no pending litigation or proceeding involving a director, officer,
employee or agent of the Company where indemnification will be required or
permitted. The Company is not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth information with
respect to all compensation paid by the Company to the Company's Chief
Executive Officer and each of the other four most highly compensated executive
officers for the year ended December 31, 1996 (the "Named Executive
Officers").

ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------
SECURITIES LTIP
UNDERLYING PAYOUTS OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS(2) OPTIONS/SARS(3) (4) COMPENSATION(5)
- --------------------------- ------- ----------------------------------- -------- ---------------

Raymond L. Gellein, 1996 $ 530,204 -- -- -- $13,125
Jr.....................
Chairman of the Board
and
Co-Chief Executive
Officer
Jeffrey A. Adler........ 1996 $ 530,204 -- -- -- $13,125
President and Co-Chief
Executive Officer
Matthew E. Avril........ 1996 $ 225,000$ 52,360 180,000 $125,000 $ 8,840
Executive Vice
President, Chief
Operating Officer and
Chief Financial Officer
Susan Werth (6)......... 1996 $ 141,519 -- 75,000 -- $ 4,132
Senior Vice President,
General Counsel and
Secretary
Carol Lytle............. 1996 $ 225,000$ 99,921 180,000 $125,000 $ 2,400
Vice President

- --------
(1) In accordance with the rules of the Commission, only information with
respect to the most recently completed fiscal year is reported in the
Summary Compensation Table because the Company was not a reporting company
during the three immediately preceding fiscal years.
(2) Reflects amounts paid in 1996 in respect of the year ended December 31,
1995.
(3) Does not include options to acquire 400,000, 125,000 and 400,000 shares of
Common Stock granted by the Existing Shareholders to Mr. Avril, Ms. Werth
and Ms. Lytle, respectively. See "Principal and Selling Shareholders."
(4) Consists of deferred executive incentive compensation under a previous
plan.
(5) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has not been separately
itemized because such perquisites and other personal benefits constituted
less than the lesser of $50,000 or 20% of the annual salary and bonus for
the named executive officer for such year.
(6) Ms. Werth's employment by the Company commenced in May 1996. Accordingly,
salary and bonus amounts reflect a partial year of employment.

The Company has entered into employment agreements with each of Messrs.
Gellein, Adler and Avril, Ms. Werth and Ms. Lytle which provide, among other
things, that from and after the completion of the offering, the annual base
salaries of Messrs. Gellein, Adler and Avril, Ms. Werth and Ms. Lytle will be
$360,000, $360,000, $250,000, $230,000 and $250,000, respectively. See "--
Employment Agreements."

Stock Option Grants in Last Fiscal Year. The following table contains
information concerning the grant of stock options made for the year ended
December 31, 1996 to the Named Executive Officers. The table also lists
potential realizable values of such options on the basis of assumed annual
compounded stock appreciation rates of 5% and 10% over the life of the options
which are set for a maximum of ten years.

INDIVIDUAL GRANTS

POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF SHARE
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(2)
OPTIONS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME (1) FISCAL YEAR PER SHARE DATE 5% 10%
---- --------------- ------------- ----------- ---------- ---------- ----------

Raymond L. Gellein,
Jr..................... -- -- -- -- -- --
Jeffrey A. Adler........ -- -- -- -- -- --
Matthew E. Avril........ 180,000 33.6% $11.00 12/26/06 $1,245,211 $3,155,610
Susan Werth............. 75,000 14.0% $11.00 12/26/06 $ 518,838 $1,314,838
Carol Lytle............. 180,000 33.6% $11.00 12/26/06 $1,245,211 $3,155,610

- --------
(1) These options were granted with an exercise price equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors. These options are nonqualified stock options, will vest in
equal amounts over four years and have a ten-year term. See "--Stock Plan."
(2) The potential realizable value is reported net of the option price, but
before income taxes associated with exercise. These amounts represent
assumed annual compounded rates of appreciation at 5% and 10% only from
the date of grant to the expiration date of the option.

STOCK PLAN

General. The Stock Plan was initially adopted by the Company in December
1996. The Stock Plan provides for the issuance of options to acquire up to
1,900,000 shares of Common Stock to employees, directors and officers of, and
consultants to, the Company and permits the Company to grant (i) shares of
Common Stock subject to transfer restrictions ("Restricted Stock"); (ii)
incentive stock options ("ISOs") within the meaning of Section 422 of the Code;
(iii) non-qualified stock options ("NSOs") ("ISOs" and "NSOs," individually, or
collectively, "Options"); (iv) stock appreciation rights ("SARs"); and (v)
phantom stock awards.

Purpose. The purpose of the Stock Plan is to foster the interests of the
Company and its shareholders by enabling employees, directors and officers of,
and consultants to, the Company to acquire a proprietary interest in the
Company and to provide an additional incentive for such persons to promote the
success of the Company's business.

Administration. The Stock Plan is administered by the Compensation Committee
of the Board, which selects the persons who will receive grants of awards under
the Stock Plan. The Committee is comprised of two or more outside directors who
are "non-employee directors" for purposes of Rule 16b-3 of the Exchange Act.
The Board appoints the members of the Compensation Committee, fills vacancies
on the Compensation Committee and has the power to replace members of the
Compensation Committee with other eligible persons at any time. The
Compensation Committee is authorized to make grants under the Stock Plan, to
determine the terms and conditions thereof and to otherwise administer and
interpret the Stock Plan.

Eligibility. Employees, directors and officers of, and consultants to, the
Company and its subsidiaries are eligible to participate in the Stock Plan and
receive grants of awards thereunder. The selection of employees who will
receive grants under the Stock Plan (the "Participants") is in the sole
discretion of the Compensation Committee.

Exercise Price of Options. The exercise price of any Option granted under
the Stock Plan is set in each case by the Compensation Committee; however, the
exercise price of any ISO may not be less than 100% of the fair market value
of the shares of Common Stock subject to the ISO on the date of grant (110% if
the ISO is granted to a greater than 10% shareholder of the Company).

Terms of Options. ISOs granted under the Stock Plan expire upon the earliest
to occur of (i) a period not to exceed ten years from the Option Date (as that
term is defined in the Stock Plan) (or five years if the ISO is granted to a
greater than 10% shareholder of the Company); (ii) the date on which the ISO
is forfeited under the terms of the Stock Plan due to termination of
employment (i.e., all Options, whether or not vested, are forfeited and expire
upon termination of a Participant's employment for Cause, as that term is
defined in the Stock Plan); (iii) with respect to any nonvested Options, the
date on which a Participant voluntarily terminates employment by the Company;
(iv) with respect to vested Options, three months after the Participant's
termination of employment by the Company for any reason other than Cause or
death; or (v) six months after the Participant's death. The duration of NSOs
granted under the Stock Plan are identical to those of ISOs (except for the
five year expiration period for greater than 10% shareholders of the Company).

Exercise of Awards. Unless the Compensation Committee establishes a
different vesting schedule and except with respect to the automatic director
Options discussed below, Options, Restricted Stock, SARs and phantom stock
granted or awarded under the Stock Plan shall become 25% vested after 12
months from the grant or award date, and shall vest annually pro rata in
arrears over a period of three years thereafter. Notwithstanding the
foregoing, upon a Change in Control (as that term is defined in the Stock
Plan) all Options, Restricted Stock, SARs and phantom stock shall become 100%
vested and immediately exercisable. If a Participant's employment with the
Company, membership on the Board of Directors or retention as a consultant
terminates, all unvested grants and awards are forfeited. Under the Stock
Plan, upon the exercise of an Option, the optionee may make payment either in
cash, with shares of Common Stock having an aggregate fair market value on the
date of delivery equal to the exercise price, or by delivery of an irrevocable
commitment to use the proceeds of the sale of stock acquired from exercise of
the option. No Common Stock may be delivered upon the exercise of an Option
until full payment has been made for such shares. For individuals subject to
Rule 16b-3, any withholding obligation of the Company will be satisfied
automatically by the automatic withholding of shares of Common Stock otherwise
issuable to the Participant.

Director Options. Each initial director of the Company who is an Eligible
Director will automatically be granted NSOs to purchase 45,000 shares of
Common Stock for an exercise price per share equal to the Price to Public. Of
such NSOs, NSOs to purchase 15,000 shares of Common Stock will be exercisable
immediately upon grant, NSOs to purchase 15,000 shares of Common Stock will be
exercisable immediately following the date of the 1998 annual meeting of the
Company's shareholders (provided that such initial director continues to be a
director of the Company following such annual meeting) and NSOs to purchase
the remaining 15,000 shares of Common Stock will be exercisable immediately
following the date of the 1999 annual meeting of the Company's shareholders
(provided that such initial director continues to be a director of the Company
following such annual meeting).

In addition, it is the intention of the Company that (i) each initial
director of the Company who is an Eligible Director will also be granted
immediately-exercisable NSOs to purchase 5,000 shares of Common Stock
immediately following the date of each scheduled annual meeting of the
Company's shareholders commencing with the 2000 annual meeting of the
Company's shareholders (provided that such initial director continues to be a
director of the Company following such annual meeting) and (ii) each new
director of the Company who is an Eligible Director will be granted
immediately-exercisable NSOs to purchase 5,000 shares of Common Stock
immediately following the date of each scheduled annual meeting of the
Company's shareholders (provided that such director continues to be a director
of the Company following such annual meeting). The Company intends that the
exercise price of such NSOs will be the fair market value of the Common Stock
on the date of grant.

Unless the Compensation Committee establishes an earlier termination date,
NSOs granted to a director will expire ten years from the date of grant.

Grant of Options. In December 1996, the Company granted certain executive
officers and other employees of the Company options to purchase an aggregate of
535,000 shares of Common Stock pursuant to the Stock Plan at an exercise price
of $11.00 per share. See "--Executive Compensation" and "--Employment
Agreements." Concurrently with the completion of the Offering, the Board of
Directors may grant to several employees of the Company (including the Named
Executive Officers) options to purchase additional shares of Common Stock under
the Stock Plan at an exercise price equal to the Price to Public.

Stock Appreciation Rights (SARs). Under the terms of the Stock Plan, the
Compensation Committee may, in its discretion, grant naked SARs and/or tandem
SARs to eligible Participants. A tandem SAR is an SAR that is granted in
connection with an Option and is exercisable only if the fair market value of
the Company's Common Stock on the date of surrender exceeds the Option Price of
the related ISO or the fair market value of the Common Stock on the Option Date
in the case of an NSO, and only to the extent that the related NSO or ISO is
exercisable. A Participant who elects to exercise a tandem SAR may surrender
the exercisable portion of related Options in exchange for a number of shares
of Common Stock determined by a formula in the Stock Plan. A naked SAR is
similar to a tandem SAR but it is not granted in connection with an underlying
Option and its terms are governed by the Participant's SAR agreement.

Phantom Stock. Under the Stock Plan, the Compensation Committee may, in its
discretion, award phantom stock to eligible Participants and, in connection
therewith, grant the Participant the right to receive payments equal to
dividends paid on the Common Stock to which the phantom stock relates. Subject
to certain terms and limitations, an award of phantom stock entitles the
Participant to surrender all or part of the vested portion of such stock and to
receive from the Company the fair market value on the date of surrender of the
Common Stock to which the phantom stock relates.

Non-Assignability of Options, SARs and Phantom Stock. Options, SARs and
phantom stock granted under the Stock Plan are generally not transferable other
than by will or the then applicable laws of descent and distribution. During
the lifetime of a Participant, Options may be exercised only by such
Participant.

Restricted Stock. In addition to Options, SARs and phantom stock, the
Compensation Committee may, in its discretion, make awards of restricted stock
to eligible Participants under the Stock Plan. A Participant may not sell or
transfer shares of restricted stock awarded under the Stock Plan and the shares
are subject to forfeiture in the event of the termination of the Participant's
employment with the Company or membership on the Board of Directors prior to
the vesting thereof. Notwithstanding the transfer restrictions, the holder of
restricted stock has the right to vote his or her shares of restricted stock
and to receive dividends in the same amount as dividends paid on non-restricted
shares of Common Stock.

Adjustment to Reflect Change in Capital Structure. If there is any change in
the corporate structure or shares of the capital stock of the Company, the
Board of Directors has the authority to make any adjustments necessary to
prevent accretion or to protect against dilution in the number and kind of
shares authorized by the Stock Plan or in the number and kind of shares covered
by awards thereunder.

OPTIONS GRANTED BY EXISTING SHAREHOLDERS

Effective upon completion of the Offering, the Existing Shareholders, pro
rata in accordance with the ownership of Common Stock, will grant to certain
executive officers and other employees of the Company options to acquire an
aggregate of 1,350,000 shares of Common Stock at an exercise price equal to the
Price to Public. These options will be exercisable in full at the date of grant
and will terminate ten years after the date of grant, subject to certain
exceptions. See "Principal and Selling Shareholders" and "Shares Eligible for
Future Sale."

401(K) PLAN

The Company has established a qualified retirement plan, with a salary
deferral feature designed to qualify under Section 401 of the Code (the "401(k)
Plan"). Employees of the Company are eligible to participate in the

401(k) Plan if they meet certain requirements concerning minimum age and
period of credited service. The 401(k) Plan allows participants to defer up to
15% of their compensation on a pre-tax basis subject to certain maximum
amounts. The 401(k) Plan allows the Company discretionary matching
contributions up to a maximum of 6% of the participant's compensation per
year. The Company has historically matched participant contributions in an
amount equal to 25 cents for each dollar of participant contributions and
expects to continue to do so. Certain other statutory limitations with respect
to the Company's contribution under the 401(k) Plan also apply. Amounts
contributed by the Company will vest over six years and will be held in trust
until distributed pursuant to the terms of the 401(k) Plan. All contributions
to the 401(k) Plan are invested in accordance with participant elections among
certain investment options. Distributions from participant accounts are not
permitted before an employee attains the age of 59 1/2, except in the event of
death, disability, certain financial hardships or termination of employment.

EMPLOYMENT AGREEMENTS

Prior to the completion of the Offering, the Company will enter into a new
employment agreement with each of Messrs. Gellein, Adler and Avril, Ms. Werth
and Ms. Lytle for a term commencing on the completion of the Offering and
ending on the fourth anniversary of the Offering; however, each employee's
employment by the Company is terminable at any time by either party, with or
without cause. Pursuant to these agreements, Messrs. Gellein, Adler and Avril,
Ms. Werth and Ms. Lytle will be entitled to receive an annual base salary of
$360,000, $360,000, $250,000, $230,000 and $250,000, respectively, as adjusted
on March 1 of each year by the annual percentage increase in the Consumer
Price Index, All Urban Consumers for the Orlando, Florida area. In addition,
Messrs. Gellein, Adler and Avril and Ms. Werth will be eligible to receive an
annual performance bonus not to exceed 60%, 60%, 60% and 40%, respectively, of
such employee's annual base salary, based upon the Company's achievement of
certain predetermined performance goals. Ms. Lytle will be eligible to receive
performance bonuses based on the Company's achievement of certain operating
goals. See "Management--Executive Compensation." Upon termination of
employment, the employee will be entitled to unpaid compensation for services
rendered through the date of termination, together with employee benefits
accrued through the date of termination. In addition, if the employee's
employment by the Company is terminated by the Company without cause, the
employee will be entitled to receive certain severance payments payable in
accordance with the Company's payroll practices.

The Company has also granted Mr. Avril, Ms. Werth and Ms. Lytle options to
purchase 180,000, 75,000 and 180,000 shares of Common Stock, respectively, at
an exercise price of $11.00 per share pursuant to the Stock Plan. See "--
Executive Compensation."

Under the terms of the employment agreements, Messrs. Gellein, Adler and
Avril, Ms. Werth and Ms. Lytle will be prohibited from disclosing any
confidential information or trade secrets of the Company. Messrs. Gellein,
Adler and Avril, Ms. Werth and Ms. Lytle are also prohibited, during the term
of their employment by the Company and for a period of two years thereafter,
from (i) engaging in any business or becoming employed or otherwise rendering
services to any company engaged in the timeshare or vacation ownership
business and (ii) soliciting the employment of any employees of the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In addition to the transactions described under "Management--Employment
Agreements," the Company has had during its last fiscal year, or contemplates
having, the transactions described below.

Charles E. Harris, who has consented to become a director of the Company upon
completion of the Offering, is President and Chief Executive Officer and a
principal shareholder of Synagen. Synagen has served as financial advisor to
the Company and the Existing Shareholders with respect to various corporate
transactions since 1991. During the years ended December 31, 1996 and 1995, the
Company paid Synagen fees of $56,000 and $140,000, respectively. No fees were
paid to Synagen during 1994. The Company currently anticipates that it will pay
fees of approximately $280,000 to Synagen prior to the date that Mr. Harris
becomes a director of the Company.

Mr. Harris is also President and Chief Executive Officer of Allen C. Ewing &
Co. ("Ewing"), and a principal shareholder of Ewing's parent holding company.
The Representatives have agreed to include Ewing as one of the Underwriters.
See "Underwriting."

The Existing Shareholders, after giving effect to the Offering, the owners of
70.5% of the Common Stock (approximately 66.1% if the Underwriters' over-
allotment option is exercised in full and all shares of Common Stock subject
thereto are sold solely by the Selling Shareholders), are parties to a
Shareholders' Agreement which will become effective prior to the completion of
the Offering (the "Shareholders' Agreement"). Pursuant to the Shareholders'
Agreement, the Existing Shareholders have agreed to vote their shares of Common
Stock in favor of proxies solicited by the Board of Directors, unless both
Messrs. Gellein and Adler disagree with the position taken by the Board of
Directors. The Shareholders' Agreement contains restrictions on the disposition
of Common Stock and provides for certain rights of refusal. The Shareholders'
Agreement will terminate and be of no further force and effect upon the
earliest to occur of (i) the agreement of the Existing Shareholders; (ii) the
tenth anniversary of the Offering; and (iii) the date upon which one of the
Existing Shareholders (treating Mr. Gellein and JGG Holdings Trust together as
one Existing Shareholder) fails to own 5% of the Common Stock. See "Risk
Factors--Control by Existing Shareholders Following the Offering; Shareholder's
Agreement."

Messrs. Gellein and Adler, JGG Holdings Trust and certain executive officers
and other employees of the Company are entitled, under certain circumstances,
to require the Company to register under the Securities Act shares of Common
Stock owned by them or which they may purchase upon exercise of options granted
by the Existing Shareholders. See "Principal and Selling Shareholders" and
"Shares Eligible for Future Sale."

The Company believes that all transactions disclosed above have been, and the
Company's Board of Directors intends that any future transactions with its
officers, directors, affiliates or principal shareholders will be, effected on
terms that are no less favorable to the Company than those that are obtainable
in arms' length transactions with unaffiliated third parties.

PRINCIPAL AND SELLING SHAREHOLDERS

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

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
--------------------- NUMBER OF ------------------------
NUMBER OF SHARES NUMBER OF
NAME(1) SHARES(2) PERCENTAGE BEING OFFERED(3) SHARES PERCENTAGE(4)
------- ---------- ---------- ---------------- ---------- -------------

Raymond L. Gellein,
Jr.(5)................. 7,087,500 50.0% 462,500(6) 6,625,000 35.24%
Jeffrey A. Adler(7)..... 7,087,500 50.0% 462,500 6,625,000 35.24%
Laurence S. Geller(8)... -- -- -- 15,000 *
Charles E. Harris(8).... -- -- -- 15,000 *
Proposed Director(8).... -- -- -- 15,000 *
Matthew E. Avril(9)..... 400,000 2.8% -- 400,000 2.1%
Susan Werth(10)......... 125,000 * -- 125,000 *
Carol Lytle(11)......... 400,000 2.8% -- 400,000 2.1%
All directors and
executive officers as a
group (8 persons)(12).. 14,175,000 100% 925,000 13,295,000 70.5%

- --------
* Less than 1%.
(1) The address of each director, executive officer and beneficial owner of
more than 5% of the currently outstanding shares of Common Stock is in
care of the Company, 8801 Vistana Centre Drive, Orlando, Florida 32821.
(2) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares of Common Stock which such
person has the right to acquire within 60 days after the date of this
Prospectus. For purposes of computing the percentage of outstanding
shares of Common Stock held by each person or group of persons named
above, any security which such person or persons has or have the right to
acquire from the Company within 60 days after the date of this Prospectus
is deemed to be outstanding, but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.
(3) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full and all shares
subject thereto are sold by the Selling Stockholders, an additional
416,250 shares of Common Stock beneficially owned by each of Messrs.
Gellein and Adler will be sold and Messrs. Gellein and Adler will each
beneficially own 33.0% of the total outstanding Common Stock.
(4) Such amounts have been adjusted to reflect the issuance of the Common
Stock in the Offering.
(5) Includes (i) 3,543,750 shares (3,312,500 shares after giving effect to
the Offering) of Common Stock held by JGG Holdings Trust, a trust for the
primary benefit of Mr. Gellein's former spouse; (ii) 254,440 shares of
Common Stock held by the Raymond L. Gellein, Jr. Retained Annuity Grantor
Trust dated 10/18/96, a trust primarily for the benefit of Mr. Gellein's
children; (iii) 42,880 shares of Common Stock held by the Matthew James
Gellein Irrevocable Trust dated 10/18/96, a trust for the benefit of Mr.
Gellein's son; (iv) 42,880 shares of Common Stock held by the Brett Tyler
Gellein Irrevocable Trust dated 10/18/96, a trust for the benefit of Mr.
Gellein's other son; (v) 3,203,550 (2,972,300 after giving effect to the
Offering) shares of Common Stock held by the Raymond L. Gellein, Jr.
Revocable Trust, a trust for the benefit of Mr. Gellein; and (vi) 416,250
shares which may be sold pursuant to an option granted to the
Underwriters to cover a portion of the Underwriters' over-allotments, if
any. See "Underwriting." Excludes, an aggregate of 675,000 shares of
Common Stock subject to options granted to certain executive officers and
other employees of the Company. See notes (9), (10), (11) and (12) below.
(6) Includes 231,250 shares of Common Stock held by JGG Holdings Trust
(439,375 shares of Common Stock if the Underwriters' over-allotment
option is exercised in full and all shares subject thereto are sold by
the Selling Stockholders).

(7) All shares of Common Stock beneficially owned by Mr. Adler are owned by
The Jeffrey A. Adler Revocable Trust, of which Mr. Adler is the sole
trustee and the sole beneficiary during his lifetime. Excludes an
aggregate of 675,000 shares of Common Stock subject to options granted
to certain executive officers and other employees of the Company. See
notes (9), (10), (11) and (12) below. Includes 416,250 shares which may
be sold pursuant to an option granted to the Underwriters to cover a
portion of the Underwriters' over-allotments, if any. See
"Underwriting."
(8) Represents 15,000 shares of Common Stock which may be acquired upon
exercise of options granted under the Stock Plan. Excludes 30,000 shares
of Common Stock issuable pursuant to options granted under the Stock
Plan which are not exercisable within 60 days of the date of this
Prospectus. Messrs. Geller and Heyer have indicated that they intend to
purchase shares of Common Stock in the Offering.
(9) Represents 400,000 shares of Common Stock which may be acquired upon
exercise of options granted by the Existing Shareholders, which options
were granted in December 1996 at an exercise price equal to the Price to
Public. Excludes options to acquire 180,000 shares of Common Stock
granted by the Company in December 1996 pursuant to the Stock Plan which
are not exercisable within 60 days of the date of this Prospectus.
(10) Represents 125,000 shares of Common Stock which may be acquired upon
exercise of options granted by the Existing Shareholders, which options
were granted in December 1996 at an exercise price equal to the Price to
Public. Excludes options to acquire 75,000 shares of Common Stock granted
by the Company in December 1996 pursuant to the Stock Plan, which are not
exercisable within 60 days of the date of this Prospectus.
(11) Represents 400,000 shares of Common Stock which may be acquired upon
exercise of options granted by the Existing Shareholders, which options
were granted in December 1996 at an exercise price equal to the Price to
Public. Excludes options to acquire 180,000 shares of Common Stock
granted by the Company in December 1996 pursuant to the Stock Plan which
are not exercisable within 60 days of the date of this Prospectus.
(12) Represents (i) 14,175,000 shares of Common Stock owned by the Existing
Shareholders, (13,250,020 after giving effect to the Offering); (ii) an
aggregate of 925,000 shares of Common Stock which may be acquired upon
exercise of options granted by the Existing Shareholders; and (iii)
45,000 shares of Common Stock which may be acquired upon exercise of
options granted under the Stock Plan. Excludes options to acquire an
aggregate of 535,000 shares of Common Stock granted by the Company in
December 1996 pursuant to the Stock Plan, which are not exercisable
within 60 days of the date of this Prospectus. See "Management--Stock
Plan."

DESCRIPTION OF CAPITAL STOCK

Upon the completion of the Offering and the consummation of the Formation
Transactions, the authorized capital stock of the Company will consist of (i)
100,000,000 shares of Common Stock, par value $0.01 per share, 18,800,000
shares of which will be outstanding after completion of the Offering and the
Formation Transaction, and (ii) 5,000,000 shares of Preferred Stock, par value
$0.01 per share, none of which will be outstanding after the Offering and the
Formation Transactions. The following summary description of the capital stock
of the Company is qualified in its entirety by reference to the Articles of
Incorporation and By-Laws of the Company, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part. See
"Additional Information."

COMMON STOCK

The rights of the holders of the Common Stock discussed below are subject to
such rights as the Board of Directors may hereafter confer on the holders of
the preferred stock; accordingly, rights conferred on holders of preferred
stock issued under the Articles of Incorporation may adversely affect the
rights of holders of the Common Stock.

Subject to the rights of holders of preferred stock, the holders of
outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor, at such times and in such amounts as the
Board of Directors may from time to time determine. See "Dividend Policy." The
shares of Common Stock are

neither redeemable nor convertible and the holders thereof have no preemptive
or subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive, pro rata, the assets of the Company that are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of preferred stock
then outstanding. Each outstanding share of Common Stock is entitled to one
vote on all matters submitted to a vote of shareholders. There is no cumulative
voting in the election of directors.

PREFERRED STOCK

The Articles of Incorporation authorize the Board of Directors to issue
preferred stock in classes or series and to establish the designations,
preferences, qualifications, limitations or restrictions of any class or series
with respect to, among other things, the rate and nature of dividends, the
price, terms and conditions on which shares may be redeemed, the terms and
conditions for conversion or exchange into any other class or series of the
stock and voting rights. The Company will have authority, without approval of
the holders of Common Stock, to issue preferred stock that has voting, dividend
or liquidation rights superior to the Common Stock and that may adversely
affect the rights of holders of Common Stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of the holders of Common Stock and could have the effect of delaying,
deferring or preventing a change in control of the Company. The Company
currently has no plans to issue any shares of preferred stock.

CLASSIFICATION OF THE BOARD OF DIRECTORS

The Company's Articles of Incorporation provides that the number of directors
of the Company shall be established by the By-Laws but shall not be less than
the minimum number required by the FBCA. The By-Laws currently provide that the
Board of Directors will consist of not fewer than five nor more than nine
members. The Company's Articles of Incorporation and By-Laws provide for a
staggered Board of Directors consisting of three classes as nearly equal in
size as practicable. One class will hold office initially for a term expiring
at the annual meeting of the Company's shareholders to be held in 1998, another
class will hold office initially for a term expiring at the annual meeting of
the Company's shareholders to be held in 1999 and another class will hold
office initially for a term expiring at the annual meeting of the Company's
shareholders to be held in 2000. As the term of each class expires, directors
for that class will be elected for a term of three years and until their
successors are duly elected and qualify.

The provisions of the Articles of Incorporation and the By-Laws summarized in
the preceding paragraphs and the provisions of the Florida Business Corporation
Act (the "FBCA") contain provisions that may have the effect of delaying,
deferring or preventing a non-negotiated merger or other business combination
involving the Company. These provisions are intended to encourage any person
interested in acquiring the Company to negotiate with and obtain the approval
of the Board of Directors in connection with the transaction. Certain of these
provisions may, however, discourage a future acquisition of the Company not
approved by the Board of Directors in which shareholders might receive an
enhanced value for their shares or that a substantial number or a majority of
the Company's shareholders might believe to be in their best interest. As a
result, shareholders who desire to participate in such a transaction may not
have the opportunity to do so. Such provisions could also discourage bids for
the Common Stock at a premium, as well as create a depressive effect on the
market price of the Common Stock.

CERTAIN PROVISIONS OF FLORIDA LAW

The Company is subject to several anti-takeover provisions that apply to a
public corporation organized under the FBCA, unless the corporation has elected
to opt out of those provisions in its articles of incorporation or by-laws. The
Company has not elected to opt out of those provisions. Subject to certain
exceptions, the FBCA prohibits the voting of shares in a publicly-held Florida
corporation that are acquired in a "control share acquisition" unless the
holders of a majority of the corporation's voting shares (exclusive of shares
held by

officers of the corporation, inside directors or the acquiring party) approve
the granting of voting rights as to the shares acquired in the control share
acquisition. A "control share acquisition" is defined as an acquisition that
immediately thereafter entitles the acquiring party to vote in the election of
directors within each of the following ranges of voting power: (i) one-fifth or
more but less than one-third of such voting power; (ii) one-third or more but
less than a majority of such voting power; and (iii) more than a majority of
such voting power.

Subject to certain exceptions, the FBCA also contains an "affiliated
transaction" provision that prohibits a corporation organized under the FBCA
from engaging in a broad range of business combinations or other extraordinary
corporate transactions with an "interested shareholder" unless: (i) the
transaction is approved by a majority of disinterested directors before the
person becomes an interested shareholder; (ii) the interested shareholder has
owned at least 80% of the corporation's outstanding voting shares for at least
five years; or (iii) the transaction is approved by the holders of two-thirds
of the corporation's voting shares other than those owned by the interested
shareholder. An interested shareholder is defined as a person who together with
affiliates and associates beneficially owns more than 10% of the corporation's
outstanding voting shares.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is .

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and the Formation Transactions, the Company
will have outstanding 18,800,000 shares of Common Stock. Of these shares, the
5,550,000 shares sold in the Offering plus any additional shares sold upon
exercise of the Underwriters' over-allotment option will be freely tradable in
the public market without restriction or further registration under the
Securities Act.

The remaining 13,250,000 outstanding shares of Common Stock were issued
pursuant to the Formation Transactions and are "restricted securities" as that
term is defined under Rule 144 of the Securities Act and may be sold only
pursuant to registration under the Securities Act or pursuant to an exemption
therefrom, such as that provided by Rule 144. In general, under Rule 144 as
currently in effect, if two years have elapsed since the later of the date of
acquisition of shares of Common Stock from the Company or the date of
acquisition of shares of Common Stock from any "affiliate" of the Company, as
that term is defined under the Securities Act, the acquiror or subsequent
holder is entitled to sell within any three-month period a number of shares of
Common Stock that do not exceed the greater of (i) 1% of the then-outstanding
shares of Common Stock and (ii) the average weekly trading volume of shares of
Common Stock on all exchanges and reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain restrictions on the manner of
sales, notice requirements and the availability of current public information
about the Company. If three years have elapsed since the date of acquisition of
shares of Common Stock from the Company or from any "affiliate" of the Company,
and the acquiror or subsequent holder thereof is deemed not to have been an
affiliate of the Company at any time during the 90 days preceding a sale, such
person would be entitled to sell such shares of Common Stock in the public
market under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.

Following the Offering, the Company intends to file under the Securities Act
a registration statement on Form S-8 to register all of the shares of Common
Stock subject to outstanding options under the Stock Plan and reserved for
future grants under the Stock Plan. This registration statement is expected to
become effective upon

filing and shares covered by this registration statement will be eligible for
sale, subject, in the case of affiliates only, to the restrictions of Rule 144,
other than the holding period requirement, and subject to the expiration of the
lock-up agreements with the Underwriters. As of December 31, 1996, although
options to acquire an aggregate of 535,000 shares of Common Stock had been
granted under the Stock Plan, none of such options were currently exercisable.

The Company has entered into a Registration Rights Agreement the
("Registration Rights Agreement") with the Existing Shareholders and certain
executive officers and other employees of the Company pursuant to which the
Company is obligated to register the shares owned by such persons under the
Securities Act at specified times and in specified amounts. Specifically, the
Company, subject to certain exceptions and limitations, will, upon request, be
required (i) at any time after the third anniversary of the Offering, to
register all or a portion of the Common Stock (not to exceed 15% of the then
outstanding Common Stock on any one occasion) owned by each of Messrs. Gellein
and Adler on up to two separate occasions each in connection with an
underwritten offering of any such Common Stock; (ii) at the beginning of each
of the first two 12-month periods following the second anniversary of the
Offering, to register up to 50% of the Common Stock held, or acquirable
pursuant to the exercise of options granted by the Existing Shareholders, by
each of the parties to the Registration Rights Agreement, other than the
Existing Shareholders, on a delayed or continuous basis, but not as part of an
underwriting (a "Shelf Registration") at the beginning of each of the 12 month
periods following the second anniversary of the completion of the Offering;
provided, however, that the number of shares included in any such Shelf
Registration may not exceed a maximum of 5% of the then outstanding Common
Stock; (iii) to register all of the shares of Common Stock held, or acquirable
pursuant to the exercise of options granted by the Existing Shareholders, by
each party to the Registration Rights Agreement, other than the Existing
Shareholders, pursuant to a Shelf Registration in the event of such party's
death or disability, such party's termination of employment by the Company
without cause or a change in control (as defined in the Registration Rights
Agreement). The Company is required to use its best efforts to keep all
registration statements relating to Shelf Registrations effective until the
Common Stock included therein has been sold.

Under the Registration Rights Agreement, subject to certain exception and
limitations, if the Company proposes to register any of its securities under
the Securities Act for its own account or the account of another person
pursuant to an underwriting, the parties to the Registration Rights Agreement
may require the Company to include in such registration all or part of the
shares of Common Stock held by such persons after completion of the Offering.
An aggregate of 925,000 shares of Common Stock are being registered by the
Existing Shareholders in the Offering (1,757,500 shares of Common Stock if the
Underwriter's over-allotment option is exercised in full and all shares subject
thereto are sold by the Selling Stockholders).

The Company is required to pay all expenses incident to the performance of
its obligations under the Registration Rights Agreement, other than any
underwriting discounts and commissions, or transfer taxes relating to shares of
Common Stock registered pursuant thereto.

Each party to the Registration Rights Agreement has agreed that if such
holder is requested by an underwriter in an underwritten offering of the
Company's securities (whether for the account of the Company or otherwise), not
to effect any public sale or distribution of any shares of Common Stock or
other Company equity securities, including a sale pursuant to Rule 144, during
the 10-day period prior to, and during the 90-day period beginning on, the
closing date of such underwritten offering. In addition, each of Messrs.
Gellein and Adler have agreed not exercise their rights to require the Company
to register all or a portion of the Common Stock owned by them more than once
during any 360-day period.

Prior to the Offering, there has been no public market for the Common Stock
and the effect, if any, that future market sales of Common Stock or the
availability of such Common Stock for sale will have on the market price of the
Common Stock prevailing from time to time cannot be predicted. Nevertheless,
sales of substantial amounts of Common Stock in the public market (or the
perception that such sales could occur) might adversely affect market prices
for the Common Stock.

UNDERWRITING

The Underwriters named below (the "Underwriters"), represented by Montgomery
Securities and Smith Barney 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 Shareholders
and the Underwriters to purchase from the Company and the Selling Shareholders
the number of shares of Common Stock indicated below opposite their respective
names, at the initial public offering price less the underwriting discounts and
commissions 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.

NUMBER OF
SHARES TO BE
UNDERWRITER PURCHASED
----------- ------------

Montgomery Securities........................................
Smith Barney Inc. ...........................................
---
Total......................................................
===

The Underwriters, through the Representatives, have advised the Company and
the Selling Shareholders that the Underwriters propose initially to offer the
shares of Common Stock to the public at a public offering price set forth on
the cover page of this Prospectus. The Underwriters may allow selected dealers
a concession of not more than $ per share; the Underwriters may allow, and
such dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the initial public offering, the public offering
price and other selling terms may be changed by the Representatives.

The Company and the Selling Shareholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to an aggregate maximum of 832,500 additional shares
of Common Stock, to cover over-allotments, if any, at the same price per share
as the initial shares to be purchased by the Underwriters. Pursuant to the
terms of the option, the Selling Shareholders have the right to sell all or any
part of the shares to be sold the Underwriters, and the Company has the
obligation to sell to the Underwriters the difference between the amount sold
by the Selling Shareholders and the aggregate amount of shares required to
satisfy the Underwriters' option exercise. To the extent that the Underwriters
exercise this option, the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with the Offering.

The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.

The directors, Existing Shareholders, officers and certain other employees of
the Company have agreed, with certain exceptions, that, for a period of one
year 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 their 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.

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.

Charles E. Harris is also President and Chief Executive Officer of Ewing, and
a principal shareholder of Ewing's parent holding company. The Representatives
have agreed to include Ewing as one of the Underwriters. See "Certain
Relationships and Related Transactions."

Out of the 5,550,000 shares of Common Stock to be sold pursuant to the
Offering, the Underwriters have accepted the Company's request to sell up to
5% of such shares at the public offering price set forth on the cover page to
employees and other persons designated by the Company.

Prior to the Offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price will be
determined by negotiations among the Company and the Representatives of the
Underwriters. Among the factors to be considered in such negotiations will be
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
earnings and the trend of such earnings, the prospects for future earnings of
the Company, the present state of the Company's development, the general
condition of securities markets at the time of the Offering and the market
price of publicly traded stocks of comparable companies in recent periods.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Neal, Gerber & Eisenberg, Chicago,
Illinois in reliance, as to matters of Florida corporate law, on the opinion
of Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A., as to matters of
Florida law governing the vacation ownership industry, on the opinion of Baker
& Hostetler, and, as to matters of South Carolina law governing the vacation
ownership industry, on the opinion of . In connection with the Offering,
certain attorneys of Neal, Gerber & Eisenberg intend to purchase shares of
Common Stock at the Price to Public, which constitute a portion of the shares
reserved by the Underwriters for sale at the Price to Public to certain
employees and other persons designated by the Company. Certain legal matters
in connection with the Offering will be passed upon for the Underwriters by
O'Melveny & Myers LLP, San Francisco, California in reliance, as to matters of
Florida law, on the opinion of Dean, Mead, Egerton, Bloodworth, Capouano &
Bozarth, P.A., as to matters of Florida law governing the vacation ownership
industry, on the opinion of Baker & Hostetler, and, as to matters of South
Carolina law governing the vacation ownership industry, on the opinion of
.

EXPERTS

The Combined Financial Statements of Vistana, Inc. as of December 31, 1994
and 1995 and for each of the years in the three-year period ended December 31,
1995 included elsewhere in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent auditors, as set forth in their reports appearing
elsewhere herein. The financial statements and the selected combined financial
information referred to above have been so included in reliance upon such
reports given upon the authority of such firm as experts in auditing and
accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
omits certain of the information contained in the Registration Statement and
the exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. For
further information with respect to the Common Stock and the Common Stock,
reference is made to the Registration Statement and the exhibits and schedules
thereto. The Registration Statement, including exhibits and schedules thereto,
may be inspected and copied at the public reference facilities maintained by
the Commission, including at the Commission's Public Reference Room, 450 Fifth
Street, NW, Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies may be obtained at prescribed rates from the Public Reference
Section of the Commission as its principal office in Washington, D.C. Such
materials also may be accessed electronically by means of the Commission's
home page on the Internet at http://www.sec.gov.

Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other documents filed as an
exhibit to the Registration Statement, each such statement being qualified in
its entirety by such reference.

INDEX TO FINANCIAL STATEMENTS

Combined Financial Statements:
Independent Auditors' Report............................................ F-2
Combined Balance Sheets as of December 31, 1994 and 1995................ F-3
Combined Statements of Income for the Years Ended December 31, 1993,
1994 and 1995.......................................................... F-4
Combined Statements of Equity for the Years Ended December 31, 1993,
1994 and 1995.......................................................... F-5
Combined Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995.......................................................... F-6
Notes to Combined Financial Statements.................................. F-7
Unaudited Combined Financial Statements:
Combined Balance Sheets as of September 30, 1995 and 1996............... F-18
Combined Statements of Income for the Nine Months Ended September 30,
1995 and 1996.......................................................... F-19
Combined Statements of Equity for the Nine Months Ended September 30,
1995 and 1996.......................................................... F-20
Combined Statements of Cash Flows for the Nine Months Ended September
30, 1995 and 1996...................................................... F-21
Notes to Unaudited Combined Financial Statements........................ F-22

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Vistana, Inc. and Combined Affiliates:

We have audited the combined balance sheets of Vistana, Inc. and Combined
Affiliates (the "Company") as of December 31, 1994 and 1995 and the related
combined statements of income, equity and cash flows for each of the years in
the three-year period ended December 31, 1995. 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 Vistana, Inc. and
Combined Affiliates as of December 31, 1994 and 1995 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

/s/ KPMG Peat Marwick LLP

Orlando, Florida
December 23, 1996

F-2

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED BALANCE SHEETS

DECEMBER 31,
-------------------------
1994 1995
------------ ------------

Cash................................................. $ 2,539,898 $ 7,543,036
Restricted cash...................................... 2,323,879 3,244,873
Customer mortgages receivable, net................... 64,014,162 80,493,952
Other receivables, net............................... 2,537,209 2,805,502
Inventory of vacation ownership interests............ 5,522,788 9,607,814
Construction in progress............................. 10,401,129 8,694,684
------------ ------------
Total vacation ownership interests................. 15,923,917 18,302,498
------------ ------------
Prepaid expenses and other assets.................... 4,698,458 7,548,877
Investment in limited partnerships................... 9,738,828 5,058,710
Land held for development............................ 5,593,275 4,297,121
Property and equipment, net.......................... 10,619,449 11,356,914
------------ ------------
Total assets....................................... $117,989,075 $140,651,483
============ ============
Accounts payable and accrued liabilities............. 4,974,551 4,905,831
Accrued compensation and benefits.................... 3,802,569 8,552,982
Customer deposits.................................... 1,667,254 2,349,357
Repurchase obligations............................... 6,909,822 3,002,847
Other liabilities.................................... 2,207,645 2,432,399
Notes and mortgages payable.......................... 64,769,423 101,503,639
------------ ------------
Total liabilities.................................. 84,331,264 122,747,055
Equity............................................... 33,657,811 17,904,428
------------ ------------
Total liabilities and equity....................... $117,989,075 $140,651,483
============ ============

See accompanying notes to combined financial statements

F-3

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
----------- ----------- -----------

Revenues:
Vacation ownership interest sales....... $55,657,690 $54,186,316 $50,156,397
Interest income......................... 5,096,480 7,654,323 12,886,189
Resort revenue.......................... 10,876,973 11,834,044 12,613,242
Telecommunications...................... 1,980,002 3,377,865 4,802,025
Other................................... 550,716 583,765 652,039
----------- ----------- -----------
Total revenues........................ 74,161,861 77,636,313 81,109,892
Costs and operating expenses:
Costs of vacation ownership interests
sold................................... 11,521,416 11,390,644 12,052,497
Sales and marketing..................... 21,865,427 22,871,809 22,318,165
Interest expense--treasury.............. 2,069,951 3,605,227 6,515,497
Provision for doubtful accounts......... 3,902,755 3,802,905 3,522,316
Resort expenses......................... 9,493,180 10,036,963 10,585,320
Telecommunications expenses............. 1,536,536 2,519,980 3,654,386
General and administrative.............. 7,419,040 7,988,613 6,979,337
Depreciation and amortization........... 875,180 1,391,638 2,215,274
Interest expense--other................. 2,269,439 2,105,869 3,167,975
Other................................... 1,317,811 1,240,971 1,019,986
Deferred executive incentive compensa-
tion................................... 379,575 332,078 3,447,945
----------- ----------- -----------
Total costs and operating expenses.... 62,650,310 67,286,697 75,478,698
----------- ----------- -----------
Operating income...................... 11,511,551 10,349,616 5,631,194
Excess value recognized................... 700,822 364,952 219,095
----------- ----------- -----------
Net Income............................ $12,212,373 $10,714,568 $ 5,850,289
=========== =========== ===========
Pro-forma data (unaudited):
Net income before taxes................. 12,212,373 10,714,568 5,850,289
Pro forma provision for income taxes.... 4,432,000 3,984,000 2,126,000
----------- ----------- -----------
Pro forma net income.................. $ 7,780,373 $ 6,730,568 $ 3,724,289
=========== =========== ===========
Pro forma net income per share of common
stock.................................... $ 0.26
===========
Pro forma weighted number of shares of
common stock outstanding................. 14,175,000
===========

See accompanying notes to combined financial statements.

F-4

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED STATEMENTS OF EQUITY

COMMON STOCK
(PAR VALUE $.01) ADDITIONAL
------------------ PAID-IN RETAINED TOTAL
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- -------- ---------- ----------- -----------

Balances at January 1,
1993...................... 40,000 $ 400 $267,900 $11,985,420 $12,253,720
Distributions.............. -- -- -- (740,292) (740,292)
Net income................. -- -- -- 12,212,373 12,212,373
--------- ------- -------- ----------- -----------
Balances at December 31,
1993...................... 40,000 400 267,900 23,457,501 23,725,801
Distributions.............. -- -- -- (782,558) (782,558)
Net income................. -- -- -- 10,714,568 10,714,568
--------- ------- -------- ----------- -----------
Balances at December 31,
1994...................... 40,000 400 267,900 33,389,511 33,657,811
Distributions/redemptions.. -- -- -- (21,603,672) (21,603,672)
Net income................. -- -- -- 5,850,289 5,850,289
--------- ------- -------- ----------- -----------
Balances at December 31,
1995...................... 40,000 $ 400 $267,900 $17,636,128 $17,904,428
========= ======= ======== =========== ===========

See accompanying notes to combined financial statements.

F-5

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995
------------ ------------ ------------

Operating activities:
Net income......................... $ 12,212,373 $ 10,714,568 $ 5,850,289
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.... 875,180 1,391,638 2,215,274
Amortization of discount on
customer mortgages receivable... -- -- 2,061,541
Provision for doubtful accounts.. 3,902,755 3,802,905 3,522,316
Changes in operating assets and
liabilities:
Other receivables.............. (857,645) (127,354) (268,293)
Construction in progress....... (7,805,265) (3,954,546) (1,082,427)
Prepaid expenses and other as-
sets.......................... 246,616 412,018 (2,850,419)
Accounts payable and accrued
liabilities................... 936,412 839,216 (68,720)
Accrued compensation and bene-
fits.......................... 1,129,603 90,708 4,750,413
Customer deposits.............. 403,556 54,339 682,103
Repurchase obligations......... 1,360,994 (834,849) (1,603,975)
Other liabilities.............. (1,524,209) 1,182,091 224,754
------------ ------------ ------------
Net cash provided by operating
activities................... 10,880,370 13,570,734 13,432,856
Investing activities:
Expenditures for property and
equipment......................... (2,514,800) (1,646,332) (2,952,739)
Sale of customer mortgages receiv-
able.............................. 15,650,072 6,557,769 --
Repurchase of customer mortgages
receivable........................ -- -- (1,692,083)
Customer mortgages receivable...... (33,664,940) (25,345,638) (17,994,446)
------------ ------------ ------------
Net cash used in investing ac-
tivities...................... (20,529,668) (20,434,201) (22,639,268)
Financing activities:
Proceeds from notes and mortgages
payable........................... 42,471,581 51,511,207 79,345,191
Payments on notes and mortgages
payable........................... (30,646,661) (44,216,204) (42,610,975)
Equity distributions/redemptions... (740,292) (782,558) (21,603,672)
------------ ------------ ------------
Net cash provided by financing
activities...................... 11,084,628 6,512,445 15,130,544
Net increase (decrease) in cash
and cash equivalents............ 1,435,330 (351,022) 5,924,132
Cash and cash equivalents, beginning
of year............................. 3,779,469 5,214,799 4,863,777
------------ ------------ ------------
Cash and cash equivalents, end of
year................................ $ 5,214,799 $ 4,863,777 $ 10,787,909
============ ============ ============
Supplemental disclosure of cash flow
information:
Cash paid during the year for in-
terest............................ $ 4,076,360 $ 5,674,646 $ 9,728,802
============ ============ ============

See accompanying notes to combined financial statements.

F-6

VISTANA, INC. AND COMBINED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

(1) NATURE OF BUSINESS

Vistana, Inc. and its combined affiliates (the "Company") are comprised of
certain entities under common control. The Company generates revenues from the
sale and financing of vacation ownership interests in its resort properties
which typically entitle the buyer to ownership of a fully-furnised unit for a
one week period on an annual or alternate year basis. The Company's principal
operations through 1995 consisted of (1) constructing, furnishing, marketing
and selling vacation ownership interests at Vistana Resort, in Lake Buena
Vista, Florida and Vistana's Beach Club on Hutchinson Island, Florida, (2)
providing consumer financing for the purchase of vacation ownership interests
at its resorts and (3) managing the operations of its resorts and related
amenities, and the installation and maintenance of telecommunications
equipment, principally at its resorts, as well as for others on a limited
basis. The Company sells vacation ownership interests to both domestic and
foreign purchasers. All contracts relating to the sale of vacation ownership
interests are denominated in U.S. dollars. As of December 31, 1995, the
following comprise the affiliates which are wholly owned by common interests:

Vistana Capital Holdings, Inc.
Vistana Capital Management, Inc.
WE4 Fun, Inc.
Vistana Development, Ltd.
Vistana Management, Ltd.
VCH Communications, Inc.
VCH Trademark, Inc.

Each of the entities listed above was formed in November 1991 by the current
owners to acquire and own, either directly or indirectly, the assets and
certain liabilities of the predecessor operating entities of Vistana Resort
and Vistana's Beach Club from the previous owner, hereinafter referred to as
the "Seller".

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Combination

The combined financial statements include the accounts of Vistana, Inc. and
its affiliates as listed and described in Note 1. All significant intercompany
transactions and balances have been eliminated from these combined financial
statements.

(b) Cash and Cash Equivalents

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

Restricted cash consists of (1) deposits received on sales of vacation
ownership interests that are held in escrow until the applicable statutory
rescission period has expired and the related customer mortgage receivable has
been recorded, and (2) workman's compensation funds.

(d) Allowance for Losses on Customer Mortgages Receivable and Repurchase
Obligations

The Company controls the credit risk of customer mortgages receivable
through its origination process and by retaining the ongoing servicing of such
receivables, even if sold.

F-7

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
with recourse of customer mortgages receivable by the Company, to limited
partnerships in which the Company had a residual interest, pursuant to
agreements entered into during 1991 and 1992 (see Note 2(g)). Management
believes that all such allowances and estimated liabilities are adequate. As of
December 31, 1995, the outstanding balance of customer mortgages receivable
previously sold with recourse to the Company was $15,687,491.

The Company, assessing the borrower's ability to repay their obligations,
considers customer mortgages receivable impaired when it is probable that the
Company will be unable to collect all amounts due according to the contractual
terms of the applicable mortgage receivable. When a customer mortgage
receivable is considered impaired, the amount of impairment is recorded based
on the book value of the vacation ownership interest securing the customer
mortgage receivable and recognized when the week is returned to inventory.
Impaired customer mortgages receivable are included in the allowance for
doubtful accounts.

(e) Inventory of Vacation Ownership Interests

Inventory of vacation ownership interests and related construction in
progress are carried at cost, which is lower than net realizable value.

(f) Prepaid Expenses and Other Assets

Costs associated with a five-year covenant not-to-compete agreement with a
former shareholder/executive of the Company are included in other assets in the
accompanying combined balance sheet. These costs are being amortized over the
term of the agreement.

Prepaid financing fees related to notes and mortgages payable are capitalized
and amortized over the lives of the respective debt on a straight-line basis.

(g) Investment in Limited Partnerships

Investment in limited partnerships represents the Company's initial
investment in certain limited partnerships, in which it has residual interests,
formed in 1991 and 1992, to which the Company sold customer mortgages
receivable pursuant to a commitment to sell a stipulated amount, which was
fulfilled by early 1994. The Company has reflected such investments on the cost
method and recorded its initial investment in limited partnerships as the
difference between the outstanding contractual amount of customer mortgages
receivable sold and the proceeds from such sale. The Company estimates that its
cost is not in excess of net realizable value. Upon repurchasing customer
mortgages receivable previously sold pursuant to "clean up" call provisions
related to such sales, the Company records the difference between the remaining
outstanding contractual receivable amount and the net repurchase amount as a
loan discount, to be amortized over the estimated remaining life of the
receivables.

(h) Property and Equipment

Property and equipment are recorded at cost. Depreciation of property and
equipment is computed over the applicable estimated useful lives (between 3 and
30 years) of the assets using the straight-line method.

(i) Customer Deposits

Until a vacation ownership interest contract qualifies as a sale, all
payments received are accounted for as deposits. If a contract is canceled
after the applicable statutory period, deposits forfeited are credited to
income.

(j) Revenue Recognition

Substantially all vacation ownership interests sold by the Company generate
installment receivables secured by a mortgage on the related vacation ownership
interest. These customer mortgages receivable are payable in monthly
installments, including interest, with maturities up to seven years. Sales are
included in revenues when minimum down payment requirements have been met. A
provision is recorded for those contracts expected to rescind in the allowed
statutory rescission period.

F-8

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Product costs and direct selling expenses related to a vacation ownership
interest sale are recorded at the time the sale is recognized. Product costs
include the cost of land, professional fees, improvements to the property and
the costs of amenities constructed for the use and benefit of the vacation
ownership interest owners. Product costs are allocated to each vacation
ownership interest based on the total number of vacation ownership interests in
the particular phase.

Resort revenues are recognized on an accrual basis. Telecommunications
revenues, primarily from contracting services to third parties are recognized
when earned. Labor, material, equipment and operating expenses related to such
contracting services are recorded when incurred.

(k) Excess Value Over Consideration

In connection with the acquisition by the Company in 1991 from the Seller
described in Note 1, the estimated value of the assets acquired exceeded the
consideration paid (including the estimated liabilities assumed as part of the
transaction) by $3,380,621. Accordingly, the excess value over consideration
has been allocated on a pro-rata basis to reduce the recorded value of long-
term assets originally acquired from the Seller, principally customer mortgages
receivable. This excess value over consideration is being amortized into income
over the life of those assets. The amount of excess value over consideration
amortized into income was $700,822, $364,952 and $219,095 in 1993, 1994 and
1995, respectively, with $944,230 remaining unamortized as of December 31,
1995.

(l) Interest Rate Swap Agreements

The Company only uses derivative financial instruments on a limited basis and
does not use them for trading purposes. Derivative financial instruments are
used to manage well-defined interest rate risks. The differential to be paid or
received under the terms of the interest rate swap agreements is accrued as
interest rates change and is recognized over the life of the applicable
interest rate swap agreements.

(m) Fair Value of Financial Instruments

The carrying amount reported in the combined balance sheets for cash,
restricted cash, other receivables, accounts payable and accrued liabilities
approximates fair value due to the immediate or short-term maturity of these
financial instruments.

The carrying amount of customer mortgages receivable approximates the fair
value as the interest rates on the customer mortgages receivable are
predominantly at current market rates.

The carrying amount of notes and mortgages payable approximates fair value as
the interest rate on the underlying instruments reprices frequently.

The fair value of the interest rate swaps (used for hedging purposes) is the
estimated amount the Company would pay to terminate the interest rate swap
agreements at December 31, 1995, taking into account the interest rates and the
current credit-worthiness of the interest rate swap counterparty. The fair
value of the liability for interest rate swaps at December 31, 1995 is $337,000
based upon the estimated unwind cost which would be associated with terminating
the interest rate swap agreements. The interest rate swaps do not have a
carrying value as they did not have an initial cost when acquired.

(n) Income Taxes

The Company and its combined affiliates include entities taxed as S
corporations taxable at the shareholder level or as partnerships taxable at the
partner level. Accordingly, the accompanying combined financial statements do
not include assets or liabilities related to or provision for income taxes (See
Note 14).

(o) Use of Estimates

F-9

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
combined financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates and assumptions.

(p) Effect of New Accounting Pronouncements

In March 1995, the FASB issued Statement 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. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121
in the first quarter of 1996 and there was no material impact on the Company's
operations or financial position upon adoption.

In May 1995, the FASB issued statement No. 122, Accounting for Mortgage
Servicing Rights, which amends FASB Statement No. 65, Accounting for Certain
Mortgage Banking Activities. This Statement requires that an enterprise assess
its capitalized mortgage servicing rights for impairment based on the fair
value of those rights. The Company adopted Statement No. 122 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 Statement of Financial Accounting Standards
No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. SFAS 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 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 Company does
not anticipate a material impact on its operations or financial position from
the implementation of SFAS 125 as it has no current plans to sell customer
mortgages receivable in the foreseeable future.

(3) CUSTOMER MORTGAGES RECEIVABLE, NET

As of December 31, customer mortgages receivable, net consisted of:

1994 1995
----------- -----------

Customer mortgages receivable, gross................. $74,929,460 $93,686,882
Less:
Unamortized discount on customer mortgages
receivable purchased.............................. -- (3,714,702)
Unamortized excess value over consideration........ (210,080) (125,233)
Allowance for loss on receivables and rescissions.. (10,705,218) (9,352,995)
----------- -----------
Customer mortgages receivable, net................. $64,014,162 $80,493,952
=========== ===========

As of December 31, 1994 and 1995, customer mortgages receivable, gross, or
subject to recourse obligations from foreign buyers aggregated approximately
$27,200,000 and $26,400,000, respectively with buyers within no individual
foreign country aggregating more than 5% of outstanding customer mortgages
receivable owned or subject to recourse obligations.

Stated interest rates on customer mortgages receivable outstanding at
December 31, 1995 range from 00.0% to 17.9% per annum (averaging approximately
13.9% per annum). Interest is not imputed on customer mortgages receivable
with less than a market interest rate because such amounts are immaterial.

F-10

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The activity in the customer mortgages receivable allowance for doubtful
accounts is as follows:

1993 1994 1995
----------- ----------- -----------

Balance, beginning of year............. $12,162,040 $11,148,417 $10,705,218
Provision for doubtful accounts........ 3,902,755 3,802,905 3,522,316
Allowance relating to customer
mortgages receivable purchased........ -- -- 628,397
Customer mortgages receivable charged
off................................... (4,916,378) (4,246,104) (5,502,936)
----------- ----------- -----------
Balance, end of year................... $11,148,417 $10,705,218 $ 9,352,995
=========== =========== ===========

During the first quarter of 1994, pursuant to an agreement entered into
during 1992, the Company completed the sale of $7,723,695 of customer mortgages
receivable for proceeds of $6,565,141, prior to related transaction expenses.
The sale resulted in no gain or loss in the accompanying combined statements of
income. The purchaser was a partnership in which the Company has a residual
minority limited partnership interest. The Company's interest in the
partnership, as well as other such partnerships, to which customer mortgages
receivable were sold during 1991, 1992, and 1993, have been reflected with a
carrying value of $9,738,828 and $5,058,710 as of December 31, 1994 and 1995,
respectively.

During 1995, under the clean up call provisions of the related transactions,
the Company repurchased the remaining amount of customer mortgages receivable
previously sold. The Company acquired gross customer mortgages receivable of
$10,473,284 and recorded a discount which amounted to $5,776,243. This discount
is being amortized over the estimated remaining collection period of the
purchased customer mortgages receivable. Amortization of the discount during
1995 was $2,061,541 and is included in interest income.

(4) PROPERTY AND EQUIPMENT, NET

As of December 31, property and equipment, net consisted of:

1994 1995
----------- -----------

Land and land improvements............................ $ 2,483,353 $ 2,483,353
Buildings and building improvements................... 5,996,257 6,319,497
Furniture, fixtures and equipment..................... 4,457,805 4,950,841
Other................................................. 181,530 314,938
----------- -----------
Subtotal............................................ 13,118,945 14,068,629
Less accumulated depreciation......................... (2,499,496) (3,805,521)
----------- -----------
Subtotal............................................ 10,619,449 10,263,108
Construction in progress.............................. -- 1,093,806
----------- -----------
Property and equipment, net........................... $10,619,449 $11,356,914
=========== ===========

(5) PREPAID EXPENSES AND OTHER ASSETS

As of December 31, prepaid expenses and other assets consisted of:

1994 1995
---------- ----------

Deferred servicing premiums.............................. $ 420,351 $ 277,490
Mortgage interest earned................................. 324,000 438,223
Due from homeowners associations......................... 499,668 444,145
Prepaid expenses......................................... 564,796 726,920
Sales documents and premium inventory.................... 272,773 388,607
Covenant not-to-compete (note 8)......................... 86,824 1,589,257
Prepaid financing fees................................... 1,570,017 2,459,171
Inventories.............................................. 346,128 352,479
Other.................................................... 613,901 872,585
---------- ----------
Total prepaid expenses and other assets.............. $4,698,458 $7,548,877
========== ==========

F-11

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The covenant-not-to-compete with a former shareholder/executive of the
Company (see Note 8) is being amortized over the term of this five year
agreement. Prepaid financing fees related to notes and mortgages payable are
capitalized and amortized over the lives of the respective debt on a straight-
line basis. During 1995, the Company incurred prepaid financing fees of
$1,542,852 associated with the refinancing of new and existing debt.
Amortization expense related to prepaid financing fees was $278,561, $355,764
and $909,249 in 1993, 1994 and 1995, respectively.

(6) REPURCHASE OBLIGATIONS

As of December 31, repurchase obligations under the recourse provisions of
the agreements under which the Company sold customer mortgages receivable and
the recourse obligations assumed from the Seller, consisted of:

1993 1994 1995
---------- ----------- ----------

Estimated loss on repurchase obligations on
customer mortgages receivable sold with
recourse.................................... $7,695,421 $ 6,874,715 $2,976,689
Related transaction fees and expenses........ 49,250 35,107 26,158
---------- ----------- ----------
Total repurchase obligations............. $7,744,671 $ 6,909,822 $3,002,847
========== =========== ==========

Changes in repurchase obligations during the years ended December 31 were as
follows:

1993 1994 1995
---------- ---------- ----------

Balance, beginning of year................. $6,383,677 $7,744,671 $6,909,822
Additional obligations for customer
mortgages receivable sold during the year
with recourse............................. 1,841,185 771,502 --
Loss on customer mortgages receivable
repurchased under recourse provisions..... (480,191) (1,606,351) (1,603,419)
Remaining balance of estimated losses on
repurchase obligations relating to
customer mortgages receivable
repurchased............................... -- -- (2,303,556)
---------- ---------- ----------
Balances, end of year...................... $7,744,671 $6,909,822 $3,002,847
========== ========== ==========

F-12

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(7) NOTES AND MORTGAGES PAYABLE

As of December 31, notes and mortgages payable consisted of:

1994 1995
----------- ------------

Notes payable and mortgage obligations to lender,
cross collateralized which, except as noted, bear
interest at prime plus 2% (10.5% per annum at
December 31, 1995):
Note payable secured by customer mortgages
receivable. Remaining availability under this line
of credit is $7,266,575 at December 31, 1995. In
addition, there is a preapproved option to
increase the line by $10 million. The remaining
commitment term for new borrowings expires in
August 1998. The note matures 84 months after the
expiration of the last borrowing during the
commitment term................................... $25,316,426 $ 42,046,126
Note payable requiring quarterly payments of prin-
cipal and matures on May 26, 2000................. -- 3,600,000
Mortgage obligation secured by land and building
with anticipated final payment in 1997............ -- 2,087,300
Mortgage obligations secured by land and office
building due May 18, 2004 bearing interest at
10.08% per annum.................................. 5,058,203 4,705,163
Notes payable to bank:
Note payable bearing interest at a variable rate
(applicable Eurodollar rate plus 4% (see Note 11))
payable quarterly. The note requires quarterly
payments of principal and matures on June 30,
2000.............................................. -- 12,600,000
Note payable bearing interest at a variable rate
(applicable Eurodollar rate plus 6% (see Note 11))
payable quarterly. The note requires quarterly
payments of principal and matures on December 29,
2000.............................................. -- 6,500,410
Note payable to lender bearing interest at 11.34% per
annum, secured by customer mortgages receivable.
Lender receives all principal and interest collected
from customer mortgages receivable securing the
note. Final payment is expected prior to December
19, 2001............................................ 19,022,472 15,903,003
Note payable to lender bearing interest at 10.68% per
annum, secured by customer mortgages receivable.
Lender receives all principal and interest collected
from customer mortgages receivable securing the
note. Final payment is expected by December 1998.... -- 5,462,111
Subordinated unsecured note payable to lender bearing
interest at prime plus 2% (10.5% per annum at
December 31, 1995) payable semi-annually. The note
requires one balloon payment of principal on June 1,
2001................................................ -- 4,500,000
Note payable to bank bearing interest at prime plus
1.5% (10% per annum at December 31, 1995) secured by
customer mortgages receivable. Remaining
availability under this revolving line of credit is
$4,494,922 at December 31, 1995 and the remaining
commitment term for new borrowings expires in
December 1996....................................... 166,679 2,505,078
Mortgage obligation, secured by land and building,
bearing interest at 7.8% per annum due December 5,
1996 (subsequently renewed through December 1997)... 937,542 786,059
Construction loan with an available line of
$1,100,000 secured by land and improvements
(including the constructed premises). The loan bears
interest at prime rate plus 1% (9.5% per annum at
December 31, 1995).................................. -- 610,547
Subordinated, unsecured notes bearing interest at 9%
per annum. The notes required annual payments of
principal on December 1 of each year beginning
December 1, 1992 and was repaid in 1995............. 14,000,000 --
Various notes payable with monthly payments of
principal and interest, ranging from 8.25% to 11.03%
per annum. Final payments are due through March
1999. The notes are collateralized by transportation
and telecommunications equipment.................... 268,101 197,842
----------- ------------
Total notes and mortgages payable................ $64,769,423 $101,503,639
=========== ============

F-13

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Scheduled principal payments on the notes and mortgages payable where there
are agreed upon scheduled principal repayments subsequent to December 31, 1995,
are as follows:

YEAR ENDED DECEMBER 31:
-----------------------

1996........................................................... $ 7,686,957
1997........................................................... 6,425,646
1998........................................................... 6,098,031
1999........................................................... 5,408,816
2000........................................................... 2,404,149
Thereafter..................................................... 6,873,380
-----------
$34,896,979
===========

Repayment terms on the notes payable secured by customer mortgages receivable
are such that all collections on the receivables serving as collateral are paid
to the lender on a monthly basis. Payments are first applied to outstanding
interest and then to principal. As principal repayments on notes payable are
made by collections of the related secured customer mortgages receivable, there
are no fixed amortization dates for these notes. Total amount of pledged
customer mortgages receivable was $44,505,577 and $65,916,318 at December 31,
1994 and 1995, respectively.

(8) EQUITY REDEMPTIONS

During 1995, the Company made distributions to one of its shareholders
sufficient to redeem all of that individual's interests in the Company. As part
of this transaction, the former shareholder/executive and the Company entered
into a five-year covenant-not-to-compete and a consulting and management
agreement. Costs associated with the five-year covenant-not-to-compete have
been capitalized and are included in other assets in the accompanying balance
sheet (Note 5) and are being amortized over the life of the five-year
agreement.

In connection with the sale of customer mortgages receivable concurrent with
the acquisition by the Company in 1991 (see Note 3), unaffiliated third parties
received options to purchase limited partnership interests totaling 15% of
certain of the combined affiliates of the Company. During 1995, the Company
repurchased these options from the unaffiliated third parties.

These two transactions have been reflected as equity redemptions in the
amount of $20,167,055 in the accompanying combined statements of equity for the
year ended December 31, 1995.

(9) DEFERRED EXECUTIVE INCENTIVE COMPENSATION

In 1992, the Company entered into employment agreements (which were amended
and expanded in 1995) with certain senior management executives who were not
owners of the Company. In order to receive payment under the agreements the
executives were required to remain in the employ of the Company through
December 31, 1996. The agreements, provided that these executives would be
entitled to receive, on a deferred basis, an aggregate of 3% (amended in 1995
to 10%) of the cumulative pretax income of the Company during the period of
employment, before determination of the deferred executive incentive
compensation amounts. Payment of amounts earned by these executives under the
applicable agreements was to occur when and if the owners of the Company
received distributions of their equity (other than for taxes) or in the event
of a change in control from the Company's current owners.

The total expense associated with these deferred executive incentive
compensation agreements was $379,575, $332,078 and $3,447,945 for the years
ended December 31, 1993, 1994 and 1995, respectively. Amounts payable under
these agreements totaled $1,113,594 and $4,561,539 as of December 31, 1994 and
1995, respectively, and are included in accrued compensation and benefits in
the accompanying combined balance sheets.

F-14

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(10) COMMITMENTS AND CONTINGENCIES

The Company is, from time to time, party to certain litigation which relates
to matters arising in the ordinary course of business. Management anticipates
that the final resolution of such matters will not have a material adverse
effect on the financial position of the Company.

Certain of the agreements related to the sale of customer mortgages
receivable contain certain performance tests related to the customer mortgages
receivable purchased which, if not met, entitle the purchasing partnerships to
record a lien on a certain piece of property owned by the Company. This
property is currently unencumbered, undeveloped land intended for future
development. (see Note 13)

(11) INTEREST RATE SWAP AGREEMENTS

The Company entered into interest rate swap agreements to reduce the impact
of changes in interest rates on certain of its floating rate term debt. At
December 31, 1995, the Company had two outstanding interest rate swap
agreements with a commercial bank, having a total notional principal amount of
$20,252,215. These interest rate swap agreements effectively fix the Company's
interest rates on its $12,600,000 floating rate note due June 30, 2000 and on
its $6,500,410 floating rate note due December 29, 2000, to 9.69% per annum and
11.69% per annum, respectively.

The interest rate swap agreements mature at the time the related notes
mature. The Company is exposed to credit loss in the event of nonperformance by
the other parties to the interest rate swaps agreements. However, the Company
believes the risk of incurring losses related to credit risk is remote and any
losses would be immaterial. As of December 31, 1995, the Company had no risk of
loss as it related to the counterparty as it would have cost the Company
approximately $337,000 to terminate the agreements at that date.

(12) SUPPLEMENTAL DISCLOSURES OF NON-CASH OPERATING AND INVESTING ACTIVITIES

1993 1994 1995
----------- ---------- -----------

Supplemental schedule of non-cash operating
activities:
Transfers from construction in progress to
inventory of vacation ownership inter-
ests..................................... $12,983,687 $4,836,553 $12,554,304
=========== ========== ===========
Transfers from land held for development
to inventory of vacation ownership inter-
ests..................................... $ 1,160,000 $ 480,000 $ 1,330,808
=========== ========== ===========
Supplemental schedule on non-cash investing
activities:
Increases to investments in limited
partnerships attributed to customer
mortgages receivable sold in excess of
proceeds received........................ $ 2,761,778 $1,157,253 $ --
=========== ========== ===========

During 1995 the Company purchased customer mortgages receivable previously
sold pursuant to clean up call provisions relating to such sales.

Contractual balance of customer mortgages receivable acquired.. $10,473,284
Allowance for doubtful accounts assigned to customer mortgages
receivable acquired........................................... (628,397)
Remaining balance of estimated losses on repurchase obligations
relating to customer mortgages receivable repurchased......... 2,303,556
Investment in limited partnership.............................. (4,680,117)
Cash paid upon repurchase...................................... (1,692,083)
-----------
Discount on purchase of customer mortgages receivable.......... $ 5,776,243
===========

F-15

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(13) SUBSEQUENT EVENTS (UNAUDITED)

On October 2, 1996, pursuant to a clean up call provision of the related
transaction, the Company repurchased $9,804,274 of customer mortgages
receivable previously sold. The Company recorded a discount on this purchase
which amounted to $5,034,093. This discount will be amortized over the
estimated remaining collection period of the purchased customer mortgages
receivable.

The Company intends to conduct an initial public offering of 5,550,000 shares
of its Common Stock (of which 4,625,000 shares would be sold by the Company).
In connection with the completion of the Offering, the current owners will
transfer to the Company all of their interests in the entities described in
Note 1 as well as entities created subsequent to December 31, 1995, which are
controlled by owners common to the Company, in exchange for shares of the
Company's Common Stock (the "Formation Transactions"). There can be no
assurances that the Offering will be consummated. The Company also plans to
adopt a stock option plan which will provide for the issuance of up to
1,900,000 shares of Common Stock.

(14) PRO FORMA DISCLOSURES (UNAUDITED)

The Company has a pending initial public offering for the sale of Common
Stock (the "Offering"). Upon completion of the Offering, the Company will be
subject to federal and state income taxes from the effective date of the sale
of the Common Stock. In addition, the Company will be required to provide a
deferred tax liability for cumulative temporary differences between financial
reporting and tax reporting by recording a provision for such deferred taxes in
its statement of income for the period following the effective date of the
Offering. Such deferred taxes will be based on the cumulative temporary
differences at the date of the Offering.

The unaudited pro forma provision for income taxes represents the estimated
income taxes that would have been reported had the Company filed federal and
state income tax returns as a regular corporation. The following summarizes the
unaudited pro forma provision for income taxes:

YEAR ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- -----------

Current:
Federal.................................. $ 79,000 $1,500,000 $(1,200,000)
State.................................... -- 200,000 --
---------- ---------- -----------
79,000 1,700,000 (1,200,000)
---------- ---------- -----------
Deferred:
Federal.................................. 3,788,000 1,971,000 2,957,000
State.................................... 565,000 313,000 369,000
---------- ---------- -----------
4,353,000 2,284,000 3,326,000
---------- ---------- -----------
Unaudited pro forma provision for income
taxes..................................... $4,432,000 $3,984,000 $ 2,126,000
========== ========== ===========

F-16

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

A reconciliation between the unaudited pro forma statutory provision for
income taxes (at 34%) and the unaudited pro forma provision for income taxes is
shown as follows for the year ended December 31:

1993 1994 1995
---------- ---------- ----------

Income tax at federal statutory rate...... $4,152,207 $3,642,953 $1,989,098
State tax, net of federal benefit......... 372,900 338,580 243,540
Amortization of excess value recognized... (238,500) (124,000) (74,500)
Other..................................... 145,393 126,467 (32,138)
---------- ---------- ----------
Unaudited pro forma provision for income
taxes.................................... $4,432,000 $3,984,000 $2,126,000
========== ========== ==========

Deferred income taxes reflect the net tax affects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the pro forma net deferred tax liabilities were as follows for
the year ended December 31:

1993 1994 1995
----------- ----------- -----------

Deferred tax assets:
Vacation ownership interests.......... $ 5,179,300 $ 8,219,950 $ 9,739,355
Period costs and excess servicing
premium.............................. 1,805,362 1,768,400 1,759,622
Net operating loss carryforward....... 528,290 -- 126,750
Accrued compensation and benefits..... 324,000 479,000 1,714,000
Other................................. 348,742 176,650 139,000
Minimum tax credit carryover.......... 85,196 -- --
Basis adjustment for tax purposes
relating to redemption of equity
interests............................ -- -- 2,778,000
----------- ----------- -----------
Total deferred tax assets........... $ 8,270,890 $10,644,000 $16,256,727
=========== =========== ===========
Deferred tax liabilities:
Deferred revenue (installment sales).. $14,081,000 $18,569,000 $24,627,000
Purchase accounting book/tax
difference........................... 980,000 929,000 922,000
Fixed assets.......................... 130,000 115,000 49,000
Vacation ownership interest and other
inventory............................ 14,890 250,000 327,000
Other................................. -- -- 98,727
----------- ----------- -----------
Total deferred tax liabilities...... 15,205,890 19,863,000 26,023,727
----------- ----------- -----------
Pro forma net deferred tax
liabilities........................ $(6,935,000) $(9,219,000) $(9,767,000)
=========== =========== ===========

The deferred tax benefit associated with the equity redemption deferred tax
asset in 1995 is an offset to the distributions made for that purpose rather
than as an element of the pro forma deferred tax provision for 1995.

Pro forma weighted average number of shares of Common Stock outstanding as
shown on the accompanying combined statement of income for the year ended
December 31, 1995, is based upon the number of shares to be issued to current
shareholders based upon the Formation Transactions described in Note 13.

F-17

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED BALANCE SHEETS

(UNAUDITED)
(UNAUDITED) PRO FORMA
SEPTEMBER 30, NOTE 2(C)
------------------------- ------------
SEPTEMBER
1995 1996 30, 1996
------------ ------------ ------------

Cash................................... $ 6,531,563 $ 6,706,981 $ 4,206,981
Restricted cash........................ 3,361,219 3,464,795 3,464,795
Customer mortgages receivable, net..... 78,520,519 93,239,476 93,239,476
Other receivables, net................. 2,302,103 2,927,352 2,927,352
Inventory of vacation ownership
interests............................. 11,591,192 6,138,389 6,138,389
Construction in progress............... 7,579,487 14,360,292 14,360,292
------------ ------------ ------------
Total vacation ownership
interests......................... 19,170,679 20,498,681 20,498,681
------------ ------------ ------------
Prepaid expenses and other assets...... 7,160,844 13,383,449 13,383,449
Investment in limited partnerships..... 5,058,710 5,058,710 5,058,710
Land held for development.............. 4,288,458 6,328,235 6,328,235
Property and equipment, net............ 10,979,563 11,893,507 11,893,507
------------ ------------ ------------
Total assets....................... $137,373,658 $163,501,186 $161,001,186
============ ============ ============
Accounts payable and accrued
liabilities........................... 2,482,540 3,000,153 3,000,153
Accrued compensation and benefits...... 7,235,265 9,419,614 9,419,614
Customer deposits...................... 2,698,772 3,840,492 3,840,492
Repurchase obligations................. 3,120,080 2,462,615 2,462,615
Other liabilities...................... 4,900,576 6,116,926 6,116,926
Notes and mortgages payable............ 100,098,275 110,284,276 110,284,276
------------ ------------ ------------
Total liabilities.................. 120,535,508 135,124,076 135,124,076
Minority interest...................... -- 2,562,960 2,562,960
Equity................................. 16,838,150 25,814,150 23,314,150
------------ ------------ ------------
Total liabilities and equity....... $137,373,658 $163,501,186 $161,001,186
============ ============ ============

See accompanying notes to unaudited combined financial statements.

F-18

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED STATEMENTS OF INCOME

(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1996
----------- -----------

Revenues:
Vacation ownership interest sales.................... $38,477,749 $46,161,326
Interest income...................................... 9,102,717 10,727,538
Resort revenue....................................... 9,640,746 10,583,562
Telecommunications................................... 3,688,231 5,256,925
Other................................................ 409,875 372,774
----------- -----------
Total revenues..................................... 61,319,318 73,102,125
Costs and operating expenses:
Costs of vacation ownership interests sold........... 9,215,012 11,328,548
Sales and marketing.................................. 16,728,015 20,094,361
Interest expense--treasury........................... 4,678,199 5,026,202
Provision for doubtful accounts...................... 2,700,481 3,271,765
Resort expenses...................................... 8,145,372 8,847,283
Telecommunications expenses.......................... 2,851,760 4,113,990
General and administrative........................... 5,141,147 5,342,536
Depreciation and amortization........................ 1,564,826 1,814,692
Interest expense--other.............................. 2,185,446 2,972,419
Other................................................ 903,411 567,199
Deferred executive incentive compensation............ 2,585,959 913,830
----------- -----------
Total costs and operating expenses................. 56,699,628 64,292,825
----------- -----------
Operating income................................... 4,619,690 8,809,300
Excess value recognized................................ 164,321 105,000
----------- -----------
Net income......................................... $ 4,784,011 $ 8,914,300
=========== ===========
Pro forma data:
Net income before taxes.............................. 4,784,011 8,914,300
Pro forma provision for income taxes................. 1,740,000 3,270,000
----------- -----------
Pro forma net income............................... $ 3,044,011 $ 5,644,300
=========== ===========
Pro forma net income per share of common stock....... $ 0.40
===========
Pro forma weighted average number of shares of common
stock outstanding................................... 14,175,000
===========

See accompanying notes to unaudited combined financial statements.

F-19

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED STATEMENTS OF EQUITY

COMMON STOCK ADDITIONAL
------------- PAID-IN RETAINED TOTAL
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- ------------ ------------

Balances at December 31,
1994........................ 40,000 $400 $267,900 $ 33,389,511 $ 33,657,811
(Unaudited):
Distributions/Redemptions.. -- -- -- (21,603,672) (21,603,672)
Net income................. -- -- -- 4,784,011 4,784,011
------ ---- -------- ------------ ------------
Balances at September 30,
1995........................ 40,000 $400 $267,900 $ 16,569,850 $ 16,838,150
====== ==== ======== ============ ============
Balances at December 31,
1995........................ 40,000 $400 $267,900 $ 17,636,128 $ 17,904,428
(Unaudited):
Distributions.............. -- -- -- (1,004,578) (1,004,578)
Net income................. -- -- -- 8,914,300 8,914,300
------ ---- -------- ------------ ------------
Balances at September 30,
1996........................ 40,000 $400 $267,900 $ 25,545,850 $ 25,814,150
====== ==== ======== ============ ============

See accompanying notes to unaudited combined financial statements.

F-20

VISTANA, INC. AND COMBINED AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1995 1996
------------ ------------

Operating activities:
Net income........................................... $ 4,784,011 $ 8,914,300
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 1,564,826 1,814,692
Amortization of discount on mortgage receivables... 1,320,675 1,626,734
Provision for bad debt expense..................... 2,700,481 3,271,765
Changes in operating assets and liabilities:
Other receivables................................ 235,106 (121,850)
Construction in progress......................... (1,941,945) (4,227,297)
Prepaid expenses and other assets................ (2,462,387) (5,834,572)
Accounts payable and accrued liabilities......... (2,492,011) (1,905,678)
Accrued compensation and benefits................ 3,432,696 866,632
Customer deposits................................ 1,031,518 1,491,135
Repurchase obligations........................... (3,789,742) (540,231)
Other liabilities................................ 2,692,931 3,684,527
------------ ------------
Net cash provided by operating activities...... 7,076,159 9,040,156
Investing activities:
Expenditures for property and equipment.............. (1,924,940) (2,351,285)
Repurchase of customer mortgages receivable.......... (1,692,083) --
Customer mortgages receivable........................ (12,155,312) (17,644,023)
------------ ------------
Net cash used in investing activities.......... (15,772,335) (19,995,308)
Financing activities:
Proceeds from notes and mortgages payable............ 68,873,169 42,668,697
Payments on notes and mortgages payable.............. (33,544,316) (33,888,060)
Equity distributions/redemptions..................... (21,603,672) (1,004,578)
Minority interest capital contribution............... -- 2,562,960
------------ ------------
Net cash provided by financing activities...... 13,725,181 10,339,019
Net increase (decrease) in cash and cash
equivalents................................... 5,029,005 (616,133)
Cash and cash equivalents, beginning of period......... 4,863,777 10,787,909
------------ ------------
Cash and cash equivalents, end of period............... $ 9,892,782 $ 10,171,776
============ ============

See accompanying notes to unaudited combined financial statements.

F-21

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 1995 AND 1996

(1) NATURE OF BUSINESS

Vistana, Inc. and its combined affiliates (the "Company") are comprised of
certain entities under common control. The Company generates revenues from the
sale and financing of vacation ownership interests in its resort properties
which typically entitle the buyer to ownership of a fully-furnished unit for a
one week period on an annual or alternative year basis. The Company's
principal operations through 1995 consisted of (1) constructing, furnishing,
marketing and selling vacation ownership interest at Vistana Resort, in Lake
Buena Vista, Florida and Vistana's Beach Club on Hutchinson Island, Florida,
(2) providing consumer financing for the purchase of vacation ownership
interests at its resorts and (3) managing the operations of its resorts and
related amenities and the installation and maintenance of telecommunications
equipment, principally at its resorts, as well as for others on a limited
basis. The company sells vacation ownership interests to both domestic and
foreign purchasers. All contracts relating to the sale of vacation ownership
interests are denominated in U.S. dollars. As of September 30, 1995, the
following comprise the affiliates which are wholly owned by common interests:

Vistana Capital Holdings, Inc.
Vistana Capital Management, Inc.
WE4 Fun, Inc.
Vistana Development, Ltd.
Vistana Management, Ltd.
VCH Communications, Inc.
VCH Trademark, Inc.

During June 1996, the owners of the Company formed two new entities which
entered into two additional ventures, Vistana WGV, Ltd. ("WGV") and Oak
Plantation Joint Venture ("OPJV"). As of September 30, 1996, the Company
includes the entities described above and the two entities formed in June
1996. Through these two new ventures the Company will construct, market, sell,
finance and manage additional resort properties.

WGV is a partnership in which the Company is the general partner and has a
37.5% controlling ownership interest. The partnership is to develop up to 408
units at a resort known as Vistana Resort at World Golf Village near St.
Augustine, Florida. WGV has entered into numerous licensing and miscellaneous
servicing fee arrangements with several parties associated with the World Golf
Village development which range in amounts from 1% to 5% of net vacation
ownership interest sales. WGV also paid a licensing fee to one of the parties
of the World Golf Village development for the use of the names and logos
associated with World Golf Village. This licensing fee has been capitalized
and included in other assets in the accompanying combined balance sheets. WGV
is contingently liable along with other developers at the World Golf Village
for annual payments related to bond funding for the related convention center
development.

The Company has a 67% interest and is the managing joint venturer of OPJV.
OPJV is converting a 242-unit multi-family property in Kissimmee, Florida into
a vacation ownership interest resort. Until the conversion is complete, the
joint venture has engaged the remaining 33% joint venturer to manage and
operate the existing apartment complex for a fee equal to 5% of the total
gross rent collections. In addition, the joint venture has entered into a
consulting service agreement in connection with the conversion of the property
to resort use with the 33% joint venturer for a fixed fee per vacation
ownership interest sold. The agreement includes an early termination option
whereby the joint venture may pay off this consulting service agreement for a
lump sum of $1,900,000 payable in two installments by January 1997.

F-22

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Combination

The combined financial statements include the accounts of Vistana, Inc. and
its affiliates as listed and described in Note 1. The financial statements of
WGV and OPJV entered into during 1996 have been included in the accompanying
combined financial statements as of and for the nine months ended September 30,
1996. The ventures entered into during 1996 have not had significant operating
activity during the period ended September 30, 1996. All significant
intercompany transactions and balances have been eliminated from these combined
financial statements.

(b) Unaudited Financial Statements

The unaudited combined financial statements as of September 30, 1995 and 1996
and for the nine months ended September 30, 1995 and 1996 do not include all
disclosures provided in the audited financial statements. These unaudited
financial statements should be read in conjunction with the December 31, 1994
and 1995 audited combined financial statements and the notes thereto. Results
for the unaudited 1996 nine month period are not necessarily indicative of the
results to be expected for the year ending December 31, 1996. However, the
accompanying unaudited financial statements reflect all adjustments which are,
in the opinion of management, of a normal and recurring nature necessary for a
fair presentation of the combined financial position, combined results of
operations and combined cash flows of the Company. All information in the
September 30, 1995 and 1996 financial statements is unaudited.

The pro forma balance sheet as of September 30, 1996 reflects the planned
distribution to existing shareholders prior to the anticipated closing of the
Company's intended initial public offering. Such distributions, which are
estimated to aggregate $2,500,000, relate to undistributed S Corporation
earnings and anticipated tax liabilities attributable to the Company's
operations prior to the completion of the offering. No assurances can be given
that such offering will be consummated.

(d) Allowance for Losses on Customer Mortgages Receivable and Repurchase
Obligations

The company controls the credit risk of customer mortgages receivable through
its origination process and by refunding the ongoing servicing of such
receivables, even if sold.

The Company provides for estimated future losses to be incurred related to
uncollectible customer mortgages receivable. The allowance is based on the
collection history of the customer mortgages receivable and is net of
anticipated cost recoveries of the underlying vacation ownership interests.
Additionally, the Company has established liabilities reflecting repurchase
obligations which were assumed as part of: (i) the acquisition by the Company
in 1991 (see Note 1) related to prior sales of customer mortgages receivable by
the Seller and; (ii) related to sales with recourse of customer mortgages
receivable by the Company, to a limited partnership in which the Company had a
residual interest pursuant to agreements entered into during 1991 and 1992.
Management believes that all such allowances and estimated liabilities are
adequate.

The Company, assessing the borrower's ability to repay their obligations,
considers a customer mortgage receivable impaired when it is probable that the
Company will be unable to collect all amounts due according to the contractual
terms of the applicable customer mortgage agreement. When a customer mortgage
receivable is considered impaired, the amount of impairment is recorded based
on the book value of the vacation ownership interest securing the customer
mortgage receivable and recognized when the week is returned to inventory.
Impaired customer mortgages receivable are included in the allowance for
doubtful accounts.

F-23

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(e) Inventory of Vacation Ownership Interests

Inventory of vacation ownership interests and related construction in
progress are carried at cost, which is lower than net realizable value.

(f) Revenue Recognition

Substantially all vacation ownership interests sold by the Company generate
installment receivables, secured by a mortgage on the related vacation
ownership interest. These customer mortgages receivable are payable in monthly
installments, including interest, with maturities up to seven years. Sales are
included in revenues when minimum down payment requirements have been met. A
provision is recorded for those contracts expected to rescind in the
applicable statutory rescission period.

(g) Income Taxes

The Company and its combined affiliates include entities taxed as S
corporations taxable at the shareholder level or as partnerships taxable at
the partner level. The unaudited pro forma income tax expense represents the
estimated income taxes that would have been reported had the Company filed
federal and state tax returns as a regular corporation.

(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 May 1995, the FASB issued Statement No. 122, Accounting for Mortgage
Servicing Rights, which amends FASB Statement No. 65, Accounting for Certain
Mortgage Banking Activities. This Statement requires that an enterprise assess
its capitalized mortgage servicing rights for impairment based on the fair
value of

F-24

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
those rights. The Company adopted Statement No. 122 in the first quarter of
1996 and there was no material impact on the Company's operations or financial
position upon adoption.

(3)CUSTOMER MORTGAGES RECEIVABLE; NET

As of September 30, customer mortgages receivable, net consisted of:

1995 1996
----------- ------------

Customer mortgages receivable, gross................ $93,362,008 $104,462,974
Less:
Unamortized discount on customer mortgages receiv-
able purchased................................... (4,455,569) (2,087,968)
Unamortized excess value over consideration....... (146,445) (73,233)
Allowance for loss on receivables and
rescissions...................................... (10,239,475) (9,062,297)
----------- ------------
Customer mortgages receivable, net................ $78,520,519 $ 93,239,476
=========== ============

As of September 30, 1995 and 1996, customer mortgages receivable, gross or
subject to recourse obligation from foreign buyers, aggregated approximately
$26,600,000 and $27,900,000, respectively, with buyers within no individual
foreign country aggregating more than 5% of outstanding customer mortgages
receivable owned or subject to recourse obligation.

Stated interest rates on customer mortgages receivable outstanding at
September 30, 1996 range from 00.0% to 18.9% (averaging approximately 13.9%).
Interest is not imputed on customer mortgages receivable with less than a
market interest rate because such amounts are immaterial.

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

1995 1996
----------- ------------

Balance, beginning of period........................ $10,705,218 $ 9,352,995
Provision for doubtful accounts..................... 2,700,481 3,271,765
Allowance relating to customer mortgages receivable
purchased.......................................... 628,493 --
Customer mortgages receivable charged off........... (3,797,717) (3,562,463)
----------- ------------
Balance, end of period.............................. $10,239,475 $ 9,062,297
=========== ============

During the first quarter of 1994, pursuant to an agreement entered into
during 1992, the Company completed the sale of customer mortgages receivable
to partnerships in which the Company has a minority limited partnership
interest. The Company's interest in the partnership, as well as other such
partnerships, to which customer mortgages receivable were sold during 1991,
1992 and 1993 have been reflected with a carrying value of $5,058,710 as of
September 30, 1995 and 1996.

F-25

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
During 1995, under the clean up call provisions of the related transaction,
the Company repurchased the remaining amount of customer mortgages receivable
previously sold. The Company acquired gross customer mortgages receivable of
$10,473,284 and recorded a discount which amounted to $5,776,243. This discount
is being amortized over the estimated remaining collection period of the
purchased customer mortgages receivable and is included in interest income.
Amortization of the discount during the nine months ended September 30, 1995
and 1996 was $1,320,675 and $1,626,734, respectively.

(4)NOTES AND MORTGAGES PAYABLE

As of September 30, notes and mortgages payable consisted of:

1995 1996
----------- -----------

Notes payable and mortgage obligations to lender,
cross collateralized which except as noted, bear in-
terest at prime plus 2% (10.5% at December 31, 1995):
Note payable secured by customer mortgages
receivable. Remaining availability under this line
of credit is $7,266,575 at December 31, 1995. In
addition, there is a pre-approved option to
increase the line by $10 million. The remaining
commitment term for new borrowings expires in
August 1998. The note matures 84 months after the
expiration of the last borrowing during the
commitment term.................................... $36,201,299 $51,922,161
Note payable requiring quarterly payments of princi-
pal and matures on May 26, 2000.................... 3,800,000 3,000,000
Mortgage obligation secured by land and building
with anticipated final payment in March 1997....... 2,235,000 1,217,900
Mortgage obligations secured by land and office
building due May 8, 2004 bearing interest at 10.08%
per annum.......................................... 4,796,600 4,417,868
Notes payable to bank:
Note payable bearing interest at a variable rate
(applicable Eurodollar rate plus 4%) (which has
been swapped) payable quarterly. The note requires
quarterly payments of principal and matures on June
30, 2000........................................... 13,300,000 10,500,000
Note payable bearing interest at a variable rate
(applicable Eurodollar rate plus 6%) (which has
been swapped) payable quarterly. The note requires
quarterly payments of principal and matures on
December 29, 2000.................................. 6,951,687 5,146,570
Note payable to lender bearing interest at 11.34% per
annum, secured by customer mortgages receivable.
Lender receives all principal and interest collected
from customer mortgages receivable securing the note.
Final payment is expected prior to December 19,
2001................................................. 17,724,088 10,176,933
Note payable to lender bearing interest at 10.68% per
annum, secured by customer mortgages receivable.
Lender receives all principal and interest collected
from customer mortgages receivable securing the note.
Final payment is expected by December 1998........... 6,755,987 2,041,933
Subordinated unsecured note payable to lender bearing
interest at prime plus 2% (10.5% per annum at Decem-
ber 31, 1995) payable semi-annually. The note re-
quires one balloon payment of principal on June 1,
2001................................................. 4,500,000 4,500,000

F-26

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

1995 1996
------------ ------------

Note payable to bank bearing interest at prime plus
1.5% (10% per annum at December 31, 1995) secured
by customer mortgages receivable. Remaining
availability under this revolving line of credit is
$4,494,922 at December 31, 1995 and the remaining
commitment term for new borrowings expires in June
1996............................................... 2,759,405 1,533,032
Mortgage obligation, secured by land and store
building, bearing interest at 7.8% per annum, due
December 5, 1996 (subsequently renewed through De-
cember 1997)....................................... 809,867 684,353
Construction loan with an available line of
$1,100,000 secured by land and improvements (in-
cluding the constructed premises). The loan bears
interest at prime rate plus 1% (9.5% per annum at
December 31, 1995)................................. 41,602 1,012,363
Various notes payable with monthly payments of prin-
cipal and interest, ranging from 8.25% to 11.03%
per annum, Final payments are due through March
1999. The notes are collateralized by transporta-
tion and telecommunications equipment.............. 222,740 128,227
Note payable to lender under which the Company may
borrow up to $25,000,000 and bearing interest at
prime +(2%) and will be secured by customer
mortgages receivable............................... -- --
Term note payable under which a total $16,200,000
may be borrowed bearing interest at prime plus 2%,
requiring monthly interest payments, and maturing
on June 25, 2001. Secured by real property and
construction in progress........................... -- 10,963,734
Unsecured note payable under a $2,500,000 working
capital loan agreement bearing interest at prime
plus 2% requiring monthly interest payments, and
maturing on June 25, 2001.......................... -- 426,876
Acquisition note payable under which a total of
$3,000,000 may be borrowed bearing interest at
prime plus 2%, requiring monthly interest payments,
and maturing on July 24, 2001. Secured by real and
personal property.................................. -- 65,193
Construction mortgage note payable under which a to-
tal of $15,600,000 may be borrowed bearing interest
at prime plus 2%, requiring monthly interest pay-
ments, and maturing on July 24, 2001. Secured by
real property and construction in progress......... -- 2,547,133
------------ ------------
Total notes and mortgages payable............... $100,098,275 $110,284,276
============ ============

As part of financing the development of units for WGV and Oak Plantation
Joint Venture, the joint venturers have agreed to pay its lenders, upon
fulfillment of its obligations, incentive fees. The incentive fees will be
recognized over the term of the debt as an adjustment to interest expense
using the effective interest method.

In addition, upon formation of WGV, the Company entered into an agreement
with one of its limited partners whereby the Company could borrow up to
$1,620,000. No amounts were outstanding under this agreement as of September
30, 1996.

F-27

VISTANA, INC. AND COMBINED AFFILIATES

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(5)EQUITY REDEMPTION

During 1995, the Company made distributions to one of its shareholders
sufficient to redeem all of that individual's interests. As part of this
transaction, the former shareholder/executive and the Company entered into a
five-year covenant-not-to-compete and a consulting and management agreement.
Costs associated with the five-year covenant-not-to-compete have been
capitalized and are included in other assets in the accompanying balance sheet
and are being amortized over the life of the five-year agreement.

In connection with the sale of customer mortgages receivable concurrent with
the acquisition by the Company in 1991 (see Note 3), unaffiliated third
parties received options to purchase limited partnership interests totaling
15% of certain of the combined affiliates of the Company. During 1995, the
Company repurchased these options from the outside parties.

These two transactions have been reflected as equity redemptions in the
amount of $20,167,055 in the accompanying combined statements of equity for
the nine months ended September 30, 1995.

(6)SUBSEQUENT EVENTS

The Company intends to conduct an initial public offering of 5,550,000
shares of Common Stock (of which 4,625,000 shares would be sold by the
Company). In connection with the completion of the Offering, the current
owners will transfer to the Company all of their interests in the entities
described in Note 1 in exchange for shares of the Company's Common Stock (the
"Formation Transactions"). There can be no assurances that the Offering will
be consummated. The Company also plans to adopt a stock option plan which will
provide for the issuance of up to 1,900,000 shares of Common Stock.

(7)PRO FORMA DISCLOSURES (UNAUDITED)

The Company has a pending public offering for the sale of Common Stock (the
"Offering"). Upon completion of the Offering, the Company will be subject to
federal and state income taxes from the effective date of the sale of the
Common Stock. In addition, the Company will be required to provide a deferred
tax liability for cumulative temporary differences between financial reporting
and tax reporting by recording a provision for such deferred taxes in its
statement of income for the period following the effective date of the
Offering. Such deferred taxes will be based on the cumulative temporary
differences at the date of the Offering.

The pro forma provision for income taxes represents the estimated income
taxes that would have been reported had the Company filed federal and state
income tax returns as a regular corporation. The pro forma provision for
income taxes is reflected at the estimated effective income tax rate for the
Company's years ended December 31, 1995 and 1996, respectively.

Pro forma weighted average common shares outstanding as shown on the
accompanying combined statement of income for the nine months ended September
30, 1996, is based upon the amount of shares to be issued current shareholders
based upon the Formation Transactions described in Note 6.

F-28

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any in-
formation 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 or by any of the Under-
writers. 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

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

Page
----

Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Prior Income Tax Status and Planned Distributions........................ 22
Dilution................................................................. 23
Selected Combined Historical Financial Information....................... 24
Pro Forma Combined Financial Information................................. 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 29
Business................................................................. 36
Management............................................................... 52
Certain Relationships and Related Transactions........................... 61
Principal and Selling Shareholders....................................... 62
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 65
Underwriting............................................................. 67
Legal Matters............................................................ 68
Experts.................................................................. 68
Additional Information................................................... 68
Index to Combined Financial Statements................................... F-1

Until , 1997 (25 days after commencement of the Offering), all dealers ef-
fecting transactions in the registered securities, whether or not participating
in this distribution, may be required to deliver a Prospectus. This is in addi-
tion to the obligation of dealers to deliver a Prospectus when acting as under-
writers and with respect to their unsold allotment or subscriptions.

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

[LOGO]

VISTANA, INC.

COMMON STOCK

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

PROSPECTUS

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

MONTGOMERY SECURITIES
SMITH BARNEY INC.

, 1997

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, in connection with the sale and
distribution of the shares of Common Stock being registered hereby, all of
which will be paid by Vistana, Inc. (the "Company").

Commission Registration Fee...................................... $25,143
NASD filing fee.................................................. *
Nasdaq National Market listing fee............................... *
Accounting fees and expenses..................................... *
Blue Sky fees and expenses....................................... *
Legal fees and expenses.......................................... *
Printing and engraving expenses.................................. *
Transfer Agent fees.............................................. *
Miscellaneous expenses........................................... *
-------
TOTAL........................................................ $ *
=======

- --------
* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Florida law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to an action (other than an action
by or in the right of the corporation) by reason of such person's service as a
director of officer of the corporation, or such person's service, at the
corporation's request, as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees)
that are actually and reasonably incurred by such person ("Expenses"), and
judgments, fines and amounts paid in settlement that are actually and
reasonably incurred by such person, in connection with the defense or
settlement of such action; provided that such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. Although Florida law permits a corporation to indemnify any person
referred to above against Expenses in connection with the defense or
settlement of an action by or in the right of the corporation, provided that
such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the corporation's best interests, if such
person has been judged liable to the corporation, indemnification is only
permitted to the extent that the adjudicating court (or the court in which the
action was brought) determines that, despite the adjudication of liability,
such person is entitled to indemnity for such Expenses as the court deems
proper. The determination as to whether a person seeking indemnification has
met the required standard of conduct is to be made (i) by a majority vote of a
quorum of disinterested members of the board of directors, or (ii) by
independent legal counsel in a written opinion, if such a quorum does not
exist or if the disinterested directors so direct, or (iii) by the
shareholders. The Florida Business Corporation Act also provides for mandatory
indemnification of any director, officer, employee or agent against Expenses
to the extent such person has been successful in any proceeding covered by the
statute. In addition, the Florida Business Corporation Act provides for the
general authorization of advancement of a director's or officer's litigation
expenses in lieu of requiring the authorization of such advancement by the
board of directors in specific cases, and that indemnification and advancement
of expenses provided by the statute shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may
be entitled under any by-law, agreement or otherwise.

The Company's Articles of Incorporation and By-Laws provide that the Company
shall indemnify its directors, officers, employees and other agents to the
fullest extent permitted by Florida law.

II-1

The Company has also entered into agreements to indemnify its directors and
certain of its officers, in addition to the indemnification provided for in
the Company's Articles of Incorporation and By-Laws. These agreements provide,
among other things, that the Company will indemnify its directors and officers
for all direct and indirect expenses and costs (including, without limitation,
all reasonable attorneys' fees and related disbursements, other out-of-pocket
costs and reasonable compensation for time spent by such persons for which
they are not otherwise compensated by the Company or any third person) and
liabilities of any type whatsoever (including, but not limited to, judgments,
fines and settlement fees) actually and reasonably incurred by such person in
connection with either the investigation, defense, settlement or appeal of any
threatened, pending, or completed action, suit or other proceeding, including
the corporation, arising out of such person's services as a director, employee
or other agent of the Company, any subsidiary of the Company or any other
company or enterprise to which the person provides services at the request of
the Company. The Company believes that these provisions and agreements are
necessary to attract and retain talented and experienced directors and
officers.

The Company will maintain liability insurance for the benefit of its
directors and officers.

Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Company, its directors, certain of
its officers and persons who control the Company within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), against certain
liabilities. The Company and the Selling Shareholders have also agreed to
indemnify the Underwriters against certain liabilities which may be incurred
in connection with the Offering made by this Prospectus forming a part of the
Registration Statement, including liability under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On December 27, 1996, the Company sold ten shares of Common Stock to each of
Raymond L. Gellein, Jr. and Jeffrey A. Adler for a price of $11, or an
aggregate price of $220. These transactions were effected in reliance upon the
exemption contained in Section 4(2) of the Securities Act and/or Regulation D
promulgated thereunder.

In connection with the Formation Transactions, in December 1996, the
Existing Shareholders agreed to contribute to the Company all of their
respective interests in each of the Affiliated Companies and the Related
Partnerships in consideration for the Company's issuance of 14,174,980 shares
of the Company's Common Stock, $.01 par value. Such securities will be issued
by the Company concurrently with the completion of the Offering in reliance
upon an exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

A list of exhibits filed with this Registration Statement on Form S-1 is set
forth in the Index to Exhibits on page E-1, and is incorporated herein by
reference.

(B) FINANCIAL STATEMENT SCHEDULES

None.

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or

II-2

proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

(b) The registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
VISTANA, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ORLANDO,
STATE OF FLORIDA, ON DECEMBER 31, 1996.

Vistana, Inc.

/s/ Raymond L. Gellein, Jr.
By: _________________________________
Name: Raymond L. Gellein, Jr.
Title: Chairman of the Board and
Co-Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON DECEMBER 31, 1996, BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED:

SIGNATURE TITLE

/s/ Raymond L. Gellein, Jr. Chairman of the Board, Co-Chief
- ------------------------------------- Executive Officer and Director
RAYMOND L. GELLEIN, JR. (Principal Executive Officer)

/s/ Matthew E. Avril Executive Vice President, Chief
- ------------------------------------- Operating Officer and Chief
MATTHEW E. AVRIL Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)

/s/ Jeffrey A. Adler President and Co-Chief Executive
- ------------------------------------- Officer and Director
JEFFREY A. ADLER

II-4

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----

1.1 Form of Underwriting Agreement*
3.1 Articles of Incorporation of Vistana, Inc.*
3.2 By-Laws of Vistana, Inc.*
4.1 Form of Stock Certificate of Vistana, Inc.*
5.1 Form of Opinion of Neal, Gerber & Eisenberg regarding the
validity of the Common Stock being registered*
Form of Registration Rights Agreement among Vistana, Inc. and
10.1 the persons named therein*
10.2 Form of Employment Agreement between Vistana, Inc. and each of
Raymond L. Gellein, Jr., Jeffrey A. Adler, Matthew E. Avril,
Carol A. Lytle and Susan Werth*
Statement regarding computation of ratio of earnings to fixed
12.1 charges*
21.1 Subsidiaries of the Company*
Consent of Neal, Gerber & Eisenberg (included as part of
23.1 Exhibit 5.1)*
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Charles E. Harris*
23.4 Consent of Laurence S. Geller*
24.1 Powers of Attorney*
Consent of Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth,
23.6 P.A.*
23.7 Consent of Baker & Hostetler*
27.1 Financial Data Schedule*

- --------
* To be filed by amendment