<PAGE>   1
 
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997
                                                      REGISTRATION NO. 333-
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
 
                            TRENDWEST RESORTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                  <C>                                 <C>
             OREGON                             6552                         93-1004403
  (State or other jurisdiction      (Primary standard Industrial          (I.R.S. Employer
of incorporation or organization)    Classification Code Number)       Identification Number)
</TABLE>
 
       12301 N.E. 10TH PLACE, BELLEVUE, WASHINGTON 98005, (425) 990-2300
  (Address, including zip code, and telephone number, including area code, of
                   Registrant's principal executive offices)
 
    GARY A. FLORENCE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
                            TRENDWEST RESORTS, INC.
       12301 N.E. 10TH PLACE, BELLEVUE, WASHINGTON 98005, (425) 990-2300
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
 
                                   Copies to:
 
<TABLE>
<S>                                             <C>
               DAVID R. WILSON                                 PETER LILLEVAND
       FOSTER PEPPER & SHEFELMAN PLLC                ORRICK, HERRINGTON & SUTCLIFFE LLP
        1111 THIRD AVENUE, SUITE 3400                 OLD FEDERAL RESERVE BANK BUILDING
          SEATTLE, WASHINGTON 98101                          400 SANSOME STREET
               (206) 442-8116                          SAN FRANCISCO, CALIFORNIA 94111
                                                               (415) 392-1122
</TABLE>
 
        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this Registration Statement becomes effective.
 
     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, 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
<TABLE>
<CAPTION>
==================================================================================================
                                                                 PROPOSED MAXIMUM
                                                PROPOSED MAXIMUM    AGGREGATE
    TITLE OF EACH CLASS OF       AMOUNT TO BE    OFFERING PRICE      OFFERING        AMOUNT OF
 SECURITIES TO BE REGISTERED    REGISTERED(1)     PER SHARE(2)       PRICE(2)     REGISTRATION FEE
--------------------------------------------------------------------------------------------------
<S>                            <C>              <C>              <C>              <C>
Common Stock, no par value....         shares    $                 $46,762,306        $14,978
==================================================================================================
</TABLE>
 
(1) Includes shares that may be purchased by the Underwriters to cover
    over-allotments, if any.
 
(2) Estimated solely for the purpose of computing the registration fee pursuant
    to Rule 457(a).
 
     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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>   2
 
     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 MAY 9, 1997
 
                                             SHARES
 
                                     [LOGO]
 
                            TRENDWEST RESORTS, INC.
 
                                  COMMON STOCK
 
     Of the         shares of Common Stock ("Common Stock") of Trendwest
Resorts, Inc. (the "Company" or "Trendwest") offered hereby (the "Offering"),
        shares are being sold by the Company and         shares are being sold
by the Selling Stockholder. See "Principal and Selling Stockholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholder. Prior to the Offering, there has been no public market for the
Common Stock. It is currently estimated that the initial public offering price
will be between $     and $     per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Application has been made to list the Common Stock for quotation on the
Nasdaq National Market under the symbol "TWRI."
 
     SEE "RISK FACTORS" COMMENCING ON PAGE 10 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
 
                            ------------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
<TABLE>
<CAPTION>
==================================================================================================
                                                                                    Proceeds to
                                   Price to       Underwriting     Proceeds to        Selling
                                    Public        Discount(1)       Company(2)      Stockholder
--------------------------------------------------------------------------------------------------
<S>                            <C>              <C>              <C>              <C>
Per Share.....................       $                $                $                $
Total(3)......................   $                $                $                $
==================================================================================================
</TABLE>
 
(1) See "Underwriting" for information concerning indemnification of the
    Underwriters and other matters.
 
(2) Before deducting expenses payable by the Company estimated at $           .
 
(3) The Company has granted to the Underwriters a 30-day option to purchase up
    to            additional shares of Common Stock solely to cover
    over-allotments, if any. If the Underwriters exercise this option in full,
    the Price to Public will total $           , the Underwriting Discount will
    total $           and the Proceeds to Company will total $           . See
    "Underwriting."
 
     The shares of Common Stock are offered by the several Underwriters named
herein, when, as and if delivered and accepted by the Underwriters and subject
to their right to reject any order in whole or in part. It is expected that the
delivery of the certificates representing such shares will be made against
payment therefor at the office of Montgomery Securities on or about
              , 1997.
 
                            ------------------------
 
MONTGOMERY SECURITIES                                       SALOMON BROTHERS INC
                                         , 1997
<PAGE>   3
 
     The following graphic is depicted:
 
        Map of western U.S., Hawaii, British Columbia and Baja Peninsula
        denoting the locations of WorldMark's resorts and the Company's sales
        offices and future resort locations.
 
     CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
 
     THIS PROSPECTUS RELATES ONLY TO THE SALE OF THE COMMON STOCK OFFERED
HEREBY. SHAREHOLDERS OF THE COMPANY ARE NOT ENTITLED TO ANY RIGHTS WITH RESPECT
TO WORLDMARK RESORTS SOLELY AS A RESULT OF THEIR OWNERSHIP OF COMMON STOCK.
 
     TRENDWEST RESORTS(R) and WORLDMARK, THE CLUB(R) are registered trademarks
of the Company and WorldMark, the Club, respectively.
 
                                        2
<PAGE>   4
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, included elsewhere in this
Prospectus. Except as otherwise noted, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option, (ii) gives
effect to the consummation of the Consolidation Transactions (as defined
herein), which will occur immediately prior to the closing of the Offering, and
(iii) reflects an adjustment for a      -for-1 stock split to be effected in May
1997. Unless the context otherwise indicates, the "Company" and "Trendwest" mean
Trendwest Resorts, Inc. after giving effect to the consummation of the
Consolidation Transactions.
 
                                  THE COMPANY
 
     Trendwest Resorts, Inc. markets, sells and finances timeshare ownership
interests ("Vacation Ownership Interests") and acquires, develops and manages
timeshare resorts. In 1996, Trendwest was ranked as one of the largest timeshare
companies in the United States, according to published sales volume data in the
Vacation Ownership World trade magazine. The Company's timeshare resorts are
owned by and operated through WorldMark, the Club ("WorldMark"), a nonprofit
mutual benefit corporation organized by Trendwest in 1989 to provide an
innovative, flexible vacation ownership system. As of March 31, 1997, WorldMark
had in excess of 41,000 members ("Owners") and owned and maintained an aggregate
of 800 condominium-style units at 19 recreational resorts (the "WorldMark
Resorts") in the western United States, Hawaii, British Columbia and Mexico. The
Company presently sells Vacation Ownership Interests in Washington, Oregon and
California, primarily through eight off-site sales offices.
 
     Trendwest sells Vacation Ownership Interests in the form of perpetual
timeshare credits ("Vacation Credits") which are created by the contribution to
WorldMark of resort units purchased or developed by the Company. Vacation
Credits can be used by Owners to reserve units at any of the WorldMark Resorts,
at any time during the year and in time increments as short as one day. The use
of Vacation Credits is not tied to any particular resort unit or time period as
is typical in the timeshare industry. The Company believes that the combination
of multiple resorts and its Vacation Credit system provides Owners with an
attractive range of vacation planning choices and values not generally available
within the timeshare industry. The Company's Vacation Credit system with
multiple WorldMark Resorts facilitates the sale of Vacation Credits at off-site
sales offices located in major metropolitan areas and reduces dependence on
on-site sales centers located at more remote resort locations.
 
     According to the American Resort Development Association ("ARDA"), the
total annual sales volume for the timeshare industry increased from $490 million
in 1980 to $4.76 billion in 1994 (the latest year for which data is published).
Based on other industry information, the Company believes that timeshare sales
volume for the timeshare industry exceeded $5 billion in 1995. The Company
believes that, based on ARDA reports, the timeshare industry has benefited
recently from increased consumer acceptance of the timeshare concept resulting
from more effective governmental regulation of the industry, the entry into the
industry by national lodging and hospitality companies and increased vacation
flexibility resulting from the growth of timeshare exchange networks. The
Company expects the timeshare industry to continue to grow as consumer awareness
of the timeshare industry increases and as the baby boom generation (currently
ages 32-50) moves through the 40-55 year age bracket, the age group of persons
who purchased the most timeshare interests in 1994.
 
     The Company believes its operating strategy and vacation ownership system
provide the following advantages over other timeshare companies:
 
     - Vacation Flexibility. The Company's Vacation Credit system allows Owners
     access to multiple WorldMark Resorts, permitting them to tailor their
     vacation according to their schedules, desired vacation length, location
     preferences and space requirements. The 19 WorldMark Resort locations
     provide access to a variety of vacation experiences, from skiing to golf,
     and a variety of settings, from beaches to mountains. Vacation time is
     reserved on a first come, first served basis. In 1996, based on
 
                                        3
<PAGE>   5
 
     information provided by Owner comment cards, the Company believes that
     approximately 73% of Owners received their first choice of resort location
     when reserving vacation time. To enhance Owner usage and facilitate weekend
     stays and stays shorter than one week, the Company purchases and develops a
     large percentage of WorldMark Resort units within a reasonable driving
     distance of the Company's primary metropolitan sales markets.
 
     - Appeal to Broad Consumer Base. The Company believes its Vacation Credit
     system enables it to market more effectively to potential customers with a
     broader range of income levels and vacation requirements than is addressed
     by most timeshare companies. The Company provides prospective purchasers
     with the opportunity to purchase varying increments of Vacation Credits
     suitable for their financial position and vacation needs. The Company's
     minimum purchase requirement of 6,000 Vacation Credits, which presently
     costs $7,800, makes entry into WorldMark affordable for a significant
     number of households. The Company also offers additional Vacation Credits
     to existing Owners ("Upgrades") in smaller increments, which accounted for
     approximately 13% of Vacation Credit sales in 1996.
 
     - Marketing Through Off-Site Sales Offices. The Company's Vacation Credit
     system facilitates marketing Vacation Ownership Interests effectively at
     off-site sales offices. The Company believes the use of off-site sales
     offices enables it to attract a larger number of prospective purchasers to
     sales presentations than at sales offices at more remote resort locations.
     In addition, the location of sales offices in metropolitan areas provides
     the Company with the flexibility to establish sales offices in the most
     demographically attractive areas within a geographic market and to relocate
     sales offices quickly at a modest cost when conditions warrant.
 
     - Inventory Control. The Company's sale of Vacation Credits rather than
     deeded interests with weekly intervals at individual resorts enables it to
     schedule its resort acquisition and development activities in accordance
     with its anticipated sales volumes and to diversify the risk of its capital
     commitments among several resorts. Since all Vacation Credits have the same
     use rights and sell for the same price, the Company does not experience a
     buildup of inventory of less desirable resort units or interval dates which
     are difficult to sell. The Company can also develop resorts at desirable
     remote locations since it does not depend on on-site sales offices to
     generate sales.
 
     - Owner Satisfaction. The Company places great importance on Owner
     satisfaction. The Company believes that Owner satisfaction is achieved by
     maintaining a high level of quality at WorldMark Resorts, by increasing the
     number of resort locations and by satisfying Owners' first vacation
     requests a high percentage of the time. Of the 19 WorldMark Resorts, 12
     have the highest rating from Resort Condominiums International Inc.
     ("RCI"), the world's largest timeshare exchange network, four have the
     second-highest rating from RCI, and three have been recently opened and
     have not yet been rated. The Company has increased the number of WorldMark
     Resorts from three in 1989 to its present 19 and intends to contribute two
     additional WorldMark Resorts during the remainder of 1997 and two
     additional WorldMark Resorts in 1998. Although Owners have exchange
     privileges through the RCI network, the Company believes that Owner
     satisfaction with the WorldMark Resorts is demonstrated by the Owners'
     usage of approximately 74% of their Vacation Credits at WorldMark Resorts
     in 1996. The satisfaction of existing Owners with the WorldMark Resorts
     generates additional revenues to the Company through the sale of Upgrades
     ("Upgrade Sales") and from Owner referrals of new prospects.
 
     The Company's growth strategy is to (i) expand existing WorldMark Resorts
and acquire and develop additional resorts primarily in the western United
States, Hawaii, British Columbia and Mexico to provide additional Vacation
Credits for sale by the Company and a wider range of WorldMark Resorts for use
by Owners; (ii) increase sales and financings of Vacation Credits to new
customers by expanding sales and marketing efforts, including opening additional
off-site sales offices; and (iii) increase Upgrade Sales by establishing and
maintaining long-term relationships with Owners through effective customer
service programs and innovative benefit programs and discount packages.
 
     The Company's Vacation Ownership Interests are generally targeted to
purchasers in an age range from 35 to 60 with annual household incomes ranging
from $30,000 to $100,000. The average number of Vacation Credits purchased by a
new Owner in 1996 was approximately 6,600 at a cost of approximately $8,600. The
 
                                        4
<PAGE>   6
 
number of Vacation Credits that is required to stay one day at the WorldMark
Resorts varies, depending upon the resort location, the size of the unit, the
vacation season and the day of the week. For example, a Friday or Saturday night
stay at a one-bedroom unit may require 825 Vacation Credits per night off-season
and 1,450 Vacation Credits per night in peak season. WorldMark Resort units are
fully furnished, condominium style accommodations and range in size from studios
to three bedrooms. WorldMark's participation in RCI provides Owners with access
to over 3,000 resorts worldwide which participate in the RCI network.
 
     The Company sells Vacation Credits at its 11 sales offices, eight of which
are located off-site in metropolitan areas. The other sales offices are located
on-site at three of the WorldMark Resorts. The Company intends to establish an
additional off-site sales office in California in late 1997. The Company
contributed 224 resort units to WorldMark in 1996, 146 resort units in 1995 and
86 resort units in 1994. Revenues from Vacation Credit sales increased to
approximately $100.0 million in 1996 from approximately $77.8 million in 1995
and approximately $54.9 million in 1994. The Company contributed 48 resort units
to WorldMark during the first quarter of 1997. As of March 31, 1997, the Company
had purchase agreements and developments in progress to obtain an additional 163
units that are expected to be available during the remainder of 1997 and an
additional 201 units that are expected to be available during 1998. See
"Business -- Growth Strategy."
 
     Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, a significant portion of its sales of
Vacation Credits to new Owners is financed by the Company, thereby allowing
Owners to make monthly payments. In addition, existing Owners have the
opportunity to finance the purchase of Upgrades through the Company. At December
31, 1996, loans to Owners to finance the purchase of Vacation Credits ("Notes
Receivable") with an aggregate balance of $179.2 million were outstanding, of
which approximately $52.4 million with a weighted average interest rate of 14.1%
per annum had been retained by the Company. The remaining Notes Receivable
balance of approximately $126.8 million had been sold by the Company prior to
that date, although the Company retained limited recourse liability with respect
to these Notes Receivable. The Company may continue to sell a substantial amount
of its Notes Receivable. See "Business -- Customer Financing" and "-- Finance
Subsidiaries."
 
                                        5
<PAGE>   7
 
                             THE WORLDMARK RESORTS
 
     The following table sets forth certain information as of March 31, 1997
regarding each existing WorldMark Resort, planned expansion at existing
WorldMark Resorts through 1998, and planned new WorldMark Resorts through 1998.
 
<TABLE>
<CAPTION>
                                                                 EXISTING
                                                    DATE          UNITS
                                                 CONTRIBUTED        IN       PLANNED    TOTAL UNITS
    EXISTING RESORTS            LOCATION       TO WORLDMARK(a)   SERVICE    EXPANSION   ANTICIPATED        RCI RATING(B)
-------------------------  ------------------  ---------------   --------   ---------   ------------   ---------------------
<S>                        <C>                 <C>               <C>        <C>         <C>            <C>
BRITISH COLUMBIA
  Sundance                 Whistler             February 1992        25         --            25       R.I.D.
CALIFORNIA
  North Shore Estates      Bass Lake            September 1992       61         --            61       Gold Crown
  Beachcomber              Pismo Beach          April 1993           20         --            20       Gold Crown
  Palm Springs             Palm Springs         July 1995            64         --            64       Gold Crown
  Big Bear                 Big Bear Lake        April 1996           12         58(c)         70       (d)
HAWAII
  Valley Isle              Maui                 December 1990        14         --            14(e)    Gold Crown
  Kapaa Shores             Kauai                June 1991            42         --            42(e)    R.I.D.
NEVADA
  Lake Tahoe               Stateline            January 1991         50         --            50       Gold Crown/R.I.D.(f)
  Las Vegas                Las Vegas            December 1996        42         --            42       (d)
OREGON
  Eagle Crest              Redmond              September 1989       63           (g)         63(e)    Gold Crown
  Gleneden Beach           Lincoln City         February 1996        80         --            80       Gold Crown
  Running Y Ranch          Klamath Falls        February 1997        27         40(h)         67       (d)
WASHINGTON
  Lake Chelan Shores       Chelan               July 1990            13         --            13(e)    R.I.D.
  Surfside                 Long Beach           September 1991       25         --            25       R.I.D.
  Discovery Bay            Sequim               January 1992         32         --            32       Gold Crown
  Park Village             Leavenworth          July 1992            72         --            72       Gold Crown
  Mariner Village          Ocean Shores         June 1994            32         --            32       Gold Crown
  Birch Bay                Blaine               January 1995         52         52(i)        104       Gold Crown
MEXICO
  Coral Baja               San Jose del Cabo    November 1994        74         62(j)        136       Gold Crown
PLANNED RESORTS
-------------------------
  Clear Lake               Nice, California     (k)                  --         88(k)         88
  Kona                     Hawaii, Hawaii       (l)                  --         64(l)         64
                                                                    ---        ---         -----
                                                Total........       800        364         1,164
                                                                    ===        ===         =====
</TABLE>
 
---------------
 
(a) The dates in this column indicate, for each resort, the month and year in
    which the first completed units at such resort were contributed to
    WorldMark. At certain resorts, additional units were contributed to
    WorldMark at later dates.
 
(b) Gold Crown and Resort of International Distinction ("R.I.D.") are resort
    ratings awarded annually by RCI. In 1996, approximately 13% of the resorts
    reviewed by RCI received a Gold Crown rating, the highest rating awarded by
    RCI, and approximately 14% of the resorts reviewed by RCI received an R.I.D.
    rating, the second-highest rating awarded by RCI.
 
(c) Construction began on these units in January 1997. These units are expected
    to be completed and contributed to WorldMark in the second and third
    quarters of 1997.
 
(d) This resort has recently become available to WorldMark and has not yet been
    rated by RCI.
 
(e) These units represent less than one-half of the total number of units at
    this resort.
 
(f) Consists of three locations totalling 50 units. The units at Tahoe I and II
    (totalling 15 units) are rated R.I.D., and the units at Tahoe III
    (totalling 35 units) are rated Gold Crown.
 
(g) The Company has an agreement with Eagle Crest, Inc. ("Eagle Crest") whereby
    the Company has assigned to Eagle Crest the right to sell Vacation Credits
    in WorldMark at the Eagle Crest Resort and to retain the gross proceeds from
    such sales. In exchange for such sales, Eagle Crest must transfer
    condominium units to WorldMark at no cost to either the Company or
    WorldMark. In addition, commencing July 1997, the Company will receive a fee
    from Eagle Crest equal to 3% of net sales of Vacation Credits occurring at
 
                                        6
<PAGE>   8
 
    the Eagle Crest Resort. See "Certain Transactions -- Relationship with
    Jeld-Wen." The number of additional units to be deeded to WorldMark will
    depend on the number of Vacation Credits sold by Eagle Crest, an estimate of
    which is not provided in this table.
 
(h) The Company is obligated to purchase 20 units in April 1998 and 20 units in
    July 1998. Units will be contributed to WorldMark as they are purchased. The
    Company has an agreement with Running Y Resort, Inc. ("Running Y") whereby
    the Company has assigned to Running Y the right to sell Vacation Credits in
    WorldMark at the Running Y Resort and to retain the gross proceeds from such
    sales. In exchange for such sales, Running Y must transfer condominium units
    to WorldMark at no cost to either the Company or WorldMark. In addition,
    commencing July 1997, the Company will receive a fee from Running Y equal to
    3% of net sales of Vacation Credits occurring at the Running Y Resort. See
    "Certain Transactions -- Relationship with Jeld-Wen." The number of
    additional units to be deeded to WorldMark will depend on the number of
    Vacation Credits sold by Running Y, an estimate of which is not provided in
    this table.
 
(i) The Company expects to obtain all necessary permits for construction by the
    end of the second quarter of 1998. All 52 units are expected to be completed
    and contributed to WorldMark by the end of 1998.
 
(j) Construction on these units began in July 1996. The project is expected to
    add 62 units, with five units contributed to WorldMark each month beginning
    December 1997 and all units are expected to be contributed by the end of
    1998.
 
(k) Construction on these units began in April 1997. Of these units, 50 are
    expected to be completed and contributed to WorldMark in the third quarter
    of 1997, and the remaining 32 units are expected to be completed and
    contributed to WorldMark in the first quarter of 1998.
 
(l) Construction on these units began in February 1997. Of these units, 44 are
    expected to be completed and contributed to WorldMark in the fourth quarter
    of 1997 and the remaining 20 units are expected to be completed and
    contributed to WorldMark in the first quarter of 1998.
 
                                 SALES REGIONS
 
     The Company's sales of Vacation Credits primarily occur at eight off-site
sales offices located in metropolitan areas in three regions. The remainder of
the Company's sales of Vacation Credits occur at three on-site sales offices.
The Company plans to open a new off-site sales office in California in late
1997. Certain information with respect to the Company's sales offices in the
three regions is provided below.
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
        -------------------------------------------------------------------------------------------------------------------------
                         1994                                     1995                                     1996
        ---------------------------------------  ---------------------------------------  ---------------------------------------
                                                         (DOLLARS IN THOUSANDS)
          AVERAGE NUMBER                           AVERAGE NUMBER                           AVERAGE NUMBER
             OF SALES        NUMBER OF                OF SALES        NUMBER OF                OF SALES       NUMBER OF
REGION  REPRESENTATIVES(1)   OWNERS(2)  SALES(3) REPRESENTATIVES(1)   OWNERS(2)  SALES(3) REPRESENTATIVES(1)  OWNERS(2)  SALES(3)
------- -------------------  ---------  -------  -------------------  ---------  -------  ------------------  ---------  --------
<S>     <C>                  <C>        <C>      <C>                  <C>        <C>      <C>                 <C>        <C>
Pacific
  Northwest(4)..    54         11,367   $31,654          83            17,157     $43,926          104         23,907    $ 54,313
Northern
  California(5)..   35         7,297    23,250           60            10,327      31,324           66         13,702      37,287
Southern
  California(6)..   --            --        --            6               295       2,533           22          1,222       8,440
                    --        ------   -------          ---            ------     -------          ---         ------    --------
       Total...     89        18,664   $54,904          149            27,779     $77,783          192         38,831    $100,040
                    ==        ======   =======          ===            ======     =======          ===         ======    ========
</TABLE>
 
------------------------
 
(1) Represents the average number of sales representatives during the year. This
    calculation is based on the number of sales representatives at the end of
    each calendar quarter during the indicated year.
 
(2) Cumulative number of Owners at the end of the year, excluding Owners who
    purchased Vacation Credits at Eagle Crest and Running Y.
 
(3) Includes Upgrade Sales.
 
(4) Comprised of three off-site sales offices (Kirkland, Washington, which
    opened in October 1989 and moved to Seatac, Washington in February 1994;
    Vancouver, Washington, which opened in February 1994; and Lynnwood,
    Washington, which opened in June 1995) and three on-site sales offices
    (Leavenworth, Washington, which opened in September 1994, Birch Bay,
    Washington, which opened in June 1995, and Gleneden Beach, Oregon, which
    opened in February 1996). These figures include an off-site sales office in
    Bellingham, Washington, which opened in July 1990, and was consolidated into
    the Lynnwood and Birch Bay offices in June 1995.
 
(5) Comprised of three off-site sales offices: Santa Clara, which opened in
    April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened
    in May 1995.
 
(6) Comprised of the Ontario off-site sales office which opened in April 1996.
    These figures include sales from an on-site sales office at Palm Springs,
    which opened in April 1995 and was consolidated into the Ontario sales
    office in August 1996. The Company opened a new off-site sales office in
    Costa Mesa in February 1997.
 
                                        7
<PAGE>   9
 
         CORPORATE BACKGROUND AND CONSOLIDATION OF FINANCE SUBSIDIARIES
 
     The Company commenced its timeshare business as a wholly-owned subsidiary
of JELD-WEN, inc. ("Jeld-Wen") in 1989 with three condominium units. Jeld-Wen is
currently the Company's principal stockholder. See "Principal and Selling
Stockholders." Jeld-Wen is a privately owned company that was founded in 1960
and is a major manufacturer of doors, windows and millwork products.
Headquartered in Klamath Falls, Oregon, Jeld-Wen has diversified operations
located throughout the United States and in nine foreign countries that include
manufacturing, hospitality and recreation, retail, financial services and real
estate. Along with its subsidiaries, Jeld-Wen employs approximately 12,000
people.
 
     The Company raises capital for property acquisitions and working capital by
selling or securitizing Notes Receivable through two subsidiaries of Jeld-Wen
(the "Finance Subsidiaries"). Immediately prior to the closing of the Offering,
the Company will acquire the Finance Subsidiaries from Jeld-Wen for
shares of the Company's Common Stock (the "Consolidation Transactions"). The
value of the shares of the Finance Subsidiaries and the value of the shares of
the Company's Common Stock were determined in negotiations between Jeld-Wen and
the Company. The Company may continue its program of selling and securitizing
Notes Receivable through the Finance Subsidiaries or similar entities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions -- Acquisition of Finance Subsidiaries."
 
     All of the WorldMark Resort units are owned by WorldMark, a California
nonprofit mutual benefit corporation that was formed by Trendwest in 1989 in
order to implement its Vacation Credit system. WorldMark's articles of
incorporation provide that the specific purpose for which it was formed is to
own, operate and manage the real property contributed to it by the Company.
Owners receive the right to use all WorldMark Resort units at any available time
and interval selected by the Owner. Trendwest has a management agreement with
WorldMark whereby Trendwest acts as the exclusive manager and servicing agent of
WorldMark and the Vacation Ownership Interest program.
 
     The Company was incorporated in Oregon in 1989. The Company's principal
executive offices are located at 12301 N.E. 10th Place, Bellevue, Washington
98005, and its telephone number is (425) 990-2300.
 
                                  THE OFFERING
 
<TABLE>
<S>                                                     <C>
Common Stock offered:
  By the Company....................................                    shares
  By the Selling Stockholder........................                    shares
Common Stock to be outstanding after the Offering...                    shares(1)
Use of proceeds.....................................    To repay outstanding indebtedness, to
                                                        purchase and develop additional
                                                        resorts and for working capital and
                                                        other general corporate purposes.
Proposed Nasdaq National Market symbol..............    TWRI
</TABLE>
 
---------------
 
(1) Does not include             shares of Common Stock authorized for issuance
    under the Company's stock option plan. See "Management -- 1997 Stock Option
    Plan."
 
                                        8
<PAGE>   10
 
              SUMMARY COMBINED FINANCIAL AND OPERATING INFORMATION
          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
 
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                 --------------------------------------------------------
                                                                  1992        1993        1994        1995         1996
                                                                 -------     -------     -------     -------     --------
<S>                                                              <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
    Vacation Credit sales, net.................................  $35,798     $38,743     $54,904     $77,783     $100,040
    Finance income.............................................    3,069       3,813       3,736       5,368        7,143
    Gains on sales of notes receivable.........................       --       1,558       1,635       3,222        5,673
    Resort management services.................................      219       1,102       2,805       1,579        1,501
    Other......................................................      241         344         763       1,226        2,552
                                                                 -------     -------     -------     -------     --------
  Total revenues...............................................   39,327      45,560      63,843      89,178      116,909
                                                                 -------     -------     -------     -------     --------
Costs and operating expenses:
    Vacation Credit cost of sales..............................    9,083       8,743      15,070      20,484       27,400
    Resort management services.................................      301         959       2,613       1,283          859
    Sales and marketing........................................   17,954      19,523      25,615      36,374       47,810
    General and administrative.................................    3,253       4,056       6,588       8,391       10,904
    Provision for doubtful accounts and recourse liability.....    2,031       2,805       4,537       6,522        7,467
    Interest...................................................    2,457       1,929         881       2,380        2,445
                                                                 -------     -------     -------     -------     --------
  Total costs and operating expenses...........................   35,079      38,015      55,304      75,434       96,885
                                                                 -------     -------     -------     -------     --------
Income before income taxes.....................................    4,248       7,545       8,539      13,744       20,024
    Income tax expense.........................................    1,542       2,909       3,214       4,979        7,348
                                                                 -------     -------     -------     -------     --------
Net income.....................................................  $ 2,706     $ 4,636     $ 5,325     $ 8,765     $ 12,676
                                                                 =======     =======     =======     =======     ========
PRO FORMA DATA:
Pro forma net income(1)........................................                                                  $ 14,281
Pro forma net income per share of Common Stock(1)..............
Pro forma weighted average shares of Common Stock
  outstanding..................................................
EBITDA(2)......................................................  $ 6,881     $ 9,759     $10,605     $17,935     $ 25,706
OPERATING DATA:
Number of WorldMark Resorts (at end of period) ................       11          12          14          16           18
Number of units (at end of period).............................      147         239         325         499          746
Number of Vacation Credits sold (in thousands).................   32,761      34,335      47,181      64,503       80,248
Average price per Vacation Credit sold.........................  $  1.09     $  1.13     $  1.16     $  1.21     $   1.25
Average cost per Vacation Credit sold..........................  $  0.28     $  0.26     $  0.32     $  0.32     $   0.34
Number of Owners (at end of period)............................    8,252      12,732      18,740      27,965       38,997
Average purchase price for new Owners..........................  $ 7,909     $ 8,190     $ 8,244     $ 8,460     $  8,609
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                              DECEMBER 31, 1996
                                                                                          --------------------------
                                                                                          ACTUAL      AS ADJUSTED(3)
                                                                                          -------     --------------
<S>                                                                                       <C>         <C>
BALANCE SHEET DATA:
Cash, including restricted cash.........................................................  $   802        $ 14,342
Total assets............................................................................   84,659          98,199
Indebtedness(4).........................................................................   22,371           1,055
Stockholders' equity....................................................................   49,744          84,600
</TABLE>
 
---------------
(1) Reflects the issuance of shares of Common Stock offered by the Company
    hereby, the retirement of $21.3 million of debt and the elimination of
    interest expense related to the retirement of $21.3 million of debt.
(2) As shown below, EBITDA represents net income before interest expense, income
    taxes, depreciation and amortization. EBITDA does not represent cash flows
    from operations and should not be considered to be an alternative to net
    income as an indicator of operating performance or as an alternative to cash
    flows from operations as a measure of liquidity. In addition, the Company's
    presentation of EBITDA could differ from similar presentations prepared by
    other companies. Management believes that EBITDA represents a useful measure
    to evaluate the Company's results of operations, without reference to its
    capitalization and tax structure. Management also believes EBITDA is a
    useful indicator of the Company's ability to service and/or incur
    indebtedness because it adjusts net income for non-cash expenditures, taxes
    and existing interest expenses. The following table reconciles EBITDA to net
    income:
 
<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                 ---------------------------------------------------------
                                                                   1992        1993        1994        1995        1996
                                                                 --------    --------    --------    --------    ---------
<S>                                                              <C>         <C>         <C>         <C>         <C>
Net income.....................................................    $2,706      $4,636     $ 5,325     $ 8,765      $12,676
Interest expense...............................................     2,457       1,929         881       2,380        2,445
Taxes..........................................................     1,542       2,909       3,214       4,979        7,348
Depreciation...................................................       176         285         302         330          502
Amortization of excess servicing asset.........................        --          --         883       1,481        2,735
                                                                   ------      ------     -------     -------      -------
EBITDA.........................................................    $6,881      $9,759     $10,605     $17,935      $25,706
                                                                   ======      ======     =======     =======      =======
</TABLE>
 
(3) Adjusted to give effect to (i) the sale of     shares of Common Stock
    offered by the Company hereby at an assumed initial public offering price of
    $        per share less the underwriting discount and the payment by the
    Company of the estimated offering expenses and (ii) the retirement of $21.3
    million of debt. See "Use of Proceeds."
(4) Indebtedness is comprised of notes payable to Jeld-Wen and others.
 
                                        9
<PAGE>   11
 
                                  RISK FACTORS
 
     In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing any of the shares of Common Stock offered
hereby. The Company cautions the reader that this list of risk factors may not
be exhaustive. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results and the timing of certain
events could differ materially from those anticipated by such forward-looking
statements as a result of certain factors, including the factors set forth below
and in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.
 
DEPENDENCE ON ACQUISITIONS OF ADDITIONAL RESORT UNITS FOR GROWTH; NEED FOR
ADDITIONAL CAPITAL
 
     The Company purchases or develops resort units for WorldMark in exchange
for the exclusive right to sell the Vacation Credits assigned to these units.
The Company can only sell additional Vacation Credits to the extent that it
acquires or develops additional resort units for WorldMark. The Company's future
growth and financial success therefore will depend to a significant degree on
the availability of attractive resort locations and the Company's ability to
acquire and develop additional resort units on favorable terms and to obtain
additional debt and equity capital to fund such acquisitions and development.
There can be no assurance that the Company will be successful in this regard. As
of March 31, 1997, the Company had purchase agreements and developments in
progress to obtain 364 additional resort units by the end of 1998. No assurance
can be given that all of such units will be acquired or completed on a timely
basis or at all. There are numerous potential buyers of resort real estate
competing to acquire resort properties which the Company may consider attractive
resort acquisition opportunities, and many of these potential buyers are better
capitalized than the Company. There can be no assurance that the Company will be
able to compete against such other buyers successfully.
 
     When the Company purchases or develops a new resort or additional units at
an existing WorldMark Resort, the Company causes the units to be conveyed
directly to WorldMark free of any monetary encumbrances, and therefore must
purchase its properties without any financing secured by the properties. Since
the Company generally finances at least 85% of the aggregate purchase price of
Vacation Credits sold to new Owners, it does not generate sufficient cash from
sales to provide the necessary capital to acquire or develop additional resort
units. Accordingly, the Company has a continuous need for capital to purchase
additional resort units. Historically, the Company's primary source of capital
has been the sale of Notes Receivable to a group of banks and a securitization,
through one of the Finance Subsidiaries, of Notes Receivable to institutional
investors which was completed in April 1996. Immediately prior to the closing of
the Offering, Jeld-Wen will transfer the ownership of the Finance Subsidiaries
to the Company in exchange for additional shares of the Company's Common Stock.
See "Summary -- Corporate Background and Consolidation of Finance Subsidiaries."
The Finance Subsidiaries' relationship with the participating banks is expected
to continue following the Consolidation Transactions. No assurance can be given,
however, that the Company will be able to obtain adequate debt or equity capital
through the sale or securitization of its Notes Receivables, or otherwise, in
order to continue to acquire additional properties or that such future financing
can be obtained on terms favorable to the Company. See "Business -- Finance
Subsidiaries" and "Certain Transactions -- Acquisition of Finance Subsidiaries."
 
RISKS ASSOCIATED WITH DEVELOPMENT AND CONSTRUCTION ACTIVITIES
 
     The Company intends to expand its acquisition, development, construction
and expansion of timeshare resorts. There can be no assurance that the Company
will complete current or future development or expansion projects. Risks
associated with these activities include the risks that (i) acquisition or
development opportunities may be abandoned; (ii) construction costs may exceed
original estimates, possibly making the development or expansion uneconomical or
unprofitable; (iii) financing may not be available on favorable terms or at all;
and (iv) construction may not be completed on schedule, resulting in increased
interest expense and delays in the availability for sale of Vacation Credits.
Development activities are also subject to risks relating to the inability to
obtain, or delays in obtaining, all necessary zoning,
 
                                       10
<PAGE>   12
 
land-use, building, occupancy and other required governmental permits and
authorizations, the ability of the Company to coordinate construction activities
with the process of obtaining such permits and authorizations, and the ability
of the Company to obtain the financing necessary to complete the necessary
acquisition, construction and conversion work. In addition, the Company's
construction activities are generally performed by third-party contractors.
These third-party contractors generally control the timing, quality and
completion of the construction activities. Nevertheless, construction claims may
be asserted against the Company for construction defects and such claims may
give rise to liabilities. New development activities, regardless of whether or
not they are ultimately successful, typically require a substantial portion of
management's time and attention. The ability of the Company to expand its
business to include new resorts will in part depend upon the availability of
suitable properties at reasonable prices and the availability of financing for
the acquisition and development of such properties. In the future, the Company
may undertake the development of larger resort complexes. No assurance can be
given that any such larger resort complexes will be developed in a profitable
manner, if at all.
 
FACTORS AFFECTING SALES VOLUME
 
     As the number of potential customers in the geographic area of a sales
office who have attended a sales presentation increases, the Company may have
increasing difficulty in attracting additional potential customers to a sales
presentation at that office and it may become increasingly difficult for the
Company to maintain current sales levels at its existing sales offices.
Accordingly, the Company anticipates that a substantial portion of its future
sales growth will depend on the opening of additional off-site sales offices.
The Company intends to open an additional off-site sales office in California in
late 1997. No assurance can be given, however, that sales from existing or new
off-site sales offices will meet management's expectations. If the Company does
not open additional sales offices or if existing or new sales offices do not
perform as expected, the Company's business, results of operations and financial
condition could be materially adversely affected.
 
GEOGRAPHIC CONCENTRATION ON WEST COAST
 
     The Company presently sells Vacation Credits in Washington, Oregon and
California, primarily to residents of those states and of British Columbia. The
Company intends to continue to sell Vacation Credits in these three states and
to increase the number of its off-site sales offices in California. Since all of
the Company's sales offices are in the western United States, any economic
downturn in this area of the country could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the appeal of becoming an Owner may decrease if residents of Washington, Oregon,
California and British Columbia do not continue to view the locations of
WorldMark's Resorts (which are primarily located in these areas) as attractive
vacation destinations.
 
GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN TIMESHARE INDUSTRY
 
     Any downturn in economic conditions or significant price increases or
adverse events related to the travel and tourism industry, such as the cost and
availability of fuel, could depress discretionary consumer spending and have a
material adverse effect on the Company's business, results of operations and
financial condition. Any such economic conditions, including recession, may also
adversely affect the future availability of attractive financing rates for the
Company or its customers and may materially adversely affect the Company's
business. Furthermore, adverse changes in general economic conditions may
adversely affect the collectibility of the Notes Receivable. Because the
Company's operations are conducted solely within the timeshare industry, any
adverse changes affecting the timeshare industry, such as a reduction in demand
for timeshare units, changes in travel and vacation patterns, an increase of
governmental regulation of the timeshare industry and increases in construction
costs or taxes, as well as negative publicity for the timeshare industry, could
have a material adverse effect on the Company's business, results of operations
and financial condition.
 
                                       11
<PAGE>   13
 
RISKS ASSOCIATED WITH CUSTOMER FINANCING
 
     In 1996, the Company provided financing for approximately 87% of the
aggregate purchase price of Vacation Credits sold to new Owners, with an average
new Note Receivable of approximately $7,650. The Company also allows existing
Owners the opportunity to finance the purchase of Upgrades. The Company obtains
a security interest in the purchased Vacation Credits and it does not verify a
prospective Owner's credit history. At December 31, 1996, an aggregate of $179.2
million of Notes Receivable were outstanding, of which approximately $52.4
million had been retained by the Company. The remaining balance of approximately
$126.8 million of Notes Receivable had been sold by the Company prior to that
date, although the Company retained limited recourse liability with respect to
these Notes Receivable. See Notes 4, 5 and 15(a) of Notes to Combined Financial
Statements.
 
     Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At December 31, 1996, approximately $3.2 million of
Notes Receivable, including Notes Receivable previously sold by the Company,
were past due 60 days or more. The Notes Receivable are secured by a security
interest in the related Vacation Credits. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records an expense for any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits to inventory available for resale. However, the associated marketing
costs and sales commissions are not recovered by the Company and these expenses
must be incurred again to resell the Vacation Credits.
 
     The Company maintains a reserve for doubtful accounts in respect of the
Notes Receivable owned by the Company and a reserve for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these reserves at December 31, 1995 and 1996 were $8.0
million and $11.2 million, respectively, representing approximately 6.3% of the
total portfolio of Notes Receivable at those dates, including the Notes
Receivable that had been sold by the Company. These reserves are estimates and
if the amount of the Notes Receivable that is ultimately uncollectible
materially exceeds the related reserves, the Company's business, results of
operations and financial condition could be materially adversely affected. See
"Business -- Customer Financing."
 
INTEREST RATE RISK
 
     The Company generally provides financing for a significant portion of the
aggregate purchase price of Vacation Credits sold at a fixed interest rate. In
order to provide liquidity, the Company, through the Finance Subsidiaries, sells
or securitizes its Notes Receivable. Although a significant portion of the
existing financing of the Notes Receivable through the Finance Subsidiaries is
at a fixed rate or at a variable rate with a cap on the maximum rate, if
interest rates were to increase significantly, the Company's future cost of
funds would also likely increase significantly. The Company has the ability to
respond to rising interest rates by increasing the interest rate offered to
finance Vacation Credit purchases. However, such an increase could have a
material adverse effect on sales of Vacation Credits or on the percentage of
Owners who finance their Vacation Credit purchases through the Company, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business -- Customer Financing" and "--
Finance Subsidiaries."
 
COMPETITION
 
     The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Some of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
interval resorts include Marriott International, Inc. ("Marriott"), The Walt
Disney Company ("Disney"), Hilton Hotels Corporation ("Hilton"), Hyatt
Corporation ("Hyatt"), Four Seasons Hotels & Resorts, Inc. ("Four Seasons"),
InterContinental Hotels and Resorts, Inc. ("Inter-
 
                                       12
<PAGE>   14
 
Continental"), Westin Hotels & Resorts ("Westin") and Promus Hotels, Inc.
("Promus"). In addition, other publicly-traded companies focused on the
timeshare industry, such as Signature Resorts, Inc. ("Signature"), Fairfield
Communities, Inc. ("Fairfield") and Vistana, Inc. ("Vistana"), currently
compete, or may in the future compete, with the Company. Many of these entities
possess significantly greater financial, marketing and other resources than
those of the Company. Management believes that industry competition will be
increased by recent and potential future consolidation in the timeshare
industry.
 
     The Company has entered into marketing agreements with affiliates of its
parent, Jeld-Wen, pursuant to which these affiliates may market Vacation Credits
for their own account at Eagle Crest Resort in Redmond, Oregon and Running Y
Resort in Klamath Falls, Oregon in exchange for their contribution to WorldMark
of condominium units at those resorts. These sales activities are competitive
with the Company's marketing activities, particularly in the Oregon and northern
California markets. See "Certain Transactions -- Relationship with Jeld-Wen."
 
     Resales of Vacation Credits by Owners may compete with sales of Vacation
Credits by the Company and may inhibit the Company's ability to increase the
market price of Vacation Credits it sells.
 
DEPENDENCE ON KEY PERSONNEL
 
     The Company's success depends to a large extent upon the experience and
abilities of William F. Peare, the Company's President and Chief Executive
Officer, Jeffery P. Sites, the Company's Executive Vice President and Chief
Operating Officer, and Gary A. Florence, the Company's Vice President, Chief
Financial Officer and Treasurer. The loss of the services of any one of these
individuals could have a material adverse effect on the Company's business,
results of operations and financial condition. Prior to the closing of the
Offering, the Company intends to enter into employment agreements with Messrs.
Peare and Sites. The Company's success is also dependent upon its ability to
attract and retain qualified development, acquisition, marketing, management,
administrative and sales personnel for which there is keen competition. In
addition, the cost of retaining such key personnel could escalate over time.
There can be no assurance that the Company will be successful in attracting and
retaining such personnel. See "Management -- Employment Agreements."
 
REGULATION OF MARKETING AND SALES OF VACATION CREDITS; OTHER LAWS
 
     The Company's marketing and sales of Vacation Credits and certain of its
other operations are subject to extensive regulation by the states and foreign
jurisdictions in which the WorldMark Resorts are located and in which Vacation
Credits are marketed and sold and also by the federal government.
 
     State and Provincial Regulations. Most U.S. states and Canadian provinces
have adopted specific laws and regulations regarding the sale of vacation
interval ownership programs. Washington, Oregon, California, Hawaii and British
Columbia require the Company to register WorldMark Resorts, the Company's
vacation program and the number of Vacation Credits available for sale in such
state or province with a designated state or provincial authority. The Company
must amend its registration if it desires to increase the number of Vacation
Credits registered for sale in that state or province. Either the Company or the
state or provincial authority assembles a detailed offering statement describing
the Company and all material aspects of the project and sale of Vacation
Credits. The Company is required to deliver the offering statement to all new
purchasers of Vacation Credits, together with certain additional information
concerning the terms of the purchase. Hawaii imposes particularly stringent and
broad regulation requirements for the sale of interests in interval ownership
programs that have resort units located in Hawaii. The Company has incurred
substantial expenditures over an extended period of time in the registration
process in Hawaii and still has not completed this process. Hawaii has allowed
the use of WorldMark units in Hawaii, provided that the Company continues in
good faith to pursue registration in Hawaii. Laws in each state where the
Company sells Vacation Credits grant the purchaser of Vacation Credits the right
to cancel a contract of purchase at any time within a period ranging from three
to seven calendar days following the later of the date the contract was signed
or the date the purchaser received the last of the documents required to be
provided by the Company. Most states have other laws which regulate the
Company's activities, such as real estate licensure laws, laws relating to the
use
 
                                       13
<PAGE>   15
 
of public accommodations and facilities by disabled persons, sellers of travel
licensure laws, anti-fraud laws, advertising laws and labor laws.
 
     Federal Regulations. The Federal Trade Commission has taken an active
regulatory role in the interval ownership industry through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-In-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Standards Practices Act, the Telephone Consumer
Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act,
the Civil Rights Act of 1964 and 1968, the Fair Housing Act and the Americans
with Disabilities Act.
 
     Although the Company believes that it is in material compliance with all
federal, state, local and foreign laws and regulations to which it is currently
subject, there can be no assurance that it is in fact in compliance. Any failure
by the Company to comply with applicable laws or regulations could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company will continue to incur significant
costs to remain in compliance with applicable laws and regulations, and such
costs could increase substantially in the future.
 
DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORK; NO ASSURANCE OF CONTINUED
PARTICIPATION
 
     The attractiveness of purchasing Vacation Credits is enhanced by the
ability of Owners to exchange Vacation Credits for an occupancy right in a
resort participating in the RCI network. RCI provides broad-based vacation
interval exchange services, and, subject to payment of a fee to RCI, Owners are
permitted to exchange their Vacation Credits for vacation use among the resorts
which participate in the RCI network. However, no assurance can be given that
the Company will continue to be able to ensure that Owners will be eligible to
participate in the RCI network or that the weekly RCI exchange value for
Vacation Credits will not become less favorable to Owners. Moreover, if the RCI
exchange network ceases to function effectively, or if Vacation Credits are not
accepted as exchanges for other desirable resorts, the Company's sales of
Vacation Credits could be materially adversely affected. See
"Business -- Participation in Vacation Interval Exchange Network."
 
POSSIBLE ENVIRONMENTAL LIABILITIES
 
     Under various federal, state, local and foreign laws, ordinances and
regulations, the owner or operator of real property generally is liable for the
costs of removal or remediation of certain hazardous or toxic substances located
on or in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Other federal and state laws
require the removal or encapsulation of asbestos-containing material when such
material is in poor condition or in the event of construction, demolition,
remodeling or renovation. Other statutes may require the removal of underground
storage tanks. Noncompliance with these and other environmental, health or
safety requirements may result in the need to cease or alter operations at a
property. Although the Company conducts an environmental assessment with respect
to the properties it acquires for WorldMark, the Company has not received a
Phase I environmental report for any WorldMark Resort. There can be no assurance
that any environmental assessments undertaken by the Company with respect to the
WorldMark Resorts have revealed all potential environmental liabilities, or that
an environmental condition does not otherwise exist as to any one or more of the
WorldMark Resorts that could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
NATURAL DISASTERS; UNINSURED LOSS
 
     WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from
earthquakes, floods or acts of war, are generally excluded from WorldMark's
insurance coverage. Should an uninsured loss or loss in excess of insured limits
occur, WorldMark has the option to either (i) remove such
 
                                       14
<PAGE>   16
 
units from the Vacation Credit system, which would result in a proportionate
dilution of vacation time available for the Vacation Credits which have been
sold, or (ii) pay the related costs of replacement. Although WorldMark's board
of directors may impose a limited amount of special assessments to pay for
capital improvements or major repairs, there can be no assurance that WorldMark
would be able to increase assessments to provide sufficient funds to pay for all
possible capital improvements and major repairs of the units at the WorldMark
Resorts. In such an event, the Company may need to advance funds to WorldMark in
order to maintain the quality of the WorldMark Resorts or WorldMark may be
required to defer certain improvements or repairs. See "Business -- Insurance;
Legal Proceedings."
 
EFFECTIVE VOTING CONTROL BY EXISTING STOCKHOLDER; ANTITAKEOVER PROVISIONS
 
     Upon closing of the Offering, Jeld-Wen will own           % of the
outstanding shares of Common Stock. This concentration of ownership will give
Jeld-Wen control of the election of directors and the management and affairs of
the Company and sufficient voting power to determine the outcome of all matters
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all, or substantially all, of the Company's assets. In addition,
certain provisions of Oregon law and of the Company's Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws could have the effect
of making it more difficult or more expensive for a third party to acquire, or
of discouraging a third party from attempting to acquire, control of the
Company. In addition, the Company is authorized to issue Preferred Stock with
rights senior to, and that may adversely affect, the Common Stock, with such
rights, preferences and privileges as the Company's Board of Directors may
determine, without the necessity of stockholder approval. The Company, however,
has no present plans to issue any shares of Preferred Stock. See "Principal and
Selling Stockholders," "Description of Capital Stock" and "Certain Provisions of
Oregon Law and of Trendwest's Articles of Incorporation and Bylaws."
 
SHARES ELIGIBLE FOR FUTURE SALE
 
     Upon closing of the Offering, all of the shares of Common Stock offered
hereby will be eligible for public sale without restriction. Holders of the
other           shares of Common Stock hold their shares subject to the
limitations of Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act"). All holders of these shares have entered into lock-up
agreements with the Underwriters not to offer, sell or otherwise dispose of any
equity securities of the Company for 180 days after the date of this Prospectus
without the prior written consent of Montgomery Securities. Montgomery
Securities may, in its sole discretion, at any time without notice, release all
or any portion of the shares subject to the lock-up agreements during this 180
day period. Future sales of substantial amounts of Common Stock, or the
potential for such sales, could adversely affect prevailing market prices. See
"Shares Eligible for Future Sale" and "Underwriting."
 
IMMEDIATE AND SUBSTANTIAL DILUTION; NO ANTICIPATED DIVIDENDS
 
     Purchasers of Common Stock in the Offering will experience immediate
dilution in pro forma net tangible book value per share of Common Stock of
$          from the initial public offering price per share (assuming an initial
public offering price of $          per share). See "Dilution." In addition, the
Company does not anticipate that it will pay any cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
 
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
 
     There has been no prior public market for the Company's Common Stock.
Although application has been made to list the Common Stock for quotation on the
Nasdaq National Market, there can be no assurance that a viable public market
for the Common Stock will develop or be sustained after the Offering or that
purchasers of the Common Stock will be able to resell their Common Stock at
prices equal to or greater than the initial public offering price. The initial
public offering price will be determined by negotiations among the Company, the
Selling Stockholder and the representatives of the Underwriters and may not be
indicative of the prices that may prevail in the public market after the
Offering is completed. Numerous factors, including announcements of fluctuations
in the Company's or its competitors' operating results and market conditions
 
                                       15
<PAGE>   17
 
for hospitality and timeshare industry stocks in general, could have a
significant impact on the future price of the Common Stock. In addition, the
stock market in recent years has experienced significant price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many growth companies, and have often been unrelated or
disproportionate to the operating performance of these specific companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
See "Underwriting."
 
                                USE OF PROCEEDS
 
     The net proceeds to the Company from the sale of the           shares of
Common Stock offered by the Company hereby at an estimated initial public
offering price of $          per share, after deducting the underwriting
discount and estimated expenses of the Offering, are estimated to be $34.9
million ($40.5 million if the Underwriters' over-allotment option is exercised
in full). The Company intends to use approximately $22.8 million of the
estimated net proceeds to repay all of the outstanding indebtedness and accrued
interest owed to Jeld-Wen. The balance of the net proceeds of approximately
$14.2 million will be used for working capital and general corporate purposes,
including the acquisition and development of additional resort properties. See
"Summary -- The WorldMark Resorts" and "Business -- Growth Strategy" for a
discussion of the projects which are currently under development or subject to
acquisition agreements. Pending application as described above, the net proceeds
to the Company will be invested in short-term, investment grade, interest
bearing securities.
 
     Indebtedness to be repaid out of the net proceeds from the Offering bears
interest at the prime rate plus 1% (currently 9.50%) per annum and is payable on
demand. Indebtedness to be repaid that was incurred within the last year was
incurred for the acquisition and development of timeshare resorts and for
general corporate purposes.
 
     The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholder.
 
                                DIVIDEND POLICY
 
     The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its Common Stock 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.
 
                                       16
<PAGE>   18
 
                                 CAPITALIZATION
 
     The following table sets forth, as of December 31, 1996, the debt and total
capitalization of the Company on an actual basis and as adjusted to give effect
to the sale of Common Stock offered by the Company at an assumed initial public
offering price of $          per share and the application of the estimated net
proceeds to the Company therefrom. This table should be read in conjunction with
the historical financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. See "Use of Proceeds" and "Selected
Combined Financial and Operating Data."
 
<TABLE>
<CAPTION>
                                                                   AS OF DECEMBER 31,
                                                                          1996
                                                                 ----------------------
                                                                                  AS
                                                                  ACTUAL       ADJUSTED
                                                                 --------      --------
                                                                 (DOLLARS IN THOUSANDS)
        <S>                                                      <C>           <C>
        Debt:
          Notes payable.........................................  $ 1,055       $ 1,055
          Due to parent company.................................   21,316            --
                                                                  -------       -------
                  Total debt(1).................................   22,371         1,055
        Stockholders' equity:
          Preferred Stock, no par value; 10,000,000 shares
             authorized; no shares issued and outstanding.......       --            --
                                                                  -------       -------
          Common Stock, no par value; 90,000,000 shares
             authorized;      shares issued and outstanding;
                  shares issued and outstanding as
             adjusted(2)........................................   14,970        49,826
          Retained earnings.....................................   34,774        34,774
                                                                  -------       -------
          Total stockholders' equity............................   49,744        84,600
                                                                  -------       -------
                  Total capitalization..........................  $72,115       $85,655
                                                                  =======       =======
</TABLE>
 
---------------
 
(1) See Notes 6 and 9 of Notes to Combined Financial Statements.
 
(2) Does not include shares of Common Stock authorized for issuance under the
    Company's stock option plan. See "Management -- 1997 Stock Option Plan."
 
                                       17
<PAGE>   19
 
                                    DILUTION
 
     The pro forma net tangible book value of the Company at December 31, 1996
was approximately $49.7 million, or $          per share of Common Stock. Pro
forma net tangible book value per share represents the Company's total tangible
assets less its total liabilities, divided by the total number of outstanding
shares of Common Stock after giving effect to the Consolidation Transactions.
After giving effect to the sale of      shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $          per
share and the application of the estimated net proceeds therefrom, the pro forma
net tangible book value of the Company at December 31, 1996 would have been
approximately $86.8 million or $          per share of Common Stock. This
represents an immediate increase in such pro forma net tangible book value of
$          per share to the existing stockholders of the Company and an
immediate dilution in pro forma net tangible book value of $          per share
to purchasers of Common Stock in the Offering. The following table illustrates
this dilution on a per share basis:
 
<TABLE>
        <S>                                                        <C>         <C>
        Assumed initial public offering price per share...........             $
                                                                               -------
          Pro forma net tangible book value per share before the
             Offering............................................. $
                                                                   -------
          Increase per share attributable to new investors........
                                                                   -------
        Pro forma net tangible book value per share after the
          Offering................................................
                                                                               -------
        Dilution per share to new investors.......................             $
                                                                               =======
</TABLE>
 
     The following table sets forth, as of December 31, 1996, the number of
shares of Common Stock purchased, the total consideration paid therefor and the
average price paid per share by the existing stockholders of the Company and the
purchasers of Common Stock in the Offering, at an assumed initial public
offering price of $          per share (before deducting the estimated
underwriting discount and offering expenses payable by the Company). The
following table does not include           shares of Common Stock which the
Underwriters may purchase pursuant to their over-allotment option. See
"Underwriting."
 
<TABLE>
<CAPTION>
                                     SHARES PURCHASED        TOTAL CONSIDERATION
                                    ------------------     -----------------------     AVERAGE PRICE
                                    NUMBER     PERCENT       AMOUNT        PERCENT       PER SHARE
                                    ------     -------     -----------     -------     -------------
    <S>                             <C>        <C>         <C>             <C>         <C>
    Existing stockholders(1).......                         14,700,000
    New investors(2)...............
                                    ------       -----     -----------       -----
              Total................              100.0%    $                 100.0%
                                    ======       =====     ===========       =====
</TABLE>
 
---------------
 
(1) Sales of Common Stock by the Selling Stockholder in the Offering will cause
    the number of shares of Common Stock held by the existing stockholders to be
    reduced to           shares, or      % of the total number of shares of
    Common Stock to be outstanding after the Offering, and will increase the
    number of shares of Common Stock held by new investors to           shares,
    or      % of the total number of shares to be outstanding after the
    Offering. See "Principal and Selling Stockholders."
 
(2) Purchasers of Common Stock in the Offering.
 
                                       18
<PAGE>   20
 
                 SELECTED COMBINED FINANCIAL AND OPERATING DATA
          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
 
     The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of December 31, 1995 and 1996 and
for each of the years in the three-year period ended December 31, 1996 are
derived from the combined financial statements of Trendwest Resorts, Inc. and
certain affiliates, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such combined financial
statements and the report thereon are included elsewhere in this Prospectus. The
information as of December 31, 1994 and 1993 and for the year ended December 31,
1993 has been derived from the financial statements of Trendwest Resorts, Inc.
and the financial statements of TW Holdings, Inc., which have been audited by a
predecessor auditor as adjusted for certain prior period adjustments. The
information as of and for the year ended December 31, 1992 has been derived from
the financial statements of Trendwest Resorts, Inc., which have been audited by
a predecessor auditor as adjusted for certain prior period adjustments. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the combined financial information for the Company and the notes thereto which
are contained elsewhere herein. The information presented below under the
captions "Pro Forma Data" and "Operating Data" is unaudited.
 
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                 --------------------------------------------------------
                                                                  1992        1993        1994        1995         1996
                                                                 -------     -------     -------     -------     --------
<S>                                                              <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  Vacation Credit sales, net...................................  $35,798     $38,743     $54,904     $77,783     $100,040
  Finance income...............................................    3,069       3,813       3,736       5,368        7,143
  Gains on sales of notes receivable...........................       --       1,558       1,635       3,222        5,673
  Resort management services...................................      219       1,102       2,805       1,579        1,501
  Other........................................................      241         344         763       1,226        2,552
                                                                 -------     -------     -------     -------      -------
        Total revenues.........................................   39,327      45,560      63,843      89,178      116,909
Costs and operating expenses:
  Vacation Credit cost of sales................................    9,083       8,743      15,070      20,484       27,400
  Resort management services...................................      301         959       2,613       1,283          859
  Sales and marketing..........................................   17,954      19,523      25,615      36,374       47,810
  General and administrative...................................    3,253       4,056       6,588       8,391       10,904
  Provision for doubtful accounts and recourse liability.......    2,031       2,805       4,537       6,522        7,467
  Interest.....................................................    2,457       1,929         881       2,380        2,445
                                                                 -------     -------     -------     -------      -------
        Total costs and operating expenses.....................   35,079      38,015      55,304      75,434       96,885
                                                                 -------     -------     -------     -------      -------
Income before income taxes.....................................    4,248       7,545       8,539      13,744       20,024
  Income tax expense...........................................    1,542       2,909       3,214       4,979        7,348
                                                                 -------     -------     -------     -------      -------
Net income.....................................................  $ 2,706     $ 4,636     $ 5,325     $ 8,765     $ 12,676
                                                                 =======     =======     =======     =======      =======
PRO FORMA DATA:
Pro forma net income(1)........................................                                                  $ 14,281
Pro forma net income per share of Common Stock(1)..............
Pro forma weighted average shares of Common Stock
  outstanding..................................................
EBITDA(2)......................................................  $ 6,881     $ 9,759     $10,605     $17,935     $ 25,706
OPERATING DATA:
Number of WorldMark Resorts (at end of period).................       11          12          14          16           18
Number of units (at end of period).............................      147         239         325         499          746
Number of Vacation Credits sold (in thousands).................   32,761      34,335      47,181      64,503       80,248
Average price per Vacation Credit sold.........................  $  1.09     $  1.13     $  1.16     $  1.21     $   1.25
Average cost per Vacation Credit sold..........................  $  0.28     $  0.26     $  0.32     $  0.32     $   0.34
Number of Owners (at end of period)............................    8,252      12,732      18,740      27,965       38,997
Average purchase price for new Owners..........................  $ 7,909     $ 8,190     $ 8,244     $ 8,460     $  8,609
BALANCE SHEET DATA:
Cash, including restricted cash................................  $   758     $   528     $   375     $   516     $    802
Total assets...................................................   26,624      35,995      50,021      68,807       84,659
Indebtedness(3)................................................   18,254       4,809      10,378      24,826       22,371
Stockholders' equity...........................................    5,412      22,308      27,456      36,753       49,744
</TABLE>
 
---------------
 
(1) Reflects the issuance of         shares of Common Stock offered by the
    Company hereby, the retirement of $21.3 million of debt and the elimination
    of interest expense related to the retirement of $21.3 million of debt.
 
                                       19
<PAGE>   21
 
(2) As shown below, EBITDA represents net income before interest expense, income
    taxes, depreciation and amortization. EBITDA does not represent cash flows
    from operations and should not be considered to be an alternative to net
    income as an indicator of operating performance or as an alternative to cash
    flows from operations as a measure of liquidity. In addition, the Company's
    presentation of EBITDA could differ from similar presentations prepared by
    other companies. Management believes that EBITDA represents a useful measure
    to evaluate the Company's results of operations, without reference to its
    capitalization and tax structure. Management also believes EBITDA is a
    useful indicator of the Company's ability to service and/or incur
    indebtedness because it adjusts net income for non-cash expenditures, taxes
    and existing interest expenses. The following table reconciles EBITDA to net
    income:
 
<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                            ------------------------------------------------------
                                                             1992       1993        1994        1995        1996
                                                            -------    -------    --------    --------    --------
        <S>                                                 <C>        <C>        <C>         <C>         <C>
        Net income........................................   $2,706     $4,636     $ 5,325     $ 8,765     $12,676
        Interest expense..................................    2,457      1,929         881       2,380       2,445
        Taxes.............................................    1,542      2,909       3,214       4,979       7,348
        Depreciation......................................      176        285         302         330         502
        Amortization of excess servicing asset............       --         --         883       1,481       2,735
                                                             ------     ------     -------     -------     -------
        EBITDA............................................   $6,881     $9,759     $10,605     $17,935     $25,706
                                                             ======     ======     =======     =======     =======
</TABLE>
 
(3) Indebtedness is comprised of notes payable to Jeld-Wen and others.
 
                                       20
<PAGE>   22
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
     Trendwest markets, sells and finances timeshare ownership interests in the
form of Vacation Credits and acquires, develops and manages the WorldMark
Resorts. The Company derives revenues primarily from the sale of Vacation
Credits and, to a lesser extent, from the financing of Vacation Credits and from
management fees generated from its management agreement with WorldMark.
 
     Vacation Credits sales are recognized on the accrual basis after the
Company has received an executed sales contract and a minimum 10% down payment,
and the rescission period (generally three to seven days) has passed. The
Company acquires or develops additional resort units for WorldMark and
contributes those units to WorldMark free of monetary encumbrances, thereby
creating additional Vacation Credits for sale by the Company. The Company
assigns each WorldMark Resort unit a specific number of Vacation Credits based
on its vacation use value relative to existing WorldMark Resort units.
Acquisition and construction costs associated with the WorldMark Resort units
are recorded as inventory. Vacation Credit cost of sales are allocated as
Vacation Credit sales are recognized.
 
     Financing of Vacation Credits is provided to Owners by Trendwest at an
interest rate of 13.9% or 14.9% per annum for a term of up to seven years. The
Company routinely sells Notes Receivable to financial institutions and other
investors to generate liquidity to acquire or develop new resort units and for
working capital. The Company recognizes a gain on the sale of Notes Receivable
at the time of sale equal to the present value of the estimated net future cash
flow of the payment streams. This gain is recorded as an excess servicing asset
on the Company's balance sheet and is amortized over the term of the Notes
Receivable using the interest method.
 
RESULTS OF OPERATIONS
 
     The following discussion of the results of operations relates to entities
comprising the Company on a combined historical basis. The following table sets
forth certain operating information for the Company.
 
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                  -----------------------------
                                                                   1994       1995       1996
                                                                  ------     ------     -------
<S>                                                               <C>        <C>        <C>
AS A PERCENTAGE OF TOTAL REVENUES:
  Vacation Credit sales, net....................................    86.0%      87.2%       85.5%
  Finance income................................................     5.8        6.0         6.1
  Gains on sales of notes receivable............................     2.6        3.6         4.9
  Resort management services....................................     4.4        1.8         1.3
  Other.........................................................     1.2        1.4         2.2
                                                                   -----      -----       -----
                                                                   100.0%     100.0%      100.0%
                                                                   =====      =====       =====
AS A PERCENTAGE OF VACATION CREDIT SALES, NET:
  Vacation Credit cost of sales.................................    27.4%      26.3%       27.4%
  Sales and marketing...........................................    46.7       46.8        47.8
  Provision for doubtful accounts and recourse liability........     8.3        8.4         7.5
AS A PERCENTAGE OF RESORT MANAGEMENT REVENUES:
  Cost of resort management services............................    93.2       81.3        57.2
AS A PERCENTAGE OF TOTAL REVENUES:
  General and administrative....................................    10.3        9.4         9.3
  Total costs and operating expenses............................    86.6       84.6        82.9
</TABLE>
 
                                       21
<PAGE>   23
 
   Comparison of the year ended December 31, 1996 to the year ended December 31,
   1995
 
     For 1996, the Company achieved total revenue of $116.9 million compared to
$89.2 million for 1995, an increase of 31.1%. This increase was primarily due to
a 28.5% increase in Vacation Credit sales, from $77.8 million to $100.0 million,
and a 31.5% increase in finance income, from $5.4 million to $7.1 million. This
increase in Vacation Credit sales was primarily the result of a 24.3% increase
in the number of Vacation Credits sold from 64.5 million in 1995 to 80.2 million
in 1996 due to the opening of two new off-site sales offices (one in May 1995
and one in April 1996) and three new on-site sales offices (one in April 1995,
one in June 1995 and one in February 1996). Upgrade Sales increased from $8.3
million for 1995 to $15.6 million for 1996, due to the increased number of
Owners and more effective sales programs. The average price per Vacation Credit
sold increased slightly from $1.21 for 1995 to $1.25 for 1996, an increase of
3.3%. The increase in finance income was primarily due to increased carrying
balances of Notes Receivable related to higher Vacation Credit sales in 1996
compared to 1995. Gains on sales of Notes Receivable increased 78.1% from $3.2
million for 1995 to $5.7 million for 1996. This increase was due to a greater
amount of Notes Receivable sales, which increased from $38.5 million for 1995 to
$72.2 million for 1996.
 
     Vacation Credit cost of sales increased from $20.5 million for 1995 to
$27.4 million for 1996, an increase of 33.7%, primarily reflecting the increase
in sales of Vacation Credits. As a percentage of Vacation Credit sales, Vacation
Credit cost of sales increased to 27.4% in 1996 from 26.3% in 1995. This
increase was due to the relatively higher cost of developing and constructing
the Gleneden Beach resort in Oregon compared to other WorldMark Resorts and the
reduction of revenue resulting from an increase in net deferred gross profit on
Upgrade Sales.
 
     Cost of resort management services decreased 30.8% from $1.3 million in
1995 to $0.9 million in 1996, primarily as a result of the shift in the
management responsibility for WorldMark's resort level operations from Trendwest
to WorldMark which occurred in the second quarter of 1995.
 
     For 1996, sales and marketing costs increased 31.3% from $36.4 million in
1995 to $47.8 million in 1996. As a percentage of Vacation Credit sales, sales
and marketing costs increased slightly from 46.8% in 1995 to 47.8% in 1996. The
growth in sales and marketing costs reflects the increase in Vacation Credit
sales and the opening of two new sales offices.
 
     General and administrative expenses increased 29.8% from $8.4 million in
1995 to $10.9 million in 1996, primarily reflecting the growth in the overall
business of Trendwest. General and administrative expenses decreased as a
percentage of total revenues from 9.4% in 1995 to 9.3% in 1996, primarily
reflecting the realization of certain economies of scale causing administrative
expenses to increase at a lower rate than total revenues.
 
     Interest expense remained consistent at $2.4 million, as lower average
interest rates offset the effect of somewhat higher average loan balances.
 
     Provision for doubtful accounts and recourse liability increased 15.4% from
$6.5 million in 1995 to $7.5 million in 1996. As a percentage of Vacation Credit
sales, the provision declined from 8.4% in 1995 to 7.5% in 1996. Reserve
strengthening contributed to the higher percentage in 1995 and a higher
percentage of the Company's Notes Receivable being held by Upgrade Owners at the
end of 1996 contributed to the lower percentage in 1996.
 
   Comparison of the year ended December 31, 1995 to the year ended December 31,
   1994
 
     For the year ended December 31, 1995, the Company achieved total revenues
of $89.2 million compared to $63.8 million for 1994, an increase of 39.8%. This
increase was primarily due to a 41.7% increase in Vacation Credit sales, from
$54.9 million in 1994 to $77.8 million in 1995, a 45.9% increase in finance
income, from $3.7 million in 1994 to $5.4 million in 1995, and a 100.0% increase
in gains on sales of Notes Receivable, from $1.6 million in 1994 to $3.2 million
in 1995. These increases were partially offset by a decrease in resort
management service revenues from $2.8 million in 1994 to $1.6 million in 1995.
The increase in Vacation Credit sales was primarily the result of a 36.7%
increase in the number of Vacation Credits sold from 47.2 million in 1994 to
64.5 million in 1995, primarily due to the addition of one new off-site sales
office (in
 
                                       22
<PAGE>   24
 
May 1995) and three new on-site sales offices (one in September 1994, one in
April 1995 and one in June 1995). In addition, the growth in Upgrade Sales
contributed to the increase in Vacation Credit sales. The average price per
Vacation Credit sold in 1995 increased 4.3% from $1.16 in 1994 to $1.21 in 1995.
Finance income increased as a result of a higher average balance of Notes
Receivable outstanding due to financing associated with the increased Vacation
Credit sales. Gains on sales of notes receivable increased from $1.6 million in
1994 to $3.2 million in 1995 reflecting the increase in the amount of Notes
Receivable sold from $23.9 million in 1994 to $38.6 million in 1995 and improved
interest rate spread on the Notes Receivable sold. The decrease in resort
management service revenues was attributable to the shift in Worldmark's
resort-level operations from Trendwest to WorldMark which occurred in the second
quarter of 1995.
 
     Vacation Credit cost of sales increased 35.8% from $15.1 million in 1994 to
$20.5 million in 1995. The increase in Vacation Credit costs of sales reflects
the increase in the number of Vacation Credits sold in 1995. As a percentage of
Vacation Credit sales, Vacation Credit cost of sales declined from 27.4% in 1994
to 26.3% in 1995 due to favorable product costs and economies of scale
associated with developing and acquiring larger projects.
 
     Cost of resort management services decreased 50.0% from $2.6 million in
1995 to $1.3 million in 1994, primarily as a result of the shift in the
management responsibility for WorldMark's resort-level operations from Trendwest
to WorldMark.
 
     Sales and marketing costs increased 42.2% from $25.6 million in 1994 to
$36.4 million in 1995, primarily as a result of increased Vacation Credit sales.
As a percentage of Vacation Credit sales, sales and marketing costs increased
from 46.7% in 1994 to 46.8% in 1995, primarily as a result of the increased
costs associated with opening the three new sales offices in 1995.
 
     General and administrative expenses increased 27.3% from $6.6 million in
1994 to $8.4 million in 1995, reflecting the growth in the overall business of
Trendwest. General and administrative expenses decreased as a percentage of
total revenues from 10.3% in 1994 to 9.4% in 1995, reflecting the realization of
certain economies of scale causing a lower rate of growth in administrative
expenses compared to the increase in total revenues.
 
     Interest expense increased from $0.9 million in 1994 to $2.4 million in
1995. The increase in interest expense reflects the higher average loan balance
associated with carrying a higher average Notes Receivable balance.
 
     Provision for doubtful accounts and recourse liability increased 44.4% from
$4.5 million in 1994 to $6.5 million in 1995 reflecting the increase in Vacation
Credit sales. As a percentage of Vacation Credit sales, provision for doubtful
accounts and recourse liability increased from 8.3% in 1994 to 8.4% in 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company generates cash from operations from down payments on sales of
Vacation Credits which are financed, cash sales of Vacation Credits, principal
and interest on Notes Receivable, and proceeds from sales and borrowings
collateralized by Notes Receivable. The Company also generates cash on the
interest differential between the interest charged on the Notes Receivable and
the interest paid on loans collateralized by Notes Receivable.
 
     During the years ended December 31, 1994, 1995 and 1996, cash flow provided
by (used in) operating activities was ($11.6) million, ($14.2) million and $3.5
million, respectively. For 1996, cash flows from operating activities resulted
primarily from the sale of Notes Receivable, net of repayments, of $88.6 million
and net income of $12.7 million. Cash flow used in operating activities was
principally for issuance of Notes Receivable to finance the purchase of Vacation
Credits by Owners and to increase inventory levels by $5.7 million due to the
increasing sales of Vacation Credits. In 1994 and 1995, the cash flow used in
operating activities was primarily the result of issuance of Notes Receivable of
$50.3 million and $71.1 million, respectively, partially offset by cash received
from the sale and repayment of Notes Receivable of $42.9 million and $57.7
million, respectively, and net income of $5.3 million and $8.8 million,
respectively.
 
                                       23
<PAGE>   25
 
     Net cash used in investing activities for the years ended December 31,
1994, 1995 and 1996 was $0.2 million, $0.1 million and $1.4 million,
respectively. Cash used in the acquisition of property, plant and equipment is
primarily used to acquire office furniture and fixtures and data processing
equipment for the continued growth of the Company. In 1995, cash of $4.2 million
was provided from the sale of marketable equitable securities.
 
     Net cash provided by (used in) financing activities for the years ended
December 31, 1994, 1995 and 1996 was $11.5 million, $14.4 million and ($2.1)
million, respectively. Net cash provided by (used in) financing activities
primarily relates to net loan repayments or borrowings from Jeld-Wen.
 
     Since completed units at various resort properties are acquired or
developed in advance and a significant portion of the purchase price of Vacation
Credits is financed by the Company, the Company continually needs funds to
acquire and develop property, to carry Notes Receivable contracts and to provide
working capital. The Company has historically secured additional funds through
loans from Jeld-Wen and the sale of Notes Receivable through the Finance
Subsidiaries. As of December 31, 1996, the outstanding indebtedness to Jeld-Wen
was $21.3 million, and the income taxes payable to Jeld-Wen was $2.1 million.
Upon consummation of the Offering, the Company intends to repay the indebtedness
to Jeld-Wen. See "Risk Factors -- Dependence on Acquisitions of Additional
Resort Units for Growth; Need for Additional Capital."
 
     Financing of Notes Receivable has been accomplished by use of a $68.0
million purchase commitment from a group of banks led by Seattle-First National
Bank (the "Bank Group"). As of December 31, 1996, Notes Receivable totaling
$55.0 million had been purchased by the Bank Group. The Notes Receivable
purchased by the Bank Group are collateralized by a pool of Notes Receivable
equal to 25% of the amount purchased by the Bank Group. Interest rates under the
line of credit with the Bank Group are at 30 day, 60 day, 90 day, or 180 day
LIBOR plus 150 basis points. The Company has purchased a three year, 30-day
LIBOR interest rate cap at 10.125% per annum on $31.8 million. The interest rate
cap expires on April 10, 1998. The agreement with the Bank Group is subject to
annual renewal on June 30 of each year with the next renewal scheduled for June
30, 1997. Management intends to seek an increase in the size of this facility to
$100.0 million and presently has commitments for $88.0 million. In the future,
the Company may hypothecate its Notes Receivable.
 
     Through the end of 1998, the Company anticipates spending approximately
$68.0 million for acquisitions and development of new resort properties and for
expansion and development activities at the existing WorldMark Resorts. The
Company plans to fund these expenditures with the net proceeds of the Offering
(after reduction of debt) and cash generated from operations, including further
sales or securitizations of Notes Receivable. The Company believes that, with
respect to its current operations, the net proceeds to the Company from the
Offering, together with cash generated from operations and future borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the end of 1998.
 
     In the future, the Company may negotiate additional credit facilities, or
issue corporate debt or equity securities. Any debt incurred or issued by the
Company may be secured or unsecured, at a fixed or variable rate interest, and
may be subject to such additional terms as management deems reasonable.
 
                                       24
<PAGE>   26
 
                                    BUSINESS
 
OVERVIEW
 
     Trendwest Resorts, Inc. markets, sells and finances timeshare Vacation
Ownership Interests and acquires, develops and manages timeshare resorts. In
1996, Trendwest was ranked as one of the largest timeshare companies in the
United States, according to published sales volume data in the Vacation
Ownership World trade magazine. The Company's timeshare resorts are owned by and
operated through WorldMark, a non-profit mutual benefit corporation organized by
Trendwest in 1989 to provide an innovative, flexible vacation ownership system.
As of March 31, 1997, WorldMark had in excess of 41,000 Owners and owned and
maintained an aggregate of 800 condominium-style units at 19 WorldMark Resorts
in the western United States, Hawaii, British Columbia and Mexico. The Company
presently sells Vacation Ownership Interests in Washington, Oregon and
California, primarily through eight off-site sales offices.
 
     Trendwest sells Vacation Ownership Interests in the form of Vacation
Credits which are created by the contribution to WorldMark of resort units
purchased or developed by the Company. Vacation Credits can be used by Owners to
reserve units at any of the WorldMark Resorts, at any time during the year and
in time increments as short as one day. The use of Vacation Credits is not tied
to any particular resort unit or time period as is typical in the timeshare
industry. The Company believes that the combination of multiple WorldMark
Resorts and the Company's Vacation Credit system provides Owners with an
attractive range of vacation planning choices and values not generally available
within the timeshare industry. The Company's Vacation Credit system with
multiple WorldMark Resorts facilitates the sale of Vacation Credits at off-site
sales offices located in major metropolitan areas and reduces dependence on
on-site sales centers located at more remote resort locations.
 
     The Company sells Vacation Credits at its 11 sales offices, eight of which
are located off-site in metropolitan areas. The other sales offices are located
on-site at three of the WorldMark Resorts. The Company intends to establish an
additional off-site sales office in California in late 1997. The Company
contributed 224 resort units to WorldMark in 1996, 146 resort units in 1995 and
86 resort units in 1994. Revenues from Vacation Credit sales increased to
approximately $100.0 million in 1996 from $77.8 million in 1995 and
approximately $54.9 million in 1994. The Company contributed 48 resort units to
WorldMark during the first quarter of 1997. As of March 31, 1997, the Company
had purchase agreements and developments in progress to obtain an additional 364
resort units during the remainder of 1997 and 1998, of which 163 units are
expected to be available in 1997, and the remaining 201 resort units are
expected to be available during 1998.
 
OPERATING STRATEGY
 
     The Company believes its operating strategy and vacation ownership system
provide the following advantages over other timeshare companies:
 
     - Vacation Flexibility. The Company's Vacation Credit system allows Owners
     access to multiple WorldMark Resorts, permitting them to tailor their
     vacation according to their schedules, desired vacation length, location
     preferences and space requirements. The 19 WorldMark Resort locations
     provide access to a variety of vacation experiences, from skiing to golf,
     and a variety of settings, from beaches to mountains. Vacation time is
     reserved on a first come, first served basis. In 1996, based on information
     provided by Owner comment cards, the Company believes that approximately
     73% of Owners received their first choice of resort location when reserving
     vacation time. To enhance Owner usage and facilitate weekend stays and
     stays shorter than one week, the Company purchases and develops a large
     percentage of WorldMark Resort units within a reasonable driving distance
     of the Company's primary metropolitan sales markets.
 
     - Appeal to Broad Consumer Base. The Company believes its Vacation Credit
     system enables it to market effectively to potential customers with a
     broader range of income levels and vacation requirements than is addressed
     by most timeshare companies. The Company provides prospective purchasers
     with the opportunity to purchase varying increments of Vacation Credits
     suitable for their financial position and vacation needs. The Company's
     minimum purchase requirement of 6,000 Vacation Credits, which
 
                                       25
<PAGE>   27
 
     presently costs $7,800, makes entry into WorldMark affordable for a
     significant number of households. The Company also markets Upgrades to
     existing Owners in smaller increments, which accounted for approximately
     13% of Vacation Credit sales in 1996.
 
     - Marketing Through Off-Site Sales Offices. The Company's Vacation Credit
     system facilitates marketing Vacation Ownership Interests effectively at
     off-site sales offices. The Company believes the use of off-site sales
     offices enables it to attract a larger number of prospective purchasers to
     sales presentations than at sales offices at more remote resort locations.
     In addition, the location of sales offices in metropolitan areas provides
     the Company with the flexibility to establish sales offices in the most
     demographically attractive areas within a geographic market and to relocate
     sales offices quickly at a modest cost when conditions warrant.
 
     - Inventory Control. The Company's sale of Vacation Credits rather than
     deeded interests with weekly intervals at individual resorts enables it to
     schedule its resort acquisition and development activities in accordance
     with its anticipated sales volumes and to diversify the risk of its capital
     commitments among several resorts. Since all Vacation Credits have the same
     use rights and sell for the same price, the Company does not experience a
     buildup of inventory of less desirable resort units or interval dates which
     are difficult to sell. The Company can also develop resorts at desirable
     remote locations since it does not depend on on-site sales offices to
     generate sales.
 
     - Owner Satisfaction. The Company places great importance on Owner
     satisfaction. The Company believes that Owner satisfaction is achieved by
     maintaining a high level of quality at the WorldMark Resorts, by increasing
     the number of resort locations and by satisfying Owners' first vacation
     requests a high percentage of the time. Of the 19 WorldMark Resorts, 12
     have the highest rating from Resort Condominiums International Inc.
     ("RCI"), the world's largest timeshare exchange network, four have the
     second-highest rating from RCI and three have been recently opened and have
     not yet been rated. The Company has increased the number of WorldMark
     Resorts from three in 1989 to its present 19 and intends to add two
     additional WorldMark Resorts during the remainder of 1997 and two
     additional WorldMark Resorts in 1998. Although Owners have exchange
     privileges through the RCI network, the Company believes that Owner
     satisfaction with the WorldMark Resorts is demonstrated by the Owners'
     usage of approximately 74% of their Vacation Credits at WorldMark Resorts
     in 1996. The satisfaction of existing Owners with WorldMark and the
     WorldMark Resorts generates additional revenues to the Company through
     Upgrade Sales and from Owner referrals of new prospects.
 
GROWTH STRATEGY
 
     The Company's growth strategy is to (i) expand existing WorldMark Resorts
and acquire and develop additional resorts primarily in the western United
States, Hawaii, British Columbia and Mexico to provide additional Vacation
Credits for sale by the Company and a wider range of WorldMark Resorts for use
by Owners; (ii) increase sales and financings of Vacation Credits to new
customers by expanding sales and marketing efforts, including opening additional
off-site sales offices; and (iii) increase Upgrade Sales by establishing and
maintaining long-term relationships with Owners through effective customer
service programs and innovative benefit programs and discount packages.
 
     Acquisition and Development of Additional Resorts. The Company acquires and
develops additional resort units for WorldMark, thereby providing additional
Vacation Credits for sale by the Company and a greater variety of resort
locations for the Owners. The Company acquires and develops properties in
attractive vacation areas that are either within a reasonable driving distance
(generally two to five hours) from an off-site sales office or are easily
accessible by air travel. The Company's goal is to obtain a mix of resort
locations that can accommodate purchasers of approximately 70% of the Vacation
Credits sold in a particular geographic market within a reasonable driving
distance of that market. The Company intends to acquire new resort locations in
the western United States (west of the Rocky Mountains) and in Hawaii, British
Columbia and Mexico. The Company seeks properties that have on-site resort
amenities, or are located close to such amenities, such as ski lifts, golf
courses, tennis courts, swimming pools, rivers, lakes and beaches. As of March
31, 1997, the Company had an existing inventory of 24.3 million Vacation Credits
and had purchase
 
                                       26
<PAGE>   28
 
agreements and developments in progress to add 163 units that are expected to be
available during the remainder of 1997, and an additional 201 units that are
expected to be available during 1998. These new units are expected to provide an
aggregate of approximately 167.5 million Vacation Credits.
 
     Sales and Financings of Vacation Credits. The Company plans to increase the
sales and financings of Vacation Credits to new customers primarily through the
opening of additional off-site sales offices. The Company opened a new off-site
sales office in Costa Mesa, California in February 1997 and anticipates opening
an additional off-site sales office in late 1997 in California. While sales at
existing sales offices have generally experienced annual increases, the Company
believes that a substantial portion of its sales growth will come from recently
established and new off-site sales offices. The Company believes that the
success of its owner referral program will also be a significant factor to
increase sales. The Company's owner referral program, where existing Owners
refer prospective new Owners to the Company, was the source for approximately
13% of sales of Vacation Credits during 1996.
 
     Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales of Vacation Credits will continue to be financed by the
Company. In 1996, the Company provided financing for approximately 87% of the
aggregate purchase price of Vacation Credits sold to new Owners. During 1996,
the average new Note Receivable had a principal amount of approximately $7,650,
and the aggregate amount of Notes Receivable generated in connection with the
sale of Vacation Credits to new Owners was approximately $79.1 million. The
Company has sold, and expects in the future to sell, a substantial amount of its
Notes Receivable. See "-- Customer Financing," "-- Finance Subsidiaries" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
     Sales of Additional Vacation Credits to Existing Owners. The Company places
significant emphasis on Upgrade Sales to existing Owners. Upgrade Sales
accounted for approximately 9% and 13% of the Company's sales of Vacation
Credits during 1995 and 1996, respectively. With an increasing number of Owners,
the Company believes that Upgrade Sales will continue to increase. Since a new
Owner may purchase as few as 6,000 Vacation Credits to become an Owner, Owners
often are interested in purchasing Upgrades in order to expand their ability to
use the WorldMark Resorts. Upgrades are offered in increments of 1,000 Vacation
Credits and generally may be purchased at a discount from the then current
price. Owners have the opportunity to finance the purchase of Upgrades through
the Company. Upgrade Sales to existing Owners provide a higher gross margin to
the Company due to substantially lower sales and marketing costs associated with
such sales. The Company has a segment of its sales and marketing group which
concentrates on Upgrade Sales. See "-- Customer Financing."
 
THE TIMESHARE INDUSTRY
 
     The Market. The resort component of the leisure industry primarily is
serviced by two separate alternatives for overnight accommodations: commercial
lodging establishments and timeshare or "vacation ownership" resorts. Commercial
lodging consists of hotels, motels, privately owned condominiums and houses
rented on a nightly, weekly or monthly basis. For many vacationers, particularly
those with families, a lengthy stay at a quality commercial lodging
establishment is above the available budget, and the space provided relative to
the cost is not adequate. The Company believes that vacation ownership programs
present an economical alternative to commercial lodging for vacationers.
 
                                       27
<PAGE>   29
 
     According to ARDA, a nonprofit industry organization, the timeshare
industry experienced a record year in 1994 with 384,000 new owners purchasing
560,000 vacation intervals generating sales of $4.76 billion. First introduced
in Europe in the mid-1960s, ownership of vacation intervals has been one of the
fastest growing segments of the hospitality industry over the past two decades.
As shown in the following charts the worldwide timeshare industry has expanded
significantly since 1980 both in vacation interval sales volume and number of
vacation interval owners.
 
<TABLE>
<S>                            <C>              <C>              <C>              <C>
1980                                     0.49
1981                                     0.97
1982                                     1.17
1983                                     1.34
1984                                     1.74
1985                                     1.58
1986                                     1.61
1987                                     1.94
1988                                     2.39
1989                                     2.97
1990                                     3.24
1991                                     3.74
1992                                     4.25
1993                                     4.51
1994                                     4.76
1980                                               155
1981                                               220
1982                                               335
1983                                               470
1984                                               620
1985                                               805
1986                                               970
1987                                              1125
1988                                              1310
1989                                              1530
1990                                              1800
1991                                              2070
1992                                              2363
1993                                              2760
1994                                              3144
</TABLE>
 
---------------
 
Source: American Resort Development Association, The 1995 Worldwide Timeshare
Industry.
 
                                       28
<PAGE>   30
 
     The Company believes that, based on published industry data, the following
factors have contributed to the increased acceptance of the timeshare concept
among the general public and the substantial growth of the timeshare industry
over the past 15 years:
 
     - Increased consumer confidence resulting from consumer protection
       regulation of the timeshare industry and the entry of brand name national
       lodging companies into the industry;
 
     - Increased flexibility of timeshare ownership due to the growth of
       exchange organizations such as RCI and Interval International;
 
     - Improvement in the quality of both the facilities themselves and the
       management of available timeshare resorts;
 
     - Increased consumer awareness of the value and benefits of timeshare
       ownership, including the cost savings relative to other lodging
       alternatives; and
 
     - Improved availability of financing for purchasers of vacation intervals.
 
     The timeshare industry traditionally has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, most with relatively small resort portfolios consisting of units with
differing quality. The Company believes that one of the most significant factors
contributing to the current success of the timeshare industry is the entry into
the market of some of the world's major lodging, hospitality and entertainment
companies. Such major companies which now operate or are developing or
franchising vacation interval resorts include Marriott, Disney, Hilton, Hyatt,
Four Seasons, InterContinental, Westin and Promus. Unlike the Company, however,
the timeshare operations of each of these companies comprise only a relatively
small portion of such company's overall operations. Moreover, brand name lodging
companies are believed by the Company to have had less than 10% of the worldwide
vacation interval market in 1995. The timeshare products offered by most
companies are limited to the use of one resort in weekly intervals and only
provide use of the resort for a fixed period of time. Vacation Credits can be
used by Owners at any WorldMark Resort, at any time during the year and for any
number of days. Unlike the typical requirements imposed by other timeshare
companies, the use of Vacation Credits is not related to any specific resort,
fixed usage period, or time of year. The Company believes that the combination
of its system of Vacation Credits and numerous WorldMark Resorts provides its
customers with a range of vacation choices not offered by any other timeshare
company. See "-- Competition."
 
     The Consumer. According to 1995 information compiled by ARDA, (i) the prime
market for vacation intervals is customers in the 40-55 year age range who are
reaching the peak of their earning power, (ii) the median age of a vacation
interval buyer was 50, and (iii) the median annual household income of vacation
interval owners in the United States was approximately $63,000, with
approximately 35% of all vacation interval owners having an annual household
income greater than $75,000 and approximately 17% of such owners having an
annual household income greater than $100,000. Despite the growth in the
timeshare industry, vacation interval ownership as of December 31, 1994 had
achieved only a 3.0% market penetration among United States households with
income above $35,000 per year and a 3.9% market penetration among United States
households with income above $50,000 per year.
 
     According to the ARDA study, the three primary reasons cited by consumers
for purchasing a vacation interval are (i) the ability to exchange the vacation
interval for accommodations at other resorts through exchange networks such as
RCI (cited by 82% of vacation interval purchasers), (ii) the savings as compared
to traditional resort vacations (cited by 61% of such purchasers), and (iii) the
quality and appeal of the resort at which they purchased a vacation interval
(cited by 54% of such purchasers). According to the ARDA study, vacation
interval buyers have a high rate of repeat purchases. Approximately 41% of all
vacation interval owners own more than one interval representing approximately
65% of the industry inventory, and approximately 51% of all owners who bought
their first vacation interval before 1985 subsequently purchased a second
vacation interval. In addition, the ARDA study suggests that customer
satisfaction increases with length of ownership, age, income, multiple location
ownership and accessibility to vacation interval exchange networks.
 
                                       29
<PAGE>   31
 
     The Company believes it is well positioned to take advantage of these
trends because its vacation ownership program provides (i) an increasing number
of high quality resorts, (ii) the flexibility to stay at any of the WorldMark
Resorts, (iii) the opportunity to participate in the RCI network, (iv) the
relative affordability of becoming an Owner compared to alternative vacation
interval programs, and (v) an innovative combination of features that provides
Owners with a more flexible timeshare product than those presently offered in
the timeshare industry. The Company expects the timeshare industry to continue
to grow as the baby-boom generation (currently ages 32 to 50) moves through the
40-55 year age bracket, the age group which purchased the most vacation
intervals in 1994.
 
DESCRIPTION OF THE WORLDMARK RESORTS
 
     The following table sets forth certain information with respect to the
WorldMark Resorts as of March 31, 1997. All of the units are fully-furnished,
including telephones, televisions, VCRs and stereos, and all but the studio
units feature full kitchens. Most of the units contain a washer and dryer,
fireplace, microwave and private outdoor barbecue grill. Many units also include
a private deck.
<TABLE>
<CAPTION>
                                                 SIZE OF UNITS(1)                  WORLDMARK RESORT AMENITIES
                                             ------------------------    -----------------------------------------------
                                                                                   SWIMMING    WHIRLPOOL/    RESTAURANT/
 EXISTING RESORTS           LOCATION          S     1BR    2BR    3BR    TENNIS      POOL       JACUZZI        LOUNGE
-------------------    -------------------    -     ---    ---    ---    ------    --------    ----------    -----------
<S>                    <C>                   <C>    <C>    <C>    <C>    <C>       <C>         <C>           <C>
BRITISH COLUMBIA
 Sundance              Whistler                 0   10      9      6                             X
CALIFORNIA
 North Shore
   Estates             Bass Lake                0    0     61      0      X          X           X
 Beachcomber           Pismo Beach              0   20      0      0      X
 Palm Springs          Palm Springs            10   12     35      7                 X           X             X
 Big Bear              Big Bear Lake            0   12      0      0
HAWAII
 Valley Isle           Maui                     2    6      6      0                 X                         X
 Kapaa Shores          Kauai                    0   25     17      0      X          X           X
NEVADA
 Lake Tahoe            Stateline                0   23     21      6                 X           X
 Las Vegas             Las Vegas                0   22     20      0
OREGON
 Eagle Crest           Redmond                  1   28     22     12      X          X           X             X
 Gleneden Beach        Lincoln City             0   35     41      4      X          X           X
 Running Y Resort      Klamath Falls            0   12     13      2      X          X           X
WASHINGTON
 Lake Chelan Shores    Chelan                   0    5      8      0      X          X           X
 Surfside              Long Beach               0   20      5      0                 X           X
 Discovery Bay         Sequim                   0    0     32      0      X          X           X             X
 Park Village          Leavenworth              0    0     72      0                 X           X
 Mariner Village       Ocean Shores             0    8     24      0                 X           X

 Birch Bay             Blaine                   0   16     36      0                 X           X

MEXICO
 Coral Baja            San Jose del Cabo        0   50     23      1      X          X           X             X

PLANNED RESORTS:
 Clear Lake(2)         Nice, California
 Kona(2)               Hawaii, Hawaii
</TABLE>
 
<TABLE>
<CAPTION>
 
 EXISTING RESORTS          NEARBY AMENITIES
-------------------  ----------------------------
<S>                   <C>
BRITISH COLUMBIA
 Sundance            Golf, Skiing
CALIFORNIA
 North Shore         Water Activities, Yosemite
   Estates           National Park
 Beachcomber         Beaches
 Palm Springs        Golf
 Big Bear            Skiing, Water Activities
HAWAII
 Valley Isle         Golf, Beaches
 Kapaa Shores        Golf, Beaches
NEVADA
 Lake Tahoe          Skiing, Golf, Water
                     Activities, Gaming
 Las Vegas           Gaming, Golf
OREGON
 Eagle Crest         Golf, Equestrian Center,
                     Fitness Center
 Gleneden Beach      Golf, Beaches, Gaming
 Running Y Resort    Golf, Water Activities
WASHINGTON
 Lake Chelan Shores  Water Activities
 Surfside            Beaches
 Discovery Bay       Water Activities
 Park Village        Golf, Skiing
 Mariner Village     Beaches
 Birch Bay           Beaches, Gaming
MEXICO
 Coral Baja          Beaches, Golf
PLANNED RESORTS:
 Clear Lake(2)       Golf, Water Activities
 Kona(2)             Golf, Beaches
</TABLE>
 
---------------
 
(1) S indicates studio; 1BR indicates one bedroom; 2BR indicates two bedrooms;
    and 3BR indicates three bedrooms. Units with the same number of bedrooms may
    vary in size and amenities.
 
(2) These units are expected to be contributed to WorldMark in 1997 and 1998.
 
                                       30
<PAGE>   32
 
     In addition to the planned additions of Clear Lake and Kona as WorldMark
Resorts, the Company currently has several other resorts in the permitting stage
and several more in the advanced planning stage. One potential development is
the MountainStar project which initially would involve a 1,100 acre parcel in
central Washington owned by Jeld-Wen. On behalf of Jeld-Wen, the Company is
currently pursuing the necessary regulatory approvals. Should the required
approvals be obtained in a timely manner, active development of this project
could commence as early as the summer of 1998, and the Company anticipates that
it would purchase a portion of the real estate involved in the project and
construct condominium units for its own account and for contribution to
WorldMark. In addition, the Company may be retained by Jeld-Wen to act as
project manager for the overall development of MountainStar.
 
WORLDMARK
 
     WorldMark is a California nonprofit mutual benefit corporation that was
formed by Trendwest in 1989. WorldMark's articles of incorporation provide that
the specific purpose for which it was formed is to own, operate and manage the
real property conveyed to it by the Company. Owners receive the right to use all
WorldMark Resort units at any available time and interval selected by the Owner,
and the right to vote to elect WorldMark's board members and with respect to
certain major WorldMark matters. The number of votes that each Owner has is
based on the number of Vacation Credits owned.
 
     Compared to other timeshare arrangements, the WorldMark concept provides
Owners significant flexibility in planning vacations. Depending on how many
Vacation Credits an Owner has purchased, the Owner may use the Vacation Credits
for one or more vacations annually. The number of Vacation Credits that are
required to stay one day at WorldMark's units varies, depending upon the resort
location, the size of the unit, the vacation season and the day of the week. For
example, a Friday or Saturday night stay at a one-bedroom unit may require 825
Vacation Credits per night off-season and 1,450 Vacation Credits per night in
peak season. A midweek stay at the same one-bedroom unit would require less
Vacation Credits. This range of Vacation Credits that is required to stay one
day enables an Owner to receive a varying number of days at the WorldMark
Resorts depending on the vacation choices made by the Owner. Under this system,
Owners can select vacations according to their schedules, space needs and
available Vacation Credits. Vacation Credits are reissued on an anniversary date
basis and any unused Vacation Credits may be carried over for one year. An Owner
may also borrow Vacation Credits from the Owner's succeeding year's allotment.
 
     An Owner may also purchase bonus time ("Bonus Time") from WorldMark for use
when space is available. Bonus Time can only be reserved within two weeks of
use. Bonus Time gives Owners the opportunity to use available units on short
notice at a reduced rate (generally from $20 to $50 per night for a two bedroom
unit, mid-week in the off-season) and to obtain usage beyond their Vacation
Credit allotment.
 
     WorldMark collects maintenance dues from Owners based on the number of
Vacation Credits owned. Currently, the annual dues are $237 for the first 5,000
Vacation Credits owned, plus $72 for each additional increment of 2,500 Vacation
Credits owned. These dues are intended to cover WorldMark's operating costs,
including condominium association dues at the WorldMark Resorts. Trendwest pays
WorldMark the dues on all unsold Vacation Credits. Such payments totaled
$137,000, $512,000 and $273,000 in 1994, 1995 and 1996, respectively.
 
     WorldMark has a five member board of directors that manages its business
and affairs. Three of the directors and principal executive officers of
WorldMark are also officers of the Company. The Board must obtain the approval
of a majority of the voting power of the Owners represented (excluding
Trendwest) to take certain actions, including (i) incurrence of capital
expenditures exceeding 5% of WorldMark's budgeted gross expenses during any
fiscal year and (ii) selling property of WorldMark during any fiscal year with
an aggregate fair market value in excess of 5% of WorldMark's budgeted gross
expenses for such year.
 
     Trendwest has a Management Agreement with WorldMark whereby Trendwest acts
as the exclusive manager and servicing agent of WorldMark and the vacation owner
program. Trendwest's responsibilities under the Management Agreement include
general management of WorldMark, overseeing the property management and service
levels of the resorts, and preparing financial forecasts and budgets for
WorldMark. The Management Agreement provides for automatic one-year renewals
unless such renewal is denied by a
 
                                       31
<PAGE>   33
 
majority of the voting power of the Owners (excluding Trendwest). As
compensation for its services, Trendwest receives the portion of total revenues
received by WorldMark remaining after WorldMark pays or reserves for its
expenses plus reserves for repair and replacement of WorldMark Resorts. This
amount is subject to a ceiling equal to 15% of the budgeted annual expenses and
reserves of WorldMark (exclusive of Trendwest's fee). Trendwest's management
revenues from WorldMark during 1994, 1995 and 1996 were approximately $173,000,
$747,000 and $1,103,000, respectively.
 
SALES AND MARKETING
 
     The Company's sales of Vacation Credits primarily occur at eight off-site
sales offices located in metropolitan areas in three regions. The remainder of
the Company's sales of Vacation Credits occur at three on-site sales offices in
these regions. The Company plans to open a new off-site sales office in
California in late 1997. Certain information with respect to the Company's sales
offices in the three regions is provided below.
 
<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
          -----------------------------------------------------------------------------------------------------------------------
                           1994                                    1995                                    1996
          --------------------------------------  --------------------------------------  --------------------------------------
                                                          (DOLLARS IN THOUSANDS)          
            AVERAGE NUMBER                          AVERAGE NUMBER                          AVERAGE NUMBER
               OF SALES       NUMBER OF                OF SALES       NUMBER OF                OF SALES       NUMBER OF
 REGION   REPRESENTATIVES(1)  OWNERS(2)  SALES(3) REPRESENTATIVES(1)  OWNERS(2)  SALES(3) REPRESENTATIVES(1)  OWNERS(2)  SALES(3)
--------- ------------------  ---------  -------  ------------------  ---------  -------  ------------------  ---------  --------
<S>       <C>                 <C>        <C>      <C>                 <C>        <C>      <C>                 <C>        <C>
Pacific
Northwest(4)...         54      11,367   $31,654           83           17,157   $43,926          104           23,907   $ 54,313
Northern
California(5)..         35       7,297    23,250           60           10,327    31,324           66           13,702     37,287
Southern
California(6)..         --          --        --            6              295     2,533           22            1,222      8,440
                        --      ------   -------          ---           ------   -------          ---           ------   --------
 Total...               89      18,664   $54,904          149           27,779   $77,783          192           38,831   $100,040
                        ==      ======   =======          ===           ======   =======          ===           ======   ========
</TABLE>
 
---------------
 
(1) Represents the average number of sales representatives during the year. This
    calculation is based on the number of sales representatives at the end of
    each calendar quarter during the indicated year.
 
(2) Cumulative number of Owners at the end of the year, excluding Owners who
    purchased Vacation Credits at Eagle Crest and Running Y.
 
(3) Includes Upgrade Sales.
 
(4) Comprised of three off-site sales offices (Kirkland, Washington, which
    opened in October 1989 and moved to Seatac, Washington in February 1994;
    Vancouver, Washington, which opened in February 1994; and Lynnwood,
    Washington, which opened in June 1995) and three on-site sales offices
    (Leavenworth, Washington, which opened in September 1994, Birch Bay,
    Washington, which opened in June 1995, and Gleneden Beach, Oregon, which
    opened in February 1996). Those figures include an off-site sales office in
    Bellingham, Washington, which opened in July 1990, and was consolidated into
    the Lynnwood and Birch Bay offices in June 1995.
 
(5) Comprised of three off-site sales offices: Santa Clara, which opened in
    April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened
    in May 1995.
 
(6) Comprised of the Ontario off-site sales office which opened in April 1996.
    These figures include sales from an on-site sales office at Palm Springs,
    which opened in April 1995 and was consolidated into the Ontario sales
    office in August 1996. The Company opened a new off-site sales office in
    Costa Mesa in February 1997.
 
     The Company believes the advantages of using off-site sales offices
compared to sales offices located at more remote resorts include (i) access to
larger numbers of potential customers, (ii) convenience for prospective
customers to attend a sales presentation, (iii) access to a wider group of
qualified sales personnel due to more convenient work locations, (iv) ability to
open new sales offices quickly and without significant capital expenditures and
(v) lower marketing costs to attract prospective customers to visit a sales
office.
 
     The Company's off-site sales offices are approximately 5,000 square feet
and include a theater, sales area and reception area. Each off-site sales center
is staffed by a sales manager, an office administrator, approximately 10 to 25
salespeople, two verification representatives, and additional staff for guest
registration and clerical assistance. The on-site sales offices are
approximately 2,500 square feet and generally include similar facilities and a
smaller number of staff compared to the off-site sales offices.
 
     The Company uses a variety of marketing programs to attract prospective
Owners, including sponsored promotional contests offering vacation packages or
gifts, targeted mailings and telemarketing efforts, and various other
promotional programs. The Company also co-sponsors sweepstakes, giveaways and
other promotional programs with professional teams at major sporting events
(such as Portland Trail Blazers basketball games and Seattle Mariners baseball
games) and with supermarkets. Management believes that a variety of marketing
programs supplemented with the use of independent marketing agents is the most
 
                                       32
<PAGE>   34
 
effective strategy to reach different segments of the population. The Company
continually monitors and adjusts its marketing programs to improve efficiency
and recently established a website on the Internet. Trendwest targets
prospective Owners through an analysis of age, income and travel interests. The
Company delivers targeted prospective Owners a notice related to the specific
promotion, inviting the prospective Owner to call the Company's toll-free voice
mail system to leave a return phone number. Those persons who call the Company
and leave their phone number receive a call from the Company to invite them to
visit an off-site sales office and attend a sales presentation. As an incentive
to attend the presentation, the Company offers gifts, such as an overnight trip
or electronic equipment. The Company believes that its non-obtrusive method of
marketing helps maintain the quality image of the Company with its prospective
Owners and the public.
 
     When prospective Owners visit a sales facility, they are greeted by a host
or hostess and are shown to the theater to view a 30-minute, multi-media
presentation describing the benefits of timeshares in general, and WorldMark
specifically. After the presentation, all prospective owners are introduced to
WorldMark and the benefits of becoming an Owner by a representative of
Trendwest. The speaker introduces the guests to their salesperson, who provides
more specific information, answers questions and invites the guest to join
WorldMark. Audience size is limited to about 20 prospects per presentation. Each
sales office generally conducts three or four presentations per day, five days a
week.
 
     Printed information regarding Trendwest and its properties, as well as the
rights and obligations of Owners, is provided to each prospective member before
Vacation Ownership Interests are sold. Prior to finalizing a sale, each new
Owner meets with one of the Company's verification representatives to discuss
the new Owner's reasons for joining and to review the rights and obligations of
Owners. The purpose of this meeting is to allow prospective Owners to review
their proposed commitment in an environment separate from the sales process.
 
     Under the laws of each state where the Company sells Vacation Ownership
Interests, each purchaser has a right to rescind the purchase of Vacation
Credits for a period ranging from three to seven calendar days following the
later of the date the contract was signed or the date the purchaser received the
last of the documents required to be provided by the Company, depending on the
state. The Company's current practice is to allow all purchasers a seven day
rescission period, even if state law allows a shorter period. During 1995 and
1996, the Company had a rescission rate of 18.9% and 17.7%, respectively, which
is consistent with the Company's historical experience.
 
     The Company's salespeople are trained to use a soft sales approach. The
salespeople emphasize the advantages of becoming an Owner, including
convenience, flexibility, ownership and affordability. The Company believes the
success of its sales approach is reflected not only by the amount of sales of
Vacation Credits to new Owners, but also by the amount of sales of Vacation
Credits to "non-Owner" referrals. Sales to non-Owner referrals, who are persons
referred to the Company by those who have attended a sales presentation but who
did not purchase Vacation Credits themselves, accounted for $2.3 million and
$4.0 million of the Company's net sales of Vacation Credits during 1995 and
1996, respectively.
 
     Trendwest offers existing Owners cash awards for referrals of new Owners.
The Company maintains a staff of marketing individuals who specialize in
promoting referrals by existing Owners. In addition, as part of the Company's
ongoing marketing efforts, it offers existing Owners the opportunity to purchase
additional Vacation Credits generally at a discount from the current price.
Owners may purchase additional Vacation Credits in increments of 1,000.
Trendwest currently employs 20 sales representatives who specialize in Upgrade
Sales. Sales of Vacation Credits from the Company's owner referral program and
Upgrade Sales contributed in the aggregate approximately 25.3% and 29.0% of the
Company's net sales in 1995 and 1996, respectively.
 
CUSTOMER FINANCING
 
     Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales of Vacation Credits will continue to be financed by the
Company. In 1996, the average new Owner purchased approximately 6,600 Vacation
Credits for a purchase price of approximately $8,600 and the Company financed
approximately 87% of the aggregate
 
                                       33
<PAGE>   35
 
purchase price of Vacation Credits sold to new Owners with an average new Note
Receivable of approximately $7,650. During 1996, the aggregate amount of Notes
Receivable generated in connection with the sale of Vacation Credits to new
Owners was approximately $79.1 million. The Company requires a down payment of
at least 10% of the purchase price and provides a term of up to seven years and
an interest rate of 13.9% or 14.9% per annum, depending on the method of payment
selected. Because the Company offers a discount if the full purchase price for
Vacation Credits is received within 90 days after the purchase is completed, the
Company received full payment in 1996 for approximately 17% of Vacation Credit
sales to new Owners during this 90 day period.
 
     Existing Owners purchasing additional Vacation Credits must either make a
down payment of 10% of the price of the Upgrade Sales or have sufficient equity
in their existing Vacation Credits to provide at least 10% of the value of all
Vacation Credits, including the Upgrade. The amount of the existing receivable
is combined with the purchase price of the additional Vacation Credits purchased
and the interest rate and the term of the Note Receivable may be modified,
subject to a maximum term of ten years.
 
     At December 31, 1996, an aggregate of $179.2 million of Notes Receivable
were outstanding, of which approximately $52.4 million with a weighted average
interest rate of 14.1% per annum had been retained by the Company. The balance
of approximately $126.8 million of Notes Receivable had been sold by the Company
prior to that date, although the Company retained limited recourse liability
with respect to these Notes Receivable. See Notes 4, 5 and 15(a) to Notes to
Combined Financial Statements. The Company may continue to sell a substantial
amount of its Notes Receivable. See "-- Finance Subsidiaries" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
     Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At December 31, 1996, approximately $3.2 million of
Notes Receivable, including Notes Receivable previously sold by the Company,
were past due 60 days or more. The Notes Receivable are secured by a security
interest in the related Vacation Credits. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records as an expense any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits to inventory available for resale.
 
     The Company maintains a reserve for doubtful accounts in respect of the
Notes Receivable owned by the Company and a reserve for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these reserves at December 31, 1995 and 1996 were $8.0
million and $11.2 million, respectively, representing approximately 6.3% of the
total portfolio of Notes Receivable at those dates, including the Notes
Receivable that had been sold by the Company. No assurance can be given that
these reserves will be adequate, and if the amount of the Notes Receivable that
is ultimately written off materially exceeds the related reserves, the Company's
business, results of operations and financial condition could be materially
adversely affected.
 
     Sage Systems, Inc. ("Sage"), a licensed escrow company, services the
Company's entire portfolio of Notes Receivable under an Escrow Agreement with
the Company. Under the Escrow Agreement, contracts for the sale of Vacation
Credits by the Company, and the funds received from such sales, are placed in
escrow with Sage. The escrowed funds and documents are released to the Company
when the Company certifies that it has sufficient Vacation Credits available for
sale, the applicable state-mandated cancellation period (under which a purchaser
may rescind his purchase) has expired, and Sage receives notice from the Company
that a rescission notice has not been received from the purchaser. The Company
pays Sage a fee of $35 per account serviced under the Escrow Agreement. The
Company and Sage are also parties to a Service Agreement under which Sage is
responsible for maintaining a data processing system to process bills and
receive monthly receivable payments. The Company pays Sage a monthly fee of
$1.75 per account under the Service Agreement. The Company handles billing
inquiries and all other personal interaction with the Owners, including
collections on its Notes Receivable. Collections of delinquent installment
accounts are administered by 22 collection representatives. See "Certain
Transactions -- Relationship with Sage Systems."
 
                                       34
<PAGE>   36
 
FINANCE SUBSIDIARIES
 
     TW Holdings, Inc. ("TW") was organized in 1993 to purchase Notes Receivable
at face value plus accrued interest. TW sells these Notes Receivable to a group
of banks led by Seattle-First National Bank (the "Bank Group") pursuant to a
receivables transfer agreement. Through TW, the Company sold eligible Notes
Receivable of $23.9 million in 1994, $38.5 million in 1995 and $42.1 million in
1996 to the Bank Group. The sales are subject to recourse for defaults and the
Company maintains a reserve for recourse liability. See Note 5 of Notes to
Combined Financial Statements.
 
     The present commitment of the Bank Group is $68.0 million and it is subject
to an overcollateralization pool of 25% of the balance of outstanding Notes
Receivable sold to the Bank Group. At December 31, 1996, the Bank Group held
Notes Receivable with a remaining principal balance of $55.0 million. TW's
agreement with the Bank Group is subject to annual renewals on June 30 of each
year. In the event of nonrenewal of the commitment, the Company would not be
able to sell additional Notes Receivable to the Bank Group.
 
     In April 1996, the Company sold $30.1 million of Notes Receivable to a
special purpose company, Trendwest Funding I, Inc. ("TFI"). In addition, the
Bank Group sold $47.1 million of Notes Receivable purchased from TW to another
special purpose company. The special purpose companies sold the receivables to
TRI Funding Company I, L.L.C. ("TFL"), a special purpose limited liability
company, and TFL issued $70.0 million of 7.42% fixed rate senior notes, series
1996-1 to private institutional investors. The notes were rated 'A' by Fitch
Investors and are secured by the Notes Receivable owned by TFL. The rating
reflects credit enhancements of a 10% overcollateralization and a 2% minimum
reserve account. The notes have a stated maturity of May 15, 2004.
 
     Both TW and TFI are wholly owned by Jeld-Wen. Immediately prior to the
closing of the Offering, the Company will acquire TW and TFI from Jeld-Wen in
exchange for        shares of the Company's Common Stock. See "Certain
Transactions -- Acquisition of Finance Subsidiaries."
 
PROPERTY OWNERSHIP
 
     Unlike many "right-to-use" timeshare operations in which a developer sells
timeshare interests in properties it owns, the Company does not own the
properties designated for timeshare use. Rather, when the Company purchases
resort property, it vests in WorldMark title to the property free and clear of
any debt encumbrance. With respect to property developed by the Company, the
Company may initially obtain title in the undeveloped property and then deed the
developed resort property in WorldMark. At the time the Company vests title to
the property in WorldMark, a "Declaration of Vacation Owner Program" is recorded
on the property. This declaration establishes the usage rights of Owners as a
covenant on title, thus protecting those rights against the effect of any future
blanket encumbrance. This ownership structure is designed to protect the
timeshare usage rights of the Owners and complies with statutory regulations.
 
     The Company's only consideration for paying for the properties and for
arranging for the seller of the property to transfer title of the property
directly to WorldMark is the exclusive right to sell Vacation Credits and to add
new properties and additional units at the Company's discretion. The Company's
rights to sell Vacation Credits against the deeded properties are protected by a
security interest in the unsold inventory of Vacation Credits. This lien
prevents WorldMark from revoking such rights or transferring them to another
party.
 
     Vacation Credits are allocated to each unit based on its vacation use value
relative to existing properties. Vacation Credits are assigned for weeks of
peak, shoulder and off-peak use, reserving time for Bonus Time, repairs and
maintenance. The aggregate Vacation Credits assigned to each unit may not be
changed in the future, and the actual number of Credits assigned are contained
in the recorded declaration. This system of irrevocable allocation and
registration with the state protects the Owners by preventing dilution in the
usage value of the Owner's Vacation Credits.
 
     As of December 31, 1996, WorldMark had a reserve for replacement costs of
approximately $3.3 million for all depreciable assets (e.g., furniture,
appliances, carpeting, roofs and decks) of the WorldMark Resorts. In those
WorldMark Resorts where WorldMark owns only a small percentage of the units in a
complex and
 
                                       35
<PAGE>   37
 
belongs to an independent homeowners' association, the dues paid to such
association by WorldMark are partially used to provide adequate reserves for
replacement costs relating to such properties.
 
PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORK
 
     The Company believes that sale of Vacation Credits is made more attractive
by the Company's participation in the vacation interval exchange network
operated by RCI. In a 1995 study sponsored by the Alliance for Timeshare
Excellence and ARDA, the exchange opportunity was cited by purchasers of
vacation intervals as the most significant factor in determining whether to
purchase a vacation interval. For an annual membership fee (currently $67),
Owners may participate in RCI, which allows Owners to exchange Vacation Credits
for an occupancy right at a participating resort in RCI based upon availability
and the payment of an additional exchange fee (currently $90 to $100). WorldMark
pays the RCI annual membership fee for the Owner's first year. An Owner may
exchange Vacation Credits for an occupancy right in a resort participating in
the RCI network by requesting occupancy and specifying the desired unit size and
time period. RCI provides an Owner hotline with direct phone access to
representatives who are knowledgeable about WorldMark and are responsible for
assisting Owners with an exchange. RCI assigns a weekly exchange value for
Vacation Credits. This exchange value is based upon a number of factors. If RCI
is unable to meet the Owner's initial request, it suggests alternative resorts
based on availability.
 
     Founded in 1974, RCI, which was recently acquired by HFS Incorporated, has
grown to be the world's largest vacation interval exchange organization. As of
March 20, 1997 it had a total of 3,109 participating resort facilities and over
2.2 million members worldwide. During 1995, RCI processed approximately 1.7
million vacation interval exchanges. During 1995, approximately 97% of all
exchange requests were ultimately fulfilled by RCI, and approximately 58% of all
exchange requests were confirmed on the day of the request.
 
COMPETITION
 
     The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Some of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
interval resorts include Marriott, Disney, Hilton, Hyatt, Four Seasons, Inter-
Continental, Westin and Promus. In addition, other publicly-traded companies
focused on the timeshare industry, such as Signature, Fairfield and Vistana,
currently compete, or may in the future compete, with the Company. Many of these
entities possess significantly greater financial, marketing and other resources
than those of the Company. Management believes that industry competition will be
increased by recent and potential future consolidation in the timeshare
industry.
 
     The Company has entered into marketing agreements with affiliates of its
parent, Jeld-Wen, pursuant to which these affiliates may market Vacation
Ownership Interests for their own account at Eagle Crest Resort in Redmond,
Oregon and Running Y Resort in Klamath Falls, Oregon in exchange for their
contribution to WorldMark of condominium units at those resorts. These sales
activities are competitive with the Company's marketing activities, particularly
in the Oregon and northern California markets. See "Certain Transactions --
Relationship with Jeld-Wen."
 
GOVERNMENTAL REGULATION
 
     General. The Company's marketing and sales of Vacation Credits and certain
of its other operations are subject to extensive regulation by the states and
foreign jurisdictions in which the WorldMark Resorts are located and in which
Vacation Credits are marketed and sold and also by the federal government.
 
     State and Provincial Regulations. Most U.S. states and Canadian provinces
have adopted specific laws and regulations regarding the sale of vacation
interval ownership programs. Washington, Oregon, California, Hawaii and British
Columbia require the Company to register WorldMark Resorts, the Company's
vacation program and the number of Vacation Credits available for sale in such
state or province with a designated
 
                                       36
<PAGE>   38
 
state or provincial authority. The Company must amend its registration if it
desires to increase the number of Vacation Credits registered for sale in that
state or province. Either the Company or the state or provincial authority
assembles a detailed offering statement describing the Company and all material
aspects of the project and sale of Vacation Credits. The Company is required to
deliver the offering statement to all new purchasers of Vacation Credits,
together with certain additional information concerning the terms of the
purchase. Hawaii imposes particularly stringent and broad regulation
requirements for the sale of interests in interval ownership programs that have
resort units located in Hawaii. The Company has incurred substantial
expenditures over an extended period of time in the registration process in
Hawaii and still has not completed this process. Hawaii has allowed the use of
WorldMark units in Hawaii, provided that the Company continues in good faith to
pursue registration in Hawaii. Laws in each state where the Company sells
Vacation Credits grant the purchaser of Vacation Credits the right to cancel a
contract of purchase at any time within a period ranging from three to seven
calendar days following the later of the date the contract was signed or the
date the purchaser received the last of the documents required to be provided by
the Company. Most states have other laws which regulate the Company's
activities, such as real estate licensure laws, laws relating to the use of
public accommodations and facilities by disabled persons, sellers of travel
licensure laws, anti-fraud laws, advertising laws, and labor laws.
 
     Federal Regulations. The Federal Trade Commission has taken an active
regulatory role in the interval ownership industry through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-In-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Standards Practices Act, the Telephone Consumer
Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act,
the Civil Rights Act of 1964 and 1968, the Fair Housing Act and the Americans
with Disabilities Act.
 
     Although the Company believes that it is in material compliance with all
federal, state, local and foreign laws and regulations to which it is currently
subject, there can be no assurance that it is in fact in compliance. Any failure
by the Company to comply with applicable laws or regulations could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company will continue to incur significant
costs to remain in compliance with applicable laws and regulations, and such
costs could increase substantially in the future.
 
     Environmental Matters. Under various federal, state, local and foreign
laws, ordinances and regulations, the owner or operator of real property
generally is liable for the costs of removal or remediation of certain hazardous
or toxic substances located on or in, or emanating from, such property, as well
as related costs of investigation and property damage. Such laws often impose
such liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. Other
federal and state laws require the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the
event of construction, demolition, remodeling or renovation. Other statutes may
require the removal of underground storage tanks. Noncompliance with these and
other environmental, health or safety requirements may result in the need to
cease or alter operations at a property. Although the Company conducts an
environmental assessment with respect to the properties it acquires for
WorldMark, the Company has not received a Phase I environmental report for any
WorldMark Resort. There can be no assurance that any environmental assessments
undertaken by the Company with respect to the WorldMark Resorts have revealed
all potential environmental liabilities, or that an environmental condition does
not otherwise exist as to any one or more of the WorldMark Resorts that could
have a material adverse effect on the Company's business, financial condition
and results of operations.
 
EMPLOYEES
 
     As of March 31, 1997, Trendwest had 681 full-time employees, with 403 in
sales, 122 in marketing and 156 in administration. The Company believes that its
employee relations are good. None of the Company's employees is represented by a
labor union.
 
                                       37
<PAGE>   39
 
     The Company enforces a stringent drug policy with all employees. All
prospective employees are tested for the presence of impairing substances before
being hired by the Company. Employees of the Company are tested periodically for
the presence of impairing substances and, in addition, any Company employee may
be tested for such substances for cause. Any employee who is found to be under
the influence of an impairing substance is subject to appropriate disciplinary
action, including termination.
 
INSURANCE; LEGAL PROCEEDINGS
 
     WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from
earthquakes, floods, or acts of war, are generally excluded from WorldMark's
insurance coverage. Should an uninsured loss or loss in excess of insured limits
occur, WorldMark has the option to either (i) remove such units from the
Vacation Credit system, which would result in a proportionate dilution of
vacation time available for the Vacation Credits which have been sold, or (ii)
pay for the related costs of replacement. Although WorldMark's board of
directors may impose a limited amount of special assessments to pay for capital
improvements or major repairs, there can be no assurance that WorldMark would be
able to increase assessments to provide sufficient funds to pay for all possible
capital improvements and major repairs of the units at the WorldMark Resorts. In
such an event, the Company may be required to advance funds to WorldMark in
order to maintain the quality of the WorldMark Resorts or WorldMark may need to
defer certain improvements or repairs, which could have an adverse effect on the
Company's liquidity and the sale of Vacation Credits. See "Risk
Factors -- Natural Disasters; Uninsured Loss."
 
     The Company is not aware of any legal proceedings pending against it. The
Company may be subject to claims and legal proceedings from time to time in the
ordinary course of business.
 
                                       38
<PAGE>   40
 
                                   MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS; KEY EMPLOYEES
 
     The following table sets forth certain information concerning each of the
Company's directors and executive officers, as well as certain other key
employees of the Company. The Company intends to add three additional
independent directors to its Board of Directors after consummation of the
Offering.
 
<TABLE>
<CAPTION>
                 NAME                   AGE                            POSITION
--------------------------------------  ---     ------------------------------------------------------
<S>                                     <C>     <C>
Directors and Executive Officers:
William F. Peare......................  59      President, Chief Executive Officer and Director
Jeffery P. Sites......................  40      Executive Vice President, Chief Operating Officer,
                                                  Secretary and Director
Gary A. Florence......................  55      Vice President, Chief Financial Officer and Treasurer
J. Michael Moyer......................  60      Senior Vice President
Gerald T. Lynch.......................  54      Vice President -- Marketing
Ronald A. Buzard......................  65      Vice President -- Sales
Alan B. Schriber......................  45      Vice President -- Administration
Roderick C. Wendt.....................  41      Director
Jerol E. Andres.......................  53      Director
Douglas Kintzinger....................  35      Director
Other Key Employees:
Gene F. Hensley.......................  44      Vice President -- Operations
Alice R. Heuple.......................  51      Vice President -- Product Development
Dan Stearns...........................  51      Vice President -- Corporate Communications
</TABLE>
 
     WILLIAM F. PEARE has served as its President and Chief Executive Officer,
and as a director, since 1989. Mr. Peare also serves as a director and as
President of WorldMark. Mr. Peare developed the WorldMark concept and attracted
key management personnel to the Company. From 1987 to 1989, Mr. Peare served as
a management consultant for Eagle Crest Resort in Redmond, Oregon and for
Elkhorn Resort in Sun Valley, Idaho. From 1985 to 1987, Mr. Peare was a Senior
Vice President of Horizon Airlines. From 1983 to 1985, Mr. Peare served as Chief
Executive Officer of All Seasons Resorts, Inc. ("All Seasons"), a
publicly-traded membership campground company. From 1975 to 1982, Mr. Peare
served as President of Thousand Trails Inc. ("Thousand Trails"), the nation's
largest membership campground company.
 
     JEFFERY P. SITES has served as Executive Vice President, Chief Operating
Officer, Secretary of the Company since 1989, and served as Treasurer from 1989
to January 1997. Mr. Sites has been a director of the Company since 1991. Mr.
Sites also serves as a director and as Treasurer of WorldMark. Mr. Sites
oversees the day-to-day operations of the Company. From 1987 to 1989, Mr. Sites
was Chief Financial Officer of OMT, Inc., a holding company with a variety of
businesses including an interval ownership project in Sun Valley, Idaho. From
1985 to 1987, Mr. Sites was Executive Vice President and co-founder of Venture
Out Resorts, a regional membership campground company. From 1983 to 1985, Mr.
Sites was the Controller for All Seasons.
 
     GARY A. FLORENCE has served as Vice President, Chief Financial Officer and
Treasurer of the Company since January 1997. Prior to that time, he served as
Treasurer of Jeld-Wen, a position he held since 1992. From 1973 to 1991, Mr.
Florence served as Jeld-Wen's Corporate Controller. Mr. Florence has been
responsible for establishing the Finance Subsidiaries and structuring the Notes
Receivable sales transactions.
 
     J. MICHAEL MOYER has served as Senior Vice President of the Company since
1989. Mr. Moyer also serves as a director and as Secretary of WorldMark. Mr.
Moyer oversees the Company's legal affairs, including property closings,
registration of the Company's product under state timeshare laws, permitting of
new developments, managing the governance of WorldMark, and directing outside
legal counsel. From 1978 to 1986, Mr. Moyer served in a similar capacity at
Thousand Trails and All Seasons.
 
                                       39
<PAGE>   41
 
     GERALD T. LYNCH has served as Vice President -- Marketing of the Company
since 1991. From 1984 to 1991, Mr. Lynch served as Director and President of
Omni Concepts, a contract sales, marketing and business management company
serving the direct sales industry. From 1983 to 1984, Mr. Lynch served as Vice
President of sales and marketing for National American Corporation, a national
developer of resort communities. From 1973 to 1983, Mr. Lynch served as Vice
President of Sweet Water Corporation ("Sweet Water"), an interval ownership
company, and as President of Time Share Realty, a wholly-owned subsidiary of
Sweet Water.
 
     RONALD A. BUZARD has served as Vice President -- Sales since August 1993
and has overall responsibility for the Company's sales activities. Mr. Buzard
joined the Company in 1990, serving in various sales management positions. From
1987 to 1990, Mr. Buzard was a consultant in the timeshare and development
business. From 1984 to 1986, Mr. Buzard served as Vice President -- Sales for
All Seasons.
 
     ALAN B. SCHRIBER has served as Vice President -- Administration of the
Company since January 1997, and served as Vice President -- Administration and
Finance from September 1994 to January 1997. Mr. Schriber is responsible for the
accounts receivable, data processing, contract processing, and human resources
functions for the Company. From 1987 to 1994, Mr. Schriber was Senior Vice
President of Gulf American Financial Services, which specialized in the
development, implementation, and project management of consumer credit and
accounts receivable operations and systems. From 1981 to 1987, Mr. Schriber was
Vice President of Administration for Thousand Trails.
 
     RODERICK C. WENDT has served as a director of the Company since March 1993.
Mr. Wendt has served as the President of Jeld-Wen since March 1992.
 
     DOUGLAS P. KINTZINGER has served as a director of the Company since March
1994. Mr. Kintzinger has been employed by Jeld-Wen in various capacities since
1987, most recently serving as Vice President and Secretary of Jeld-Wen since
March 1994.
 
     JEROL E. ANDRES has served as a director of the Company since 1989. Since
1988, Mr. Andres has served as Chief Executive Officer and President of Eagle
Crest. From 1984 to 1988, Mr. Andres founded and was Chief Executive Officer and
President of Happy Trails Resort. Since 1993, Mr. Andres has served as a
director of Bank of the Cascades, a publicly-traded bank company. Mr. Andres
served on the board of ARDA for 11 years, serving as Chairman from 1984 to 1986.
From 1978 to 1984, Mr. Andres served as a Vice President of Thousand Trails.
 
     GENE F. HENSLEY has served as Vice President -- Operations since December
1995 and has been employed by the Company in various managerial and sales
positions since 1990. Mr. Hensley is responsible for the day to day operations
of the WorldMark Resorts as well as the Company's reservation, exchange and
owner service departments and travel. From 1979 to 1988, Mr. Hensley worked for
Thousand Trails, ultimately assuming regional management responsibilities.
 
     ALICE R. HEUPLE has served as Vice President -- Product Development since
1993 and has been employed by the Company in product development since 1992. Ms.
Heuple is responsible for the development of the WorldMark Resorts, managing
site development, construction, specifications and design, and purchasing. From
1980 to 1992, Ms. Heuple worked for Vacation Internationale, a vacation interval
company, serving at various times in various management positions.
 
     DAN STEARNS has served as Vice President -- Corporate Communications since
1995 and has been employed by the Company in corporate communications since
1990. Mr. Stearns oversees the Company's audio visual, design and printing
needs, and oversees the production of monthly communications to both Owners and
Company employees. From 1988 to 1990, Mr. Stearns worked with Harmon &
Associates Real Estate as Director of Corporate Communications. From 1980 to
1988, Mr. Stearns served as President of the Stearns Group, an audio visual and
video production services company serving the vacation interval industry.
 
                                       40
<PAGE>   42
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     The Board has recently established an Audit Committee and a Compensation
Committee. The Audit Committee, currently comprised of Messrs.           ,
          and           , recommends the selection of the Company's independent
auditors and consults with the independent auditors on the Company's internal
accounting controls. The Compensation Committee, currently comprised of Messrs.
          ,           and           , recommends to the Board salaries and
bonuses for the Company's executive officers and administers the Company's Stock
Option Plan.
 
CLASSIFIED BOARD OF DIRECTORS
 
     Upon the closing of the Offering, the Company's board of directors will be
divided into three classes. The directors in Class I are Messrs.
          and           , whose terms expire at the annual stockholders meeting
in 1998. The directors in Class II are Messrs.           and           , whose
terms expire at the annual stockholders meeting in 1999. The directors in Class
III are Messrs.           and           , whose terms expire at the annual
stockholders meeting in 2000. Commencing with the annual stockholders meeting in
1998 and thereafter, each director will serve for a term of three years
following the annual stockholders meeting at which such director was elected.
See "Certain Provisions of Oregon Law and of Trendwest's Articles of
Incorporation and Bylaws -- Classification of the Board of Directors."
 
     After consummation of the Offering, the Company intends to appoint three
additional independent directors, Mr.           , Mr.           and Ms.
          .
 
DIRECTOR FEES
 
     Directors who are not employees of the Company or Jeld-Wen will receive a
fee of $          for each Board meeting attended. All directors are reimbursed
for out of pocket expenses for each Board meeting attended.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
 
     The Company's Articles of Incorporation provide that the liability of the
directors of the Company for monetary damages will be eliminated to the fullest
extent permissible under Oregon law. This is intended to eliminate the personal
liability of a director for monetary damages in an action brought by or in the
right of the Company for breach of a director's duties to the Company or its
stockholders except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any unlawful distribution to stockholders, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision does not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's duty of care. This provision also does not
affect the director's responsibilities under any other laws, such as the federal
or state securities or environmental laws.
 
     The Articles of Incorporation and the Bylaws also provide that the Company
shall indemnify, to the fullest extent permitted under Oregon law, any person
who has been made, or is threatened to be made, a party to an action, suit or
legal proceeding by reason of the fact that the person is or was a director or
officer of the Corporation. The Company intends to enter into separate
indemnification agreements with each of its directors. These agreements will
require the Company to indemnify its directors to the fullest extent permitted
by law, including circumstances in which indemnification would otherwise be
discretionary. Among other things, the agreements require the Company to
indemnify directors against certain liabilities that may arise by reason of
their status or service as a director and to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified.
The Company also intends to obtain insurance on behalf of it executive officers
and directors for certain liabilities arising out of their actions in such
capacities. The Company believes that these contractual arrangements, the
provisions in its Articles of Incorporation and Bylaws and insurance coverage
are necessary to attract and retain qualified persons as directors and officers.
 
                                       41
<PAGE>   43
 
EXECUTIVE COMPENSATION
 
     Summary Compensation Table. The following table sets forth the annual
compensation during 1996 for Trendwest's chief executive officer and each of the
Company's other four most highly compensated executive officers (the "Named
Executive Officers").
 
<TABLE>
<CAPTION>
                                                     ANNUAL COMPENSATION
                                            -------------------------------------
                                                                     OTHER ANNUAL        ALL OTHER
        NAME AND PRINCIPAL POSITION         SALARY       BONUS       COMPENSATION     COMPENSATION(1)
------------------------------------------- -------     --------     ------------     ---------------
<S>                                         <C>         <C>          <C>              <C>
William F. Peare........................... $96,000     $192,013        $   7,660              10,500
  President and Chief Executive Officer
Jeffery P. Sites...........................  70,000      139,991            5,953              10,500
  Executive Vice President and Chief
     Operating Officer
J. Michael Moyer...........................  90,000       58,159               --              10,371
  Senior Vice President
Gerald T. Lynch............................  50,000      170,005               --              10,500
  Vice President -- Marketing
Ronald A. Buzard...........................  50,000      198,544               --              10,500
  Vice President -- Sales
</TABLE>
 
---------------
 
 (1) These amounts were paid by the Company under the Company's retirement plan.
 
     No options or other equity-based compensation were granted to or exercised
by any of the Named Executive Officers in 1996 and none of the Named Executive
officers beneficially owned any options at December 31, 1996.
 
EMPLOYMENT AGREEMENTS
 
     Messrs. Peare and Sites will enter into employment agreements with the
Company prior to the Offering. Under the employment agreements, Mr. Peare will
receive a base annual salary of $100,000, and Mr. Sites will receive a base
annual salary of $75,000, and each will have the opportunity to receive
performance bonuses. The agreements will contain a covenant not to compete for a
period of two years in the event of termination of employment for any reason. If
employment is terminated by the Company without cause, the employee will receive
his base salary for a period of one year following the date of termination plus
the amount of bonus earned during the preceding twelve months.
 
1997 STOCK OPTION PLAN
 
     Prior to the Offering, the Board of Directors will adopt the 1997 Stock
Option Plan (the "1997 Plan") and will authorize up to 5% of the number of
shares of Common Stock outstanding from time to time for issuance thereunder.
Under the 1997 Plan, options may be granted to the Company's employees,
directors, consultant and independent contractors. Only employees may receive
"incentive stock options," which are intended to qualify for certain tax
treatment; employees and nonemployees, including nonemployee directors, may
receive "nonqualified stock options," which do not qualify for such treatment.
The exercise price of all stock options under the 1997 Plan must at least equal
the fair market value of the Common Stock on the date of grant. All incentive
stock options granted under the 1997 Plan will expire ten years from the date of
grant unless terminated sooner pursuant to the provisions of the 1997 Plan.
Nonqualified stock options may have a term which exceeds ten years at the
discretion of the Board of Directors. In the event of a change of control of the
Company, including a merger or sale of substantially all of the Company's
assets, outstanding options must be assumed by any successor corporation, or
equivalent options must be substituted, or they will become fully vested and
exercisable.
 
                                       42
<PAGE>   44
 
                              CERTAIN TRANSACTIONS
 
RELATIONSHIP WITH JELD-WEN
 
     Background. Prior to the Offering, Jeld-Wen owned 95.2% of the outstanding
shares of Common Stock, and following completion of the Offering will own   % of
the outstanding shares of Common Stock. Roderick Wendt and Douglas Kintzinger
are directors of the Company and Richard Wendt was a director of the Company
until March 1997. Richard Wendt, Roderick Wendt and Douglas Kintzinger are all
directors of Jeld-Wen. In addition, Richard Wendt, Roderick Wendt and Douglas
Kintzinger own 38.2%, 1.4% and 0.5%, respectively, of the outstanding shares of
Jeld-Wen. Jeld-Wen has established the Jeld-Wen Foundation, which is a
charitable foundation of which Richard Wendt, Roderick Wendt and William Early,
an officer and director of Jeld-Wen, are members of the Foundation's Board of
Directors. Eagle Crest GP, Inc. ("Eagle Crest"), a wholly-owned subsidiary of
Jeld-Wen, is developing the Eagle Crest Resort. Running Y Resort, Inc. ("Running
Y"), a wholly-owned subsidiary of Eagle Crest, is developing the Running Y
Resort.
 
     Administrative Services. Jeld-Wen has provided certain administrative
services to the Company, including management services, payroll and accounting
services. The Company paid Jeld-Wen approximately $544,000, $723,000 and
$913,000 in 1994, 1995 and 1996, respectively, for such services. Jeld-Wen
provides a self-insured health, life and disability benefits plan to its
employees, in which the Company participated. The Company paid Jeld-Wen
approximately $608,000, $834,000 and $1,157,000 in 1994, 1995 and 1996,
respectively, to include the Company's employees within the Jeld-Wen plan.
Jeld-Wen also self-insures its workmen's compensation liability and the Company
also participates in that plan. The Company paid Jeld-Wen approximately
$178,000, $45,000 and $147,000 in 1994, 1995 and 1996, respectively, to include
the Company's employees within the Jeld-Wen plan. The Company did not
participate in the foregoing plans prior to January 1, 1994. The Company intends
to maintain its relationship with Jeld-Wen for certain of these administrative
services after consummation of the Offering.
 
     Credit Facility. The Company maintains an open revolving credit line with
Jeld-Wen. The credit line has no maximum balance restriction and is payable on
demand. The Company pays Jeld-Wen interest at prime plus one percent. The
maximum month-end balance of the line outstanding to Jeld-Wen during 1994, 1995
and 1996 was approximately $5,767,000, $30,651,000 and $27,954,000,
respectively. At March 31, 1997, the Company owed Jeld-Wen approximately
$24,265,000 under the line of credit. The Company intends to repay the entire
principal amount of the line of credit from the net proceeds of the Offering.
See "Use of Proceeds."
 
     Agreement with Eagle Crest. The Company has an agreement with Eagle Crest
whereby the Company has assigned to Eagle Crest the nonexclusive right to sell
Vacation Credits in WorldMark at Eagle Crest's resort in Redmond, Oregon and to
retain the gross proceeds from such sales. Eagle Crest must transfer condominium
units to WorldMark at no cost to WorldMark. Eagle Crest cannot sell more
Vacation Credits than has been allocated to the condominium units transferred to
WorldMark. Trendwest determines the number of Vacation Credits allocated to
those condominium units transferred to WorldMark using the same bases as other
resort units transferred by Trendwest to WorldMark by Eagle Crest. Effective
July 1, 1997, the agreement will require Eagle Crest to pay the Company a fee
equal to 3% of net sales of Vacation Credits sold at Eagle Crest. In addition,
the Company purchases Notes Receivable from Eagle Crest at face value plus
accrued interest. During 1994, 1995 and 1996, the Company purchased Notes
Receivable in the principal amount of approximately $6,005,000, $11,305,000 and
$8,993,000, respectively.
 
     Agreement with Running Y. The Company and Running Y are parties to an
agreement under which Running Y will develop at its expense condominium units at
the Running Y Resort. The Company will pay Running Y a purchase price for each
such unit equal to the number of Vacation Credits attributable to such unit (as
determined by the Company), multiplied by the then-current price per Vacation
Credit, multiplied by 26%. The Company has purchased 20 units through March 31,
1997 at a cost of $2,680,000, and is required to purchase an additional 80 units
prior to April 2000. Effective July 1, 1997, the agreement will require Running
Y to pay the Company a fee equal to 3% of net sales of Vacation Credits sold at
Running Y. In
 
                                       43
<PAGE>   45
 
addition, the Company purchased Notes Receivable in the principal amount of
approximately $2,157,000 in 1996.
 
     Purchase of Notes Receivable. I&I Holdings, Ltd., a wholly-owned subsidiary
of Jeld-Wen, has purchased Notes Receivable from the Company at face value plus
accrued interest on a full recourse basis. During 1994, 1995 and 1996, I&I
Holdings, Ltd. purchased Notes Receivables with outstanding balances of
approximately $13,000, $1,321,000 and $232,000, respectively.
 
     R & R Vista, an Oregon general partnership comprised of Richard L. Wendt
and Roderick C. Wendt, has purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1994, 1995 and
1996, R & R Vista purchased Notes Receivable with outstanding balances of
approximately $9,714,000, $3,905,000 and $3,350,000, respectively.
 
     The Jeld-Wen Foundation purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1994, 1995 and
1996, the Foundation purchased Notes Receivable with outstanding balances of
approximately $297,000, $191,000 and $211,000, respectively.
 
     Indebtedness of Management. The Company entered into a Stock Purchase
Agreement with each of William Peare and Jerol Andres for the purchase of
     shares of Common Stock from the Company. As full consideration for each
such sale, Messrs. Peare and Andres executed a promissory note to the Company in
the amount of $303,210 bearing interest at 9% per annum. Mr. Andres repaid his
promissory note in December 1995, and Mr. Peare repaid his promissory note in
November 1996.
 
ACQUISITION OF FINANCE SUBSIDIARIES
 
     TW Holdings, Inc. ("TW") and Trendwest Funding I, Inc. ("TFI") are
wholly-owned subsidiaries of Jeld-Wen. TW and TFI (the "Finance Subsidiaries")
were formed to enable the Company to sell and securitize Notes Receivable in
"off balance sheet" financings. In 1994, 1995 and 1996, TW and TFI purchased
$22,031,000, $45,195,000 and $75,522,000, respectively, of Notes Receivable from
the Company at face value plus accrued interest. See "Business -- Finance
Subsidiaries."
 
     The Company and Jeld-Wen have agreed that, immediately prior to the closing
of the Offering, the Company will acquire all shares of common stock of the
Finance Subsidiaries in exchange for      shares of the Company's Common Stock.
The value of the shares of the Finance Subsidiaries and the value of the shares
of Common Stock were determined in negotiations between Jeld-Wen and the
Company. As a result of this acquisition, the Finance Subsidiaries will become
wholly-owned subsidiaries of the Company. See Note 1(b) of Notes to Combined
Financial Statements.
 
RELATIONSHIP WITH SAGE SYSTEMS
 
     Background. The Company and Sage, a licensed escrow company, are parties to
several administrative agreements. See "Business -- Customer Financing." Woodrow
O'Rourke, the President of Sage, is the brother-in-law of William F. Peare, a
director and the President and Chief Executive Officer of the Company.
 
     Escrow. The Company and Sage are parties to an Escrow Agreement under which
contracts for the sale of Vacation Credits by the Company, and the funds
received from such sales, must be placed in escrow with Sage. The Company pays
Sage a fee of $35 per account for which Sage holds escrowed funds. Under the
Escrow Agreement, the Company paid Sage approximately $104,000 in 1996.
 
     Servicing of Accounts. The Company and Sage are parties to a Service
Agreement under which Sage is responsible for maintaining a data processing
system to bill and receive monthly receivable payments. The Company pays Sage a
monthly fee of $1.75 per account serviced by Sage. Under the Service Agreement,
the Company paid Sage approximately $274,000, $387,000 and $555,000 in 1994,
1995 and 1996, respectively.
 
     Software. The Company, Sage and James McBride, Sr., an employee of Sage,
entered into a Software Transfer Agreement in August 1994, under which Sage and
Mr. McBride granted the Company an irrevocable, royalty-free license to use
certain computer software programs. Concurrently with the Software Transfer
Agreement, the Company and Sage entered into a Software Support and Maintenance
Agreement
 
                                       44
<PAGE>   46
 
(the "Maintenance Agreement"), under which Sage provides modifications,
improvements and customer service to the Company in connection with the licensed
computer software programs. Under the Maintenance Agreement, the Company paid
Sage an initial fee of $12,000, a retainer of $2,000 per month and labor charges
of $50 per hour for services in excess of ten hours per month. Under the
Maintenance Agreement, the Company has paid Sage approximately $47,000, $35,000
and $35,000 in 1994, 1995 and 1996, respectively.
 
                                       45
<PAGE>   47
 
                       PRINCIPAL AND SELLING STOCKHOLDERS
 
     The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company and as adjusted to reflect the sale
of shares offered hereby, with respect to (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each person who is a director or Named Executive Officer of the Company and
(iii) all directors and executive officers of the Company as a group.
 
<TABLE>
<CAPTION>
                                     BENEFICIAL OWNERSHIP
                                         PRIOR TO THE                                BENEFICIAL OWNERSHIP
                                          OFFERING(1)                                 AFTER THE OFFERING
         NAME AND ADDRESS            ---------------------     SHARES TO BE SOLD     ---------------------
        OF BENEFICIAL OWNER          SHARES     PERCENTAGE      IN THE OFFERING      SHARES     PERCENTAGE
-----------------------------------  ------     ----------     -----------------     ------     ----------
<S>                                  <C>        <C>            <C>                   <C>        <C>
Jeld-Wen(2)........................                95.2%
William F. Peare...................                 3.1
Jeffery P. Sites...................                   *
Ronald A. Buzard...................                   *
Gerald T. Lynch....................                   *
J. Michael Moyer...................                   *
Jerol E. Andres....................                  --
Douglas Kintzinger.................                  --
Roderick C. Wendt..................                  --
All directors and executive
  officers as a group (10
  persons).........................                 4.5
</TABLE>
 
---------------
 
 *  Less than 1%.
 
(1) Each beneficial owner has the sole power to vote and to dispose of all
    shares of Common Stock owned by such beneficial owner.
 
(2) The address of this stockholder is 3250 Lakeport Blvd., Klamath Falls,
    Oregon 97601.
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The following descriptions of the Company's capital stock and of certain
provisions of the Articles of Incorporation and Bylaws are summaries which do
not purport to be complete and are subject to, and qualified in their entirety
by reference to, the Articles of Incorporation and Bylaws, forms of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. Reference is made to such exhibits for a detailed description of the
provisions summarized below.
 
     The Company's authorized capital stock consists of 90,000,000 shares of
Common Stock, no par value per share, and 10,000,000 shares of preferred stock,
no par value per share (the "Preferred Stock").
 
     On the date of this Prospectus, there were           shares of Common Stock
and no shares of Preferred Stock issued and outstanding. Upon the closing of the
Offering, there will be           shares of Common Stock and no shares of
Preferred Stock issued and outstanding.
 
COMMON STOCK
 
     Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by the stockholders. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. In the event of
the liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of the
Company's liabilities. The right of holders of the Common Stock to elect all of
the Company's directors, to receive dividends and to share ratably in assets
upon a liquidation of the Company may be subject to the rights of holders of
shares of Preferred Stock, if any such shares are issued.
 
                                       46
<PAGE>   48
 
PREFERRED STOCK
 
     Pursuant to the Articles of Incorporation, the Company is authorized to
issue "blank check" Preferred Stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the stockholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of the
Preferred Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, among other
things, could adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium to the prevailing market price or otherwise adversely affect the market
price of the Common Stock. Currently, the Company has no plans to issue shares
of Preferred Stock.
 
TRANSFER AGENT AND REGISTRAR
 
     The Company has appointed                     as its transfer agent and
registrar.
 
                        CERTAIN PROVISIONS OF OREGON LAW
            AND OF TRENDWEST'S ARTICLES OF INCORPORATION AND BYLAWS
 
     The following paragraphs summarize certain provisions of Oregon law and the
Company's Articles and Bylaws. The summary does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the Articles and
Bylaws, forms of which are filed as exhibits to the Registration Statement of
which this Prospectus is a part, and to Oregon law.
 
CONTROL SHARE ACQUISITIONS
 
     Upon completion of the Offering, the Company will become subject to the
Oregon Control Share Act (Oregon Revised Statutes Sections 60.801 - 60.816). The
Oregon Control Share Act generally provides that a person (the "Acquiring
Person") who acquires voting stock of an Oregon corporation in a transaction
which results in such Acquiring Person holding more than 20%, 33 1/3% or 50% of
the total voting power of such corporation (a "Control Share Acquisition")
cannot vote the shares it acquires in the Control Share Acquisition ("control
shares") unless voting rights are accorded to such control shares by the holders
of a majority of the outstanding voting shares, excluding the control shares
held by the Acquiring Person and shares held by the Company's officers and
inside directors ("interested shares"), and by the holders of a majority of the
outstanding voting shares, including interested shares. This vote would be
required at the time an Acquiring Person's holdings exceed 20% of the total
voting power of a company, and again at the time the Acquiring Person's holdings
exceed 33 1/3% and 50%, respectively. The term "Acquiring Person" is broadly
defined to include persons acting as a group. A transaction in which voting
power is acquired solely by receipt of an immediately revocable proxy does not
constitute a "Control Share Acquisition."
 
     The Acquiring Person may, but is not required to, submit to the Company an
"Acquiring Person Statement" setting forth certain information about the
Acquiring Person and its plans with respect to the Company. The Acquiring Person
Statement may also request that the Company call a special meeting of
stockholders to determine whether the control shares will be allowed to retain
voting rights. If the Acquiring Person does not request a special meeting of
stockholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of stockholders that is held more
than 60 days after the date of the Control Share Acquisition. If the Acquiring
Person's control shares are accorded voting rights and represent a majority or
more of all voting power, stockholders who do not vote in favor of the
restoration of such voting rights will have the right to receive the appraised
"fair value" of their shares, which may not be less than the highest price paid
per share by the Acquiring Person for the control shares.
 
     The Oregon Control Share Act will have the effect of encouraging any
potential acquiror to negotiate with the Company's Board of Directors and will
also discourage certain potential acquirors unwilling to
 
                                       47
<PAGE>   49
 
comply with the provisions of this law. A corporation may provide in its
articles of incorporation or bylaws that this law does not apply to its shares.
The Company has not adopted such a provision and does not currently intend to do
so. This law may make the Company less attractive for takeover, and thus
stockholders may not benefit from a rise in the price of the Common Stock that a
takeover could cause.
 
BUSINESS COMBINATIONS
 
     Upon completion of the Offering, the Company will become subject to the
Oregon Business Combination Act (Oregon Revised Statutes Sections
60.825 - 60.845). The Oregon Business Combination Act generally provides that in
the event a person or entity acquires 15% or more of the voting stock of an
Oregon corporation (an "Interested Stockholder"), the corporation and the
Interested Stockholder, or any affiliated entity, may not engage in certain
business combination transactions for a period of three years following the date
the person became an Interested Stockholder. Business combination transactions
for this purpose include (a) a merger or plan of share exchange, (b) any sale,
lease, mortgage or other disposition of the assets of the corporation where the
assets have an aggregate market value equal to 10% or more of the aggregate
market value of the corporation's assets or outstanding capital stock, and (c)
certain transactions that result in the issuance of capital stock of the
corporation to the Interested Stockholder. These restrictions do not apply if
(i) the Interested Stockholder, as a result of the transaction in which such
person became an Interested Stockholder, owns at least 85% of the outstanding
voting stock of the corporation (disregarding shares owned by directors who are
also officers and certain employee benefit plans), (ii) the Board of Directors
approves the share acquisition or business combination before the Interested
Stockholder acquired 15% or more of the corporation's voting stock, or (iii) the
Board of Directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Stockholder) approve the transaction after the Interested Stockholder acquires
15% or more of the corporation's voting stock.
 
     The Oregon Business Combination Act will have the effect of encouraging any
potential acquiror to negotiate with the Company's Board of Directors and will
also discourage certain potential acquirors unwilling to comply with the
provisions of this law. A corporation may provide in its articles of
incorporation or bylaws that this law does not apply to its shares. The Company
has not adopted such a provision and does not currently intend to do so. This
law may make the Company less attractive for takeover, and thus stockholders may
not benefit from a rise in the price of the Common Stock that a takeover could
cause.
 
CLASSIFICATION OF THE BOARD OF DIRECTORS
 
     The Articles provide for a Board of Directors with three classes (Class I,
Class II and Class III), each class consisting as nearly as possible of
one-third of the directors. A classified Board of Directors make it more
difficult for stockholders, including those holding a majority of the
outstanding shares, to effect an immediate change in a majority of the members
of the Board of Directors. At least two annual meeting of stockholders may be
required for the stockholders to change a majority of the members of the Board
of Directors, whether or not a change in the Board of Directors would be
beneficial to the Company and its stockholders and whether or not a majority of
the Company's stockholders believe that such a change would be beneficial.
 
SPECIAL STOCKHOLDER MEETINGS
 
     In order for stockholders to call special meetings, the Bylaws require the
written request of holders of shares entitled to cast at least 10% of all votes
entitled to be cast at such meeting. This provision could preclude stockholders
owning small percentages of the Company's Common Stock from calling a special
meeting to elect new directors or to take other major corporate actions, even if
such elections or other actions would be beneficial to the Company or its
stockholders. Special stockholder meetings may also be called by the President
of the Company or the Board of Directors.
 
                                       48
<PAGE>   50
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Upon completion of the Offering, the Company will have        shares of
Common Stock outstanding. The        shares sold in the Offering (       shares
if the Underwriters' over-allotment option is exercised in full) will be freely
tradable on the public market without restriction or further registration under
the Securities Act, except to the extent that such shares are held by an
affiliate of the Company. The remaining outstanding shares of Common Stock were
issued and sold by the Company in private transactions, and public sale thereof
will be restricted except to the extent such shares are registered under the
Securities Act or sold in accordance with an exemption from such registration.
The        restricted shares of Common Stock will be eligible for public sale
pursuant to Rule 144 under the Securities Act commencing 90 days after the date
of this Prospectus. The holders of all of these shares have entered into
agreements (the "Lock-Up Agreements") with the Underwriters not to offer, sell
or otherwise dispose of any equity securities of the Company for 180 days after
the date of this Prospectus (the "lock-up period") without the prior written
consent of Montgomery Securities. Montgomery Securities may, in its sole
discretion, at any time without notice, redeem all or any part of its shares
subject to the Lock-Up Agreements during the lock-up period.
 
     In general, Rule 144, as currently in effect, provides that any person who
has beneficially owned shares for at least one year, including an "affiliate"
(as defined in Rule 144), is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) the average weekly
trading volume during the four calendar weeks preceding the sale or (ii) 1% of
the shares of Common Stock then outstanding. Sales under Rule 144 are subject to
certain manner of sale restrictions, notice requirements and availability of
current public information concerning the Company. A person who is not an
affiliate of the Company, and who has not been an affiliate within three months
prior to the sale, generally may sell shares without regard to the limitations
of Rule 144 provided that the person has held such shares for a period of at
least two years.
 
     Any employee, director or officer of the Company holding shares purchased
pursuant to a written compensatory plan or contract (including options) entered
into prior to the Offering is entitled to rely on the resale provisions of Rule
701, which permit nonaffiliates to sell such shares without having to comply
with the public information, holding period, volume limitations or notice
requirements of Rule 144 and permit affiliates to sell their Rule 701 shares
without having to comply with the holding period restrictions of Rule 144, in
each case commencing 90 days after the date of this Prospectus.
 
     Prior to the Offering, there has been no public market for the Common Stock
and no prediction can be made of the effect, if any, that the sale or
availability for sale of shares of Common Stock will have on the market price of
the Common Stock. Nevertheless, sales of substantial amounts of such shares in
the public market could adversely affect the market price of the Common Stock.
 
                                       49
<PAGE>   51
 
                                  UNDERWRITING
 
     The Underwriters named below (the "Underwriters"), represented by
Montgomery Securities and Salomon Brothers Inc (the "Representatives"), have
severally agreed, subject to the terms and conditions of the underwriting
agreement (the "Underwriting Agreement") by and among the Company, the Selling
Stockholder and the Underwriters, to purchase from the Company and the Selling
Stockholder the number of shares of Common Stock indicated below opposite their
respective names, at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters are committed to purchase
all of the shares of Common Stock if they purchase any.
 
<TABLE>
<CAPTION>
                                                                            NUMBER OF
                                                                           SHARES TO BE
                                   UNDERWRITER                              PURCHASED
        -----------------------------------------------------------------  ------------
        <S>                                                                <C>
        Montgomery Securities............................................
        Salomon Brothers Inc.............................................
 
                                                                           ------------
                  Total..................................................
                                                                            =========
</TABLE>
 
     The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover of this Prospectus
and to certain dealers at such price less a concession not in excess of
$          per share, and that the Underwriters and such selected dealers may
reallow a concession to other dealers not in excess of $          per share.
After the public offering of the Common Stock, the public offering price, the
concessions to selected dealers and reallowance to other dealers may be changed
by the Representatives.
 
     The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to an additional
       shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. To the extent the
Underwriters exercise such option, each of the Underwriters will become
obligated, subject to certain conditions, to purchase such percentage of such
additional shares of Common Stock as is approximately equal to the percentage of
shares of Common Stock that it is obligated to purchase as shown in the table
set forth above. The Underwriters may exercise such option only to cover
over-allotments, if any, incurred in the sales of shares of Common Stock.
 
     The Company, Jeld-Wen and the Selling Stockholder have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
 
     Jeld-Wen and William Peare have agreed that, for a period of 360 days from
the date of this Prospectus, they will not sell, offer to sell, contract to
sell, or otherwise sell or dispose of any shares of their Common Stock, or
options or warrants to acquire shares of Common Stock, without the prior written
consent of Montgomery Securities. The remaining directors and executive officers
of the Company and all of the remaining existing stockholders of the Company
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not sell, offer to sell, contract to sell, or otherwise sell or
dispose of any shares of their
 
                                       50
<PAGE>   52
 
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.
 
     Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations among the Company, the Selling Stockholder and the Representatives.
Among the factors to be considered in determining the initial public offering
price, in addition to prevailing market conditions, will be certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's development,
and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to the Company. The
initial public offering price value should not, however, be considered an
indication of the actual value of the Common Stock. Such price is subject to
change as a result of market conditions and other factors. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the Offering
at or above the initial offering price.
 
     The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the Offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the Offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefor not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
 
                                 LEGAL MATTERS
 
     The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholder by Foster Pepper & Shefelman PLLC, Seattle,
Washington. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California.
 
                                    EXPERTS
 
     The combined financial statements of Trendwest Resorts, Inc. and certain
affiliates as of December 31, 1995 and 1996 and for each of the years in the
three year period ended December 31, 1996 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
 
                                       51
<PAGE>   53
 
                             CHANGE IN ACCOUNTANTS
 
     The Company engaged KPMG Peat Marwick LLP ("KPMG") on March 12, 1997 as the
Company's independent accountants to report on the Company's balance sheets as
of December 31, 1996 and 1995, and the related combined statements of income,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1996. The decision to appoint KPMG was approved by the
Company's Board of Directors.
 
     Molatore, Peugh, McDaniel, Scroggin & Co. LLP ("MPMS") had acted as the
Company's independent accountants since 1992. None of such accountant's reports
on the Company's financial statements for any of the years reported on contained
an adverse opinion or disclaimer of opinion, nor were the opinions modified as
to uncertainty, audit scope or accounting principles, nor were there any events
of the type requiring disclosure under Item 304(a)(1)(v) of Regulation S-K under
the Securities Act. There were no disagreements with MPMS, resolved or
unresolved, on any matter of accounting principles or practices, financial
disclosure, or auditing scope or procedure, which, if not resolved to MPMS's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports. MPMS was not retained to report
on the Company's 1996 financial statements.
 
     In August 1996, the Company engaged Coopers & Lybrand LLP ("C&L") as the
Company's independent accountants to report on the Company's balance sheet as of
December 31, 1995 and 1994, and the related statements of income, stockholders'
equity and cash flow for each of the years in the three year period ended
December 31, 1995. C&L did not render any report on the Company's financial
statements and was dismissed as the Company's independent accountants on
February 10, 1997. The decision to retain and subsequently to dismiss C&L was
approved by the Company's Board of Directors.
 
     During the period of C&L's engagement, disagreements arose over the
accounting treatment of the sales of additional Vacation Credits to existing
Owners ("Upgrade Sales"). The Company contended that Upgrade Sales could be
fully recognized as income under Financial Accounting Standards Board Statement
No. 66 ("SFAS 66") without an additional 10% cash down payment, provided that
the Owner had sufficient equity in previously purchased Vacation Credits
(including prior principal payments on the Note Receivable from the previous
purchases) and additional cash down payments, if any, at the time of the Upgrade
Sale, to satisfy the 10% down payment requirement for full accrual profit
recognition under SFAS 66. C&L's position was that SFAS 66 and Emerging Issues
Task Force Issue No. 88-12 required each Upgrade Sale to have a separate 10%
cash down payment (without consideration of equity from previously purchased
Vacation Credits) before the full accrual of revenue could be recognized on such
sale. Prior to C&L's dismissal, the Company agreed to modify its revenue
recognition policies in accordance with C&L's position.
 
     Upon an Upgrade Sale, any existing Note Receivable is cancelled and a new
Note Receivable with a seven year term is executed for the balance of the
existing Note Receivable and the financed amount of the Upgrade Sale. The
Company and C&L discussed the allocation of payments on the new Note Receivable
for the purpose of profit recognition on the Upgrade Sale. The Company's view,
as reflected in the financial statements included herein, is that the payment
due on the new Note Receivable could be bifurcated between the amount
attributable to the Upgrade Sale and the amount attributable to the extended
balance of the previous Note Receivable, and that the excess of the payment due
under the new Note Receivable over the part of the bifurcated payment
attributable to the extended balance of the previous Note Receivable could be
allocated to the financed portion of the Upgrade Sale without affecting the
accounting for the previous sale. Profit on the Upgrade Sale would be recognized
on the installment method until allocated principal payments equal to 10% of the
Upgrade Sale are received. Profit would them be recognized on the accrual
method. C&L recommended that the concurrence of the Securities and Exchange
Commission staff with this methodology be obtained prior to the filing of this
Registration Statement. C&L was prepared to accept the Company's view, provided
that the Commission staff concurred. Accordingly, at the time of C&L's
dismissal, with the exception of the issue of profit recognition on the new Note
Receivable and the effect of the allocation of principal payments on the new
Note Receivable on the recognition of profit on the previous sale, the Company
does not believe that there were any unresolved disagreements with C&L on any
matter of accounting principles or practices, financial disclosure, or auditing
scope or procedure, which, if not resolved to C&L's
 
                                       52
<PAGE>   54
 
satisfaction, would have caused it to make reference to the subject matter of
the disagreements in connection with its reports. C&L discussed each of these
issues with members of the Board of Directors of the Company and of the board of
directors of the Company's parent, Jeld-Wen. The Company has authorized C&L to
respond fully to the inquiries of KPMG concerning each of the disagreements.
 
     In addition, C&L advised the Company of two matters that, if further
considered in connection with its audit of the financial statements, could
materially impact the fairness of the financial statements. The matters relate
to the adequacy of the Company's allowance for doubtful accounts for receivables
from the sale of Vacation Credits and the method of calculating gains on the
sale of such receivables. Due to their dismissal, C&L did not complete the audit
procedures and inquiries necessary to conclude on these matters.
 
     Prior to the engagement of KPMG, the Company met with representatives of
KPMG at a meeting on January 22, 1997 to discuss KPMG's experience in the
Company's industry and industry accounting practices in connection with Upgrade
Sales. At that meeting, the disagreements between the Company and C&L were
discussed. KPMG orally advised the Company that they believed that C&L's view on
the revenue recognition principles applicable to the required down payment on
Upgrade Sales was the correct interpretation of SFAS 66. KPMG did not express
any views on the other area of discussion between the Company and C&L, the
recognition of revenue from Upgrade Sales based on an allocation of principal
payments on Notes Receivable. The Company did not request, nor did it receive,
any oral or written reports from KPMG concerning the subject of the unresolved
disagreements with C&L. The Company did not consult C&L regarding the issues
which were the subject of the disagreement following the date of dismissal. KPMG
did discuss with C&L the subject matter of the disagreements and other matters
relevant to the audit of the Company's financial statements prior to KPMG's
agreement to the engagement as the Company's auditors. The Company has requested
KPMG to review the disclosure contained herein and has provided KPMG the
opportunity to furnish the Company with a letter addressed to the Commission
containing any new information, clarification of the Company's expression of
KPMG's views or the respects in which KPMG does not agree with the statements
contained herein. KPMG has reviewed the disclosure contained herein and has
advised the Company that it does not intend to deliver such a letter to the
Company.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to Trendwest and
the Common Stock offered hereby, reference is hereby made to such Registration
Statement and the exhibits thereto. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete
and in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Copies of the Registration
Statement may be obtained from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission at its
Washington address upon payment of the fees prescribed by the Commission or may
be examined without charge at the offices of the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.
 
     The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.
 
                                       53
<PAGE>   55
 
                 TRENDWEST RESORTS, INC. AND CERTAIN AFFILIATES
 
                     INDEX TO COMBINED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
Independent Auditors' Report..........................................................  F-2
Combined Balance Sheets...............................................................  F-3
Combined Statements of Income.........................................................  F-4
Combined Statements of Stockholders' Equity...........................................  F-5
Combined Statements of Cash Flows.....................................................  F-6
Notes to Combined Financial Statements................................................  F-7
</TABLE>
 
                                       F-1
<PAGE>   56
 
                          INDEPENDENT AUDITORS' REPORT
 
The Stockholders
Trendwest Resorts, Inc.
TW Holdings, Inc.
Trendwest Funding I, Inc.:
 
We have audited the accompanying combined balance sheets of Trendwest Resorts,
Inc. and certain affiliates as of December 31, 1995 and 1996, and the related
combined statements of income, stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1996. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Trendwest Resorts,
Inc. and certain affiliates as of December 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
 
KPMG Peat Marwick LLP
 
Seattle, Washington
May 2, 1997, except for note 18, which is as of May 8, 1997
 
                                       F-2
<PAGE>   57
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
                            COMBINED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                             -----------------
                                                                              1995      1996
                                                                             -------   -------
<S>                                                                          <C>       <C>
Assets:
  Cash.....................................................................  $   135   $    93
  Restricted cash..........................................................      381       709
  Notes receivable, net of allowance for doubtful accounts, sales returns
     and deferred gross profit.............................................   38,161    40,777
  Accrued interest and other receivables...................................    4,184     4,606
  Excess servicing asset...................................................    6,451    10,839
  Inventories..............................................................   10,594    16,247
  Property and equipment, net..............................................    4,834     5,912
  Deferred income taxes....................................................    1,938     2,360
  Other assets.............................................................    2,129     3,116
                                                                             -------   -------
          Total assets.....................................................  $68,807   $84,659
                                                                             =======   =======
 
                             LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable.........................................................  $ 1,057   $ 1,037
  Accrued liabilities......................................................    1,490     2,100
  Accrued construction in progress.........................................      950     2,089
  Due to Parent............................................................   22,284    21,316
  Allowance for recourse liability on notes sold...........................    2,535     5,409
  Income taxes payable to Parent...........................................    1,196     1,909
  Notes payable............................................................    2,542     1,055
                                                                             -------   -------
          Total liabilities................................................   32,054    34,915
                                                                             -------   -------
Stockholders' equity:
  Common stock.............................................................   14,969    14,970
  Employee notes receivable for common stock...............................     (314)       --
  Retained earnings........................................................   22,098    34,774
                                                                             -------   -------
          Total stockholders' equity.......................................   36,753    49,744
Commitments and contingencies
                                                                             -------   -------
          Total liabilities and stockholders' equity.......................  $68,807   $84,659
                                                                             =======   =======
</TABLE>
 
            See accompanying notes to combined financial statements.
 
                                       F-3
<PAGE>   58
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
                         COMBINED STATEMENTS OF INCOME
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                   ----------------------------
                                                                    1994      1995       1996
                                                                   -------   -------   --------
<S>                                                                <C>       <C>       <C>
Revenues:
  Vacation Credit sales, net.....................................  $54,904   $77,783   $100,040
  Finance income.................................................    3,736     5,368      7,143
  Gains on sales of notes receivable.............................    1,635     3,222      5,673
  Resort management services.....................................    2,805     1,579      1,501
  Other..........................................................      763     1,226      2,552
                                                                   -------   -------   --------
          Total revenues.........................................  $63,843   $89,178   $116,909
                                                                   -------   -------   --------
Costs and operating expenses:
  Vacation Credit cost of sales..................................  $15,070   $20,484   $ 27,400
  Resort management services.....................................    2,613     1,283        859
  Sales and marketing............................................   25,615    36,374     47,810
  General and administrative.....................................    6,588     8,391     10,904
  Provision for doubtful accounts and recourse liability.........    4,537     6,522      7,467
  Interest.......................................................      881     2,380      2,445
                                                                   -------   -------   --------
          Total costs and operating expenses.....................   55,304    75,434     96,885
                                                                   -------   -------   --------
          Income before income taxes.............................    8,539    13,744     20,024
Income tax expense...............................................    3,214     4,979      7,348
                                                                   -------   -------   --------
          Net income.............................................  $ 5,325   $ 8,765   $ 12,676
                                                                   =======   =======   ========
Unaudited pro forma net income per share of common stock.........                      $ 451.23
Unaudited pro forma weighted average shares of common stock
  outstanding....................................................                        28,092
                                                                                       ========
</TABLE>
 
            See accompanying notes to combined financial statements.
 
                                       F-4
<PAGE>   59
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
                  COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  EMPLOYEE
                                                 CLASS A           CLASS B         NOTES                  TOTAL
                                              COMMON STOCK      COMMON STOCK     RECEIVABLE              STOCK-
                                             ---------------   ---------------   FOR COMMON   RETAINED   HOLDERS'
                                             SHARES   AMOUNT   SHARES   AMOUNT     STOCK      EARNINGS   EQUITY
                                             ------   ------   ------   ------   ----------   --------   -------
<S>                                          <C>      <C>      <C>      <C>      <C>          <C>        <C>
Balance at December 31, 1993...............  14,200   $5,200     100    $8,500        --      $ 8,608    $22,308
Issuance of Trendwest common stock to
  employees for notes......................   2,625     910       --       --       (910)          --         --
Issuance of Trendwest common stock to
  Parent...................................     875     303       --       --         --           --        303
Dividends declared and paid................      --      --       --       --         --         (480)      (480)
Net income.................................      --      --       --       --         --        5,325      5,325
                                             ------   ------     ---    ------      ----         ----     ------
Balance at December 31, 1994...............  17,700   $6,413     100    $8,500      (910)     $13,453    $27,456
Exchanges for parent company stock.........      --      --       --       --        607           --        607
Issuance of Trendwest common stock to
  employees for notes......................     472      56       --       --        (41)          --         15
Note payments..............................      --      --       --       --         30           --         30
Dividends declared and paid................      --      --       --       --         --         (120)      (120)
Net income.................................      --      --       --       --         --        8,765      8,765
                                             ------   ------     ---    ------      ----         ----     ------
Balance at December 31, 1995...............  18,172   $6,469     100    $8,500      (314)     $22,098    $36,753
Issuance of common stock, Trendwest
  Funding..................................   1,000       1       --       --         --           --          1
Note payments..............................      --      --       --       --        314           --        314
Net income.................................      --      --       --       --         --       12,676     12,676
                                             ------   ------     ---    ------      ----         ----     ------
Balance at December 31, 1996...............  19,172   $6,470     100    $8,500        --      $34,774    $49,744
                                             ======   ======     ===    ======      ====         ====     ======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                                  1996 PRO FORMA
                                                  1995                       1996                   (UNAUDITED)
                                        ------------------------   ------------------------   -----------------------
                                                     ISSUED AND                 ISSUED AND                 ISSUED AND
                                        AUTHORIZED   OUTSTANDING   AUTHORIZED   OUTSTANDING   AUTHORIZED   OUTSTANDING
                                        ----------   -----------   ----------   -----------   ----------   ----------
<S>                                     <C>          <C>           <C>          <C>           <C>          <C>
Trendwest:
  Common Stock, no par value..........    20,000        17,972       20,000        17,972     90,000,000     28,092
  Preferred Stock, no par value.......        --            --           --            --     10,000,000         --
TW Holdings:
  Class A, no par value...............       200           200          200           200             --         --
  Class B, no par value...............       200           100          200           100             --         --
Trendwest Funding.....................        --            --        1,000         1,000             --         --
                                          ------        ------       ------        ------         ------     ------
</TABLE>
 
            See accompanying notes to combined financial statements.
 
                                       F-5
<PAGE>   60
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
                       COMBINED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                               --------------------------------
                                                                 1994        1995        1996
                                                               --------    --------    --------
<S>                                                            <C>         <C>         <C>
Cash flows from operating activities:
  Net income.................................................  $  5,325    $  8,765    $ 12,676
  Adjustments to reconcile net income to net cash provided by
     (used in) operating activities:
     Depreciation and amortization...........................       302         330         502
     Amortization of excess servicing asset..................       883       1,481       2,735
     Provision for doubtful accounts, recourse liability and
       sales reversals.......................................     5,500       7,655      10,078
     Recoveries of notes receivable charged off..............       138         113          72
     Excess servicing spread on notes receivables sold.......    (2,174)     (3,258)     (5,674)
     Change in deferred gross profit.........................       711       1,480       2,737
     Deferred income tax expense.............................    (1,000)       (364)       (422)
     Issuance of notes receivable............................   (50,278)    (71,052)    (91,593)
     Proceeds from sale and repayment of notes receivable....    42,884      57,749      88,645
     Purchase of notes receivable............................    (6,005)    (11,305)    (11,150)
     Changes in certain assets and liabilities:
       Increase in restricted cash...........................      (161)       (110)       (328)
       Inventories...........................................    (9,576)      1,493      (5,653)
       Accounts payable and accrued liabilities..............     3,928      (3,279)      1,729
       Income taxes payable to Parent........................      (134)     (2,207)        713
       Other assets..........................................    (1,951)     (1,740)     (1,540)
                                                               --------    --------    --------
          Net cash provided by (used in) operating
            activities.......................................   (11,608)    (14,249)      3,527
                                                               --------    --------    --------
Cash flows from investing activities:
  Purchase of property and equipment.........................      (229)     (4,312)     (1,429)
  Proceeds from sale of marketable equity securities.........        --       4,219          --
                                                               --------    --------    --------
          Net cash used in investing activities..............      (229)        (93)     (1,429)
                                                               --------    --------    --------
Cash flows from financing activities:
  Proceeds from notes payable................................     5,366         100          --
  Payments on notes payable..................................    (6,203)     (1,529)     (1,487)
  Net change in revolving credit line with Parent............    12,538      15,877        (968)
  Dividends paid.............................................      (480)       (120)         --
  Issuance of common stock...................................       303          15           1
  Payments on notes receivable for stock.....................        --          30         314
                                                               --------    --------    --------
          Net cash provided by (used in) financing
            activities.......................................    11,524      14,373      (2,140)
                                                               --------    --------    --------
          Net increase (decrease) in cash....................      (313)         31         (42)
Cash at beginning of period..................................       417         104         135
                                                               --------    --------    --------
Cash at end of period........................................  $    104    $    135    $     93
                                                               ========    ========    ========
Supplemental disclosures of cash flow information -- cash
  paid during the period for:
  Interest...................................................  $    905    $  2,091    $  2,579
  Income taxes...............................................     5,111       7,547       7,056
                                                               ========    ========    ========
Supplemental schedule of noncash investing and financing
  activities:
  Issuance of common stock for notes receivable..............  $    910    $     41    $     --
                                                               ========    ========    ========
</TABLE>
 
            See accompanying notes to combined financial statements.
 
                                       F-6
<PAGE>   61
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
     (A) DESCRIPTION OF BUSINESS
 
     Trendwest Resorts, Inc. (Trendwest) and certain affiliates as identified in
note 1(b) (Company) is comprised of certain entities under the control of a
common stockholder. The Company generates revenues from the sale and financing
of Vacation Credits in WorldMark -- The Club (WorldMark), which typically
entitle the owner to use a fully furnished vacation resort based on the number
of Vacation Credits purchased. Vacation Credits are created through the
contribution of resort units developed or purchased by the Company to WorldMark.
The Company also manages resort properties under a management agreement with
WorldMark (see Note 15(b)). WorldMark is a separate entity which owns the
contributed properties for the benefit of Vacation Credit owners (members).
 
     The Company sells Vacation Credits to individuals in the Western United
States. These sales are financed by the Company after requiring a minimum 10%
down payment and the note balance is secured by the Vacation Credits sold. The
cash receipts of the Company are primarily from the sale and collection of the
notes receivable.
 
     (B) BASIS OF PRESENTATION
 
     The combined financial statements include the accounts of Trendwest, TW
Holdings, Inc. (TW Holdings) and Trendwest Funding I, Inc. (Trendwest Funding).
Trendwest Funding is included in the combined financial statements from April
19, 1996 (inception).
 
     Trendwest is a majority owned subsidiary of JELD-WEN, inc. (Parent), and TW
Holdings and Trendwest Funding are wholly-owned subsidiaries of the Parent. In
conjunction with and conditioned upon an initial public offering (IPO) of
Trendwest's common stock, as described in note 18, the Parent will transfer to
Trendwest all of the outstanding common stock of TW Holdings and Trendwest
Funding in exchange for additional shares of the common stock of Trendwest
(Consolidation Transaction).
 
     All intercompany balances and transactions have been eliminated in
combination.
 
     (C) UNAUDITED PRO FORMA NET INCOME PER SHARE
 
     Unaudited pro forma net income per share for 1996 has been computed based
on the number of shares of Trendwest common stock outstanding at December 31,
1996 and the number of additional shares issued to the Parent in connection with
the Consolidation Transaction. Due to the significant impact of the
Consolidation Transaction on the number of outstanding shares of Trendwest
common stock, historical net income per share is not meaningful and is therefore
not presented. No common stock equivalents were outstanding at December 31,
1996.
 
     (D) PRIOR PERIOD ADJUSTMENTS
 
     The accompanying combined financial statements were prepared in connection
with the proposed IPO and present for the first time the combined results of
Trendwest, TW Holdings and Trendwest Funding. Certain adjustments were made to
conform accounting policies and to record certain prior period adjustments to
the individual entities. Prior period adjustments were made to the allowance for
doubtful accounts, gains on sales of notes receivable and recognition of revenue
on upgrade sales.
 
                                       F-7
<PAGE>   62
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     (A) RESTRICTED CASH
 
     Restricted cash consists primarily of deposits received on sales of
Vacation Credits that are held in escrow until the applicable statutory
rescission period has expired and the related customer note receivable has been
recorded and amounts received prior to the attainment of the required 10% down
payment.
 
     (B) ALLOWANCES FOR DOUBTFUL ACCOUNTS AND RECOURSE LIABILITY
 
     The Company provides for estimated future losses to be incurred related to
uncollectible notes receivable outstanding and notes receivable sold with
recourse. The provision for credit losses and recourse liability is charged to
income in amounts sufficient to maintain the allowance and the recourse
liability at levels considered adequate to cover anticipated losses resulting
from liquidation of notes receivable outstanding and notes receivable sold with
recourse. The allowance for doubtful accounts and recourse liability are based
on the collection history of the receivables and are net of anticipated cost
recoveries of the underlying Vacation Credits. Management believes that all such
allowances and estimated liabilities are adequate.
 
     (C) INVENTORIES
 
     Inventories consist of Vacation Credits and construction in progress as
follows at December 31:
 
<TABLE>
<CAPTION>
                                                                     1995        1996
                                                                   --------    --------
        <S>                                                        <C>         <C>
        Vacation Credits.........................................  $      0    $  7,784
        Construction in progress.................................    10,594       8,463
                                                                    -------     -------
                  Total inventories..............................  $ 10,594    $ 16,247
                                                                    =======     =======
</TABLE>
 
     Vacation Credits represent the costs of unsold ownership interests in
WorldMark. Resort properties are completed and ownership is contributed by the
Company to WorldMark in return for the right to sell Vacation Credits in these
properties based on the number of credits available for the properties. Credits
available are determined using a formula based on the number of user days
available as well as the relative value of each property. Vacation Credits are
carried at the lower of cost, based on the weighted average of property cost per
Vacation Credit established, or net realizable value.
 
     Construction in progress is valued at the lower of cost or net realizable
value. Interest, taxes and other carrying costs incurred during the construction
period are capitalized. The amount of interest capitalized during the years
ended December 31, 1994, 1995 and 1996 amounted to $0, $0 and $343,
respectively.
 
     (D) REVENUE RECOGNITION
 
  (i) Vacation Credits
 
     Substantially all Vacation Credits sold by the Company generate installment
notes receivable secured by an interest in the related Vacation Credits. These
notes receivable are payable in monthly installments, including interest, with
maturities up to seven years. Sales are included in revenues when at least a 10%
down payment requirement has been met and any recission period has expired.
 
     Product costs and direct selling expenses related to a Vacation Credit sale
are recorded at the time the sale is recognized. Product costs include the cost
of land, improvements to the property including costs of amenities constructed
for the use and benefit of the Vacation Credit owners, and other direct
acquisition costs.
 
                                       F-8
<PAGE>   63
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     The Company also finances sales of additional Vacation Credits to existing
owners (Upgrades) which result in the cancellation of any existing note
receivable and the issuance of a new seven-year note secured by an interest in
all Vacation Credits owned. No additional down payment is required by the
Company as long as the owner's equity interest in the original Vacation Credits
is equal to 10% of the value of all Vacation Credits, including those from the
Upgrade sale, and the customer is not delinquent in their payments on their
existing note receivable. When the Company finances an Upgrade sale and the
customer does not make an additional down payment of at least 10% of the Upgrade
sale amount, the Company uses the installment method to recognize revenue
whereby profit is recognized as a portion of each principal payment received on
the Upgrade. Revenue is fully recognized on the Upgrade sale when the cash
collected relating to the Upgrade sale totals 10% of the Upgrade sale. Cash
collected relating to a financed Upgrade sale is measured as the sum of any
additional down payment received at the time of the Upgrade sale and the
principal repayment of the new note receivable which is allocable to the Upgrade
sale. Principal repayments are allocated to the Upgrade sale component of the
new note receivable and the pre-Upgrade sale component of the new note
receivable based on the ratio of such components at the time of the Upgrade
sale.
 
     Management fees are recognized on an accrual basis as earned.
 
  (ii) Notes Receivable
 
     The Company sells notes receivable to outside investors and securitizes
notes receivable through a limited liability company which is majority owned by
an independent third party who has made a substantial capital investment and has
substantial risks and rewards relating to the assets of the limited liability
company (LLC).
 
     Gains on sales of notes receivable represent the present value of the
differential between contractual interest rates charged to borrowers on notes
receivable sold by the Company and the interest rates to be received by the
purchasers of such notes receivable, after considering the effects of estimated
prepayments and a normal servicing fee (excess servicing spread), net of
transaction costs. The Company recognizes such gains on sales of notes
receivable on the settlement date. Concurrent with recognizing such gain on
sale, the Company records a corresponding asset on its combined balance sheet in
an initial amount equal to the excess servicing spread (excess servicing asset).
Gains on the sale of a portion of notes receivable are based on the relative
fair market values of the notes receivable portions sold and retained. The
Company generally sells its notes receivable at par value.
 
     In discounting cash flows related to notes receivable sales, the Company
discounts cash flows on its sales at the rate (12.25%) it believes a purchaser
would require as a rate of return. The Company has developed its assumptions
based on experience with its own portfolio, available market data and ongoing
consultation with its investment bankers.
 
     Income from the differential retained is recorded in finance income using
the interest method. In addition, finance income includes interest income on
notes receivable retained by the Company. The excess servicing asset is carried
at the lower of amortized cost or net realizable value.
 
     Currently, the carrying value of the excess servicing asset is analyzed
quarterly by the Company on a disaggregated basis to determine whether
prepayment experience has had an impact on this carrying value. Expected cash
flows of the underlying notes receivable sold are reviewed based upon current
economic conditions and the type of notes receivable originated and are revised
as necessary using the original discount rate used in calculating the gain on
sale. Losses arising from adverse prepayment experience are recognized as a
charge to earnings while favorable experience is not recognized until realized
(see note 2(d)(i)).
 
                                       F-9
<PAGE>   64
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     The Company charges off notes receivable when deemed to be uncollectible.
Finance income previously accrued and unpaid is reversed.
 
     (E) PROPERTY AND EQUIPMENT
 
     Property and equipment are recorded at cost and depreciated using the
straight-line method over the following assets' estimated useful lives:
 
<TABLE>
        <S>                                                             <C>
        Building and improvements.....................................  20 to 45 years
        Equipment, furniture and fixtures.............................  3 to 12 years
        Leasehold improvements........................................  2 to 5 years
</TABLE>
 
     (F) ADVERTISING
 
     Advertising costs are expensed as incurred and amounted to $1,783, $2,012
and $4,036 for the years ended December 31, 1994, 1995 and 1996, respectively.
 
     (G) INCOME TAXES
 
     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
 
     The Company is included in the consolidated tax return of the Parent. TW
Holdings filed a separate tax return for 1994. The Parent allocates the combined
current and deferred tax expense to the Company as if the Company had filed on a
stand-alone basis.
 
     (H) USE OF ESTIMATES
 
     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the combined financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these combined financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates and assumptions.
 
     (I) EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
 
     In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of 1996 and there was no material impact on the Company's
operations or financial position upon adoption.
 
                                      F-10
<PAGE>   65
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are based
on consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. This Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively. This
statement requires the Company's excess servicing asset to be measured at fair
value and reclassified as a marketable equity security accounted for in
accordance with SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The adoption of SFAS No. 125 on January 1, 1997 will result
in an increase in the excess servicing asset as compared to the balance at
December 31, 1996 of $584 and a corresponding increase in net income before
taxes as the Company intends to classify the excess servicing asset as a trading
security under SFAS No. 115. SFAS No. 125 will also have the impact of
increasing the gain on sale of notes receivable at the time of sale and reducing
future financing income for receivables sold after January 1, 1997.
 
     In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. SFAS
No. 128 establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential common
stock. This statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. The Company does not anticipate a material impact upon
adoption of this standard.
 
(3) MARKETABLE SECURITIES
 
     In 1995, the Company sold marketable equity securities to the Parent. No
gain or loss was realized on this transaction.
 
(4) NOTES RECEIVABLE
 
     The Company provides financing to the purchasers of Vacation Credits. The
notes resulting from sales of Vacation Credits in 1995 and 1996 bear interest at
13.9% or 14.9%, depending on method of payment, and are written with initial
terms of up to 84 months. Once a 10% down payment has been received, the Company
has no obligation under the notes to refund monies or provide further services
to members in the event membership is terminated for nonpayment of contract
obligations.
 
                                      F-11
<PAGE>   66
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     The activity in the allowances for doubtful accounts, sales returns and
recourse liability is as follows:
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                        -------------------------------
                                                         1994        1995        1996
                                                        -------     -------     -------
        <S>                                             <C>         <C>         <C>
        Balances at beginning of period...............  $ 2,930     $ 5,284     $ 7,964
        Provision for doubtful accounts, sales returns
          and recourse liability......................    5,500       7,655      10,078
        Notes receivable charged-off and sales returns
          net of Vacation Credits recovered...........   (3,284)     (5,088)     (6,873)
        Recoveries....................................      138         113          72
                                                        -------     -------     -------
        Balances at end of period.....................  $ 5,284     $ 7,964     $11,241
                                                        =======     =======     =======
        Allowance for doubtful accounts and sales
          returns.....................................    3,584       5,429       5,832
        Allowance for recourse liability on notes
          sold........................................    1,700       2,535       5,409
                                                        -------     -------     -------
                                                        $ 5,284     $ 7,964     $11,241
                                                        =======     =======     =======
</TABLE>
 
     Total notes receivable outstanding, including notes receivable sold,
amounted to $126,015 and $179,231 at December 31, 1995 and 1996, respectively.
 
(5) SALES OF NOTES RECEIVABLE
 
     The Company sells an 80% interest in certain notes receivable to outside
investors primarily through a receivables transfer agreement (Agreement), as
amended on December 31, 1996, expiring June 30, 1997 with Seattle-First National
Bank and other purchasers (Investors). Under the terms of the Agreement, up to
$68,000 of receivables can be sold to the Investors and proceeds from the
collection of sold note receivables are used to purchase additional notes
receivable. The notes receivable are sold at par to yield LIBOR plus 1.5% per
annum to the Investors.
 
     Total notes receivable sold and outstanding under this Agreement amounted
to $68,000 and $55,000 at December 31, 1995 and 1996.
 
     The Company securitizes notes receivable by selling them to the LLC in
exchange for cash and a retained interest in the LLC. The retained interest in
the LLC entitles the Company to the excess cash flows from the LLC after
required payments to the LLC noteholders and outside investor and the payment of
related expenses.
 
     The Investors and the LLC noteholders and the LLC outside investor have
recourse to the Company's retained interest in notes receivable sold and the LLC
under certain default provisions related primarily to the delinquency status of
the notes receivable sold. The Company's retained interest is included in notes
receivable in the accompanying combined balance sheets, and amounted to $17,000
and $26,436 at December 31, 1995 and 1996, respectively.
 
(6) DUE TO/FROM PARENT
 
     The Company has an open revolving credit line with its Parent to meet
operating needs and invest excess funds. The credit line is without limit and is
payable on demand. It bears interest at prime plus 1% at December 31, 1996 on
funds borrowed and prime minus 1% on funds loaned back to the Parent.
 
                                      F-12
<PAGE>   67
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
(7) PROPERTY AND EQUIPMENT
 
     Property and equipment, net, consists primarily of the Company's corporate
headquarters and leased sales offices as follows:
 
<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                     -----------------
                                                                      1995       1996
                                                                     ------     ------
        <S>                                                          <C>        <C>
        Land.......................................................  $  877     $  877
        Building and improvements..................................   3,005      3,586
        Equipment, furniture and fixtures..........................   1,807      2,504
        Leasehold improvements.....................................     185        336
                                                                     ------     ------
                                                                      5,874      7,303
        Less accumulated depreciation and amortization.............   1,040      1,391
                                                                     ------     ------
                                                                     $4,834     $5,912
                                                                     ======     ======
</TABLE>
 
(8) DEFERRED GROSS PROFIT
 
     The Company accounts for certain Upgrade sales on the installment method
prior to satisfaction of minimum down payment requirements. Information for
those transactions follows:
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                          -----------------------------
                                                           1994       1995       1996
                                                          ------     ------     -------
        <S>                                               <C>        <C>        <C>
        Gross sales value...............................  $4,229     $8,266     $15,618
                                                          ------     ------     -------
        Gross profit deferred...........................   1,958      3,826       7,230
        Gross profit recognized.........................   1,247      2,346       4,493
                                                          ------     ------     -------
        Net gross profit deferred during period.........  $  711     $1,480     $ 2,737
                                                          ======     ======     =======
</TABLE>
 
     Notes receivable is presented net of deferred gross profit in the
accompanying combined balance sheets. Such deferred amounts aggregated $3,102
and $5,839 at December 31, 1995 and 1996, respectively.
 
(9) NOTES PAYABLE
 
     The Company has a line of credit of $5,000 with FINOVA Capital Corporation.
The outstanding balance at December 31, 1995 and 1996 was $2,542 and $1,055,
respectively. Notes receivable are assigned to the lender and as principal
payments are received, they are applied to this loan. The agreement requires
replacement of notes that become 60 days past due and bears interest at 10.5%
per annum. The agreement also requires the Company to maintain minimum financial
ratios, restricts certain expenses and limits cash distributions. The line of
credit matures in 1997.
 
                                      F-13
<PAGE>   68
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
(10) INCOME TAXES
 
     The provision for income taxes consist of the following:
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                           ----------------------------
                                                            1994       1995       1996
                                                           ------     ------     ------
        <S>                                                <C>        <C>        <C>
        Federal:
          Current........................................  $4,141     $5,218     $7,426
          Deferred.......................................    (936)      (308)      (450)
                                                           ------     ------     ------
                                                            3,205      4,910      6,976
                                                           ------     ------     ------
        State:
          Current........................................      73        125        344
          Deferred.......................................     (64)       (56)        28
                                                           ------     ------     ------
                                                                9         69        372
                                                           ------     ------     ------
                  Total..................................  $3,214     $4,979     $7,348
                                                           ======     ======     ======
</TABLE>
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below:
 
<TABLE>
<CAPTION>
                                                                      1995       1996
                                                                     ------     ------
        <S>                                                          <C>        <C>
        Deferred tax assets:
          Allowance for doubtful accounts and sales returns........  $2,980     $4,206
          Deferred gross profit....................................   1,161      2,185
          Other....................................................     516        571
                                                                     ------     ------
                  Total deferred tax assets........................   4,657      6,962
                                                                     ------     ------
        Deferred tax liability:
          Excess servicing asset...................................   1,807      3,375
          Other assets.............................................     253        196
          Property and equipment...................................      59        120
          Other....................................................     600        911
                                                                     ------     ------
                  Total deferred tax liability.....................   2,719      4,602
                                                                     ------     ------
                  Net deferred tax asset...........................   1,938     $2,360
                                                                     ======     ======
</TABLE>
 
     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
 
     Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company will
realize the benefits of these deferred tax assets.
 
                                      F-14
<PAGE>   69
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     Income tax expense differed from the amounts computed by applying the
Federal income tax rate of 35% to pretax income as a result of the following:
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                                 ----------------------
                                                                 1994     1995     1996
                                                                 ----     ----     ----
        <S>                                                      <C>      <C>      <C>
        Income tax at Federal statutory rate...................  35.0%    35.0%    35.0%
        State taxes, net of Federal benefit....................   2.0      2.0      2.4
        Other..................................................    .6      (.8)     (.7)
                                                                 ----     ----     ----
                                                                 37.6%    36.2%    36.7%
                                                                 ====     ====     ====
</TABLE>
 
(11) EMPLOYEE NOTES FOR COMMON STOCK
 
     Notes accepted upon the purchase of Company common stock are secured by the
stock and bear interest at 9% and are included as a reduction to stockholders'
equity. In 1995, certain individuals exchanged their Company common stock for
common stock of the Parent and the notes were repaid.
 
(12) PARENT COMPANY 401(k) PLAN
 
     The Company participates in the 401(k) plan of the Parent. Company
contributions, which are invested in Parent common stock, are at the discretion
of the Board of Directors of the Parent and totaled $945, $1,283 and $1,686 for
the years ended December 31, 1994, 1995 and 1996, respectively.
 
(13) INTEREST RATE CAP AGREEMENT
 
     In March 1995, the Company entered into an interest rate cap agreement for
$92 to reduce the impact of changes in interest rates on its notes receivable
sold. The interest rate cap agreement has a notional principal amount of $31,800
on which the Company receives interest payments to the extent that LIBOR exceeds
10.125% per annum.
 
     The interest rate cap agreement expires in April 1998. The Company is
exposed to credit loss in the event of nonperformance by the other party to the
interest rate cap agreement. However, the Company believes the risk of incurring
losses related to credit risk is remote and any losses would be immaterial. No
payments have been received by the Company under the terms of the agreement.
 
(14) FAIR VALUES OF FINANCIAL INSTRUMENTS
 
     SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Fair values
are based on estimates using present value or other valuation techniques in
cases where quoted market prices are not available. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
 
                                      F-15
<PAGE>   70
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments 1996 are set forth below:
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                             -------------------------------------------------
                                                      1995                       1996
                                             ----------------------     ----------------------
                                                          ESTIMATED                  ESTIMATED
                                             CARRYING       FAIR        CARRYING       FAIR
                                              VALUE         VALUE        VALUE         VALUE
                                             --------     ---------     --------     ---------
        <S>                                  <C>          <C>           <C>          <C>
        Financial assets:
          Cash(a)..........................  $    135      $   135      $     93      $    93
          Restricted cash(a)...............       381          381           709          709
          Notes receivable(a)..............    41,263       41,263        46,616       46,616
          Excess servicing asset(b)........     6,451        7,323        10,839       11,423
        Financial liabilities:
          Due to Parent(c).................    22,284       22,284        21,841       21,841
          Allowance for recourse liability
             on notes sold(a)..............     2,535        2,535         5,409        5,409
          Notes payable(c).................     2,542        2,542         1,055        1,055
</TABLE>
 
---------------
 
(a) The carrying value, prior to consideration of deferred gross profit in the
    case of notes receivable, is considered to be a reasonable estimate of fair
    value.
 
(b) Fair value is determined using estimated discounted future cash flows taking
    into consideration anticipated prepayment rates.
 
(c) The carrying value reported approximates fair value due to the variable
    interest rates charged on the borrowings.
 
     Because no market exists for a portion of the financial instruments, fair
value estimates may be based on judgments regarding future instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
 
     The fair market value of the interest rate cap agreement is based on
current interest rates and is estimated to be $0 at December 31, 1995 and 1996.
 
                                      F-16
<PAGE>   71
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
(15) RELATED PARTY TRANSACTIONS
 
     (A) NOTES RECEIVABLE
 
     The Company, on an ongoing basis, acquires from and sells notes receivable
to related parties. A summary of these transactions for the years ended December
31 follows:
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                         ------------------------------
                                                          1994       1995        1996
                                                         ------     -------     -------
        <S>                                              <C>        <C>         <C>
        Sale of notes receivable:
          Members of the Board of Directors of the
             Parent (at face value, full recourse).....  $9,714     $ 3,905     $ 3,350
          I&I Holdings, a subsidiary of the Parent (at
             face value, full recourse)................      13       1,321         232
          Parent Foundation (at amount to yield 10%
             interest earnings, full recourse).........     297         191         211
        Purchases of notes receivable:
          Eagle Crest Partners, Ltd., a subsidiary of
             the Parent (at face value, full
             recourse).................................   6,005      11,305       8,993
          Running Y Resorts, Ltd., a subsidiary of the
             Parent (at face value, full recourse).....      --          --       2,157
</TABLE>
 
     With respect to notes receivable sold to members of the Board of Directors
of the Parent and subsidiary of the Parent, the Company services such
receivables without compensation.
 
     The outstanding balance of notes receivable sold with full recourse to
related parties amounted to $18,747 and $18,512 at December 31, 1995 and 1996,
respectively.
 
     (B) WORLDMARK
 
     The Company manages the resort properties transferred to WorldMark under
the terms of a management agreement which is subject to annual approval by the
members of WorldMark. Under the terms of the management agreement, the Company
receives a management fee equal to the lesser of 15% of WorldMark's expenditures
or net profit of WorldMark and is reimbursed for certain expenses. In addition,
the Company is responsible for paying annual dues on Vacation Credits which it
owns prior to their sale to customers. A summary of these transactions for the
years ended December 31 follows:
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER
                                                                          31,
                                                                 ----------------------
                                                                 1994    1995     1996
                                                                 ----   ------   ------
        <S>                                                      <C>    <C>      <C>
        WorldMark:
          Management fee income................................  $173   $  747   $1,103
          Dues expense incurred by Trendwest...................   137      512      273
          Reimbursed salaries..................................   528    1,533    3,103
          Other reimbursed expenses............................   170      297      353
</TABLE>
 
                                      F-17
<PAGE>   72
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     (C) PARENT
 
     In addition to the note payable to Parent described in note 6, the Company
reimburses the Parent for administrative services received and its share of
insurance expenses. Also, the Parent is named as the master servicer under the
terms of certain sales of notes receivable and receives a servicing fee of 1.75%
per annum of the sold receivables to service the receivable. The Parent
subcontracts the servicing to Trendwest for a servicing fee of 1.25% per annum
of the sold receivable balance and Trendwest, in turn, subcontracts components
of the servicing to a third-party servicer, SAGE. A summary of these
transactions with Parent for the years ended December 31 follows:
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                             --------------------------
                                                             1994      1995       1996
                                                             ----     ------     ------
        <S>                                                  <C>      <C>        <C>
        Parent:
          Interest income..................................  $167     $   --     $  451
          Interest expense.................................   114      1,993      2,564
          Insurance expense................................   786        879      1,304
          Administrative service expense...................   544        723        913
          Servicing fee expense, net.......................   604      1,163      1,008
</TABLE>
 
(17) COMMITMENTS AND CONTINGENCIES
 
     (A) PURCHASE COMMITMENTS
 
     The Company routinely enters into purchase agreements with various
developers to acquire and build resort properties. At December 31, 1996, the
Company has outstanding purchase commitments of $28,077 related to four
properties under development.
 
     (B) TAX CONTINGENCY
 
     The Internal Revenue Service (IRS) is currently auditing the 1991, 1992 and
1993 tax returns of Trendwest, Inc., the former parent of the Company. The
Company is a party to this matter. The IRS has issued a statutory Notice of
Deficiency of tax and interest totaling approximately $9,300. The deficiency
relates primarily to the disallowance of all resort property costs. The Company
believes that this matter is close to resolution and that the amount of any
actual deficiency will not be material to the Company's financial condition,
results of operations or liquidity.
 
     (C) LITIGATION
 
     The Company is involved in various claims and lawsuits arising in the
ordinary course of business. Management believes the outcome of these matters
will not have a material adverse effect on the Company's financial position,
results of operations or liquidity.
 
                                      F-18
<PAGE>   73
 
                            TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES
 
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
 
     (D) LEASE COMMITMENTS
 
     The Company has various operating lease agreements, primarily for sales
offices. These obligations generally have remaining noncancelable terms of five
years or less. Future minimum lease payments are as follows for the years ending
December 31:
 
<TABLE>
<CAPTION>
                <S>                                                   <C>
                1997................................................  $1,255
                1998................................................   1,044
                1999................................................     922
                2000................................................     807
                2001................................................     363
</TABLE>
 
     Rental expense amounted to $877, $1,126 and $1,426 for the years ended
December 31, 1994, 1995 and 1996, respectively.
 
(18) SUBSEQUENT EVENT
 
     On May 8, 1997 the Board of Directors of Trendwest authorized the filing of
a registration statement with the Securities and Exchange Commission and the
issuance of 10,120 shares of common stock to Parent in conjunction with the
Consolidation Transaction. In addition, the Board amended the articles of
incorporation, subject to stockholder approval, to increase the number of
authorized shares of common stock to 90,000,000 and to establish preferred stock
with 10,000,000 shares authorized and terms to be determined by the Board.
 
     The Board also adopted the 1997 Stock Option Plan (the "1997 Plan") and
authorized up to 5% of the number of common stock outstanding from time to time
for issuance thereunder.
 
                                      F-19
<PAGE>   74
 
=========================================================
 
     No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, by the Selling
Stockholder or by any of the Underwriters. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any security other than
the registered securities to which this Prospectus relates or any offer to any
person in any jurisdiction where such an offer would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof.
                           --------------------------
 
                               TABLE OF CONTENTS
                           --------------------------
 
<TABLE>
<CAPTION>
                                          Page
                                          ----
<S>                                       <C>
Prospectus Summary......................    3
Risk Factors............................   10
Use of Proceeds.........................   16
Dividend Policy.........................   16
Capitalization..........................   17
Dilution................................   18
Selected Combined Financial and
  Operating Data........................   19
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations............................   21
Business................................   25
Management..............................   39
Certain Transactions....................   43
Principal and Selling Stockholders......   46
Description of Capital Stock............   46
Certain Provisions of Oregon Law and of
  Trendwest's Articles of Incorporation
  and Bylaws............................   47
Shares Eligible For Future Sale.........   49
Underwriting............................   50
Legal Matters...........................   51
Experts.................................   51
Change in Accountants...................   52
Additional Information..................   53
Index to Combined Financial
  Statements............................  F-1
</TABLE>
 
     Until           , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotment or
subscriptions.
=========================================================
=========================================================
 
                                             SHARES
                                     [LOGO]
                            TRENDWEST RESORTS, INC.
 
                                  COMMON STOCK
 
                          ---------------------------
 
                                   PROSPECTUS
                          ---------------------------
 
                             MONTGOMERY SECURITIES
                              SALOMON BROTHERS INC
                                          , 1997
=========================================================
<PAGE>   75
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the 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 such
costs and expenses are estimates, except the Commission registration fee and the
NASD filing fee, and all of such costs are payable by the Company.
 
<TABLE>
        <S>                                                                 <C>
        Commission registration fee.......................................  $
        NASD filing fee...................................................
        Accounting fees and expenses......................................
        Blue Sky fees and expenses........................................
        Legal fees and expenses...........................................
        Printing and engraving expenses...................................
        Transfer agent fees...............................................
        Miscellaneous expenses............................................
                                                                            --------
                  Total...................................................  $
                                                                            ========
</TABLE>
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Sections 60.387 through 60.414 of the Oregon Business Corporation Act
authorize a court to award, or a corporation's board of directors to grant,
indemnification to directors and officers on terms sufficiently broad to permit
indemnification under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article X of the
Registrant's Articles of Incorporation (Exhibit 3.1 hereto) provide for
indemnification of the Registrant's directors to the maximum extent permitted by
Oregon law. Article X of the Registrant's Articles of Incorporation also permits
the Registrant's board of directors to indemnify the Registrant's officers,
employees and agents up to the maximum extent permitted by Oregon law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in such capacity pursuant to a liability
insurance policy maintained by the Company for such purpose.
 
     Section 60.047(2)(d) of the Oregon Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
stockholders for monetary damages for acts or omissions as a director, except in
the event of (i) a breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) an unlawful
corporate distribution, or (iv) a transaction from which the director derived an
improper personal benefit. Article IX of the Registrant's Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Oregon law, such limitations on a director's liability to the Registrant and
its stockholders.
 
     The proposed form of Underwriting Agreement (Exhibit 1.1 hereto) contains
certain provisions regarding the indemnification of officers and directors of
the Registrant by the Underwriters.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
 
                                      II-1
<PAGE>   76
 
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     In June 1995, the Registrant sold the indicated number of shares of its
Common Stock to the following individuals who were directors or executive
officers of the Registrant:
 
<TABLE>
<CAPTION>
                                                                             PURCHASE
                              NAME                      NUMBER OF SHARES      PRICE
            ----------------------------------------    ----------------     --------
            <S>                                         <C>                  <C>
            William F. Peare                                  875            $303,210
            Jerol Andres                                      875             303,210
            Jeffery Sites                                     175              17,900
            Michael Moyer                                     105              10,050
</TABLE>
 
     Payments for all of these sales were made in the form of a promissory note
with interest at 9% per annum. All of the promissory notes have been fully paid.
 
     These sales were exempt under Section 4(2) of the Securities Act.
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
     (a) Exhibits
 
<TABLE>
    <C>        <S>
       *1.1    Form of Underwriting Agreement among the Registrant, the Selling Stockholder
               and the Underwriters.
        3.1    Form of Amended and Restated Articles of Incorporation of the Registrant,
               dated             , 1997.
        3.2    Form of Amended and Restated Bylaws of the Registrant, dated             ,
               1997.
       *5.1    Opinion of Foster Pepper & Shefelman PLLC.
       10.1    Management Agreement (Fourth Amended) between the Registrant and WorldMark the
               Club ("WorldMark"), dated September 30, 1994.
       10.2    Software Support and Maintenance Agreement between the Registrant and Sage
               Systems, Inc. ("Sage"), dated           , 1994.
       10.3    Service Agreement between the Registrant and Sage, dated January 1, 1996.
       10.4    Software Transfer Agreement between the Registrant, Sage and James McBride,
               Sr., dated August, 1994.
       10.5    Escrow Agreement between the Registrant, Club Esprit (predecessor to
               WorldMark) and Sage, dated as of October 25, 1990.
       10.6    Form of WorldMark Retail Installment Contract Vacation Owner Agreement.
       10.7    Indenture among the Registrant, TRI Funding Company I, L.L.C. and LaSalle
               National Bank, dated as of March 1, 1996.
       10.8    Servicing Agreement among the Registrant, TRI Funding Company I, L.L.C., Sage
               and LaSalle National Bank, dated as of March 1, 1996.
       10.9    Purchase and Sale Agreement among the Registrant, Trendwest Funding I, Inc.,
               TWH Funding I, Inc. and TRI Funding Company I, L.L.C., dated March 1, 1996.
      10.10    Receivables Purchase Agreement among the Registrant, TW Holdings, Inc. and
               Trendwest Funding I, Inc., dated March 1, 1996.
      10.11    Loan and Security Agreement between the Registrant and Greyhound Financial
               Corporation, dated as of May 5, 1993.
      10.12    Receivables Purchase Agreement between Registrant and TW Holdings, Inc., dated
               December 1, 1993.
</TABLE>
 
                                      II-2
<PAGE>   77
 
<TABLE>
    <C>        <S>
      10.13    Receivables Purchase Agreement between Eagle Crest Partners, Ltd. and TW
               Holdings, Inc., dated December 1, 1993.
      10.14    Receivables Transfer Agreement among TW Holdings, Inc., Seattle-First National
               Bank and JELD-WEN, inc. ("Jeld-Wen"), dated as of December 1, 1993.
      10.15    Nonexclusive Limited Assignment among the Registrant, Eagle Crest Partners,
               Ltd. and WorldMark, dated September 20, 1996.
      10.16    Nonexclusive Limited Assignment among the Registrant, Running Y, Inc. and
               WorldMark dated September 20, 1996.
      10.17    Purchase Agreement among the Registrant, Eagle Crest Partnership, Ltd.,
               Roderick C. Wendt and Richard L. Wendt, dated December 30, 1992.
      10.18    Purchase Agreement among the Registrant, Roderick C. Wendt and Richard L.
               Wendt, dated April 1, 1993.
      10.19    Purchase Agreement between the Registrant and Jeld-Wen Foundation, dated March
               13, 1992.
      10.20    Purchase Agreement between the Registrant and Jeld-Wen, dated March 15, 1993.
      10.21    Purchase Agreement between the Registrant and Jeld-Wen, dated September 30,
               1993.
      10.22    Purchase Agreement between the Registrant and Jewel W. Kintzinger, dated
               October 12, 1993.
      10.23    Servicing Escrow Agreement between Jewel Kintzinger, the Registrant and Sage,
               dated October 12, 1993.
      10.24    Articles of Incorporation of WorldMark, the Club, dated December 10, 1992.
      10.25    Bylaws of WorldMark, dated December 2, 1994.
      10.26    Form of Employment Agreement between William F. Peare and the Registrant.
      10.27    Form of Employment Agreement between Jeffery P. Sites and the Registrant.
      10.28    Trendwest Resorts, Inc. 1997 Employee Stock Option Plan.
       16.1    Letter re change in Certifying Accountant.
      *16.2    Letter re change in Certifying Accountant.
       21.1    List of all Subsidiaries of the Registrant.
      *23.1    Consent of Foster Pepper & Shefelman PLLC.
       23.2    Consent of KPMG Peat Marwick LLP, Independent Auditors.
       24.1    Power of Attorney from officers and directors (contained on signature page).
</TABLE>
 
---------------
 
* To be filed by amendment
 
     (b) Financial Statement Schedules
 
     None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.
 
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
registrants have 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 proceeding) is asserted by such
director, officer or controlling person in connection with the
 
                                      II-3
<PAGE>   78
 
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.
 
          (c) The registrant hereby undertakes to provide to the underwriter at
     the closing specified in the underwriting agreements, certificates in such
     denominations and registered in such names as required by the underwriter
     to permit prompt delivery to each purchaser.
 
                                      II-4
<PAGE>   79
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended,
Trendwest Resorts, Inc. has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bellevue, State of Washington, on May 9, 1997.
 
                                          TRENDWEST RESORTS, INC.
 
                                          By:      /s/ JEFFERY P. SITES
                                            ------------------------------------
                                            Jeffery P. Sites
                                            Executive Vice President
 
                               POWER OF ATTORNEY
 
     Each person whose signature appears below constitutes and appoints and
hereby authorizes William F. Peare and Jeffery P. Sites, and either of them,
with the full power of substitution, as attorney-in-fact to execute in the name
and on behalf of each person, individually and in each capacity stated below,
and to file any and all amendments to this Registration Statement, including any
and all post-effective amendments, and any related registration statement that
is to be effective upon filing pursuant to Rule 462(b).
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
 
<TABLE>
<C>                                         <C>                                  <S>
           /s/ WILLIAM F. PEARE             President, Chief Executive Officer   May 9, 1997
------------------------------------------   and Director (Principal Executive
             William F. Peare                            Officer)
 
           /s/ JEFFERY P. SITES                  Executive Vice President,       May 9, 1997
------------------------------------------      Chief Operating Officer and
             Jeffery P. Sites                            Director
 
           /s/ GARY A. FLORENCE                  Vice President, Treasurer       May 9, 1997
------------------------------------------      and Chief Financial Officer
             Gary A. Florence                  (Principal Financial Officer)
 
           /s/ JEROL E. ANDRES                           Director                May 9, 1997
------------------------------------------
             Jerol E. Andres
 
          /s/ DOUGLAS KINTZINGER                         Director                May 9, 1997
------------------------------------------
            Douglas Kintzinger
 
          /s/ RODERICK C. WENDT                          Director                May 9, 1997
------------------------------------------
            Roderick C. Wendt
</TABLE>
 
                                      II-5
<PAGE>   80
 
                                 EXHIBIT INDEX
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
                                                                                     SEQUENTIALLY
    EXHIBIT                                                                            NUMBERED
    NUMBER                                 DESCRIPTION                                   PAGE
    -------   ---------------------------------------------------------------------  ------------
    <C>       <S>                                                                    <C>
     *1.1     Form of Underwriting Agreement among the Registrant, the Selling
              Stockholder and the Underwriters.....................................
      3.1     Form of Amended and Restated Articles of Incorporation of the
              Registrant, dated             , 1997.................................
      3.2     Form of Amended and Restated Bylaws of the Registrant, dated
                          , 1997...................................................
     *5.1     Opinion of Foster Pepper & Shefelman PLLC............................
     10.1     Management Agreement (Fourth Amended) between the Registrant and
              WorldMark the Club ("WorldMark"), dated September 30, 1994...........
     10.2     Software Support and Maintenance Agreement between the Registrant and
              Sage Systems, Inc. ("Sage"), dated           , 1994..................
     10.3     Service Agreement between the Registrant and Sage, dated January 1,
              1996.................................................................
     10.4     Software Transfer Agreement between the Registrant, Sage and James
              McBride, Sr., dated August, 1994.....................................
     10.5     Escrow Agreement between the Registrant, Club Esprit (predecessor to
              WorldMark) and Sage, dated as of October 25, 1990....................
     10.6     Form of WorldMark Retail Installment Contract Vacation Owner
              Agreement............................................................
     10.7     Indenture among the Registrant, TRI Funding Company I, L.L.C. and
              LaSalle National Bank, dated as of March 1, 1996.....................
     10.8     Servicing Agreement among the Registrant, TRI Funding Company I,
              L.L.C., Sage and LaSalle National Bank, dated as of March 1, 1996....
     10.9     Purchase and Sale Agreement among the Registrant, Trendwest Funding
              I, Inc., TWH Funding I, Inc. and TRI Funding Company I, L.L.C., dated
              March 1, 1996........................................................
     10.10    Receivables Purchase Agreement among the Registrant, TW Holdings,
              Inc. and Trendwest Funding I, Inc., dated March 1, 1996..............
     10.11    Loan and Security Agreement between the Registrant and Greyhound
              Financial Corporation, dated as of May 5, 1993.......................
     10.12    Receivables Purchase Agreement between Registrant and TW Holdings,
              Inc., dated December 1, 1993.........................................
     10.13    Receivables Purchase Agreement between Eagle Crest Partners, Ltd. and
              TW Holdings, Inc., dated December 1, 1993............................
     10.14    Receivables Transfer Agreement among TW Holdings, Inc., Seattle-First
              National Bank and JELD-WEN, inc. ("Jeld-Wen"), dated as of December
              1, 1993..............................................................
     10.15    Nonexclusive Limited Assignment among the Registrant, Eagle Crest
              Partners, Ltd. and WorldMark, dated September 20, 1996...............
     10.16    Nonexclusive Limited Assignment among the Registrant, Running Y, Inc.
              and WorldMark dated September 20, 1996...............................
     10.17    Purchase Agreement among the Registrant, Eagle Crest Partnership,
              Ltd., Roderick C. Wendt and Richard L. Wendt, dated December 30,
              1992.................................................................
</TABLE>
<PAGE>   81
 
<TABLE>
<CAPTION>
                                                                                     SEQUENTIALLY
    EXHIBIT                                                                            NUMBERED
    NUMBER                                 DESCRIPTION                                   PAGE
    -------   ---------------------------------------------------------------------  ------------
    <C>       <S>                                                                    <C>
     10.18    Purchase Agreement among the Registrant, Roderick C. Wendt and
              Richard L. Wendt, dated April 1, 1993................................
     10.19    Purchase Agreement between the Registrant and Jeld-Wen Foundation,
              dated March 13, 1992.................................................
     10.20    Purchase Agreement between the Registrant and Jeld-Wen, dated March
              15, 1993.............................................................
     10.21    Purchase Agreement between the Registrant and Jeld-Wen, dated
              September 30, 1993...................................................
     10.22    Purchase Agreement between the Registrant and Jewel W. Kintzinger,
              dated October 12, 1993...............................................
     10.23    Servicing Escrow Agreement between Jewel Kintzinger, the Registrant
              and Sage, dated October 12, 1993.....................................
     10.24    Articles of Incorporation of WorldMark, the Club, dated December 10,
              1992.................................................................
     10.25    Bylaws of WorldMark, dated December 2, 1994..........................
     10.26    Form of Employment Agreement between William F. Peare and the
              Registrant...........................................................
     10.27    Form of Employment Agreement between Jeffery P. Sites and the
              Registrant...........................................................
     10.28    Trendwest Resorts, Inc. 1997 Employee Stock Option Plan..............
     16.1     Letter re change in Certifying Accountant............................
    *16.2     Letter re change in Certifying Accountant............................
     21.1     List of all Subsidiaries of the Registrant...........................
    *23.1     Consent of Foster Pepper & Shefelman PLLC............................
     23.2     Consent of KPMG Peat Marwick LLP, Independent Auditors...............
     24.1     Power of Attorney from officers and directors (contained on signature
              page)................................................................
</TABLE>
 
---------------
 
* To be filed by amendment