SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K


               [X]  Annual  report  pursuant  to  Section  13 or  15(d)  of  the
Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996

               [ ]  Transition  report  pursuant  to  Section 13 or 15(d) of the
Securities  Exchange Act of 1934 for the transition  period from ____________ to
______________


Commission file number 333-26861


                            TRENDWEST RESORTS, INC..
               (Exact name of registrant as specified in charter)


                    OREGON                                 93-1004403
   (State or other jurisdiction of organization)  (IRS Employer Identification
                                                       No.)

                              12301 NE 10TH Place
                               Bellevue, WA 98005
              (Address of principal executive offices) (Zip Code)


(Registrant's telephone number, including area code):  (425) 990-2300


Securities registered pursuant to Section 12(b) of the Act:    None
Securities registered pursuant to Section 12(g) of the Act:    Common stock,
                                                               no par value
                                (Title of Class)

               Aggregate market price of shares held by  non-affiliates at March
24, 1998 was $76,384,013.75, consisting of 3,867,545 shares.

               The  number of shares of common  stock  outstanding  on March 24,
1998 was 17,593,366 shares.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding  twelve months (or for such shorter period that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ____

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


               DOCUMENTS  INCORPORATED  BY REFERENCE:

               Portions of the Company's Proxy Statement for the 1998 Annual
Meeting of stockholders are incorporated by reference into Part III of this
Form 10-K.

<PAGE>


                                     PART I

Item 1. Business

    Trendwest  Resorts,  Inc.  (Company)  markets,  sells and finances timeshare
Vacation  Ownership  Interests  and  acquires,  develops  and manages  timeshare
resorts.  A  Vacation  Ownership  Interest  entitles  an  owner  to use a  fully
furnished  vacation  resort unit at any of the  WorldMark  resorts  based on the
number of Vacation Credits purchased.  The Company's timeshare resorts are owned
and operated  through  WorldMark,  the Club,  (WorldMark)  a  non-profit  mutual
benefit  corporation  organized by  Trendwest in 1989 to provide an  innovative,
flexible  vacation  ownership  system.  The  Company  presently  sells  Vacation
Ownership  interests in  Washington,  Oregon and  California  primarily  through
off-site sales offices.

    Trendwest sells Vacation Ownership Interests in the form of Vacation Credits
which are created by the  transfer to  WorldMark  of resort  units  purchased or
developed  by the  Company.  Vacation  credits  can be used by Owners to reserve
units at any of the WorldMark resorts, at any time of the year and in 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 fourteen sales offices,  ten of which
are located off-site in metropolitan  areas. The other sales offices are located
on-site at four of the WorldMark Resorts.

    In  addition  to the  planned  addition  of Angel's  Camp to the  network of
WorldMark  resorts (see table),  the Company currently has several other resorts
in the permitting  stage and several more in the advanced  planning  stage.  One
potential  development is the MountainStar project which initially would involve
an 1,100 acre parcel in central  Washington  owned by JELD-WEN  inc,  (Parent or
JELD-WEN).  On behalf  of  JELD-WEN,  the  Company  is  currently  pursuing  the
necessary  regulatory  approvals  and has incurred  approximately  $4,400,000 in
costs related to the project as of December 31, 1997. All costs incurred will be
reimbursed  by JELD-WEN  and are  included  as a reduction  to the due to Parent
amounts on the Company's balance sheet.

Corporate Background and Consolidation of Finance Subsidiaries

    The Company commenced its timeshare business as a wholly-owned subsidiary of
JELD-WEN,  in 1989 with three  condominium  units.  JELD-WEN  is  currently  the
Company's principal stockholder.  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.

    The Company raises capital for property  acquisitions and working capital by
selling or securitizing  Notes Receivable through two subsidiaries (the "Finance
Subsidiaries").  Prior to June 30, 1997, the Finance  Subsidiaries were owned by
JELD-WEN. Effective June 30, 1997, the Company acquired the Finance Subsidiaries
from  JELD-WEN  for  5,193,693   shares  of  the  Company's  Common  Stock  (the
"Consolidation  Transactions").  On August 15, 1997,  the Company  consummated a
public  offering  of  3,176,250  shares  of  Common  Stock at  $18.00  per share
resulting in net proceeds of $51,772,000  after  deducting the related  issuance
costs.

    The Company has  transactions  with other JELD-WEN  subsidiaries and related
parties.  See note 15 "Related Party Transactions" in the notes to the financial
statements contained herein.

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



<PAGE>


WorldMark

    WorldMark is a California  nonprofit  mutual benefit  corporation  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 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.

    The  Resorts  are  owned  by  WorldMark  free  and  clear  of  all  monetary
encumbrances.  WorldMark  maintains  a  replacement  reserve  for the  WorldMark
Resorts  which  is  funded  from  the  annual  assessments  of the  Owners.  The
replacement  reserve is utilized to  refurbish  and  replace the  interiors  and
furnishings  of the  condominium  units and to maintain the exteriors and common
areas in WorldMark Resorts in which all units are owned by WorldMark.

    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.  The Company
pays WorldMark the dues on all unsold Vacation  Credits.  Such payments  totaled
$512,000, $275,000 and $793,000 in 1995, 1996 and 1997, 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.


<PAGE>



                              The WorldMark Resorts

    The following table sets forth certain  information as of December 31, 1997,
regarding  each  existing  WorldMark  Resort,   planned  expansion  at  existing
WorldMark Resorts through 1999, and planned new WorldMark Resorts through 1999.

<TABLE>
<CAPTION>
                                                        Existing
                                           Date           Units
                                         Contributed       in       Planned     Total Units
 Existing Resorts       Location        To WorldMark (a) Service    Expansion   Anticipated  RCI Rating (b)
 <S>                    <C>             <C>              <C>              <C>          <C>   <C>
 British Columbia

 Sundance               Whistler        February 1992             25       ---          25   R.I.D.

 California

 North Shore Estates    Bass Lake       October 1991              61       ---          61   Gold Crown
 Beachcomber            Pismo Beach     April 1993                20       ---          20   Gold Crown
 Palm Springs           Palm Springs    July 1995                 64       ---          64   Gold Crown
 Big Bear               Big Bear Lake   April 1996                51       19 (c)       70   Gold Crown

 Hawaii

 Valley Isle            Maui            April 1990                14       ---          14 (d) Gold Crown
 Kapaa Shores           Kauai           July 1991                 49       ---          49 (d) Gold Crown
 Kona                   Hawaii          November 1997             32       32 (e)       64   Gold Crown

 Nevada

 Lake Tahoe             Stateline       January 1991              50       ---          50   Gold Crown/R.I.D.
 Las Vegas              Las Vegas       December 1996             42       ---          42   Gold Crown

 Oregon

 Eagle Crest            Redmond         September 1989            67       --- (f)      67   Gold Crown
 Gleneden Beach         Lincoln City    March 1996                80       ---          80   Gold Crown
 Running Y Ranch        Klamath Falls   February 1997             54       40 (g)       94   Gold Crown
 Schooner Landing       Newport         September 1997            13 (h)   ---          13   Gold Crown

 Washington

 Lake Chelan Shores     Chelan          August 1990               13       ---          13 (d) Gold Crown
 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        November 1994             80       56 (j)      136   Gold Crown
                         del Cablo
Planned Resorts
 Clear Lake             Nice, CA        (k)                                88          88
Angel's Camp            Angel's Camp, WA(l)                      ---      112         112
                                                                 ---      ---         ---

                        Total                                    928      399       1,327
                                                                 ===      ===       =====

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

(b) Gold Crown and Resort of  International  Distinction  ("R.I.D.")  are resort
    ratings awarded annually by RCI. In 1997,  approximately  17% of the resorts
    reviewed by RCI received a Gold Crown rating,  the highest rating awarded by
    RCI, and approximately 13% of the resorts reviewed by RCI received an R.I.D.
    rating, the second-highest rating awarded by RCI.

(c) Construction  on 45 units began in January  1997 with all units  complete at
    December 31, 1997.  The remaining 19 units will be  transferred to WorldMark
    in early 1998.

(d) These units represent less than 1/2 the number of units at this resort.

(e) Construction  of this resort was  completed  in November  1997 with 32 units
    transferred to WorldMark.  The remaining 32 units will be transferred in the
    first quarter of 1998.

(f) 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  Trendwest  will  purchase the
    financed  portion of such sales,  with full  recourse,  which will allow the
    company to realize the stated rates of interest ranging from 13.9% to 15.4%.
    Eagle Crest will  repurchase  defaulted  contracts when they become 180 days
    delinquent or are written off at their unpaid principal  amount. In exchange
    for such sales, Eagle Crest must transfer  condominium units to WorldMark at
    no cost to either the Company or  WorldMark.  Retention of the full interest
    amounts from the contracts was  negotiated in lieu of a fee from Eagle Crest
    equal to 3% of net sales of vacation  credits  occurring  at the Eagle Crest
    resort and originally  planned to commence in September  1997. 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.

(g) The Company is obligated to purchase 20 units in November  1998 and 20 units
    in 1999. Units will be transferred to WorldMark as purchased The Company has
    an  agreement  with  Running Y, 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 Trendwest  will  purchase the financed  portion of such
    sales with full recourse, which will allow the company to realize the stated
    rates of interest  ranging  from 13.9% to 15.4%.  Running Y will  repurchase
    defaulted  contracts when they become 180 days delinquent or are written off
    at their unpaid principal amount. In exchange for such sales, Running Y must
    transfer  condominium units to WorldMark at no cost to either the Company or
    WorldMark.  Retention of the full  interest  amounts from the  contracts was
    negotiated  in lieu of a fee  from  Running  Y equal  to 3% of net  sales of
    vacation credits occurring at the Running Y resort and originally planned to
    commence in September  1997. 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.

(h) The Company purchased 659 weeks of time per year from Schooner's Landing and
    deeded  the  rights  to this time to  WorldMark.  This is  equivalent  to 13
    condominium units.

(i)  Construction  began in April 1997 with units  completed and  transferred
     to WorldMark in February and March of 1998.

(j) Construction  was  completed by the  developer in December 1997 with 6 units
    transferred to WorldMark in December. The remaining 56 units are expected to
    be transferred to WorldMark in 1998.

(k) This project was substantially complete at December 31, 1997 with 50% of the
    units  available  for use by WorldMark  owners.  Individual  units cannot be
    transferred to WorldMark until  construction  is 100% completed  because the
    individual  units do not have separate legal  descriptions.  The Company has
    experienced  delays in obtaining  final  certificates  of occupancy  for the
    entire project as County Building  Inspectors have been dealing with several
    emergency  conditions  throughout  the County due to heavy rains  associated
    with El Nino.
    Final certificates of occupancy are expected in early April 1998.

(l) Construction  on this resort  began in  September,  1997.  The first units
    are  expected  to be  completed  in August, 1998.

</TABLE>

Sales And Marketing

    The  Company's  sales of Vacation  Credits  primarily  occur at ten off-site
sales offices located in metropolitan  areas in three regions.  The remainder of
the Company's sales of Vacation Credits occur at four on-site sales offices.

    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.  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.

    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 1996 and
1997, the Company had a rescission rate of 17.7% and 16.5%  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.

    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 29.0% and 25.3% of the
Company's net sales in 1996 and 1997, 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 1997, the average new Owner purchased  approximately 6,600 Vacation
Credits for a purchase price of  approximately  $8,507 and the Company  financed
approximately  88% of the aggregate  purchase price of Vacation  Credits sold to
new Owners with an average new Note Receivable of approximately  $7,653.  During
1997, the aggregate amount of Notes Receivable  generated in connection with the
sale of Vacation  Credits to new Owners was  approximately  $98.3  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.

    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 cancelled  and a new  seven-year  note secured by an interest in all Vacation
Credits owned is issued.

    At December 31, 1997,  an  aggregate of $242.3  million of Notes  Receivable
were outstanding,  of which  approximately $84.7 million with a weighted average
interest rate of 14.1% per annum had been  retained by the Company.  The balance
of approximately $157.6 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.  The  Company  may  continue to sell a
substantial amount of its Notes Receivable. See "Liquidity and Capital Resources
-- 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, 1997, approximately $4.5 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 as 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, 1996 and 1997 were $11.2
million, and $15.2 million,  respectively,  representing approximately 6.2%, and
6.3%  respectively,  of the total portfolio of Notes  Receivable at those dates,
including the Notes  Receivable that had been sold by the Company.  No assurance
can be given  that these  reserves  will be  adequate,  and if the amount of the
Notes Receivable that is ultimately  written off materially  exceeds the related
reserves, the Company's business,  results of operations and financial condition
could be materially adversely affected.

    The Company  estimates  its  reserve  for  doubtful  accounts  and  recourse
liability by analysis of bad debts by each sales site by year of Note Receivable
origination.  The Company uses this  historical  analysis,  in conjunction  with
other factors such as local economic conditions and industry trends. The Company
also utilizes  experience factors of more mature sales sites in establishing the
reserve for bad debts at new sales offices.  The Company  generally  charges off
all  receivables  when they  become 180 days past due and  returns  the  credits
associated with such charge-offs to inventory. At December 31, 1997, 1.9% of the
Company's total  receivables  portfolio of $242.3 million were more than 60 days
past due.

    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
handles billing  inquiries and all other personal  interaction  with the Owners,
including collections on its Notes Receivable.

Property Ownership

    Unlike many "right-to-use"  timeshare  operations in which a developer sells
timeshare  interests  in  properties  it  owns,  the  Company  does  not own the
properties  designated for timeshare  use.  Rather,  when the Company  purchases
resort  property,  it vests in WorldMark title to the property free and clear of
any debt  encumbrance.  With respect to property  developed by the Company,  the
Company may initially obtain title in the undeveloped property and then deed the
developed  resort property to WorldMark.  At the time the Company vests title to
the property in WorldMark, a "Declaration of Vacation Owner Program" is recorded
on the property.  This  declaration  establishes the usage rights of Owners as a
covenant on title, thus protecting those rights against the effect of any future
blanket  encumbrance.  This  ownership  structure  is  designed  to protect  the
timeshare usage rights of the Owners and comply 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, 1997,  WorldMark had a reserve for  replacement  costs of
approximately  $5.3  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 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 Resort  Condominiums  International,  LLC  (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 $78),  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 $110 for exchanges in North America and $145
for International exchanges). The Company 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 11, 1998, RCI had approximately 3,200 participating  resort facilities and
over 2.4 million members worldwide. During 1997, RCI processed approximately 1.8
million vacation interval exchanges.

Competition

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

Employees

    As of December 31, 1997, Trendwest had 837 full-time employees.  The Company
believes that its employee  relations are good. None of the Company's  employees
are represented by a labor union.

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


<PAGE>


                                  RISK FACTORS

    In  addition  to the other  information  contained  in this Form  10-K,  the
following risk factors should be carefully  considered in evaluating the Company
and its business. The Company cautions the reader that this list of risk factors
may not be exhaustive.  This document 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 the Form 10-K.

     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.  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. 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 December 31,
1997, the Company had purchase agreements and developments in progress to obtain
399  additional  resort units by the end of 1999. 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.

     Since the Company  generally  finances  approximately  88% 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  purchase
additional resort units. No assurance can be given that the Company will be able
to obtain debt or equity capital through the sale or securitization of its Notes
Receivable,  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 "Liquidity and Capital Resources - 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 risk 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  inability  to
obtain,  or delays in  obtaining,  all  necessary  zoning,  land-use,  building,
occupancy  and other  required  governmental  permits  and  authorizations,  the
ability of the Company to coordinate construction activities with the process of
obtaining  such  permits and  authorizations,  and the ability of the Company to
obtain  the  financing   necessary  to  complete  the   necessary   acquisition,
construction  and  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. 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
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  material  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 could have a material adverse
effect on the Company's business, results of operations and financial condition.

Risks Associated with Customer Financing

    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,
1997, an aggregate of $242.3 million of Notes  Receivable were  outstanding,  of
which  approximately  $84.7  million  had  been  retained  by the  Company.  The
remaining  balance of approximately  $157.6 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.

     Notes Receivable  become  delinquent when a 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,  1997,  approximately  $4.5  million of Notes
Receivable  previously  sold by the Company  were past 60 days due 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.  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
"Liquidity and Capital Resources - Finance Subsidiaries."

    The Company is exposed to credit losses in the event of  nonperrformance  by
the counterparties to its interest rate caps and forward swap agreements used to
hedge interest rate risk in  securitization  transactions.  The Company does not
obtain  collateral  to support  financial  instruments  but  monitors the credit
standing of the counterparties.

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., The Walt Disney Company,
Hilton Hotels Corporation, Hyatt Corporation, Four Seasons Hotels and & Resorts,
Inc.,  Inter-Continental  Hotels and Resorts,  Inc., Westin Hotels & Resorts and
Promus  Hotels,  Inc.  In  addition,  other  publicly-traded  companies  in  the
timeshare  industry,  such as Signature Resorts,  Inc.,  Fairfield  Communities,
Inc., and Vistana, Inc., 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.

    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.  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.

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 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.

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 the
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, results of operations and financial condition.

Natural Disasters; Uninsured Loss

    WorldMark maintains property insurance and liability insurance for the units
at the WorldMark Resorts, with certain policy specifications, insured limits and
deductibles.  Certain types of losses,  such as losses arising from earthquakes,
floods  or  acts of war,  are  generally  excluded  from  WorldMark's  insurance
coverage.  Should an uninsured  loss or loss in excess of insured  limits occur,
WorldMark  has the  option to either (i)  remove  such  units from the  Vacation
Credit system,  which would result in a  proportional  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
event,  the Company may need to advance  funds to WorldMark in order to maintain
the  quality of the  WorldMark  Resorts or  WorldMark  may be  required to defer
certain  improvements or repairs. In addition,  the Company may advance funds to
WorldMark if WorldMark does not have sufficient  funds to pay its obligations in
a timely manner. See "Business - Insurance; Legal Proceedings."

Item 2. Properties

    The Company owns its headquarters building in Bellevue,  Washington.  In the
ordinary course of business,  the Company purchases property for development and
deeds said property to WorldMark upon completion of the project.
See "Business - WorldMark".

Item 3. Legal Proceedings

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

Item 4. Submission of Matters to a Vote of Securities Holders

    There were no matters  submitted to a vote of the Company's  equity  holders
during the fourth quarter of 1997.

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

    The Company's  initial  public  offering of Common Stock was  consummated on
August 15, 1997 at an initial price of $18.00 per share.  The  Company's  common
stock is quoted on the  Nasdaq  National  Market  under the symbol  "TWRI".  The
following  table sets forth for the  periods  indicated,  the high and low sales
price for Common Stock, as quoted on the Nasdaq National Market:

                                                High         Low
                                               -------   -----------
      Year ended December 31, 1997:
      Third quarter (commencing August 15,     $20 7/8      $17 7/8
       1997)

      Fourth quarter                           $29 1/2      $18 1/2

      January 1, 1998 to March 24, 1998        $22 3/4      $18 13/16


On March  24,  1998,  there  were  approximately  37  holders  of  record of the
Company's common stock and approximately 1,362 beneficial stockholders.

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


<PAGE>



Item 6. Selected Financial 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" are derived from the audited financial
statements of Trendwest Resorts,  Inc. and certain  affiliates.  The information
set forth below should be read in conjunction with "Management's  Discussion and
Analysis of Financial  Condition and Results of Operations" and the combined and
consolidated  financial  information for the Company and the notes thereto which
are  contained  elsewhere  herein.  The  information  presented  below under the
caption "Operating Data" is unaudited.

<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                              -------------------------------------------------------------
                                                    1993        1994        1995         1996          1997
                                                 ----------  ----------  ----------  ------------  --------
 <S>                                             <C>         <C>         <C>         <C>          <C>
 Statement of Operations Data:
 Revenues:
   Vacation Credit sales, net...............     $38,743     $54,904     $77,783     $ 100,040    $ 128,835
   Finance income...........................       3,813       3,736       5,368         7,143       11,989
   Gains on sales of notes receivable.......       1,558       1,635       3,222         5,673        6,582
   Resort management services...............       1,102       2,805       1,579         1,501        2,032
   Other....................................         344         763       1,226         2,552        2,149
                                                 -------     -------     -------   -----------  -----------
         Total revenues.....................      45,560      63,843      89,178       116,909      151,587
 Costs and operating expenses:
   Vacation Credit cost of sales............       8,743      15,070      20,484        27,400       34,569
   Resort management services...............         959       2,613       1,283           859        1,108
   Sales and marketing......................      19,523      25,615      36,374        47,810       59,448
   General and administrative...............       4,056       6,588       8,391        10,904       13,449
   Provision for doubtful accounts and
 recourse                                          2,805       4,537       6,522         7,467         9,077
     liability..............................
   Interest.................................       1,929         881       2,380         2,445        1,739
                                                 -------     -------     -------   -----------  -----------
         Total costs and operating expenses.      38,015      55,304      75,434        96,885       119,390
                                                 -------     -------     -------   -----------  ------------
 Income before income taxes.................       7,545       8,539      13,744        20,024        32,197
   Income tax expense.......................       2,909       3,214       4,979         7,348        11,588
                                                 -------     -------     -------   -----------  ------------
 Net income.................................     $ 4,636     $ 5,325     $ 8,765   $    12,676  $     20,609
                                                 =======     =======     =======   ===========  ============

 Basic and diluted  net income per share of
 Common Stock...............................     $ 0.37     $  0.42      $ 0.61    $       0.88 $       1.32
 Shares used in computing basic and diluted
 net income per share of Common Stock (1)..    12,378,643  12,758,616  14,387,169   14,417,116    15,596,419

 Operating Data:
 Number of WorldMark Resorts (at end of
   period)..................................          12          14          16            19            22
 Number of units (at end of period).........         239         325         499           746           928
 Number of Vacation Credits sold (in
   thousands)...............................      34,296      47,025      65,308        82,270        99,911
 Average price per Vacation Credit sold.....     $   1.14    $   1.18    $   1.21  $       1.24 $       1.27
 Average cost per Vacation Credit sold......     $   0.25    $   0.32    $   0.31  $       0.33 $       0.35
 Number of Owners (at end of period)........      12,732      18,740      27,965        38,997       51,778
 Average purchase price for new Owners......     $ 7,879     $ 8,141     $ 8,325   $     8,432  $      8,507

 Balance Sheet Data:
 Cash, including restricted cash............     $   528     $   375     $   516   $       802  $      1,289
 Total assets...............................      36,007      51,143      71,289        89,330       151,750
 Indebtedness(2)............................       4,809      10,378      24,826        22,371         1,947
 Stockholders' equity.......................      22,308      27,456      36,753        49,744       122,125

----------
(1)  Includes 5,193,693 shares issued to JELD-WEN in connection with the Consolidation Transactions.

(2)  Indebtedness is comprised of notes payable to JELD-WEN and others.

</TABLE>

<PAGE>


Selected quarterly financial data

<TABLE>
<CAPTION>
                                                        1996 quarters ended
                                        March 31      June 30     September 30    December 31
                                      ------------- ------------ --------------- --------------
     <S>                               <C>          <C>             <C>            <C>
     Total revenue                     $25,202      $31,016         $31,166        $29,525
     Total costs and operating          21,936       24,639          25,809         24,501
     expenses
     Net income                          2,057        4,043           3,386          3,190
     Basic and diluted net income
         per common share               $ 0.14      $  0.28         $  0.23        $  0.22
</TABLE>

<TABLE>
<CAPTION>
                                                        1997 quarters ended
                                        March 31      June 30     September 30    December 31
                                      ------------- ------------ --------------- --------------
     <S>                                  <C>          <C>             <C>            <C>
     Total revenue                        $ 32,613     $ 39,837        $ 40,472       $ 38,665
     Total costs and operating              26,361       30,803          31,963         30,263
     expenses
     Net income                              3,999        5,781           5,433          5,396
     Basic and diluted net income
         per common share                 $   0.28     $   0.40        $   0.34       $   0.31
</TABLE>

Item 7.   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 revenue primarily from the sale of Vacation Credits
and, to a lesser extent,  from financing of Vacation Credits and from management
fees generated from its management agreement with WorldMark.

    Vacation  Credit sales and Upgrade Sales are recognized on the accrual basis
after the Company has received an executed sales contract and a minimum 10% down
payment,  and the rescission  period (generally three to seven days) has passed.
In instances  where the Company  finances an Upgrade Sale and the customer  does
not make an additional cash down payment of at least 10% of the Upgrade Sale the
Company uses the installment method to recognize revenue.  Under the installment
method, gross profit on such Upgrade Sale is deferred and thereafter  recognized
in relation to each principal payment  received.  Revenue is fully recognized on
the Upgrade Sale when the cash collected  related to the Upgrade Sale totals 10%
of the amount of the Upgrade sale.  Commencing in the first quarter of 1997, the
Company  modified its Upgrade  Sales  marketing  practices so as to encourage an
additional  cash down  payment of at least 10% of the Upgrade  Sale  amount.  In
1996, 13% of Upgrade Sales had the additional 10% cash down payment, as compared
to 55% in 1997.

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

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


<PAGE>


Results of Operations

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

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                            ------------------------------
      As a Percentage of Total Revenues:                                    1995        1996        1997
                                                                            ----        ----        ----
         <S>                                                                <C>          <C>         <C>
         Vacation Credit sales, net                                          87.2%       85.5%       85.0%
         Finance income                                                       6.0         6.1         7.9
         Gains on sales of notes receivable                                   3.6         4.9         4.3
         Resort management services                                           1.8         1.3         1.3
         Other                                                                1.4         2.2         1.5
                                                                            -----       -----       -----
                                                                            100.0%      100.0%      100.0%
                                                                            =====       =====       =====

      As a Percentage of Vacation Credit Sales, Net:
         Vacation Credit cost of sales                                       26.3%       27.4%       26.8%
         Sales and marketing                                                 46.8        47.8        46.1
         Provision for doubtful accounts and recourse liability               8.4         7.5         7.0

      As a Percent of Resort Management Revenues:
         Cost of resort management services                                  81.3%       57.2%       54.5%

      As a Percentage of Total Revenues:
         General and administrative                                           9.4%        9.3%        8.9%
         Total costs and operating expenses                                  84.6        82.9        78.8

</TABLE>

Comparison  of the year ended  December 31, 1997 to the year ended  December 31,
1996

    For the year ended December 31, 1997 the Company  achieved total revenues of
$151.6 million  compared to $116.9 million for the year ended December 31, 1996,
an increase of 29.7%.  The principal  reason for the overall  improvement  was a
28.8%  increase in Vacation  Credit sales from $100.0 million for the year ended
December 31, 1996 to $128.8  million for the year ended  December 31, 1997.  The
increase in Vacation  Credit sales was primarily the result of a 21.4%  increase
in the number of  Vacation  Credits  sold from 82.3  million  for the year ended
December  31, 1996 to 99.9 million for the year ended  December  31,  1997.  The
increase in Vacation  Credits sold was largely  attributable to two new off-site
sales offices in the Southern California region,  Costa Mesa and Woodland Hills,
opened in February and October 1997;  the  maturation  of two offices  opened in
February and April of 1996; and increased  Upgrade sales.  Revenues from Upgrade
Sales increased 60.5% from $12.4 million for the year ended December 31, 1996 to
$19.9  million for the year ended  December 31, 1997 due largely to the increase
in number of Owners who made the  necessary  10% cash down payment to allow full
revenue recognition at the time of the sale. The number of Vacation Credits sold
as Upgrades increased by approximately 11.4% in the year ended December 31, 1997
compared  to the year ended  December  31, 1996 due to the  continued  growth of
resorts and effective sales efforts.  The average price per Vacation Credit sold
increased  from $1.24 for the year ended December 31, 1996 to $1.27 for the year
ended December 31, 1997, an increase of 2.4%,  which was due primarily to a 4.5%
increase in the sales price of Upgrade credits.

    Finance income increased 69.0% from $7.1 million for the year ended December
31,  1996 to $12.0  million for the year ended  December  31,  1997,  due to the
increased   carrying  balances  of  Notes  Receivable  and  the  recognition  of
unrealized gain on residual  interest in Notes  Receivable sold of $1.0 million.
Gains on sales of Notes  Receivable  increased  15.8% from $5.7  million for the
year ended  December  31, 1996 to $6.6  million for the year ended  December 31,
1997 due to  higher  net  interest  spreads  on the  principal  amount  of Notes
Receivable sold.

    Vacation  Credit  cost of sales  increased  from $27.4  million for the year
ended  December 31, 1996 to $34.6 million for the year ended  December 31, 1997,
an increase of 26.3% and  primarily  reflects  the increase in sales of Vacation
Credits. As a percentage of Vacation Credit sales, Vacation Credit cost of sales
decreased  from 27.4% for the year ended December 31, 1996 to 26.8% for the year
ended December 31, 1997. The Company believes that the change in Vacation Credit
cost of sales as a percentage of Vacation  Credit sales would have been slightly
higher for the year ended  December  31,  1997 as  compared  with the year ended
December 31, 1996 absent the increase in the percentage of Owners who made a 10%
cash down payment on Upgrade Sales.

    Sales and marketing  costs  increased  24.3% from $47.8 million for the year
ended December 31, 1996 to $59.4 million in the year ended December 31, 1997. As
a percentage of Vacation Credit sales,  sales and marketing costs decreased from
47.8% for the year ended  December 31, 1996 to 46.1% for the year ended December
31, 1997 primarily due to a substantially higher percentage of Upgrade Sales for
the year ended December 31, 1997 that were entitled to full revenue  recognition
at the time of sale.  The Company  believes that sales and marketing  costs as a
percentage of Vacation Credit sales would have remained  relatively constant for
the two years compared  absent the increase in the percentage of Owners who made
a 10% cash down payment on Upgrade Sales.

    General and  administrative  expenses increased 22.9% from $10.9 million for
the year ended  December 31, 1996 to $13.4  million for the year ended  December
31,  1997  primarily   reflecting  the  increased  sales  growth  and  increased
administration costs due to regionalization.  As a percentage of total revenues,
general  and  administrative  expenses  decreased  from 9.3% for the year  ended
December 31, 1996 to 8.9% for the year ended December 31, 1997, due primarily to
the substantially  higher percentage of Upgrade Sales that were entitled to full
revenue  recognition at the time of sale. The Company  believes that general and
administrative  expenses as a percentage of total  revenues  would have remained
relatively  constant  for the years ended  December 31, 1996 and 1997 absent the
increase in the percentage of Owners who made a 10% cash down payment on Upgrade
Sales in 1997.

    Interest  expense  decreased  from $2.4 million for 1996 to $1.7 million for
1997, a decrease of 29.2% due primarily to the repayment of borrowings  from the
Parent from net proceeds of the Offering in August 1997.

    Provision for doubtful accounts and recourse liability  increased 21.3% from
$7.5  million for the year ended  December 31, 1996 to $9.1 million for the year
ended December 31, 1997. As a percentage of Vacation Credit sales, the provision
declined  from 7.5% for the year ended  December  31,  1996 to 7.0% for the year
ended December 31, 1997 due to the  substantially  higher  percentage of Upgrade
Sales for 1997 that were  entitled to full  revenue  recognition  at the time of
sale and continued  growth in the amount of Notes  Receivable from Upgrade Sales
which have a historically lower default rate than new sales.

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

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

    Vacation Credit cost of sales increased from $20.5 million for 1995 to $27.4
million for 1996,  an increase of 33.7%,  primarily  reflecting  the increase in
sales of Vacation  Credits.  As a percentage of Vacation Credit sales,  Vacation
Credit  cost of  sales  increased  to  27.4% in 1996  from  26.3% in 1995.  This
increase was due to the relatively  higher cost of developing  and  constructing
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.

    Provisions 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.

                         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,  management
fees,  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 year ended  December 31 1997,  cash used in operating  activities
was $46.5  million.  While net income was higher for the year ended December 31,
1997,  cash generated from operating  activities was reduced  principally due to
the increased  issuance of Notes  Receivable to finance the purchase of Vacation
Credits, reduced proceeds from sales of Notes Receivable and higher expenditures
to increase  inventory  levels of Vacation  Credits.  Cash flows from  operating
activities resulted primarily from the sale and repayment of Notes Receivable of
$71.1  million  and net  income of $20.6  million.  Cash flow used in  operating
activities  was  principally  due to an increase in Notes  Receivable  of $112.2
million to finance the purchase of Vacation Credits by Owners and an increase in
inventory of $28.3 million due to the increasing sales of Vacation Credits.  The
decrease  in  proceeds  from the  sales of Notes  Receivable  was due in part to
treating the  transfer of such  receivables  to the Bank Group after  January 1,
1997, and prior to June 30 1997 as secured borrowing as TW Holdings did not meet
the sales recognition  criteria of Statement of Financial  Accounting  Standards
Number 125 (SFAS 125).

    Net cash used in investing  activities for the year ended December 31, 1997,
was $1.7 million and  primarily  consisted  of  acquisitions  of  furniture  and
fixtures  and data  processing  equipment  required  to meet the  growth  of the
Company.

    Net cash  provided by financing  activities  for the year ended  December 31
1997 was $48.2 million.  The Company received net proceeds of $51.8 million from
the offering of 3,176,250  shares of the Company's  stock. Net proceeds from the
offering were used to repay $41.9 million of borrowings from JELD-WEN, resulting
in a net change due to Parent of $19.4 million. The balance of the proceeds were
used to finance the acquisition of additional resort properties,  to carry Notes
Receivable  contracts,  and for  working  capital  and other  general  corporate
purposes.  After  January  1,  1997,  and prior to June 30,  1997,  the  Company
borrowed $16.8 million from a group of banks through TW Holdings,  Inc., secured
by Notes Receivable to meet working capital needs.

    The Company continually needs to acquire and develop additional resort units
for WorldMark in order to provide  additional  vacation  credits for sale by the
Company and to provide a greater  variety of resort  location  for  Owners.  The
continued  growth of the Company  and  increase in the owner base allows for the
development of larger resorts which provides  certain  economies of scale to the
Company and to  WorldMark  from an operating  cost  standpoint.  The  permitting
process for larger resorts can be lengthy at times,  particularly  in California
and  necessitates  the need to  acquire  land as much 12 to 18  months  before a
resort is completed.  This is reflected in the Company's investment in inventory
which increased $28.3 million in 1997 to $44.5 million at December 31, 1997.

    At December 31, 1997,  there were 5.2 million  credits  available  for sale.
Included in  construction  in progress at December 31, 1997 were 55.2 million of
credits  associated with Kona, Big Bear and Coral Baja which will be transferred
to the Company by developers in 1998 in accordance with the transfer  schedules.
In  addition,  Clear Lake was  substantially  complete at December 31, 1997 with
some use by Owners.  Due to the impact of El Nino,  final  approvals  from local
authorities  allowing for  transfer of title to WorldMark  could not be obtained
until late March of 1998. This project will provide  approximately  37.1 million
of credits for sale by the Company. With the above units coming on line in 1998,
completion of 112 units at Angel's Camp,  the expansion of existing  resorts and
completion of the permitting process for Maui, the Company believes it will have
an adequate  supply of credits  available to meet its planned growth through the
early part of the year 2000. 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.

    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  the  Parent  and  the  sale  of  Notes  Receivable   through  the  Finance
Subsidiaries.  See "Risk  Factors - Dependence  on  Acquisitions  of  Additional
Resort Units for Growth; Need for Additional Capital."

Finance Subsidiaries

    TW Holdings,  Inc. ("TW") was organized in 1993 to purchase Notes Receivable
at face value plus accrued  interest.  TW transfers these Notes  Receivable to a
group of banks led by Bank of America  NT&SA (the "Bank  Group")  pursuant  to a
receivables  transfer agreement.  Through TW, the Company  transferred  eligible
Notes  Receivable  of $38.6  million  in 1995,  $42.1  million in 1996 and $57.1
million in 1997 to the Bank Group.  The  transfers  are subject to recourse  for
defaults and the Company maintains a reserve for recourse liability.

    Financing  of  Notes  Receivable  has  been  accomplished  by use of a $98.0
million purchase  commitment from the Bank Group. As of December 31, 1997, Notes
Receivable  totaling $98.0 million had been  transferred to the Bank Group.  The
Company's transfer of receivables to the Bank Group in the first quarter of 1997
did not meet the sale  recognition  criteria of SFAS No. 125 and were treated as
secured  borrowings.  The Notes  Receivable  transferred  to the Bank  Group are
collateralized  by a pool  of  Notes  Receivable  equal  to  25%  of the  amount
transferred to 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 125 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.  In  conjunction  with the renewal of the purchase  commitment  in June of
1997, the Company  modified its transfer  arrangements so that Notes  Receivable
transferred to the Bank Group qualify for sales  recognition  under SFAS 125. In
December of 1997 the purchase commitment was amended to increase the size of the
facility from $93.0 million to $98.0 million. TW's agreement with the Bank Group
is  subject  to  annual  renewals  on June 30 of each  year,  with  the  present
commitment  expiring  on June  30,  1998.  In the  event  of  nonrenewal  of the
commitment,  the  Company  would  not  be  able  to  transfer  additional  Notes
Receivable to the Bank Group

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

    The Company has limited  involvement with derivative  financial  instruments
and uses them only to manage well-defined interest rate risks. They are not used
for trading purposes.

    The  Company has a $10  million  open line of credit  with the Parent  which
bears  interest  at prime plus 1%  (currently  9.5%) per annum and is payable on
demand.  As of December 31, 1997 the outstanding  indebtedness to the Parent was
$1.9 million and income taxes payable to the Parent were $2.8 million.



    In October 1997, the Company  entered into two $50 million  notional  amount
forward  interest  rate  swap  agreements  to  effectively  hedge  the  treasury
component  of a future  financing  transaction  expected to be  completed in the
first  quarter  of 1998.  These  transactions  meet the  requirement  for  hedge
accounting,   including  designation  to  a  specific   transaction,   and  high
correlation.  Gains and losses on the forward swap  agreements  are deferred and
recognized upon completion of the transaction. The fair value of these swaps was
($472,000) at December 31, 1997, which reflects the estimated amount the Company
would have to pay at that date to cancel the contracts or transfer them to other
parties.

    The  remaining  balance of the  Company's  $5.0  million line of credit with
FINOVA Capital  Corporation  was paid in August 1997, and the line of credit was
terminated by the Company due to the relatively high interest rate of 10.5%. The
Company pursued and consummated a $30 million  revolving line of credit with its
Bank Group agented by Bank of America NT&SA in February  1998, at more favorable
interest rates, (see discussion under "Recent Developments.").

    Through the end of 1999,  the  Company  anticipates  spending  approximately
$98.0 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  from net proceeds of a securitization
of notes receivable completed in March 1998, further sales or securitizations of
Notes  Receivable  and  a $30  million  revolving  credit  facility,  which  was
consummated  in the  first  quarter  of  1998,  (see  discussion  under  "Recent
Developments").  The above credit facilities,  together with cash generated from
financing  transactions and the $10 million line of credit with Parent should be
sufficient to meet the Company's  working capital and capital  expenditure needs
for the near future.

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

Recent Developments

    In February 1998, the Company  entered into a Credit  Agreement with a group
of banks to provide the Company with a  three-year  unsecured  revolving  credit
facility for $30 million.  The credit  agreement  provides for borrowings at the
reference rate as announced by Bank of America, NT&SA or at LIBOR plus 100 basis
points.  The Credit  Agreement  provides for a commitment fee to the banks of 30
basis  points  per  annum  on  the  total  unused  amount  of  the   commitment.
Availability  under the line of credit is subject to a borrowing base which is a
percentage of unencumbered  Notes Receivable and inventory,  including  property
under  development.  Under the terms of the  Credit  Agreement,  the  Company is
required to maintain certain interest coverage ratios and capitalization  ratios
and also imposes limitations on certain liens and carrying amounts of inventory.
The Credit Agreement matures on February 12, 2001. The Company plans to use this
facility to meet short term working capital needs.

    In March  1998,  the Company  sold $37.9  million of Notes  Receivable  to a
special purpose company,  Trendwest Funding II, Inc. In addition, the Bank Group
sold $98.0  million of Notes  Receivable  purchased  from TW  Holdings,  Inc. to
Trendwest  Funding II, Inc. The special  purpose  company sold the receivable to
TRI Funding II, Inc.  (TRI),  a special  purpose  entity , and TRI issued $130.4
million  in two  classes  of  senior  and  subordinated  notes to  institutional
investors.  The 1998-1,  Class A notes were issued for $125.0 million at a fixed
rate of 6.88%. The 1998-1, Class B notes were issued for $5.4 million at a fixed
rate of 7.98%.  The Class A notes and Class B notes  were rated `A" and `BBB' by
Fitch IBCA, Inc., respectively, and are secured by the Notes Receivable owned by
TRI. The ratings reflect credit enhancements of a 4% overcollaterilization and a
2% minimum reserve account.  The notes have a stated maturity of April 15, 2009.
Upon completion of this financing, the Company had $93.0 million of availability
under the TW Holdings  facility and $30.0  million  under the  revolving  credit
agreement.

     On March 17, 1998 the Company opened its  Burlingame,  California  off-site
sales office  bringing the total number of off-site  sales  offices to fourteen,
ten of which are located  off-site in metropolitan  areas.  This newest Northern
California sales office will compliment other off-site Northern California sales
offices in  Sacramento,  Santa Clara and Walnut Creek.  In the second quarter of
1998 the Company expects to open two additional  off-site sales offices,  one in
the San Diego area and one in the Phoenix area. The latter which will provide an
entrance into the Southwest  Region market area which the Company  believes will
provide  additional  sales  opportunities  to  sustain  near-term  growth of the
Company.

    The Company is presently  negotiating the purchase of land and  construction
of a new  Corporate  headquarters  building to be available  for occupancy on or
about  December 1, 1998.  The facility  will be larger and enable the Company to
consolidate most of the existing Corporate operations at one location. Estimated
cost of the new facility is expected to be approximately  $11.0 million and will
provide  space to meet growth of the Company for the near  future.  The existing
Corporate  facility will be sold with proceeds  estimated at approximately  $3.8
million.  The new  building is a expected to be  financed  under a  conventional
commercial real estate mortgage.

Year 2000

    The Year 2000 issue is a flaw in many  electronic  data  processing  systems
which prevents them from processing  year-date data  accurately  beyond the year
1999. This is the result of using a two-digit  representation  for the year, for
example "99" for "1999".  This approach assumed that the first two digits of the
abbreviated  date is  "19".  However,  when  the  computer  reaches  2000 it may
interpret "00" as the year 1900 possibly  causing  inaccurate data processing or
processing to stop altogether. The Company has reviewed its exposure to the Year
2000 issue with respect to its data  processing  systems and determined the cost
of Year 2000  compliance  will be  immaterial  to its  financial  condition  and
results of  operations.  Additionally,  the Company has reviewed its exposure to
Year 2000 issue with respect to material  vendors such as Sage and is monitoring
Sage's Year 2000 compliance program to ensure timely completion.

    The above  statement and other  statements  herein contain  forward  looking
information  which  include  future  financing   transactions,   acquisition  of
properties,   and  the  Company's  future  prospects  and  other  forecasts  and
statements of  expectations.  Actual  results may differ  materially  from those
expressed in any forward-looking  statement made by the Company, due among other
things,  to the  Company's  ability  to develop  or  acquire  additional  resort
properties,  find acceptable debt or equity capital to fund such development, as
well as other risk  factors as  outlined in the "Risk  Factors"  section of this
Form 10-K.

Item 8. Financial Statements and Supplementary Data

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

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

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

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

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

     As  previously  discussed,  C&L was prepared to accept the  Company's  view
regarding  revenue  recognition for Upgrade Sales,  provided that the Commission
staff concurred.  The Commission  staff did not object to the Company's  revenue
recognition  policy  for  upgrade  sales at the time of the  Company's  IPO.  In
addition, due to their dismissal,  C&L did not complete the audit procedures and
inquiries  necessary to conclude on certain other matters.  The Company believes
that, if C&L had been allowed to complete their engagement the resolution of the
aforementioned issues and matters would have been treated no differently than as
presently treated.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

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

Item 11. Executive Compensation

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

Item 12. Security Ownership of Certain Beneficial Owners and Management

    The  information  required  by this  Item  will be set  forth  under  "Proxy
Statement - Share  Ownership of Directors  and Executive  Officers,"  and "Other
information  -  Certain  Shareholders"  in the  Company's  Proxy  Statement  and
reference is expressly  made thereto for the specific  information  incorporated
herein by the aforesaid reference.


<PAGE>


Item 13. Certain Relationships and Related Transactions

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

PART IV

Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K

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

<TABLE>
<CAPTION>
     Exhibit
      Number                                              Description
     <S>        <C>
     3.1        Amended and Restated Articles of Incorporation of the Registrant, dated July 2, 1997. (1)
     3.2        Amended and Restated Bylaws of the Registrant. (1)
     10.1       Management Agreement (Fourth Amended) between the Registrant and WorldMark,  the Club
                ("WorldMark"), dated September 30, 1994. (1)
     10.2       Software Support and Maintenance Agreement between the Registrant and Sage Systems, Inc.
                ("Sage"), dated           , 1994. (1)
     10.3       Service Agreement between the Registrant and Sage, dated January 1, 1996. (1)
     10.4       Software Transfer Agreement between the Registrant, Sage and James McBride,  Sr., dated
                August, 1994. (1)
     10.5       Escrow Agreement between the Registrant, Club Esprit (predecessor to WorldMark) and Sage,
                dated as of October 25, 1990. (1)
     10.6       Form of WorldMark Retail Installment Contract Vacation Owner Agreement. (1)
     10.7       Indenture among the Registrant, TRI Funding Company I, L.L.C. and LaSalle National Bank, dated
                as of March 1, 1996. (1)
     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. (1)
     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. (1)
     10.10      Receivables Purchase Agreement among the Registrant, TW Holdings, Inc. and Trendwest Funding
                I, Inc., dated March 1, 1996. (1)
     10.12      Receivables Purchase Agreement between Registrant and TW Holdings, Inc., dated December 1,
                1993. (1)
     10.13      Second Amended and Restated Eagle Crest Receivables Purchase Agreement dated as of June 1,
                1997, by and between Eagle Crest, Inc. and TW Holdings
     10.14      Second Amended and Restated Receivables Transfer Agreement dated as of June 1, 1997, by and
                between TW Holdings, Inc. as Seller, Bank of America National Trust and Savings Association,
                doing business as Seafirst Bank, and Other Purchasers Named Therein as Purchasers, Seafirst
                Bank as Agent, and Trendwest Resorts, Inc. as Master Servicer
     10.14.1    First Amendment to Receivables Transfer Agreement
     10.15      Nonexclusive Limited Assignment among the Registrant, Eagle Crest Partners,  Ltd. and
                WorldMark, dated September 20, 1996. (1)
     10.16      Nonexclusive Limited Assignment among the Registrant, Running Y, Inc. and WorldMark dated
                September 20, 1996. (1)
     10.17      Purchase Agreement among the Registrant, Eagle Crest Partnership, Ltd.,  Roderick C. Wendt and
                Richard L. Wendt, dated December 30, 1992. (1)
     10.18      Purchase Agreement among the Registrant, Roderick C. Wendt and Richard L.  Wendt, dated April
                1, 1993. (1)
     10.19      Purchase Agreement between the Registrant and Jeld-Wen Foundation, dated March 13, 1992. (1)
     10.20      Purchase Agreement between the Registrant and Jeld-Wen, dated March 15, 1993. (1)
     10.21      Purchase Agreement between the Registrant and Jeld-Wen, dated September 30,  1993. (1)
     10.22      Purchase Agreement between the Registrant and Jewel W. Kintzinger, dated October 12, 1993. (1)
     10.23      Servicing Escrow Agreement between Jewel Kintzinger, the Registrant and Sage,  dated October
                12, 1993. (1)
     10.24      Articles of Incorporation of WorldMark, the Club, dated December 10, 1992. (1)
     10.25      Bylaws of WorldMark, dated December 2, 1994. (1)
     10.26      Form of Employment Agreement between William F. Peare and the Registrant. (1)
     10.27      Form of Employment Agreement between Jeffery P. Sites and the Registrant. (1)
     10.28      Trendwest Resorts, Inc. 1997 Employee Stock Option Plan. (1)
     10.29      Stock Purchase Agreement between Trendwest Resorts, Inc. and JELD-WEN, inc. (1)
     10.30      Stock Purchase Agreement between Trendwest Resorts, Inc. and I&I Holdings,  Ltd. (1)
     11.1       Statement re Computation of Earnings per Share
     13.1       Annual Report to Shareholders (2)
     21.1       List of all Subsidiaries of the Registrant. (1)
     24.1       Power of Attorney from officers and directors (contained on signature page).
     27.1       Financial Data Schedule (one year)

(1)   Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-26861).
(2)   Incorporated by reference to the Company's Annual Report to Shareholders.
</TABLE>
----------

(b) Reports on Form 8-K

    No  reports  on Form 8-K were filed by the  Company  during the three  month
period ending December 31, 1997.





<PAGE>


                                   SIGNATURES

    Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  as
amended, Trendwest Resorts, Inc. has duly caused this report to be signed on its
behalf by the undersigned,  thereunto duly authorized,  in the City of Bellevue,
State of Washington, on March 30, 1998.

                                   TRENDWEST RESORTS, INC.

                              By:   /s/ JEFFERY P. SITES
                                    Jeffery P. Sites
                                    Executive Vice President

          /s/   WILLIAM F. PEARE           President,            March 30, 1998
----------------------------------   Chief Executive Officer
               William F. Peare            and Director
                                   (Principal Executive Officer)

 /s/           JEFFERY P. SITES      Executive Vice President,  March 30, 1998
----------------------------------
               Jeffery P. Sites     Chief Operating Officer and
                                             Director

  /s/          GARY A. FLORENCE      Vice President, Treasurer  March 30, 1998
----------------------------------
               Gary A. Florence     and Chief Financial Officer
                                   (Principal Financial Officer)

  /s/          JEROL E. ANDRES               Director           March 30, 1998
----------------------------------
               Jerol E. Andres


                                             Director           March __, 1998
----------------------------------
              Harry L. Demorest


/s/           MICHAEL P. HOLLERN             Director           March 30, 1998
----------------------------------
              Michael P. Hollern


 /s/        DOUGLAS P. KINTZINGER            Director           March 30, 1998
----------------------------------
            Douglas P. Kintzinger


                                             Director           March __, 1998
----------------------------------
                Linda M. Tubbs


 /s/          RODERICK C. WENDT              Director           March 30, 1998
----------------------------------
              Roderick C. Wendt



<PAGE>

                          INDEX TO FINANCIAL STATEMENTS
                    TRENDWEST RESORTS, INC. AND SUBSIDIARIES



                                                                  Page

Independent Auditors' Report..................................     F-2

Combined and Consolidated Balance Sheets......................     F-3

Combined and Consolidated Statements of Income................     F-4

Combined and Consolidated Statements of Stockholders' Equity..     F-5

Combined and Consolidated Statements of Cash Flows............     F-6

Notes to Combined and Consolidated Financial Statements.......     F-7





<PAGE>



                          INDEPENDENT AUDITORS' REPORT



The Stockholders
Trendwest Resorts, Inc.:


We have audited the  accompanying  combined and  consolidated  balance sheets of
Trendwest  Resorts,  Inc. and subsidiaries as of December 31, 1996 and 1997, and
the related combined and consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1997.   These   combined  and   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these combined and  consolidated  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 and consolidated  financial statements referred to
above  present  fairly,  in all material  respects,  the  financial  position of
Trendwest  Resorts,  Inc. and subsidiaries as of December 31, 1996 and 1997, and
the  results of their  operations  and their cash flows for each of the years in
the  three-year  period ended  December 31, 1997, in conformity  with  generally
accepted accounting principles.




KPMG Peat Marwick LLP




Seattle, Washington
February 13, 1998

                                      F-2

<PAGE>
                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

                    Combined and Consolidated Balance Sheets

                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                    --------------------------------------
                                    Assets                                                1996                 1997
                                                                                    -----------------    -----------------
<S>                                                                                 <C>                   <C>
Assets:
    Cash                                                                            $         93                   70
    Restricted cash                                                                          709                1,219
    Notes receivable, net of allowance for doubtful accounts, sales
       returns and deferred gross profit                                                  45,448               73,075
    Accrued interest and other receivables                                                 4,606                7,435
    Residual interest in notes receivable sold                                            10,839               15,235
    Inventories                                                                           16,247               44,534
    Property and equipment, net                                                            5,912                7,057
    Deferred income taxes                                                                  2,360                  924
    Other assets                                                                           3,116                2,201
                                                                                    -----------------    -----------------

                   Total assets                                                     $     89,330              151,750
                                                                                    -----------------    -----------------
                                                                                    -----------------    -----------------

                     Liabilities and Stockholders' Equity

Liabilities:
    Accounts payable                                                                       1,037                  944
    Accrued liabilities                                                                    2,100                3,862
    Accrued construction in progress                                                       2,089               10,480
    Due to Parent                                                                         21,316                1,947
    Allowance for recourse liability and deferred gross profit on notes
       receivable sold                                                                    10,080                8,757
    Income taxes payable to Parent                                                         1,909                2,755
    Income taxes payable                                                                     --                  880
    Notes payable                                                                          1,055                  --
                                                                                    -----------------    -----------------

                   Total liabilities                                                      39,586               29,625
                                                                                    -----------------    -----------------

Stockholders' equity:
    Preferred stock, no par value.  Authorized 10,000,000 shares;
       no shares shares issued or outstanding                                               --                    --
    Common stock, no par value.  Authorized 90,000,000 shares;
       issued and outstanding 17,593,366 shares at December 31, 1997                      14,970               66,742
    Retained earnings                                                                     34,774               55,383
                                                                                    -----------------    -----------------

                   Total stockholders' equity                                             49,744              122,125

Commitments and contingencies
                                                                                    -----------------    -----------------

                   Total liabilities and stockholders' equity                   $         89,330              151,750
                                                                                    -----------------    -----------------
                                                                                    -----------------    -----------------
</TABLE>

See accompanying notes to combined and consolidated financial statements.



<PAGE>



                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

                 Combined and Consolidated Statements of Income

                  (dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                    Year ended December 31,
                                                                 1995                  1996                   1997
                                                           ------------------    ------------------     ------------------
<S>                                                        <C>                       <C>                      <C>
Revenues:
    Vacation Credit sales, net                             $      77,783               100,040                128,835
    Finance income                                                 5,368                 7,143                 11,989
    Gains on sales of notes receivable                             3,222                 5,673                  6,582
    Resort management services                                     1,579                 1,501                  2,032
    Other                                                          1,226                 2,552                  2,149
                                                           ------------------    ------------------     ------------------

                Total revenues                                    89,178               116,909                151,587
                                                           ------------------    ------------------     ------------------

Costs and operating expenses:
    Vacation Credit cost of sales                                 20,484                27,400                 34,569
    Resort management services                                     1,283                   859                  1,108
    Sales and marketing                                           36,374                47,810                 59,448
    General and administrative                                     8,391                10,904                 13,449
    Provision for doubtful accounts and recourse
       liability                                                   6,522                 7,467                  9,077
    Interest                                                       2,380                 2,445                  1,739
                                                           ------------------    ------------------     ------------------

                Total costs and operating expenses                75,434                96,885                119,390
                                                           ------------------    ------------------     ------------------

                Income before income taxes                        13,744                20,024                 32,197

Income tax expense                                                 4,979                 7,348                 11,588
                                                           ------------------    ------------------     ------------------

                Net income                             $           8,765                12,676                 20,609
                                                           ------------------    ------------------     ------------------
                                                           ------------------    ------------------     ------------------


Basic and diluted net income per common share          $             .61                   .88                   1.32

Basic and diluted weighted average shares of
    common stock outstanding                                  14,387,169            14,417,116             15,596,419
</TABLE>

See accompanying notes to combined and consolidated financial statements.



<PAGE>





                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Combined and Consolidated Statements of Stockholders' Equity

                             (dollars in thousands)
<TABLE>
<CAPTION>
                                                                                             Employee
                                           Class A                       Class B               notes
                                         common stock                  common stock          receivable                  Total
                                  ------------------------         ----------------------    for common     Retained  stockholders'
                                      Shares        Amount          Shares        Amount       stock        earnings    equity
                                  -----------    ---------        ----------     --------    ---------    ----------  ------------

<S>                                <C>           <C>                 <C>         <C>          <C>           <C>            <C>
Balance at December 31, 1994       8,981,388     $   6,413            100        $  8,500     (910)         13,453         27,456

Exchanges for parent company
    stock                                 --            --             --              --      607              --            607
Issuance of Trendwest common
    stock
    to employees for notes           242,235            56             --              --      (41)             --             15
Note payments                             --            --             --              --       30              --             30
Dividends declared and paid by
    TW Holdings                           --            --             --              --       --            (120)          (120)
Net income                                --            --             --              --       --           8,765          8,765
                                  -----------    ----------    ---------------    --------   ----------    ------------  ---------

Balance at December 31, 1995       9,223,623         6,469            100           8,500     (314)         22,098         36,753

Issuance of Trendwest Funding
    common stock                       1,000             1             --              --       --              --              1
Note payments                             --            --             --              --      314              --            314
Net income                                --            --             --              --       --          12,676         12,676
                                  -----------    ----------    ---------------    --------   ----------    ------------  ---------

Balance at December 31, 1996       9,224,623         6,470            100           8,500       --          34,774         49,744

Consolidation transactions
    (5,193,693 shares of Trendwest
    common stock issued in
    exchange for all of the out-
   standing shares of TW Holdings
    and Trendwest Funding)         5,192,493         8,500           (100)         (8,500)      --              --             --
Issuance of common stock, net
    of issuance costs of $5,401    3,176,250        51,772             --              --       --              --         51,772
Net income                                --            --             --              --       --          20,609         20,609
                                  -----------    ----------    ---------------    --------   ----------    ------------  ---------

Balance at December 31, 1997      17,593,366     $  66,742             --         $    --       --          55,383        122,125
                                  -----------    ----------    ---------------    --------   ----------    ------------  ---------
                                  -----------    ----------    ---------------    --------   ----------    ------------  ---------
</TABLE>

<TABLE>
<CAPTION>
                                                              December 31, 1996
                                                         ----------------------------
                                                                           Issued and
                                                          Authorized        outstanding
                                                         --------------    -----------
<S>                                                     <C>                 <C>
Trendwest:
    Common stock, voting no par value                   10,264,215          9,223,423
    Preferred stock, no par value                            --                 --

TW Holdings:
    Class A, voting, no par value                             200                 200
    Class B, nonvoting, no par value                          200                 100

Trendwest Funding common stock,
    voting, no par value                                    1,000               1,000
</TABLE>

See accompanying notes to combined and consolidated financial statements.


<PAGE>


                             TRENDWEST RESORTS, INC.
                             AND CERTAIN AFFILIATES

               Combined and Consolidated Statements of Cash Flows

                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                          ------------------------------------------------
                                                                              1995             1996             1997
                                                                          --------------   --------------   --------------
<S>                                                                       <C>              <C>                <C>
Cash flows from operating activities:
    Net income                                                            $   8,765           12,676           20,609
    Adjustments to reconcile net income to net cash provided by
       (used in) operating activities:
          Depreciation and amortization                                         330              502              681
          Amortization of residual interest in notes receivable sold          1,481            2,735            4,089
          Provision for doubtful accounts, sales returns and recourse
           liability                                                          7,655           10,078           11,755
          Recoveries of notes receivable charged off                            113               72              132
          Residual interest in notes receivables sold                        (3,258)          (5,674)          (6,729)
          Unrealized gain on residual interest in notes receivable sold          --               --           (1,044)
          Change in deferred gross profit                                     1,480            2,737             (684)
          Deferred income tax expense (benefit)                                (364)            (422)           1,436
          Issuance of notes receivable                                      (71,052)         (91,593)        (112,170)
          Proceeds from sale of notes receivable                             46,665           67,257           42,292
          Proceeds from repayment of notes receivable                        11,084           21,388           28,781
          Purchase of notes receivable                                      (11,305)         (11,150)         (16,571)
          Changes in certain assets and liabilities:
             Increase in restricted cash                                       (110)            (328)            (510)
             Inventories                                                      1,493           (5,653)         (28,287)
             Accounts payable and accrued liabilities                        (3,279)           1,729           10,060
             Income taxes payable to Parent                                  (2,207)             713              846
             Income taxes payable                                                --               --              880
             Other                                                           (1,740)          (1,540)          (2,044)
                                                                          --------------   --------------   --------------

              Net cash provided by (used in) operating activities           (14,249)           3,527          (46,478)
                                                                          --------------   --------------   --------------

Cash flows from investing activities:
    Purchase of property and equipment                                       (4,312)          (1,429)          (1,696)
    Proceeds from sale of marketable equity securities                        4,219               --               --
                                                                          --------------   --------------   --------------

               Net cash used in investing activities                           (93)          (1,429)          (1,696)
                                                                          --------------   --------------   --------------

Cash flows from financing activities:
    Proceeds from notes payable                                                 100               --           16,803
    Payments on notes payable                                                (1,529)          (1,487)          (1,055)
    Net change in due to Parent                                              15,877             (968)         (19,369)
    Dividends paid                                                             (120)              --               --
    Proceeds from issuance of common stock                                       15                1           51,772
    Payments on notes receivable for stock                                       30              314               --
                                                                          --------------   --------------   --------------

               Net cash provided by (used in) financing activities           14,373           (2,140)          48,151
                                                                          --------------   --------------   --------------
                         Net increase (decrease) in cash                         31              (42)             (23)

Cash at beginning of period                                                     104              135               93
                                                                          --------------   --------------   --------------

Cash at end of period                                                  $        135               93               70
                                                                          --------------   --------------   --------------
                                                                          --------------   --------------   --------------

Supplemental  disclosures of cash flow  information
  cash paid during the period  for:
       Interest                                                        $      2,091            2,579            1,951
       Income taxes                                                           7,547            7,056            8,010
                                                                          --------------   --------------   --------------
                                                                          --------------   --------------   --------------

Supplemental schedule of noncash investing and financing activities:
    Issuance of common stock for notes receivable                      $         41               --               --
    Reduction of notes payable through transfer of notes receivable              --               --           16,803
    Issuance of note receivable in exchange for other assets sold                --               --              489
                                                                          --------------   --------------   --------------
                                                                          --------------   --------------   --------------

</TABLE>

See accompanying notes to combined and consolidated financial statements.


<PAGE>



                             TRENDWEST RESORTS, INC.

                                AND SUBSIDIARIES

     Notes to Combined and Consolidated Financial Statements, Continued

                        December 31, 1995, 1996 and 1997

                          (dollar amounts in thousands)


(1)    Description of Business and Basis of Presentation

       Description of Business

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

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

       Basis of Presentation

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

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

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

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

       Capital Transactions and Public Offering

       In contemplation of the Company's initial public offering,  the Company's
       articles of incorporation were amended effective July 2, 1997 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.

       As authorized,  the pricing committee of the Board declared a 513.211 for
       1 stock split effective July 2, 1997. The accompanying combined financial
       statements have been retroactively  restated to give effect to this stock
       split.

       On August 15,  1997,  the Company  consummated  the offering of 3,176,250
       shares of the  Company's  common stock at $18 per share  resulting in net
       proceeds of $51,772, after deducting the related issuance costs.

       Basic and Diluted Net Income Per Common Share

       Basic and diluted net income per common share has been computed  based on
       the number of shares of Trendwest  common stock  outstanding  and assumes
       the  5,193,693  shares  issued  to the  Parent  in  connection  with  the
       Consolidation   Transactions   have  been  outstanding  for  all  periods
       presented.

       The following  illustrates the  reconciliation of weighted average shares
used for basic net income per share:
<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                                -----------------------------------------------------
                                                                     1995               1996               1997
                                                                ---------------    ---------------    ---------------
<S>                                                                <C>                <C>              <C>

    Basic

    Weighted average shares - Trendwest                             9,193,476          9,223,423         10,402,726
    Effect of consolidation transactions                            5,193,693          5,193,693          5,193,693
                                                                ---------------    ---------------    ---------------

    Basic weighted average shares outstanding                      14,387,169         14,417,116         15,596,419
                                                                ===============    ===============    ===============
</TABLE>


     Net income available to common  shareholders for basic net income per share
was $8,765,  $12,676 and $20,609 for the years ended December 31, 1995, 1996 and
1997, respectively.

     There were no dilutive  securities  outstanding  for the periods  presented
resulting in basic and diluted net income per share being equal.

     At December 31,  1997,  there were  options to purchase  490,000  shares of
common stock  outstanding  which were  antidilutive  in 1997 and  therefore  not
included in the computation of diluted net income per share.


(2)    Summary of Significant Accounting Policies

       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.

       Allowance for Doubtful Accounts and Recourse Liability

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

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

       Inventories

       Inventories  consist of Vacation  Credits and construction in progress as
follows:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                            -----------------------------------
                                                                                 1996               1997


                                                                            ----------------   ----------------
<S>                                                                      <C>                    <C>

                      Vacation Credits                                   $         7,784              1,722
                      Construction in progress                                     8,463             42,812
                                                                            ----------------   ----------------

                               Total inventories                         $        16,247             44,534
                                                                            ================   ================
</TABLE>

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

       Construction in progress is valued at the lower of cost or net realizable
       value.  Interest,  taxes and other  carrying  costs  incurred  during the
       construction period are capitalized.  The amount of interest  capitalized
       during the years ended  December 31, 1995,  1996 and 1997 amounted to $0,
       $343 and $637, respectively.

       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.

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

       The  Company  also  finances  sales  of  Upgrades  which  result  in  the
       cancellation  of any existing note  receivable  and the issuance of a new
       seven-year note secured by an interest in all Vacation  Credits owned. No
       additional down payment is required by the Company as long as the owner's
       equity interest in the original  Vacation  Credits is equal to 10% of the
       value of all Vacation Credits, including those from the Upgrade sale, and
       the  customer is not  delinquent  in his  payments on his  existing  note
       receivable.  When the Company  finances an Upgrade  sale and the customer
       does not make an  additional  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 is
       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.

              (ii)  Sales of Notes Receivable

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

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

       Income from the differential retained is recorded in finance income using
       the interest method. In addition, finance income includes interest income
       on notes  receivable  retained by the Company.  Prior to January 1, 1997,
       the  residual  interest in notes  receivable  sold was  classified  as an
       excess  servicing asset and carried at the lower of amortized cost or net
       realizable  value.  Beginning  January 1, 1997, the residual  interest in
       notes  receivable sold is classified as a trading  security in accordance
       with SFAS No. 115,  Accounting for Certain  Investments in Debt or Equity
       Securities,  and is carried at market value.  Also,  beginning January 1,
       1997,  changes in the fair  market  value  (see note 14) of the  residual
       interest in notes receivable sold are recognized as finance income.

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

       Property and Equipment

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

                      Building and improvements                   20 to 45 years
                      Equipment, furniture and fixtures           3 to 12 years
                      Leasehold improvements                      2 to 5 years


       Advertising

       Advertising  costs,  included  in sales  and  marketing  expenses  in the
       accompanying  combined statements of income, are expensed as incurred and
       amounted to $2,012,  $4,036 and $4,204 for the years ended  December  31,
       1995, 1996 and 1997, respectively.



<PAGE>


       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 was  included in the Federal  consolidated  tax return of the
       Parent  prior to August 15,  1997.  The  Parent  allocated  the  combined
       current  and  deferred  tax  expense to the Company as if the Company had
       filed on a stand-alone basis.

       Subsequent to August 15, 1997, the Company files its Federal consolidated
tax return on a stand-alone basis.

       Stock-Based Compensation

       During 1995,  the  Financial  Accounting  Standards  Board (FASB)  issued
       Statement of Financial  Accounting  Standards (SFAS) No. 123,  Accounting
       for  Stock-Based  Compensation,   effective  for  years  beginning  after
       December  15,  1995.  The  statement  requires  expanded  disclosures  of
       stock-based  compensation  arrangements  and  encourages  (but  does  not
       require)  application  of the fair  value  recognition  provision  in the
       statement. Under the fair value recognition method,  compensation cost is
       measured at the grant date of the option, based on the value of the award
       and  is  recognized  over  the  vesting  period.   Under  existing  rules
       ("intrinsic  value based method"),  compensation  cost is the excess,  if
       any,  of the  market  value of the stock at grant date over the amount an
       employee  must pay to acquire  the  stock.  None of the  Company's  stock
       options  have any  intrinsic  value at grant date and,  under  Accounting
       Principles  Board  (APB)  Opinion No. 25, no  compensation  cost has been
       recognized for them. SFAS No. 123 does not alter the existing  accounting
       rules for employee stock-based programs. Companies may continue to follow
       rules  outlined in APB Opinion No. 25, but are  required to disclose  the
       pro forma  amounts of net income and  earnings  per share that would have
       been  reported  had they  elected to follow  the fair  value  recognition
       provision of SFAS No. 123. Effective January 1, 1996, the Company adopted
       the disclosure  requirements  of SFAS No. 123, but has determined that it
       will   continue  to  measure  its   employee   stock-based   compensation
       arrangements under the provisions of APB Opinion No. 25. Accordingly,  no
       compensation cost has been recognized for its stock option plan.



<PAGE>


       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 financial statements
       and the reported  amounts of revenues and expenses  during the  reporting
       period to prepare these financial statements in conformity with generally
       accepted  accounting  principles.  Actual results could differ from those
       estimates and assumptions.

       Derivative Financial Instruments

       The Company has limited involvement with derivative financial instruments
       and uses them only to manage  well-defined  interest rate risks. They are
       not used for trading purposes.

       The  Company  enters  into  forward  interest  rate swap  agreements  and
       interest  rate cap  agreements  to hedge the effects of  fluctuations  in
       interest rates related to anticipated sales of notes  receivables.  These
       transactions  meet  the  requirements  for  hedge  accounting,  including
       designation to a specific  transaction  and high  correlation.  Gains and
       losses on these agreements are deferred and recognized upon completion of
       the sale of notes receivable.

       Effect of New Accounting Pronouncements

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

       The  adoption of SFAS No. 125 on January 1, 1997  resulted in an increase
       in the  carrying  value  of the  Company's  residual  interest  in  notes
       receivable  sold at  December  31,  1996 of $755 and $111  related to the
       sales of notes  receivable  to  Investors  and to the  limited  liability
       company (LLC), respectively, (see note 5).

       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
       adopted  SFAS No. 128 in the fourth  quarter of 1997 and has restated all
       prior  periods  to  conform to the new  standard.  There was no  material
       impact on earnings per share from the 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 1996 and 1997 bear
       interest at 13.9% or 14.9%,  depending on the 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 the Owners in the event
       membership is terminated for nonpayment of the notes.

       Maturities of notes receivable at December 31, 1997 are as follows during
the next five years and thereafter:

                                  1998            $        10,435
                                  1999                     11,585
                                  2000                     12,627
                                  2001                     13,544
                                  2002                     13,986
                                  Thereafter               22,537
                                                     ---------------

                                                  $        84,714
                                                     ===============

       Customers  over 60 days  past  due on  monthly  payments  are  considered
       delinquent.  Delinquent  notes  receivable  represent  1.80% and 1.88% of
       notes receivable at December 31, 1996 and 1997, respectively.

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

                                                                          1995               1996               1997
                                                                     ---------------    ---------------    ---------------
<S>                                                                <C>                  <C>                <C>

         Balances at beginning of period                          $         5,284              7,964             11,241

         Provision for doubtful accounts, sales returns and
             recourse liability                                             7,655             10,078             11,755
         Notes receivable charged-off and sales returns net of
             Vacation Credits recovered                                    (5,088)            (6,873)            (7,888)
         Recoveries                                                           113                 72                132
                                                                     ---------------    ---------------    ---------------

         Balances at end of period                                $         7,964             11,241             15,240
                                                                     ===============    ===============    ===============


                                                                          1995               1996               1997
                                                                     ---------------    ---------------    ---------------

         Allowance for doubtful accounts and sales returns        $         5,429              5,832              9,935
         Recourse liability on notes receivable sold                        2,535              5,409              5,305
                                                                     ---------------    ---------------    ---------------

                                                                  $         7,964             11,241             15,240
                                                                     ===============    ===============    ===============

       Total notes receivable outstanding,  including notes receivable sold (see
       note 5), amounted to $180,323 and $242,286 at December 31, 1996 and 1997,
       respectively.
</TABLE>


(5)    Sales of Notes Receivable

       TW Holdings

       The Company sells  through TW Holdings,  an 80% interest in certain notes
       receivable  to  outside  investors  primarily  through an  agreement,  as
       amended on December 30, 1997,  expiring  June 30, 1998  (Agreement)  with
       Seattle-First National Bank and other purchasers  (Investors).  Under the
       terms of the Agreement,  up to $98,000 of receivables  can be sold to the
       Investors and proceeds from the  collection of sold notes  receivable can
       be used to purchase  additional  notes  receivable.  The notes receivable
       have stated rates of 13.9%-14.9%  and are sold at par to yield LIBOR plus
       1.25% per annum to the Investors.  The 20% retained  interest is recorded
       as notes  receivable  whereas  the  residual  interest in the excess cash
       flows of notes  receivable  sold is  classified  as residual  interest in
       notes receivable sold, and beginning  January 1, 1997 is measured at fair
       value under SFAS No. 125.

     Total notes receivable sold and outstanding  under this Agreement  amounted
to $55,000 and $98,000 at December 31, 1996 and 1997, respectively.

       The Investors have recourse to the Company's  retained  interest in notes
       receivable sold under certain default provisions related primarily to the
       delinquency  status of the notes receivable sold. The Company's  retained
       interest included in notes receivable in the accompanying  balance sheets
       amounted  to  $13,750  and  $24,500  at  December   31,  1996  and  1997,
       respectively.

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

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

       Trendwest Funding I

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

       The LLC  noteholders  and the LLC outside  investor  have recourse to the
       Company's  retained  interest  in notes  receivable  sold  under  certain
       default  provisions  related  primarily to the delinquency  status of the
       notes  receivable  sold. The Company's  retained  interest is included in
       notes  receivable  in  the  accompanying  combined  balance  sheets,  and
       amounted to  approximately  $12,600 and $14,580 at December  31, 1996 and
       1997, respectively.

       The LLC is controlled and 99% owned by an independent third party who has
       made a  substantial  capital  investment  and has  substantial  risks and
       rewards of the assets of the LLC.


(6)    Property and Equipment

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

                                                                                    1996              1997


                                                                               ---------------   ----------------
<S>                                                                         <C>                  <C>

                Land                                                        $           877               877
                Building and improvements                                             3,586             3,612
                Equipment, furniture and fixtures                                     2,504             3,697
                Leasehold improvements                                                  336               814
                                                                               ---------------   ----------------

                                                                                      7,303             9,000
                Less accumulated depreciation and amortization                        1,391             1,943
                                                                               ---------------   ----------------

                                                                            $         5,912             7,057
                                                                               ===============   ================



</TABLE>

<PAGE>



(7)    Deferred Gross Profit

       The Company accounts for certain Upgrade sales on the installment  method
       prior to satisfaction of minimum down payment  requirements.  Information
       for those transactions follows for the years ended December 31:
<TABLE>
<CAPTION>
                                                                            1995               1996               1997
                                                                       ---------------    ---------------    ---------------
<S>                                                                  <C>                  <C>                <C>

                   Gross sales value                                 $        8,266             15,618              9,023
                                                                       ===============    ===============    ===============

                   Gross profit deferred                                      3,826              7,328              4,277
                   Gross profit recognized                                    2,346              4,591              4,961
                                                                       ---------------    ---------------    ---------------

                   Net gross profit deferred (recognized)
                       during period                                 $        1,480              2,737               (684)
                                                                       ===============    ===============    ===============

</TABLE>
       Notes  receivable  is  presented  net of  deferred  gross  profit  in the
       accompanying  balance sheets. Such deferred amounts aggregated $1,168 and
       $1,704 at December 31, 1996 and 1997, respectively.

       Deferred gross profit related to notes  receivable  sold is combined with
       allowance  for  recourse  liability  on  notes  receivable  sold  in  the
       accompanying  balance sheets. Such deferred amounts aggregated $4,671 and
       $3,451 at December 31, 1996 and 1997, respectively.



(8)    Notes Payable

       The  Company  had  a  line  of  credit  of  $5,000  with  FINOVA  Capital
       Corporation which was terminated in August 1997. The outstanding  balance
       at December 31, 1996 and 1997 was $1,054 and $0, respectively.




<PAGE>



(9)    Income Taxes

       The  provision  for income taxes  consist of the  following for the years
ended December 31:
<TABLE>
<CAPTION>
                                                              1995               1996               1997
                                                         ---------------    ---------------    ---------------
<S>                                                      <C>                <C>                <C>
                           Federal:
                               Current                $         5,218              7,426              9,173
                               Deferred                          (308)              (450)             1,749
                                                         ---------------    ---------------    ---------------

                                                                4,910              6,976             10,922
                                                         ---------------    ---------------    ---------------

                           State:
                               Current                            125                344                980
                               Deferred                           (56)                28               (314)
                                                         ---------------    ---------------    ---------------

                                                                   69                372                666
                                                         ---------------    ---------------    ---------------

                                      Total           $         4,979              7,348             11,588
                                                         ===============    ===============    ===============
</TABLE>

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

                                                                                1996               1997
                                                                           ----------------   ----------------
<S>                                                                     <C>                   <C>
                           Deferred tax assets:
                               Allowance for credit losses              $         4,206              3,940
                               Deferred gross profit                              2,185              1,964
                               Other                                                571                690
                                                                           ----------------   ----------------

                                      Total deferred tax assets                   6,962              6,594
                                                                           ----------------   ----------------

                           Deferred tax liability:
                               Excess servicing asset                             3,375              4,664
                               Other assets                                         196                150
                               Property and equipment                               120                251
                               Other                                                911                605
                                                                           ----------------   ----------------

                                      Total deferred tax liability                4,602              5,670
                                                                           ----------------   ----------------

                                      Total deferred asset, net         $         2,360                924
                                                                           ================   ================



</TABLE>

<PAGE>


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

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

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

<TABLE>
<CAPTION>
                                                                          1995              1996               1997
                                                                     ---------------   ----------------   ----------------
<S>                                                                  <C>               <C>                <C>
                Income tax at Federal statutory rate                      35.0%             35.0%              35.0%
                State tax, net of Federal benefit                           .3               1.2                1.3
                Other                                                       .9                .5                (.3)
                                                                     ---------------   ----------------   ----------------

                                                                          36.2%             36.7%              36.0%
                                                                     ===============   ================   ================

</TABLE>

(10)   Employee Notes for Common Stock

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


(11)   401(k) Plans

       Prior to August 15, 1997, the Company  participated  in the Parent 401(k)
       plan. Company  contributions,  which are invested in Parent common stock,
       were at the  discretion  of the  Board of  Directors  of the  Parent  and
       totaled  $1,283,  $1,686 and $1,124 for the years ended December 31, 1995
       and  1996 and the  period  from  January  1,  1997 to  August  15,  1997,
       respectively.

       On August 15, 1997, the Company ceased participation in the Parent 401(k)
       plan and  sponsored a new plan  (Trendwest  plan)  covering all Trendwest
       employees.  Company contributions totaled $765 for the period from August
       15, 1997 to December 31, 1997.


(12)   Derivative Financial Instruments

       Interest Rate Cap Agreement

       In March 1995, the Company entered into an interest rate cap agreement at
       a cost of $92 to reduce the impact of  changes in  interest  rates on its
       notes  receivable  sold.  The interest  rate cap  agreement  has a 30-day
       notional  principal  amount  of  $31,800  on which the  Company  receives
       interest  payments to the extent that LIBOR exceeds an annualized rate of
       10.25%.

       The interest rate cap agreement expires in April 1998.

       Forward Swap Agreement

       In October 1997,  the Company  entered into two $50,000  notional  amount
       forward  interest rate swap  agreements.  These contracts are designed to
       hedge the interest rate risk of an  anticipated  securitization  of notes
       receivable expected to close in the first quarter of 1998.

       The Company is exposed to credit losses in the event of nonperformance by
       the  counterparties  to its  interest  rate  caps  and its  forward  swap
       agreements. The Company anticipates, however, that counterparties will be
       able to fully satisfy their obligations under the contracts.  The Company
       does not obtain collateral to support financial  instruments but monitors
       the credit standing of the counterparties.


(13)   Stock Option Plan

       In 1997,  the Board of  Directors  approved  the adoption of an incentive
       stock option plan  providing for the award of incentive  stock options to
       employees of the Company at the discretion of the Board of Directors.

       Under the plan,  on the date of grant,  the exercise  price of the option
       must be at least  equal to the  market  value of common  stock for shares
       issued.  The  plan  provides  for  grants  up  to  5%  of  the  Company's
       outstanding shares (879,668 at December 31, 1997).

       Stock  options  vest ratably over five years and expire three years after
becoming fully vested.

       The following table  summarizes  stock option activity for the year ended
December 31, 1997:

<TABLE>
<CAPTION>
                                                                                                 Weighted
                                                                                                  average
                                                                               Shares          option price
                                                                           ----------------   ----------------
<S>                                                                        <C>             <C>

                 Options granted                                                492,000    $      26.875
                 Expired or canceled                                              2,000             --
                                                                           ----------------   ----------------

                 Balance at end of year                                         490,000    $      26.875
                                                                           ================   ================

</TABLE>

       There are no options exercisable at December 31, 1997.

       The Company  applies APB Opinion No. 25 in  accounting  for its plan and,
       accordingly,  no  compensation  cost has been  recognized  for its  stock
       options  in  the  accompanying  financial  statements.  Had  the  Company
       determined  compensation  cost based on the fair value at the grant date,
       the Company's net income would have been reduced to the pro forma amounts
       indicated below:

<TABLE>
<CAPTION>
                                                                                            Year ended
                                                                                         December 31, 1997
                                                                                        --------------------
<S>                                                                                  <C>

                       Net income, as reported                                       $          20,609
                       Net income, pro forma                                                    20,377
                       Basic and diluted EPS, as reported                                        1.32
                       Basic and diluted EPS, pro forma                                          1.31
</TABLE>

       The fair value of the options  granted is  estimated on the date of grant
       using  the  Black-Scholes  method  with the  following  weighted  average
       assumptions used in 1997; annual dividend yield of 0%; volatility of 45%;
       risk free  interest  rate of 6.4%;  and  expected  lives of 6 years.  The
       weighted  average  grant  date fair  value per share of  options  granted
       during the year ended December 31, 1997 was $12.94.


(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.



<PAGE>


       Estimated  fair  values,   carrying   values  and  various   methods  and
       assumptions used in valuing the Company's  financial  instruments are set
       forth below at December 31:
<TABLE>
<CAPTION>
                                                                   1996                                  1997
                                                     ----------------------------------    ----------------------------------
                                                     Carrying value       Estimated        Carrying value       Estimated
                                                                          fair value                            fair value
                                                     ---------------    ---------------    ---------------    ---------------
<S>                                         <C>   <C>                   <C>                <C>                <C>
       Financial assets:
           Cash                             (a)   $            93                 93                 70                 70
           Restricted cash                  (a)               709                709              1,219              1,219
           Notes receivable                 (a)            46,616             46,616             74,779             74,779
           Residual interest in notes
             receivable sold                (b)            10,839             11,705             15,235             15,235

       Financial liabilities:
           Due to Parent                    (c)            21,316             21,316              1,937              1,947
           Recourse liability on notes      (a)             5,409              5,409              5,305              5,305
             sold
           Notes payable                    (c)             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. The
              Company utilizes the following assumptions in determining the fair
              value  of its  residual  interest  in  notes  receivable  sold  at
              December 31:

<TABLE>
<CAPTION>
                                                                         1996               1997
                                                                    ---------------    ---------------
<S>                                                                 <C>                <C>
                                       Discount rate                      12.25%            12.25%
                                       Annual prepayment rate              6%                6%

</TABLE>
       (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, 1996 and
       1997.  The fair value of the Company's  forward swap agreement was $(472)
       at December 31, 1997.  This negative fair value  represents the estimated
       amount the Company would have to pay at each date to cancel the contracts
       or transfer them to other parties.


(15)   Related Party Transactions

       Notes Receivable

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

                                                                              1996               1996             1997
                                                                          --------------    ---------------   --------------
<S>                                                                       <C>               <C>                <C>
        Sale of notes receivable:
            Members of the Board of Directors of the Parent (at
              face value, no recourse)                                 $       3,905              3,350              917
            I&I Holdings, a subsidiary of the Parent (at face value,
              full recourse)                                                   1,321                232               55
            Parent Foundation (at face value, full recourse)                     191                211               --
        Purchases of notes receivable:
            Eagle Crest Partners, Ltd., a subsidiary of the Parent
              (at face value, full recourse)                                  11,305              8,993            7,134
            Running Y Resorts, Ltd., a subsidiary of the Parent (at
              face value, full recourse)                                          --              2,157            3,218
            Parent foundation (at face value, full recourse)                      --                 --            2,536
</TABLE>

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

       The  outstanding  balance of notes  receivable sold with full recourse to
       related parties  amounted to $18,512 and $13,564 at December 31, 1996 and
       1997, respectively.



<PAGE>


       WorldMark

              (i)  Management Contract

       The Company manages the resort properties  transferred to WorldMark under
       the terms of a management  agreement  which is subject to annual approval
       by the Members. Under the terms of the management agreement,  the Company
       receives  a  management  fee equal to the  lesser  of 15% of  WorldMark's
       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>
                                                                       1995               1996               1997
                                                                  ----------------   ----------------   ----------------
<S>                                                               <C>                <C>                <C>
            WorldMark:
                 Management fee income                         $           747              1,103              1,488
                 Dues expense incurred by Trendwest                        512                275                793
                 Reimbursed salaries                                     1,533              3,103              5,448
                 Resort operations, maid and key service
                    income                                                 332                 --                 --
                 Other reimbursed expenses                                 297                323                612

              (ii)  Financial Information (Unaudited)
</TABLE>

     A summary of financial  information  for  WorldMark as of and for the years
ended December 31, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
                                                                                          1996               1997
                                                                                     ----------------   ----------------
<S>                                                                               <C>                   <C>
            Cash and investment securities                                        $         4,166              6,364
            Member dues receivable                                                          6,694              8,860
            Other                                                                             908              2,170
                                                                                     ----------------   ----------------

                     Total assets                                                          11,768             17,394
                                                                                     ----------------   ----------------

            Deferred revenue                                                                7,441             10,080
            Other                                                                           1,015              2,008
                                                                                     ----------------   ----------------

                     Total liabilities                                                      8,456             12,088
                                                                                     ----------------   ----------------

                     Net assets                                                   $         3,312              5,306
                                                                                     ================   ================

            Annual member assessments                                             $        10,733             15,426
                                                                                     ================   ================

            Excess of revenues over expenses                                      $         1,351              1,994
                                                                                     ================   ================

            Condominiums owned, at developers unamortized historical cost         $        98,826            128,411
                                                                                     ================   ================

</TABLE>

<PAGE>


       Parent and Other Related Party

       The  Company  has an open  revolving  credit line with its Parent to meet
       operating  needs and invest excess funds.  The credit line is $10 million
       and is payable on demand. It bears interest at the prime rate plus 1% per
       annum (9.5% at December 31, 1997).

       The  Company  also  reimburses  the  Parent for  administrative  services
       received and its share of insurance expenses. Also, through June 30, 1997
       the Parent was named as the  master  servicer  under the terms of certain
       sales of notes receivable and received a servicing fee of 1.75% per annum
       of  the  sold   receivables  to  service  the   receivable.   The  Parent
       subcontracted the servicing to Trendwest for a servicing fee of 1.25% per
       annum of the sold receivable balance. Trendwest also received a servicing
       fee from TRI  Funding  Company  I,  LLC of  1.75%  per  annum of the sold
       receivables'  balance and subsequent to June 30, 1997 is the named master
       servicer under the terms of certain sales of notes receivable. Trendwest,
       in  turn,  subcontracts  components  of the  servicing  to a  third-party
       servicer,  SAGE.  A summary of these  transactions  follows for the years
       ended December 31:
<TABLE>
<CAPTION>
                                                                    1995               1996               1997
                                                               ----------------   ----------------   ----------------
<S>                                                             <C>               <C>                <C>
                Parent:
                    Interest income                         $            --                451                159
                    Interest expense                                  1,993              2,564              1,945
                    Insurance expense                                   879              1,304              1,865
                    Administrative service expense                      723                913                 --
                    Servicing fee expense, net                        1,163              1,008                240
                TRI Funding Company I, LLC - servicing fee
                    income                                               --                925              1,157
</TABLE>

       The  Company  is  developing  a resort  in  central  Washington  known as
       MountainStar in conjunction with its Parent. The Parent owns the land and
       the  Company is acting as the  developer.  On behalf of its  Parent,  the
       Company has incurred approximately $4,400 in costs related to the project
       as of December 31, 1997.  All costs  incurred  will be  reimbursed by the
       Parent and are  included as a reduction  to the due to Parent  amounts on
       the Company's balance sheet.


(16)   Commitments and Contingencies

       Purchase Commitments

       The  Company  routinely  enters into  purchase  agreements  with  various
       developers to acquire and build resort properties.  At December 31, 1997,
       the Company  has  outstanding  purchase  commitments  $28,353  related to
       properties  under   development.   The  Company  has  also  committed  to
       purchasing  20  condominium  units  in  each  of  1998,  1999  and  2000,
       respectively, from Running Y Resorts, Ltd. The cost of the units is fixed
       at 26% of the selling price of Vacation Credits at the time the units are
       purchased.

       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.

       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:

                       1998                            $ 1,582
                       1999                              1,483
                       2000                              1,229
                       2001                                729
                       2002                                133

     Rental  expense  amounted to $1,126,  $1,426 and $2,018 for the years ended
December 31, 1995, 1996 and 1997, respectively.


(17)   Subsequent Events

       Credit Facility

       In February  1998,  the Company  entered into a credit  agreement  with a
       group  of  banks to  provide  the  Company  with a  three-year  unsecured
       revolving credit facility for $30 million.

       Trendwest Funding II, Inc.

       In March 1998,  the Company sold $37.9  million of notes  receivable to a
       special purpose company, Trendwest Funding II, Inc. In addition, the Bank
       Group sold $98.0 million of notes  receivable  purchased from TW Holdings
       to  Trendwest  Funding II,  Inc.  The special  purpose  company  sold the
       receivable to TRI Funding II, Inc. (TRI), a special  purpose entity,  and
       TRI issued $130.4 million in two classes of senior and subordinated notes
       to institutional investors.

       Purchase Commitment

       The Company has an agreement in principle to purchase  land and construct
       a new office building in Redmond,  Washington. The estimated construction
       and land  costs  are $11  million  and the  building  is  expected  to be
       completed on or before December 1, 1998.