<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-K

     (MARK ONE)

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

          FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                       OR

     [ ]  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 0-29114

                                 Vistana, Inc.
                                 -------------
            (Exact name of registrant as specified in its charter)


              Florida                                          59-3415620
         ------------------                               ---------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


8801 Vistana Centre Drive, Orlando, Florida                      32821
-------------------------------------------                  ------------
(Address of principal executive offices)                  (Zip Code)


                                (407) 239-3100
                           ------------------------
             (Registrant's telephone number, including area code)

     Securities registered pursuant to Section 12(b) of the Act:  None

     Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No 
                                             ---   ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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. [ ]

     As of March 1, 1998, there were 21,007,630 shares of the registrant's
common stock outstanding. The aggregate market value of the registrant's voting
stock that was held by non-affiliates on such date was $301,056,923 based on the
closing sale price of the registrant's common stock on February 27, 1998 as
reported on the Nasdaq National Market.

                     Documents Incorporated by Reference:

     Portions of Vistana, Inc.'s 1997 Annual Report to Shareholders and
definitive proxy statement for its annual meeting of shareholders to be held on
April 30, 1998 are incorporated by reference into Parts II and III of this Form
10-K, as indicated.
<PAGE>
 
                                    PART I

          Except where otherwise indicated, the information contained in this
Annual Report on Form 10-K ("Annual Report") assumes Vacation Ownership
Interests (as defined herein) are presented on an annual, as opposed to an
alternate-year, basis. See "Item 1. Business--Company Resorts." Unless the
context otherwise requires, the "Company" means Vistana, Inc., its consolidated
subsidiaries, its corporate and partnership predecessors, partnerships in which
the Company owns a controlling interest and, following September 16, 1997,
Success and Points (as defined herein). Unless otherwise indicated, all vacation
ownership industry data contained herein is derived from information prepared by
the American Resort Development Association ("ARDA"), the industry's principal
trade association.

          Vistana(R) and Vistana Resort(R) are trademarks of Vistana, Inc. or
its affiliates. Embassy Vacation Resort(R), Embassy Suites(R), Hampton Vacation
Resort(R), Hampton Inn(R), Homewood Vacation Resorts, and Homewood Suites(R) are
trademarks and service marks of Promus Hotels, Inc. and other wholly-owned
subsidiaries of Promus Hotel Corporation. PGA(R) is a trademark of The
Professional Golfers' Association of America. World Golf Village(SM) is a
service mark of World Golf Foundation, Inc. Atlantis(R) is a service mark for
lodging accommodation services of Sun International Representation, Inc.

          Statements in this Annual Report, including statements contained in
the "Business--Company Resorts," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,"
"Business--Promus Relationship," and "Business--PGA of America Relationship"
sections regarding the Company's prospective business opportunities, financial
performance and expansion plans are forward-looking statements that involve
substantial risks and uncertainties. Such forward-looking statements include,
without limitation, (i) the plan to develop and sell additional resorts, (ii)
the intention to acquire additional land for the expansion of existing resorts
and for the development of future resorts, (iii) the anticipation of when
construction will commence for existing and future vacation resorts, (iv) the
plan to develop future PGA of America (as defined herein) and Promus (as defined
herein) affiliated resorts, and (v) statements relating to the Company or its
operations that are preceded by terms such as "anticipates," "believes,"
"intends," "expects" and similar expressions.

          In accordance with the Private Securities Litigation Reform Act of
1995, the following are important risk factors that could cause the Company's
actual results, performance or achievements to differ materially from those
implied by such forward-looking statements: (i) the Company lacks experience in
certain of the markets where it has purchased land and is developing vacation
ownership resorts, (ii) the Company is subject to significant competition from
other entities in the leisure and vacation industry, (iii) the Company's success
depends to a significant extent on its ability to hire, train and retain
qualified employees, (iv) the Company's ability to acquire, develop, and sell
Vacation Ownership Interest inventory and finance customer purchases of its
Vacation Ownership Interests requires access to external funding on satisfactory
terms, (v) the Company's indebtedness and related service obligations may
increase its vulnerability to adverse economic conditions, (vi) the Company's
agreements with Promus, the PGA of America, and Sun (as defined herein) are
subject to various conditions and requirements which may not be fulfilled, and
(vii) the Company has not yet entered into the final joint venture documents
with Sun and its subsidiaries relating to the Villas at Atlantis.
<PAGE>
 
Item 1.  Business.

General

          Founded in 1980, the Company is a leading developer and operator of
high quality timeshare resorts in the United States. The Company's principal
operations consist of (i) acquiring, developing and operating timeshare resorts,
also known as vacation ownership resorts; and (ii) marketing, selling and
financing vacation ownership interests in its resorts, which typically entitle
the buyer to ownership of a fully-furnished unit for a one-week period on either
an annual or an alternate-year basis ("Vacation Ownership Interests").

          The Company currently operates and sells Vacation Ownership Interests
at six vacation ownership resorts. Three of these resorts are in Florida
(Vistana Resort in Orlando, Hampton Vacation Resort--Oak Plantation in
Kissimmee, and Vistana's Beach Club on Hutchinson Island), two in Colorado
(Eagle Point in Vail and Falcon Point in Avon) and one in Arizona (Villas of
Cave Creek located north of Scottsdale). Available inventory at two of these
resorts (Vistana's Beach Club and Eagle Point) is limited to Vacation Ownership
Interests that the Company has reacquired in connection with defaults under
customer mortgages. The Company has four new resorts under development. These
resorts are Embassy Vacation Resort at Myrtle Beach in South Carolina, Vistana
Resort at World Golf Village near St. Augustine, Florida, PGA Vacation Resort by
Vistana in Port St. Lucie, Florida, and Embassy Vacation Resort in Scottsdale,
Arizona. In addition, the Company acts as exclusive sales and marketing agent
for The Christie Lodge, a large vacation ownership resort in Avon, Colorado. The
Company has also entered into an agreement with a subsidiary of Sun
International Hotels Limited ("Sun") to form a joint venture to develop a
proposed new vacation ownership resort to be known as the Villas at Atlantis
adjacent to the Atlantis Resort and Casino on Paradise Island in The Bahamas.
See "--Company Resorts."

          During its 17-year history, the Company has sold in excess of $650
million of Vacation Ownership Interests and has developed an ownership base of
over 65,000 Vacation Ownership Interest owners residing in more than 100
countries. The Company was the first to open a vacation ownership resort in the
Orlando, Florida market, which has become one of the largest vacation ownership
resort markets in the world in terms of Vacation Ownership Interests sold. Each
of the Company's existing Florida-based resorts is rated as a Gold Crown resort
by Resort Condominiums International ("RCI"), and the Villas of Cave Creek and
Falcon Point Resort are rated as Five Star Resorts by Interval International
("II"). Two of the Company's resorts under development, Vistana Resort at World
Golf Village and the Embassy Vacation Resort at Myrtle Beach, have received the
Gold Crown designation from RCI prior to their official openings.

          As part of its operating strategy, the Company seeks to develop
strategic relationships with selected parties in order to broaden and enhance
its marketing and sales efforts and to provide additional vacation ownership
resort development opportunities. In furtherance of this strategy, the Company
has entered into (i) an exclusive joint venture agreement with Promus Hotels,
Inc. ("Promus"), a leading hotel company in the United States; (ii) a long-term
affiliation agreement with a subsidiary of The Professional Golfers' Association
of America ("PGA of America"); (iii) a limited partnership (in which the Company
is the general partner) which has the exclusive right to develop and market
Vacation Ownership Interests at World Golf Village; and (iv) an agreement to
form an exclusive joint venture agreement with a subsidiary of Sun to develop a
vacation ownership resort in The Bahamas.

                                      -2-
<PAGE>
 
          Since completing its initial public offering in March 1997, the
Company has been using four business strategies to achieve growth: (i)
continuing sales of Vacation Ownership Interests at the Company's existing
resorts; (ii) developing and selling additional vacation ownership resorts;
(iii) pursuing selected acquisitions; and (iv) improving margins, principally by
reducing the cost of the Company's financing. There is no assurance that these
strategies will be successful during future periods.

          The Company's ability to develop and sell additional vacation
ownership resorts will depend on a number of factors, including (i) the
availability of attractive resort development opportunities; (ii) the Company's
ability to acquire unimproved real estate relating to such opportunities on
economically feasible terms; (iii) the Company's ability to obtain the capital
necessary to finance the acquisition of unimproved real estate and develop
vacation ownership resorts thereon, as well as to cover any necessary sales,
marketing and resort operation expenditures; (iv) the Company's ability to
market and sell Vacation Ownership Interests at newly-developed vacation
ownership resorts; and (v) the Company's ability to manage newly-developed
vacation ownership resorts cost-effectively and in a manner which results in
significant customer satisfaction. There can be no assurance that the Company
will be successful with respect to any or all of these factors. The acquisition,
development, construction, conversion and expansion of existing and new vacation
ownership resorts also involve a number of risks, including risks that (i)
acquisition or development opportunities may be abandoned, requiring project
costs to be expensed during the current period; (ii) construction costs may
exceed original estimates, possibly making the development, expansion or
conversion uneconomical or unprofitable; (iii) construction or conversion may
not be completed on schedule, possibly resulting in delayed recognition of
revenues and increased interest expense; (iv) zoning, land-use, construction,
occupancy and other required governmental permits and authorizations may not be
obtained or may be delayed; and (v) financing necessary to complete the
acquisition, development, construction, conversion or expansion activities may
not be obtained or may not be available on favorable terms.

Company Resorts

          The following table sets forth certain information as of December 31,
1997 and for the year then ended regarding each of the Company's existing
vacation ownership resorts, resorts under construction and planned resorts,
including location, the year sales of Vacation Ownership Interests commenced (or
are expected to commence), the number of existing and total planned units, the
number of Vacation Ownership Interests sold at each existing resort since its
development by the Company and the number of Vacation Ownership Interests sold
during the year ended December 31, 1997, the average sales price of Vacation
Ownership Interests sold during the year ended December 31, 1997 and the number
of Vacation Ownership Interests available for sale at December 31, 1997 and
after giving effect to planned expansion. The exact number of units ultimately
constructed and Vacation Ownership Interests available for sale at each resort
may differ from the following planned estimates based on, among other things,
future land use, project development, site layout considerations and customer
demand. The number of Vacation Ownership Interests available for sale will also
vary depending upon whether certain two-bedroom lockoff units are sold as a
single unit (as assumed in the following table) or as two one-bedroom units. In
addition, the Company's construction and development of new vacation ownership
resorts or additional units at its existing resorts (and its sales of the
related Vacation Ownership Interests) is dependent upon general economic
conditions and other factors and may also be subject to delay as a result of
certain circumstances, some of which are not within the Company's control.


                                      -3-
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                  Unsold Vacation
                                                                                                                Ownership Interests
                                                                             Vacation Ownership                           at
                                                           Units at Resort    Interest Sold(a)                       Resorts(a)
                                                           ----------------  -------------------               ---------------------

                                             Year Sales                                             Average
                                             Commenced/                                              Sales
    Vacation Ownership                      Expected to              Total                         Price in     Current     Planned
          Resorts              Location     Commence(b)    Current  Planned   Total      1997       1997(a)    Inventory   Expansion
---------------------------  ------------  --------------  -------  -------  -------  ----------  -----------  ----------  ---------
<S>                          <C>           <C>             <C>      <C>      <C>      <C>         <C>          <C>         <C>
Existing Resorts:

Vistana Resort (c)             Orlando,
                               Florida           1980       1,205    1,539   62,476  7,552A(d)   $10,267A(d)       3,078     16,371

Vistana's Beach               Hutchinson
Club (e)                       Island,
                               Florida           1989          76       76    3,932       83      $ 9,394              -          0
Hampton Vacation
Resort--Oak
Plantation (f)               Kissimmee,
                              Florida            1996         242      242    1,433    1,300      $ 7,502         11,138          0

Eagle Point Resort (g)          Vail,
                             Colorado            1987          54       54    3,569       45      $ 9,065             11          0

Falcon Point Resort (h)         Avon,
                             Colorado            1986          58       82    3,398      120      $10,559            261      1,224

Villas of Cave Creek (i)     Cave Creek,
                              Arizona            1996          25       35      498      401      $10,711            399        510


Resorts Under
Development:

Embassy Vacation                Myrtle
Resort at Myrtle Beach (j)      Beach,
                                South
                               Carolina          1997          --      550      497      497      $ 9,543             --     28,050

Vistana Resort at World          St.
Golf Village (k)              Augustine,
                               Florida           1998          --      408       --       --           --             --     20,808

PGA Vacation Resort by         Port St.
Vistana (l)                     Lucie,
                               Florida           1998          --      387       --       --           --             --     19,737

Embassy Vacation Resort      Scottsdale,
 at Scottsdale (m)            Arizona            1998          --      150       --       --           --             --      7,650

Planned Resorts:

Villas at Atlantis (n)         Paradise
                               Island,
                               Bahamas           1998          --      375       --       --           --             --     19,125

                                                            -----    -----   ------    -----                      ------    -------
                                                  TOTAL     1,660    3,898   75,803    9,998                      14,887    113,475
                                                            =====    =====   ======    =====                      ======    =======

</TABLE>
-------------
(a) The Company sells both annual Vacation Ownership Interests (entitling the
    owner to the use of a unit for a one-week period on an annual basis) and
    alternate-year Vacation Ownership Interests (entitling the owner to the use
    of a unit for a one-week period on an alternate-year basis) with respect to
    51 weeks per unit per year, with one week reserved for maintenance of the
    unit. Accordingly, the Company is generally able to sell 51 annual Vacation
    Ownership Interests or 102 alternate-year Vacation Ownership Interests per
    unit (although historically sales at Eagle Point, Falcon Point and the
    Villas of Cave Creek have been based on 52 weeks per unit per year). For
    purposes of calculating Vacation Ownership Interests Sold and Average Sales
    Price in 1997, data with respect to Vacation Ownership Interests reflects
    Vacation Ownership Interests sold regardless of classification as an annual
    or alternate-year Vacation Ownership Interest. For purposes of calculating
    Unsold Vacation Ownership Interests at Resorts, both the Current Inventory
    and Planned Expansion numbers are based on sales of Vacation Ownership
    Interests on an annual basis only and assume the sale of 51 weeks per unit
    per year. To the extent that alternate-year Vacation Ownership Interests or
    52 weeks per unit per year are sold, the actual number of unsold Vacation
    Ownership Interests at Resorts would be increased.
(b) Dates listed represent the dates the Company began recording (or expects to
    begin recording) sales of Vacation Ownership Interests for financial
    reporting purposes.
(c) At December 31, 1997, Vistana Resort consisted of eight development phases,
    six of which had been completed and two of which were in development. The
    number of units at Vistana Resort at December 31, 1997 included (i) 1,205
    current existing units and (ii) 334 additional planned units (representing
    an additional 16,371 unsold annual Vacation Ownership Interests).
    Construction of 73 of the additional units (representing 3,723 Vacation
    Ownership Interests) is currently underway. The Company constructs
    additional units at various times depending upon general market conditions
    and other factors. Accordingly, construction of the remaining 272 additional
    units will be commenced from time to time as demand and other conditions
    merit. Figures with respect to this resort assume that all units to be
    constructed will consist of one- and two-bedroom units; however, the actual
    number of additional Vacation Ownership Interests resulting from planned
    construction could vary depending upon the configuration of these units.

                                      -4-
<PAGE>
 
(d) Includes 2,223 alternate-year Vacation Ownership Interests with an average
    sales price of $7,472 and 5,329 annual Vacation Ownership Interests with an
    average sales price of $11,433.
(e) Vistana's Beach Club consists of two buildings containing a total of 76
    current existing units, which represent 3,876 Vacation Ownership Interests.
    The Company's Current Inventory at this resort consists primarily of
    previously-sold Vacation Ownership Interests that the Company has since
    reacquired in connection with defaults under customer mortgages. The Company
    has no plans to build any additional units at this resort.
(f) Hampton Vacation Resort--Oak Plantation consists of 242 existing units,
    representing 12,342 annual Vacation Ownership Interests. Prior to its
    acquisition by the Company in June 1996, this property was operated by a
    third party as a rental apartment complex. The Company commenced conversion
    of the property into a vacation ownership resort in July 1996. As of
    December 31, 1997, the conversion of 169 units (representing 8,619 annual
    Vacation Ownership Interests) had been completed. The Company intends to
    convert the remaining 73 units at various times depending upon general
    market conditions and other factors. The Company currently has no plans to
    build any additional units at this resort. Hampton Vacation Resort--Oak
    Plantation is operated on a franchise basis as the first Hampton Vacation
    Resort pursuant to the Promus Agreement (as defined herein).
(g) Eagle Point Resort consists of 54 existing units, representing 2,754
    Vacation Ownership Interests. This resort was acquired by the Company
    pursuant to the Acquisition in September 1997, and is owned and operated by
    the Company.
(h) Falcon Point Resort consists of 58 existing units, representing 2,958
    Vacation Ownership Interests and 24 additional planned units to be
    constructed on property which the Company recently acquired (representing an
    additional 1,224 unsold annual Vacation Ownership Interests). This resort
    was acquired by the Company pursuant to the Acquisition in September 1997,
    and is owned and operated by the Company.
(i) Villas of Cave Creek consists of 25 existing units, representing 1,275
    Vacation Ownership Interests and 10 additional planned units (representing
    an additional 510 unsold annual Vacation Ownership Interests). This resort
    was acquired by the Company pursuant to the Acquisition in September 1997,
    and is owned and operated by the Company.
(j) In December 1996, the Company acquired the initial 14 acres of unimproved
    land in Myrtle Beach, South Carolina for the development of the Embassy
    Vacation Resort at Myrtle Beach. The Company also has an option until
    December 31, 2003 to acquire up to 26 additional acres of contiguous
    property for phased expansion of this resort. The Company commenced
    construction of the 44-unit first phase of this resort (representing 2,244
    annual Vacation Ownership Interests) during the third quarter of 1997.
    Because the Company constructs additional units at its resorts based on
    general market conditions and other factors, construction of the remaining
    506 units at this resort (assuming acquisition of the remaining 26 acres)
    will be commenced from time to time as demand and other conditions merit.
    Myrtle Beach will be operated as an Embassy Vacation Resort franchise
    pursuant to the terms of the Promus Agreement.
(k) Vistana Resort at World Golf Village will consist of an estimated 408 units,
    representing an estimated 20,808 annual Vacation Ownership Interests, of
    which 102 units, representing 5,202 annual Vacation Ownership Interests, are
    currently under construction and scheduled for completion in the second
    quarter of 1998. The Company intends to commence construction of the
    remaining 306 additional units from time to time as demand and other
    conditions merit.
(l) PGA Vacation Resort by Vistana will consist of an estimated 387 units,
    representing an estimated 19,737 annual Vacation Ownership Interests, and
    will be constructed by the Company on 25 acres of land which the Company
    acquired in September 1997. The Company anticipates that it will commence
    construction of the 40-unit first phase of this resort (representing 2,040
    annual Vacation Ownership Interests) during the first quarter of 1998.
    Because the Company constructs additional units at its resorts based on
    general market conditions and other factors, construction of the remaining
    347 units at this resort is expected to be commenced from time to time as
    demand and other conditions merit.
(m) The Embassy Vacation Resort at Scottsdale will consist of an estimated 150
    units, representing 7,650 Vacation Ownership Interests, and will be
    constructed by the Company on approximately 10 acres of land which the
    Company acquired in 1997. The Company anticipates that it will commence
    construction during the first quarter of 1998. The Scottsdale property will
    be operated as an Embassy Vacation Resort franchise pursuant to the Promus
    Agreement.
(n) Villas at Atlantis will consist of an estimated 375 units, representing
    19,125 Vacation Ownership Interests. The Company anticipates that it will
    commence construction of the 175-unit first phase of this resort
    (representing 8,925 annual Vacation Ownership Interests) on five acres of
    land during the second half of 1998. The Company intends to commence
    construction of the remaining 250 additional units from time to time as
    demand and other conditions merit.

                                      -5-
<PAGE>
 
     Pricing of Vacation Ownership Interests. The following table sets forth the
current range of selling prices of annual and alternate-year Vacation Ownership
Interests at each of the Company's resorts:



<TABLE>
<CAPTION>
                                                                Selling Prices(a)
                                                 -----------------------------------------------
                                                    Annual Vacation     Alternate-year Vacation
Resort                                            Ownership Interests     Ownership Interests
-----------------------------------------------  ---------------------  ------------------------
<S>                                              <C>                    <C>
Vistana Resort(b)..............................    7,950  -  $  17,000      4,530  -   $  10,600
Vistana's Beach Club(c)........................    8,995  -  $   9,950            N/A
Hampton Vacation Resort--Oak Plantation(d).....    6,700  -  $  10,750       4,020  -  $   6,450
Eagle Point Resort(d)..........................    7,995  -  $  14,995       5,995  -  $   9,495
Falcon Point Resort(b).........................    8,995  -  $  19,995       6,495  -  $  11,995
Villas of Cave Creek(c)........................   13,495  -  $  13,495       9,495  -  $   9,495
Embassy Vacation Resort at Myrtle Beach(b)(e)..    5,230  -  $  13,495       4,920  -  $   9,600
Vistana Resort at World Golf Village(b)(e).....    7,950  -  $  17,000       4,920  -  $   9,600
PGA Vacation Resort by Vistana(b)(e)...........    6,000  -  $  12,000            (f)
Embassy Vacation Resort at Scottsdale(e).......    7,000  -  $  15,000       4,200  -  $   9,000
Villas at Atlantis(c)..........................     Not determined                (f)
</TABLE>

-------------
(a) Selling prices vary depending upon the specific calendar week or season to
    which a Vacation Ownership Interest relates and unit-specific factors.
(b) Includes one-, two- and two-bedroom lockoff unit Vacation Ownership
    Interests.
(c) Includes two-bedroom unit Vacation Ownership Interests only.
(d) Includes one- and two-bedroom unit Vacation Ownership Interests.
(e) Resort not yet in operation.  Selling prices listed reflect the actual range
    of pre-opening prices at Embassy Vacation Resort at Myrtle Beach and the
    anticipated range of selling prices at Vistana Resort at World Golf Village,
    PGA Vacation Resort by Vistana, Embassy Vacation Resort at Scottsdale and
    Villas at Atlantis.
(f) The decision to offer alternate-year Vacation Ownership Interests is made on
    a site-by-site basis.  As the Company has not yet commenced sales at these
    properties, there has been no final decision with regard to offering
    alternate-year Vacation Ownership Interests or pricing.

   Vistana Resort (Orlando, Florida).  Vistana Resort, the Company's flagship
vacation ownership property, is located less than one mile from the Walt Disney
World(R) Resort complex. Vistana Resort was the first vacation ownership resort
in Orlando. The resort has received the RCI Gold Crown designation since the
inception of the designation by RCI. Vistana Resort opened as a vacation
ownership resort in July 1980 with an initial phase, known as the Courts Villas,
containing 98 units on a 25-acre parcel. In November 1980, the Company purchased
an additional 100 acres of surrounding unimproved land, in 1987 the Company
purchased 15 acres of contiguous land and, in January 1993, it acquired the last
available contiguous parcel to Vistana Resort, consisting of 10 acres. Through
December 31, 1997, the Company had constructed a total of eight phases at
Vistana Resort.

   The gated-access resort consists of a 135-acre complex that features tropical
landscaping, lakes, waterfalls, fountains, walking paths, scenic bridges and
gazebos. The resort's athletic facilities include six recreation centers, 13
lighted tennis courts, a tennis pro shop, six outdoor temperature-controlled
swimming pools, seven outdoor whirlpools, five children's pools, an 18-hole
miniature golf course,

                                      -6-
<PAGE>
 
lighted basketball courts, sand volleyball pits, shuffleboard courts and other
recreational amenities. Other guest-oriented amenities at Vistana Resort include
two restaurants and a general store containing a Pizza Hut(R) facility.
Accommodations at Vistana Resort as of December 31, 1997 consisted of 1,163 two-
bedroom units and 34 one-bedroom units, divided into eight villages. The units
at Vistana Resort sleep from four to eight people (depending upon floorplan) and
include amenities such as a fully-equipped kitchen, washer/dryer, three color
televisions with cable service, a videocassette player, and an outdoor terrace
or balcony. Most units have master bathrooms that include a whirlpool tub or
feature screened terraces or balconies with water views. Later phases include
units with an optional two-bedroom lockoff floor plan, a feature that allows the
unit to be divided into two separate one-bedroom units or a studio and a one-
bedroom unit, depending upon floor plan. Owners of the lockoff units have
increased flexibility regarding the use of their Vacation Ownership Interest,
including splitting the unit and using each portion for separate one-week
vacations.

   Vistana's Beach Club (Hutchinson Island, Florida). Vistana's Beach Club on
Hutchinson Island is located on Florida's Treasure Coast, approximately 40 miles
north of West Palm Beach and approximately a two hour drive from Orlando.
Located on a 3.5-acre parcel, Vistana's Beach Club was purchased by the Company
in January 1989. The resort consists of one nine-story building containing 48
units and one eight-story building containing 28 units. The resort contains
numerous recreational amenities, including a freshwater swimming pool, outdoor
whirlpool, children's pool, elevated sun deck and access to two tennis courts.
Vistana's Beach Club contains 76 fully-equipped two-bedroom, two-bathroom
oceanfront units, each of which includes a terrace with a view of the Atlantic
Ocean. The units at Vistana's Beach Club sleep up to six people (depending upon
floorplan) and include amenities such as a fully-equipped kitchen, washer/dryer,
color televisions with cable service and a videocassette player. The Company
continues to manage and operate the property; however, sales at this resort
consist primarily of previously-sold Vacation Ownership Interests that the
Company has since reacquired in connection with defaults under customer
mortgages. RCI has awarded the resort its Gold Crown designation.

   Hampton Vacation Resort--Oak Plantation (Kissimmee, Florida).  In June 1996,
the Company acquired, through a related partnership, a 242-unit multifamily
rental apartment complex located in Kissimmee, Florida, approximately ten miles
from Walt Disney World(R) Resort, which it has converted in phases into a
vacation ownership resort. Sales of the first phase containing 32 units
commenced in October 1996. The gated-access 16-acre resort contains one- and
two-bedroom units, each of which offers a fully-equipped kitchen. The landscaped
resort includes a scenic lake with a lighted fountain, swimming pools and other
recreational amenities. The resort has received the Gold Crown designation from
RCI. Pursuant to the Promus Agreement, the Company operates the resort on a
franchise basis as the first Hampton Vacation Resort. The Company holds a 67%
controlling ownership interest in the limited partnership that operates the
resort.

   Falcon Point Resort (Avon, Colorado).  Falcon Point is a 58-unit condominium
resort located in Avon, Colorado at the foot of Beaver Creek Ski Area in Vail
Valley. Amenities include a clubhouse, a heated swimming pool, indoor and
outdoor hot tubs, sauna, ski lockers and a coin operated laundry. This resort
contains studio, as well as one- and two-bedroom units. All Falcon Point units,
except studios, contain a fully-equipped kitchen. In 1998, the Company intends
to develop an additional 24 units on a parcel of land adjacent to Falcon Point
Resort. Presales for this adjacent development are planned to begin in 1998. II
has awarded the resort its Five Star rating.

                                      -7-
<PAGE>
 
   Villas of Cave Creek (Cave Creek, Arizona).  The Villas of Cave Creek is
comprised of 25, two-story villas located at the base of Black Mountain in the
Sonoran Desert foothills, just north of Scottsdale. Amenities include two
swimming pools, a clubhouse, an exercise room, a lawn game area and a
playground. All of the villas have a master suite, fully-equipped kitchen,
dining room, living room, a second bedroom and two full baths. II has awarded
the resort its Five Star rating.

   Eagle Point Resort (Vail, Colorado). Eagle Point Resort is a 54-unit,
courtyard resort which is bordered by Gore Creek and located in Vail, Colorado.
Amenities include a heated swimming pool, indoor and outdoor hot tubs, a sauna
and a coin-operated laundry. Additionally, Eagle Point Resort offers a
complimentary shuttle service to the Lionshead Gondola at Vail during the ski
season. Eagle Point is equipped with one-and two-bedroom units, each of which
includes a fully-equipped kitchen. The Company continues to operate and manage
this resort; however, active sales have been completed.

   Vistana Resort at World Golf Village (St. Augustine, Florida). In September
1996, through a related partnership, the Company commenced construction of the
first 102-unit phase of a 408-unit vacation ownership resort to be known as
Vistana Resort at World Golf Village. The first phase is expected to be
completed in the second quarter of 1988. The centerpiece of an approximately
6,000-acre planned community under development near St. Augustine, Florida,
World Golf Village is a destination resort which will contain the World Golf
Hall of Fame, championship golf courses and other amenities. The units at
Vistana Resort at World Golf Village, which will consist of one- and two-bedroom
units, will sleep from four to eight people (depending upon floorplan) and
include features such as a fully-equipped kitchen, washer/dryer, color
televisions with cable service, a videocassette player and an outdoor terrace or
balcony. The resort will be located adjacent to the 17th and 18th fairways of
the first golf course at World Golf Village. Resort guests and owners will have
preferred access to daily tee times on the course.

   World Golf Village is being developed in conjunction with World Golf
Foundation, Inc., which is supported by the world's leading golf organizations
and was formed to build and operate the World Golf Hall of Fame. The member
organizations of World Golf Foundation, Inc. include the PGA Tour, PGA of
America, Ladies Professional Golf Association, Augusta National Golf Club, Royal
Canadian Golf Association, Royal & Ancient Golf Club of St. Andrews, PGA
European Tour, PGA Tour of Japan and FNB Tour of Southern Africa.

   In addition to the World Golf Hall of Fame and the Company's vacation
ownership resort, the World Golf Village resort complex will also include a
championship golf course named in honor of Sam Snead and Gene Sarazen, a PGA
Tour licensed golf academy, the International Golf Library and Resource Center,
the 300-room World Golf Village Resort Hotel and 80,000-square foot St. Johns
County Conference Center, themed retail space, the headquarters and television
production studios for PGA Tour Productions and a theater. The component
facilities within World Golf Village will be linked by the Walk of Champions
honoring each member of the World Golf Hall of Fame. Two additional golf courses
are also planned.

   The Company holds a 37.5% controlling ownership interest in a limited
partnership which is developing Vistana Resort at World Golf Village. The
partnership has the exclusive right to develop and market Vacation Ownership
Interests at World Golf Village, and has exclusive multi-year marketing
agreements for solicitation at key locations throughout World Golf Village,
including the hotel/conference center, golf course, Walk of Champions and retail
facilities. Neither the partnership

                                      -8-
<PAGE>
 
nor the Company is developing World Golf Village itself or any of the other
facilities or amenities. The Company also has entered into an agreement with PGA
Tour Golf Course Properties, Inc. that allows the Company access to PGA Tour
databases for marketing purposes.

   PGA Vacation Resort by Vistana (Port St. Lucie, Florida).  In September 1997,
the Company purchased from an affiliate of PGA of America approximately 25 acres
of land within The Reserve community in Port St. Lucie, Florida for the purpose
of developing, marketing and operating a vacation ownership resort. The resort
will be developed as a PGA Vacation Resort by Vistana and will be contiguous to
the South Course of the PGA Golf Club at The Reserve, a nationally-acclaimed $15
million golf course complex that opened in early 1996. The South Course,
designed by Tom Fazio, was named the best new course in its price category by
Golf Digest magazine in December 1996. PGA of America has announced its
intention to open a golf learning center and to build a third golf course at the
facility. In addition to resort amenities and services comparable to the
Company's other resorts, the PGA Vacation Resort by Vistana will, pursuant to a
golf access agreement, also offer its owners and renters preferred access to the
PGA Golf Club and other PGA golf courses in St. Lucie County. Owners and renters
at the resort will be able to book tee times through a centralized reservation
system that is anticipated to be developed jointly by the Company and PGA of
America.

   The resort is planned to contain approximately 387 units. The 40-unit first
phase is expected to be completed during the fourth quarter of 1998 or the first
quarter of 1999. The Company believes that PGA of America, through its
approximately 20,000 golf professionals and the Company's license to use PGA of
America's name, initials, trademark and logo, will provide strategic marketing
opportunities for the Port St. Lucie vacation ownership resort and any future
PGA Vacation Resorts developed by the Company. In September 1997, the Company
and PGA of America executed a long-term affiliation agreement which provides for
the development of future vacation ownership resorts and marketing and golf
access agreements for the Port St. Lucie, Florida property. See "--PGA of
America Relationship."

   Embassy Vacation Resort at Myrtle Beach (Myrtle Beach, South Carolina).  In
December 1996, the Company acquired an initial 14-acre parcel of unimproved land
on a 40-acre site in Myrtle Beach, South Carolina, on which the Company plans to
construct a vacation ownership resort with up to 550 units. The Company has
options to acquire the remaining 26 acres of land in multiple phases through
December 31, 2003. The resort will be centrally located in Myrtle Beach,
adjacent to Broadway at the Beach, a large entertainment and specialty retail
complex, which includes a Hard Rock Cafe and a Planet Hollywood restaurant.
Pursuant to the Promus Agreement, the Company will operate the resort on a
franchise basis as an Embassy Vacation Resort. The Company began pre-sales in
May 1997 and commenced construction of the 88-unit first phase during the third
quarter of 1997. The first phase is expected to be completed in mid-1998.

   Embassy Vacation Resort at Scottsdale (Scottsdale, Arizona).  The Company
plans to construct a 150-unit Embassy Vacation Resort at Scottsdale on a 10-acre
site which the Company recently purchased near the TPC Scottsdale golf course.
Construction of the 75-unit first phase is scheduled to begin during the second
quarter of 1998. Amenities are expected to include a 12,000 square-foot
clubhouse and reception building, a recreation complex, a free-form swimming
pool, a children's club and a fully-equipped fitness center. All of the villas
are anticipated to have two-bedrooms, two baths, a fully-equipped kitchen,
dining room, living room, and an in-room washer and dryer. The Scottsdale
property will be operated as an Embassy Vacation Resort franchise pursuant to
the Promus Agreement.

                                      -9-
<PAGE>
 
   Villas at Atlantis (Paradise Island, The Bahamas).  In November 1997, the
Company and Sun entered into an agreement to form a 50-50 joint venture to
design, develop, sell and manage a planned vacation ownership resort with up to
375 units adjacent to Sun's Atlantis Resort and Casino on Paradise Island, The
Bahamas. Construction of the 175-unit first phase is expected to commence in the
second half of 1998 on approximately seven acres of land that Sun plans to
contribute to the joint venture. The Company plans to contribute approximately
$7 million to the joint venture as part of the first phase of development. The
agreement calls for Sun to oversee the development and construction and manage
the hospitality elements of the Villas at Atlantis, while the Company will
oversee all timeshare operations, including portfolio management, sales and
marketing, and property management services.

   Accommodations at Villas at Atlantis are expected to consist of two-bedroom,
lockoff units, each of which will contain a separate master bedroom with a
whirlpool tub, a fully-equipped kitchen, and living and dining areas. Owners and
guests at the resort will have access to Sun's Atlantis Resort and Casino,
including all of its amenities. The Atlantis Resort and Casino is a 1,147-room
luxury resort with the largest casino in the Caribbean. A significant expansion
project containing an additional 1,208 rooms is currently under construction.
Amenities of the Atlantis Resort include a 14-acre waterscape, a lagoon,
waterfalls, a water slide, underground grottos, a rope suspension bridge and
five pools. Other amenities include 12 indoor and outdoor restaurants and six
lounges. Guests can also enjoy snorkeling, scuba diving, windsurfing, sailing,
championship tennis and golf, and an extensive children's program.

Risks Associated with Expansion into New Markets

   Because the Company's proposed resorts near St. Augustine, Florida, Port St.
Lucie, Florida, Myrtle Beach, South Carolina, Scottsdale, Arizona, and Paradise
Island, The Bahamas are outside the Company's historical geographical area of
operation, the Company's resort development and operation experience in the
Orlando, Florida area does not ensure the success of the development or
operation of these properties or the marketing of Vacation Ownership Interests
at these locations. Accordingly, in connection with these and other proposed new
resorts, the Company may be exposed to a number of risks, including risks
associated with (i) the lack of local market knowledge and experience; (ii) the
inability to hire, train and retain sales, marketing and resort staff at new
locations; (iii) the inability to obtain, or obtain in a timely manner,
necessary permits and approvals from state and local government agencies and
qualified construction tradesmen at competitive prices; (iv) the inability to
secure sufficient marketing relationships with local hospitality, retail and
tourist attraction operators; (v) the inability to capitalize on the new
marketing relationships and development agreements associated with certain of
the Company's growth strategies; and (vi) the uncertainty involved in, and
additional costs which may be associated with, selling Vacation Ownership
Interests prior to completion of the related units. Additionally, with respect
to any vacation ownership resort located in a foreign market, the Company's
operations may be materially and adversely affected by developments with respect
to inflation, interest rates, government policies and regulations, price and
wage controls, exchange control regulations, exchange rates, taxation, political
and social instability and other political or economic developments in or
affecting such foreign jurisdiction.

Promus Relationship

   In December 1996, the Company and Promus entered into the Promus Agreement,
an exclusive five-year agreement to jointly acquire, develop, market and operate
vacation ownership resorts in North America under Promus' Embassy Vacation
Resort, Hampton Vacation Resort and Homewood Vacation

                                      -10-
<PAGE>
 
Resort brands. Promus is a wholly-owned operating subsidiary of Promus Hotel
Corporation, a New York Stock Exchange company, which is one of the largest
companies in the hotel industry. Under the Promus Agreement, the Company is
Promus' exclusive joint venture partner for the development and operation of
vacation ownership resorts in North America and also has the option of operating
vacation ownership resorts on a franchise basis. The Company is the sole
franchisee in North America of the Hampton Vacation Resort and the Homewood
Vacation Resort brands, and one of only two franchisees in North America of the
Embassy Vacation Resort brand. In six selected markets agreed to by the parties,
the Company is the sole franchisee in North America of the Embassy Vacation
Resort brand. These six markets consist of three coastal areas of Florida
(including portions of the southeastern and western coasts of Florida and the
Panhandle); the coastal region between Jacksonville, Florida and Myrtle Beach,
South Carolina; Phoenix and Scottsdale, Arizona; and Palm Springs and Palm
Desert, California. The Promus Agreement precludes the Company from acquiring or
developing vacation ownership resorts with any other multi-hotel brand, but
preserves its ability to develop vacation ownership resorts in combination with
non-hotel brands (such as PGA of America), to develop vacation ownership resorts
with unique, non-multi-hotel brand hotel properties (such as the Atlantis Resort
and Casino), and to acquire or develop vacation ownership resorts under the
Vistana name (other than in the six selected markets referred to above).

   Each vacation ownership resort jointly developed under the Promus Agreement
will be acquired, developed and operated by a newly-formed entity that will be
owned equally by Promus and the Company and will be managed by the Company. The
parties have agreed that each of these entities will enter into a sales and
marketing agreement with the Company, pursuant to which the Company will be
responsible for marketing and sales of Vacation Ownership Interests at the
resort and for which the Company will receive a fee based on a percentage of
sales and rental revenues. Additionally, the Company and Promus have agreed to
enter into a license agreement and hospitality management agreement, pursuant to
which Promus will license the applicable brand name and provide other
hospitality-related services at the resort and for which Promus will receive a
fee based on a percentage of sales and rental revenues. The Promus Agreement
provides that both parties must first offer vacation ownership resort
development opportunities in the six selected markets to the joint venture (with
certain exceptions for development of the Company's non-multi-hotel branded
resorts). In the event that one party elects not to pursue the opportunity, the
other party has certain rights to develop the resort independently or, in the
case of Promus, franchise an Embassy Vacation Resort to its existing franchisee.
However, if Promus elects not to pursue an opportunity through the joint
venture, the Company may elect to develop the resort as a Promus franchisee,
subject to Promus' standard franchise approval, on pre-agreed terms, conditions
and fees. In order to maintain its franchise relationship with Promus, the
Company may be required to incur expenditures and meet other obligations at the
franchised resorts required by the applicable franchise agreements, which may
(i) increase its operating costs, and (ii) limit the Company's flexibility with
respect to the operation of the applicable resort in order to comply with the
applicable franchise agreements. The amount of expenditures which the Company
may be required to incur and the amount of obligations which the Company may be
required to satisfy will depend upon, among other things, the extent to which
the applicable franchise agreement requires the Company to incur construction
and development costs, operating expenses and capital expenditures and
maintenance costs. The Promus Agreement may be terminated by either party in the
event that the parties have not jointly developed a resort during the first
three years of the Promus Agreement. The Promus Agreement is also terminable
upon a change in control of Promus or the Company.

                                      -11-
<PAGE>
 
   Although the Company and Promus are actively evaluating new resort
development opportunities for possible joint venture, no firm commitments have
been made for any joint venture developments. However, pursuant to the Promus
Agreement, Promus has granted franchises for two of the Company's properties:
(i) Hampton Vacation Resort--Oak Plantation, which is the first vacation
ownership resort to operate under the Hampton Vacation Resort brand and (ii) the
Embassy Vacation Resort at Myrtle Beach, currently under construction in South
Carolina. In addition, the parties have agreed to franchise the proposed resort
being developed in Scottsdale as an Embassy Vacation Resort.

   The Company believes that its strategic relationship with Promus will offer
growth opportunities with respect to the development and operation of vacation
ownership resorts by enhancing the sales and marketing of Vacation Ownership
Interests and providing further management expertise. The Company anticipates
that such growth opportunities will occur as a result of Promus' strong brand
recognition, large customer base and extensive product development, marketing,
management and information technology capabilities. Moreover, the Company
believes that its strategic relationship with Promus will offer the Company
access to a target market of prospective customers who, because of their
favorable demographics and, in the case of Promus' Embassy Suites and Homewood
Suites hotel brands, preference for suite accommodations, will respond favorably
to the Company's resorts. The Company believes that the Embassy Vacation Resort,
the Hampton Vacation Resort and the Homewood Vacation Resort brands will
generally (i) conform to the relative price points; (ii) target similar
customers; and (iii) effect similar brand segmentation, as applicable to Promus'
Embassy Suites, Hampton Inn and Homewood Suites hotel brands, respectively.
There is no assurance that these anticipated benefits will accrue from the
Promus relationship or that Promus will prove to be a favorable partner for the
Company. Moreover, in order to maintain its franchise and joint venture
relationships with Promus, the Company may be required to incur franchise fees
and other expenditures which may (i) increase its operating costs and (ii) limit
the Company's flexibility with respect to the operation of the applicable
resort. The Promus Agreement may also prevent the Company from developing
resorts under its own name or entering into joint venture or franchise
agreements with other multi-hotel brand companies, even where such developments
or agreements would be in the Company's best interests.

   In December 1997, Promus and Doubletree Corp., a Phoenix-based hotel
management company, merged to form a combined company called Promus Hotel
Corporation, the senior management of which is comprised of personnel from
Promus and Doubletree. Although the Company does not anticipate that the merger
will have any effect on the Promus Agreement, there can be no assurance that the
Company will continue to enjoy the same relationship which it has historically
had with Promus and its senior management.

PGA of America Relationship

   The Company and an affiliate of PGA of America have entered into a ten-year
affiliation agreement (the "Affiliation Agreement"), pursuant to which the
Company has the exclusive right to acquire, develop, manage, market and sell
vacation ownership resorts in St. Lucie County, Florida, and potentially in
other, yet to be determined, areas, under the PGA name, initials, trademark and
logo. PGA Vacation Resort by Vistana is the first resort that will be developed
pursuant to the Affiliation Agreement. See "--Company Resorts."

   Under the Affiliation Agreement, the Company has the right of first offer to
be the developer of additional PGA vacation resorts at other potential
properties (outside St. Lucie County, Florida)

                                      -12-
<PAGE>
 
identified by the Company or by PGA of America or its affiliates. If the parties
mutually agree to develop any other property, the Company will have the
exclusive rights and licenses to use the PGA name, initials, trademark and logos
in connection with such property. In the event that either party elects not to
pursue development of another potential resort, the other party has certain
rights to develop that resort independently. Except for Port St. Lucie, there
are no current commitments for development of any other vacation ownership
resorts, and there is no assurance that the parties will successfully negotiate
and execute any future development agreements. If the Company and PGA of America
enter into future development agreements, the Affiliation Agreement contemplates
that the parties will execute similar agreements and covenants as those
regarding the PGA Vacation Resort by Vistana.

   The Company's exclusive right to develop the PGA Vacation Resort by Vistana,
and its right of first offer for other potential vacation ownership resorts,
does not apply to development projects outside St. Lucie County, Florida which
already bear the PGA name. Likewise, the Affiliation Agreement does not limit,
prohibit or restrict the Company or any of its affiliates from conducting its
business in any manner it determines to be necessary or advantageous to it,
including, without limitation, developing, marketing, managing, owning,
operating or selling vacation ownership resorts other than the PGA Vacation
Resort by Vistana or other properties that may be developed by the parties.

   The Company has the right under the Affiliation Agreement, but not the
obligation, to include one or more of the PGA Vacation Resorts in a vacation
club or other exchange program in combination with other vacation resorts of
comparable or superior quality owned or operated by the Company or one of its
affiliates, subject to PGA of America's approval.

   In addition, the Company and PGA of America entered into a marketing
agreement under which the Company is granted access to the PGA mailing list
(which includes over 72,000 names of PGA members, apprentices and business
contacts) as well as media recognition in publications such as the PGA News, the
PGA International Golf Show Directory and listing on the PGA website. See "--
Company Resorts."

Acquisition of Success and Points

   On September 16, 1997, the Company completed the acquisition (the
"Acquisition") of entities comprising The Success Companies, Success
Developments, L.L.C. and Points of Colorado, Inc. (collectively, "Success and
Points") from Donald J. Dubin, Larry D. Doll, Ronald R. Sharp, David E. Bruce
and David E. Friedman (collectively, the "Sellers"). Pursuant to the Agreement
and Plan of Reorganization dated as of August 15, 1997 (the "Agreement and Plan
of Reorganization"), the Company acquired all of the outstanding stock of
Success and Points for a purchase price consisting of approximately $24 million
in cash (financed with bank borrowings of approximately $24 million) and 638,444
shares of common stock of the Company, par value $.01 per share (the "Common
Stock"). Delivery of 430,814 of such shares is contingent upon Success and
Points achieving certain operating results on a quarterly basis during the
calendar years 1998 through 2000. The consideration was determined as a result
of arm's-length negotiations between the Company and the Sellers. In addition, a
wholly-owned subsidiary of the Company entered into employment agreements with
each of the Sellers pursuant to which each of them serves as an officer of such
subsidiary.

                                      -13-
<PAGE>
 
   In connection with the Acquisition, the Company has agreed to file and use
its reasonable best efforts to cause to be declared effective prior to
approximately March 31, 1998, a shelf registration statement with the Commission
for the purpose of registering the 207,630 shares of Common Stock issued by the
Company in connection with the Acquisition and the 430,814 shares of Common
Stock contingently deliverable by the Company in connection with the
Acquisition. The Company has agreed to use its reasonable best efforts to keep
this shelf registration statement effective for a period ending on the earlier
of (i) such date as all of such shares of Common Stock are tradeable without
restriction under the Securities Act and (ii) the first date on which all of the
shares of Common Stock subject to the shelf registration statement have been
sold pursuant to the shelf registration statement. The Company will bear the
expenses incident to the registration of such shares of Common Stock, except for
any underwriting discounts or commissions, or transfer taxes relating to such
shares of Common Stock.

   Prior to their acquisition by the Company, Success and Points were a closely-
held group of companies which developed, marketed, financed and operated three
vacation ownership resorts: (i) the Villas of Cave Creek, near Scottsdale,
Arizona; (ii) Eagle Point Resort in Vail, Colorado; and (iii) Falcon Point
Resort in Avon, Colorado. See "--Company Resorts." In addition, Success and
Points served, and the Company is continuing to serve, as the exclusive
marketing and sales agent for the largest vacation ownership resort in Colorado,
The Christie Lodge, located in Avon. As a result of the Acquisition, the Company
recently acquired undeveloped land in Scottsdale, Arizona on which it is
developing the Embassy Vacation Resort at Scottsdale.

   Success and Points provided a foundation for the Company's sales, marketing
and resort operations in the western region of the United States and also
provided the Company with experience in direct marketing to consumers in Arizona
and Colorado. The Company believes that the strategic relationships and
operational expertise gained in the Acquisition will improve its ability to
identify additional developments and acquisitions in Arizona, Colorado and other
western states.

Additional Acquisitions and Expansion

   The Company regularly examines opportunities to acquire additional vacation
ownership resorts, additional land for the expansion or development of vacation
ownership resorts, and companies having vacation ownership assets, management,
or sales or marketing expertise relevant to the Company's existing or future
business in the vacation ownership industry. Such acquisitions, if consummated,
may involve the issuance of additional debt or equity securities, increased debt
leverage, and business operations, geographic locations and risks that are
different from those associated with the Company's existing business. There is
no assurance that any such acquisitions will be consummated or, if consummated,
that they will be successfully integrated into the Company's business.

Sales and Marketing

   Marketing Programs.  The Company's current marketing efforts center on three
principal programs--the Vistana Preview Coordinator program (the "VPC Program"),
the VIP/In-House Program and international brokerage and sales operations. In
addition to these programs, the Company also utilizes a variety of other
marketing approaches, including vacation sampler programs (designed to allow a
prospective purchaser to be a guest at the resort and to experience vacation
ownership prior to making a decision to buy), telemarketing, direct mail and,
more recently, strategic alliances with travel, lodging

                                      -14-
<PAGE>
 
and recreational partners, such as Promus and PGA of America. The Company
intends to increase its telemarketing, vacation sampler, and strategic alliance
marketing programs during future periods. Each of the Company's marketing
programs seeks to provide consistent access to qualified prospective buyers and
involves specific target marketing to leisure industry customers.

   The VPC Program consists of public contact marketing by an employee of the
Company who provides concierge-type services in the lobby of a hotel or
condominium vacation property, or at other attractions near one of the Company's
resorts. The goal of the VPC Program is to generate a regular flow of qualified
potential Vacation Ownership Interest purchasers to visit the on-site sales
centers at the Company's resorts. Any loss or increase in the cost of the
Company's VPC Program sites could have a material adverse effect on the Company.
The VIP/In-House Program focuses on guests staying at the Company's vacation
ownership resorts, whether they are owners, renters or exchangers. Through a
combination of guest services and telephone contact, these guests are invited to
a VIP tour of the vacation ownership resort. This program is more effective at
larger resorts, such as Vistana Resort in Orlando, which have a high number of
owners, renters, and exchangers.

   In order to enhance its sales and marketing operations, in November 1997, a
newly-formed subsidiary of the Company acquired substantially all of the assets
of three related entities engaged in the tour generation, guest services and
marketing businesses in Florida. In January 1998, the Company also acquired the
assets of a telemarketing firm.

   In addition to the Company's domestic operations, the Company uses a
combination of independent brokers and direct sales offices to sell Vacation
Ownership Interests in its resorts to customers in various foreign countries,
primarily in Central and South America. In light of the increasing popularity of
central Florida among overseas visitors and the overall rise in vacation
ownership worldwide, the Company believes that the international market presents
significant growth opportunities. However, international interest in the
Company's future resorts is expected to vary depending upon the location of the
project. During the year ended December 31, 1997, approximately 34% of the
Company's sales were to foreign purchasers (with all sales made in United States
dollars), including sales made to customers visiting the United States and sales
made to foreign purchasers who buy the Vacation Ownership Interest "sight
unseen" based on the Company's reputation for delivering a high-quality
experience. The Company is currently increasing the number of overseas marketing
offices owned directly by the Company. The Company's intentional sales generally
involve higher sales and marketing expenses and greater risks than its sales to
domestic purchasers. These risks include potential adverse effects from foreign
governmental policies and regulations, inflation, interest rates, price and wage
controls, exchange control regulations, exchange rates, taxation, political and
social instability and other political or economic developments in or affecting
such foreign jurisdictions.

   Sales Focus.  The Company's marketing efforts are currently supported by
resort-based sales operations, which, in the Company's view, have been the
foundation of the Company's successful performance during its history.
Prospective purchasers are given a personalized on-site tour of the Company's
resorts and provided information about vacation ownership and available
financing options. Presentations to potential buyers, which typically last
between two and one-half and four hours, are individually tailored to take into
account each guest's particular needs and background, such as vacationing habits
and familiarity with the vacation ownership concept. Prior to closing, each sale
is verified by a settlement manager who reviews all documents and pertinent
facts of the sale with the

                                      -15-
<PAGE>
 
purchaser and is available to answer any questions that the new owner may have.
The Company is continuing to evaluate new sales techniques.

   Because the most critical component of the Company's sales effort is its
sales personnel, the Company strives to attract, train and retain a superior
sales force. The Company's policy is for each of its sales representatives to be
a licensed real estate professional and undergo instruction and training. In
addition, except for certain independent contractors, each sales representative
is an employee of the Company and receives full employment benefits. See "--
Governmental Regulation."

Customer Financing

   The Company extends financing to purchasers of Vacation Ownership Interests
at its resorts. These purchasers generally make a down payment equal to at least
10% of the sales price and borrow the remaining sales price from the Company.
These borrowings bear interest at fixed rates, are secured by first mortgages on
the underlying Vacation Ownership Interests and amortize over periods ranging up
to ten years. The Company funds its resort acquisition and development and
operations in part by borrowing up to 90% of the aggregate principal amount of
its customer mortgages receivable under its credit facilities. As of December
31, 1997, the Company's credit facilities provided for an aggregate of up to
approximately $185.0 million of available customer mortgages receivable
financing to the Company (assuming the availability of sufficient receivables)
bearing interest at variable rates based on a specified reference rate. As of
December 31, 1997, the Company had approximately $79.2 million of indebtedness
outstanding under its existing customer mortgages receivable credit facilities
at a weighted average interest rate of 9.5% per annum secured by the Company's
pledge of a portion of its customer mortgages receivable. As of December 31,
1997, the Company had a portfolio of approximately 26,068 loans to customers
totalling approximately $155.0 million, net, with an average contractual yield
of 14.2% per annum. As of December 31, 1997 (i) approximately 3.0% of the
Company's customer mortgages receivable were 60 to 120 days past due; and (ii)
approximately 4.0% of the Company's customer mortgages receivable were more than
120 days past due and the subject of legal proceedings. The Company's provision
for doubtful accounts for the year ended 1997 was 6.9% of Vacation Ownership
Interest sales. The Company periodically monitors its provision for doubtful
accounts to provide for future losses associated with any defaults on customer
mortgages receivable and provides for additions to the allowance for loss on
receivables through its provision for doubtful accounts on an annual basis.
Management believes that the allowance is adequate for such future losses.

   The Company has historically derived net interest income from its financing
activities as a result of the positive difference between the interest rates it
charges its customers who finance their purchase of a Vacation Ownership
Interest and the interest rates it pays its lenders. Because the Company's
indebtedness bears interest primarily at variable rates and the Company's
customer mortgages receivable bear interest at fixed rates, the Company bears
the risk of increases in interest rates with respect to its indebtedness. The
Company engages in limited interest rate hedging activities from time to time in
an effort to reduce the risk and impact of increases in interest rates with
respect to such indebtedness. There is no assurance such activities will be
adequate to protect the Company fully from any adverse changes in interest
rates. In addition, the Company also faces the risk that a reduction in interest
rates would cause customers to prepay their mortgages, which would reduce the
Company's income from financing activities.

                                      -16-
<PAGE>
 
   The Company does not presently have existing credit facilities or binding
lender commitments to supply all of the financing the Company anticipates that
it will need to construct and develop all of the resorts it plans to develop and
market, and there can be no assurance that alternative or additional credit
arrangements can be obtained on terms that are satisfactory to the Company.
Accordingly, future sales of Vacation Ownership Interests may be limited by the
availability of funds to finance the initial negative cash flow attributable to
Vacation Ownership Interest sales financed by the Company (i.e., the amount by
which the Company's product cost and marketing, sales and general administrative
expenses per Vacation Ownership Interest exceeds the customer's down payment).
In addition, if the Company were required to sell its customer mortgages
receivable in order to satisfy its cash flow needs, the Company would cease to
be eligible to report income attributable to sales of Vacation Ownership
Interests on the installment sales method for federal income tax purposes and,
as a result, the Company would be required to accelerate the payment of a
substantial federal income tax liability with respect to the customer mortgages
receivable sold. Such an event could have a material adverse effect on the
Company's cash flow from operations.

   The Company bears the risk of defaults under its customer mortgages on
Vacation Ownership Interests. If a purchaser of a Vacation Ownership Interest
defaults on the mortgage during the early part of the loan amortization period,
the Company will not have recovered its marketing, selling (other than certain
sales commissions), and general and administrative costs per Vacation Ownership
Interest, and such costs will again be incurred in connection with the
subsequent resale of the Vacation Ownership Interest. As is sometimes the
practice in the vacation ownership industry, the Company does not verify the
credit history of its customers. Based on the Company's historical customer
default rate, the fact that its customers are required to make a down payment of
at least 10% of the purchase price of a Vacation Ownership Interest (which the
Company views as indicative of a customer's financial wherewithal to meet
obligations under the mortgage related to the Vacation Ownership Interest) and
that the customer mortgage is secured by the underlying Vacation Ownership
Interest, the Company does not believe that credit history verification is cost-
effective or necessary. In addition, although in certain jurisdictions
(including Florida) the Company may seek recourse against a defaulting customer
for the sales price of the Vacation Ownership Interest, the Company has not
historically pursued such a remedy. Accordingly, there is no assurance that the
sales price will be fully or partially recovered from a defaulting customer or,
in the event of such defaults, that the Company's allowance for loss will be
adequate.

   The Company had historically provided customer mortgages receivable financing
for up to seven years, as had been typical for the industry. Over the past
several years, industry trends have been to lengthen the term of such financing
to up to ten years. The Company has recently begun to offer ten-year financing
for certain of its customer mortgages receivable. Although the increased term
has been introduced on a limited basis, there is no assurance that the inclusion
of customer mortgages with a ten-year maturity will not have an adverse effect
on the performance of the Company's portfolio of customer mortgages receivable.

Other Operations

   Room Rental Operations.  In order to generate additional revenues at its
resorts that have an inventory of unused or unsold Vacation Ownership Interests,
the Company rents units with respect to such Vacation Ownership Interests on a
nightly or weekly basis. The Company offers these unoccupied units through
direct consumer sales, travel agents and package vacation wholesalers. In
addition to

                                      -17-
<PAGE>
 
providing the Company with supplemental revenues, the Company's room rental
operations provide it with a good source of lead generation for the sale of
Vacation Ownership Interests. As part of the management services provided by the
Company, at the request of a Vacation Ownership Interest owner, the Company, for
a fee equal to 50% of a unit's rental rate, net of commissions, generally will
rent an owner's Vacation Ownership Interest in the event the owner is unable to
use or exchange the Vacation Ownership Interest. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."

   Resort Management.  The Company currently provides both hospitality and
homeowners' association management services at its existing vacation ownership
resorts, and intends to provide, or arrange for the provision of, the same
services, directly or through subcontracts with third parties, at its future
vacation ownership resorts pursuant to management agreements with the
homeowners' associations present at such resorts (which are comprised of owners
of Vacation Ownership Interests at the resort or, in the case of Vistana Resort,
a particular phase of the resort). Pursuant to each such management agreement
the Company is paid by the applicable homeowners' association an annual
management fee which is generally equal to approximately 10% of applicable costs
and expenses incurred by the homeowners' association. The Company is responsible
for, and has authority over, all activities necessary for the day-to-day
operation of the resorts, including administrative services, procurement of
inventories and supplies, and promotion and publicity. Management agreements
between the Company and the homeowners' associations typically provide for an
initial term of three or more years, with automatic renewals. In general, the
homeowners' associations may remove the Company as manager upon obtaining the
requisite owner vote. The Company also provides, directly or indirectly,
managerial and other employees necessary for the operation of its resorts, whose
duties include, among other things, review of the maintenance of the resorts,
preparation of reports, budgets and projections and employee training.

   Pursuant to management and submanagement agreements with the Company, Promus
will provide hospitality management services to the Embassy Vacation Resort at
Myrtle Beach and the Embassy Vacation Resort at Scottsdale and may provide such
services to other future resorts developed pursuant to the Promus Agreement. Sun
is also expected to provide hospitality management services to the proposed
Villas at Atlantis resort. These services will be provided for a negotiated
management fee which in some cases may result in a sharing of the homeowner
association management fee payable to the Company.

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

Participation in Vacation Ownership Interest Exchange Networks

   In a 1995 study sponsored by the Alliance for Timeshare Excellence and ARDA,
exchange opportunity was cited by purchasers of Vacation Ownership Interests as
one of the most significant factors in their decision to purchase a Vacation
Ownership Interest. The Company believes that

                                      -18-
<PAGE>
 
consumers are more likely to purchase its Vacation Ownership Interests as a
result of the Company's participation in the Vacation Ownership Interest
exchange network operated by RCI and II. Membership in RCI or II allows the
Company's customers to exchange in a particular year their occupancy right in
the unit in which they own a Vacation Ownership Interest for an occupancy right
at the same time or a different time in another participating resort, based upon
availability and the payment of a variable exchange fee. A member may exchange
his or her Vacation Ownership Interest for an occupancy right in another
participating resort by listing the Vacation Ownership Interest as available
with the exchange network operator and by requesting occupancy at another
participating resort, indicating the particular resort or geographic area to
which the member desires to travel, the size of the unit desired and the period
during which occupancy is desired. The exchange network assigns a rating to each
listed Vacation Ownership Interest, based upon a number of factors, including
the location and size of the unit, the quality of the resort and the period of
the year during which the Vacation Ownership Interest is available, and attempts
to satisfy the exchange request by providing an occupancy right in another
Vacation Ownership Interest with a similar rating. If RCI or II is unable to
meet the member's initial request, the network operator suggests alternative
resorts based on availability. Participants in RCI and II generally pay an
annual membership fee plus an additional fee for each exchange.

   The agreements between one of the Company's predecessors and RCI generally
provide that, until May 2001, the RCI exchange program will be the only exchange
program permitted at resorts developed by that entity and any other entity which
it controls. In addition, Messrs. Gellein and Adler have agreed with RCI that,
until May 2001, each vacation ownership resort owned, developed or managed by an
entity in which Messrs. Gellein or Adler, individually or collectively, have a
controlling interest will execute an affiliation agreement with RCI with an
initial six-year term.

Competition

   The Company is subject to significant competition from other entities engaged
in the leisure and vacation industry, including vacation ownership resorts,
hotels, motels and other accommodation alternatives.

   The vacation ownership industry historically has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality.
More recently, many of the world's most widely-recognized lodging, hospitality
and entertainment companies have begun to develop and sell Vacation Ownership
Interests under their brand names, including Marriott International, Inc., The
Walt Disney Company, Hilton Hotels Corporation, Hyatt Corporation, Four Seasons
Hotels & Resorts, Inc., Inter-Continental Hotels and Resorts, Inc., Westin
Hotels & Resorts and Promus. In addition, other publicly-traded companies
focused on the vacation ownership industry, such as Signature Resorts, Inc.,
Fairfield Communities, Inc., Silverleaf Resorts, Inc., Trendwest Resorts, Inc.
and Bluegreen Corporation have competed, currently compete, or may in the future
compete, with the Company. Moreover, competition in the Orlando market is
particularly intense, and includes many nationally recognized lodging,
hospitality and entertainment companies, as well as active privately-owned local
operators of vacation ownership resorts such as Central Florida Investments,
Inc. and Orange Lake Country Club. Significant competition also exists in other
markets in which the Company currently operates or is developing vacation
ownership resorts. Certain entities with which the Company competes possess
significantly greater financial, sales and marketing, personnel and other
resources than those of the Company and may be able to grow at

                                      -19-
<PAGE>
 
a more rapid rate or more profitably as a result. Management believes that
competition in the vacation ownership industry will be increased by
consolidation in the industry, by increased development of vacation ownership
resorts by industry participants, and by the entry into the industry of real
estate investment trusts and additional hospitality companies.

Governmental Regulation

   General.  The Company's marketing and sales of Vacation Ownership Interests
and other resort operations are subject to extensive regulation by the federal
government and the states in which the Company's resorts are located and in
which its Vacation Ownership Interests are marketed and sold. Federal
legislation to which the Company is or may be subject includes the Federal Trade
Commission Act, the Fair Housing Act, the Truth-in-Lending Act, the Real Estate
Settlement Procedures Act, the Equal Credit Opportunity Act, the Interstate Land
Sales Full Disclosure Act, the Telephone Consumer Protection Act, the
Telemarketing and Consumer Fraud and Abuse Prevention Act and the Civil Rights
Acts of 1964 and 1968. The Florida Condominium Act and the Florida Vacation Plan
and Timesharing Act extensively regulate the creation and management of
timeshare condominiums, the marketing and sale of Vacation Ownership Interests,
the escrow of purchaser funds and other property prior to completion of
construction and closing, the content and use of advertising materials and
promotional offers, the creation and operation of exchange programs and multi-
site timeshare plan reservation systems, and the resale of Vacation Ownership
Interests. In addition, many states have adopted similar legislation as well as
specific laws and regulations regarding the sale of Vacation Ownership
Interests. The laws of most states, including Arizona and Florida, require a
designated state authority to approve a detailed offering statement describing
the Company and all material aspects of the resort and sale of Vacation
Ownership Interests at such resort. In addition, the laws of most states in
which the Company sells Vacation Ownership Interests grant the purchaser of a
Vacation Ownership Interest the right to rescind a contract of purchase at any
time within a statutory rescission period. Furthermore, most states have other
laws which regulate the Company's activities, such as real estate licensure
laws, travel sales licensure laws, anti-fraud laws, telemarketing laws, prize,
gift and sweepstakes laws, and labor laws. The Company believes that it is in
material compliance with all applicable federal, state, local and foreign laws
and regulations to which it is currently subject.

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

                                      -20-
<PAGE>
 
costs it incurs in connection with the contamination. Finally, the owner or
operator of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from a
site. In connection with its ownership and operation of its properties, the
Company may be potentially liable for such costs.

   The Company has conducted Phase I environmental assessments at each of its
existing resorts, properties under development and properties subject to
acquisition in order to identify potential environmental concerns. These Phase I
assessments have been carried out in accordance with accepted industry practices
and consisted of non-invasive investigations of environmental conditions at the
properties owned by the Company, including a preliminary investigation of the
sites and identification of publicly known conditions concerning properties in
the vicinity of the sites, physical site inspections, review of aerial
photographs and relevant governmental records where readily available,
interviews with knowledgeable parties, investigation for the presence of above-
ground and underground storage tanks presently or formerly at the sites, a
visual inspection of potential lead-based paint and suspect friable asbestos
containing materials where appropriate, a radon survey, and the preparation and
issuance of written reports. The Company's assessments of its properties have
not revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets, financial condition
or results of operations, nor is the Company aware of any such material
environmental liability.

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

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

Employees

   As of December 31, 1997, the Company had approximately 1,984 full-time
employees and utilized the services of approximately 71 independent contractors
as sales agents. The Company believes that its employee relations and relations
with its independent contractors are good. None of the Company's employees are
represented by a labor union.

                                      -21-
<PAGE>
 
Insurance

   The Company carries comprehensive liability, fire, windstorm, tropical storm
and business interruption insurance with respect to its properties and interests
in its resorts (i.e., its inventory of unsold Vacation Ownership Interests) with
policy specifications, insured limits and deductibles customarily carried for
similar properties which the Company believes are adequate. However, there are
certain types of losses that are not generally insured because they are either
uninsurable or not economically feasible to insure and for which the Company
does not have insurance coverage. Should an uninsured loss or a loss in excess
of insured limits occur, the Company could lose its investment in a resort as
well as the anticipated future revenues from such resort, and would continue to
be obligated on any mortgage indebtedness or other obligations related to the
resort. Moreover, if a homeowners' association fails to adequately insure the
property committed to the condominium form of ownership (typically, all units,
common areas, facilities and amenities), any uninsured or under-insured casualty
may affect the Company's ability to collect customer mortgages receivable
related to such condominium property. In addition, certain of the Company's
vacation ownership resorts are located in areas that are susceptible to tropical
storms, hurricanes, and tornadoes. The Company's resorts could suffer
significant damage as a result of wind storms, hurricanes, floods and other
natural disasters. Any such damage, as well as adverse weather conditions
generally, could impair or delay the Company's ability to sell Vacation
Ownership Interests at its resorts and have a material adverse effect on the
Company's results of operations.

Item 2.  Properties.

   The Company's other owned properties include an office plaza consisting of
two three-story buildings (totalling approximately 67,000-square feet), which
headquarters the Company's administrative operations, a 27,000-square foot two-
story reception center and resort operations complex, maintenance and laundry
facilities, a freestanding general store and a gift shop leased to an
unaffiliated entity. All of these other properties are owned by the Company, and
are located within or adjacent to Vistana Resort in Orlando. In addition, the
Company leases office and warehouse space in various locations near its existing
resorts and resorts under development for sales and marketing, construction and
development, and administrative operations.

Item 3.  Legal Proceedings.

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

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

     No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of its fiscal year ended December 31, 1997.

                                      -22-
<PAGE>
 
                                    PART II

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

     The Company's initial public offering of Common Stock was consummated in
March 1997 (the "Initial Public Offering") at an initial public offering price
of $12.00 per share. The Company's Common Stock is quoted on the Nasdaq National
Market under the symbol "VSTN." The following table sets forth, for the periods
indicated, the range of high and low sale prices for the Common Stock, as quoted
on the Nasdaq National Market.
<TABLE>
<CAPTION>
                                                      Common Stock
                                                  -----------------------
                                                     High          Low
                                                  ----------  -----------
<S>                                               <C>         <C>
Year Ending December 31, 1997:
  First Quarter (commencing February 28, 1997)..  $  5 7/8   $   11
  Second Quarter................................    15 1/2        9
  Third Quarter.................................    22 7/8       14 3/4
  Fourth Quarter................................    27 3/4       18 1/2
</TABLE>

     As of March 1, 1998, there were 21,007,630 shares of Common Stock
outstanding, held by approximately 55 shareholders of record.

     The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate declaring or paying cash dividends on its Common
Stock in 1998 or in the foreseeable future. The Company currently intends to
retain future earnings to finance its operations and fund the growth of its
business. Any payment of future dividends will be at the discretion of the Board
of Directors of the Company and will depend upon, among other things, the
Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions in respect of the payment of dividends
and other factors that the Company's Board of Directors deems relevant.

     In March 1997, investors in the Company's predecessor general partnerships,
limited partnerships and corporations contributed their interests in such
entities to the Company in consideration for the issuance of 14,174,980 shares
of Common Stock. See "Item 13. Certain Relationships and Related Party
Transactions." Such securities were issued by the Company concurrently with the
completion of the Initial Public Offering in reliance upon an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof.

Item 6.  Selected Financial Data.

     There is hereby incorporated by reference the information appearing under
the caption "Selected Financial Data" appearing in the Company's 1997 Annual
Report to Shareholders.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operation.

     There is hereby incorporated by reference the information appearing under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operation" appearing in the Company's 1997 Annual Report to
Shareholders.

                                      -23-
<PAGE>
 
Item 8.  Financial Statements and Supplementary Data.

     There is hereby incorporated by reference from the Company's 1997 Annual
Report to Shareholders the Consolidated Balance Sheets as of December 31, 1997
and 1996, the Consolidated Statements of Income, Consolidated Shareholders'
Equity and Cash Flows for each of the three years in the period ended December
31, 1997, the Notes to Financial Statements, and the Report of KPMG Peat Marwick
LLP.

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

     None.

                                      -24-
<PAGE>
 
                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

     There is hereby incorporated by reference the information appearing under
the captions "Proposal 1: Election of Directors" and "Executive Officers" in the
Company's definitive proxy statement for its 1998 Annual Meeting of
Shareholders.

Item 11.  Executive Compensation.

     There is hereby incorporated by reference the information appearing under
the captions "Executive Officers--Executive Compensation" and "Executive
Officers--Employment Agreements" in the Company's definitive proxy statement for
its 1998 Annual Meeting of Shareholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     There is hereby incorporated by reference the information appearing under
the caption "Security Ownership of Certain Beneficial Owners and Management" in
the Company's definitive proxy statement for its 1998 Annual Meeting of
Shareholders.

Item 13.  Certain Relationships and Related Party Transactions.

     There is hereby incorporated by reference the information appearing under
the caption "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement for its 1998 Annual Meeting of Shareholders.

                                      -25-
<PAGE>
 
                                    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:

     (1)  Financial Statements

          There is hereby incorporated by reference from the Company's 1997
          Annual Report to Shareholders the following:

                 (i)  Report of Independent Auditors;

                (ii)  Consolidated Balance Sheets--December 31, 1997 and 1996;

               (iii)  Consolidated Statements of Income for each of the three
                      years in the period ended December 31, 1997;

                (iv)  Consolidated Statements of Shareholders' Equity for each
                      of the three years in the period ended December 31, 1997;

                 (v)  Consolidated Statements of Cash Flows for each of the
                      three years in the period ended December 31, 1997; and

                (iv)  Notes to Financial Statements.

     (2)  Financial Statement Schedules

          None.


     (3)  Exhibits:


                                 EXHIBIT INDEX

Exhibit
Number     Document Description
-------    --------------------

  2.1     Agreement and Plan of Reorganization dated as of August 15, 1997 among
          Vistana, Inc., V Sub-1, Inc., Donald J. Dubin, Ronald R. Sharp, David
          E. Bruce, Larry D. Doll, and David H. Freidman. Complete 1 and
          Schedule 1.5A thereto (incorporated by reference to the
          correspondingly numbered exhibit to the Current Report on Form 8-K
          dated September 29, 1997 of Vistana, Inc. (File No. 0-29114))

  3.1     Articles of Incorporation of Vistana, Inc. (1)

  3.2     Amended and Restated By-Laws of Vistana, Inc. (2)

                                      -26-
<PAGE>
 
   4.1    Form of Common Stock certificate of Vistana, Inc. (1)

  10.1    Employment Agreement, dated as of December 27, 1995, between Vistana,
          Inc. and Raymond L. Gellein, Jr. (1, 3)

  10.2    Employment Agreement, dated as of December 27, 1996, between Vistana,
          Inc. and Jeffrey A. Adler (1, 3)

  10.3    Employment Agreement, dated as of December 27, 1996, between Vistana,
          Inc. and Matthew E. Avril (1, 3)

  10.4    Employment Agreement, dated as of December 27, 1996, between Vistana,
          Inc. and Susan Werth (1, 3)

  10.5    Employment Agreement, dated as of December 27, 1996, between Vistana,
          Inc. and Carol Lytle (1, 3)

  10.6    Employment Agreement, dated as of February 10, 1997, between Vistana,
          Inc. and John M. Sabin (1, 3)

 *10.6-A  Agreement, dated as of February 5, 1998, between Vistana, Inc. and
          John M. Sabin (3)

 *10.6-B  Employment Agreement, dated as of November 18, 1997, between Vistana,
          Inc. and Charles E. Harris (3)

  10.7    Amended and Restated Subscription Agreement, dated as of February 10,
          1997, among Vistana, Inc. and each of the persons whose signatures
          appear on the execution pages thereof (1)

  10.8    Vistana Stock Plan (1, 3)

  10.9    Vistana, Inc. Employee Stock Purchase Plan (incorporated by reference
          to Exhibit 4.1 to the Registration Statement on Form S-8 of Vistana,
          Inc. (File No. 333-35823))

  10.10   Form of Indemnification Agreement between Vistana, Inc. and certain
          officers and directors of Vistana, Inc. (1)

  10.11   Registration Rights Agreement, dated as of February 10, 1997, among
          Vistana, Inc., the Raymond L. Gellein, Jr. Retained Annuity Grantor
          Trust, the Matthew James Gellein Irrevocable Trust, the Brett Tyler
          Gellein Irrevocable Trust, the Raymond L. Gellein, Jr. Revocable
          Trust, the JGG Holdings Trust, the Jeffrey A. Adler Revocable Trust,
          Matthew E. Avril, Susan Werth, Carol A. Lytle, John M. Sabin, Barbara
          L. Hollkamp, James A. McKnight, William McLaughlin and Alain Grange
          (1)

 *10.11-A Joinder to Registration Rights Agreement, dated as of November 18,
          1997, between Vistana, Inc. and Charles E. Harris

 *10.11-B Assignment and Assumption Agreement, dated as of December 21, 1997,
          between Raymond L. Gellein, Jr., Trustee of Raymond L. Gellein, Jr.
          Revocable Trust, and NevWest Limited Partnership

                                      -27-
<PAGE>
 
 *10.11-C Assignment and Assumption Agreement, dated as of December 21, 1997,
          between Raymond L. Gellein, Jr., Trustee of JGG Holdings Trust, and
          NevEast Limited Partnership

 *10.11-D Assignment and Assumption Agreement, dated as of December 21, 1997,
          between Jeffrey A. Adler, Trustee of Jeffrey A. Adler Trust, and Rija
          Limited Partnership

  10.12   Agreement for Affiliation, dated as of May 26, 1995, among Resort
          Condominiums International, Inc., Vistana Development, Ltd., Raymond
          L. Gellein, Jr. and Jeffrey A. Adler (1)

  10.13   Limited Partnership Agreement of Vistana WGV, Ltd., dated as of June
          28, 1995, among Vistana WGV Holdings, Inc., Vistana WGV Investment,
          Ltd., United Timeshares, Inc. and A. Zimand WGV Investment, Inc. (1)

  10.14   Parcel One Property Sale Agreement, dated as of June 4, 1996, By and
          Between SJH Partnership, Ltd. and Vistana WGV, Ltd. (1)

  10.15   Amended and Restated Joint Venture Agreement, dated as of June 25,
          1996, among R. Edward Noble, Andrew E. Kidd, Noble-Kidd Corporation
          and VCH Oaks, Ltd. (1)

  10.16   Limited Partnership Agreement of VCH Oaks, Ltd., dated as of June 25,
          1996, among VCH Oaks, Inc., R. Edward Noble, Andrew E. Kidd and
          Vistana OP Investment, Ltd. (1)

  10.17   Exclusive Joint Venture Agreement, dated as of December 24, 1996,
          between Vistana Development, Ltd. and Promus Hotels, Inc. (1)

  10.17-A First Amendment to Exclusive Joint Venture Agreement, dated February
          7, 1997, between Vistana Development, Ltd. and Promus Hotels, Inc. (1)

  10.17-B Second Amendment to Exclusive Joint Venture Agreement, dated February
          27, 1997 between Vistana Development, Ltd. and Promus Hotels, Inc. (2)

  10.17-C Third Amendment to Exclusive Joint Venture Agreement, dated May 1,
          1997 between Vistana Development, Ltd. and Promus Hotels, Inc. (2)

  10.18   Land Purchase Agreement, dated as of December 30, 1996, between Myrtle
          Beach Farms Company Inc. and Vistana Myrtle Beach, L.P. (1)

  10.19   Purchase and Sale Agreement dated as of August 12, 1997 by and between
          PGA Golf Development, Inc. and Vistana PSL, Inc.(2)

  10.19-A First Amendment to Purchase and Sale Agreement dated as of September
          12, 1997 by and between PGA Golf Development, Inc. and Vistana PSL,
          Inc. (2)

  10.19-B Second Amendment to Purchase and Sale Agreement dated as of September
          17, 1997 by and between PGA Golf Development, Inc. and Vistana PSL,
          Inc. (2)

  10.20   Affiliation Agreement dated as of September 15, 1997 by and between
          PGA Golf Properties, Inc. and Vistana, Inc. (2)

                                      -28-
<PAGE>
 
 *10.21   Loan and Security Agreement, dated as of November 1, 1997, between
          Vistana Timeshare Mortgage Corp., as Borrower, and Dresdner Bank AG
          New York and Grand Cayman Branches, as Lender

 *10.22   Line of Credit Agreement, dated as of November 1, 1997, among Vistana,
          Inc. and Vistana Development, Ltd. and Dresdner Bank AG New York and
          Grand Cayman Branches

 *13.1    Vistana, Inc. 1997 Annual Report to Shareholders

 *21.1    List of subsidiaries of Vistana, Inc.

 *23.1    Consent of KPMG Peat Marwick LLP

 *27.1    Financial Data Schedule
_________
*Filed herewith.

     (1) Incorporated by reference to the correspondingly numbered exhibit to
         the Registration Statement (File No. 333-19045) on Form S-1, as
         amended, filed by Vistana, Inc. under the Securities Act of 1933, as
         amended.

     (2) Incorporated by reference to the correspondingly numbered exhibit to
         the Registration Statement (File No. 333-38187) on Form S-1, as
         amended, filed by Vistana, Inc. under the Securities Act of 1933, as
         amended.

     (3) Management contract or compensatory plan or arrangement.


(b)  Reports on Form 8-K.

     A Current Report on Form 8-K/A, dated October 16, 1997, was filed by the
Company with the Securities and Exchange Commission to report under Item 7
thereof, the financial statements, pro forma financial information and exhibits
regarding the Company's acquisitions of entities comprising The Success
Companies, Success Developments, L.L.C. and Points of Colorado, Inc.

     A Current Report on Form 8-K/A, dated October 23, 1997, was filed by the
Company with the Securities and Exchange Commission to file a conformed
signature page to the Form 8-K/A dated October 16, 1997.

                                      -29-
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City Orlando,
State of Florida, on March 26, 1998.

                                    Vistana, Inc.


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


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 26, 1998 by the following persons on behalf of
the registrant and in the capacities indicated:

<TABLE>
<S>                             <C>
 /s/ RAYMOND L. GELLEIN, JR.    Chairman of the Board, Co-Chief Executive
------------------------------  Officer and Director (Principal Executive Officer)
     Raymond L. Gellein, Jr.
 
 /s/ JEFFREY A. ADLER           President, Co-Chief Executive Officer and
------------------------------  Director
     Jeffrey A. Adler
 
 /s/ CHARLES E. HARRIS          Vice Chairman of the Board, Chief Financial
------------------------------  Officer and Director (Principal Financial Officer)
     Charles E. Harris
 
 /s/ MARK E. PATTEN             Vice President and Chief Accounting Officer
------------------------------  (Principal Accounting Officer)
     Mark E. Patten
 
                                Director
------------------------------
     James G. Brocksmith, Jr.
 
 /s/ LAURENCE S. GELLER         Director
------------------------------
     Laurence S. Geller
 
 /s/ STEVEN J. HEYER            Director
------------------------------
     Steven J. Heyer
</TABLE>


                                      -30-