Marriott Vacations Worldwide Annual Report 2015

FY2015 Annual Report · Marriott Vacations Worldwide

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The Business of Fun

Vibrant destinations. Vivid experiences.

TO OUR VALUED SHAREHOLDERS

2015 was an excellent year. Our successes not only make us proud – they
inspire us with their promise for the future. Th e year was exemplifi ed
by adding new destinations in San Diego, Washington, D.C. and Surfers
Paradise, Australia to our portfolio and a resounding affi rmation of our
growth strategy. Owner and guest satisfaction once again set the standard
within the industry and associate engagement showed the passion and
commitment that create truly unique vacations around the world.

Our fi nancial performance has been equally impressive, with over $1.8
billion in total revenues and $123 million in net income. North American
volume per guest remained strong, at $3,386, in line with 2014, and North
American development margin was 22.9%.

We also returned over $225 million to shareholders through the
repurchase of nearly 2.9 million shares of our stock and the payment of
dividends during the year. Additionally, it was announced on February
12, 2016 that our Board of Directors had authorized us to repurchase up
to 2.0 million additional shares.

Th e future is truly bright with the planned addition of new sales
distribution centers in key markets that we expect will drive contract
sales growth and add new Owners. Announced new properties in
New York City, Bali and Miami’s South Beach will complement our
commitment for growth and our strategy of utilizing capital effi cient
transactions where appropriate.

We’re quite proud of our year, as we grew earnings from all areas of our
business, which is a testament that our culture of excellence and passion
in all that we do drives results. On behalf of the Board of Directors and
each of our nearly 10,000 associates, we truly thank you for your support
and commitment to Marriott Vacations Worldwide.

Bill Shaw, Chairman of the Board

Steve Weisz, President & CEO

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the Fiscal Year Ended January 1, 2016

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from

Commission File No. 001-35219

MARRIOTT VACATIONS WORLDWIDE CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

6649 Westwood Blvd., Orlando, FL
(Address of Principal Executive Offices)

45-2598330
(IRS Employer
Identification No.)

32821
(Zip Code)

Registrant’s Telephone Number, Including Area Code (407) 206-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value
(28,847,648 shares outstanding as of February 19, 2016)

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act. Yes È No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È

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 È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes È No ‘

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.
See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer È

Accelerated filer

‘

Non-accelerated filer ‘ (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È

Smaller reporting company ‘

The aggregate market value of shares of common stock held by non-affiliates at June 19, 2015, was $2,405,493,792.

Portions of the Proxy Statement prepared for the 2016 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

Part I.

Part II.

Business

Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures

Properties
Legal Proceedings

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities
Selected Financial Data

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

Item 9A. Controls and Procedures
Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.

Principal Accounting Fees and Services

Part III.

Part IV.

Item 15. Exhibits, Financial Statement Schedules

Signatures

Page

2
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Throughout this Annual Report on Form 10-K (this “Annual Report”), we refer to Marriott Vacations

Worldwide Corporation, together with its subsidiaries, as “Marriott Vacations Worldwide,” “we,” “us,” or “the
Company.” Unless otherwise specified, each reference to a particular year means the fiscal year ended on the
date shown in the table below, rather than the corresponding calendar year. All fiscal years included 52 weeks,
except for 2013, which included 53 weeks.

Fiscal Year
2015
2014
2013
2012
2011

Fiscal Year-End Date
January 1, 2016
January 2, 2015
January 3, 2014
December 28, 2012
December 30, 2011

In addition, in order to make this Annual Report easier to read, we refer throughout to (i) our

Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Income as
our “Statements of Income,” (iii) our Consolidated Balance Sheets as our “Balance Sheets” and (iv) our
Consolidated Statements of Cash Flows as our “Cash Flows.” References throughout to numbered “Footnotes”
refer to the numbered Notes to our Financial Statements that we include in the Financial Statements section of
this Annual Report.

Throughout this Annual Report, we refer to brands that we own, as well as those brands that we license

from Marriott International, Inc. (“Marriott International”) or its affiliates, as our brands.

By referring to our corporate website, www.marriottvacationsworldwide.com, or any other website, we

do not incorporate any such website or its contents in this Annual Report.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We make forward-looking statements throughout this Annual Report, including in, among others, the

sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” based on our management’s beliefs and assumptions and on information
currently available to our management. Forward-looking statements include, among other things, the information
concerning our possible or assumed future results of operations, business strategies, financing plans, competitive
position, potential growth opportunities, potential operating performance improvements, and the effects of
competition. Forward-looking statements include all statements that are not historical facts and can be identified
by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,”
“estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms
or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ
materially from those expressed in these forward-looking statements. You should not put undue reliance on any
forward-looking statements in this Annual Report. We do not have any intention or obligation to update forward-
looking statements after the date of this Annual Report, except as required by law.

The risk factors discussed in “Risk Factors” could cause our results to differ materially from those

expressed in forward-looking statements. There may be other risks and uncertainties that we cannot predict at
this time or that we currently do not expect will have a material adverse effect on our financial position, results of
operations or cash flows. Any such risks could cause our results to differ materially from those we express in
forward-looking statements.

PART I

Item 1.

Overview

Business

We are one of the world’s largest companies whose business is focused almost entirely on vacation

ownership, based on number of owners, number of resorts and revenues. We are the exclusive worldwide
developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation
Club and Grand Residences by Marriott brands. We are also the exclusive worldwide developer, marketer and
seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, and we have
the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton
Residences brand.

Our business is grouped into three reportable segments: North America, Europe and Asia Pacific. As of

January 1, 2016, our portfolio consisted of 61 properties in the United States and eight other countries and
territories, including two hotels that we intend to convert to vacation ownership interests. We generate most of
our revenues from four primary sources: selling vacation ownership products; managing our resorts; financing
consumer purchases of vacation ownership products; and renting vacation ownership inventory.

Our strategic goal is to further strengthen our leadership position in the vacation ownership industry

through initiatives to drive profitable contract sales growth, maximize cash flow and optimize our capital
structure, selectively pursue compelling new business opportunities, and focus on our owners, guests and
associates. We believe that we have significant competitive advantages, including our scale and global reach, the
quality and strength of the Marriott and Ritz-Carlton brands, our system of high-quality resorts, our loyal and
highly satisfied customer base, our long-standing track record and our experienced management team and
associates.

The Vacation Ownership Industry

The vacation ownership industry (also known as the timeshare industry) enables customers to share
ownership and use of fully-furnished vacation accommodations. Typically, a purchaser acquires an interest
(known as a “vacation ownership interest”) that is either a real estate ownership interest (known as a “timeshare
estate”) or a contractual right-to-use interest (known as a “timeshare license”) in a single resort or a collection of
resort properties. In the United States, most vacation ownership products are sold as timeshare estates, which can
be structured in a variety of ways including, but not limited to, a deeded interest in a specified accommodation
unit, an undivided interest in a building or an entire resort, or a beneficial interest in a trust that owns one or more
resort properties. By purchasing a vacation ownership interest, owners make a commitment to vacation. For
many purchasers, vacation ownership provides an attractive alternative to traditional lodging accommodations
(such as hotels, resorts and condominium rentals). In addition to avoiding the volatility in room rates to which
traditional lodging customers are subject, vacation ownership purchasers also enjoy accommodations that are, on
average, more than twice the size of traditional hotel rooms and typically have more features, such as kitchens
and separate living areas. Purchasers who might otherwise buy a second home find vacation ownership a
preferable alternative because it is more affordable and reduces maintenance and upkeep concerns.

Typically, developers sell vacation ownership interests for a fixed purchase price that is paid in full at
closing or financed with a loan. Many vacation ownership companies provide financing or facilitate access to
third-party bank financing for customers. Vacation ownership resorts are often managed by a nonprofit property
owners’ association of which owners of vacation ownership interests are members. Most property owners’
associations are governed by a board of directors that includes owners and which may include representatives of
the developer. Some vacation ownership resorts are held through a trust structure in which a trustee holds title
and manages the property. The board of the property owners’ association, or trustee, as applicable, typically
delegates much of the responsibility for managing the resort to a management company, which is often affiliated
with the developer.

After the initial purchase, most vacation ownership programs require the owner of the vacation ownership

interest to pay an annual maintenance fee. This fee represents the owner’s allocable share of the costs and
expenses of operating and maintaining the vacation ownership property and providing program services. This fee
typically covers expenses such as housekeeping, landscaping, taxes, insurance and resort labor, a property
management fee payable to the management company for providing management services, and an assessment to
fund a capital asset reserve account used to renovate, refurbish and replace furnishings, common areas and other
assets (such as parking lots or roofs) as needed over time. Owners typically reserve their usage of vacation
accommodations in advance through a reservation system (often provided by the management company or an
affiliated entity), unless a vacation ownership interest specifies fixed usage dates and a particular unit every year.

The vacation ownership industry has grown through expansion of established vacation ownership
developers as well as entrance into the market of well-known lodging and entertainment companies, including
Marriott International, Wyndham Worldwide Corporation, Starwood Hotels & Resorts Worldwide, Inc., Hilton
Hotels Corporation, Hyatt Hotels Corporation and The Walt Disney Company. The industry’s growth can also be
attributed to increased market acceptance of vacation ownership products, stronger consumer protection laws and
the evolution of vacation ownership interests from a fixed- or floating-week product, which provides the right to
use the same property every year, to membership in multi-resort vacation networks, which offer a more flexible
vacation experience. These vacation networks often issue their members an annual allotment of points that can be
redeemed for stays at affiliated vacation ownership resorts or for alternative vacation experiences available
through the program.

To enhance the flexibility and appeal of their products, many vacation ownership developers affiliate

their projects with vacation ownership exchange service providers so that owners may exchange their rights to
use the developer’s resorts for accommodation at other resorts in the exchange service provider’s broader
network of properties. The two leading exchange service providers are Interval International, with which we are
associated, and RCI. According to their websites, Interval International’s and RCI’s networks include more than
2,900 and nearly 4,500 affiliated resorts, respectively, as identified on each company’s website.

According to the American Resort Development Association (“ARDA”), a trade association representing
the vacation ownership and resort development industries, as of December 31, 2014, the U.S. vacation ownership
community was comprised of over 1,500 resorts, representing over 198,000 units and an estimated 8.7 million
vacation ownership week equivalents. According to ARDA, sales in the U.S. market were $7.9 billion in 2014.
We believe there is considerable potential for further growth in the industry both in the U.S. and globally.

Our History

We recently celebrated our 30-year anniversary of providing vacation memories and experiences to
millions of families. Prior to the incorporation of Marriott Vacations Worldwide Corporation in Delaware in June
2011, our operations were the vacation ownership division of Marriott International. Marriott International
completed the spin-off of its vacation ownership division on November 21, 2011 (the “Spin-Off”). Since the
Spin-Off, we have been an independent public company, with our common stock listed on the New York Stock
Exchange under the symbol “VAC” and our corporate headquarters located in Orlando, Florida.

Since 1984, when Marriott became the first major lodging company to enter the vacation ownership

industry with its acquisition of American Resorts, a small vacation ownership company, we have been
recognized as a leader and innovator in the vacation ownership industry. Marriott International leveraged its
well-known “Marriott” brand to sell vacation ownership intervals, which were frequently located at resorts
developed adjacent to Marriott International hotels. Over time, the company differentiated its offerings through
its high-quality resorts that were purpose-built for vacation ownership, exchange opportunities available under its
Marriott Rewards customer loyalty program that increased the flexibility of use of ownership, its dedication to
excellent customer service and its commitment to ethical business practices. These qualities encouraged repeat
business and word-of-mouth customer referrals.

We have continuously worked with ARDA to encourage the enactment of responsible consumer-
protection legislation and state regulation that enhances the reputation and respectability of the overall vacation

ownership industry. We believe that, over time, our vacation ownership products and services helped improve the
public perception of the vacation ownership industry. A number of other major lodging companies later entered
the vacation ownership business, further enhancing the industry’s image and credibility.

In connection with the Spin-Off, we entered into a License, Services, and Development Agreement (the
“Marriott License Agreement”) with Marriott International and its subsidiary Marriott Worldwide Corporation
and a License, Services, and Development Agreement (the “Ritz-Carlton License Agreement” and, together with
the Marriott License Agreement, the “License Agreements”) with The Ritz-Carlton Hotel Company, L.L.C.
(“The Ritz-Carlton Hotel Company”), a subsidiary of Marriott International. Under the License Agreements, we
are granted the exclusive right, for the terms of the License Agreements, to use certain Marriott and Ritz-Carlton
marks and intellectual property in our vacation ownership business, the exclusive right to use the Grand
Residences by Marriott marks and intellectual property in our residential real estate business and the non-
exclusive right to use certain Ritz-Carlton marks and intellectual property in our residential real estate business.
We also entered into a Non-Competition Agreement with Marriott International (the “Non-Competition
Agreement”), which generally prohibits Marriott International and its subsidiaries from engaging in the vacation
ownership business and prohibits us and our subsidiaries from engaging in the hotel business until the earlier of
November 21, 2021 or the termination of the Marriott License Agreement.

Under the Marriott Rewards Affiliation Agreement that we and certain of our subsidiaries entered into
with Marriott International and its subsidiary Marriott Rewards, LLC (the “Marriott Rewards Agreement”), we
are allowed to continue to participate in the Marriott Rewards customer loyalty program following the Spin-Off;
this participation includes the ability to purchase and use Marriott Rewards Points in connection with our
Marriott-branded vacation ownership business. The Marriott Rewards Agreement is coterminous with the
Marriott License Agreement.

Our Business Strategy

Our strategic goal is to further strengthen our leadership position in the vacation ownership industry. To

achieve this goal, we are pursuing the following initiatives:

Drive profitable contract sales growth

We intend to continue to generate growth in vacation ownership sales by leveraging our globally
recognized brand names and targeting high-quality inventory that allows us to add desirable new destinations to
our system with new on-site sales locations. We expect to focus our efforts to generate growth through our two
points-based ownership programs: Marriott Vacation Club DestinationsTM (“MVCD”) and Marriott Vacation
Club, Asia Pacific. We will also continue to focus on our approximately 410,000 owners around the world. In
2015, approximately 64 percent of our sales of vacation ownership products were to our existing owners. In
addition, we are concentrating on growing our tour flow cost effectively as we seek to generate more first-time
buyer tours and achieve our longer term goal of selling to an equal mix of new buyers and existing buyers. Our
strategy includes an emphasis on new sales distributions and new marketing channels geared toward driving first-
time buyer tour growth. We are also committed to maximizing development margin through efficient marketing
and sales spending and managing inventory costs and development activities.

Maximize cash flow and optimize our capital structure

Through the use of our points-based products, we are able to more closely match inventory investment
with sales pace and reduce inventory levels, thereby generating strong cash flows over time. Additionally, by
limiting the amount of completed inventory on hand, we are able to reduce the maintenance fees that we pay on
unsold inventory. Over the last few years, we have significantly reduced our costs, and we intend to continue to
control costs as sales volumes grow. We also seek to optimize our inventory investments by targeting high-
quality inventory that allows us to add desirable new destinations to our system as well as new on-site sales
locations. We seek to use capital efficient deal structures that may include working with third parties to develop
new inventory or convert previously built units to be sold to us close to when we need such inventory. We also

proactively buy back previously sold vacation ownership interests at lower costs than would be required to
develop new inventory.

We expect our modest level of debt and the use of capital efficient structures will enable us to maintain a
level of liquidity that ensures financial flexibility, giving us the ability to pursue strategic growth opportunities,
withstand potential future economic downturns, optimize our cost of capital, and pursue strategies for returning
capital to shareholders. We intend to meet our liquidity needs through operating cash flow, the disposition of
excess assets, our $200 million revolving credit facility (the “Revolving Corporate Credit Facility”), our $250
million non-recourse warehouse credit facility (the “Warehouse Credit Facility”), and continued access to the
asset-backed securities (“ABS”) term financing market.

Selectively pursue compelling new business opportunities

We are positioned to explore new business opportunities, such as the continued enhancement of our

exchange programs, new management affiliations and acquisitions of existing vacation ownership and related
businesses. We intend to selectively pursue these types of opportunities, focusing on opportunities that drive
recurring revenue and profit streams. Prior to entering into any new business opportunity, we will evaluate its
strategic fit and assess whether it is complementary to our current business, has strong expected financial returns
and leverages our existing competencies.

Focus on our owners, guests and associates

We are in the business of providing high-quality vacation experiences to our owners and guests around

the world. We intend to maintain and improve their satisfaction with our products and services, particularly
because our owners and guests are our most cost-effective sales channels. We intend to continue to sell our
products through these very effective channels and believe that maintaining a high level of engagement across all
of our customer groups is key to our success. We intend to provide innovative offerings in new destinations to
meet the needs of current and future customers. We intend to develop new offerings to attract the next generation
of travelers looking for a greater variety of experiences with the high quality standards expected from a brand
they trust.

Engaging our associates in the success of our business continues to be one of our long-term core

strategies. We understand the connection between the engagement of our associates and the satisfaction and
engagement of our owners and guests. At the heart of our culture is the belief that if we take care of our
associates, they will take care of our owners and guests and the owners and guests will return again and again.

Our Brands

We design, build, manage and maintain our properties at upscale and luxury levels under four brands in
accordance with the Marriott and Ritz-Carlton brand standards with which we must comply under the License
Agreements.

The Marriott Vacation Club brand is our signature offering in the upscale tier of the vacation ownership

industry. Marriott Vacation Club resorts typically combine many of the comforts of home, such as spacious
accommodations with one, two and three bedroom options, living and dining areas, in-unit kitchens and laundry
facilities, with resort amenities such as large feature swimming pools, restaurants and bars, convenience stores,
fitness facilities and spas, as well as sports and recreation facilities appropriate for each resort’s unique location.

Grand Residences by Marriott is an upscale tier vacation ownership and whole ownership residence

brand. The accommodations for this brand are similar to those we offer under the Marriott Vacation Club brand,
but the duration of the vacation ownership interest is longer, ranging between three and thirteen weeks. We also
offer whole ownership residential products under the Grand Residences by Marriott brand.

The Ritz-Carlton Destination Club is a luxury tier vacation ownership brand. The Ritz-Carlton

Destination Club provides luxurious vacation experiences commensurate with the legacy of the Ritz-Carlton
brand. The Ritz-Carlton Destination Club resorts typically feature two, three and four bedroom units that

generally include marble foyers, walk-in closets, custom kitchen cabinetry and luxury resort amenities such as
large feature pools and access to full service restaurants and bars. On-site management and services, which
usually include daily maid service, valet, in-residence dining, and access to fitness facilities as well as spa and
sports facilities as appropriate for each destination, are provided by The Ritz-Carlton Hotel Company.

The Ritz-Carlton Residences is a luxury tier whole ownership residence brand. The Ritz-Carlton
Residences includes whole ownership luxury residential condominiums co-located with The Ritz-Carlton
Destination Club resorts. Owners can typically purchase condominiums that vary in size from one-bedroom
apartments to spacious penthouses. Owners of The Ritz-Carlton Residences can avail themselves of the services
and facilities that are associated with the co-located The Ritz-Carlton Destination Club resort on an a la carte
basis. On-site management and services are provided by The Ritz-Carlton Hotel Company.

Our Products

Our Points-Based Vacation Ownership Products

We sell the majority of our products through two points-based ownership programs: MVCD and Marriott

Vacation Club, Asia Pacific. While the structural characteristics of each of our points-based programs differ, in
each program, owners receive an annual allotment of points representing owners’ usage rights, and owners can
use these points to access vacation ownership units across multiple destinations within their program’s portfolio
of resort locations. Each program permits shorter or longer stays than a traditional weeks-based vacation
ownership product and provides for flexibility with respect to check-in days and size of accommodations. In
addition to traditional resort stays, the MVCD program enables our owners to utilize their points for the wide
variety of innovative vacation experiences included in our Explorer Collection, such as cruises, guided tours,
safaris and other unique vacation alternatives. Members of our points-based programs pay annual fees in
exchange for the ability to participate in the program.

The MVCD and the Marriott Vacation Club, Asia Pacific programs allow owners to bank and borrow

their annual point allotments, access other Marriott Vacation Club locations through internal exchange programs
that we and Interval International operate, and access Interval International’s approximately 2,900 affiliated
resorts. Owners can also trade their vacation ownership usage rights for Marriott Rewards Points, which can be
used to access the vast majority of Marriott International’s system of over 4,000 participating hotels or redeem
their Marriott Rewards Points for airline miles or other merchandise offered through the Marriott Rewards
customer loyalty program. MVCD owners hold an interest in real estate, owned in perpetuity. Our Marriott
Vacation Club, Asia Pacific program offers usage for a term of 50 years from the program’s 2006 launch date.

Our Weeks-Based Vacation Ownership Products

We continue to sell Marriott Vacation Club branded weeks-based vacation ownership products in select

markets, including in countries where legal and tax constraints currently limit our ability to include those
locations in one of our points-based programs. We offer multi-week vacation ownership interests in specific
Grand Residences by Marriott and The Ritz-Carlton Destination Club resorts, but we also intend to continue
placing luxury branded inventory into the MVCD program. Our Marriott Vacation Club, Grand Residences by
Marriott and The Ritz-Carlton Destination Club weeks-based vacation ownership products in the United States
and select Caribbean locations are typically sold as fee simple deeded real estate interests at a specific resort
representing an ownership interest in perpetuity, except where restricted by leasehold or other structural
limitations. We sell vacation ownership interests as a right-to-use product subject to a finite term under the
Marriott Vacation Club brand in Europe and Asia Pacific and under the Grand Residences by Marriott brand in
Europe.

As part of the launch of the MVCD program in mid-2010, we offered our existing Marriott Vacation Club

owners who held weeks-based products in the United States and Caribbean the opportunity to participate in the
MVCD program on a voluntary basis. In mid-2012, we began offering owners who held weeks-based products in
Europe the opportunity to participate in the MVCD program. All existing owners, whether or not they elected to
participate in the MVCD program, retained their existing rights and privileges of vacation ownership. Owners

who elected to participate in the program received the ability to trade their weeks-based interval usage for
vacation club points usage each year, subject to payment of an initial enrollment fee and annual fees. As of the
end of 2015, over 146,000 weeks-based owners have enrolled nearly 253,000 weeks in the MVCD program since
its launch.

Our Sources of Revenue

We generate most of our revenues from four primary sources: selling vacation ownership products;
managing our resorts; financing consumer purchases of vacation ownership products; and renting vacation
ownership inventory.

Sale of Vacation Ownership Products

Our principal source of revenue is the sale of vacation ownership interests. See “—Marketing and Sales

Activities” below for information regarding our marketing and sales activities.

Resort Management and Other Services

We generate revenue from fees we earn for managing each of our resorts. See “—Management
Activities” below for additional information on the terms of our management agreements. In addition, we earn
revenue for providing ancillary offerings, including food and beverage, retail, and golf and spa offerings at our
resorts. We also receive annual fees, club dues, settlement fees from the sale of vacation ownership products, and
certain transaction-based fees from owners and other third parties, including external exchange service providers
with which we are associated.

Financing

We earn interest income on loans that we provide to purchasers of our vacation ownership interests, as

well as loan servicing and other fees. See “—Consumer Financing” below for further information regarding our
consumer financing activities.

Rental

We generate rental revenue from transient rentals of inventory we hold for sale as interests in our

vacation ownership programs or as residences, or inventory that we control because our owners have elected
alternative usage options permitted under our vacation ownership programs.

Marketing and Sales Activities

We sell our upscale tier vacation ownership products under the Marriott Vacation Club brand primarily

through our worldwide network of resort-based sales centers and certain off-site sales locations. Marriott
Vacation Club products are currently marketed for sale throughout the United States and in over 30 countries
around the world, targeting customers who vacation regularly with a focus on family, relaxation and recreational
activities. In 2015, approximately 85 percent of our sales originated at sales centers that are co-located with one
of our resorts. We maintain a range of different off-site sales centers, including our central telesales organization
based in Orlando, our network of third-party brokers in Latin America and Europe, and our city-based sales
centers, such as our sales centers in Dubai and Singapore. We have over 50 global sales locations focused on the
sale of Marriott Vacation Club products. We utilize a number of marketing channels to attract qualified
customers to our sales locations for our Marriott Vacation Club products.

We solicit our owners primarily while they are staying in our resorts, but also offer our owners the
opportunity to make additional purchases through direct phone sales, owner events and inquiries from our central
customer service center located in Salt Lake City, Utah. In 2015, approximately 64 percent of our sales of
vacation ownership products were to our existing owners. In addition, we are concentrating on growing our tour
flow cost effectively as we seek to generate more first-time buyer tours and achieve our longer term goal of

selling to an equal mix of new buyers and existing owners. Our strategy includes an emphasis on new marketing
channels geared toward driving first-time buyer tour growth.

We offer customers who are referred to us by our owners discounted stays at our resorts and conduct

scheduled sales tours while they are on site. Where allowed by applicable law, we offer Marriott Rewards Points
to our owners when their referral candidates tour with us or buy vacation ownership interests from us.

We also market to existing Marriott Rewards customer loyalty program members and travelers who are
staying in locations where we have resorts. We market extensively to guests in Marriott International hotels that
are located near one of our sales locations and have marketing partnerships with Marriott International’s
North American reservation centers. In addition, we operate other local marketing venues in various high-traffic
areas. A significant part of our direct marketing activities are focused on prospects in the Marriott Rewards
customer loyalty program database and our in-house database of qualified prospects. We offer guests who do not
buy a vacation ownership interest during their initial tour an “Encore” package for a future stay at our resorts.
These return guests are nearly twice as likely to purchase as a first-time visitor.

Our Marriott Vacation Club sales tours are designed to provide our guests with an overview of our

company and our products, as well as a customized presentation to explain how our products and services can
meet their vacationing needs. Our sales force is highly trained in a consultative sales approach designed to ensure
that we meet customers’ needs on an individual basis. We hire our Marriott Vacation Club sales executives based
on stringent selection criteria. After they are hired, they spend a minimum of four weeks in product and sales
training before interacting with any customers. We manage our sales executives’ consistency of presentation and
professionalism using a variety of sales tools and technology and through a post-presentation survey of our
guests that measures many aspects of each guest’s interaction with us.

We believe consumers place a great deal of trust in the Marriott and Ritz-Carlton brands and the strength

of these brands is important to our ability to attract qualified prospects in the marketplace. We maintain a
prominent presence on the www.marriott.com and www.ritzcarlton.com websites. Our proprietary sites, which
include www.marriottvacationsworldwide.com, www.marriottvacationclub.com and www.ritzcarltonclub.com,
had over 5.6 million visits in 2015.

Inventory and Development Activities

We secure inventory by building additional phases at our existing resorts, repurchasing inventory in the

secondary market, repurchasing inventory as a result of owner loan or maintenance fee defaults, or developing or
acquiring resorts in strategic markets. We proactively buy back previously sold vacation ownership interests
under our repurchase program at lower costs than would be required to develop new inventory.

We intend to continue to selectively pursue growth opportunities in North America and Asia by targeting

high-quality inventory that allows us to add desirable new destinations to our system with new on-site sales
locations in ways that optimize the timing of our capital investments. These capital efficient deal structures may
include working with third parties to develop new inventory or convert previously built units to be sold to us
close to when we need such inventory.

Approximately one-quarter of our vacation ownership resorts are co-located with Marriott International
and Ritz-Carlton hotel properties. Co-location of our resorts with Marriott International or Ritz-Carlton branded
hotels can provide several advantages from development, operations, customer experience and marketing
perspectives, including sharing amenities, infrastructure and staff, integration of services, and other cost
efficiencies. The larger campus of an integrated vacation ownership and hotel resort often can afford our owners
more varied and elaborate amenities than those that would generally be available at a stand-alone resort. Shared
infrastructure can also reduce our overall development costs for our resorts on a per unit basis. Integration of
services and sharing staff and other expenses can lower overhead and operating costs for our resorts. Our on-site
access to hotel customers, including Marriott Rewards customer loyalty program members, who are visiting
co-located hotels also provides us with a cost-effective marketing channel for our vacation ownership products.

Co-located resorts require cooperation and coordination among all parties and are subject to cost sharing
and integration agreements among us, the applicable property owners’ association and managers and owners of
the co-located hotel. Our License Agreements with Marriott International and Ritz-Carlton allow for the
development of co-located properties in the future, and we intend to opportunistically pursue co-located projects
with them.

Under our points-based business model, we are able to supply many sales offices with new inventory

from a small number of resort locations, which provides us with greater efficiency in the use of our capital. As a
result, our risk associated with construction delays is concentrated in fewer locations than it has been in the past.
Additionally, selling vacation ownership interests in a system of resorts under a points-based business model
increases the risk of temporary inventory depletion. We sell vacation ownership interests denominated in points
from a single trust entity in each of our North America and Asia Pacific business segments. Thus, the primary
source of inventory for each segment is concentrated in its corresponding trust. To avoid the risk of temporary
inventory depletion, we employ a strategy of seeking to maintain a surplus supply of completed inventory based
on our forecasted sales pace. If this surplus is not sufficient, we believe that the actual risk of temporary
inventory depletion is relatively minor, as there are other mitigation strategies we could employ to prevent this,
such as accelerating completion of resorts under construction, acquiring vacation ownership interests on the
secondary market, or reducing sales pace by adjusting prices or sales incentives.

Owners generally can offer their vacation ownership interests for resale on the secondary market, which

can create pricing pressure on the sale of developer inventory. However, owners who purchase vacation
ownership interests on the secondary market typically do not receive all of the benefits that owners who purchase
products directly from us receive. When an owner purchases a vacation ownership interest directly from us, the
owner receives certain entitlements that are tied to the underlying vacation ownership interest, such as the right to
reserve a resort unit that underlies their vacation ownership interest in order to occupy that unit or exchange its
use for use of a unit at another resort through an outside exchange service provider, as well as benefits that are
incidental to the purchase of the vacation ownership interest. While a purchaser on the secondary market will
receive all of the entitlements that are tied to the underlying vacation ownership interest, the purchaser is not
entitled to receive certain incidental benefits. For example, owners who purchase our products on the secondary
market have restricted access to our internal exchange programs and are not entitled to trade their usage rights for
Marriott Rewards Points. Therefore, those owners are only entitled to use the inventory that underlies the
vacation ownership interests they purchased. Additionally, most of our vacation ownership interests provide us
with a right of first refusal on secondary market sales. We monitor sales that occur in the secondary market and
exercise our right of first refusal when it is advantageous for us to do so, whether due to pricing, desire for the
particular inventory, or other factors. All owners, whether they purchase directly from us or on the secondary
market, are responsible for the annual maintenance fees, property taxes and any assessments that are levied by
the relevant property owners’ association, as well as any exchange service membership dues or service fees.

Management Activities

We enter into a management agreement with the property owners’ association or other governing body at
each of our resorts and, in the event a trust holds resorts or interests in resorts, with the trust’s governing body. In
exchange for a management fee, we typically provide owner account management (reservations and usage
selection), housekeeping, check-in, maintenance and billing and collections services. The management fee is
typically based on either a percentage of the budgeted cost to operate such resorts or a fixed fee arrangement. We
earn these fees regardless of usage or occupancy. We also receive revenues that represent reimbursement for
certain costs we incur under our management agreements, principally payroll-related costs, at the locations where
we employ the associates providing on-site services.

The terms of our management agreements generally range from three to ten years and are generally

subject to periodic renewal for one to five year terms. Many of these agreements renew automatically unless
either party provides advance notice of termination before the expiration of the term. When our management
agreement for a Marriott Vacation Club branded resort is not renewed or is terminated, the resort loses the ability
to use the Marriott name and trademarks. The owners at such resorts also lose their ability to trade their vacation

ownership usage rights for Marriott Rewards Points and to access other Marriott Vacation Club resorts through
our internal exchange system.

The Ritz-Carlton Hotel Company manages the on-site operations for The Ritz-Carlton Destination Club

and The Ritz-Carlton Residences properties in our portfolio under separate management agreements with us. We
provide property owners’ association governance and vacation ownership program management services for The
Ritz-Carlton Destination Club and co-located The Ritz-Carlton Residences properties, including preparing
association budgets, facilitating association meetings, billing and collecting maintenance fees, and supporting
reservations, vacation experience planning and other off-site member services. We and The Ritz-Carlton Hotel
Company typically split the management fees equally for these resorts. If a management agreement for a resort
expires or is terminated, the resort loses the ability to use the Ritz-Carlton name and trademarks. The owners at
such resorts also lose their ability to access other usage benefits, such as access to accommodations at other The
Ritz-Carlton Destination Club resorts, preferential access to Ritz-Carlton hotels worldwide and access to our
internal exchange and vacation travel options.

Each management agreement requires the property owners’ association or trust association to provide sufficient

funds to pay for the vacation ownership program and operating costs. To satisfy this requirement, owners of vacation
ownership interests pay an annual maintenance fee. This fee represents the owner’s allocable share of the costs of
operating and maintaining the resorts in which they hold a vacation ownership interest, including management fees and
expenses, taxes (in some locations), insurance, and other related costs, and the costs of providing program services
(such as reservation services). This fee includes a management fee payable to us for providing management services as
well as an assessment for funds to be deposited into a capital asset reserve fund and used to renovate, refurbish and
replace furnishings, common areas and other resort assets (such as parking lots or roofs) as needed over time. As the
owner of completed but unsold vacation ownership inventory, we also pay maintenance fees in accordance with the
legal requirements of the jurisdictions applicable to such resorts and programs. In addition, in early phases of
development at a resort, we sometimes enter into subsidy agreements with the property owners’ associations under
which we agree to pay costs that otherwise would be covered by annual maintenance fees associated with vacation
ownership interests or units that have not yet been built. These subsidy arrangements help keep maintenance fees at a
reasonable level for owners who purchase in the early stages of development.

In the event of a default by an owner in payment of maintenance fees or other assessments, the property
owners’ association typically has the right to foreclose on or revoke the defaulting owner’s vacation ownership
interest. We have entered into arrangements with several property owners’ associations to assist in reselling
foreclosed or revoked vacation ownership interests in exchange for a fee, or to reacquire such foreclosed or
revoked vacation ownership interests from the property owners’ associations.

Consumer Financing

We offer purchase money financing for purchasers of our vacation ownership products who meet our

underwriting guidelines. By offering or eliminating financing incentives and modifying underwriting standards,
we have been able to increase or decrease our financing activities depending on market conditions. We are not
providing financing to buyers of our residential products.

In our North America segment in 2015, approximately 49 percent of Marriott Vacation Club customers

financed their purchase with us. The average loan for our Marriott Vacation Club products totaled approximately
$22,800, which represented 88 percent of the average purchase price. Our policy is to require a minimum down
payment of 10 percent of the purchase price, although down payments and interest rates are typically higher for
applicants with credit scores below certain levels and for purchasers who do not have credit scores, such as
non-U.S. purchasers. The average interest rate for loans for our Marriott Vacation Club products originated in
2015 was 12.59 percent and the average term was 10.4 years. Interest rates are fixed, and a loan fully amortizes
over the life of the loan. The average monthly mortgage payment for a Marriott Vacation Club owner who
received a loan in 2015 was $397. We do not impose any prepayment penalties. Generally, loans for The
Ritz-Carlton Destination Club products have a significantly higher balance, a longer term and a lower interest
rate than loans for our Marriott Vacation Club products.

In 2015, approximately 88 percent of our loans were used to finance U.S.-based products. In our
North American business, we perform a credit investigation or other review or inquiry to determine the
purchaser’s credit history before originating a loan. The interest rates on the loans we provide are based primarily
upon the purchaser’s credit score, the size of the purchase, and the term of the loan. We base our financing terms
largely on a purchaser’s FICO score, which is a branded version of a consumer credit score widely used in the
United States by banks and lending institutions. FICO scores range from 300 to 850 and are calculated based on
information obtained from one or more of the three major U.S. credit reporting agencies that compile and report
on a consumer’s credit history. In 2015, the average FICO score of our customers who were U.S. citizens or
residents who financed a vacation ownership purchase was 736; 71 percent had a credit score of over 700,
89 percent had a credit score of over 650 and over 97 percent had a credit score of over 600.

We use other information to determine minimum down payments and interest rates applicable to loans

made to purchasers who do not have a credit score or who do not reside within the United States, such as regional
historical default rates and currency fluctuation risk.

In the event of a default, we generally have the right to foreclose on or revoke the defaulting owner’s

vacation ownership interest. We typically resell interests that we reacquire through foreclosure or revocation or
place such interests into the MVCD or Marriott Vacation Club, Asia Pacific programs.

We securitize the majority of the consumer loans we originate in support of our North American business.

Historically, we have sold these loans to institutional investors in the ABS market on a non-recourse basis,
completing securitization transactions once or twice each year. These vacation ownership notes receivable
securitizations provide funding for us at interest rates similar to those available to companies with investment
grade credit ratings, and transfer the economic risks and substantially all the benefits of the consumer loans we
originate to third parties. In a vacation ownership notes receivable securitization, various classes of debt
securities issued by a special purpose entity are generally collateralized by a single tranche of transferred assets,
which consist of vacation ownership notes receivable. We service the vacation ownership notes receivable.
During 2015, we completed one securitization transaction, which is discussed in detail in Footnote No. 10,
“Debt,” to our Financial Statements. On an ongoing basis, we have the ability to use our Warehouse Credit
Facility to securitize eligible consumer loans. Those loans may later be transferred to term securitization
transactions in the ABS market, which we intend to continue to complete at least once per year. Excluding
amounts securitized through the Warehouse Credit Facility, since the early 1990s, we have securitized nearly
$5.6 billion of loans. We retain the servicing and collection responsibilities for the loans we securitize, for which
we receive a servicing fee.

Our Competitive Advantages

We believe that competition in the vacation ownership industry is based primarily on the quality, number
and location of vacation ownership resorts, trust in the brand, pricing of product offerings and the availability of
program benefits, such as exchange programs and access to affiliated hotel networks. Vacation ownership is a
vacation option that is positioned and sold as an attractive alternative to vacation rentals (such as hotels, resorts
and condominium rentals) and second home ownership. The various segments within the vacation ownership
industry are differentiated by the quality level of the accommodations, range of services and ancillary offerings,
and price. We believe that we have significant competitive advantages that support our leadership position in the
vacation ownership industry.

A leading global “pure-play” vacation ownership company

We are one of the world’s largest “pure-play” vacation ownership companies (that is, a company whose
business is focused almost entirely on vacation ownership), based on number of owners, number of resorts and
revenues. As a “pure-play” vacation ownership company, we are able to enhance our focus on the vacation
ownership industry and tailor our business strategy to address our company’s industry-specific goals and needs.

We believe our scale and global reach, coupled with our renowned brands and development, marketing,

sales and management expertise, help us achieve operational efficiencies and support future growth

opportunities. Our size allows us to provide owners with the flexibility of a wide variety of experiences within
our high-quality resort portfolio, coupled with the ease and certainty of working with a single trusted provider.
We also believe our size helps us obtain better financing terms from lenders, achieve cost savings in procurement
and attract talented management and associates.

The breadth and depth of our operations enables us to offer a variety of products and to continue to adapt
those products to the ever changing needs and preferences of our existing and future customers. For example, in
addition to traditional resort experiences, our owners can enjoy studio units in properties located in the heart of
some of the most sought after global destinations. We cater to a diverse range of customers through our upscale
tier Marriott-branded resorts and our luxury tier Ritz-Carlton branded resorts.

Premier global brands

We believe that our exclusive licenses of the Marriott and Ritz-Carlton brands for use in the vacation
ownership business provide us with a meaningful competitive advantage. Marriott International is a leading
lodging company with more than 4,400 properties in 87 countries and territories, including Marriott and
Ritz-Carlton branded properties. Consumer confidence in these renowned brands helps us attract and retain
guests and owners. In addition, we provide our customers with access to the award-winning Marriott Rewards
customer loyalty program. We also utilize the Marriott and Ritz-Carlton websites, www.marriott.com and
www.ritzcarlton.com, as relatively low-cost marketing tools to introduce Marriott and Ritz-Carlton guests to our
products and rent available inventory.

Loyal, highly satisfied customers

We have a large, highly satisfied customer base. In 2015, based on over 222,000 survey responses,

approximately 90 percent of respondents indicated that they were highly satisfied with our products, sales and
owner services and their on-site experiences (by selecting 8, 9 or 10 on a 10-point scale). Owner satisfaction is
also demonstrated by the fact that our average resort occupancy was nearly 90 percent in 2015, significantly
higher than the overall vacation ownership industry average of just over 78 percent in 2014, the most recent year
for which average resort occupancy data was reported by ARDA. We believe that strong customer satisfaction
and brand loyalty result in more frequent use of our products and encourage owners to purchase additional
products and to recommend our products to friends and family, which in turn generates higher revenues.

Long-standing track record, experienced management and engaged associates

We have been a pioneer in the vacation ownership industry since 1984, when Marriott International

became the first company to introduce a lodging-branded vacation ownership product. Our seasoned
management team is led by Stephen P. Weisz, our President and Chief Executive Officer. Mr. Weisz has served
as President of our company since 1996 and has over 43 years of combined experience at Marriott International
and Marriott Vacations Worldwide. William J. Shaw, the Chairman of our Board of Directors, is the former Vice
Chairman, President and Chief Operating Officer of Marriott International and has nearly 37 years of experience
at Marriott International. Our nine executive officers have an average of over 26 years of total combined
experience at Marriott Vacations Worldwide and Marriott International, with half of such total combined
experience spent leading our business. We believe our management team’s extensive public company and
vacation ownership industry experience has enabled us to achieve solid operating results and will enable us to
continue to respond quickly and effectively to changing market conditions and consumer trends. Our
management’s experience in the highly regulated vacation ownership industry also provides us with a
competitive advantage in expanding existing product forms and developing new ones.

We believe that our associates provide superior customer service, which enhances our competitive
position. We leverage outstanding associate engagement and strong corporate culture to deliver positive customer
experiences in sales, marketing and resort operations. We survey our associates regularly through an external
survey provider to understand their satisfaction and engagement, defined as how passionate employees are about
the company’s mission and their willingness to “go the extra mile” to see it succeed. We routinely rank highly
compared to other companies participating in such surveys. In 2015, 83 percent of our associates indicated that

they were “engaged,” which is five points above Aon Hewitt’s “Global Best Employer” benchmark of
78 percent. This external benchmark is based on research conducted by Aon Hewitt of more than
500 organizations that are considered to be “Best Employers.”

Segments

Our operations are grouped into three reportable business segments: North America, Europe and Asia

Pacific. The “Corporate and Other” information described below includes activities that do not collectively
comprise a separate reportable segment. The table below shows our revenue for 2015 for each of our segments
and each of our revenue sources (dollars in thousands).
North
America

Revenue Source

Asia Pacific

Europe

Total

Vacation ownership sales . . . . . . . $
Resort management and other

services . . . . . . . . . . . . . . . . . . .
Financing . . . . . . . . . . . . . . . . . . . .
Rental . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . .

586,774

28,963

59,592

675,329

272,596
115,738
277,348
369,467

27,643
3,949
20,679
33,348

11,990
4,346
14,970
3,060

312,229
124,033
312,997
405,875

1,621,923

114,582

93,958

1,830,463

Financial information by segment and geographic area for 2015, 2014 and 2013 appears in Footnote

No. 17, “Business Segments,” to our Financial Statements.

We generally own the unsold vacation ownership inventory at our properties as either a deeded beneficial

interest in a real estate land trust, a deeded interest at a specific resort, or a right to use interest in real estate
owned or leased by a trust or other property owning or leasing vehicle (these forms of ownership are described in
more detail in “Business—Our Products”). With respect to inventory that has not yet been converted into one of
these forms of vacation ownership, we generally hold a fee interest in the underlying real estate rights to the land
parcel, building or units corresponding to such inventory. Further, we also own or lease other property at these
resorts, including golf courses, fitness, spa and sports facilities, food and beverage outlets, resort lobbies and
other common area assets. See Footnote No. 9, “Contingencies and Commitments,” to our Financial Statements
for more information on our operating leases. Substantially all of our ownership and leasehold interests in these
properties, subject to certain exceptions, are pledged as collateral for our Revolving Corporate Credit Facility.

Our Properties

As of January 1, 2016, our portfolio consisted of 61 properties including two operating hotels, with
12,807 vacation ownership villas (“units”) and we had approximately 410,000 owners. The following table
shows our vacation ownership and residential properties as of January 1, 2016, and indicates the segment with
which such property is associated:

Property(1)

Segment

Experience

Location

47 Park Street-Grand Residences by Marriott
Aruba Ocean Club
Aruba Surf Club
Barony Beach Club
BeachPlace Towers
Canyon Villas
Club Son Antem
Crystal Shores
Custom House
Cypress Harbour
Desert Springs Villas
Fairway Villas
Frenchman’s Cove
Grand Chateau

Europe

Urban

London, UK

North America Island/Beach Aruba
North America Island/Beach Aruba
Beach
North America
North America
Beach
North America Golf/Desert Phoenix, AZ

Hilton Head, SC
Fort Lauderdale, FL

Europe

Island/Golf Mallorca, Spain

North America Island/Beach Marco Island, FL
North America
Boston, MA
Urban
North America Entertainment Orlando, FL
North America Golf/Desert Palm Desert, CA
North America
Golf
North America Island/Beach St. Thomas, USVI
North America
/Asia Pacific

Entertainment Las Vegas, NV

Absecon, NJ

Vacation
Ownership
(VO) or
Residential

Units
Built(2)

Additional
Planned
Units(3)

VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO

49
218
450
255
206
213
224
71
84
510
638
180
155
656

—
—
—
—
—
39
—
148
—
—
—
90
65
224

Segment

Experience

Location

Vacation
Ownership
(VO) or
Residential

Units
Built(2)

Additional
Planned
Units(3)

Property(1)

Grande Ocean
Grande Vista
Harbour Club
Harbour Lake
Harbour Point / Sunset Pointe
Heritage Club
Imperial Palms
Kauai Beach Club
Kauai Lagoons:

Grand Residences by Marriott
Kalanipu’u

Ko Olina Beach Club

Hilton Head, SC

Beach

North America
North America Entertainment Orlando, FL
North America
North America Entertainment Orlando, FL
North America
North America
North America Entertainment Orlando, FL
North America Island/Beach Kauai, HI

Beach
Golf

Hilton Head, SC
Hilton Head, SC

Hilton Head, SC

North America Island/Beach Kauai, HI
North America Island/Beach Kauai, HI
Island/Beach Oahu, HI
North America
/Asia Pacific
North America Entertainment Orlando, FL
North America
Asia Pacific

Beach

Europe

Golf
Beach

Hilton Head, SC

Panama City, FL
Phuket, Thailand

North America Entertainment Williamsburg, VA

Lakeshore Reserve
Legends Edge
Mai Khao Beach
Manor Club at Ford’s Colony
Marbella, Spain
Marbella Beach Resort
Marriott Grand Residence Club, Lake Tahoe North America Mountain/Ski Lake Tahoe, CA
Maui Ocean Club
Monarch
Mountain Valley Lodge
MountainSide
Newport Coast Villas
Ocean Pointe
OceanWatch
Oceana Palms
Phuket Beach Club
Playa Andaluza
Royal Palms
Sabal Palms
Shadow Ridge
St. Kitts Beach Club
Streamside
Summit Watch
SurfWatch
The Empire Place
The Ritz-Carlton Club and Residences,
San Francisco

North America Island/Beach Maui, HI
North America
North America Mountain/Ski Breckenridge, CO
North America Mountain/Ski Park City, UT
Beach
North America
Beach
North America
Beach
North America
Beach
North America
Beach
Asia Pacific
Beach
Europe

North America Entertainment Orlando, FL
North America Entertainment Orlando, FL
North America Golf/Desert Palm Desert, CA
North America Island/Beach West Indies
North America Mountain/Ski Vail, CO
North America Mountain/Ski Park City, UT
Beach
North America
Urban
Asia Pacific

Hilton Head, SC
Bangkok, Thailand

Newport Beach, CA
Palm Beach Shores, FL
Myrtle Beach, SC
Singer Island, FL
Phuket, Thailand
Estepona, Spain

Vacation Ownership
Residential

The Ritz-Carlton Club, Aspen Highlands
The Ritz-Carlton Club, Lake Tahoe
The Ritz-Carlton Club, St. Thomas
The Ritz-Carlton Club, Vail
Timber Lodge
Village d’Ile-de-France
Villas at Doral
Waiohai Beach Club

Willow Ridge Lodge

Total

Units Available for Sale(4)

Urban
Urban

San Francisco, CA
San Francisco, CA

North America
North America
North America Mountain/Ski Aspen, CO
North America Mountain/Ski Lake Tahoe, CA
North America
Beach
North America Mountain/Ski Vail, CO
North America Mountain/Ski Lake Tahoe, CA

St. Thomas, USVI

Entertainment Paris, France

Europe
North America
North America
/Asia Pacific
North America Entertainment Branson, MO

Miami, FL
Island/Beach Kauai, HI

Golf

VO
VO
VO
VO
VO
VO
VO
VO

Residential
VO
VO

VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO
VO

VO
Residential
VO
VO
VO
VO
VO
VO
VO
VO

290
900
40
312
111
30
46
232

3
74
546

85
83
133
200
288
199
458
122
78
182
699
341
361
159
144
173
123
80
569
88
96
135
195
55

25
57
73
11
105
45
264
185
141
230

132

12,807

781

—
—
—
588
—
—
—
—

—
—
202

254
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
430
—
—
—
—
—

—
19
—
—
—
—
—
—
—
—

282

2,341

(1) A property is counted as a separate property to the extent it does not share common areas (such as check-in

(2)

(3)

(4)

facilities, pools, etc.) with another property.
“Units Built” represents units with a certificate of occupancy.
“Additional Planned Units” represents the total additional units under construction or that we expect to build.
To be sold as vacation ownership interests; includes units that we reacquired through foreclosure or our
repurchase program.

As of January 1, 2016, we also owned the following properties which we intend to convert to vacation

ownership interests.

Location

Segment

Experience

San Diego, CA(1)
Washington, DC(2)
Surfers Paradise, Australia(3)

North America
North America
Asia Pacific

Urban
Urban
Beach

Total

Expected Vacation
Ownership Units

264
71
88

423

(1) Represents an operating hotel in San Diego, California, acquired during the first quarter of
2015, which is operated by a third party, that we intend to convert, in its entirety, into
vacation ownership interests for future use in our MVCD program.

(2) Represents units at The Mayflower Hotel, Autograph Collection, an operating hotel located
in Washington, D.C., acquired during the third quarter of 2015. We intend to include these
vacation ownership units, in their current form, in our MVCD program.

(3) Represents a 329 room operating hotel in Surfers Paradise, Australia, acquired during the
third quarter of 2015, which is operated by a third party. We intend to convert a portion of
this hotel into vacation ownership interests for future use in our Asia Pacific segment, and
sell the remaining downsized hotel to a third party.

Subsequent to January 1, 2016, we assumed management of an operating hotel in New York, New York.
In addition we entered into a commitment to purchase the operating hotel for $158.5 million, in a capital efficient
transaction. We expect to acquire the units in the hotel, in their current form, over time. See Footnote No. 19,
“Subsequent Events” to our Financial Statements for additional information regarding this transaction.

In the first quarter of 2016, we completed the acquisition of an operating hotel located in the South Beach

area of Miami Beach, Florida, for approximately $23.5 million. We intend to convert this hotel into vacation
ownership interests for future use in our MVCD program.

North America Segment

In our North America segment, we develop, market, sell and manage vacation ownership products under

the Marriott Vacation Club and Grand Residences by Marriott brands in the United States and the Caribbean, and
resort residential real estate located within our vacation ownership developments under the Grand Residences by
Marriott brand. We also develop, market and sell vacation ownership and related products under The Ritz-
Carlton Destination Club brand, as well as whole ownership residential products under The Ritz-Carlton
Residences brand.

Europe Segment

In our Europe segment, we are focused on selling our existing projects and managing existing resorts. We

do not have any current plans for new development in this segment.

Asia Pacific Segment

In our Asia Pacific segment, we develop, market, sell and manage vacation ownership products through

Marriott Vacation Club, Asia Pacific, a right-to-use points program that we specifically designed to appeal to the
vacation preferences of the Asian market, as well as a weeks-based right-to-use product. We believe opportunity
exists to expand our Asia Pacific segment and are seeking to add inventory to support the growth of this business.

Corporate and Other

Corporate and Other consists of results not specifically attributable to an individual segment, including

expenses in support of our financing operations, non-capitalizable development expenses incurred to support

overall company development, company-wide general and administrative costs, corporate interest expense,
consumer financing interest expense and the fixed royalty fee payable under the License Agreements.

Intellectual Property

We manage and sell properties under the Marriott Vacation Club, Grand Residences by Marriott, The

Ritz-Carlton Destination Club and The Ritz-Carlton Residences brands under license agreements with Marriott
International and The Ritz-Carlton Hotel Company. The foregoing segment descriptions specify the brands that
are used by each of our segments. We operate in a highly competitive industry and our brand names, trademarks,
service marks, trade names and logos are very important to the marketing and sales of our products and services.
We believe that our licensed brand names and other intellectual property have come to represent the highest
standards of quality, caring, service and value to our customers and the traveling public. We register and protect
our intellectual property where we deem appropriate and otherwise seek to protect against its unauthorized use.

Seasonality

In general, the vacation ownership business is modestly seasonal, with stronger revenue generation during

traditional vacation periods, including summer months and major holidays. Similar to the lodging industry, our
rental operations generally maintain higher occupancy and room rates during the first, second and third quarters
of our fiscal year compared to our fourth quarter. These seasonal patterns can be expected to cause fluctuations in
the quarterly rental revenues and margin. Our residential business is generally not subject to seasonal
fluctuations; rather, the sales pace of our residential products typically depends on the underlying residential real
estate environment in the applicable geographic market.

Competition

Competition in the vacation ownership industry is based primarily on the quality, number and location of

vacation ownership resorts, the quality and capability of the related property management program, trust in the
brand, pricing of product offerings and the availability of program benefits, such as exchange programs and
access to affiliated hotel networks. We believe that our focus on offering distinctive vacation experiences,
combined with our financial strength, well-established and diverse market presence, strong brands, expertise and
well-managed and maintained properties, will enable us to remain competitive. Vacation ownership is a vacation
option that is positioned and sold as an attractive alternative to vacation rentals (such as hotels, resorts and
condominium rentals) and second home ownership. The various segments within the vacation ownership industry
can be differentiated by the quality level of the accommodations, range of services and ancillary offerings, and
price. Our brands operate in the upscale and luxury tiers of the vacation ownership segment of the industry and
the upscale and luxury tiers of the whole ownership segment (also referred to as the residential segment) of the
industry.

Our competitors in the vacation ownership industry range from small vacation ownership companies to

large branded hotel companies that operate vacation ownership businesses. In North America and the Caribbean,
we typically compete with companies that sell upscale tier vacation ownership products under a lodging or
entertainment brand umbrella, such as Starwood Vacation Ownership (which includes the Westin and Sheraton
brands), Hilton Grand Vacations Club, Hyatt Vacation Club, and Disney Vacation Club, as well as numerous
regional vacation ownership operators. Our luxury vacation ownership products compete with vacation
ownership products offered by Four Seasons, Exclusive Resorts, Timbers Resorts and several other smaller
independent companies. In addition, the vacation ownership industry competes generally with other vacation
rental options (such as hotels, resorts and condominium rentals) offered by the lodging industry. Innovations that
impact the industry may also lead to new products and services that could disrupt our business model and create
new and stronger competitors.

Outside North America and the Caribbean, we operate in two primary regions, Europe and Asia Pacific.

In both regions, we are one of the largest lodging-branded vacation ownership companies operating in the
upscale tier, with regional operators dominating the competitive landscape. Where possible, our vacation

ownership properties in these regions are co-located with Marriott International branded hotels. In Europe, our
owner base is derived primarily from the North America, Europe and Middle East regions. In Asia Pacific, our
owner base is derived primarily from the Asia Pacific region and secondarily from the Europe and
North America regions.

Recent and potential future consolidation in the highly fragmented timeshare industry may increase
competition. For example, Interval Leisure Group, Inc., which operates the Interval International exchange
program, acquired Hyatt Residence Club in October 2014 and announced in October 2015 that it had agreed to
acquire the vacation ownership operations of Starwood Hotels & Resorts Worldwide, Inc. (which includes the
Westin and Sheraton brands), to be known as Vistana Signature Experiences, Inc. Diamond Resorts International,
Inc. completed the acquisition of the vacation ownership business of Gold Key Resorts in October 2015 and the
acquisition of the vacation ownership business of Intrawest Resort Club Group in January 2016. Consolidation
may create competitors that enjoy significant advantages resulting from, among other things, a lower cost of, and
greater access to, capital and enhanced operating efficiencies.

Regulation

Our business is heavily regulated. We are subject to a wide variety of complex international, national,
federal, state and local laws, regulations and policies in jurisdictions around the world. Some laws, regulations
and policies may impact multiple areas of our business, such as securities, anti-discrimination, anti-fraud, data
protection and security and anti-corruption and bribery laws and regulations or government economic sanctions,
including applicable regulations of the Consumer Financial Protection Bureau, the U.S. Department of the
Treasury’s Office of Foreign Asset Control and the U.S. Foreign Corrupt Practices Act (“FCPA”). The FCPA
and similar anti-corruption and bribery laws in other jurisdictions generally prohibit companies and their
intermediaries from making improper payments to government officials for the purpose of obtaining or
generating business. Other laws, regulations and policies primarily affect one of four areas of our business: real
estate development activities; marketing and sales activities; lending activities; and resort management activities.

Real Estate Development Regulation

Our real estate development activities are regulated under a number of different timeshare, condominium

and land sales disclosure statutes in many jurisdictions. We are generally subject to laws and regulations
typically applicable to real estate development, subdivision, and construction activities, such as laws relating to
zoning, land use restrictions, environmental regulation, accessibility, title transfers, title insurance and taxation.
In the United States, these include the Fair Housing Act and the Americans with Disabilities Act. In addition, we
are subject to laws in some jurisdictions that impose liability on property developers for construction defects
discovered or repairs made by future owners of property developed by the developer.

Marketing and Sales Regulation

Our marketing and sales activities are closely regulated. In addition to regulations implementing laws

enacted specifically for the vacation ownership and land sales industries, a wide variety of laws and regulations
govern our marketing and sales activities in the jurisdictions in which we carry out such activities, including
regulations implementing the USA PATRIOT Act, Foreign Investment In Real Property Tax Act, the Federal
Interstate Land Sales Full Disclosure Act and fair housing statutes, U.S. Federal Trade Commission (the “FTC”)
and state “Little FTC Act” and other regulations governing unfair, deceptive or abusive acts or practices
including unfair or deceptive trade practices and unfair competition, state attorney general regulations, anti-fraud
laws, prize, gift and sweepstakes laws, real estate, title agency or insurance, travel insurance and other licensing
or registration laws and regulations, anti-money laundering, consumer information privacy and security, breach
notification, information sharing and telemarketing laws, home solicitation sales laws, tour operator laws,
lodging certificate and seller of travel laws, securities laws, and other consumer protection laws.

vacation ownership interests and other real estate interests we market and sell, such as information concerning
the interests being offered, the project, resort or program to which the interests relate, applicable condominium or
vacation ownership plans, evidence of title, details regarding our business, the purchaser’s rights and obligations
with respect to such interests, and a description of the manner in which we intend to offer and advertise such
interests. Regulation outside the United States includes, for example, European regulations to which our vacation
ownership activities within the European Union are subject and Singaporean regulations to which certain of our
Asia Pacific operations are subject. Among other things, the European and Singaporean regulations: (1) require
delivery of specified disclosure (some of which must be provided in a specific format or language) to purchasers;
(2) require a specified “cooling off” rescission period after a purchase is made; and (3) prohibit any advance
payments during the “cooling off” rescission period.

We must obtain the approval of numerous governmental authorities for our marketing and sales activities.

Changes in circumstances or applicable law may necessitate the application for or modification of existing
approvals. Currently, we are qualified to market and sell vacation ownership products in all 50 states and the
District of Columbia in the United States and numerous countries in North and South America, the Caribbean,
Europe, Asia and the Middle East. In some countries our vacation ownership products are marketed by third
party brokers.

Laws in many jurisdictions in which we sell vacation ownership interests grant the purchaser of a
vacation ownership interest the right to cancel a purchase contract during a specified rescission period following
the later of the date the contract was signed or the date the purchaser received the last of the documents required
to be provided by us.

In recent years, regulators in many jurisdictions have increased regulations and enforcement actions
related to telemarketing operations, including requiring adherence to the federal Telephone Consumer Protection
Act (the “TCPA”) and similar “do not call” legislation. These measures have significantly increased the costs
associated with telemarketing. While we continue to be subject to telemarketing risks and potential liability, we
believe that our exposure to adverse effects from telemarketing legislation and enforcement is mitigated in some
instances by the use of permission-based marketing, under which we obtain the permission of prospective
purchasers to contact them in the future. We participate in various programs and follow certain procedures that
we believe help reduce the possibility that we contact individuals who have requested to be placed on federal or
state “do not call” lists, including subscribing to the federal and certain state “do not call” lists, and maintaining
an internal “do not call” list.

Lending Regulation

Our lending activities are subject to a number of laws and regulations including those of applicable
supervisory agencies such as, in the United States, the Consumer Financial Protection Bureau, the FTC, and the
Financial Crimes Enforcement Network. These laws and regulations, some of which contain exceptions
applicable to the timeshare industry, may include, among others, the Real Estate Settlement Procedures Act and
Regulation X, the Truth In Lending Act and Regulation Z, the Federal Trade Commission Act, the Equal Credit
Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Fair Housing Act and implementing
regulations, the Fair Debt Collection Practices Act, the Electronic Funds Transfer Act and Regulation E, unfair,
deceptive or abusive acts or practices regulations and the Consumer Practices Act, the USA PATRIOT Act, the
Right to Financial Privacy Act, the Gramm-Leach-Bliley Act, the Servicemembers Civil Relief Act and the Bank
Secrecy Act. Our lending activities are also subject to the laws and regulations of other jurisdictions, including,
among others, laws and regulations related to consumer loans, retail installment contracts, mortgage lending,
usury, fair debt collection practices, consumer debt collection practices, mortgage disclosure, lender or mortgage
loan originator licensing and registration and anti-money laundering.

Resort Management Regulation

Our resort management activities are subject to laws and regulations regarding community association

management, public lodging, food and beverage services, labor, employment, health care, health and safety,

accessibility, discrimination, immigration, gaming, and the environment (including climate change). In addition,
many jurisdictions in which we manage our resorts have statutory provisions that limit the duration of the initial
and renewal terms of our management agreements for property owners’ associations and/or permit the property
owners’ association for a resort to terminate our management agreement under certain circumstances (for
example, upon a super-majority vote of the owners), even if we are not in default under the agreement.

Environmental Compliance and Awareness

The properties we manage or develop are subject to national, state and local laws and regulations that

govern the discharge of materials into the environment or otherwise relate to protecting the environment. These
laws and regulations include requirements that address health and safety; the use, management and disposal of
hazardous substances and wastes; and emission or discharge of wastes or other materials. We believe that our
management and development of properties comply, in all material respects, with environmental laws and
regulations. Our compliance with such provisions also has not had a material impact on our capital expenditures,
earnings or competitive position, nor do we anticipate that such compliance will have a material impact in the
future.

We take our commitment to protecting the environment seriously. We have collaborated with Audubon
International to further the “greening” of our resorts in our North America segment through the Audubon Green
Leaf Eco-Rating Program for Hotels. The Audubon partnership is just one of several programs incorporated into
our green initiatives. We have more than 20 years of energy conservation experience that we have put to use in
implementing our environmental strategy across all of our segments. This strategy includes further reducing
energy and water consumption, expanding our portfolio of green resorts, including LEED® (Leadership in
Energy & Environmental Design) certification, educating and inspiring associates and guests to support the
environment, and embracing innovation.

Employees

As of January 1, 2016 we had nearly 10,000 employees with an average length of service of

approximately seven years. We believe our relations with our employees are very good.

Executive Officers

See Part III, Item 10. “Directors, Executive Officers and Corporate Governance” of this Annual Report

for information about our executive officers.

Available Information

Our website address is www.marriottvacationsworldwide.com. Our Annual Reports on Form 10-K,

Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any and all amendments thereto are
available free of charge through our website as soon as reasonably practicable after they are filed or furnished to
the Securities and Exchange Commission (the “SEC”). These materials are also accessible on the SEC’s website
at www.sec.gov.

Item 1A.

Risk Factors

This section describes circumstances or events that could have a negative effect on our financial results or

operations or that could change, for the worse, existing trends in our businesses. The occurrence of one or more
of the circumstances or events described below could have a material adverse effect on our financial condition,
results of operations and cash flows or on the trading prices of our common stock. The risks and uncertainties
described in this Annual Report are not the only ones facing us. Additional risks and uncertainties that currently
are not known to us or that we currently believe are immaterial also may adversely affect our businesses and
operations.

General economic uncertainty and weak demand in the vacation ownership industry could impact our

financial results and growth.

Weak economic conditions in the United States, Europe, Asia and much of the rest of the world and the

uncertainty over the duration of such conditions could have a negative impact on the vacation ownership
industry. Weak consumer confidence and limited availability of consumer credit can, as it has in the past, cause
us to experience weakened demand for our vacation ownership products. Recent improvements in demand trends
globally may not continue, and our future financial results and growth could be harmed or constrained if
economic conditions worsen.

The sale of vacation ownership interests in the secondary market by existing owners could cause our

sales revenues and profits to decline.

Existing owners have offered, and are expected to continue to offer, their vacation ownership interests for

sale on the secondary market. The prices at which these interests are sold are typically less than the prices at
which we would sell the interests. As a result, these sales create additional pricing pressure on our sale of
vacation ownership products, which could cause our sales revenues and profits to decline. In addition, if the
secondary market for vacation ownership interests becomes more organized and liquid than it currently is, the
resulting availability of vacation ownership interests (particularly where the vacation ownership interests are
available for sale at lower prices than the prices at which we would sell them) could adversely affect our sales
and our sales revenues. Further, unlawful or deceptive third-party vacation ownership interest resale schemes
involving interests in our resorts could damage our reputation and brand value and adversely impact our sales
revenues.

Development of a viable secondary market may also cause the volume of vacation ownership interests

inventory that we are able to repurchase to decline, which could adversely impact our development margin, as we
utilize this lower cost inventory source to supplement our inventory needs and help manage our cost of vacation
ownership products.

Our reliance on capital efficient transactions to satisfy a portion of our future needs for inventory and

additional on-site sales locations, may impact our ability to have inventory available for sale when needed.

We have entered into capital efficient transactions in which third parties are responsible for delivering
completed units which we will purchase at an agreed upon price in the future. As we continue to execute our
strategy to deploy capital more efficiently, we will seek to enter into additional transactions to source inventory
using similar or new transaction structures. These structures may expose us to additional risk as we will not control
development activities or timing of development completion. If third parties with whom we enter into capital
efficient transactions do not fulfill their obligations to us, or if they exercise their right to sell inventory to a third
party other than us, the inventory we expect to acquire may not be delivered on time or at all, or may not otherwise
be within agreed upon specifications. If our capital efficient transaction counterparties do not perform as expected
and we do not purchase the expected inventory or obtain inventory from alternative sources on a timely basis, we
may not be able to achieve sales forecasts. In addition, we anticipate opening new on-site sales locations in
connection with some or all of our new resort locations. If third parties with whom we enter into transactions do not
deliver these sales locations, as expected, our future sales growth could be negatively impacted.

Our ability to develop, acquire and repurchase vacation ownership inventory may be impaired if we or

third parties with whom we do business are unable to access capital when necessary.

The availability of funds for new investments, primarily developing, acquiring or repurchasing vacation

ownership inventory, depends in part on liquidity factors and capital markets over which we can exert little, if
any, control. We have historically securitized the majority of the consumer loans we originate in support of our
North America segment in the ABS market, completing transactions once each year for the past several years.
Instability in the financial markets could impact the timing and volume of any securitizations we undertake, as
well as the financial terms of such securitizations. Any future deterioration in the financial markets could
preclude, delay or increase the cost to us of future note securitizations. Such deterioration could also impact our
ability to renew the Warehouse Credit Facility, which we must do in order to access funds under that facility after
November 2017, on terms favorable to us, or at all. Further, the obligations of one of our consolidated
subsidiaries, MVW US Holdings, Inc. (“MVW US Holdings”), to its preferred shareholders and any
indebtedness we incur, including indebtedness under our Revolving Corporate Credit Facility or our Warehouse
Credit Facility, may adversely affect our ability to obtain additional financing. If we are unable to access these
sources of funds, our ability to acquire additional vacation ownership inventory, repurchase vacation ownership
interests that our owners propose to sell to third parties, or make other investments in our business could be
impaired.

In addition, as discussed above, we intend to continue to use capital efficient structures to optimize the

timing of our capital investments. If developers or other third parties are not able to obtain or maintain financing
necessary for their operations, we may not be able to enter into transactions using these capital efficient
structures.

If the default rates or other credit metrics underlying our vacation ownership receivables deteriorate,

our vacation ownership notes receivable securitization program could be adversely affected.

Our vacation ownership notes receivable securitization program could be adversely affected if a particular

vacation ownership receivables pool fails to meet certain ratios, which could occur if the default rates or other
credit metrics of the underlying vacation ownership notes receivable deteriorate. Our ability to sell securities
backed by our vacation ownership notes receivable depends on the continued ability and willingness of capital
market participants to invest in such securities. Asset-backed securities issued in our securitization programs
could be downgraded by credit agencies in the future. If a downgrade occurs, our ability to complete other
securitization transactions on acceptable terms or at all could be jeopardized, and we could be forced to rely on
other potentially more expensive and less attractive funding sources, to the extent available. This would decrease
our profitability and might require us to adjust our business operations, including by reducing or suspending our
provision of financing to purchasers of vacation ownership interests. Sales of vacation ownership interests may
decline if we reduce or suspend the provision of financing to purchasers, which may adversely affect our cash
flows, revenues and profits.

Purchaser defaults on the vacation ownership notes receivable our business generates could reduce

our revenues, cash flows and profits.

We are subject to the risk that purchasers of our vacation ownership interests may default on the
financing that we provide. Purchaser defaults could cause us to foreclose on vacation ownership notes receivable
and reclaim ownership of the financed interests, both for loans that we have not securitized and in our role as
servicer for the vacation ownership notes receivable we have securitized through the ABS market or the
Warehouse Credit Facility.

If default rates increase beyond current projections and result in higher than expected foreclosure activity,

our results of operations could be adversely affected. In addition, the transactions in which we have securitized
vacation ownership notes receivable contain certain portfolio performance requirements related to default and
delinquency rates, which, if not met, would result in loss or disruption of cash flow until portfolio performance

sufficiently improves to satisfy the requirements. In addition, we may not be able to resell foreclosed interests in
a timely manner or for an attractive price.

The terms of any future equity or debt financing may give holders of any preferred securities rights

that are senior to rights of our common shareholders or impose more stringent operating restrictions on our
company.

Debt or equity financing may not be available to us on acceptable terms. If we incur additional debt or

raise equity through the issuance of additional preferred stock, the terms of the debt or the preferred stock issued
may give the holders rights, preferences and privileges senior to those of holders of our common stock,
particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent
restrictions on our operations. If we raise funds through the issuance of additional equity, the ownership
percentage of our existing shareholders would be diluted.

The degree to which we are leveraged may have a material adverse effect on our financial position,

results of operations and cash flows.

We can borrow up to $200 million under the Revolving Corporate Credit Facility and could also incur
additional debt to the extent permitted under the Revolving Corporate Credit Facility. Our ability to make dividend
payments to holders of our common stock or preferred shareholders of MVW US Holdings and to make payments
on and refinance our indebtedness, including any future debt that we may incur, will depend on our ability to
generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to
general economic, financial, competitive, legislative, regulatory and other factors that we cannot control. If we
cannot repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous
actions, including (1) reducing capital expenditures, (2) limiting financing offered to customers, which could result
in reduced sales, and (3) dedicating an unsustainable level of our cash flow from operations to the payment of
principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to
changes in the vacation ownership industry could be impaired. The lenders who hold such debt could also accelerate
amounts due, which could potentially trigger a default or acceleration of our other debt.

The obligations of MVW US Holdings to its preferred shareholders will limit the ability of MVW US

Holdings to distribute cash to us.

MVW US Holdings issued $40 million in mandatorily redeemable preferred stock to Marriott

International, which sold the preferred stock to third-party investors prior to completion of the Spin-Off. For the
first five years after issuance, the Series A preferred stock will pay an annual cash dividend equal to the five year
U.S. Treasury Rate as of October 19, 2011 plus a spread of 10.958 percent, for a total annual cash dividend rate
of 12 percent. On the fifth anniversary of issuance, if we do not elect to redeem the preferred stock, the annual
cash dividend rate will be reset to the five year U.S. Treasury Rate in effect on such date plus the same 10.958
percent spread. The payment of this dividend will reduce the amount of cash otherwise available for distribution
by MVW US Holdings to us for further distribution to our common shareholders or for other corporate purposes.
MVW US Holdings will not be able to pay any dividends to us if it is in arrears on the payment of dividends to
the preferred shareholders. In addition, in the event of a liquidation of MVW US Holdings, the preferred
shareholders will be entitled to an aggregate liquidation preference of $40 million plus any accrued and unpaid
dividends and a premium if the liquidation occurs during the first five years after issuance of the preferred stock,
which will reduce the amount of cash available for distribution by MVW US Holdings to us. Further, if MVW
US Holdings either (1) is in arrears on the payment of six or more quarterly dividend payments on the preferred
stock, whether or not the payment dates are consecutive, or (2) defaults on its obligations to redeem the preferred
stock on the tenth anniversary of issuance or following a change of control, the preferred shareholders may
designate a representative to attend meetings of our Board of Directors as a non-voting observer until all unpaid
dividends on the outstanding shares of preferred stock have been paid or all such unpaid dividends have been
paid or declared with an amount sufficient for the payment set aside for payment, or the shares required to be
redeemed have been redeemed, as applicable.

Our business will be materially harmed if our License Agreements with Marriott International and The

Ritz-Carlton Hotel Company are terminated or if we are unable to maintain our ongoing relationship with
Marriott International.

Our success depends, in part, on the maintenance of ongoing relationships with Marriott International that

are governed by a number of agreements that we entered into with Marriott International in connection with the
Spin-Off. In particular, our License Agreements with Marriott International and The Ritz-Carlton Hotel
Company, among other things, provide us with the exclusive right to use the Marriott and Ritz-Carlton names,
respectively, in our vacation ownership business. Each License Agreement has an initial term that expires in
2090; however, if we breach our obligations under either License Agreement, Marriott International and The
Ritz-Carlton Hotel Company may be entitled to terminate the License Agreements.

The termination of the License Agreements would materially harm our business and results of operations

and impair our ability to market and sell our products and maintain our competitive position, and could have a
material adverse effect on our financial position, results of operations or cash flows. For example, we would not
be able to rely on the strength of the Marriott and Ritz-Carlton brands to attract qualified prospects in the
marketplace, which would cause our revenue and profits to decline and our marketing and sales expenses to
increase. In addition, we would not be able to use www.marriott.com and www.ritzcarlton.com as channels
through which to rent available inventory, which would cause our rental revenue to decline.

The Marriott Rewards Agreement would also terminate upon termination of the License Agreements, and

we would not be able to offer Marriott Rewards Points to owners and potential owners, which would impair our
ability to sell our products and would reduce the flexibility and options available in connection with our products.

If Marriott International or The Ritz-Carlton Hotel Company terminates our rights to use the Marriott
or Ritz-Carlton marks at any properties that do not meet applicable brand standards, our reputation could be
harmed and our ability to market and sell our products at those properties could be impaired.

Marriott International and The Ritz-Carlton Hotel Company can terminate our rights under the License

Agreements to use the Marriott or Ritz-Carlton marks at any properties that do not meet applicable brand
standards. The termination of such rights could harm our reputation and impair our ability to market and sell our
products at the subject properties, either of which could harm our business, and we could be subject to claims by
Marriott International and The Ritz-Carlton Hotel Company, property owners, third parties with whom we have
contracted and others.

Our ability to expand our business and remain competitive could be harmed if Marriott International

or The Ritz-Carlton Hotel Company do not consent to our use of their trademarks at new resorts we acquire or
develop in the future.

Under the terms of our License Agreements with Marriott International and The Ritz-Carlton Hotel
Company, we must obtain Marriott International’s or The Ritz-Carlton Hotel Company’s consent, as applicable,
to use the Marriott or Ritz-Carlton trademarks in connection with resorts, residences or other accommodations
that we acquire or develop in the future. Marriott International or The Ritz-Carlton Hotel Company may reject a
proposed project if, among other things, the project does not meet Marriott International’s or The Ritz-Carlton
Hotel Company’s respective construction and design standards or Marriott International or The Ritz-Carlton
Hotel Company reasonably believes the project will breach contractual or legal restrictions applicable to them
and their affiliates. In addition, The Ritz-Carlton Hotel Company may reject a proposed project if The Ritz-
Carlton Hotel Company will not be able to provide services that comply with Ritz-Carlton brand standards at the
proposed project. If Marriott International or The Ritz-Carlton Hotel Company do not permit us to use their
trademarks in connection with our development or acquisition plans, our ability to expand our Marriott and Ritz-
Carlton businesses and remain competitive may be materially adversely affected. The requirement to obtain
Marriott International’s or The Ritz-Carlton Hotel Company’s consent to our expansion plans, or the need to
identify and secure alternative expansion opportunities because Marriott International or The Ritz-Carlton Hotel
Company do not allow us to use their trademarks with proposed new projects, may delay implementation of our
expansion plans and cause us to incur additional expense.

Our business depends on the quality and reputation of the Marriott and Ritz-Carlton brands, and any
deterioration in the quality or reputation of these brands could have an adverse impact on our market share,
reputation, business, financial condition or results of operations.

Currently, our products and services are predominantly offered under Marriott or Ritz-Carlton brand

names, and we intend to continue to offer products and services under these brands in the future. If the quality of
these brands deteriorates, or the reputation of these brands declines, our market share, reputation, business,
financial condition or results of operations could be materially adversely affected.

Our industry is competitive, which may impact our ability to compete successfully with other vacation

ownership brands and with other vacation rental options for customers.

A number of highly competitive companies participate in the vacation ownership industry, including

several branded hotel companies. Our brands compete with the vacation ownership brands of major hotel chains
in national and international venues, as well as with the vacation rental options (such as hotels, resorts and
condominium rentals) offered by the lodging industry. Innovations that impact the industry may also lead to new
products and services that could disrupt our business model and create new and stronger competitors.

Recent and potential future consolidation in the highly fragmented timeshare industry may increase
competition. For example, Interval Leisure Group, Inc., which operates the Interval International exchange
program, acquired Hyatt Residence Club in October 2014 and announced in October 2015 that it had agreed to
acquire the vacation ownership operations of Starwood Hotels & Resorts Worldwide, Inc., to be known as
Vistana Signature Experiences, Inc. Diamond Resorts International, Inc. completed the acquisition of the
vacation ownership business of Gold Key Resorts in October 2015 and the acquisition of the vacation ownership
business of Intrawest Resort Club Group in January 2016. Consolidation may create competitors that enjoy
significant advantages resulting from, among other things, a lower cost of, and greater access to, capital and
enhanced operating efficiencies.

In addition, under our License Agreements with Marriott International and The Ritz-Carlton Hotel
Company, if other international hotel operators offer new products and services as part of their respective hotel
businesses that may directly compete with our vacation ownership products and services in the future, then
Marriott International and The Ritz-Carlton Hotel Company may also offer such new products and services, and
use their respective trademarks in connection with such offers. If Marriott International or The Ritz-Carlton Hotel
Company offer new vacation ownership products and services under their trademarks, our vacation ownership
products and services may compete directly with those of Marriott International or The Ritz-Carlton Hotel
Company, and we may not be able to distinguish our vacation ownership products and services from those
offered by Marriott International and The Ritz-Carlton Hotel Company. Our ability to remain competitive and to
attract and retain owners depends on our success in distinguishing the quality and value of our products and
services from those offered by others. If we cannot compete successfully in these areas, this could limit our
operating margins, diminish our market share and reduce our earnings.

If a Marriott International or Ritz-Carlton hotel property with which one of our resorts is co-located

ceases to be operated by Marriott International or The Ritz-Carlton Hotel Company or one of their affiliates,
our business could be harmed.

Approximately one-quarter of our vacation ownership resorts are co-located with Marriott International
and Ritz-Carlton hotel properties. If a Marriott International or Ritz-Carlton branded hotel property with which
one of our resorts is co-located ceases to be operated by Marriott International or The Ritz-Carlton Hotel
Company or one of their affiliates, we could lose the benefits derived from co-location of our resorts, such as the
sharing of amenities, infrastructure and staff, integration of services, and other cost efficiencies. Our owners
could lose access to the more varied and elaborate amenities that are generally available at the larger campus of
an integrated vacation ownership and hotel resort. We expect our overhead and operating costs for resorts that are
no longer co-located with a Marriott International or Ritz-Carlton hotel property would increase. We would also
lose our on-site access to hotel customers, including Marriott Rewards customer loyalty program members, at
such resorts, which is a cost-effective marketing channel for our vacation ownership products, and our sales may
decline.

If we are not able to maintain relationships with third parties that support our marketing activities, our

business could be harmed.

Many of our marketing activities require us to maintain relationships with third parties. For example, we

market to existing Marriott Rewards customer loyalty program members and travelers who are staying in
locations where we have resorts. We also market extensively to guests in Marriott International hotels that are
located near one of our sales locations and have marketing partnerships with Marriott International’s North
American reservation centers. In addition, we operate other local marketing venues in various high-traffic areas.
If we are not able to maintain these marketing arrangements with these third parties on terms that are favorable to
us or at all, our sales may decline, which could adversely affect our financial conditions and result of operations.

A failure to keep pace with developments in technology could impair our operations or competitive

position.

Our business model and competitive conditions in the vacation ownership industry demand the use of

sophisticated technology and systems, including those used for our sales, reservation, inventory management and
property management systems, and technologies we make available to our owners. We must refine, update and/or
replace these technologies and systems with more advanced systems on a regular basis. If we cannot do so as
quickly as our competitors or within budgeted costs and time frames, our business could suffer. We also may not
achieve the benefits that we anticipate from any new technology or system, and a failure to do so could result in
higher than anticipated costs or could harm our operating results.

Inadequate or failed technologies could lead to interruptions in our operations, which may materially

adversely affect our business, financial position, results of operations or cash flows.

Our operations depend on our ability to maintain existing systems and implement new technology, which

includes allocating sufficient resources to periodically upgrade our information technology systems, and to
protect our equipment and the information stored in our databases against both manmade and natural disasters, as
well as power losses, computer and telecommunications failures, technological breakdowns, unauthorized
intrusions, cyber-attacks, and other events. Conversions to new information technology systems require effective
change management processes and may result in cost overruns, delays or business interruptions. If our
information technology systems are disrupted, become obsolete or do not adequately support our strategic,
operational or compliance needs, our business, financial position, results of operations or cash flows may be
adversely affected.

Our operations outside of the United States make us susceptible to the risks of doing business

internationally, which could lower our revenues, increase our costs, reduce our profits or disrupt our business.

We conduct business in over 30 countries and territories, and our operations outside the United States
represented approximately 15 percent of our revenues, excluding cost reimbursements, in 2015. International
properties and operations expose us to a number of additional challenges and risks, including the following, any
of which could reduce our revenues or profits, increase our costs, or disrupt our business: (1) complex and
changing laws, regulations and policies of governments that may impact our operations, including foreign
ownership restrictions, import and export controls, and trade restrictions; (2) U.S. laws that affect the activities of
U.S. companies abroad; (3) limitations on our ability to repatriate non-U.S. earnings in a tax-effective manner;
(4) the difficulties involved in managing an organization doing business in many different countries;
(5) uncertainties as to the enforceability of contract and intellectual property rights under local laws; (6) rapid
changes in government policy, political or civil unrest, acts of terrorism or the threat of international boycotts or
U.S. anti-boycott legislation; (7) currency exchange rate fluctuations; and (8) other exposure to local economic
risks. We also derive revenue from sales to customers from outside the United States that are transacted in United
States dollars. As a result, factors such as changes in foreign currency exchange rates or weak economic
conditions in the markets in which our customers reside could reduce our revenues or profits.

Our business may be adversely affected by factors that disrupt or deter travel.

The profitability of the vacation ownership resorts that we develop and manage may be adversely affected

by a number of factors that can disrupt or deter travel. A substantial amount of our sales activity occurs at our
resorts, and sales volume is impacted by the number of prospective owners who visit our resorts. Fear of
exposure to contagious and other diseases, such as Ebola virus, H1N1 Flu, Avian Flu, the Zika virus and Severe
Acute Respiratory Syndrome, or natural or man-made disasters, such as earthquakes, tsunamis, hurricanes,
floods, fires, volcanic eruptions, radiation releases and oil spills, may deter travelers from scheduling sales tours
at our resorts or cause them to cancel travel plans. Actual or threatened war, civil unrest and terrorist activity, as
well as heightened travel security measures instituted in response to the same, could also interrupt or deter travel
plans. In addition, demand for vacation options such as our vacation ownership products may decrease if the cost
of travel, including the cost of transportation and fuel, increases or if general economic conditions decline.
Changes in the desirability of the locations where we develop and manage resorts as vacation destinations and
changes in vacation and travel patterns may adversely affect our cash flows, revenue and profits.

Our business is subject to extensive regulation, and any failure to comply with applicable laws and

regulations could have a material adverse effect on our business.

Our business is heavily regulated. We are subject to a wide variety of complex international, national,
federal, state and local laws, regulations and policies in jurisdictions around the world. Some laws, regulations
and policies impact multiple areas of our business, such as securities, anti-discrimination, anti-fraud, data
protection and security and anti-corruption and bribery laws and regulations or government economic sanctions,
including applicable regulations of the Consumer Financial Protection Bureau, the U.S. Department of the
Treasury’s Office of Foreign Asset Control and the FCPA. Other laws, regulations and policies primarily affect
one of four areas of our business: real estate development activities; marketing and sales activities; lending
activities; and resort management activities. For more information regarding laws, regulations and policies to
which we are subject, see “Business—Regulation.”

The FCPA and similar anti-corruption and bribery laws in other jurisdictions generally prohibit
companies and their intermediaries from making improper payments to government officials for the purpose of
obtaining or generating business. Our internal controls and procedures may not always protect us from the
reckless or criminal acts that may be committed by our employees or third parties with whom we work. If we are
found to be liable for violations of the FCPA or similar anti-corruption laws in international jurisdictions,
criminal or civil penalties could be imposed on us.

Our real estate development activities are subject to laws and regulations typically applicable to real
estate development, subdivision and construction activities, such as laws relating to zoning, land use restrictions,
environmental regulation, accessibility, title transfers, title insurance and taxation. In addition, we are subject to
laws in some jurisdictions that impose liability on property developers for construction defects discovered or
repairs made by future owners of property developed by the developer.

A number of laws and regulations govern our marketing and sales activities, such as vacation ownership
and land sales acts, regulations implementing the USA PATRIOT Act and fair housing statutes, as well as rules
governing unfair, deceptive or abusive acts or practices including unfair or deceptive trade practices and unfair
competition, anti-fraud laws, prize, gift and sweepstakes laws, real estate, insurance and other licensing or
registration laws and regulations, anti-money laundering, consumer information privacy and security, breach
notification, information sharing and telemarketing laws, home solicitation sales laws, tour operator laws, seller
of travel laws, securities laws, and other consumer protection laws. In addition, laws in many jurisdictions in
which we sell vacation ownership interests grant the purchaser of a vacation ownership interest the right to
cancel a purchase contract during a specified rescission period.

In recent years, the TCPA and similar “do not call” legislation has significantly increased the costs
associated with telemarketing. We have implemented procedures that we believe will help reduce the possibility
that we contact individuals on regulatory “do not call” lists, but such procedures may not be effective in ensuring
regulatory compliance. Additionally, we are not considered an affiliate of Marriott International for purposes of

“do not call” legislation in some jurisdictions, which may make it more difficult for us to utilize customer
information we obtain from Marriott International.

Many jurisdictions, including many jurisdictions in the United States, require that we file detailed
registration or offering statements with regulatory authorities disclosing certain information regarding the
vacation ownership interests and other real estate interests we market and sell. Regulation outside the
United States includes, for example, European regulations to which our vacation ownership activities within the
European Union are subject and Singaporean regulations to which certain of our Asia Pacific operations are
subject. Among other things, the European and Singaporean regulations: (1) require delivery of specified
disclosure (some of which must be provided in a specific format or language) to purchasers; (2) require a
specified “cooling off” rescission period after a purchase is made; and (3) prohibit any advance payments during
the “cooling off” rescission period.

Our lending activities are subject to a number of U.S. laws and regulations, including those of applicable
supervisory agencies such as, in the United States, the Consumer Financial Protection Bureau, the FTC, and the
Financial Crimes Enforcement Network, as well as laws and regulations of other jurisdictions, including, among
others, laws and regulations related to consumer loans, retail installment contracts, mortgage lending, usury, fair
debt collection practices, consumer debt collection practices, mortgage disclosure, lender or mortgage loan
originator licensing and registration and anti-money laundering.

Our resort management activities are subject to laws and regulations regarding community association

management, public lodging, food and beverage services, labor, employment, health care, health and safety,
accessibility, discrimination, immigration, gaming and the environment (including climate change). In addition,
many jurisdictions in which we manage our resorts have statutory provisions that limit the duration of the initial
and renewal terms of our management agreements for property owners’ associations and/or permit the property
owners’ association for a resort to terminate our management agreement under certain circumstances (for
example, upon a super-majority vote of the owners), even if we are not in default under the agreement. Such
statutory provisions expose us to a risk that one or more of our management agreements may not be renewed or
may be terminated prior to the end of the term specified in such agreements.

We may not be successful in maintaining compliance with all laws, regulations and policies to which we

are currently subject, and the cost of compliance with such laws, regulations and policies could be significant.
Failure to comply with current or future applicable laws, regulations and policies could have a material adverse
effect on our business. For example, if we do not comply with applicable laws, governmental authorities in the
jurisdictions where the violations occurred may revoke or refuse to renew licenses or registrations we must have
in order to operate our business. Failure to comply with applicable laws could also render sales contracts for our
products void or voidable, subject us to fines or other sanctions and increase our exposure to litigation.

Changes in tax regulations or their interpretation could reduce our profits or increase our costs.

Jurisdictions in which we do business may at any time review tax and other revenue raising laws,
regulations and policies, and any resulting changes could impose new restrictions, costs or prohibitions on our
current practices and reduce our profits. In particular, governments may revise tax laws, regulations or official
interpretations in ways that could have a significant impact on us, including modifications that could reduce the
profits that we can effectively realize from our non-U.S. operations, or that could require costly changes to those
operations, or the way that we structure them. For example, most U.S. company effective tax rates reflect the fact
that income earned and reinvested outside the United States is generally taxed at local rates, which are often
much lower than U.S. tax rates. In addition, interpretation of tax regulations requires us to exercise our judgment
and taxing authorities or our independent registered public accounting firm may reach conclusions about the
application of such regulations that differ from our conclusions. If changes in tax laws, regulations or
interpretations were to significantly increase the tax rates on non-U.S. income, our effective tax rate could
increase, our profits could be reduced, and if such increases were a result of our status as a U.S. company, we
could be placed at a disadvantage to our non-U.S. competitors if those competitors remain subject to lower local
tax rates.

Changes in privacy law could adversely affect our ability to market our products effectively.

We rely on a variety of direct marketing techniques, including telemarketing, email marketing and postal

mailings. Adoption of new state or federal laws regulating marketing and solicitation, or international data
protection laws that govern these activities, or changes to existing laws, such as the Telemarketing Sales Rule
and the CANSPAM Act, could adversely affect the continuing effectiveness of telemarketing, email and postal
mailing techniques and could force us to make further changes in our marketing strategy. If this occurs, we may
not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of
our sales of vacation ownership interests and other products. We also obtain access to potential customers from
travel service providers or other companies with whom we have relationships and market to some individuals on
these lists directly or by including our marketing message in the other companies’ marketing materials. If access
to these lists was prohibited or otherwise restricted, our ability to develop new customers and introduce our
products to them could be impaired.

Failure to maintain the integrity of internal or customer data could result in faulty business decisions

or operational inefficiencies, damage our reputation and/or subject us to costs, fines or lawsuits.

We collect and retain large volumes of internal and customer data, including social security numbers,

credit card numbers and other personally identifiable information of our customers in various information
systems and those of our service providers. We also maintain personally identifiable information about our
employees. The integrity and protection of that customer, employee and company data is critical to us. We could
make faulty decisions if that data is inaccurate or incomplete. Our customers and employees also have a high
expectation that we and our service providers will adequately protect their personal information. The regulatory
environment as well as the requirements imposed on us by the payment card industry surrounding information,
security and privacy is also increasingly demanding, in both the United States and other jurisdictions in which we
operate. Our systems may be unable to satisfy changing regulatory and payment card industry requirements and
employee and customer expectations, or may require significant additional investments or time in order to do so.

Our information systems and records, including those we maintain with our service providers, may be

subject to security breaches, cyber attacks, system failures, viruses, operator error or inadvertent releases of data.
A significant theft, loss, or fraudulent use of customer, employee or company data maintained by us or by a
service provider could adversely impact our reputation and could result in remedial and other expenses, fines or
litigation. A breach in the security of our information systems or those of our service providers could lead to an
interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits.

Our points-based product form exposes us to an increased risk of temporary inventory depletion.

Selling vacation ownership interests in a system of resorts under a points-based business model increases the

risk of temporary inventory depletion. We currently sell vacation ownership interests denominated in points from a
single trust entity in each of our North America and Asia Pacific business segments. Thus, the primary source of
inventory for each of these segments is concentrated in its corresponding trust. In contrast, under our prior business
model, we sold weeks-based vacation ownership interests tied to specific resorts; we thus had more sources of
inventory (i.e., resorts), and the risk of inventory depletion was diffused among those sources of inventory.

Temporary depletion of inventory available for sale can be caused by three primary factors: (1) delayed

delivery of inventory under construction by us or third parties; (2) delayed receipt of required governmental
registrations of inventory for sale; and (3) significant unanticipated increases in sales pace. If the inventory
available for sale for a particular trust were to be depleted before new inventory is added and available for sale,
we would be required to temporarily suspend sales until inventory is replenished. This could reduce our cash
flow and have a negative impact on our results of operations.

Our development activities expose us to project cost and completion risks.

Our ongoing development of new vacation ownership properties and new phases of existing vacation
ownership properties presents a number of risks. Our profits may be adversely affected if construction costs

escalate faster than the pace at which we can increase the price of vacation ownership interests. Construction
delays, zoning and other local approvals, cost overruns, lender financial defaults, or natural or man-made
disasters, such as earthquakes, tsunamis, hurricanes, floods, fires, volcanic eruptions, radiation releases and oil
spills, may increase overall project costs or result in project cancellations. In addition, any liability or alleged
liability associated with latent defects in projects we have constructed or that we construct in the future may
adversely affect our business, financial condition and reputation.

Disagreements with the owners of vacation ownership interests and property owners’ associations may

result in litigation and the loss of management contracts.

The nature of our relationships with our owners and our responsibilities in managing our vacation

ownership properties will from time to time give rise to disagreements with the owners of vacation ownership
interests and property owners’ associations. Owners of our vacation ownership interests may also disagree with
changes we make to our products or programs. We seek to expeditiously resolve any disagreements in order to
develop and maintain positive relations with current and potential owners and property owners’ associations, but
cannot always do so. Failure to resolve such disagreements has resulted in litigation, and could do so again in the
future. If any such litigation results in a significant adverse judgment, settlement or court order, we could suffer
significant losses, our profits could be reduced, our reputation could be harmed and our future ability to operate
our business could be constrained. Disagreements with property owners’ associations have in the past and could
in the future result in the loss of management contracts.

The expiration, termination or renegotiation of our management contracts could adversely affect our

cash flows, revenues and profits.

We enter into a management agreement with the property owners’ association or other governing body at

each of our resorts and, in the event a trust holds resorts or interests in resorts, with the trust’s governing body.
The management fee is typically based on either a percentage of the budgeted cost to operate such resorts or a
fixed fee arrangement. We also receive revenues that represent reimbursement for certain costs we incur under
our management agreements, principally payroll-related costs at the locations where we employ the associates
providing on-site services. The terms of our management agreements typically range from three to ten years and
are generally subject to periodic renewal for one to five year terms. Many of these agreements renew
automatically unless either party provides notice of termination before the expiration of the term. Any of these
management contracts may expire at the end of its then-current term (following notice by a party of non-renewal)
or be terminated, or the contract terms may be renegotiated in a manner adverse to us. Upon non-renewal or
termination of our management agreement for a particular resort, the resort ceases to be part of our system and
we lose the management fee revenue associated with the resort. If a management agreement is terminated or not
renewed on favorable terms, our cash flows, revenues and profits could be adversely affected.

The maintenance and refurbishment of vacation ownership properties depends on maintenance fees

paid by the owners of vacation ownership interests.

The maintenance fees that are levied on owners of our vacation ownership interests by property owners’

association boards are used to maintain and refurbish the vacation ownership properties and to keep the
properties in compliance with Marriott and Ritz-Carlton brand standards. If property owners’ association boards
do not levy sufficient maintenance fees, or if owners of vacation ownership interests do not pay their
maintenance fees, not only could our management fee revenue be adversely affected, but the vacation ownership
properties could fall into disrepair and fail to comply with applicable brand standards. If a resort fails to comply
with applicable brand standards, Marriott International or The Ritz-Carlton Hotel Company could terminate our
rights under the applicable License Agreement to use its trademarks at the non-compliant resort, which would
result in the loss of management fees, decrease customer satisfaction and impair our ability to market and sell our
products at the non-compliant locations.

If maintenance fees at our resorts are required to be increased, our product could become less

attractive and our business could be harmed.

The maintenance fees that are levied on owners of our vacation ownership interests by property owners’
association boards may increase as the costs to maintain and refurbish the vacation ownership properties and to
keep the properties in compliance with Marriott and Ritz-Carlton brand standards increase. Increased
maintenance fees could make our products less desirable, which could have a negative impact on sales of our
products.

Damage to, or other potential losses involving, properties that we own or manage may not be covered

by insurance.

Market forces beyond our control may limit the scope of the insurance coverage we can obtain or our

ability to obtain coverage at reasonable rates. Certain types of losses, generally of a catastrophic nature, such as
earthquakes, hurricanes and floods, or terrorist acts, may be uninsurable or the price of coverage for such losses
may be too expensive to justify obtaining insurance. As a result, the cost of our insurance may increase and our
coverage levels may decrease. In addition, in the event of a substantial loss, the insurance coverage we carry may
not be sufficient to pay the full market value or replacement cost of our lost investment or that of owners of
vacation ownership interests or in some cases may not provide a recovery for any part of a loss. As a result, we
could lose some or all of the capital we have invested in a property, as well as the anticipated future revenue from
the property, and we could remain obligated under guarantees or other financial obligations related to the
property.

Our pursuit of new business opportunities to grow our business may not be successful.

One of our strategic initiatives is to selectively pursue new business opportunities, such as the continued

enhancement of our exchange programs, new management affiliations and acquisitions of existing vacation
ownership and related businesses. There are substantial risks and uncertainties associated with these efforts,
particularly in connection with opportunities in locations where the markets for vacation ownership products are
not fully developed. We may invest significant time and resources in developing and marketing new businesses.
Initial timetables for the introduction and development of new businesses may not be achieved and price and
profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive
alternatives and shifting market preferences, may also impact the successful implementation of new businesses.
Furthermore, any new business could strain our system of internal controls and diminish its effectiveness. Failure
to successfully manage these risks in the development and implementation of new businesses could have a
material adverse effect on our business, results of operations and financial condition.

Our share repurchase program may not enhance long-term stockholder value, and could increase the

volatility of the market price of our common stock and diminish our cash reserves.

The share repurchase program authorized by our Board of Directors does not obligate us to repurchase
any specific dollar amount, or to acquire any specific number, of shares of our common stock. The timing and
amount of repurchases, if any, will depend upon several factors, including market conditions, business
conditions, statutory and contractual restrictions, the trading price of our common stock and the nature of other
investment opportunities available to us. The repurchase program may be limited, suspended or discontinued at
any time without prior notice. In addition, repurchases of our common stock pursuant to our share repurchase
program could affect our stock price and increase its volatility. The existence of a share repurchase program
could cause our stock price to be higher than it would be in the absence of such a program and could potentially
reduce the market liquidity for our stock. Additionally, our share repurchase program could diminish our cash
reserves, which may impact our ability to finance future growth, pursue possible future strategic opportunities
and acquisitions, and discharge liabilities. Our share repurchases may not enhance stockholder value because the
market price of our common stock may decline below the prices at which we repurchased shares of stock and
short-term stock price fluctuations could reduce the program’s effectiveness.

Our ability to pay dividends on our stock is limited.

We intend to pay a regular quarterly dividend to our stockholders. However, we may not declare or pay
such dividends in the future at the prior rate or at all. All decisions regarding our payment of dividends will be
made by our Board of Directors from time to time and will be subject to an evaluation of our financial condition,
results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice,
contractual restraints and other business considerations that our Board of Directors considers relevant. In
addition, our Revolving Corporate Credit Facility contains restrictions on our ability to pay dividends, and the
terms of agreements governing debt that we may incur in the future may also limit or prohibit dividend
payments. We may not have sufficient surplus under Delaware law to be able to pay any dividends, which may
result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital
expenditures or increases in reserves.

Our stock price may fluctuate significantly.

Our common stock has a limited trading history. The market price of our common stock may fluctuate

widely, depending on many factors, some of which may be beyond our control, including:

•

actual or anticipated fluctuations in our operating results due to factors related to our business;

success or failure of our business strategy;

our quarterly or annual earnings, or those of other companies in our industry;

our ability to obtain financing as needed;

announcements by us or our competitors of significant new business developments or significant
acquisitions or dispositions;

changes in accounting standards, policies, guidance, interpretations or principles, including a new
standard regarding revenue recognition that we will adopt in the first quarter of 2018;

the failure of securities analysts to continue to cover our common stock;

changes in earnings estimates by securities analysts or our ability to meet those estimates;

the operating and stock price performance of other comparable companies;

investor perception of our company and the vacation ownership industry;

overall market fluctuations;

initiation of or developments in legal proceedings;

changes in laws and regulations affecting our business; and

general economic conditions and other external factors.

Stock markets in general have experienced volatility that has often been unrelated to the operating
performance of a particular company. These broad market fluctuations could adversely affect the trading price of
our common stock.

The growth of our business and the execution of our business strategies depend on the services of our

senior management and our associates.

We believe that our future growth depends, in part, on the continued services of our senior management
team, including our President and Chief Executive Officer, Stephen P. Weisz, and on our ability to successfully
implement succession plans for members of our senior management team. The loss of any members of our senior
management team, or the failure to identify successors for such positions, could adversely affect our strategic and
customer relationships and impede our ability to execute our business strategies.

In addition, insufficient numbers of talented associates could constrain our ability to maintain and expand
our business. We compete with other companies both within and outside of our industry for talented personnel. If
we cannot recruit, train, develop or retain sufficient numbers of talented associates, we could experience
increased associate turnover, decreased guest satisfaction, low morale, inefficiency or internal control failures.

If we identify additional excess land and inventory in the future, or if our estimates of the fair value of

our excess land and inventory change, our financial position and results of operations could be adversely
affected.

Since the Spin-Off, we have identified excess land and inventory and have disposed of a significant
portion of the land and inventory we identified. We may also conclude in the future that additional land and
inventory are excess, in which case we would likely terminate plans to develop such land and instead seek to
dispose of such excess land and inventory through bulk sales or other methods. If we identify additional excess
land and inventory in the future, we may have to record additional non-cash impairment charges to write-down
the value of such assets. Any such impairment charges may have an adverse impact on our financial position and
results of operations. In addition, if real estate market conditions change, our estimates of the fair value of our
excess land and inventory may change. If our estimates of the fair value of these assets decline, we may have to
record additional non-cash impairment charges to write-down the value of such assets to the estimated fair value.
Any such impairment charges may have an adverse impact on our financial position and results of operations.

If we are not able to conclude that our internal control over financial reporting is effective, or if our

independent registered public accounting firm is not able to provide an unqualified report on the effectiveness
of our internal control over financial reporting, our business, financial condition or results of operations
could be materially adversely affected.

As a public entity, we are subject to the reporting requirements of the Securities Exchange Act of 1934

(the “Exchange Act”) and requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
including the obligation of our management to report on its assessment of the effectiveness of our internal control
over financial reporting. We continue to establish new infrastructure and systems, some of which may impact our
ability to favorably assess the effectiveness of our internal control over financial reporting. If we cannot
favorably assess the effectiveness of our internal control over financial reporting, or our independent registered
public accounting firm cannot provide an unqualified report on the effectiveness of our internal control over
financial reporting, investor confidence and, in turn, the market price of our common stock could decline.

Our use of different estimates and assumptions in the application of our accounting policies could

result in material changes to our reported financial condition and results of operations, and changes in
accounting standards or their interpretation could significantly impact our reported results of operations.

Our accounting policies are critical to the manner in which we present our results of operations and

financial condition. Many of these policies, including policies relating to the recognition of revenue and
determination of cost of sales, are highly complex and involve many assumptions, estimates and judgments. We
are required to review these assumptions, estimates and judgments regularly and revise them when necessary.
Our actual results of operations vary from period to period based on revisions to these estimates. In addition, the
regulatory bodies that establish accounting and reporting standards, including the SEC and the Financial
Accounting Standards Board, periodically revise or issue new financial accounting and reporting standards that
govern the preparation of our consolidated financial statements. Changes to these standards or their interpretation
could significantly impact our reported results in future periods. For example, we are currently assessing the
impact that the issuance of Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers
(Topic 606),” which is intended to significantly enhance comparability of revenue recognition practices across
entities and industries by providing a principles-based, comprehensive framework for addressing revenue
recognition issues, will have on our financial statements.

Anti-takeover provisions in our organizational documents and Delaware law and in our agreements

with Marriott International could delay or prevent a change in control.

Provisions of our Charter and Bylaws may delay or prevent a merger or acquisition that a shareholder
may consider favorable. For example, our Charter and Bylaws provide for a classified board, require advance
notice for shareholder proposals and nominations, place limitations on convening shareholder meetings and
authorize our Board of Directors to issue one or more series of preferred stock. The holders of the preferred stock
issued by our subsidiary MVW US Holdings have the right to require MVW US Holdings to redeem the
preferred stock if we sell all or substantially all of our assets or MVW US Holdings sells all or substantially all of
its assets or completes a change of control, as defined in the terms of the preferred stock. These provisions may
also discourage acquisition proposals or delay or prevent a change in control, which could harm our stock price.
In addition, Delaware law also imposes some restrictions on mergers and other business combinations between
any holder of 15 percent or more of our outstanding common stock and us.

In addition, provisions in our agreements with Marriott International may delay or prevent a merger or
acquisition that a shareholder may consider favorable. Under the Tax Sharing and Indemnification Agreement,
we agreed not to enter into any transaction involving an acquisition or issuance of our common stock or any other
transaction (or, to the extent we have the right to prohibit it, to permit any such transaction) that could reasonably
be expected to cause the distribution of our common stock to be taxable to Marriott International. We are
required to indemnify Marriott International for any tax resulting from any such prohibited transaction, and we
are required to meet various requirements, including obtaining the approval of Marriott International or obtaining
an Internal Revenue Service (“IRS”) ruling or unqualified opinion of tax counsel acceptable to Marriott
International, before engaging in such transactions. Further, our License Agreements with Marriott International
and The Ritz-Carlton Hotel Company provide that a change in control may not occur without the consent of
Marriott International or The Ritz-Carlton Hotel Company, respectively. A change in control for purposes of
these agreements would occur if, among other things, a person or group acquires beneficial ownership of, or the
power to exercise effective control over, shares of our common stock representing more than 15 percent of the
combined voting power of the then-outstanding securities entitled to vote generally in elections of directors.

The Spin-Off may expose us to potential liabilities arising out of our contractual arrangements with

Marriott International.

Pursuant to a Separation and Distribution Agreement that we entered into with Marriott International in
connection with the Spin-Off, from and after the Spin-Off, each of us and Marriott International is responsible
for the debts, liabilities and other obligations related to the business or businesses it owns and operates following
the consummation of the Spin-Off. Although we do not expect to be liable for any obligations that were not
allocated to us under such agreement, a court could disregard the allocation agreed to between the parties, and
require that we assume responsibility for obligations allocated to Marriott International (for example, tax and/or
environmental liabilities), particularly if Marriott International were to refuse or were unable to pay or perform
the allocated obligations.

Pursuant to a Tax Sharing and Indemnification Agreement that we entered into with Marriott

International in connection with the Spin-Off, we agreed to indemnify Marriott International for certain taxes and
related losses resulting from (1) any breach of the covenants regarding the preservation of the tax-free status of
the distribution and the intended tax treatment of certain related transactions undertaken in connection with the
distribution, (2) certain acquisitions of our equity securities or assets or those of certain of our subsidiaries, and
(3) any breach by us or any member of our group of certain of our representations in the documents submitted to
the IRS and the separation documents between Marriott International and us. The amount of Marriott
International’s taxes for which we agreed to indemnify Marriott International in respect of the distribution will be
based on the excess, if any, of the aggregate fair market value of our stock over Marriott International’s tax basis
in our stock at the time of the distribution of our common stock in the Spin-Off. In addition, if the distribution
fails to qualify as a tax-free transaction for reasons other than those specified in the Spin-Off tax indemnification
provisions, liability for any resulting taxes related to the distribution will be apportioned between Marriott
International and us based on the relative fair market values of Marriott International and us. In addition, Marriott

International expects to recognize, for U.S. federal income tax purposes, significant built-in losses in properties
used in the vacation ownership and related residential businesses. If Marriott International’s U.S. federal
consolidated group is unable to deduct these losses for U.S. federal income tax purposes, and, instead, the tax
basis of the properties that is attributable to the built-in losses is available to our U.S. federal consolidated group,
we have agreed to indemnify Marriott International for certain lost tax benefits that Marriott International
otherwise would have recognized if Marriott International’s U.S. federal consolidated group was able to deduct
such losses. The amount of any future indemnification payments could be substantial.

Certain of our executive officers and directors may have actual or potential conflicts of interest

because of their ownership of Marriott International equity or their former positions with Marriott
International.

Certain of our executive officers and directors are former officers and employees of Marriott International

and thus have professional relationships with Marriott International’s executive officers and directors. In
addition, many of our executive officers and directors have financial interests in Marriott International that are
substantial to them as a result of their ownership of Marriott International stock, options and other equity awards.
These relationships and personal financial interests may create, or may create the appearance of, conflicts of
interest when these directors and officers face decisions that could have different implications for Marriott
International than for us.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

As of January 1, 2016, our portfolio consisted of 61 vacation ownership or residential properties in the

United States and eight other countries and territories, including two hotels that we intend to convert to vacation
ownership interests. These properties are described in Part I, Item 1, “Business,” of this Annual Report. Except as
indicated in Part I, Item 1, “Business,” we own all unsold inventory at these properties. We also own, manage or
lease golf courses, fitness, spa and sports facilities, undeveloped and partially developed land and other common
area assets at some of our resorts, including resort lobbies and food and beverage outlets.

We own or lease our regional offices and sales centers, both in the United States and internationally. Our
corporate headquarters in Orlando, Florida consists of approximately 160,000 square feet of leased space in two
buildings, under a lease expiring in August 2021. We also own an office facility in Lakeland, Florida consisting
of approximately 125,000 square feet.

Item 3.

Legal Proceedings

Currently, and from time to time, we are subject to claims in legal proceedings arising in the normal

course of business, including, among others, the legal actions discussed in Footnote No. 9, “Contingencies and
Commitments,” to our Financial Statements. While management presently believes that the ultimate outcome of
these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows,
or overall trends in results of operations, legal proceedings are inherently uncertain, and unfavorable rulings
could, individually or in aggregate, have a material adverse effect on our business, financial condition, or
operating results.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Market Information and Dividends

Our common stock currently is traded on the New York Stock Exchange, or the “NYSE,” under the
symbol “VAC.” We have not made any unregistered sales of our equity securities. The following table sets forth
the high and low sales prices for our common stock and the per share cash dividends we declared for each fiscal
quarter during the last two years.

Stock Price

High

Low

Dividends Declared
Per Share

2015

2014

Quarter ended March 27, 2015 . . . . . . . . $
Quarter ended June 19, 2015 . . . . . . . . . $
Quarter ended September 11, 2015 . . . . $
Quarter ended January 1, 2016 . . . . . . . . $

Quarter ended March 28, 2014 . . . . . . . . $
Quarter ended June 20, 2014 . . . . . . . . . $
Quarter ended September 12, 2014 . . . . $
Quarter ended January 2, 2015 . . . . . . . . $

83.85
90.88
93.40
74.63

56.20
58.14
61.78
76.29

$
$
$
$

70.00
77.70
65.70
55.27

46.63
50.61
55.28
57.48

$
$
$
$

0.25
0.25
0.25
0.30

—
—
—
0.25

We currently expect to pay quarterly cash dividends in the future, but any future dividend payments will

be subject to Board approval, which will depend on our financial condition, results of operations and capital
requirements, as well as applicable law, regulatory constraints, industry practice and other business
considerations that our Board of Directors considers relevant. In addition, our Revolving Corporate Credit
Facility contains restrictions on our ability to pay dividends, and the terms of agreements governing debt that we
may incur in the future may also limit or prohibit dividend payments. Accordingly, there can be no assurance that
we will pay dividends in the future at the same rate or at all.

Holders of Record

On February 12, 2016, there were 25,767 holders of record of our common stock. Because many of the

shares of our common stock are held by brokers and other institutions on behalf of shareholders, we are unable to
determine the total number of shareholders represented by these record holders; however, we believe that there
were approximately 37,000 beneficial owners of our common stock as of February 12, 2016.

Issuer Purchases of Equity Securities

Period

Total Number
of Shares
Purchased

Average
Price
per Share

Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)

September 12, 2015 – October 9, 2015 . . .
October 10, 2015 – November 6, 2015 . . .
November 7, 2015 – December 4, 2015 . .
December 5, 2015 – January 1, 2016 . . . . .

— $
$
$
$

503,544
702,751
353,725

—
63.60
60.00
59.59

—
503,544
702,751
353,725

Maximum Number
of Shares That May
Yet Be Purchased
Under the Plans or
Programs (1)

3,605,937
3,102,393
2,399,642
2,045,917

(1) On February 11, 2016, our Board of Directors approved the repurchase of up to an additional 2,000,000 shares of

our common stock under our existing share repurchase program prior to March 24, 2017. Prior to that authorization,
our Board of Directors had authorized the repurchase of an aggregate of up to 8,900,000 shares of our common
stock under the share repurchase program since the initiation of the program in October 2013.

Performance Graph

Comparison of Cumulative Total Return

$500

$400

$300

$200

$100

11/08/11 12/30/11

12/28/12

01/03/14

01/02/15

01/01/16

Marriott Vacations Worldwide Corporation

S&P SmallCap 600 Index

S&P Composite 1500 Hotels, Resorts & Cruise Lines Index

The above graph compares the relative performance of our common stock, the S&P SmallCap 600 Index
and the S&P Composite 1500 Hotels, Resorts & Cruise Lines Index. The graph assumes that $100 was invested
in our common stock and each index on November 8, 2011, the date a “when-issued” trading market for our
common stock began. The stock price performance reflected above is not necessarily indicative of future stock
price performance. The foregoing performance graph is being furnished as part of this Annual Report solely in
accordance with the requirement under Rule 14a-3(b)(9) to furnish our stockholders with such information, and
therefore, shall not be deemed to be filed or incorporated by reference into any filings by the Company under the
Securities Act of 1933, as amended, or the Exchange Act.

Item 6.

Selected Financial Data

The following tables present a summary of selected historical consolidated financial data for the periods
indicated below. The selected historical consolidated statements of income data for fiscal years 2015, 2014 and
2013 and the selected consolidated balance sheet data for fiscal years 2015 and 2014 are derived from our
consolidated financial statements included elsewhere in this Annual Report. The selected historical consolidated
statement of income data for fiscal years 2012 and 2011 and the selected consolidated balance sheet data for
fiscal years 2013, 2012 and 2011 are derived from our audited consolidated financial statements not included in
this Annual Report.

Prior to November 21, 2011, the effective date of the Spin-Off, our company was a subsidiary of Marriott

International. For periods prior to the Spin-Off, our historical financial statements include allocations of certain
expenses from Marriott International, including expenses for costs related to functions such as treasury, tax,
accounting, legal, internal audit, human resources, public and investor relations, general management, real estate,
shared information technology systems, corporate governance activities and centrally managed employee benefit
arrangements. These costs may not be representative of the costs we have incurred or will incur in the future as
an independent, public company, and do not include certain additional costs we have incurred or may incur as a
public company that we did not incur as a wholly owned subsidiary of Marriott International.

The following table includes earnings before interest expense, taxes, depreciation and amortization
(“EBITDA”), which is a financial measure we use in our business that is not prescribed or authorized by United
States Generally Accepted Accounting Principles (“GAAP”). We believe this measure is useful to help investors
understand our results of operations. We explain this measure and reconcile it to the most directly comparable
financial measure calculated and presented in accordance with GAAP in Footnote No. 2 to the following table.

The following selected historical financial and other data should be read in conjunction with “Item 7—
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Financial
Statements and related notes included elsewhere in this Annual Report. All fiscal years included 52 weeks,
except for 2013, which included 53 weeks.

(in thousands, except per share amounts)
Statement of Income Data:
Total revenues . . . . . . . . . . . . . . . . . . . . $
Total revenues net of total expenses . . .
. . . . . . . . . . . . . . . . .
Net income (loss)
Basic earnings (loss) per common

2015

2014

2013

2012

2011(1)

Fiscal Years

1,830,463 $
201,123
122,799

1,735,782 $
156,498
80,756

1,749,688 $
143,920
79,730

1,638,775 $
37,971
6,149

1,624,279
(222,296)
(172,432)

share . . . . . . . . . . . . . . . . . . . . . . . . .

3.90

2.40

2.25

0.19

(5.12)

Shares used in computing basic

earnings (loss) per share . . . . . . . . . .

31,487

33,665

35,373

34,357

33,709

Diluted earnings (loss) per common

share . . . . . . . . . . . . . . . . . . . . . . . . . $

3.82 $

2.33 $

2.18 $

0.18 $

(5.12)

Shares used in computing diluted

earnings (loss) per share . . . . . . . . . .

32,168

34,635

36,621

36,183

33,709

Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . $
Total debt, net . . . . . . . . . . . . . . . . . . . .
Total mandatorily redeemable preferred
. .
stock of consolidated subsidiary, net
Total liabilities . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per common

2,395,026 $
678,793

2,530,579 $
703,013

2,623,230 $
670,619

2,604,571 $
671,300

2,843,052
844,227

38,989
1,418,759
976,267

38,816
1,450,876
1,079,703

38,643
1,414,493
1,208,737

38,470
1,466,175
1,138,396

38,270
1,712,080
1,130,972

share . . . . . . . . . . . . . . . . . . . . . . . . .

1.05

0.25

—

(in thousands, except per share amounts)

2015

2014

2013

2012

2011(1)

Fiscal Years

Other Data:
EBITDA(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Contract sales(3):

241,524 $

180,965 $

166,373 $

78,670 $

(183,548)

Vacation ownership . . . . . . . . . . . . . . . . . . . . . . . $
Residential products . . . . . . . . . . . . . . . . . . . . . .

699,884 $
28,420

698,765 $
14,514

679,089 $
14,813

686,768 $
996

Total before cancellation reversal . . . . . . .
Cancellation reversal . . . . . . . . . . . . . . . . . . . . . . . . . . .

728,304
—

713,279
—

693,902
—

687,764
—

Total contract sales . . . . . . . . . . . . . . . . . . $

728,304 $

713,279 $

693,902 $

687,766 $

660,425
15,244

675,669
3,643

679,312

(1) The financial information presented for 2011 may not necessarily reflect our financial position, results of operations
and cash flows as if we had operated as a stand-alone public company during the entirety of such year. Accordingly,
our historical results for 2011 should not be relied upon as an indicator of our future performance.

(2) EBITDA, a financial measure that is not prescribed or authorized by GAAP, is defined as earnings, or net income,

before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and
amortization. For purposes of our EBITDA calculation, we do not adjust for consumer financing interest expense
because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy
remote special purpose entities and that is generally non-recourse to us. Further, we consider consumer financing
interest expense to be an operating expense of our business.

We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to service debt,
fund capital expenditures and expand our business. We also use it, as do analysts, lenders, investors and others,
because it excludes certain items that can vary widely across different industries or among companies within the same
industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit
ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax
positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because
of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income
taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because
companies utilize productive assets of different ages and use different methods of both acquiring and depreciating
productive assets. These differences can result in considerable variability in the relative costs of productive assets and
the depreciation and amortization expense among companies.

EBITDA has limitations and should not be considered in isolation or as a substitute for performance measures calculated in
accordance with GAAP. In addition, other companies in our industry may calculate EBITDA differently than we do or may
not calculate it at all, limiting its usefulness as a comparative measure. The table below shows our EBITDA calculation and
reconciles that measure with Net income (loss).

($ in thousands)

2015

2014

Fiscal Years
2013

2012

2011(1)

Net income (loss) . . . . . . . . . . . . . $
Interest expense(a)
. . . . . . . . . . . .
Tax provision (benefit) . . . . . . . .
Depreciation and amortization . .

122,799 $
12,810
83,698
22,217

80,756 $
11,692
69,835
18,682

79,730 $
12,574
51,474
22,595

6,149 $
17,661
24,813
30,047

(172,432)
747
(44,882)
33,019

EBITDA . . . . . . . . . . . . . . . $

241,524 $

180,965 $

166,373 $

78,670 $

(183,548)

(a)

Interest expense excludes consumer financing interest expense.

(3) Contract sales represent the total amount of vacation ownership product sales under purchase agreements

signed during the period where we have received a down payment of at least ten percent of the contract price,
reduced by actual rescissions during the period. Contract sales differ from revenues from the sale of vacation
ownership products that we report in our Statements of Income due to the requirements for revenue
recognition described in Footnote No. 1, “Summary of Significant Accounting Policies,” to our Financial
Statements. We consider contract sales to be an important operating measure because it reflects the pace of
sales in our business.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our results of operations and financial condition together
with our audited historical consolidated financial statements and accompanying notes that we have included
elsewhere in this Annual Report as well as the discussion in the section of this Annual Report entitled
“Business.” This discussion contains forward-looking statements that involve risks and uncertainties. The
forward-looking statements are not historical facts, but rather are based on our current expectations, estimates,
assumptions and projections about our industry, business and future financial results. Our actual results could
differ materially from the results contemplated by these forward-looking statements due to a number of factors,
including those we discuss in the sections of this Annual Report entitled “Risk Factors” and “Special Note About
Forward-Looking Statements.”

Our consolidated financial statements, which we discuss below, reflect our historical financial condition,

results of operations and cash flows. The financial information discussed below and included in this Annual
Report, however, may not necessarily reflect what our financial condition, results of operations and cash flows
may be in the future.

Business Overview

We are one of the world’s largest companies whose business is focused almost entirely on vacation

Our business is grouped into three reportable segments: North America, Europe and Asia Pacific. As of

January 1, 2016, our portfolio consisted of 61 properties in the United States and eight other countries and
territories, including two hotels. We generate most of our revenues from four primary sources: selling vacation
ownership products; managing our resorts; financing consumer purchases of vacation ownership products; and
renting vacation ownership inventory. See “Business—Segments” for further details regarding our individual
properties by segment.

As described in Footnote No. 1, “Summary of Significant Accounting Policies,” to our Financial

Statements included in this Annual Report, the Financial Statements discussed below reflect our historical
financial position, results of operations and cash flows as we have historically operated, in conformity with
GAAP. Furthermore, due to our reporting calendar, the financial results for the fourth quarter of 2013 and full
year 2013 included the impact of an additional week as compared to 2014. To enhance the similarity of the
periods being compared, the “additional week” is the first week of 2013 when 2014 results are compared to 2013
results because that week includes the New Year’s holiday while the first week of 2014 does not.

Below is a summary of significant accounting policies used in our business that will be used in describing

our results of operations.

Sale of Vacation Ownership Products

We recognize revenues from the sale of vacation ownership products when all of the following conditions

exist: a binding sales contract has been executed; the statutory rescission period has expired; the receivable is
deemed collectible; and the remainder of our obligations are substantially completed.

Sales of vacation ownership products may be made for cash or we may provide financing. For sales

where we provide financing, we defer revenue recognition until we receive a minimum down payment equal to
ten percent of the purchase price plus the fair value of certain sales incentives provided to the purchaser. These
sales incentives typically include Marriott Rewards Points or an alternative sales incentive that we refer to as

“plus points.” These plus points are redeemable for stays at our resorts, generally up to two years from the date of
issuance. Sales incentives are only awarded if the sale is closed.

As a result of the down payment requirements with respect to financed sales and the statutory rescission

periods, we often defer revenues associated with the sale of vacation ownership products from the date of the
purchase agreement to a future period. When comparing results year-over-year, this deferral frequently generates
significant variances, which we refer to as the impact of revenue reportability.

Finally, as more fully described in the “Financing” section below, we record an estimate of expected

uncollectibility on all vacation ownership notes receivable (also known as a vacation ownership notes receivable
reserve or a sales reserve) as a reduction of revenues from the sale of vacation ownership products at the time we
recognize revenues from a sale.

We report, on a supplemental basis, contract sales for each of our three segments. Contract sales represent
the total amount of vacation ownership product sales under purchase agreements signed during the period where
we have received a down payment of at least ten percent of the contract price, reduced by actual rescissions
during the period. Contract sales differ from revenues from the sale of vacation ownership products that we
report on our Statements of Income due to the requirements for revenue recognition described above. We
consider contract sales to be an important operating measure because it reflects the pace of sales in our business.

Cost of vacation ownership products includes costs to develop and construct our projects (also known as

real estate inventory costs) as well as other non-capitalizable costs associated with the overall project
development process. For each project, we expense real estate inventory costs in the same proportion as the
revenue recognized. Consistent with the applicable accounting guidance, to the extent there is a change in the
estimated sales revenues or real estate inventory costs for the project in a period, a non-cash adjustment is
recorded on our Statements of Income to true-up costs in that period to those that would have been recorded
historically if the revised estimates had been used. These true-ups, which we refer to as product cost true-ups,
will have a positive or negative impact on our Statements of Income.

We refer to revenues from the sale of vacation ownership products less the cost of vacation ownership

products and marketing and sales costs as development margin. Development margin percentage is calculated by
dividing development margin by revenues from the sale of vacation ownership products.

Resort Management and Other Services

Our resort management and other services revenues include revenues generated from fees we earn for

managing each of our resorts. In addition, we earn revenue for providing ancillary offerings, including food and
beverage, retail, and golf and spa offerings at our resorts. We also receive annual fees, club dues, settlement fees
from the sale of vacation ownership products and certain transaction-based fees from owners and other third
parties, including external exchange service providers with which we are associated.

We provide day-to-day-management services, including housekeeping services, operation of reservation
systems, maintenance, and certain accounting and administrative services for property owners’ associations. We
receive compensation for these management services; this compensation is generally based on either a percentage
of budgeted cost to operate the resorts or a fixed fee arrangement. We earn these fees regardless of usage or
occupancy.

Resort management and other services expenses include costs to operate the food and beverage and other

ancillary operations and overall customer support services, including reservations, certain transaction-based
expenses relating to external exchange service providers and settlement expenses from the sale of vacation
ownership products.

Financing

We offer financing to qualified customers for the purchase of most types of our vacation ownership

products. The average FICO score of customers who were U.S. citizens or residents who financed a vacation
ownership purchase was as follows:

Average FICO score . . . . . . . . . . . . . . . . . . . . . . . . .

2015

736

Fiscal Years

2014

730

2013

729

The typical financing agreement provides for monthly payments of principal and interest with the

principal balance of the loan fully amortizing over the term of the related vacation ownership note receivable,
which is generally ten years. The interest income earned from the financing arrangements is earned on an accrual
basis on the principal balance outstanding over the life of the arrangement and is recorded as Financing revenues
on our Statements of Income.

Financing revenues include interest income earned on vacation ownership notes receivable as well as fees

earned from servicing the existing vacation ownership notes receivable portfolio. Financing expenses include
costs in support of the financing, servicing and securitization processes. The amount of interest income earned in
a period depends on the amount of outstanding vacation ownership notes receivable, which is impacted positively
by the origination of new vacation ownership notes receivable and negatively by principal collections. Due to
weakened economic conditions and our elimination of historical financing incentive programs, the percentage of
customers choosing to finance their vacation ownership purchase with us (which we refer to as “financing
propensity”) declined significantly through 2009 and then remained stable at 40 to 45 percent through early 2015.
In the first half of 2015, we implemented new programs to help increase financing propensity. Based upon the
success of these new programs, we are targeting a 50 to 55 percent financing propensity in 2016. We expect that
interest income will begin to increase as new originations of vacation ownership notes receivable from growth in
the business and higher financing propensity levels begin to outpace the decline in principal of our existing
vacation ownership notes receivable portfolio.

In the event of a default, we generally have the right to foreclose on or revoke the vacation ownership

interest. We return vacation ownership interests that we reacquire through foreclosure or revocation back to real
estate inventory. As discussed above, we record a vacation ownership notes receivable reserve at the time of sale
and classify the reserve as a reduction to revenues from the sale of vacation ownership products on our
Statements of Income. Historical default rates, which represent annual defaults as a percentage of each year’s
beginning gross vacation ownership notes receivable balance, were as follows:

Historical default rates . . . . . . . . . . . . . . . . . . . . . . .

3.3%

2015

Fiscal Years

2014

3.9%

2013

3.9%

Rental

We operate a rental business to provide owner flexibility and to help mitigate carrying costs associated

with our inventory. We obtain rental inventory from unsold inventory and inventory we control because owners
have elected alternative usage options offered through our vacation ownership programs.

Rental revenues are primarily the revenues we earn from renting this inventory. We also recognize rental
revenue from the utilization of plus points under the MVCD program when those points are redeemed for rental
stays at one of our resorts or upon expiration of the points.

Rental expenses include:

• Maintenance fees on unsold inventory;

• Costs to provide alternative usage options, including Marriott Rewards Points and offerings

available as part of the Explorer Collection, for owners who elect to exchange their inventory;

• Marketing costs and direct operating and related expenses in connection with the rental business

(such as housekeeping, credit card expenses and reservation services); and

• Costs associated with the banking and borrowing usage option that is available under our MVCD

program.

Rental metrics, including the average daily transient rate or the number of transient keys rented, may not

be comparable between periods given fluctuation in available occupancy by location, unit size (such as two
bedroom, one bedroom or studio unit), and owner use and exchange behavior. Further, as our ability to rent
certain luxury inventory and inventory in our Asia Pacific segment is often limited on a site-by-site basis, rental
operations may not generate adequate rental revenues to cover associated costs. Our vacation units are either
“full villas” or “lock-off” villas. Lock-off villas are units that can be separated into a master unit and a guest
room. Full villas are “non-lock-off” villas because they cannot be separated. A “key” is the lowest increment for
reporting occupancy statistics based upon the mix of non-lock-off and lock-off villas. Lock-off villas represent
two keys and non-lock-off villas represent one key. The “transient keys” metric represents the blended mix of
inventory available for rent and includes all of the combined inventory configurations available in our resort
system.

Cost Reimbursements

Cost reimbursements include direct and indirect costs that property owners’ associations reimburse to us.

In accordance with the accounting guidance for “gross versus net” presentation, we record these revenues and
expenses on a gross basis. We recognize cost reimbursements when we incur the related reimbursable costs.
These costs primarily consist of payroll and payroll related expenses for management of the property owners’
associations and other services we provide where we are the employer. Cost reimbursements consist of actual
expenses with no added margin.

Consumer Financing Interest Expense

Consumer financing interest expense represents interest expense associated with the debt from our

Warehouse Credit Facility and from the securitization of our vacation ownership notes receivable. We
distinguish consumer financing interest expense from all other interest expense because the debt associated with
the consumer financing interest expense is secured by vacation ownership notes receivable that have been sold to
bankruptcy remote special purpose entities and that is generally non-recourse to us.

Interest Expense

Interest expense consists of all interest expense other than consumer financing interest expense.

Other Items

We measure operating performance using the following key metrics:

•

Contract sales from the sale of vacation ownership products;

Development margin percentage; and

Volume per guest (“VPG”), which we calculate by dividing contract sales, excluding fractional
and residential sales, telesales and other sales that are not attributed to a tour at a sales location, by
the number of sales tours in a given period. We believe that this operating metric is valuable in
evaluating the effectiveness of the sales process as it combines the impact of average contract
price with the number of touring guests who make a purchase.

Rounding

Percentage changes presented in our public filings are calculated using whole dollars.

Consolidated Results

The following discussion presents an analysis of our results of operations for 2015, 2014 and 2013.

($ in thousands)

Revenues

2015

Fiscal Years

2014

Sale of vacation ownership products . . . . . . . . . . . . . $
Resort management and other services . . . . . . . . . . .
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . . . . . . . . . . . .

675,329
312,229
124,033
312,997
405,875

647,488
298,283
128,909
264,307
396,795

2013

671,284
290,848
141,306
261,533
384,717

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . .

1,830,463

1,735,782

1,749,688

Expenses

Cost of vacation ownership products . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Resort management and other services . . . . . . . . . . .
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .
Litigation settlement . . . . . . . . . . . . . . . . . . . . . . . . .
Organizational and separation related . . . . . . . . . . . .
Consumer financing interest . . . . . . . . . . . . . . . . . . .
Royalty fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . . . . . . . . . . . .

204,299
330,599
199,895
24,194
259,729
102,963
(232)
1,174
24,658
58,982
324
405,875

196,444
315,410
199,258
24,148
237,920
98,562
19,494
3,438
26,464
59,970
1,381
396,795

213,592
315,610
206,593
24,594
250,850
99,379
3,230
12,308
31,375
62,049
1,471
384,717

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . .

1,612,460

1,579,284

1,605,768

Gains and other income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment reversals (charges) on equity investment . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . .

9,557
(12,810)
187
—
(8,440)

206,497
(83,698)

5,171
(11,692)
74
540
—

150,591
(69,835)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

122,799

80,756

922
(12,574)
190
(1,254)
—

131,204
(51,474)

79,730

Contract Sales

2015 Compared to 2014

($ in thousands)

Contract Sales

Fiscal Years

2015

2014

Change

% Change

Vacation ownership . . . . . . . . . . $
Residential products . . . . . . . . . .

Total contract sales . . . . . . . $

699,884
28,420

728,304

698,765
14,514

713,279

1,119
13,906

15,025

NM
96%

NM = not meaningful

The $15.0 million increase in total contract sales was driven by $28.4 million of higher residential
contract sales in our Asia Pacific segment, $11.7 million of higher vacation ownership contract sales in our key
North America segment and $0.2 million of higher vacation ownership contract sales in our Asia Pacific
segment, partially offset by $10.8 million of lower contract sales in our Europe segment and $14.5 million of
lower residential contract sales in our North America segment.

The increase in vacation ownership contract sales in our North America segment reflected a $14.5 million

increase in sales at on-site sales locations and a $3.0 million increase in fractional sales as we continue to sell
through remaining luxury inventory, partially offset by a $5.8 million decrease in sales at off-site (non tour-
based) sales locations. The increase in sales at on-site sales locations included a $3.7 million decline in sales to
Latin American customers. The decline in sales at off-site sales locations included $9.6 million of lower sales in
our Latin American sales channels as a result of the strengthening of the U.S. dollar in the second half of 2015,
partially offset by $3.8 million of higher contract sales at our other off-site sales locations.

The increase in sales at on-site sales locations reflected a 2.5 percent increase in the number of tours.

VPG remained flat at $3,386 in both years, and was negatively impacted in the second half of 2015 by the
strength of the U.S. dollar, primarily impacting Latin American customers purchasing in the U.S., as well as
Japanese customers purchasing at our resort in Oahu. VPG benefitted from higher pricing and a 0.1 percentage
point increase in closing efficiency, which was offset by a decrease in the number of points sold per contract due
to the increase in sales to existing owners in 2015, as existing owners buy fewer points per contract than new
owners. The increase in the number of tours was driven by an increase in existing owner tours. In the first quarter
of 2015, we announced enhancements to our owner recognition levels that created a near-term incentive for
existing owners to purchase additional points prior to the end of the second quarter of 2015, which resulted in an
increase in existing owner tours. This was partially offset by the decrease in the number of tours in the third
quarter of 2015 as a result of hurricane and threatened hurricane activity.

Due to operational constraints, regulatory conditions and certain other conditions related to our 18 units in

Macau, we decided not to sell these units through our Marriott Vacation Club, Asia Pacific points program, and
instead disposed of the units as whole ownership residential units during the first quarter of 2015 for
$28.4 million. In the third quarter of 2015, we reinvested the proceeds from this disposition into the purchase of
an operating hotel located in Surfers Paradise, Australia. We intend to convert a portion of this hotel into a new
timeshare destination with an on-site sales location and sell the remainder to a third party.

2014 Compared to 2013

($ in thousands)

Contract Sales

Fiscal Years

2014

2013

Change

% Change

Vacation ownership . . . . . . . . . . $
Residential products . . . . . . . . . .

Total contract sales . . . . . . . $

698,765
14,514

713,279

679,089
14,813

693,902

19,676
(299)

19,377

3%
(2%)

Excluding the impact of the additional week in 2013, total contract sales increased $29.7 million and were

driven by $19.8 million of higher contract sales in our North America segment and $12.7 million of higher
contract sales in our Europe segment, partially offset by $2.8 million of lower contract sales in our Asia Pacific
segment. The $19.4 million increase in total contract sales was driven by $11.3 million of higher vacation
ownership contract sales in our key North America segment and $11.4 million of higher contract sales in our
Europe segment, partially offset by $3.0 million of lower contract sales in our Asia Pacific segment and $0.3
million of lower residential contract sales in our North America segment.

The increase in vacation ownership contract sales in our North America segment reflected a $12.3 million
increase in sales at on-site sales locations, and a $1.0 million decline in sales at off-site (non tour-based) sales locations.
The increase in sales at on-site sales locations reflected a 6 percent increase in VPG to $3,386 in 2014 from $3,200 in
2013, partially offset by a 3 percent decline in the number of tours. The increase in VPG was due to higher pricing, a
0.3 percentage point increase in closing efficiency and an increase in the number of points sold per contract. Excluding
the impact of the additional week in 2013, the number of tours declined 1.5 percent. The decline in the number of tours
continued to be driven by an increase in weeks-based owner utilization of the MVCD program, with owners taking
advantage of the program’s flexibility to take vacations of shorter duration and exercise alternative usage options. This
trend continued to reduce our existing owner tour flow in 2014 because fewer owners were in our resorts, and their
stays in our resorts were shorter, than in prior years. We implemented new programs in 2014 aimed at generating
additional existing owner tours and new marketing programs targeted toward first-time buyers.

Sale of Vacation Ownership Products

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

728,304

713,279

15,025

Reportability . . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Other(1)

(1,652)
(32,999)
(18,324)

(15,502)
(31,272)
(19,017)

Sale of vacation ownership products . . . . . $

675,329

647,488

13,850
(1,727)
693

27,841

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

The higher sales reserve is driven by the higher vacation ownership contract sales and the impact of
higher financing propensity in our North America segment, partially offset by a decrease in the estimated default
activity in our North America segment compared to 2014. Revenue reportability had a $1.7 million negative
impact in 2015, compared to a $15.5 million negative impact in 2014 due to fewer sales meeting the down
payment requirements for revenue reportability and more sales in the rescission period at the end of 2014.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

713,279

693,902

19,377

Reportability . . . . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Other(1)

(15,502)
(31,272)
(19,017)

29,206
(35,931)
(15,893)

(44,708)
4,659
(3,124)

Sale of vacation ownership products . . . . . . . $

647,488

671,284

(23,796)

(4%)

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

The lower vacation ownership notes receivable reserve activity is due to a decrease in estimated default

activity compared to 2013. Revenue reportability was higher in 2013 because the rescission period related to
certain sales had expired, of which $20.0 million related to the impact of extended rescission periods in our
Europe segment in 2013.

Development Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Sale of vacation ownership products . . . . $
Cost of vacation ownership products . . .
Marketing and sales . . . . . . . . . . . . . . . . .

675,329 $
(204,299)
(330,599)

647,488 $
(196,444)
(315,410)

27,841
(7,855)
(15,189)

Development margin . . . . . . . . . . . . . . . . $

140,431 $

135,634 $

4,797

4%
(4%)
(5%)

Development margin percentage . . . . . . .

20.8%

20.9%

(0.1 pts)

The increase in development margin reflected the following:

•

$8.6 million from higher revenue reportability compared to the prior year comparable period;

$4.0 million of lower development expenses due to more costs being capitalized in 2015
compared to 2014 and the disposition of land and related assets in Kauai in the fourth quarter of
2014 and second quarter of 2015 and at The Abaco Club on Winding Bay (“The Abaco Club”),
in the Bahamas, in the third quarter of 2014;

$3.1 million from higher residential contract sales ($5.9 million from the sale of residential
inventory in our Asia Pacific segment in 2015 compared to $2.8 million from the sale of
residential inventory in our North America segment in 2014); and

$0.8 million from higher favorable product cost true-ups ($7.3 million in 2015 compared to
$6.5 million in 2014).

These increases were partially offset by the following:

•

$9.9 million decline from the change in vacation ownership contract sales volume net of higher
direct variable expenses (i.e., cost of vacation ownership products and marketing and sales),
including $14.3 million from higher marketing and sales costs due to an inability to leverage
fixed costs on lower sales volumes in our Europe segment, investment in new programs to help
generate future incremental tour volumes and higher marketing and sales related program costs
in our North America segment, partially offset by $3.3 million from a favorable mix of lower
cost real estate inventory being sold and $1.1 million from the higher vacation ownership
contract sales volume; and

$1.8 million from the higher sales reserve activity in 2015, including $1.0 million in our Asia
Pacific segment and $0.7 million in our North America segment due to the increase in financing
propensity.

The 0.1 percentage point decline in the development margin percentage reflected a 2.2 percentage point decline

due to higher marketing and sales spending and a 0.2 percentage point decline from the higher vacation ownership
notes receivable reserve activity. This was partially offset by a 0.9 percentage point increase due to the favorable
revenue reportability year-over-year, a 0.7 percentage point increase from the lower development expenses, a 0.5
percentage point increase due to a favorable mix of lower cost vacation ownership real estate inventory being sold in
2015, a 0.1 percentage point increase due to the higher favorable product cost true-up activity year-over-year, and a 0.1
percentage point increase from the higher North America vacation ownership contract sales (which have a

development margin that is higher than the company-wide average) and the lower Europe vacation ownership contract
sales (which have a development margin that is lower than the company-wide average).

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Sale of vacation ownership products . .
Cost of vacation ownership products . .
Marketing and sales . . . . . . . . . . . . . . .

647,488
(196,444)
(315,410)

671,284 $
(213,592)
(315,610)

(23,796)
17,148
200

Development margin . . . . . . . . . . . . . .

135,634

142,082 $

(6,448)

(4%)
8%
NM

(5%)

Development margin percentage . . . . .

20.9%

21.2%

(0.3 pts)

The decline in development margin reflected a $26.5 million impact from lower revenue reportability

year-over-year (of which $11.4 million related to the impact of extended rescission periods in our Europe
segment in 2013) and $11.2 million of lower favorable product cost true-ups ($6.5 million in 2014 compared to
$17.7 million in 2013). These declines were partially offset by a $25.4 million increase from higher contract sales
volume net of lower direct variable expenses (i.e., cost of vacation ownership products and marketing and sales)
driven mainly by $22.4 million from a favorable mix of lower cost real estate inventory being sold, $1.8 million
from more efficient marketing and sales spending and $1.2 million from the net impact of the higher contract
sales volume. In addition, the development margin reflected a $4.4 million impact from the decrease in vacation
ownership notes receivable reserve activity and $1.5 million of severance related to the restructuring of sales
locations in Europe in 2013.

The 0.3 percentage point decline in the development margin percentage reflected a nearly 3 percentage

point decrease due to lower revenue reportability year-over-year and a 2 percentage point decrease due to the
lower favorable product cost true-up activity year-over-year. These declines were partially offset by a
3 percentage point increase due to a favorable mix of lower cost vacation ownership real estate inventory being
sold in 2014, a less than 1 percentage point increase due to increased efficiency in marketing and sales spending
and a less than 1 percentage point increase from the lower vacation ownership notes receivable reserve activity.

Resort Management and Other Services Revenues, Expenses and Margin

2015 Compared to 2014

Fiscal Years

5%
5%

($ in thousands)

Management fee revenues . . . . . . . . $
Other services revenues . . . . . . . . . .

Resort management and other

2015

77,612
234,617

2014

Change

% Change

73,936
224,347

3,676
10,270

services revenues . . . . . . . . . . . . .

312,229

298,283

13,946

Resort management and other

services expenses . . . . . . . . . . . . .

(199,895)

(199,258)

(637)

Resort management and other

services margin . . . . . . . . . . . . . . . $

112,334

99,025

13,309

13%

Resort management and other

services margin percentage . . . . .

36.0%

33.2%

2.8 pts

The increase in resort management and other services revenues reflected $4.0 million of higher ancillary
revenues, $3.7 million of higher management fees (net of $1.1 million negative foreign exchange impact in our
Europe segment), $2.4 million of higher resales commission and other revenues, $2.1 million of additional
annual club dues earned in connection with the MVCD program due to the cumulative increase in owners

enrolled in the program and $1.7 million of higher settlement and lien fees due to an increase in the number of
contracts closed and higher assessed lien fees. The increase in ancillary revenues included a $6.9 million increase
in ancillary revenues from food and beverage and golf offerings at our existing resorts, $7.4 million of ancillary
revenues at the operating hotel in Australia acquired in the third quarter of 2015 and $2.0 million of ancillary
revenues at the operating hotel in San Diego acquired in the first quarter of 2015. These increases were partially
offset by an $8.9 million decline due to the disposition of certain assets during the prior year, the closure of
another ancillary operation during the prior year and outsourcing of the operation of a restaurant during the prior
year, as well a $3.4 million decline from the changes in foreign exchange rates in our Europe segment.

The improvement in the resort management and other services margin reflected the changes in revenue,

as well as $0.6 million of lower expenses, including $14.4 million of ancillary expense savings from the
dispositions, closure and outsourcing noted above and $3.7 million from the changes in foreign exchange rates in
our Europe segment, partially offset by $9.8 million of higher ancillary, customer service, settlement and MVCD
program expenses related to the higher revenues from our existing resorts in 2015, $6.1 million from the
operation of the hotel in Australia and $1.6 million from the operation of the hotel in San Diego.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Management fee revenues . . . . . . . $
Other services revenues . . . . . . . . .

73,936
224,347

69,662
221,186

Resort management and other

services revenues . . . . . . . . . . . .

298,283

290,848

Resort management and other

services expenses . . . . . . . . . . . .

(199,258)

(206,593)

4,274
3,161

7,435

7,335

6%
1%

Resort management and other

services margin . . . . . . . . . . . . . . $

99,025

84,255

14,770

17%

Resort management and other

services margin percentage . . . . .

33.2%

29.0%

4.2 pts

The increase in resort management and other services revenues reflected $4.3 million of higher

management fees, $3.0 million of additional annual club dues earned in connection with the MVCD program due
to the cumulative increase in owners enrolled in the program, $2.9 million of higher fees from external exchange
service providers and $1.6 million of higher resales commission, partially offset by $3.5 million of lower
ancillary revenues. The decrease in ancillary revenues included a $3.2 million decline due to the disposition of a
golf course in Orlando, Florida during the first quarter of 2014 and a $1.8 million decline at The Abaco Club in
the Bahamas, partially offset by a $1.5 million increase in ancillary revenues from food and beverage and golf
offerings at our resorts.

The improvement in the resort management and other services margin reflected the increase in revenue,

as well as $5.4 million of lower ancillary expenses due to the dispositions noted above and other operating
improvements and $1.9 million of lower customer service and MVCD program expenses in 2014 compared to
2013.

Financing Revenues, Expenses and Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Interest income . . . . . . . . . . . . . . . . . . . . . $
Other financing revenues . . . . . . . . . . . . .

Financing revenues . . . . . . . . . . . . . . . . . .
Financing expenses . . . . . . . . . . . . . . . . . .
Consumer financing interest expense . . . .

118,020
6,013

124,033
(24,194)
(24,658)

122,551
6,358

128,909
(24,148)
(26,464)

Financing margin . . . . . . . . . . . . . . . . . . . $

75,181

78,297

(4,531)
(345)

(4,876)
(46)
1,806

(3,116)

(4%)
(5%)

(4%)
NM
7%

(4%)

Financing propensity . . . . . . . . . . . . . . . .

50%

44%

The decrease in financing revenues was due to a $48.4 million decline in the average gross vacation

ownership notes receivable balance. This decline reflected our continued collection of existing vacation
ownership notes receivable at a faster pace than our origination of new vacation ownership notes receivable.

The decline in financing margin reflects the lower financing revenues, partially offset by lower consumer

financing interest expense. The lower consumer financing interest expense was due to a lower average interest
rate on the outstanding debt balances ($2.2 million), partially offset by an increase in the outstanding debt
balances of securitized vacation ownership notes receivable and associated interest costs ($0.4 million). The
lower average interest rate reflected the continued pay down of older securitization transactions that carried
higher overall interest rates and the benefit of lower interest rates applicable to our more recently completed
securitizations of vacation ownership notes receivable.

The increase in financing propensity resulted from new programs implemented in the first half of 2015,

which helped increase financing propensity from the 40 to 45 percent average achieved in recent years. As a
result of these programs, we expect that interest income will begin to increase in the near term as new
originations of vacation ownership notes receivable begin to outpace the decline in principal of existing vacation
ownership notes receivables. We are targeting a 50 to 55 percent financing propensity in 2016.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Interest income . . . . . . . . . . . . . . . . . . . $
Other financing revenues . . . . . . . . . . . .

Financing revenues . . . . . . . . . . . . . . . .
Financing expenses . . . . . . . . . . . . . . . .
Consumer financing interest expense . .

122,551
6,358

128,909
(24,148)
(26,464)

134,735
6,571

141,306
(24,594)
(31,375)

Financing margin . . . . . . . . . . . . . . . . . . $

78,297

85,337

(12,184)
(213)

(12,397)
446
4,911

(7,040)

(9%)
(3%)

(9%)
2%
16%

(8%)

Financing propensity . . . . . . . . . . . . . . .

44%

42%

The decrease in financing revenues was due to an $84.3 million decline in the average gross vacation

The decline in financing margin reflects the lower financing revenues, partially offset by lower consumer

financing interest expense due to lower outstanding debt balances of securitized vacation ownership notes
receivable and associated interest costs ($3.0 million) as well as a lower average interest rate ($1.9 million). The

lower average interest rate reflected the continued pay-down of older securitization transactions that carried
higher overall interest rates and the benefit of lower interest rates applicable to our more recently completed
securitizations of vacation ownership notes receivable.

Rental Revenues, Expenses and Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Rental revenues . . . . . . . . . . $
Unsold maintenance fees

— upscale . . . . . . . . . .

Unsold maintenance fees

— luxury . . . . . . . . . . .

Unsold maintenance fees . . .
Other rental expenses . . . . .

312,997

264,307

48,690

(55,397)

(51,328)

(4,069)

(7,733)

(63,130)
(196,599)

(9,639)

(60,967)
(176,953)

1,906

(2,163)
(19,646)

Rental margin . . . . . . . . . . . $

53,268

26,387

26,881

Rental margin percentage . .

17.0%

10.0%

7.0 pts

18%

(8%)

20%

(4%)
(11%)

102%

Transient keys rented(1)
Average transient key rate . . $
Resort occupancy . . . . . . . . .

. . . .

Fiscal Years

2015

1,179,905
219.45
89.0%

2014

Change

% Change

1,114,370
211.68
89.4%

65,535
7.77
(0.4 pts)

6%
4%

(1) Transient keys rented exclude those obtained through the use of plus points.

The increase in rental revenues was due to a company-wide 6 percent increase in transient keys rented

($13.9 million) primarily sourced from a 7 percent increase in available keys, a company-wide 4 percent increase
in average transient rate ($9.2 million) driven by stronger consumer demand, $5.2 million of higher plus points
revenue (which is recognized upon utilization of plus points for stays at our resorts or upon expiration of the
points) and a $4.0 million increase in preview keys and other revenue. In addition, we generated $9.4 million of
revenue from the operation of the hotel in San Diego acquired during the first quarter of 2015 and $7.0 million of
revenue from the operation of the hotel in Australia acquired in the third quarter of 2015.

The increase in rental margin reflected $19.1 million of higher rental revenues net of direct variable
expenses (such as housekeeping), expenses incurred due to owners choosing alternative usage options, and
unsold maintenance fees, as well as $6.5 million of lower charges associated with Marriott Rewards Points issued
prior to the Spin-Off ($2.2 million favorable adjustment in 2015 compared to $4.3 million unfavorable charge in
2014) and the $5.2 million increase in plus points revenue, partially offset by a $2.9 million loss from the
operation of the hotel in San Diego and a $1.0 million loss from the operation of the hotel in Australia.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

264,307

261,533

2,774

Rental revenues . . . . . . . . . . . . $
Unsold maintenance fees —
upscale . . . . . . . . . . . . . .
Unsold maintenance fees —
luxury . . . . . . . . . . . . . . .

Unsold maintenance fees . . . .
Other rental expenses . . . . . . .

(51,328)

(54,307)

(9,639)

(60,967)
(176,953)

(12,180)

(66,487)
(184,363)

Rental margin . . . . . . . . . . . . . $

26,387

10,683

Rental margin percentage . . . .

10.0%

4.1%

21%

8%
4%

147%

2,979

2,541

5,520
7,410

15,704

5.9 pts

Transient keys rented (1)
Average transient key rate . . . $
Resort occupancy . . . . . . . . . .

. . . . .

Fiscal Years

2014

1,114,370
211.68
89.4%

2013

Change

% Change

1,098,755
205.68
90.0%

15,615
6.00
(0.6 pts)

1%
3%

(1) Transient keys rented exclude those obtained through the use of plus points.

The increase in rental revenues was due to a company-wide 3 percent increase in average transient rate

(nearly $6.7 million) and a company-wide 1 percent increase in transient keys rented ($3.2 million), both of
which were driven by stronger consumer demand and a favorable mix of available inventory. These increases
were partially offset by $7.0 million of lower plus points revenue (which is recognized upon utilization of plus
points for stays at our resorts or upon expiration of the points).

The increase in rental margin reflected $23.0 million of higher rental revenues net of direct variable
expenses (such as housekeeping), expenses incurred due to owners choosing alternative usage options, and
unsold maintenance fees, partially offset by the $7.0 million decline in plus points revenue resulting from the
decline in new enrollments in the MVCD program by existing owners (due to the maturity of the MVCD
program) and $0.3 million of higher charges associated with Marriott Rewards Points issued prior to the Spin-Off
($4.3 million unfavorable charge in 2014 compared to $4.0 million unfavorable charge in 2013).

Cost Reimbursements

2015 Compared to 2014

Cost reimbursements increased $9.1 million, or 2.3 percent, over 2014, reflecting an increase of $16.7
million due to higher costs and $5.1 million due to additional managed unit weeks in 2015, partially offset by
$6.5 million of lower costs associated with management contracts that were terminated prior to 2015 and a $6.2
million negative impact from foreign exchange rates in our Europe segment.

2014 Compared to 2013

Cost reimbursements increased $12.1 million, or 3 percent, over the prior year, reflecting an increase of

$12.9 million due to higher costs and $3.0 million due to additional managed unit weeks in 2014, partially offset
by $3.8 million of lower costs associated with two management contracts that were terminated in 2013.

General and Administrative

2015 Compared to 2014

General and administrative expenses increased $4.4 million (from $98.6 million to $103.0 million) and

were driven by $2.7 million of higher personnel related and other costs net of lower depreciation and cost savings
and $1.7 million of costs related to a refurbishment project in 2015.

2014 Compared to 2013

General and administrative expenses decreased $0.8 million (from $99.4 million to $98.6 million) and

included $3.0 million of savings related to organizational and separation related efforts in the human resources,
information technology and finance and accounting organizations, partially offset by $1.1 million of higher
personnel related costs and $1.1 million from the favorable resolution of an international tax (non-income tax)
matter in 2013.

Litigation Settlement

2015

During the first quarter of 2015, we reversed $0.3 million of an accrual from the sale of The Abaco Club

in the Bahamas in the fourth quarter of 2014 because actual costs incurred were lower than expected.

2014

During the fourth quarter of 2014, we completed the sale of The Abaco Club in the Bahamas. As a result

of the sale we recorded a loss of $23.8 million, which is included in the Litigation settlement line on the
Statement of Income. See Footnote No. 5, “Acquisitions and Dispositions,” and Footnote No. 9, “Contingencies
and Commitments,” to our Financial Statements for further information related to this transaction.

During the third quarter of 2014, an agreement in principle was reached to settle an action related to The

Ritz-Carlton Club and Residences, San Francisco (the “RCC San Francisco”). As a result of the agreement in
principle, we recorded a charge of $3.2 million, which is included in the Litigation settlement line on the
Statement of Income. See Footnote No. 9, “Contingencies and Commitments,” to our Financial Statements for
further information related to this pending action.

During the second quarter of 2014, we agreed to settle a dispute with a service provider relating to
services provided to us prior to 2011. The dispute related to certain lawsuits and claims asserted by several
residential unit and fractional interest owners at the RCC San Francisco, a project within our North America
segment, who questioned the adequacy of disclosures made regarding bonds issued for that project under
California’s Mello-Roos Community Facilities Act of 1982 and their payment obligations with respect to such
bonds. In connection with the settlement, we received a one-time payment of $7.6 million after the end of the
second quarter from the service provider, which no longer provides services to us. We recorded a gain of $7.6
million as a result of the settlement, which is included in the Litigation settlement line on the Statement of
Income.

2013

In the first quarter of 2013 we reversed $1.5 million of the charge we recorded in 2012 based upon final

settlement of the lawsuit related to the RCC San Francisco that was pending at the end of 2012. In the fourth
quarter of 2013 we recorded a $4.7 million charge related to the settlement of a lawsuit related to a project in our
Europe segment. The plaintiffs in this lawsuit alleged breach of a partnership agreement and copyright
infringement in connection with renovations at that project.

Organizational and Separation Related Efforts

2015 Compared to 2014 and 2014 Compared to 2013

Following the Spin-Off, Marriott International continued to provide us with certain information

technology, payroll, human resources and other administrative services pursuant to transition services
agreements, most of which we had ceased using as of the end of 2013. In connection with our organizational and
separation related activities, we incurred certain expenses to complete our separation from Marriott International.
These costs primarily related to establishing our own information technology systems and services, independent
payroll and accounts payable functions and reorganizing existing human resources, information technology, and
related finance and accounting organizations to support our stand-alone public company needs. We do not expect
to incur organizational and separation related expenses after 2015.

Organizational and separation related expenses, as reflected on our Statements of Income, continued to

decline on an annual basis and were $1.2 million in 2015, $3.4 million in 2014 and $12.3 million in 2013.

Interest Expense

2015 Compared to 2014

Interest expense increased $1.1 million (from $11.7 million to $12.8 million) due to $2.5 million of lower
capitalized interest costs because we had fewer projects under construction in 2015 compared to 2014 due to the
use of capital efficient structures, partially offset by a $0.7 million decline in expense associated with our liability
for the Marriott Rewards customer loyalty program under our Marriott Rewards Affiliation Agreement with
Marriott International and a $0.7 million decline in other interest expense. Due to the payoff of the liability
associated with the Marriott Rewards customer loyalty program, we will not incur further interest expense
associated with this liability in the future.

2014 Compared to 2013

Interest expense decreased $0.9 million (from $12.6 million to $11.7 million) due to a $1.4 million

decline in expense associated with our liability for the Marriott Rewards customer loyalty program under the
Marriott Rewards Agreement and a $1.0 million decline in other interest expense, partially offset by $1.5 million
of lower capitalized interest costs.

Royalty Fee

2015 Compared to 2014

Royalty fee expense decreased $1.0 million in 2015 (from $60.0 million to $59.0 million), and included
$2.0 million of lower costs due to a higher portion of sales of pre-owned inventory, which carry a lower royalty
fee as compared to initial sales of our real estate inventory (one percent versus two percent), partially offset by
$1.0 million of higher costs due to higher closings in 2015. Royalty fee expense decreased despite higher sales of
our real estate inventory, as the $28.4 million of residential contract sales in our Asia Pacific segment were
unbranded and did not require us to pay a royalty fee.

2014 Compared to 2013

Royalty fee expense decreased $2.0 million in 2014 (from $62.0 million in 2013 to $60.0 million in

2014), and included $1.0 million of lower costs due to a higher portion of sales of pre-owned inventory, which
carries a lower royalty fee as compared to initial sales of our real estate inventory (one percent versus two
percent), and $1.0 million of lower costs due to the additional week in 2013.

Impairment

2015 Compared to 2014 and 2014 Compared to 2013

In 2015, we recorded an impairment charge of $0.3 million associated with a building at one of our
projects in our North America segment. In 2014, we recorded impairment charges of $0.8 million associated with
a building as a result of a termination of a land lease at one of our projects in our North America segment,
$0.4 million associated with sales center assets in our North America segment and $0.2 million associated with
the closure of an ancillary operation in our North America segment. In 2013, we recorded an impairment charge
of $1.5 million related to a leased golf course at a project in our Europe segment.

Gains and Other Income

2015 Compared to 2014 and 2014 Compared to 2013

Gains and other income of $9.6 million during 2015 included an $8.7 million gain on the disposition of

undeveloped land in Kauai, Hawaii and a $0.9 million gain from the disposition of a golf course and adjacent
undeveloped land in Orlando, Florida. We disposed of the golf course and undeveloped land in Orlando, Florida
in the first quarter of 2014 and, as a condition of the sale, we continued to operate the golf course through the end
of the first quarter of 2015 at our own risk. We utilized the performance of services method to record a gain of
$3.1 million over the period during which we operated the golf course, $0.9 million of which was recorded in
2015.

Gains and other income of $5.2 million during 2014 included a $2.9 million gain on the disposition of
undeveloped and partially developed land, an operating golf course and related assets, in Kauai, Hawaii and a
$2.2 million gain related to the disposition of the golf course and adjacent undeveloped land in Orlando, Florida.
Gains and other income of $0.9 million during 2013 related to a gain on the disposition of a multi-family parcel
in St. Thomas, U.S. Virgin Islands.

Equity in Earnings

2015 Compared to 2014 and 2014 Compared to 2013

Equity in earnings, which relates to our investment in a joint venture in our Asia Pacific segment, was

$0.2 million during 2015, $0.1 million during 2014 and $0.2 million during 2013.

Impairment Reversals (Charges) on Equity Investment

2015 Compared to 2014 and 2014 Compared to 2013

There were no impairment charges or reversals on equity investment in 2015. In 2014, we reduced our

accrual by $0.5 million for remaining costs we expected to incur in connection with an interest in an equity
method investment in a joint venture project in our North America segment. In 2013, we increased our accrual by
$8.7 million for remaining costs we expected to incur in connection with an interest in an equity method
investment in a joint venture project in our North America segment. This was partially offset by $7.4 million of
earnings attributed to a partial repayment of previously reserved receivables due from the same joint venture.

Other

2015 Compared to 2014 and 2014 Compared to 2013

In 2015, we incurred $5.7 million of transaction related costs associated with the completion of our
purchase of an operating hotel located in Surfers Paradise, Australia, which was required to be accounted for as a
business combination for which transaction costs are expensed. See Footnote No. 8, “Contingencies and
Commitments,” to our Financial Statements for further information related to this transaction. In addition, we

incurred $2.1 million associated with potential acquisition opportunities and $0.6 million of costs associated with
the New York and the South Beach area of Miami Beach transactions discussed in Footnote No. 19, “Subsequent
Events”, to our Financial Statements. We did not incur any transaction related costs during 2014 or 2013.

Income Tax

Our effective tax rates for fiscal years 2015, 2014 and 2013 were 40.53%, 46.37% and 39.23%,
respectively. Our tax rate is affected by recurring items, such as non-deductible expenses, tax rates in foreign
jurisdictions and the relative amount of income we earn in different jurisdictions, which, with the exception of
the loss on the disposition of The Abaco Club in the Bahamas in 2014, we expect to be fairly consistent in the
near term. It is also affected by discrete items that may occur in any given year, but are not consistent from year
to year. The following is a description of the items impacting our effective tax rate during the current and prior
two years.

2015 Compared to 2014

Our provision for income taxes increased $13.9 million (from $69.8 million to $83.7 million) due to

higher consolidated income before income taxes in the United States and an increase in tax from foreign
jurisdictions.

2014 Compared to 2013

Our provision for income taxes increased $18.3 million (from $51.5 million to $69.8 million) due to
higher consolidated income before income taxes and the change in the geographic composition of income before
income taxes. We had lower income before income taxes in our foreign jurisdictions during 2014, as compared to
2013, due to the loss on the disposition of The Abaco Club in the Bahamas during the fourth quarter of 2014 and
an increase in the income before income taxes attributable to the United States.

EBITDA

EBITDA, a financial measure that is not prescribed or authorized by GAAP, is defined as earnings, or net

income, before interest expense (excluding consumer financing interest expense), provision for income taxes,
depreciation and amortization. For purposes of our EBITDA calculation, we do not adjust for consumer financing
interest expense because the associated debt is secured by vacation ownership notes receivable that have been
sold to bankruptcy remote special purpose entities and that is generally non-recourse to us. Further, we consider
consumer financing interest expense to be an operating expense of our business.

We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to
service debt, fund capital expenditures and expand our business. We also use it, as do analysts, lenders, investors
and others, because it excludes certain items that can vary widely across different industries or among companies
within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt
levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among
companies. The tax positions of companies can also vary because of their differing abilities to take advantage of
tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax
rates and provision for income taxes can vary considerably among companies. EBITDA also excludes
depreciation and amortization because companies utilize productive assets of different ages and use different
methods of both acquiring and depreciating productive assets. These differences can result in considerable
variability in the relative costs of productive assets and the depreciation and amortization expense among
companies. EBITDA has limitations and should not be considered in isolation or as a substitute for performance
measures calculated in accordance with GAAP. In addition, other companies in our industry may calculate
EBITDA differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure.
The table below shows our EBITDA calculation and reconciles that measure with Net income.

The table below shows our EBITDA calculation and reconciles that measure with Net income.

($ in thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . .
Tax provision . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . .

2015

122,799
12,810
83,698
22,217

Fiscal Years

2014

80,756
11,692
69,835
18,682

2013

79,730
12,574
51,474
22,595

EBITDA . . . . . . . . . . . . . . . . . . . . . . . .

241,524

180,965

166,373

Business Segments

Our business is grouped into three reportable business segments: North America, Europe and Asia

Pacific. See Footnote No. 17, “Business Segments,” to our Financial Statements for further information on our
segments, and “Business—Segments” for further details regarding our individual properties by segment.

As of January 1, 2016, our portfolio consisted of the following 61 properties by segment:

U.S. (1)

Non-U.S.

Total

North America(2)
. . . . . . . .
Europe . . . . . . . . . . . . . . . .
. . . . . . . . . .
Asia Pacific(3)

Total

. . . . . . . . . . . .

47
—
—

5
5
4

52
5
4

(1)

(2)

(3)

Includes properties located in the 48 contiguous states, Hawaii and Alaska.

Includes an operating hotel in San Diego, California acquired during the first quarter of
2015, which is operated by a third party, that we intend to convert, in its entirety, into
vacation ownership interests for future use in our MVCD program.

Includes a 329 room operating hotel in Surfers Paradise, Australia acquired during the third
quarter of 2015, which is operated by a third party. We intend to convert a portion of this
hotel into vacation ownership interests for future use in our Asia Pacific segment, and sell
the remaining downsized hotel to a third party.

North America

The following discussion presents an analysis of our results of operations for 2015, 2014 and 2013.

($ in thousands)

Revenues

2015

Fiscal Years

2014

2013

Sale of vacation ownership products . . . $
Resort management and other

services . . . . . . . . . . . . . . . . . . . . . . . .
Financing . . . . . . . . . . . . . . . . . . . . . . . .
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . .

586,774 $

577,781 $

583,038

272,596
115,738
277,348
369,467

262,727
120,111
234,668
354,270

255,190
132,403
232,353
341,832

Total revenues . . . . . . . . . . . . . . . .

1,621,923

1,549,557

1,544,816

($ in thousands)

Expenses

2015

Fiscal Years

2014

2013

Cost of vacation ownership products . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . .
Resort management and other services . . . .
Rental
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Litigation settlement . . . . . . . . . . . . . . . . . .
Organizational and separation related . . . . .
Royalty fee . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment
. . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . . . . .

164,200
288,260
166,233
225,043
(370)
532
7,971
324
369,467

170,012
272,302
168,764
209,371
19,244
894
8,825
1,381
354,270

184,554
269,569
175,838
221,875
(1,503)
42
9,774
—
341,832

Total expenses . . . . . . . . . . . . . . . . . . .

1,221,660

1,205,063

1,201,981

Gains and other income . . . . . . . . . . . . . . . .
Equity in earnings . . . . . . . . . . . . . . . . . . . .
Impairment reversals (charges) on equity

investment . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,600
200

—
(622)

5,350
205

540
—

922
192

(1,254)
—

Segment financial results . . . . . . . . . . $

409,441 $

350,589 $

342,695

Contract Sales

2015 Compared to 2014

($ in thousands)

Contract Sales

Fiscal Years

2015

2014

Change

% Change

Vacation ownership . . . . . . . . . .
Residential products . . . . . . . . . .

Total contract sales . . . . . . .

631,403
—

631,403

619,688
14,514

634,202

11,715
(14,514)

(2,799)

2%
(100%)

The increase in vacation ownership contract sales in our North America segment reflected a $14.5 million

increase in sales at on-site sales locations and a $3.0 million increase in fractional sales as we continue to sell
through remaining luxury inventory, partially offset by a $5.8 million decrease in sales at off-site (non tour-based)
sales locations. The increase at on-site sales locations included a $3.7 million decline in sales to Latin American
customers. The decline in sales at off-site sales locations included $9.6 million of lower sales in our Latin American
sales channels as a result of the strengthening of the U.S. dollar in the second half of 2015, partially offset by $3.8
million of higher contract sales at our other off-site sales locations.

The increase in sales at on-site sales locations reflected a 2.5 percent increase in the number of tours. VPG

remained flat at $3,386 in both years, and was negatively impacted in the second half of 2015 by the strength of the
U.S. dollar, primarily impacting Latin American customers purchasing in the U.S., as well as Japanese customers
purchasing at our resort in Oahu. VPG benefitted from higher pricing and a 0.1 percentage point increase in closing
efficiency, which was offset by a decrease in the number of points sold per contract due to the increase in sales to
existing owners in 2015, as existing owners buy fewer points per contract than new owners. The increase in the
number of tours was driven by an increase in existing owner tours. In the first quarter of 2015, we announced
enhancements to our owner recognition levels that created a near-term incentive for existing owners to purchase
additional points prior to the end of the second quarter of 2015, which resulted in an increase in existing owner
tours. This was partially offset by the decrease in the number of tours in the third quarter of 2015 as a result of
hurricane and threatened hurricane activity.

The decline in residential contract sales was due to the sale of $14.5 million of excess residential

inventory in the prior year comparable period.

2014 Compared to 2013

($ in thousands)

Contract Sales

Fiscal Years

2014

2013

Change

% Change

Vacation ownership . . . . . . . . . . . . . $
Residential products . . . . . . . . . . . . .

619,688
14,514

Total contract sales . . . . . . . . . . $

634,202

608,364
14,813

623,177

11,324
(299)

11,025

2%
(2%)

Excluding the impact of the additional week in 2013, contract sales increased $19.8 million in our North
America segment. The increase in vacation ownership contract sales in our North America segment reflected a
$12.3 million increase in sales at on-site sales locations, and a $1.0 million decline in sales at off-site (non tour-
based) sales locations. The increase in sales at on-site sales locations reflected a 6 percent increase in VPG to
$3,386 in 2014 from $3,200 in 2013, partially offset by a 3 percent decline in the number of tours. The increase
in VPG was due to higher pricing, a 0.3 percentage point increase in closing efficiency and an increase in the
number of points sold per contract. Excluding the impact of the additional week in 2013, the number of tours
declined 1.5 percent. The decline in the number of tours continued to be driven by an increase in weeks-based
owner utilization of the MVCD program, with owners taking advantage of the program’s flexibility to take
vacations of shorter duration and exercise alternative usage options. This trend continued to reduce our existing
owner tour flow in 2014 because fewer owners were in our resorts, and their stays in our resorts were shorter,
than in prior years. We implemented new programs in 2014 aimed at generating additional existing owner tours
and new marketing programs targeted toward first-time buyers.

Sale of Vacation Ownership Products

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

631,403

634,202

(2,799)

Reportability . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Other(1)

(841)
(26,077)
(17,711)

(12,911)
(24,753)
(18,757)

12,070
(1,324)
1,046

Sale of vacation ownership products . . . . $

586,774

577,781

8,993

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership

products revenue.

Revenue reportability had a $0.8 million negative impact in 2015, compared to a $12.9 million negative
impact in 2014 due to fewer sales meeting the down payment requirements for revenue reportability and more
sales in the rescission period at the end of 2014. The higher sales reserve is driven by the higher vacation
ownership contract sales and the impact of higher financing propensity, partially offset by a decrease in the
estimated default activity compared to 2014.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

634,202

623,177

11,025

Reportability . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Other(1)

(12,911)
(24,753)
(18,757)

5,356
(29,699)
(15,796)

(18,267)
4,946
(2,961)

Sale of vacation ownership products . . . $

577,781

583,038

(5,257)

(1%)

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership

products revenue.

The lower vacation ownership notes receivable reserve activity is due to a decrease in estimated default

activity compared to 2013.

Development Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Sale of vacation ownership products . . . $
Cost of vacation ownership products . . .
Marketing and sales . . . . . . . . . . . . . . . .

586,774
(164,200)
(288,260)

577,781
(170,012)
(272,302)

8,993
5,812
(15,958)

Development margin . . . . . . . . . . . . . . . . $

134,314

135,467

(1,153)

2%
3%
(6%)

(1%)

Development margin percentage . . . . . .

22.9%

23.4%

(0.5 pts)

The decrease in development margin reflected the following:

•

$5.0 million from higher vacation ownership contract sales volume net of higher direct variable
expenses (i.e., cost of vacation ownership products and marketing and sales), including $10.3
million from higher marketing and sales costs due to investment in new programs to help generate
future incremental tour volumes and higher marketing and sales related program costs, partially
offset by $2.8 million from the higher vacation ownership contract sales and $2.5 million from a
favorable mix of lower cost vacation ownership real estate inventory being sold;

$2.8 million from lower residential contract sales (no residential sales in 2015 compared to $14.5
million from the sale of residential inventory in 2014);

$1.3 million from lower favorable product cost true-ups ($5.0 million in 2015 compared to $6.3
million in 2014); and

$0.7 million from higher sales reserve activity in 2015 due to the increase in financing propensity.

These decreases were partially offset by $7.4 million from higher revenue reportability compared to the
prior year comparable period and $1.2 million of lower development expenses primarily from the disposition of
land and related assets in Kauai in the fourth quarter of 2014 and second quarter of 2015, and The Abaco Club in
the Bahamas in the third quarter of 2014.

The 0.5 percentage point decline in the development margin percentage reflected a 1.8 percentage point

decline due to higher marketing and sales spending and a 0.2 percentage point decrease due to the lower
favorable product cost true-up activity year-over-year. These declines were partially offset by a 0.9 percentage

point increase due to the favorable revenue reportability year-over-year, a 0.4 percentage point increase due to a
favorable mix of lower cost vacation ownership real estate inventory being sold in 2015, and a 0.2 percentage
point increase due to the lower development expenses as a result of the disposition of land and assets noted
above.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Sale of vacation ownership products . . $
Cost of vacation ownership products . .
Marketing and sales . . . . . . . . . . . . . .

577,781
(170,012)
(272,302)

583,038
(184,554)
(269,569)

(5,257)
14,542
(2,733)

Development margin . . . . . . . . . . . . . $

135,467

128,915

6,552

(1%)
8%
(1%)

Development margin percentage . . . .

23.4%

22.1%

1.3 pts

The increase in development margin reflected a $23.7 million increase from higher contract sales volume

net of lower direct variable expenses (i.e., cost of vacation ownership products and marketing and sales) driven
by $22.8 million from a favorable mix of lower cost real estate inventory being sold and $0.8 million from the
net impact of the higher contract sales volume. Additionally, the increase in development margin reflected a
$3.9 million decrease in vacation ownership notes receivable reserve activity. These increases were partially
offset by $11.0 million of lower revenue reportability compared to 2013 and $9.9 million of lower favorable
product cost true-ups ($6.3 million in 2014 compared to $16.2 million in 2013).

The 1.3 percentage point improvement in the development margin percentage reflected a 4 percentage

point increase due to a favorable mix of lower cost vacation ownership real estate inventory being sold in 2014
and a less than 1 percentage point increase from the lower vacation ownership notes receivable reserve activity,
partially offset by a 2 percentage point decrease due to the lower favorable product cost true-up activity year-
over-year and a 1 percentage point decrease due to lower revenue reportability year-over-year.

Resort Management and Other Services Revenues, Expenses and Margin

2015 Compared to 2014

($ in thousands)

Fiscal Years

2015

Management fee revenues . . . . . . . . $
Other services revenues . . . . . . . . . .

68,770
203,826

2014

64,324
198,403

Resort management and other

services revenues . . . . . . . . . . . . .

272,596

262,727

Resort management and other

services expenses . . . . . . . . . . . . .

(166,233)

(168,764)

Resort management and other

Change

% Change

4,446
5,423

9,869

2,531

7%
3%

services margin . . . . . . . . . . . . . . $

106,363

93,963

12,400

13%

Resort management and other

services margin percentage . . . . . .

39.0%

35.8%

3.2 pts

The increase in resort management and other services revenues reflected $4.4 million of higher

management fees, $2.1 million of additional annual club dues earned in connection with the MVCD program due
to the cumulative increase in owners enrolled in the program, $2.0 million of higher resales commission and
other revenues, $1.7 million of higher settlement and lien fees due to an increase in the number of contracts
closed and higher assessed lien fees and $1.0 million of higher fees from external exchange service providers,
partially offset by $1.3 million of lower ancillary revenues. The decrease in ancillary revenues included an

$8.9 million decline due to the disposition of certain assets during the prior year, the closure of another ancillary
operation during the prior year and outsourcing the operation of a restaurant during the prior year, partially offset
by a $5.6 million increase in ancillary revenues from food and beverage and golf offerings at our existing resorts
and $2.0 million of ancillary revenues at the operating hotel in San Diego acquired in the first quarter of 2015.

The improvement in the resort management and other services margin reflected the changes in revenue,

as well as $2.5 million of lower expenses, including $14.4 million of ancillary expense savings from the
dispositions, closure and outsourcing noted above, partially offset by $10.3 million of higher ancillary, customer
service, settlement and MVCD program expenses related to the higher revenues from our existing resorts in 2015
and $1.6 million from the operation of the hotel in San Diego.

2014 Compared to 2013

($ in thousands)

Fiscal Years

2014

Management fee revenues . . . . . . . . . $
Other services revenues . . . . . . . . . . .

64,324
198,403

2013

60,587
194,603

Resort management and other services
revenues . . . . . . . . . . . . . . . . . . . . .
Resort management and other services
expenses . . . . . . . . . . . . . . . . . . . . .

Resort management and other services

262,727

255,190

(168,764)

(175,838)

Change

% Change

3,737
3,800

7,537

7,074

6%
2%

margin . . . . . . . . . . . . . . . . . . . . . . . $

93,963

79,352

14,611

18%

Resort management and other services
margin percentage . . . . . . . . . . . . . .

35.8%

31.1%

4.7 pts

The increase in resort management and other services revenues reflected $3.7 million of higher

management fees, $3.0 million of additional annual club dues earned in connection with the MVCD program due
to the cumulative increase in owners enrolled in the program, $3.0 million of higher fees from external exchange
service providers and $1.3 million of higher resales commission and other revenues, partially offset by $3.5
million of lower ancillary revenues. The decrease in ancillary revenues included a $3.2 million decline due to the
disposition of a golf course in Orlando, Florida during the first quarter of 2014 and a $1.8 million decline at The
Abaco Club in the Bahamas, partially offset by a $1.5 million increase in ancillary revenues from food and
beverage and golf offerings at our resorts.

The improvement in the resort management and other services margin reflected the increases in revenue,

as well as $5.4 million of lower ancillary expenses due to the dispositions described above and other operating
improvements and $1.7 million of lower customer service and MVCD program expenses in 2014 compared to
2013.

Financing Revenues, Expenses and Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Interest income . . . . . . . . . . . . . .
Other financing revenues . . . . . .

Financing revenues . . . . . . . . . . .

Financing propensity . . . . . . . . . .

109,884
5,854

115,738

49%

113,958
6,153

120,111

42%

(4,074)
(299)

(4,373)

(4%)
(5%)

(4%)

The decrease in financing revenues was due to lower interest income from a lower outstanding vacation

The increase in financing propensity resulted from new programs implemented in the first half of 2015,

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Interest income . . . . . . . . . . . . .
Other financing revenues . . . . .

Financing revenues . . . . . . . . . .

Financing propensity . . . . . . . . .

113,958
6,153

120,111

42%

125,981
6,422

132,403

40%

(12,023)
(269)

(12,292)

(10%)
(4%)

(9%)

The decrease in financing revenues was due to lower interest income from a lower outstanding vacation

Rental Revenues, Expenses and Margin

We hold a significant amount of luxury inventory in the North America segment and as such, have a

corresponding obligation to pay maintenance fees on the real estate interests we own. Because vacation
ownership interests in our luxury inventory often consist of multiple weeks and require upscale fit and finishes
and levels of service to meet Ritz-Carlton brand standards, maintenance fees for luxury inventory are much
higher than for our other inventory. We mitigate the maintenance fee expense to the extent possible through open
market rental and internal sales-related marketing programs; however, our opportunities to rent this inventory are
limited due to contractual and legal restrictions.

2015 Compared to 2014

($ in thousands)

Rental revenues . . . . . . . . . . . . . . . . . . . . . $
Unsold maintenance fees — upscale . .
Unsold maintenance fees — luxury . . .

Unsold maintenance fees . . . . . . . . . . . . .
Other rental expenses . . . . . . . . . . . . . . . .

Fiscal Years

2015

277,348
(51,606)
(7,733)

(59,339)
(165,704)

2014

234,668
(45,722)
(9,639)

(55,361)
(154,010)

Rental margin . . . . . . . . . . . . . . . . . . . . . . $

52,305

25,297

Rental margin percentage . . . . . . . . . . . . .

18.9%

10.8%

Change

% Change

42,680
(5,884)
1,906

(3,978)
(11,694)

27,008

8.1 pts

18%
(13%)
20%

(7%)
(8%)

107%

Fiscal Years

2015

2014

Change

% Change

Transient keys rented (1) . . . . . . . . . . . . .
Average transient key rate . . . . . . . . . . . . $
Resort occupancy . . . . . . . . . . . . . . . . .

1,088,206
214.47
90.2%

1,022,846
204.38
90.3%

65,360
10.09
(0.1 pts)

6%
5%

(1)

Transient keys rented exclude those obtained through the use of plus points.

The increase in rental revenues was due to a 6 percent increase in transient keys rented ($13.4 million)

primarily sourced from a 7 percent increase in available keys, a 5 percent increase in average transient rate
($11.0 million) driven by stronger consumer demand, $5.2 million of higher plus points revenue (which is
recognized upon utilization of plus points for stays at our resorts or upon expiration of the points) and a $3.6
million increase in preview keys and other revenue. In addition, we generated $9.4 million of revenue from the
operation of the hotel in San Diego.

The increase in rental margin reflected $18.2 million of higher rental revenues net of direct variable
expenses (such as housekeeping), expenses incurred due to owners choosing alternative usage options, and
unsold maintenance fees, as well as $6.5 million of lower charges associated with Marriott Rewards Points issued
prior to the Spin-Off ($2.2 million favorable adjustment in 2015 compared to $4.3 million unfavorable charge in
2014) and the $5.2 million increase in plus points revenue, partially offset by a $2.9 million loss from the
operation of the hotel in San Diego acquired during the first quarter of 2015.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Rental revenues . . . . . . . . . . . . . . . . . . . . . . . $
Unsold maintenance fees — upscale . .
Unsold maintenance fees — luxury . . .

Unsold maintenance fees . . . . . . . . . . . . . . .
Other rental expenses . . . . . . . . . . . . . . . . . .

234,668
(45,722)
(9,639)

(55,361)
(154,010)

232,353
(48,178)
(12,180)

(60,358)
(161,517)

2,315
2,456
2,541

4,997
7,507

1%
5%
21%

8%
5%

Rental margin . . . . . . . . . . . . . . . . . . . . . . . . $

25,297

10,478

14,819

141%

Rental margin percentage . . . . . . . . . . . . . . .

10.8%

4.5%

6.3 pts

Fiscal Years

2014

2013

Change

% Change

Transient keys rented (1)
. . . .
Average transient key rate . .
Resort occupancy . . . . . . . . .

1,022,846
204.38
90.3%

1,005,851
199.65
90.7%

16,995
4.73
(0.4 pts)

2%
2%

(1)

Transient keys rented exclude those obtained through the use of plus points.

The increase in rental revenues was due to a 2 percent increase in average transient rate (nearly $4.8

million) and a 2 percent increase in transient keys rented ($3.4 million), both of which were driven by stronger
consumer demand and a favorable mix of available inventory, partially offset by $7.0 million of lower plus
points revenue (which is recognized upon utilization of plus points for stays at our resorts or upon expiration of
the points).

The increase in rental margin reflected $22.1 million of higher rental revenues net of direct variable
expenses (such as housekeeping), expenses incurred due to owners choosing alternative usage options, and
unsold maintenance fees, partially offset by the $7.0 million decline in plus points revenue resulting from the
decline in new enrollments in the MVCD program by existing owners (due to the maturity of the MVCD
program) and $0.3 million of higher charges associated with Marriott Rewards Points issued prior to the Spin-Off
($4.3 million unfavorable charge in 2014 compared to $4.0 million unfavorable charge in 2013).

Europe

The following discussion presents an analysis of our results of operations for 2015, 2014 and 2013.

($ in thousands)

Revenues

2015

Fiscal Years

2014

2013

Sale of vacation ownership products . . . $
Resort management and other services . . .
Financing . . . . . . . . . . . . . . . . . . . . . . . .
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . .

28,963
27,643
3,949
20,679
33,348

35,062
31,119
4,300
21,997
39,205

54,790
31,288
4,291
21,851
37,057

Total revenues . . . . . . . . . . . . . . . . .

114,582

131,683

149,277

Expenses

Cost of vacation ownership products . . .
Marketing and sales . . . . . . . . . . . . . . . .
Resort management and other services . . .
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . .
Litigation settlement . . . . . . . . . . . . . . . .
Royalty fee . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . .

6,509
21,974
22,968
15,431
—
464
—
33,348

8,711
24,401
27,319
16,161
—
631
—
39,205

15,479
26,036
28,040
17,244
4,733
653
1,471
37,057

Total expenses . . . . . . . . . . . . . . . . .

100,694

116,428

130,713

Losses and other expense . . . . . . . . . . . .

(14)

(176)

—

Segment financial results . . . . . . . . $

13,874

15,079

18,564

Overview

In our Europe segment, we are focused on selling our existing projects and managing existing resorts. We

do not have any current plans for new development in this segment.

Contract Sales

2015 Compared to 2014

($ in thousands)

Contract Sales

Fiscal Years

2015

2014

Change

% Change

Vacation ownership . . . . . . . . . $

Total contract sales . . . . . . $

34,376

45,171

(10,795)

(24%)

The decrease in contract sales was driven by $9.6 million of lower sales from our Middle East sales
location due to large multi-week purchases in 2014 that did not recur in 2015, as well as higher cancellations and
fewer tours in 2015 and $4.1 million from the changes in foreign exchange rates, partially offset by $2.9 million
of stronger fractional sales at our project in London, United Kingdom.

2014 Compared to 2013

($ in thousands)

Contract Sales

Fiscal Years

2014

2013

Change

% Change

Vacation ownership . . . . . . . . . $

Total contract sales . . . . . . $

45,171

33,811

11,360

34%

The increase in contract sales reflected stronger sales from our Middle East sales location ($6.5 million)
and from our onsite sales locations in Spain ($0.5 million), stronger sales of fractional interests at our project in
London, United Kingdom ($1.4 million) and higher cancellation activity in 2013 associated with extended
rescission periods in this segment ($3.0 million).

Sale of Vacation Ownership Products

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

Reportability . . . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . .

Sale of vacation ownership products . . . . . . . . $

34,376

45,171

(10,795)

(24%)

(1,144)
(3,680)
(589)
28,963

(5,274)
(4,537)
(298)
35,062

4,130
857
(291)
(6,099)

(17%)

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

Revenue reportability had a smaller negative impact in 2015 compared to 2014 because more sales met

the down payment requirement for revenue recognition purposes prior to the end of 2015 compared to 2014.

2014 Compared to 2013

($ in thousands)

Contract sales . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

Reportability . . . . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . . . . .
Other(1)
. . . . . . . . . . . . . . . . . . . . . . . . .

Sale of vacation ownership products . . . . . . . . $

Fiscal Years

2014

2013

Change

% Change

45,171

33,811

11,360

34%

(5,274)
(4,537)
(298)
35,062

24,185
(3,159)
(47)
54,790

(29,459)
(1,378)
(251)
(19,728)

(36%)

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

Revenue reportability was higher in 2013 because the rescission period related to certain sales had expired

during 2013, of which $20.0 million related to the expiration of extended rescission periods in this segment.

Development Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Sale of vacation ownership products . . . . . . . . . $
Cost of vacation ownership products . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . .
Development margin . . . . . . . . . . . . . . . . . . . . . $

Development margin percentage . . . . . . . . . . . .

28,963
(6,509)
(21,974)
480

1.7%

35,062
(8,711)
(24,401)
1,950

5.6%

(6,099)
2,202
2,427
(1,470)

3.9 pts

(17%)
25%
10%
(75%)

The decrease in development margin reflected $4.3 million from the lower vacation ownership contract
sales volume net of lower direct variable expenses (i.e., cost of vacation ownership products and marketing and
sales) due in part to less efficient marketing and sales spending at our existing sales locations due to an inability
to leverage fixed costs on the lower sales volumes. These decreases were partially offset by $2.8 million from the
higher revenue reportability year-over-year.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Sale of vacation ownership products . . . . . . . . . . . $
Cost of vacation ownership products . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . .

35,062
(8,711)
(24,401)

$ 54,790
(15,479)
(26,036)

(19,728)
6,768
1,635

Development margin . . . . . . . . . . . . . . . . . . . . . . $

1,950

13,275

(11,325)

(36%)
44%
6%

(85%)

Development margin percentage . . . . . . . . . . . . .

5.6%

24.2%

18.6 pts

The decrease in development margin reflected $17.0 million from lower revenue reportability year-over-
year (of which $11.4 million related to the impact of extended rescission periods in this segment), partially offset
by a $4.2 million increase from higher vacation ownership contract sales volume net of lower direct variable
expenses (i.e., cost of vacation ownership products and marketing and sales) due to more efficient marketing and
sales spending, as well as $1.5 million of severance charges related to the restructuring of sales locations in 2013.

Asia Pacific

The following discussion presents an analysis of our results of operations for 2015, 2014 and 2013.

($ in thousands)

Revenues

Sale of vacation ownership products . . . . . . . . $
Resort management and other services . . . . . .
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . .

Expenses

Cost of vacation ownership products . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . .
Resort management and other services . . . . . .
Rental
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty fee . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost reimbursements . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . .

Losses and other expense . . . . . . . . . . . . . . . .
Equity in losses . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015

Fiscal Years

2014

2013

59,592
11,990
4,346
14,970
3,060

93,958

26,877
20,365
10,694
19,255
684
3,060

80,935

(29)
(13)
(5,718)

34,645
4,437
4,498
7,642
3,320

54,542

8,318
18,707
3,175
12,388
686
3,320

46,594

(9)
(131)
—

33,456
4,370
4,612
7,329
5,828

55,595

6,826
20,005
2,715
11,731
800
5,828

47,905

—
(2)
—

Segment financial results . . . . . . . . . . . . . $

7,263

7,808

7,688

Overview

In our Asia Pacific segment, we continue to identify opportunities for development margin improvement.
Our on-site sales locations are more efficient sales channels than our off-site sales locations and we plan to focus

on future inventory acquisitions with strong on-site sales locations. Due to operational constraints, regulatory
conditions and certain other conditions related to our 18 units in Macau, we decided not to sell these units
through our Marriott Vacation Club, Asia Pacific points program, and instead disposed of the units as whole
ownership residential units during the first quarter of 2015. In the third quarter of 2015, we reinvested the
proceeds from this disposition into the purchase of an operating hotel located in Surfers Paradise, Australia. We
intend to convert a portion of this hotel into a new timeshare destination with an on-site sales location and sell the
remainder to a third party.

Contract Sales

2015 Compared to 2014

($ in thousands)

Contract Sales

Fiscal Years

2015

2014

Change

% Change

Vacation ownership . . . . . . . . . . $
Residential products . . . . . . . . .

Total contract sales . . . . . . . . $

34,105
28,420

62,525

33,906
—

33,906

199
28,420

28,619

1%
NM

84%

The increase in vacation ownership contract sales reflected an increase in the cancellations rate in 2014

due to changes in the Singaporean timeshare regulations and political turmoil in Thailand, partially offset by
lower sales to the existing owner base and the negative impact of local currency devaluations in 2015.

The $28.4 million of residential contract sales was from the disposition of the Macau inventory discussed

above.

2014 Compared to 2013

($ in thousands)

Contract Sales

Fiscal Years

2014

2013

Change

% Change

Vacation ownership . . . . . . . . . . . $

Total contract sales . . . . . . . . . . $

33,906

36,914

(3,008)

(8%)

The decline in contract sales reflected a 9 percent decrease in the number of tours, which were impacted

by the increase in the cancellations rate due to the change in the Singaporean timeshare regulations and continued
political turmoil in Thailand, offset by an $18 increase in VPG.

Sale of Vacation Ownership Products

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

62,525

33,906

28,619

84%

Reportability . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Other(1)

333
(3,242)
(24)

2,683
(1,982)
38

(2,350)
(1,260)
(62)

Sale of vacation ownership products . . . . $

59,592

34,645

24,947

72%

(1)

Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products
revenue.

The lower favorable reportability in 2015 is due to the recognition of sales in 2014 that were previously in

the rescission period as a result of the change in timeshare legislation in Singapore. The increase in the sales
reserve is due to an increase in the estimated default activity in 2015 compared to 2014.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Contract sales . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue recognition adjustments:

33,906

36,914

(3,008)

(8%)

Reportability . . . . . . . . . . . . . . . . . . . . . .
Sales reserve . . . . . . . . . . . . . . . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,683
(1,982)
38

(335)
(3,073)
(50)

Sale of vacation ownership products . . . . . . . . $

34,645

33,456

3,018
1,091
88

1,189

(1)

Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products
revenue.

The favorable reportability is due to the recognition of sales in 2014 that were previously in the rescission

period as a result of the change in timeshare legislation in Singapore. The decrease in the sales reserve is due to
an unfavorable notes receivable reserve adjustment in the prior year comparable period.

Development Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Sale of vacation ownership products . . . . . . . . . $
Cost of vacation ownership products . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . .

59,592
(26,877)
(20,365)

34,645
(8,318)
(18,707)

24,947
(18,559)
(1,658)

72%
(223%)
(9%)

Development margin . . . . . . . . . . . . . . . . . . . . . $

12,350

7,620

4,730

62%

Development margin percentage . . . . . . . . . . . .

20.7%

22.0%

(1.3 pts)

The increase in development margin reflected $5.9 million from the residential contract sales and $1.8

million from higher favorable product cost true-ups ($2.0 million in 2015 compared to $0.2 million in 2014).
These increases were partially offset by $1.6 million from the lower revenue reportability compared to the prior
year comparable period, $1.0 million from the increase in the sales reserve and $0.4 million of higher marketing
and sales expenses.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Sale of vacation ownership products . . . . . . . . . $
Cost of vacation ownership products . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . .

34,645
(8,318)
(18,707)

33,456
(6,826)
(20,005)

1,189
(1,492)
1,298

Development margin . . . . . . . . . . . . . . . . . . . . . $

7,620

6,625

995

4%
(22%)
6%

15%

Development margin percentage . . . . . . . . . . . .

22.0%

19.8%

2.2 pts

The increase in development margin reflected $2.0 million of favorable reportability compared to the

prior year and a $0.8 million unfavorable notes receivable reserve adjustment in the prior year comparable
period. This increase was partially offset by a $1.4 million favorable product cost true-up in 2013 and $0.4
million from the lower sales volume net of direct variable expenses (i.e., cost of vacation ownership products and
marketing and sales), and included less efficient marketing and sales spending at our existing sales locations due
to an inability to leverage fixed costs on the lower sales volumes.

Resort Management and Other Services Revenues, Expenses and Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Management fee revenues . . . . . . . . . . . . . . . . . $
Other services revenues . . . . . . . . . . . . . . . . . . .

2,695
9,295

Resort management and other services

revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,990

Resort management and other services

2,594
1,843

4,437

101
7,452

4%
404%

7,553

170%

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,694)

(3,175)

(7,519)

(237%)

Resort management and other services

margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1,296

1,262

Resort management and other services margin

percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.8%

28.4%

(17.6 pts)

The increase in resort management and other services revenues reflected $7.4 million of ancillary

revenues at the operating hotel in Australia acquired in the third quarter of 2015, $0.1 million of higher
management fees and $0.1 million of higher other revenues.

The slight increase in the resort management and other services margin reflected $1.3 million of ancillary

margin at the operating hotel in Australia, offset by spending in support of future growth in the business.

2014 Compared to 2013

($ in thousands)

2014

2013

Change

% Change

Fiscal Years

Management fee revenues . . . . . . . . . .
Other services revenues . . . . . . . . . . . .

Resort management and other services
revenues . . . . . . . . . . . . . . . . . . . . . .
Resort management and other services
expenses . . . . . . . . . . . . . . . . . . . . . .

Resort management and other services
margin . . . . . . . . . . . . . . . . . . . . . . .

Resort management and other services
margin percentage . . . . . . . . . . . . . .

2,594
1,843

4,437

2,452
1,918

4,370

142
(75)

6%
(4%)

(3,175)

(2,715)

(460)

(17%)

1,262

1,655

(393)

(24%)

28.4%

37.9%

(9.5 pts)

The increase in resort management and other services revenues reflected $0.1 million of higher
management fees. The decline in the resort management and other services margin reflected spending in support
of future growth in the business.

Rental Revenues, Expenses and Margin

2015 Compared to 2014

Fiscal Years

($ in thousands)

2015

2014

Change

% Change

Rental revenues . . . . . . . . . . .
Rental expenses . . . . . . . . . . .

Rental margin . . . . . . . . . . . . .

Rental margin percentage . . . .

14,970
(19,255)

(4,285)

(28.6%)

7,642
(12,388)

(4,746)

(62.1%)

7,328
(6,867)

461

33.5 pts

96%
(55%)

10%

The increase in rental revenues was due to the operating hotel in Australia acquired in the third quarter of
2015. The increase in rental margin reflected $1.5 million of lower unsold maintenance fees and other expenses,
partially offset by a $1.0 million loss from the operation of the hotel.

2014 Compared to 2013

Fiscal Years

($ in thousands)

2014

2013

Change

% Change

Rental revenues . . . . . . . . . . . . . . .
Rental expenses . . . . . . . . . . . . . . .

Rental margin . . . . . . . . . . . . . . . .

Rental margin percentage . . . . . . .

7,642
(12,388)

(4,746)

(62.1%)

7,329
(11,731)

(4,402)

313
(657)

(344)

(60.1%)

(2.0 pts)

4%
(6%)

(8%)

Corporate and Other

The following discussion presents an analysis of our results of operations for 2015, 2014 and 2013.

($ in thousands)

Expenses

2015

Fiscal Years

2014

2013

Cost of vacation ownership products . . . $
Financing . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . .
Litigation settlement . . . . . . . . . . . . . . . .
Organizational and separation related . . .
Consumer financing interest . . . . . . . . . .
Royalty fee . . . . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . .

Gains and other income . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,713
24,194
102,963
138
642
24,658
49,863

209,171

—
(12,810)
(2,100)

9,403
24,148
98,562
250
2,544
26,464
49,828

211,199

6
(11,692)
—

6,733
24,594
99,379
—
12,266
31,375
50,822

225,169

—
(12,574)
—

Total financial results . . . . . . . . . . . $

(224,081)

(222,885)

(237,743)

Corporate and Other consists of results not specifically attributable to an individual segment, including

expenses in support of our financing operations, non-capitalizable development expenses incurred to support
overall company development, company-wide general and administrative costs, corporate interest expense,
consumer financing interest expense and the fixed royalty fee payable under the license agreements that we
entered into with Marriott International in connection with the Spin-Off.

Total Expenses

2015 Compared to 2014

Total expenses decreased $2.0 million from the prior year comparable period. The $2.0 million decrease
resulted from $2.7 million of lower cost of vacation ownership products expenses due to lower pre-development
spending associated with potential acquisitions and higher capitalization of other development expenses, $1.9
million of lower organizational and separation related expenses due to the completion of many of the initiatives
relating to our separation from Marriott International, $1.8 million of lower consumer financing interest expense
and $0.1 million of lower litigation settlements, partially offset by $4.4 million of higher general and
administrative expenses.

The $1.8 million decline in consumer financing interest expense was due to a lower average interest rate

on the outstanding debt balances ($2.2 million), partially offset by an increase in the outstanding debt balances of
securitized vacation ownership notes receivable and associated interest costs ($0.4 million). The lower average
interest rate reflected the continued pay-down of older securitization transactions that carried higher overall
interest rates and the benefit of lower interest rates applicable to our more recently completed securitizations of
vacation ownership notes receivable.

General and administrative expenses increased $4.4 million (from $98.6 million to $103.0 million) and

were driven by $2.7 million of higher personnel related and other costs net of lower depreciation and cost savings
and $1.7 million of costs related to a refurbishment project in 2015.

2014 Compared to 2013

Total expenses decreased $14.0 million from 2013. The $14.0 million decrease resulted from $9.7 million

of lower organizational and separation related expenses due to the completion of many of the initiatives relating
to our separation from Marriott International, $4.9 million of lower consumer financing interest expense, $1.0
million of lower royalty fee expense, $0.8 million of lower general and administrative expenses and $0.4 million

of lower financing expenses, partially offset by $2.7 million of higher cost of vacation ownership products
expenses due to higher pre-development spending associated with potential acquisitions and $0.3 million of
litigation settlements in 2014.

The $4.9 million decline in consumer financing interest expense was due to lower outstanding debt
balances of securitized vacation ownership notes receivable and associated interest costs ($3.0 million) as well as
a lower average interest rate ($1.9 million). The lower average interest rate reflected the continued pay-down of
older securitization transactions that carried higher overall interest rates and the benefit of lower interest rates
applicable to our more recently completed securitizations of vacation ownership notes receivable.

General and administrative expenses decreased $0.8 million (from $99.4 million to $98.6 million) and

included $3.0 million of savings related to organizational and separation relation efforts in the human resources,
information technology and finance and accounting organizations, partially offset by $1.1 million of higher
personnel related costs and $1.1 million from the favorable resolution of an international tax (non-income tax)
matter in 2013.

Liquidity and Capital Resources

Our capital needs are supported by cash on hand ($177.1 million at the end of 2015), cash generated from

operations, our ability to raise capital through securitizations in the ABS market and, to the extent necessary,
funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility. We believe
these sources of capital will be adequate to meet our short-term and long-term liquidity requirements, finance our
long-term growth plans, satisfy debt service requirements, return capital to shareholders and fulfill other cash
requirements. At the end of 2015, $684.6 million of the $688.1 million of total gross debt outstanding was non-
recourse debt associated with vacation ownership notes receivable securitizations. In addition, we have $40.0
million of gross mandatorily redeemable preferred stock of a consolidated subsidiary that we are not required to
redeem until October 2021. We may, however, redeem the preferred stock at par beginning in October 2016 at
our option.

At the end of 2015, we had $663.9 million of real estate inventory on hand, comprised of $332.9 million

of finished goods and $331.0 million of land and infrastructure. We expect to continue to sell excess Ritz-Carlton
branded inventory through the MVCD program or bulk sale transactions in order to generate incremental cash
and reduce related carrying costs.

Our vacation ownership product offerings allow us to utilize our real estate inventory efficiently. The

majority of our sales are of a points-based product, which permits us to sell vacation ownership products at most
of our sales locations, including those where little or no weeks-based inventory remains available for sale.
Because we no longer need specific resort-based inventory at each sales location, we need to have only a few
resorts under construction at any given time and can leverage successful sales locations at completed resorts.
This allows us to maintain long-term sales locations and reduces the need to develop and staff on-site sales
locations at smaller projects in the future. We believe our points-based programs enable us to align our real estate
inventory acquisitions with the pace of sales of vacation ownership products.

We are selectively pursuing growth opportunities in North America and Asia by targeting high-quality

inventory that allows us to add desirable new destinations to our system with new on-site sales locations through
transactions that limit our up-front capital investment and allow us to purchase finished inventory closer to the
time it is needed for sale. These capital efficient deal structures may consist of the development of new
inventory, or the conversion of previously built units by third parties, just prior to sale.

We intend for our capital allocation strategy to strike a balance between enhancing our operations and

using our capital to provide returns to our shareholders through programs such as share repurchase programs and
payment of dividends.

During 2015, 2014 and 2013, we had net changes in cash and cash equivalents of $(169.5) million, $147.0

million and $96.6 million, respectively. The following table summarizes these changes:

($ in thousands)
Cash provided by (used in):

2015

Fiscal Years

2014

2013

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of change in exchange rates on cash and cash

109,034
(25,068)
(249,747)

291,411
43,126
(185,650)

160,748
(35,911)
(28,275)

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,673)

(1,883)

Net change in cash and cash equivalents . . .

(169,454)

147,004

96,604

Cash from Operating Activities

Our primary sources of funds from operations are (1) cash sales and down payments on financed sales,

(2) cash from our financing operations, including principal and interest payments received on outstanding
vacation ownership notes receivable and (3) net cash generated from our rental and resort management and other
services operations. Outflows include spending for the development of new phases of existing resorts, the
acquisition of additional inventory and funding our working capital needs.

We minimize our working capital needs through cash management, strict credit-granting policies and

disciplined collection efforts. Our working capital needs fluctuate throughout the year given the timing of annual
maintenance fees on unsold inventory we pay to property owners’ associations and certain annual compensation
related outflows. In addition, our cash from operations varies due to the timing of our owners’ repayment of
vacation ownership notes receivable, the closing of sales contracts for vacation ownership products, financing
propensity and cash outlays for real estate inventory acquisition and development.

In 2015, we generated $109.0 million of cash flows from operating activities, compared to $291.4 million
in 2014. Excluding the impact of changes in net income and adjustments for non-cash items, the decrease in cash
flows was attributable to a lump sum payment of $66.0 million to pay down the Marriott Rewards customer
loyalty program in December 2015 (due in February 2016), which was paid early in order to accelerate the timing
of certain cash tax benefits. Additional decreases in cash flows were due to outlays for an acquisition of an
operating hotel in San Diego, California that we intend to convert, in its entirety, to vacation ownership interests
in the future, the acquisition of a portion of an operating hotel in Washington, D.C. and the acquisition of a
portion of an operating hotel located in Surfers Paradise, Australia that we intend to convert to vacation
ownership interests for sale in our Asia Pacific segment. See Footnote No. 5, “Acquisitions and Dispositions,” to
our Financial Statements for additional information regarding these transactions. The operating activities also
reflect higher financing propensity due to our implementation of a new financing program, lower collections due
to the reduction in the portfolio of outstanding vacation ownership notes receivable and the timing of revenue
reportability associated with our vacation ownership and residential contract sales.

In 2015, we recorded residential contract sales of $28.4 million associated with the sale of 18 units in

Macau. In 2014, we recorded residential contract sales of $13.8 million associated with the sale of seven units at
the RCC San Francisco that we bought back as part of a legal settlement at the end of 2012.

In addition to net income and adjustments for non-cash items, the following operating activities are key

drivers of our cash flow from operating activities:

Real Estate Inventory Spending Less Than Cost of Sales

($ in thousands)

Real estate inventory spending . . . . . . . . . . . . . .
Purchase of operating hotels for future

conversion to inventory . . . . . . . . . . . . . . . . .
Real estate inventory costs . . . . . . . . . . . . . . . . .

Real estate inventory spending less than
cost of sales . . . . . . . . . . . . . . . . . . . . .

2015

Fiscal Years

2014

2013

(119,067)

(99,337)

(165,769)

(61,554)
192,071

—
180,171

—
199,385

11,450

80,834

33,616

We measure our real estate inventory capital efficiency by comparing the cash outflow for real estate

inventory spending (a cash item) to the amount of real estate inventory costs charged to expense on our
Statements of Income related to sale of vacation ownership products (a non-cash item).

Given the significant level of completed real estate inventory on hand, as well as the capital efficiency

resulting from the MVCD program and capital efficient transactions, our spending for real estate inventory
remained below the amount of real estate inventory costs in each of 2015, 2014 and 2013.

In 2015, real estate inventory spending included $32.0 million for the acquisition of 71 units at The

Mayflower Hotel, Autograph Collection, an operating hotel, in Washington, D.C. We intend to include these
vacation ownership units, in their current form, in our MVCD program. See Footnote No. 5, “Acquisitions and
Dispositions,” to our Financial Statements for additional information regarding this transaction.

We also completed the acquisition of an operating hotel located in Surfers Paradise, Australia. We intend
to convert a portion of this hotel into vacation ownership interests for future use in our Asia Pacific segment and
$14.9 million, the amount of the purchase price related to that portion is included in Purchase of operating hotels
for future conversion to inventory on our Cash Flows for 2015. We intend to sell the remaining downsized hotel
to a third party and have included the related portion of the purchase price as an Investing activity on our Cash
Flows. See Footnote No. 5, “Acquisitions and Dispositions,” to our Financial Statements for additional
information regarding this transaction.

We also capitalized on the opportunity to add a premier destination to our portfolio through the

acquisition of an operating hotel in San Diego, California for $46.6 million, that we intend to convert, in its
entirety, to vacation ownership interests for future use in our MVCD program. See Footnote No. 5, “Acquisitions
and Dispositions,” to our Financial Statements for additional information regarding this transaction.

Real estate inventory costs for 2015 included $21.6 million related to the sale of the residential units in

Macau.

Through our existing vacation ownership interest repurchase program, we proactively buy back
previously sold vacation ownership interests at lower costs than would be required to develop new inventory. By
repurchasing inventory in desirable locations, we expect to be able to stabilize the future cost of vacation
ownership products.

Notes Receivable Collections (Less Than) in Excess of New Mortgages

Fiscal Years

2015

2014

2013

($ in thousands)
Vacation ownership notes receivable collections —

non-securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,919

$ 103,074

$ 112,915

Vacation ownership notes receivable collections —

securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacation ownership notes receivable originations . . . . .

181,251
(311,195)

184,166
(267,917)

196,669
(260,444)

Vacation ownership notes receivable collections

(less than) in excess of originations . . . . . . . . . $ (41,025) $ 19,323

$ 49,140

Vacation ownership notes receivable collections include principal from non-securitized and securitized
vacation ownership notes receivable. Vacation ownership notes receivable collections continued to decline over
the three years due to the reduction in the portfolio of outstanding vacation ownership notes receivable, partially
offset by an increase in the vacation ownership product sales volumes. Vacation ownership notes receivable
originations increased in 2015 due to an increase in financing propensity to 49.9 percent compared to 43.6
percent for 2014 due to the addition of a new financing incentive program implemented in the first half of 2015.
Based on the success of these new programs, we expect financing propensity levels to remain higher than the 40
to 45 percent that we averaged before 2015 and are targeting a 50 to 55 percent financing propensity in 2016.
Vacation ownership notes receivable originations increased in 2014 compared to 2013 due to a slight increase in
financing propensity to 43.6 percent in 2014 from 42.3 percent in 2013.

During 2015, 2014 and 2013, and as of January 1, 2016, January 2, 2015 and January 3, 2014, no

securitized vacation ownership notes receivable pools were out of compliance with established performance
parameters.

Cash from Investing Activities

($ in thousands)

Capital expenditures for property and equipment

2015

Fiscal Years
2014

2013

(excluding inventory) . . . . . . . . . . . . . . . . . . . . . $ (35,735) $ (15,202) $ (21,977)
—
(17,477)
3,543

Purchase of operating hotel to be sold . . . . . . . . . .
Decrease (Increase) in restricted cash . . . . . . . . . .
Dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(24,019)
82,347

(47,658)
37,681
20,644

Net cash (used in) provided by investing

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (25,068) $

43,126

$ (35,911)

Capital Expenditures for Property and Equipment

Capital expenditures for property and equipment relate to spending for technology development,
buildings and equipment used at sales locations and ancillary offerings, such as food and beverage offerings, at
locations where such offerings are provided.

In 2015, capital expenditures for property and equipment of $35.7 million included $26.3 million to
support business operations (including $7.7 million associated with the assets purchased for the operating hotel in
San Diego, California, $13.0 million for sales locations other than the operating hotel in San Diego, California,
and $5.6 million for ancillary and other operations assets) and $9.4 million for technology spending (including
$3.8 million for Spin-Off related initiatives). See Footnote No. 5, “Acquisitions and Dispositions,” to our
Financial Statements for additional information regarding the San Diego transaction.

In 2014, capital expenditures for property and equipment of $15.2 million included $9.9 million to
support business operations (including $6.7 million for ancillary and operations assets and $3.2 million for sales
locations) and $5.3 million for technology spending (including $3.0 million for Spin-Off related initiatives).

In 2013, capital expenditures for property and equipment of $22.0 million included $14.5 million to
support business operations (including $11.1 million for ancillary and operations assets and $3.4 million for sales
locations) and $7.5 million for technology spending (including $6.6 million for Spin-Off related initiatives).

Purchase of Operating Hotel to be Sold

In 2015, we completed the acquisition of an operating hotel located in Surfers Paradise, Australia. We

intend to convert a portion of this hotel into vacation ownership interests for future use in our Asia Pacific
segment, and sell the remaining downsized hotel to a third party. We have included $47.7 million, the portion of
the purchase price related to the downsized hotel, as Purchase of operating hotel to be sold on our Cash Flows.
See Footnote No. 5, “Acquisitions and Dispositions,” to our Financial Statements for additional information
regarding this transaction.

Decrease (Increase) in Restricted Cash

Restricted cash primarily consists of cash held in reserve accounts related to vacation ownership notes
receivable securitizations, cash collected for maintenance fees to be remitted to property owners’ associations
and deposits received, primarily associated with tour package sales and vacation ownership product sales that are
held in escrow until the associated contract has closed or the period in which it can be rescinded has expired,
depending on applicable legal requirements.

The 2015 decrease in restricted cash reflected $29.6 million of higher cash distributions for maintenance
fees remitted to certain property owners’ associations subsequent to the end of 2014, an $8.4 million increase in
cash that was collected for distribution to investors in connection with securitized vacation ownership notes
receivable that was distributed to investors subsequent to the end of 2015 and a $2.2 million increase in cash
associated with vacation ownership sales held in escrow. These decreases were partially offset by a $1.8 million
related to property refurbishment reserves for the newly acquired Surfers Paradise property.

The 2014 increase in restricted cash reflected $15.8 million of higher cash collections for maintenance

fees to be remitted to certain property owners’ associations subsequent to the end of 2014, a $10.0 million
increase in sales that are held in escrow related to Hawaiian requirements for tour package sales and $0.7 million
of higher cash collected in connection with securitized vacation ownership notes receivable that was distributed
to investors subsequent to the end of 2014, partially offset by a $2.5 million decrease in funds required to be held
in escrow to guarantee our credit card business in the Asia Pacific segment.

The 2013 increase in restricted cash reflected $13.1 million of higher cash collections for maintenance

fees to be remitted to certain property owners’ associations subsequent to the end of 2013, $3.3 million of higher
cash collected in connection with securitized vacation ownership notes receivable that was distributed to
investors subsequent to the end of 2013 and $2.7 million increase in funds required to be held in escrow to
guarantee our credit card business in the Asia Pacific segment, partially offset by a $1.6 million decrease in cash
associated with vacation ownership sales held in escrow.

We expect fluctuations in restricted cash for maintenance fee activity to be relatively stable on an annual

basis, with cash inflows occurring in the fourth quarter upon receipt of maintenance fees and cash outflows
occurring in the first and second quarters upon remittance to property owners’ associations. However, in 2014
our restricted cash collections for maintenance fees increased significantly due to the timing of the large volume
of payments at fiscal year-end and related banking transfers to property owners’ associations occurring
subsequent to year-end 2014.

Dispositions

Dispositions of property and assets generated cash proceeds of $20.6 million in 2015, $82.3 million in

2014 and $3.5 million in 2013. Dispositions in 2015 included $19.6 million from the sale of undeveloped land in
Kauai, Hawaii, $0.6 million from the sale of three lots in St. Thomas, U.S. Virgin Islands, $0.4 million from the
sale of an operations facility in Hilton Head, South Carolina and $0.1 million from the sale of undeveloped land
in Absecon, New Jersey.

The 2014 dispositions included $39.3 million from the sale of undeveloped and partially developed land,

an operating golf course and related assets in Kauai, Hawaii, $22.5 million from the sale of an operating golf
course and undeveloped land in Orlando, Florida, $10.1 million from the sale of undeveloped land on Singer
Island, Florida, $7.8 million from the sale of undeveloped and partially developed land, an operating golf course,
spa and clubhouse and related facilities at The Abaco Club in the Bahamas, $1.4 million from the sale of
undeveloped land in Paris, France, $0.9 million from the sale of several lots in St. Thomas, U.S. Virgin Islands
and $0.3 million from the sale of undeveloped land in Absecon, New Jersey.

The 2013 dispositions related to the sale of a multi-family parcel and several lots in St. Thomas, U.S.

Virgin Islands.

Cash from Financing Activities

($ in thousands)

Borrowings from securitization transactions

2015

Fiscal Years

2014

2013

Bonds payable on securitized vacation ownership

notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on Warehouse Credit Facility . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255,000
—

255,000

262,638
—

262,638

250,000
111,449

361,449

Repayment of debt related to securitization transactions
Bonds payable on securitized vacation ownership

notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments on Warehouse Credit Facility . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Borrowings on Revolving Corporate Credit Facility . . . .
Repayments on Revolving Corporate Credit Facility . . . .
Proceeds from vacation ownership inventory

arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . .
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from stock option exercises . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation . . . .
Payment of withholding taxes on vesting of restricted

stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(278,427)
—

(278,427)

—
—

5,375
(5,335)
(201,380)
(23,793)
97
9,380

(10,894)
230

(228,870)
—

(228,870)

—
—

—
(6,498)
(203,596)
(8,179)
2,977
4,519

(8,077)
(564)

(249,568)
(111,449)

(361,017)

25,000
(25,000)

—
(5,159)
(25,633)
—
3,804
3,544

(5,140)
(123)

Net cash used in financing activities . . . . . . . . .

(249,747)

(185,650)

(28,275)

Warehouse Credit Facility

During 2015, we amended certain agreements associated with the Warehouse Credit Facility. As a result,

the revolving period was extended to November 22, 2017, and borrowings under the Warehouse Credit Facility
bear interest at a rate based on the one-month LIBOR and bank conduit commercial paper rates plus 1.15 percent
per annum and are generally limited at any point to the sum of the products of the applicable advance rates and
the eligible vacation ownership notes receivable at such time.

The amendment also expanded the eligibility for certain collateral by permitting some vacation ownership

notes receivable that are no more than 60 days delinquent to be financed through the Warehouse Credit Facility;
prior to the amendment, only delinquent notes that were no more than 30 days delinquent could be financed. The
other terms of the Warehouse Credit Facility are substantially similar to those in effect prior to the execution of
the amendment.

At January 1, 2016, no amounts were outstanding under the Warehouse Credit Facility and $109.8 million
of gross vacation ownership notes receivable were eligible for securitization. See Footnote No. 10, “Debt,” to our
Financial Statements for additional information regarding our Warehouse Credit Facility.

Revolving Corporate Credit Facility

During 2015, we amended the Revolving Corporate Credit Facility, and as a result, up to $130 million of

the $200 million borrowing capacity may be borrowed in the form of Australian dollars, Euros, Japanese yen,
British pounds and Singaporean dollars. The other terms of the Revolving Corporate Credit Facility are
substantially similar to those in effect prior to the execution of the amendment.

During 2014, we amended and restated the Revolving Corporate Credit Facility. The amendment and

restatement resulted in, among other things, an extension of the final maturity of the lenders’ commitments from
November 21, 2016 to September 10, 2019, a decrease in the interest margin on borrowings, lower commitment
fees on unused availability and additional flexibility to determine whether to pledge certain collateral. The
Revolving Corporate Credit Facility has a borrowing capacity of $200 million, including a letter of credit sub-
facility of $100 million, and provides support for our business, including ongoing liquidity and letters of credit.
At January 1, 2016, no amounts were outstanding under the Revolving Corporate Credit Facility, however we
had $3.3 million of letters of credit outstanding. See Footnote No. 10, “Debt,” to our Financial Statements for
additional information regarding our Revolving Corporate Credit Facility.

Borrowings from / Repayments of Debt Related to Securitization Transactions

We reflect proceeds from securitizations of vacation ownership notes receivable, including draw downs
on the Warehouse Credit Facility, as “Borrowings from securitization transactions.” We reflect repayments of
bonds associated with vacation ownership notes receivable securitizations and repayments on the Warehouse
Credit Facility (including vacation ownership notes receivable repurchases) as “Repayment of debt related to
securitization transactions.” We account for our securitizations of vacation ownership notes receivable as secured
borrowings and therefore do not recognize a gain or loss as a result of the transaction. The results of operations
for the securitization entities are consolidated within our results of operations as these entities are variable
interest entities for which we are the primary beneficiary.

In the fourth quarter of 2015, we completed the securitization of a pool of $264.2 million of vacation
ownership notes receivable. In connection with the securitization, investors purchased in a private placement
$255.0 million in vacation ownership loan-backed notes from the MVW Owner Trust 2015-1 (the “2015-1
Trust”). Two classes of vacation ownership loan backed notes were issued by the 2015-1 Trust: $233.2 million of
Class A Notes and $21.8 million of Class B Notes. The Class A Notes have an interest rate of 2.52 percent and
the Class B Notes have an interest rate of 2.96 percent, for an overall weighted average interest rate of 2.56
percent.

During 2014, we completed two securitization transactions. In the second quarter of 2014, we completed

the securitization of a pool of $23.8 million of primarily highly-seasoned vacation ownership notes receivable
that we previously classified as not being eligible for securitization. In connection with the securitization,
investors purchased in a private placement $22.6 million in vacation ownership loan backed notes from the
Kyuka Owner Trust 2014-A with an interest rate of 6.25 percent. The securitized loans previously were classified
as not eligible for securitization using criteria applicable to then current securitization transactions in the ABS
market because they did not meet certain representation criteria required in such securitizations, or because of
other factors that may have reflected investor demand in a securitization transaction.

In the fourth quarter of 2014, we completed the securitization of a pool of $250.0 million of vacation
ownership notes receivable. In connection with the securitization, investors purchased in a private placement
$240.0 million in vacation ownership loan-backed notes from the MVW Owner Trust 2014-1 (the “2014-1
Trust”). Two classes of vacation ownership loan backed notes were issued by the 2014-1 Trust: $216.2 million of
Class A Notes and $23.8 million of Class B Notes. The Class A Notes have an interest rate of 2.25 percent and
the Class B Notes have an interest rate of 2.70 percent, for an overall weighted average interest rate of 2.29
percent.

During 2013, we completed the securitization of a pool of $263.2 million of vacation ownership notes

receivable, including $115.9 million of vacation ownership notes receivable that were previously securitized in

the Warehouse Credit Facility. In connection with the securitization, investors purchased in a private placement
$250.0 million in vacation ownership loan-backed notes from the MVW Owner Trust 2013-1 (the “2013-1
Trust”). Two classes of vacation ownership loan backed notes were issued by the 2013-1 Trust: $223.7 million of
Class A Notes and $26.3 million of Class B Notes. The Class A Notes have an interest rate of 2.15 percent and
the Class B Notes have an interest rate of 2.74 percent, for an overall weighted average interest rate of 2.21
percent.

Proceeds from Vacation Ownership Inventory Arrangement

In connection with our pursuit of growth opportunities in ways that optimize the timing of our capital

investments, including working with third parties to develop new inventory or convert previously built units to be
sold to us close to when we need such inventory, during the first quarter of 2015 we sold real property located in
Marco Island, Florida to a third-party developer. We are obligated to repurchase the completed property from the
developer contingent upon the property meeting our brand standards and provided that the third-party developer
has not sold the property to another party. As discussed in Footnote No. 5, “Acquisitions and Dispositions,” to
our Financial Statements, we received cash proceeds of $5.4 million upon the sale of this real property. In
accordance with the authoritative guidance on accounting for sales of real estate, our conditional obligation to
repurchase the property constitutes continuing involvement and thus we were unable to account for this
transaction as a sale, and as such have recorded these proceeds as a financing activity.

Debt Issuance Costs

Debt issuance costs in 2015 included $4.2 million associated with the 2015 vacation ownership notes

receivable securitization and a combined $1.1 million related to the renewal of the Warehouse Credit Facility and
the amendment of the Revolving Corporate Credit Facility during the year. Debt issuance costs in 2014 included
$3.7 million associated with the two 2014 vacation ownership notes receivable securitizations and $2.8 million
associated with the amendment and restatement of the Warehouse Credit Facility and the Revolving Corporate
Credit Facility during 2014. Debt issuance costs in 2013 included $3.8 million associated with the 2013 vacation
ownership notes receivable securitization and a combined $1.4 million related to the renewal of the Warehouse
Credit Facility and the amendment of the Revolving Corporate Credit Facility during the year.

Share Repurchase Program

The following table summarizes share repurchase activity under our current share repurchase program:

($ in thousands, except per share amounts)

As of January 3, 2014 . . . . . . . . . . . . . .
For the year ended January 2, 2015 . . . .
As of January 2, 2015 . . . . . . . . . . . . . .
For the year ended January 1, 2016 . . . .

Number of
Shares
Repurchased

505,023
3,491,702
3,996,725
2,857,358

As of January 1, 2016 . . . . . . . . . . . . . .

6,854,083

Cost of Shares
Repurchased

Average Price
Paid per Share

25,633
203,596
229,229
201,380

430,609

50.76
58.31
57.35
70.48

62.92

See Footnote No. 13, “Shareholders’ Equity,” to our Financial Statements for further information related

to the share repurchase program

Dividends

We declared cash dividends to holders of common stock for the year ended January 1, 2016 as follows:

Declaration Date

Shareholder Record Date

Distribution Date

Dividend per Share

February 12, 2015
June 4, 2015
September 10, 2015
December 8, 2015

February 26, 2015
June 18, 2015
September 24, 2015
December 21, 2015

March 11, 2015
July 2, 2015
October 8, 2015
January 6, 2016

$
$
$
$

0.25
0.25
0.25
0.30

Any future dividend payments will be subject to Board approval, and there can be no assurance that we will

pay dividends in the future.

Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes our contractual obligations as of year-end 2015:

($ in thousands)

Contractual Obligations

Total

Less Than
1 Year

1-3 Years

3-5 Years

More Than
5 Years

Payments Due by Period

. . . . . . . . . . . . . . . . . . . . . . . . $

Debt(1)
Mandatorily redeemable preferred stock
of consolidated subsidiary(1) . . . . . . .

Liability for Marriott Rewards

customer loyalty program . . . . . . .
Operating leases . . . . . . . . . . . . . . . .
Purchase obligations(2) . . . . . . . . . . . .
Other long-term obligations . . . . . . .

771,898

$ 113,694

$ 204,919

$ 170,309

$ 282,976

64,588

3,815

10,174

8,479

42,120

35
67,832
123,696
7,558

35
14,315
65,612
5,457

—
21,779
49,843
2,101

—
14,161
5,428
—

—
17,577
2,813
—

Total contractual obligations . . . . . . . . . . . $ 1,035,607

$ 202,928

$ 288,816

$ 198,377

$ 345,486

(1)

Includes principal as well as interest payments.

(2) Arrangements are considered purchase obligations if a contract specifies all significant terms, including

fixed or minimum quantities to be purchased, a pricing structure, and approximate timing of the transaction.
Amounts reflected herein represent expected funding under such contracts. Amounts reflected on the
consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above.

We have joined in Marriott International’s U.S. Federal tax consolidated filing for periods up to the date of

the Spin-Off. Although we do not anticipate that a significant impact on our unrecognized tax benefit balance
will occur during the next fiscal year as a result of audits by other tax jurisdictions, the amount of our liability for
unrecognized tax benefits could change as a result of these audits. See Footnote No. 2, “Income Taxes,” to our
Financial Statements for additional information.

We have historically issued guarantees to certain lenders in connection with the provision of third-party

financing for our sales of vacation ownership products. The terms of these guarantees generally require us to fund if
the purchaser fails to pay under the terms of its note payable. We are entitled to recover any payments we make to
third-party lenders under these guarantees through reacquisition and resale of the vacation ownership product. Our
commitments under these guarantees expire as the underlying notes mature or are repaid. Our maximum exposure
under such guarantees as of January 1, 2016 in the Asia Pacific and North America segments was $5.2 million and
$2.8 million, respectively. The terms of the underlying debt to third-party lenders extend to 2022.

For additional information on these guarantees and the circumstances under which they were entered into,

see the “Guarantees” caption within Footnote No. 9, “Contingencies and Commitments,” to our Financial
Statements.

In the normal course of our resort management business, we enter into purchase commitments with

property owners’ associations to manage the daily operating needs of our resorts. Since we are reimbursed for
these commitments from the cash flows of the resorts, these obligations have minimal impact on our net income
and cash flow.

Recent Accounting Pronouncements

See Footnote No. 1, “Summary of Significant Accounting Policies,” to our Financial Statements for a
discussion of recently issued accounting pronouncements, including information on new accounting standards
and the future adoption of such standards.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make

estimates and assumptions that affect reported amounts and related disclosures. Management considers an
accounting estimate to be critical if: (1) it requires assumptions to be made that are uncertain at the time the
estimate is made; and (2) changes in the estimate, or different estimates that could have been selected, could have
a material effect on our results of operations or financial condition.

While we believe that our estimates, assumptions, and judgments are reasonable, they are based on

information presently available. Actual results may differ significantly. Additionally, changes in our
assumptions, estimates or assessments as a result of unforeseen events or otherwise could have a material impact
on our financial position or results of operations.

Please see Footnote No. 1, “Summary of Significant Accounting Policies,” to our Financial Statements

for further information on accounting policies that we believe to be critical, including our policies on:

Revenue recognition for vacation ownership products, including how we recognize revenue using the

percentage-of-completion method of accounting;

Marriott Rewards customer loyalty program, including how we determine our redemption obligation for

Marriott Rewards Points issued prior to 2012;

Inventories and cost of vacation ownership products, which requires estimation of future revenues,

including incremental revenues from future price increases or from the sale of reacquired inventory resulting
from defaulted vacation ownership notes receivable, and development costs to apply a relative sales value
method specific to the vacation ownership industry and how we evaluate the fair value of our vacation ownership
inventory;

Valuation of property and equipment, including when we record impairment losses;

Loan loss reserves for vacation ownership notes receivable, including information on how we estimate

reserves for losses;

Loss contingencies, including information on how we account for loss contingencies; and

Income taxes, including information on how we determine our current year amounts payable or

refundable, as well as our estimate of deferred tax assets and liabilities.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk from changes in interest rates, currency exchange rates, and debt prices.
We manage our exposure to these risks by monitoring available financing alternatives, through pricing policies
that may take into account currency exchange rates, and by entering into derivative arrangements. We do not
foresee any significant changes in either our exposure to fluctuations in interest rates or currency rates or how we
manage such exposure in the future.

Our Warehouse Credit Facility provides variable rate financing when we place consumer loans we
originate primarily in support of our North American business into that facility. We may manage the interest rate
risk of this facility by entering into derivative contracts such as swaps or caps that are traditionally utilized in
warehouse funding arrangements. We intend to securitize vacation ownership notes receivable in the ABS market
at least once per year. For these types of transactions or arrangements, we expect to secure fixed rate funding to
match our fixed rate vacation ownership notes receivable. However, if we have floating rate debt in the future,
we plan to hedge the interest rate risk using derivative instruments. Changes in interest rates may impact the fair
value of our fixed rate long-term debt.

From time to time, we may use derivative instruments to reduce market risks due to changes in interest
rates and currency exchange rates, including interest rate derivatives that we may be required to enter into as a

condition of the Warehouse Credit Facility. As of January 1, 2016, we were not party to any material derivative
interest rates or hedges.

Please see Footnote No. 1, “Summary of Significant Accounting Policies,” to our Financial Statements

for additional information associated with derivative instruments.

The following table sets forth the scheduled maturities and the total fair value as of year-end 2015 for our

financial instruments that are impacted by market risks:

Average
Interest
Rate

2016

2017

2018

2019

2020

Thereafter

Total
Carrying
Value

Total Fair
Value

Maturities by Period

($ in thousands)

Assets – Maturities represent expected principal receipts; fair values represent assets

Vacation ownership notes

receivable —
non-securitized . . . . . . . . .

Vacation ownership notes

12.0% $ 60,207 $ 38,414 $ 24,644 $ 18,973 $ 17,155 $

92,059 $ 251,452 $ 274,799

receivable — securitized . .
Liabilities – Maturities represent expected principal receipts; fair values represent liabilities

12.8% $ 92,725 $ 88,754 $ 84,482 $ 77,434 $ 75,057 $ 250,727 $ 669,179 $ 803,533

Non-recourse debt associated
with vacation ownership
notes receivable
securitizations . . . . . . . . .

Mandatorily redeemable
preferred stock of
consolidated subsidiary . .
. . . . . . . . . . . . . .

Other debt

2.6% $ (95,006) $ (90,486) $ (85,878) $ (77,497) $ (74,768) $ (260,969) $ (684,604) $ (677,595)

12.0% $
8.3% $

— $
(60) $

— $
(64) $

— $
(69) $

— $
(74) $

— $ (40,000) $ (40,000) $ (42,258)
(3,496)
(80) $

(3,496) $

(3,149) $

Item 8.

Financial Statements and Supplementary Data

The financial statements required by this item are contained on pages F-2 through F-52 of this Annual

Report.

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, we evaluated, under the supervision and with

the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the
effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act), and management necessarily applied its judgment in
assessing the costs and benefits of such controls and procedures, which by their nature, can provide only
reasonable assurance about management’s control objectives. Our disclosure controls and procedures have been
designed to provide reasonable assurance of achieving the desired control objectives. However, you should note
that the design of any system of controls is based in part upon certain assumptions about the likelihood of future
events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote. Based upon the foregoing evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were effective and operating to
provide reasonable assurance that we record, process, summarize and report the information we are required to
disclose in the reports that we file or submit under the Exchange Act within the time periods specified in the rules
and forms of the SEC, and to provide reasonable assurance that we accumulate and communicate such

information to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions about required disclosure.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting, as defined in Exchange Act Rule 13a-15(f). Management’s annual report on internal control over
financial reporting and the independent registered public accounting firm’s report on the effectiveness of our
internal control over financial reporting are incorporated by reference to pages F-2 and F-3 of this Annual
Report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of 2015

that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B.

Other Information

None.

PART III

As described below, we incorporate certain information appearing in the Proxy Statement we will furnish

to our shareholders in connection with our 2016 Annual Meeting of Shareholders (the “Proxy Statement”) by
reference in this Annual Report.

Item 10.

Directors, Executive Officers and Corporate Governance

We incorporate this information by reference to “Our Board of Directors,” “Section 16(a) Beneficial Ownership
Reporting Compliance,” “Committees of our Board,” “Transactions with Related Persons” and “Selection of
Director Nominees” sections of our Proxy Statement. We have included information regarding our executive
officers and our Code of Conduct below.

Executive Officers

Set forth below is certain information with respect to our executive officers. The information set forth

below is as of February 12, 2016, except where indicated.

Name and Title

Stephen P. Weisz

President and Chief Executive
Officer

Age

R. Lee Cunningham

Executive Vice President and Chief
Operating Officer

Clifford M. Delorey

Executive Vice President and Chief
Resort Experience Officer

John E. Geller, Jr.

Executive Vice President and Chief
Financial Officer

Business Experience

Stephen P. Weisz has served as our President since 1996
and as our Chief Executive Officer since 2011; he has
also been a member of our Board of Directors since 2011.
Mr. Weisz joined Marriott International in 1972. Over his
39-year career with Marriott International, he held a
number of leadership positions in the Lodging division,
including Regional Vice President of the Mid-Atlantic
Region, Senior Vice President of Rooms Operations, and
Vice President of the Revenue Management Group.
Mr. Weisz became Senior Vice President of Sales and
Marketing for Marriott Hotels, Resorts & Suites in 1992
and Executive Vice President-Lodging Brands in 1994
before being named to lead the Company in 1996. He
currently serves as Chairman of the Board of Directors of
the American Resort Development Association. Mr.
Weisz is also the Chairman of the Board of Trustees of
Children’s Miracle Network.

R. Lee Cunningham has served as our Executive Vice
President and Chief Operating Officer since December
2012. From 2007 to December 2012, he served as our
Executive Vice President and Chief Operating Officer –
North America and Caribbean. Mr. Cunningham joined
Marriott International in 1982 and held various front
office assignments at Marriott hotels in Atlanta,
Scottsdale, Miami, Kansas City, and Washington, D.C. In
1990, he became one of Marriott International’s first
revenue management-focused associates and held roles at
property, regional and corporate levels. Mr. Cunningham
joined our company in 1997 as Vice President of Revenue
Management and Owner Service Operations.

Clifford M. Delorey has served as our Executive Vice
President and Chief Resort Experience Officer since
October 2012. From May 2011 to October 2012,
Mr. Delorey served as Vice President of Operations for
the Middle East and Africa region for Marriott
International. From April 2006 to May 2011, he served as
our Vice President of Operations for the East region.
Mr. Delorey joined Marriott International in 1981 and
served in a number of operational roles, including
Director of International Operations.

John E. Geller, Jr. has served as our Executive Vice
President and Chief Financial Officer since 2009.
Mr. Geller joined Marriott International in 2005 as Senior
Vice President and Chief Audit Executive and
Information Security Officer. In 2008, he led finance and

James H Hunter, IV

Executive Vice President and General
Counsel

Lizabeth Kane-Hanan

Executive Vice President and Chief
Growth and Inventory Officer

Brian E. Miller

Executive Vice President and Chief
Sales and Marketing Officer

accounting for Marriott International’s North American
Lodging Operation’s West region as Chief Financial
Officer. Mr. Geller began his professional career at
Arthur Andersen, where he was promoted to audit partner
in its real estate and hospitality practice in 2000. During
2002 and 2003, he was an audit partner with Ernst &
Young in its real estate and hospitality practice.
Mr. Geller served as Chief Financial Officer at AutoStar
Realty in 2004.

James H Hunter, IV has served as our Executive Vice
President and General Counsel since November 2011.
Prior to that time, he had served as Senior Vice President
and General Counsel since 2006. Mr. Hunter joined
Marriott International in 1994 as Corporate Counsel and
was promoted to Senior Counsel in 1996 and Assistant
General Counsel in 1998. While at Marriott International,
he held several leadership positions supporting
development of Marriott’s lodging brands in all regions
worldwide. Prior to joining Marriott International,
Mr. Hunter was an associate at the law firm of Davis,
Graham & Stubbs in Washington, D.C.

Lizabeth Kane-Hanan has served as our Executive Vice
President and Chief Growth and Inventory Officer since
November 2011. Prior to that time, she had served as our
Senior Vice President, Resort Development and Planning,
Inventory and Revenue Management and Product
Innovation since 2009. Ms. Kane-Hanan joined our
company in 2000, and has over 25 years of hospitality
industry experience. Before joining Marriott
International, she spent 14 years in public accounting and
advisory firms, including Arthur Andersen and Horwath
Hospitality, where she specialized in real estate strategic
planning, acquisitions and development. At our company,
she has held several leadership positions of increasing
responsibility.

Brian E. Miller has served as our Executive Vice
President and Chief Sales and Marketing Officer since
November 2011. Prior to that time, he had served as our
Senior Vice President, Sales and Marketing and Service
Operations since 2007. Mr. Miller joined our company in
1991 as National Director of Marketing Operations and
has more than 25 years of vacation ownership marketing
and sales expertise. In 1994, he was promoted to Vice
President of Marketing. From 1995 to 2000, he served as
Regional Vice President of Sales and Marketing for the
Europe and Middle East region based in London. He left
our company briefly, but returned in 2001 to assume the
role of Senior Vice President, Sales and Marketing.

Dwight D. Smith

Executive Vice President and Chief
Information Officer

Dwight D. Smith has served as our Executive Vice
President and Chief Information Officer since December
2011. Prior to that time, he served as our Senior Vice
President and Chief Information Officer since 2006.
Mr. Smith joined Marriott International in 1988 as Senior
Manager and then Director of Information Resources for
Roy Rogers Restaurants. He worked from 1982 to 1988 at
Andersen Consulting as Staff Consultant and then
Consulting Manager in the advanced technology group.
Mr. Smith moved to our corporate headquarters in 1990.

Michael E. Yonker

Executive Vice President and
Chief Human Resources Officer

57 Michael E. Yonker has served as our Executive Vice
President and Chief Human Resources Officer since
December 2011. Prior to that time, he served as our Chief
Human Resources Officer since 2010. Mr. Yonker joined
Marriott International in 1983 as Assistant Controller at
the Lincolnshire Marriott Resort in Chicago. While at
Marriott International, he held a number of positions with
increasing responsibility in both the finance and human
resources areas. From 1996 to 1998, he was the Area
Director of Human Resources, supporting the mid-central
region at Sodexho Marriott. He returned to Marriott
International in 1998 as Vice President, Human
Resources supporting the Midwest Region and was
named our Vice President, Human Resources in 2007
supporting global operations.

Code of Conduct

Our Board of Directors has adopted a code of conduct, our Business Conduct Guide, that applies to all of

our directors, officers and associates, including our Chief Executive Officer, Chief Financial Officer and
Principal Accounting Officer. Our Business Conduct Guide is available in the Investor Relations section of our
website (www.marriottvacationsworldwide.com) and is accessible by clicking on “Corporate Governance.” Any
amendments to our Business Conduct Guide and any grant of a waiver from a provision of our Business Conduct
Guide requiring disclosure under applicable SEC rules will be disclosed at the same location as the Business
Conduct Guide in the Investor Relations section of our website located at www.marriottvacationsworldwide.com.

Item 11.

Executive Compensation

We incorporate this information by reference to the “Executive and Director Compensation” and

“Compensation Committee Interlocks and Insider Participation” sections of our Proxy Statement.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

We incorporate this information by reference to the “Securities Authorized for Issuance Under Equity

Compensation Plans” and the “Stock Ownership” sections of our Proxy Statement.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

We incorporate this information by reference to the “Transactions with Related Persons,” and “Director

Independence” sections of our Proxy Statement.

Item 14.

Principal Accounting Fees and Services

We incorporate this information by reference to the “Independent Registered Public Accounting Firm Fee

Disclosure” and the “Pre-Approval of Independent Auditor Fees and Services Policy” sections of our Proxy
Statement.

PART IV

Item 15.

Exhibits and Financial Statement Schedules

(a)(1)-(2) Financial Statements and Schedules

The financial statements and schedules listed in the accompanying Index to Consolidated Financial

Statements are filed as part of this Annual Report. We include the financial statement schedules required by the
applicable accounting regulations of the SEC in the notes to our consolidated financial statements and
incorporate that information in this Item 15 by reference.

(a)(3) Exhibits

See “Index to Exhibits” beginning on page E-1, which is incorporated by reference herein. The Index to

Exhibits lists all exhibits filed with this Annual Report and identifies which of those exhibits are management
contracts and compensation plans.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused
this Form 10-K to be signed on our behalf by the undersigned, thereunto duly authorized, on this 25th day of
February, 2016.

MARRIOTT VACATIONS WORLDWIDE
CORPORATION

By: /s/ Stephen P. Weisz

Stephen P. Weisz
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears

below constitutes and appoints jointly and severally, Stephen P. Weisz, John E. Geller, Jr. and James H Hunter,
IV, and each one of them, his or her attorneys-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any and all amendments to this Annual Report and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each said attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been

signed by the following persons on our behalf in the capacities indicated and on the date indicated above.

Principal Financial Officer:

/s/ Stephen P. Weisz

Stephen P. Weisz

Principal Financial Officer:

/s/ John E. Geller, Jr.

John E. Geller, Jr.

Principal Accounting Officer:

/s/ Laurie A. Sullivan

Laurie A. Sullivan

Directors:

President, Chief Executive Officer and Director

Executive Vice President and Chief Financial Officer

Senior Vice President, Corporate Controller and Chief Accounting Officer

/s/ William J. Shaw

William J. Shaw, Chairman

/s/ C.E. Andrews

C.E. Andrews, Director

/s/ Melquiades R. Martinez

Melquiades R. Martinez, Director

/s/ William W. McCarten

William W. McCarten, Director

/s/ Raymond L. Gellein, Jr.
Raymond L. Gellein, Jr., Director

/s/ Dianna F. Morgan

Dianna F. Morgan, Director

/s/ Thomas J. Hutchison III

Thomas J. Hutchison III, Director

INDEX TO EXHIBITS

The Registrant will furnish you, without charge, a copy of any exhibit, upon written request. Written
requests to obtain any exhibit should be sent to Marriott Vacations Worldwide Corporation, 6649 Westwood Blvd.,
Orlando, Florida 32821, Attention: Corporate Secretary.

Exhibit
No.

2.1

3.1

3.2

4.1

10.1

10.2

10.3

10.4

10.5

10.6

10.7

Description

Separation and Distribution Agreement, entered into on November 17, 2011, among Marriott
International, Inc., Marriott Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc.,
Marriott Resorts Hospitality Corporation, MVCI Asia Pacific Pte. Ltd. and MVCO Series LLC
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on
November 22, 2011).

Restated Certificate of Incorporation of Marriott Vacations Worldwide Corporation (incorporated by
reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 22,
2011).

Restated Bylaws of Marriott Vacations Worldwide Corporation (incorporated by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on November 22, 2011).

Form of certificate representing shares of common stock, par value $0.01 per share, of Marriott
Vacations Worldwide Corporation (incorporated by reference to Exhibit 4.1 to the Company’s
Registration Statement on Form 10 filed on October 14, 2011).

License, Services, and Development Agreement, entered into on November 17, 2011, among
Marriott International, Inc., Marriott Worldwide Corporation, Marriott Vacations Worldwide
Corporation and the other signatories thereto (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on November 22, 2011).

Letter Agreement, dated as of February 21, 2013, between Marriott International, Inc. and Marriott
Vacations Worldwide Corporation, supplementing the License, Services, and Development
Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q filed on April 25, 2013).

License, Services, and Development Agreement, entered into on November 17, 2011, among The
Ritz-Carlton Hotel Company, L.L.C., Marriott Vacations Worldwide Corporation and the other
signatories thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed on November 22, 2011).

Employee Benefits and Other Employment Matters Allocation Agreement, entered into on
November 17, 2011, between Marriott International, Inc. and Marriott Vacations Worldwide
Corporation (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-
K filed on November 22, 2011).

Tax Sharing and Indemnification Agreement, entered into on November 17, 2011, between Marriott
International, Inc. and Marriott Vacations Worldwide Corporation (incorporated by reference to
Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 22, 2011).

Amendment, dated August 2, 2012, between Marriott International, Inc. and Marriott Vacations
Worldwide Corporation, to the Tax Sharing and Indemnification Agreement (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on October 18,
2012).

Marriott Rewards Affiliation Agreement, entered into on November 17, 2011, among Marriott
International, Inc., Marriott Rewards, LLC, Marriott Vacations Worldwide Corporation, Marriott
Ownership Resorts, Inc. and the other signatories thereto (incorporated by reference to Exhibit 10.5
to the Company’s Current Report on Form 8-K filed on November 22, 2011).

E-1

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

Non-Competition Agreement, entered into on November 17, 2011, between Marriott International,
Inc. and Marriott Vacations Worldwide Corporation (incorporated by reference to Exhibit 10.6 to
the Company’s Current Report on Form 8-K filed on November 22, 2011).

Omnibus Transition Services Agreement, entered into on November 17, 2011, between Marriott
International, Inc. and Marriott Vacations Worldwide Corporation (incorporated by reference to
Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on November 22, 2011).

First Amendment to Services Exhibit, dated as of October 10, 2012, between Marriott International,
Inc. and Marriott Vacations Worldwide Corporation to the Omnibus Transition Services Agreement
(incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed on
February 22, 2013).

Information Resources Transition Services Agreement, entered into on November 17, 2011,
between Marriott International, Inc. and Marriott Vacations Worldwide Corporation (incorporated
by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on November 22,
2011).

Marriott Vacations Worldwide Corporation Amended and Restated Stock and Cash Incentive Plan
(incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed on
February 27, 2014).*

Amendment to the Marriott Vacations Worldwide Corporation Amended and Restated Stock and
Cash Incentive Plan.*

Form of Restricted Stock Unit Agreement – Marriott Vacations Worldwide Corporation Stock and
Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on December 9, 2011).*

Form of Stock Appreciation Right Agreement – Marriott Vacations Worldwide Corporation Stock
and Cash Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on December 9, 2011).*

Form of Performance Unit Award Agreement – Marriott Vacations Worldwide Corporation Stock
and Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on March 16, 2012).*

Form of Non-Employee Director Share Award Confirmation.*

Form of Non-Employee Director Stock Appreciation Right Award Agreement (incorporated by
reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed on March 21,
2012).*

Form of Director Stock Unit Agreement (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed on April 30, 2015).*

Marriott Vacations Worldwide Corporation Change in Control Severance Plan (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 16, 2012).*

Form of Participation Agreement for Change in Control Severance Plan – Marriott Vacations
Worldwide Corporation Change in Control Severance Plan (incorporated by reference to
Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 16, 2012).*

Marriott Vacations Worldwide Corporation Deferred Compensation Plan (incorporated by reference
to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on June 13, 2013).*

E-2

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

Marriott Vacations Worldwide Corporation Executive Long Term Disability Plan (incorporated by
reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on February 26,
2015).*

Marriott Vacations Worldwide Corporation Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on June 11, 2015).*

Third Amended and Restated Indenture and Servicing Agreement, entered into September 15, 2014
and dated as of September 1, 2014, among Marriott Vacations Worldwide Owner Trust 2011-1,
Marriott Ownership Resorts, Inc., and Wells Fargo Bank, National Association (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 16,
2014).

Indenture Supplement, dated June 24, 2015, among Marriott Vacations Worldwide Owner Trust
2011-1, Marriott Ownership Resorts, Inc., and Wells Fargo Bank, National Association, Deutsche
Bank AG, New York Branch, and the Conduits, Alternate Purchasers, Funding Agents and Non-
Conduit Committed Purchasers signatory thereto (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q filed on July 23, 2015).

Second Amended and Restated Sale Agreement, entered into September 15, 2014 and dated as of
September 1, 2014, between MORI SPC Series Corp. and Marriott Vacations Worldwide Owner
Trust 2011-1 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on September 16, 2014).

Omnibus Amendment No. 3, dated November 23, 2015, relating to, among other agreements, the
Third Amended and Restated Indenture and the Second Amended and Restated Sale Agreement, by
and among Marriott Vacations Worldwide Owner Trust 2011-1, Marriott Ownership Resorts, Inc.,
Wells Fargo Bank, National Association, MORI SPC Series Corp., Marriott Vacation Worldwide
Corporation, the Purchasers signatory thereto, Deutsche Bank AG, New York Branch, Wilmington
Trust, National Association, and MVCO Series LLC (incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed on November 25, 2015).

Second Amendment and Restatement Agreement, dated as of September 10, 2014, among Marriott
Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc., certain subsidiaries of
Marriott Vacations Worldwide Corporation, JPMorgan Chase Bank, N.A., and the several banks and
other financial institutions or entities from time to time parties thereto (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 11, 2014).

Second Amended and Restated Credit Agreement, dated as of September 10, 2014, among Marriott
Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc., the several banks and other
financial institutions or entities from time to time parties thereto, JPMorgan Chase Bank, N.A., as
administrative agent, Bank of America, N.A. and Deutsche Bank Securities Inc., as co-syndication
agents, and Bank of America, N.A. and Deutsche Bank Securities Inc., as co-documentation agents
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
September 11, 2014).

First Amendment, dated as of June 26, 2015, to the Second Amended and Restated Credit
Agreement, among Marriott Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc.,
the several banks and other financial institutions or entities from time to time parties thereto,
JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Deutsche Bank
Securities Inc., as co-syndication agents, and Bank of America, N.A. and Deutsche Bank Securities
Inc., as co-documentation agents (incorporated by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q filed on July 23, 2015).

E-3

10.32

10.33

10.34

10.35

10.36

21.1

23.1

24.1

31.1

31.2

32.1

32.2

Second Amended and Restated Guarantee and Collateral Agreement, dated as of September 10,
2014, made by Marriott Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc.
and certain subsidiaries of Marriott Vacations Worldwide Corporation in favor of JPMorgan
Chase Bank, N.A., as administrative agent for the banks and other financial institutions or
entities from time to time parties to the Second Amended and Restated Credit Agreement
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed
on September 11, 2014).

Purchase and Sale Agreement dated as of April 25, 2014 among Tower Development Inc.,
Lifestyle Retail Properties LLC, Kauai Lagoons LLC and MORI Golf (Kauai), LLC
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
filed on April 29, 2014).

First Amendment to Purchase and Sale Agreement dated as of October 27, 2014 among Tower
Development Inc., Lifestyle Retail Properties LLC, Kauai Lagoons LLC and MORI Golf
(Kauai), LLC. (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on
Form 10-K filed on February 26, 2015).

Second Amendment to Purchase and Sale Agreement dated as of November 21, 2014 among
Tower Development Inc., Lifestyle Retail Properties LLC, Kauai Lagoons LLC and MORI Golf
(Kauai), LLC. (incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on
Form 10-K filed on February 26, 2015).

Third Amendment to Purchase and Sale Agreement and Assignment and Assumption of
Purchase Agreement dated as of December 8, 2014 among Tower Development Inc., Lifestyle
Retail Properties LLC, Kauai Lagoons LLC and MORI Golf (Kauai), LLC. (incorporated by
reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K filed on February 26,
2015).

Subsidiaries of Marriott Vacations Worldwide Corporation.

Consent of Ernst & Young, LLP.

Powers of Attorney (included on the signature pages hereto).

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.

Certification of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 906 of the
Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 906 of the
Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Label Linkbase Document.

101.PRE

XBRL Taxonomy Presentation Linkbase Document.

* Management contract or compensatory plan or arrangement.

E-4

We have attached the following documents formatted in XBRL (Extensible Business Reporting

Language) as Exhibit 101 to this Annual Report: (i) Consolidated Statements of Income for the fiscal years ended
January 1, 2016, January 2, 2015 and January 3, 2014; (ii) the Consolidated Statements of Comprehensive
Income for the fiscal years ended January 1, 2016, January 2, 2015 and January 3, 2014; (iii) the Consolidated
Balance Sheets at January 1, 2016 and January 2, 2015; (iv) the Consolidated Statements of Cash Flows for the
fiscal years ended January 1, 2016, January 2, 2015 and January 3, 2014; and (v) the Consolidated Statements of
Shareholders’ Equity for the fiscal years ended January 1, 2016, January 2, 2015 and January 3, 2014.

E-5

INDEX TO FINANCIAL STATEMENTS
MARRIOTT VACATIONS WORLDWIDE CORPORATION

Audited Consolidated Financial Statements
Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10

MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Marriott Vacations Worldwide Corporation (the “Company”) is responsible for

establishing and maintaining adequate internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. The Company’s internal control over financial reporting
is designed to provide reasonable assurance on the reliability of financial reporting and the preparation of the
consolidated financial statements in accordance with U.S. generally accepted accounting principles.

The Company’s internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s
transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of the consolidated financial statements in accordance with U.S.
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable
assurance on prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In connection with the preparation of the Company’s annual consolidated financial statements,

management has undertaken an assessment of the effectiveness of the Company’s internal control over financial
reporting as of January 1, 2016, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO
criteria”).

Based on this assessment, management has concluded that, applying the COSO criteria, as of January 1,
2016, the Company’s internal control over financial reporting was effective to provide reasonable assurance of
the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s

consolidated financial statements included in this report, has issued a report on the effectiveness of the
Company’s internal control over financial reporting, a copy of which appears on the next page of this Annual
Report on Form 10-K.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Marriott Vacations Worldwide Corporation:

We have audited Marriott Vacations Worldwide Corporation’s internal control over financial reporting as

of January 1, 2016, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (“the COSO criteria”).
Marriott Vacations Worldwide Corporation’s management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the company’s internal control over financial reporting based on
our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

In our opinion, Marriott Vacations Worldwide Corporation maintained, in all material respects, effective

internal control over financial reporting as of January 1, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States), the consolidated balance sheets of Marriott Vacations Worldwide Corporation as of
January 1, 2016 and January 2, 2015, and the related consolidated statements of income, comprehensive income,
shareholders’ equity and cash flows for each of the three fiscal years in the period ended January 1, 2016 and our
report dated February 25, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Certified Public Accountants

Orlando, Florida
February 25, 2016

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Marriott Vacations Worldwide Corporation:

We have audited the accompanying consolidated balance sheets of Marriott Vacations Worldwide
Corporation as of January 1, 2016 and January 2, 2015, and the related consolidated statements of income,
comprehensive income, shareholders’ equity and cash flows for each of the three fiscal years in the period ended
January 1, 2016. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Marriott Vacations Worldwide Corporation at January 1, 2016 and January 2,
2015 and the consolidated results of its operations and its cash flows for each of the three fiscal years in the
period ended January 1, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States), Marriott Vacations Worldwide Corporation’s internal control over financial reporting as
of January 1, 2016, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
February 25, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Certified Public Accountants

Orlando, Florida
February 25, 2016

F-4

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Years 2015, 2014 and 2013
(In thousands, except per share amounts)

2015

2014

2013

REVENUES

Sale of vacation ownership products . . . . . . . . . . . . . . . . . . . . . . $ 675,329
312,229
Resort management and other services . . . . . . . . . . . . . . . . . . . .
124,033
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
312,997
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
405,875
Cost reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 647,488
298,283
128,909
264,307
396,795

$ 671,284
290,848
141,306
261,533
384,717

TOTAL REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,830,463

1,735,782

1,749,688

EXPENSES

Cost of vacation ownership products . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resort management and other services . . . . . . . . . . . . . . . . . . . .
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Litigation settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Organizational and separation related . . . . . . . . . . . . . . . . . . . . .
Consumer financing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment
Cost reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

204,299
330,599
199,895
24,194
259,729
102,963
(232)
1,174
24,658
58,982
324
405,875

196,444
315,410
199,258
24,148
237,920
98,562
19,494
3,438
26,464
59,970
1,381
396,795

213,592
315,610
206,593
24,594
250,850
99,379
3,230
12,308
31,375
62,049
1,471
384,717

TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,612,460

1,579,284

1,605,768

Gains and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment reversals (charges) on equity investment . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,557
(12,810)
187
—
(8,440)

206,497
(83,698)

NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,799

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3.90

Shares used in computing basic earnings per share . . . . . . . . . . . . . . . .

31,487

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3.82

Shares used in computing diluted earnings per share . . . . . . . . . . . . . . .

32,168

Dividends declared per share of common stock . . . . . . . . . . . . . . . . . . . $

1.05

5,171
(11,692)
74
540
—

150,591
(69,835)

80,756

2.40

33,665

2.33

34,635

0.25

922
(12,574)
190
(1,254)
—

131,204
(51,474)

79,730

2.25

35,373

2.18

36,621

—

See Notes to Consolidated Financial Statements

F-5

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Years 2015, 2014 and 2013
(In thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . .

Total other comprehensive (loss) income, net of tax . . . . . . . . . . . . . . . .

2015

2014

2013

122,799

80,756

79,730

(5,673)

(6,005)

1,783

COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

117,126

74,751

81,513

See Notes to Consolidated Financial Statements

F-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
Fiscal Year-End 2015 and 2014
(In thousands, except share and per share data)

ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted cash (including $26,884 and $34,986 from VIEs, respectively) . . . . . . .
Accounts and contracts receivable, net (including $4,893 and $4,992 from VIEs,

respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacation ownership notes receivable, net (including $669,179 and $750,680 from
VIEs, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015

2014

177,061
71,451

346,515
109,907

131,850

109,700

920,631
669,243
288,803
135,987

917,228
772,784
147,379
127,066

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,395,026

$ 2,530,579

LIABILITIES AND EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Advance deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities (including $669 and $1,088 from VIEs, respectively) . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and benefits liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability for Marriott Rewards customer loyalty program . . . . . . . . . . . . . . . . . . . .
Deferred compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mandatorily redeemable preferred stock of consolidated subsidiary, net
. . . . . . . .
Debt, net (including $684,604 and $708,031 from VIEs, respectively) . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

139,120
69,064
164,791
35,276
104,331
35
51,031
38,989
678,793
32,945
104,384

114,079
60,192
165,969
38,818
93,073
89,285
41,677
38,816
703,013
27,071
78,883

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,418,759

1,450,876

Contingencies and Commitments (Note 9)
Preferred stock — $.01 par value; 2,000,000 shares authorized; none issued or

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock — $.01 par value; 100,000,000 shares authorized; 36,393,800 and
36,089,513 shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock — at cost; 6,844,256 and 3,996,725 shares, respectively . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

364
(429,990)
1,150,731
11,381
243,781

361
(229,229)
1,137,785
17,054
153,732

Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

976,267

1,079,703

Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,395,026

$ 2,530,579

The abbreviation VIEs above means Variable Interest Entities.

See Notes to Consolidated Financial Statements

F-7

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years 2015, 2014 and 2013
(In thousands)

OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash litigation settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity method income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment (reversals) charges on equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in assets and liabilities:

Accounts and contracts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes receivable originations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes receivable collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of operating hotels for future conversion to inventory . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, advance deposits and accrued liabilities . . . . . . . . . . . . . . . . . . . .
Liability for Marriott Rewards customer loyalty program . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015

2014

2013

$ 122,799

$ 80,756

$ 79,730

22,217
5,586
33,083
14,142
560
(9,557)
(262)
28,162
(187)
324
—

(24,188)
(311,195)
270,170
72,158
(61,554)
(10,648)
23,419
(89,251)
(3,334)
11,380
9,354
1,060
4,796

18,682
5,462
30,534
13,376
—
(5,171)
23,778
18,876
(74)
1,381
(540)

(1,143)
(267,917)
287,240
82,690
—
8,659
(10,824)
(25,022)
18,119
8,973
4,568
(2,558)
1,566

22,595
5,561
35,981
12,015
—
(710)
—
17,880
(190)
1,471
1,254

(7,977)
(260,444)
309,584
33,950
—
(7,565)
(16,797)
(44,678)
(12,548)
(98)
(7,638)
(2,694)
2,066

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109,034

291,411

160,748

INVESTING ACTIVITIES

Capital expenditures for property and equipment (excluding inventory) . . . . . . . . . . . . . . . . .
Purchase of operating hotel to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions, net

Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . .

FINANCING ACTIVITIES

Borrowings from securitization transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of debt related to securitization transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from vacation ownership inventory arrangement
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings on Revolving Corporate Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments on Revolving Corporate Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of withholding taxes on vesting of restricted stock units . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(35,735)
(47,658)
37,681
20,644

(25,068)

255,000
(278,427)
5,375
—
—
(5,335)
(201,380)
(23,793)
97
9,380
(10,894)
230

(15,202)
—
(24,019)
82,347

43,126

262,638
(228,870)
—
—
—
(6,498)
(203,596)
(8,179)
2,977
4,519
(8,077)
(564)

(21,977)
—
(17,477)
3,543

(35,911)

361,449
(361,017)
—
25,000
(25,000)
(5,159)
(25,633)
—
3,804
3,544
(5,140)
(123)

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(249,747)

(185,650)

(28,275)

Effect of changes in exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
(DECREASE) INCREASE IN CASH AND EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,673)
(169,454)
346,515
$ 177,061

(1,883)
147,004
199,511
$ 346,515

42
96,604
102,907
$ 199,511

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING

ACTIVITIES

Non-cash transfer of sales centers from inventory to property and equipment . . . . . . . . . . . . .
Non-cash impact on Additional paid-in capital for changes in Deferred tax liabilities

distributed to Marriott Vacations Worldwide at Spin-Off . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash issuance of note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash issuance of treasury stock for employee stock purchase plan . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash impact on Additional paid-in capital to correct an immaterial error in Deferred

revenue at Spin-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 30,985

— $

(9)
(500)
(560)
(8,898)

(3,870)
—
—
—

—

(1,156)

—

—
—
—
—

—

See Notes to Consolidated Financial Statements

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MARRIOTT VACATIONS WORLDWIDE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

Marriott Vacations Worldwide Corporation (“Marriott Vacations Worldwide,” “we” or “us,” which
includes our consolidated subsidiaries except where the context of the reference is to a single corporate entity) is
the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products
under the Marriott Vacation Club and Grand Residences by Marriott brands. We are also the exclusive
worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton
Destination Club brand, and we have the non-exclusive right to develop, market and sell whole ownership
residential products under The Ritz-Carlton Residences brand. The Ritz-Carlton Hotel Company, L.L.C. (“The
Ritz-Carlton Hotel Company”), a subsidiary of Marriott International, Inc. (“Marriott International”), provides
on-site management for Ritz-Carlton branded properties.

Our business is grouped into three reportable segments: North America, Europe and Asia Pacific. As of

January 1, 2016, our portfolio consisted of 61 properties in the United States and eight other countries and
territories, including two hotels that we intend to convert into vacation ownership interests. We generate most of
our revenues from four primary sources: selling vacation ownership products; managing our resorts; financing
consumer purchases of vacation ownership products; and renting vacation ownership inventory.

Our Spin-Off from Marriott International, Inc.

On November 21, 2011, the spin-off of Marriott Vacations Worldwide from Marriott International (the

“Spin-Off”) was completed pursuant to a Separation and Distribution Agreement (the “Separation and
Distribution Agreement”) between Marriott Vacations Worldwide and Marriott International. In connection with
the Spin-Off, we entered into several agreements that govern the ongoing relationship between Marriott
Vacations Worldwide and Marriott International.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements presented herein and discussed below include 100 percent of the

assets, liabilities, revenues, expenses and cash flows of Marriott Vacations Worldwide, all entities in which
Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and those variable interest
entities for which Marriott Vacations Worldwide is the primary beneficiary in accordance with consolidation
accounting guidance. Intercompany accounts and transactions between consolidated companies have been
eliminated in consolidation. The consolidated financial statements reflect our financial position, results of
operations and cash flows as prepared in conformity with United States Generally Accepted Accounting
Principles (“GAAP”).

In order to make these Financial Statements easier to read, we refer throughout to (i) our Consolidated

Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Income as our
“Statements of Income,” (iii) our Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our
Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered
“Footnotes” refer to the numbered Notes in these Notes to Consolidated Financial Statements, unless otherwise
noted.

Our fiscal year ends on the Friday nearest to December 31. The fiscal years in the following table included
52 weeks, except for 2013, which included 53 weeks. Unless otherwise specified, each reference to a particular

F-10

year in these Financial Statements means the fiscal year ended on the date shown in the following table, rather
than the corresponding calendar year:

Fiscal Year

2015
2014
2013

Fiscal Year-End Date

January 1, 2016
January 2, 2015
January 3, 2014

The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such
estimates include, but are not limited to, revenue recognition, cost of vacation ownership products, inventory
valuation, property and equipment valuation, loan loss reserves, Marriott Rewards customer loyalty program
liability, self-insured medical plan reserves, equity-based compensation, income taxes and loss contingencies.
Accordingly, actual amounts may differ from these estimated amounts.

We have reclassified certain prior year amounts to conform to our 2015 presentation.

Revenue Recognition

Sale of Vacation Ownership Products

We market and sell real estate and in substance real estate in our three reportable segments. Real estate

and in substance real estate include deeded vacation ownership products, deeded beneficial interests, rights to use
real estate, and other interests in trusts that solely hold real estate and deeded whole ownership units in
residential buildings. Within the North America segment, we also market and sell residential units at certain
properties on a limited basis.

Vacation ownership products may be sold for cash or we may provide financing. We are not providing

financing on sales of whole ownership products. Except for revenue from the sale of residential stand-alone
structures, which we recognize upon transfer of title to a third party, we recognize revenue under the percentage-
of-completion method when all of the following exist or are true: the customer has executed a binding sales
contract, the statutory rescission period has expired (after which time the purchasers are not entitled to a refund
except for non-delivery by us), we have deemed the receivable collectible and the remainder of our obligations
are substantially completed. In addition, before we recognize any revenues, the purchaser must have met the
initial investment criteria and, as applicable, the continuing investment criteria. A purchaser has met the initial
investment criteria when we receive a minimum down payment. In accordance with the authoritative guidance
for accounting for real estate time-sharing transactions, we must also take into consideration the fair value of
certain incentives provided to the purchaser when assessing the adequacy of the purchaser’s initial investment. In
those cases where we provide financing to the purchaser, the purchaser must be obligated to remit monthly
payments under financing contracts that represent the purchaser’s continuing investment.

Resort Management and Other Services Revenues

Resort management and other services revenues consist primarily of ancillary revenues and management
fees. Ancillary revenues consist of goods and services that are sold or provided by us at restaurants, golf courses
and other retail and service outlets located at developed resorts. We recognize ancillary revenue when goods have
been provided and/or services have been rendered.

We provide day-to-day-management services, including housekeeping services, operation of a reservation

system, maintenance and certain accounting and administrative services for property owners’ associations. We
receive compensation for such management services which is generally based on either a percentage of the
budgeted cost to operate such resorts or a fixed fee arrangement. We recognize revenues when earned in
accordance with the terms of the contract and record them as a component of Resort management and other
services revenues on our Statements of Income. Management fee revenues were $77.6 million, $73.9 million and
$69.7 million during 2015, 2014 and 2013, respectively.

F-11

Resort management and other services revenues include additional fees for services we provide to our

property owners’ associations, as well as annual fees, club dues, settlement fees from the sale of vacation
ownership products, and certain transaction-based fees from owners and other third parties, including external
exchange service providers with which we are associated. We recognize fee revenues when services have been
rendered. Fee revenues included in Resort management and other services revenues were $99.5 million in 2015,
$95.1 million in 2014 and $89.9 million in 2013, as reflected on our Statements of Income.

Financing Revenues

We offer consumer financing as an option to qualifying customers purchasing vacation ownership
products, which is collateralized by the underlying vacation ownership products. We recognize interest income
on an accrual basis. The contractual terms of the financing agreements require that the contractual level of annual
principal payments be sufficient to amortize the loan over a customary period for the vacation ownership product
being financed, which is generally ten years. Generally, payments commence under the financing contracts 30 to
60 days after closing. We record an estimate of uncollectible amounts at the time of the sale with a charge to the
provision for loan losses, which we classify as a reduction of Sale of vacation ownership products on our
Statements of Income. Revisions to estimates of uncollectible amounts also impact the provision for loan losses
and can increase or decrease revenue. We earn interest income from the financing arrangements on the principal
balance outstanding over the life of the arrangement and record that interest income in Financing revenues on our
Statements of Income.

Financing revenues include certain annual and transaction-based fees we charge to owners and other third

parties for services. We recognize fee revenues when services have been rendered. Fee revenues included in
Financing revenues were $6.0 million in 2015, $6.4 million in 2014 and $6.6 million in 2013, as reflected on our
Statements of Income.

Rental Revenues

We record rental revenues when occupancy has occurred or, in the case of unused prepaid rentals, upon

forfeiture. We also recognize rental revenue from the utilization of plus points under the Marriott Vacation Club
Destinations TM (“MVCD”) program when those points are redeemed for rental stays at one of our resorts or upon
expiration of the points.

Cost Reimbursements

Cost reimbursements include direct and indirect costs that property owners’ associations reimburse to us.

In accordance with the accounting guidance for “gross versus net” presentation, we record these revenues on a
gross basis. These costs primarily consist of payroll and payroll related costs for management of the property
owners’ associations and other services we provide where we are the employer. We recognize cost
reimbursements when we incur the related reimbursable costs. Cost reimbursements consist of actual expenses
with no added margin.

Multiple-Element Transactions

From time to time, we enter into transactions involving multiple elements. We analyze contracts with

multiple elements under the accounting guidance for revenue recognition in multiple-element arrangements. If
we enter into transactions for the sale of multiple products or services, we evaluate whether the delivered
elements have value to the customer on a stand-alone basis, and whether there is objective and reliable evidence
of fair value for each undelivered element in the transaction. If these criteria are met, then we account for each
deliverable in the transaction separately. We generally recognize revenue for undelivered elements on a straight-
line basis over the contractual performance period for time-based elements or upon delivery to the customer. If
we are unable to determine the fair value of one or more undelivered elements in the transaction, we recognize
the revenue on a straight-line basis over the period in which the last deliverable is provided to the customer.

F-12

Inventory

Our inventory consists primarily of completed vacation ownership products, vacation ownership products
under construction and land held for future vacation ownership product development. We carry our inventory at
the lower of (1) cost, including costs of improvements and amenities incurred subsequent to acquisition,
capitalized interest and real estate taxes plus other costs incurred during construction, or (2) estimated fair value,
less costs to sell, which can result in impairment charges and/or recoveries of previous impairments.

We account for vacation ownership inventory and cost of vacation ownership products in accordance with

the authoritative guidance for accounting for real estate time-sharing transactions, which define a specific
application of the relative sales value method for reducing vacation ownership inventory and recording cost of
sales as described in our policy for revenue recognition for vacation ownership products. Also, pursuant to the
guidance for accounting for real estate time-sharing transactions, we do not reduce inventory for cost of vacation
ownership products related to anticipated credit losses (accordingly, no adjustment is made when inventory is
reacquired upon default of the related receivable). These standards provide for changes in estimates within the
relative sales value calculations to be accounted for as real estate inventory true-ups, which we refer to as product
cost true-ups, and are recorded in Cost of vacation ownership product expenses on the Statements of Income to
retrospectively adjust the margin previously recorded subject to those estimates. For 2015, 2014 and 2013,
product cost true-ups relating to vacation ownership products increased carrying values of inventory by
$7.3 million, $6.5 million and $17.7 million, respectively.

For residential real estate projects, we allocate costs to individual residences in the projects based on the

relative estimated sales value of each residence in accordance with ASC 970, “Real Estate—General,” which
defines the accounting for costs of real estate projects. Under this method, we reduce the allocated cost of a unit
from inventory and recognize that cost as cost of sales when we recognize the related sale. Changes in estimates
within the relative sales value calculations for residential products (similar to condominiums) are accounted for
as prospective adjustments to cost of vacation ownership products.

Capitalization of Costs

We capitalize interest and certain salaries and related costs incurred in connection with the following:

(1) development and construction of sales centers; (2) internally developed software; and (3) development and
construction projects for our real estate inventory. We capitalize costs clearly associated with the acquisition,
development and construction of a real estate project when it is probable that we will acquire a property. We
capitalize salary and related costs only to the extent they directly relate to the project. We capitalize interest
expense, taxes and insurance costs when activities that are necessary to get the property ready for its intended use
are underway. We cease capitalization of costs during prolonged gaps in development when substantially all
activities are suspended or when projects are considered substantially complete. Capitalized salaries and related
costs totaled $7.1 million, $5.1 million and $7.3 million for 2015, 2014 and 2013, respectively.

Defined Contribution Plan

We administer and maintain a defined contribution plan for the benefit of all employees meeting certain

eligibility requirements who elect to participate in the plan. Contributions are determined based on a specified
percentage of salary deferrals by participating employees. We recognized compensation expense (net of cost
reimbursements from property owners’ associations) for our participating employees totaling $7.1 million in
2015, $6.6 million in 2014 and $5.8 million in 2013.

Deferred Compensation Plan

Prior to the Spin-Off, certain members of our senior management had the opportunity to participate in the

Marriott International, Inc. Executive Deferred Compensation Plan (the “Marriott International EDC”), which
Marriott International maintains and administers. Under the Marriott International EDC, participating employees
may defer payment and income taxation of a portion of their salary and bonus. It also gives participants the
opportunity for long-term capital appreciation by crediting their accounts with notional earnings (at a fixed

F-13

annual rate of return of 4.9 percent for 2015 and 5.2 percent for 2014). Although additional discretionary
contributions to the participants’ accounts under the Marriott International EDC may be made, no additional
discretionary contributions were made for our employees in 2015, 2014 and 2013. Subsequent to the Spin-Off,
we remain liable to reimburse Marriott International for distributions for participants that were employees of
Marriott Vacations Worldwide at the time of the Spin-Off including earnings thereon.

Since 2014, certain members of our senior management have had the opportunity to participate in the
Marriott Vacations Worldwide Deferred Compensation Plan (the “Deferred Compensation Plan”), which we
maintain and administer. Under the Deferred Compensation Plan, participating employees may defer payment
and income taxation of a portion of their salary and bonus. It also gives participants the opportunity for long-term
capital appreciation by crediting their accounts with notional earnings (at a fixed annual rate of return of 5.6
percent for both 2015 and 2014). We may make additional discretionary contributions to the participant’s
accounts under the Deferred Compensation Plan. No additional discretionary contributions were made in 2015
and contributions totaling $0.1 million were made in 2014.

Property and Equipment

Property and equipment includes our sales centers, golf courses, information technology and other assets

used in the normal course of business, as well as undeveloped and partially developed land parcels that are not
part of an approved development plan and do not meet the criteria to be classified as held for sale. We record
property and equipment at cost, including interest and real estate taxes incurred during active development. We
capitalize the cost of improvements that extend the useful life of property and equipment when incurred. These
capitalized costs may include structural costs, equipment, fixtures, floor and decorative items and signage. We
expense all repair and maintenance costs as incurred. We compute depreciation using the straight-line method
over the estimated useful lives of the assets (three to forty years), and we amortize leasehold improvements over
the shorter of the asset life or lease term.

Marriott Rewards Customer Loyalty Program

We participate in the Marriott Rewards customer loyalty program and we offer Marriott Rewards Points,

or “points,” which we purchase from Marriott International, as incentives to purchase vacation ownership
products and/or through exchange and other activities. Marriott International maintains and administers this
program. The associated expense is classified on the Statements of Income based on the source of the expense
and related revenue stream.

We pay Marriott International for Marriott Rewards Points issued prior to 2012 when the points are
redeemed by program members. Our liability for Marriott Rewards Points issued prior to 2012 represents the net
present value of future cash outlays that we are obligated to pay Marriott International based on actual point
redemptions. We base the carrying value of this liability on a statistical model that projects the dollar value and
timing of future point redemptions. The most significant estimates involve the future cost of redeemed points, the
breakage for points that will never be redeemed, and the pace at which points are redeemed. We base our
estimates for these items on our historical experience, current trends and other considerations. We made a lump
sum payment of $66.0 million to repay this liability in December 2015, leaving a remaining estimated liability of
less than $0.1 million. A final payment for any outstanding Marriott Rewards Points issued prior to 2012 is due
in February 2016. Our remaining liability for these Marriott Rewards Points is included in Liability for Marriott
Rewards customer loyalty program on the Balance Sheets. See Footnote No. 12, “Other Liabilities” for more
information.

Except as noted above, we generally pay Marriott International for Marriott Rewards Points within 30
days of issuance. For Marriott Rewards Points issued for exchanges as an alternative usage option for owners
who elect to exchange their inventory in the calendar fourth quarter, payment is due within 120 days of year-end.
The rates we pay for the Marriott Rewards Points are based upon historical redemption costs with no future
adjustment for actual costs incurred by Marriott International upon fulfillment. Our liability for these Marriott
Rewards Points is included in Accrued liabilities on the Balance Sheets.

F-14

Guarantees

We record a liability for the fair value of a guarantee on the date we issue or modify the guarantee. The
offsetting entry depends on the circumstances in which the guarantee was issued. Funding under the guarantee
reduces the recorded liability. On a quarterly basis, we evaluate all material estimated liabilities based on the
operating results and the terms of the guarantee. If we conclude that it is probable that we will be required to fund
a greater amount than previously estimated, we will record a loss.

Cash and Cash Equivalents

We consider all highly liquid investments with an initial purchase maturity of three months or less at the

date of purchase to be cash equivalents.

Restricted Cash

Restricted cash primarily consists of cash held in a reserve account related to vacation ownership notes
receivable securitizations, cash collected for maintenance fees to be remitted to property owners’ associations,
and deposits received, primarily associated with vacation ownership products and residential sales that are held in
escrow until the associated contract has closed or the period in which it can be rescinded has passed, depending
on legal requirements.

Accounts and Contracts Receivable

Accounts and contracts receivable are presented net of allowances of $0.6 million at both January 1, 2016

and January 2, 2015.

Loan Loss Reserves

We record an estimate of expected uncollectibility on all notes receivable from vacation ownership

purchasers as a reduction of revenues from the sale of vacation ownership products at the time we recognize
profit on a vacation ownership product sale. We fully reserve for all defaulted vacation ownership notes
receivable in addition to recording a reserve on the estimated uncollectible portion of the remaining vacation
ownership notes receivable. For those vacation ownership notes receivable that are not in default, we assess
collectibility based on pools of vacation ownership notes receivable because we hold large numbers of
homogeneous vacation ownership notes receivable. We use the same criteria to estimate uncollectibility for non-
securitized vacation ownership notes receivable and securitized vacation ownership notes receivable because
they perform similarly. We estimate uncollectibility for each pool based on historical activity for similar vacation
ownership notes receivable.

Although we consider loans to owners to be past due if we do not receive payment within 30 days of the

due date, we suspend accrual of interest only on those loans that are over 90 days past due. We consider loans
over 150 days past due to be in default. We apply payments we receive for vacation ownership notes receivable
on non-accrual status first to interest, then to principal and any remainder to fees. We resume accruing interest
when vacation ownership notes receivable are less than 90 days past due. We do not accept payments for
vacation ownership notes receivable during the foreclosure process unless the amount is sufficient to pay all past
due principal, interest, fees and penalties owed and fully reinstate the note. We write off uncollectible vacation
ownership notes receivable against the reserve once we receive title to the vacation ownership products through
the foreclosure or deed-in-lieu process or, in Europe or Asia Pacific, when revocation is complete. For both non-
securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of
6.92 percent and 6.95 percent as of January 1, 2016 and January 2, 2015, respectively. A 0.5 percentage point
increase in the estimated default rate would have resulted in an increase in our allowance for loan losses of
$4.7 million as of both January 1, 2016 and January 2, 2015.

For additional information on our vacation ownership notes receivable, including information on the

related reserves, see Footnote No. 3, “Vacation Ownership Notes Receivable.”

F-15

Costs Incurred to Sell Vacation Ownership Products

We charge the majority of marketing and sales costs we incur to sell vacation ownership products to

expense when incurred. Deferred marketing and selling expenses, which are direct marketing and selling costs
related either to an unclosed contract or a contract for which 100 percent of revenue has not yet been recognized,
were $5.3 million at both year-end 2015 and 2014 and are included on the accompanying Balance Sheets in the
Other caption within Assets.

Valuation of Property and Equipment

Property and equipment includes our sales centers, golf courses, information technology and other assets

used in the normal course of business, as well as undeveloped and partially developed land parcels that are not
part of an approved development plan and do not meet the criteria to be classified as held for sale. We test long-
lived asset groups for recoverability when changes in circumstances indicate the carrying value may not be
recoverable, for example, when there are material adverse changes in projected revenues or expenses, significant
underperformance relative to historical or projected operating results, or significant negative industry or
economic trends. We evaluate recoverability of an asset group by comparing its carrying value to the future net
undiscounted cash flows that we expect will be generated by the asset group. If the comparison indicates that the
carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of carrying
value over the estimated fair value. When we recognize an impairment loss for assets to be held and used, we
depreciate the adjusted carrying amount of those assets over their remaining useful life.

Investments

We consolidate entities that we control. We account for investments in joint ventures which are not
consolidated variable interest entities using the equity method of accounting when we exercise significant
influence over the venture. If we do not exercise significant influence, we account for the investment using the
cost method of accounting. We account for investments in limited partnerships and limited liability companies
using the equity method of accounting when we own more than a minimal investment. Our ownership interest in
these equity method investments generally varies from 34 percent to 50 percent.

Valuation of Investments in Ventures

We evaluate investments in ventures for impairment when circumstances indicate that the carrying value

may not be recoverable due to loan defaults, significant under-performance relative to historical or projected
performance, significant negative industry or economic trends, or otherwise.

We record impairments for investments we have accounted for using the equity and cost methods of

accounting when we determine that the venture has had an “other than temporary” decline in its estimated fair
value as compared to its carrying value. Additionally, a change in business plans or strategies of a venture could
cause us to evaluate the recoverability for the individual long-lived assets in the venture and possibly the venture
itself.

We calculate the estimated fair value of an investment in a venture using the income approach. We use

internally developed discounted cash flow models that include the following assumptions, among others:
projections of revenues and expenses and related cash flows based on assumed long-term growth rates and
demand trends; expected future investments; and estimated discount rates. We base these assumptions on our
historical data and experience, third-party appraisals, industry projections, micro and macro general economic
condition projections, and our expectations.

Fair Value Measurements

We have few financial instruments that we must measure at fair value on a recurring basis. See Footnote
No. 4, “Financial Instruments,” for further information. We also apply the provisions of fair value measurement
to various non-recurring measurements for our financial and non-financial assets and liabilities.

F-16

The applicable accounting standards define fair value as the price that would be received upon selling an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
(an exit price). We measure fair value of our assets and liabilities using inputs from the following three levels of
the fair value hierarchy:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we
have the ability to access at the measurement date.

Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that
are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived
principally from or corroborated by observable market data by correlation or other means (market
corroborated inputs).

Level 3 includes unobservable inputs that reflect our assumptions about what factors market participants
would use in pricing the asset or liability. We develop these inputs based on the best information
available, including our own data.

Derivative Instruments

From time to time, we may use derivative instruments to reduce market risk due to changes in interest
rates and currency exchange rates, including interest rate derivatives that we may be required to enter into as a
condition of our $250 million non-recourse warehouse credit facility (the “Warehouse Credit Facility”). As of
January 1, 2016, we were not party to any material derivative instruments or hedges.

The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria
determines how the change in fair value of the derivative instrument is recorded on our Financial Statements. A
derivative qualifies for hedge accounting if, at inception, we expect the derivative to be highly effective in
offsetting the underlying hedged cash flows or fair value and we fulfill the hedge documentation standards at the
time we enter into the derivative contract. We designate a hedge as a cash flow hedge, fair value hedge, or a net
investment in non-U.S. operations hedge based on the exposure we are hedging. The asset or liability value of the
derivative will change in tandem with its fair value. For the effective portion of qualifying hedges, we record
changes in fair value in other comprehensive income (“OCI”). We release the derivative’s gain or loss from OCI
to match the timing of the underlying hedged items’ effect on earnings. As a matter of policy, we only enter into
hedging transactions that we believe will be highly effective at offsetting the underlying risk and do not use
derivatives for trading or speculative purposes.

Non-U.S. Operations

The U.S. dollar is the functional currency of our consolidated entities operating in the United States. The
functional currency for our consolidated entities operating outside of the United States is generally the currency
of the economic environment in which the entity primarily generates and expends cash. For consolidated entities
whose functional currency is not the U.S. dollar, we translate their financial statements into U.S. dollars. We
translate assets and liabilities at the exchange rate in effect as of the financial statement date and translate
Statement of Income accounts using the weighted average exchange rate for the period. We include translation
adjustments from currency exchange and the effect of exchange rate changes on intercompany transactions of a
long-term investment nature as a separate component of equity. We report gains and losses from currency
exchange rate changes related to intercompany receivables and payables that are not of a long-term investment
nature, as well as gains and losses from non-U.S. currency transactions, currently in operating costs and
expenses.

Loss Contingencies

We are subject to various legal proceedings and claims in the normal course of business, the outcomes of
which are subject to significant uncertainty. We record an accrual for loss contingencies when we determine that
it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making

F-17

such determinations we evaluate, among other things, the degree of probability of an unfavorable outcome and,
when it is probable that a liability has been incurred, our ability to make a reasonable estimate of the loss. We
review these accruals each reporting period and make revisions based on changes in facts and circumstances.

Share-Based Compensation Costs

We established the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan (the “Stock
Plan”) in order to compensate our employees and directors by issuing equity awards such as stock options, stock
appreciation rights (“SARs”) and restricted stock units (“RSUs”) to them. Prior to the Spin-Off, certain of our
employees received equity awards under the Marriott International, Inc. Stock and Cash Incentive Plan (the
“Marriott International Stock Plan”). For all fiscal years presented, our Statements of Income include expenses
related to our employees’ participation in both the Stock Plan and the Marriott International Stock Plan.

We follow the provisions of ASC 718, “Compensation—Stock Compensation,” which requires that a
company measure the expense of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. Generally, share-based awards granted to our employees vest
ratably over a four-year period, and we recognize the expense associated with these awards on our Statements of
Income on a straight-line basis over the period during which an employee is required to provide service in
exchange for the award. We measure the amount of compensation expense for share-based awards based on the
fair value of the awards as of the date that the share-based awards are granted and adjust that expense to the
estimated number of awards that we expect will vest. We generally determine the fair value of stock options and
SARs using the Black-Scholes option valuation model which incorporates assumptions about expected volatility,
risk free interest rate, dividend yield and expected term. The fair value of RSUs represents the number of awards
granted multiplied by the average of the high and low market price of our common stock on the date the awards
are granted reduced by the present value of the dividends expected to be paid on the shares during the requisite
service period, discounted at a risk-free interest rate. We recognize compensation cost for share-based awards
ratably over the vesting period. We will issue shares from authorized shares upon the exercise of stock options or
SARs held by our employees and directors. See Footnote No. 14, “Share-Based Compensation,” for more
information.

Advertising Costs

We expensed advertising costs as incurred of $2.1 million, $2.0 million and $2.2 million in 2015, 2014

and 2013, respectively. These costs are included in the Marketing and sales expense caption on our Statements of
Income.

Income Taxes

We file U.S. consolidated federal and state tax returns, as well as consolidated and separate tax filings for

non-U.S. jurisdictions. We account for income taxes under the asset and liability method, which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the financial statements. Under this method, deferred tax assets and liabilities are determined based
on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Changes in existing tax laws and rates, their related interpretations, and the uncertainty generated by the
current economic environment may affect the amounts of deferred tax liabilities or the valuations of deferred tax
assets over time. Our accounting for deferred tax consequences represents management’s best estimate of future
events that can be appropriately reflected in the accounting estimates.

We record net deferred tax assets to the extent we believe these assets will more likely than not be

realized. In making such a determination, we consider all available positive and negative evidence, including
future reversals of existing taxable temporary differences, projected future taxable income, tax-planning
strategies, and results of recent operations. In the event we determine that we would be able to realize our

F-18

deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to
the deferred tax asset valuation allowance, which impacts the provision for income taxes.

For tax positions we have taken, or expect to take, in a tax return we apply a more likely than not
threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the
position will be examined by the appropriate taxing authority that has full knowledge of all relevant information,
in order to continue to recognize the benefit. In determining our provision for income taxes, we use judgment,
reflecting our estimates and assumptions, in applying the more likely than not threshold.

For information about income taxes and deferred tax assets and liabilities, see Footnote No. 2, “Income

Taxes.”

Earnings Per Common Share

Basic earnings per common share is calculated by dividing the earnings available to common

shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per
common share is calculated to give effect to all potentially dilutive common shares that were outstanding during
the reporting period. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted
earnings per common share by application of the treasury stock methods.

New Accounting Standards

Accounting Standards Update No. 2015-16 – “Simplifying the Accounting for Measurement-Period
Adjustments (Topic 805): Business Combinations” (“ASU 2015-16”)

In September 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-16, which

replaces the requirement that an acquirer in a business combination account for measurement period adjustments
retrospectively with a requirement that an acquirer recognize adjustments to the provisional amounts that are
identified during the measurement period in the reporting period in which the adjustment amounts are
determined. ASU 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect
on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to
the provisional amounts, calculated as if the accounting had been completed at the acquisition date. For public
business entities, ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, including interim
periods within those fiscal years. The guidance is to be applied prospectively to adjustments to provisional
amounts that occur after the effective date of the guidance, with earlier application permitted for financial
statements that have not been issued. Our early adoption of ASU 2015-16 did not have a material impact on our
Financial Statements.

Accounting Standards Update No. 2015-11 – “Simplifying the Measurement of Inventory (Topic 330):
Inventory” (“ASU 2015-11”)

In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure inventory at the lower
of cost or net realizable value, which consists of the estimated selling prices in the ordinary course of business,
less reasonably predictable costs of completion, disposal, and transportation. For public entities, the updated
guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those
fiscal years. The guidance is to be applied prospectively with earlier application permitted as of the beginning of
an interim or annual reporting period. Our early adoption of ASU 2015-11 did not have a material impact on our
Financial Statements as it applies solely to our operating inventories. This guidance is not applicable to our
vacation ownership inventory.

Accounting Standards Update No. 2015-03 – “Interest – Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”)

In April 2015, the FASB issued ASU 2015-03, to modify the presentation of debt issuance costs. Under

ASU 2015-03, debt issuance costs related to a recognized debt liability are required to be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The
recognition and measurement guidance for debt issuance costs has not changed. ASU 2015-03 is effective for fiscal

F-19

years beginning after December 15, 2015 and early adoption is permitted for financial statements that have not been
previously issued. Our early adoption of ASU 2015-03 did not have a material impact on our Financial Statements.

Accounting Standards Update No. 2015-02 – “Consolidation (Topic 810): Amendments to the
Consolidation Analysis” (“ASU 2015-02”)

In February 2015, the FASB issued ASU 2015-02, which amends the guidance for evaluating whether to

consolidate certain legal entities. Specifically, ASU 2015-02 modifies the method for determining whether
limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities.
Further, it eliminates the presumption that a general partner should consolidate a limited partnership and impacts
the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee
arrangements and related party relationships. The updated guidance is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. Our early
adoption of ASU 2015-02 did not have a material impact on our Financial Statements.

Future Adoption of Accounting Standards

Accounting Standards Update No. 2016-01 – “Financial Instruments – Overall (Subtopic 825-10)”
(“ASU 2016-01”)

In January 2016, the FASB issued ASU 2016-01, which updates certain aspects of recognition,
measurement, presentation and disclosure of financial instruments. For public business entities, the amendments
in ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, including interim periods
within those fiscal years. We do not expect the adoption of ASU 2016-01 to have a material impact on our
Financial Statements.

Accounting Standards Update No. 2014-09 – “Revenue from Contracts with Customers (Topic 606)”
(“ASU 2014-09”)

In May 2014, the FASB issued ASU 2014-09. ASU 2014-09 supersedes the revenue recognition
requirements in Topic 605, Revenue Recognition, as well as most industry-specific guidance, and significantly
enhances comparability of revenue recognition practices across entities and industries by providing a principles-
based, comprehensive framework for addressing revenue recognition issues. In order for a provider of promised
goods or services to recognize as revenue the consideration that it expects to receive in exchange for the
promised goods or services, the provider should apply the following five steps: (1) identify the contract with a
customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when
(or as) the entity satisfies a performance obligation. ASU 2014-09 will be effective for fiscal years, and interim
periods within those years, beginning after December 15, 2017. The new standard may be applied prospectively
to each prior period presented or retrospectively with the cumulative effect recognized on the date of adoption.
We continue to evaluate the impact that this guidance, including the method of implementation, will have on our
financial statements and disclosures. We expect to adopt ASU 2014-09 commencing in our fiscal year 2018.

2. INCOME TAXES

We file U.S. consolidated federal and state tax returns, as well as consolidated and separate tax filings for

non-U.S. jurisdictions. We entered into a Tax Sharing and Indemnification Agreement with Marriott
International effective November 21, 2011 (as subsequently amended, the “Tax Sharing and Indemnification
Agreement”), which governs the allocation between Marriott International and Marriott Vacations Worldwide of
responsibility for federal, state, local and foreign income and other taxes related to taxable periods prior to and
subsequent to the Spin-Off. Under this agreement, if any part of the Spin-Off fails to qualify for the tax treatment
stated in the ruling Marriott International received from the U.S. Internal Revenue Service (the “IRS”) in
connection with the Spin-Off, taxes imposed will be allocated between Marriott International and Marriott
Vacations Worldwide as set forth in the agreement, and each will indemnify and hold harmless the other from
and against the taxes so allocated. In addition, under the Tax Sharing and Indemnification Agreement, Marriott

F-20

International is allocated the responsibility for payment of taxes for our taxable income prior to Spin-Off and we
are allocated the responsibility for payment of taxes for our taxable income subsequent to Spin-Off.

The income (loss) before provision for income taxes by geographic region is as follows:

($ in thousands)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 197,519
8,978
Non-U.S. jurisdictions . . . . . . . . . . . . . . . . . . . . .

2015

2014

2013

$ 178,297 $
(27,706)

124,729
6,475

206,497

150,591 $

131,204

Our current tax provision does not reflect the benefits attributable to us for the exercise or vesting of

employee share-based awards of $9.4 million in 2015, $4.5 million in 2014 and $3.5 million in 2013.

Our provision for income taxes consists of:

($ in thousands)
Current – U.S. Federal

. . . . . . . . . . . . . . . . . . . . $

– U.S. State . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
– Non-U.S.

Deferred – U.S. Federal

. . . . . . . . . . . . . . . . . . .
– U.S. State . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
– Non-U.S.

2015

2014

2013

(44,728)
(4,027)
(6,953)

(55,708)

(25,350)
(4,554)
1,914

(27,990)

(42,652)
(9,091)
95

(51,648)

(16,422)
1,294
(3,059)

(18,187)

(37,056)
(5,738)
(1,960)

(44,754)

(4,663)
(1,243)
(814)

(6,720)

(83,698)

(69,835)

(51,474)

The deferred tax assets and related valuation allowances in these Financial Statements have been
determined on a separate return basis. The assessment of the valuation allowances requires considerable
judgment on the part of management with respect to benefits that could be realized from future taxable income,
as well as other positive and negative factors. Valuation allowances are recorded against the deferred tax assets
of certain foreign operations for which historical losses, restructuring and impairment charges have been
incurred. The change in the valuation allowances established were $(3.7) million in 2015, $(6.7) million in 2014
and $1.5 million in 2013.

We have made no provision for U.S. income taxes or additional non-U.S. taxes on the cumulative

unremitted earnings of non-U.S. subsidiaries ($163.9 million at January 1, 2016) because we consider these
earnings to be permanently invested. We do not consider previously taxed income to be permanently reinvested
if such earnings can be distributed to a U.S. entity without incurring additional U.S. tax. These earnings could
become subject to additional taxes if remitted as dividends, loaned to us or a U.S. affiliate or if we sold our
interests in the affiliates. We cannot estimate the amount of additional taxes that might be payable on the
unremitted earnings.

We conduct business in countries that grant “holidays” from income taxes for ten to thirty year periods.

These holidays expire through 2034. Without these tax “holidays,” we would have incurred the following
aggregate additional income taxes: $0.4 million in 2015, $2.6 million in 2014 and $2.4 million in 2013.

We have joined in the Marriott International U.S. federal tax consolidated filing for periods up to the date

of the Spin-Off. The IRS has examined Marriott International’s federal income tax returns, and it has settled all
issues related to the timeshare business for the tax years through the Spin-Off. Our tax years subsequent to the
Spin-Off are subject to examination by relevant tax authorities. The IRS has concluded their audits for tax years
2011 and 2012. Our 2012 and 2013 returns are being audited by tax authorities in foreign jurisdictions. Although
we do not anticipate that a significant impact to our unrecognized tax benefit balance will occur during the next
fiscal year, the amount of our liability for unrecognized tax benefits could change as a result of these audits.

F-21

Our total unrecognized tax benefit balance that, if recognized, would impact our effective tax rate was

$2.4 million at January 1, 2016, $1.1 million at January 2, 2015 and $0.5 million at January 3, 2014.

The following table reconciles our unrecognized tax benefit balance for each year from the beginning of

2013 to the end of 2015:

($ in thousands)
Unrecognized tax benefit at beginning of year . . . . . . $
Change attributable to tax positions taken

2015

2014

2013

1,123

473

157

during the current period . . . . . . . . . . . . . . .

Change attributable to tax positions taken

during a prior period . . . . . . . . . . . . . . . . . . .

979

276

—

650

Unrecognized tax benefit at end of year . . . . . . . . . . . $

2,378

1,123

—

316

473

In accordance with our accounting policies, we recognize accrued interest and penalties related to our

unrecognized tax benefits as a component of tax expense. Related interest expense and accrued interest expense
totaled less than $0.1 million in each of 2015, 2014 and 2013.

Deferred Income Taxes

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts
of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carry-forwards. We
state those balances at the enacted tax rates we expect will be in effect when we actually pay or recover taxes.
Deferred income tax assets represent amounts available to reduce income taxes we will pay on taxable income in
future years. We evaluate our ability to realize these future tax deductions and credits by assessing whether we
expect to have sufficient future taxable income from all sources, including reversal of taxable temporary
differences, forecasted operating earnings and available tax planning strategies, to utilize these future deductions
and credits. We establish a valuation allowance when we no longer consider it more likely than not that a
deferred tax asset will be realized.

Total deferred tax assets and liabilities at January 1, 2016 and January 2, 2015 were as follows:

($ in thousands)
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . .

At Year-End
2015

160,813
(265,197)

Net deferred tax liability . . . . . . . . . . . . . . . . . . . . $

(104,384)

At Year-End
2014

157,974
(236,857)

(78,883)

The tax effect of each type of temporary difference and carry-forward that gives rise to a significant

portion of our deferred tax assets and liabilities at January 1, 2016 and January 2, 2015 was as follows:

At Year-End
2015

At Year-End
2014

($ in thousands)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marriott Rewards customer loyalty program . . . . . . . . . . .
Deferred sales of vacation ownership interests . . . . . . . . .
Long lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carry-forwards . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .

(25,671) $
34,151
(7,246)
13
(185,980)
34,692
45,481
46,476

(58,084)
(46,300)

Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . $

(104,384) $

F-22

(24,487)
34,807
(2,629)
3,142
(159,787)
36,148
43,938
39,939

(28,929)
(49,954)

(78,883)

At January 1, 2016, we had approximately $44.3 million of foreign net operating losses (excluding

valuation allowances) some of which begin expiring in 2016. However, a significant portion of these tax net
operating losses have an indefinite carry forward period. We have no federal net operating losses and net
operating losses of $1.2 million for state tax purposes which begin expiring in 2032.

Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate

The following table reconciles the expense related to the U.S. statutory income tax rate to our effective

income tax rate:

2015

2014

2013

U.S. statutory income tax rate expense . . . . . . . . . . . . . . . . .
. . . .
U.S. state income taxes, net of U.S. federal tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences(1)
Non-U.S. (loss) income(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance(3)
. . . . . . . . . . . . . . . . . . . . .

Effective rate expense . . . . . . . . . . . . . . . . . . . . . . . . .

35.00%
2.62
1.65
(0.61)
1.21
0.66

40.53%

35.00%
2.96
0.18
6.27
0.17
1.79

46.37%

. .35.00%
3.48
0.24
0.97
(2.28)
1.82

39.23%

(1) Attributed to interest on mandatorily redeemable preferred stock of a consolidated subsidiary, partially

offset by the benefit of tax holidays in certain jurisdictions in 2014 and 2013.

(2) Attributed to the difference between U.S. and foreign income tax rates.

(3) Attributed to establishment of valuation allowances in foreign jurisdictions for losses that cannot be

benefited in the U.S. income tax provision as discussed above.

Cash Taxes Paid

Cash taxes paid in 2015, 2014 and 2013 were $50.2 million, $65.2 million and $28.5 million,

respectively.

3. VACATION OWNERSHIP NOTES RECEIVABLE

The following table shows the composition of our vacation ownership notes receivable balances, net of

reserves:

($ in thousands)
Vacation ownership notes receivable — securitized . . . . . . . . . . . . $
Vacation ownership notes receivable — non-securitized

At Year-End
2015

At Year-End
2014

669,179

750,680

Eligible for securitization(1)
Not eligible for securitization(1)

. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104,671
146,781

251,452

Total vacation ownership notes receivable . . . . . . . . . . . . . . . . . . . $

920,631

24,194
142,354

166,548

917,228

(1) Refer to Footnote No. 4, “Financial Instruments,” for discussion of eligibility of our vacation

ownership notes receivable.

F-23

The following tables show future principal payments, net of reserves, as well as interest rates for our non-

securitized and securitized vacation ownership notes receivable at January 1, 2016:

Non-Securitized
Vacation Ownership
Notes Receivable

Securitized
Vacation Ownership
Notes Receivable

($ in thousands)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60,207
38,414
24,644
18,973
17,155
92,059

92,725
88,754
84,482
77,434
75,057
250,727

Balance at year-end 2015 . . . . . . . . . . . . . . . . . . . $

251,452

669,179

Total

152,932
127,168
109,126
96,407
92,212
342,786

920,631

Weighted average stated interest rate at

year-end 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
Range of stated interest rates at year-end 2015 . . .

12.0%
0.0% to 19.5%

12.8%

12.5%

4.9% to 19.5% 0.0% to 19.5%

We reflect interest income associated with vacation ownership notes receivable in our Statements of
Income in the Financing revenues caption. The following table summarizes interest income associated with
vacation ownership notes receivable:

($ in thousands)
Interest income associated with vacation ownership notes receivable –

2015

2014

2013

securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

89,693

91,790

103,781

Interest income associated with vacation ownership notes receivable –
non-securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total interest income associated with vacation ownership

28,327

30,761

30,963

notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

118,020

122,551

134,744

F-24

The following table summarizes the activity related to our vacation ownership notes receivable reserve

for 2015, 2014 and 2013:

Non-Securitized
Vacation Ownership
Notes Receivable
Reserve

Securitized
Vacation Ownership
Notes Receivable
Reserve

Total

($ in thousands)
Balance at year-end 2012 . . . . . . . . . . . . $
Provision for loan losses . . . . . . . . . . . . .
Securitizations . . . . . . . . . . . . . . . . . . . . .
Clean-up calls(1) . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . .
Defaulted vacation ownership notes
receivable repurchase activity(2)

. . . . .

Balance at year-end 2013 . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . .
Securitizations . . . . . . . . . . . . . . . . . . . . .
Clean-up calls(1) . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . .
Defaulted vacation ownership notes
receivable repurchase activity(2)

. . . . .

Balance at year-end 2014 . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . .
Securitizations . . . . . . . . . . . . . . . . . . . . .
Clean-up calls(1) . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . .
Defaulted vacation ownership notes
receivable repurchase activity(2)

. . . . .

92,785
28,885
(31,534)
14,285
(49,257)

26,412

81,576
20,509
(19,507)
1,756
(44,931)

25,349

64,752
23,832
(16,491)
7,115
(48,220)

53,782
7,068
31,534
(14,285)
—

(26,412)

51,687
9,577
19,507
(1,756)
—

(25,349)

53,666
9,209
16,491
(7,115)
—

146,567
35,953
—
—
(49,257)

—

133,263
30,086
—
—
(44,931)

—

118,418
33,041
—
—
(48,220)

24,596

(24,596)

—

Balance at year-end 2015 . . . . . . . . . . . . $

55,584

47,655

103,239

(1) Refers to our voluntary repurchase of previously securitized non-defaulted vacation ownership notes

receivable to retire outstanding vacation ownership notes receivable securitizations.

(2) Decrease in securitized vacation ownership notes receivable reserve and increase in non-securitized
vacation ownership notes receivable reserve was attributable to the transfer of the reserve when we
voluntarily repurchased the securitized vacation ownership notes receivable.

The following table shows our recorded investment in non-accrual vacation ownership notes receivable,

which are vacation ownership notes receivable that are 90 days or more past due. As noted in Footnote No. 1,
“Summary of Significant Accounting Policies,” we recognize interest income on a cash basis for these vacation
ownership notes receivable.

($ in thousands)
Investment in vacation ownership notes receivable on
non-accrual status at year-end 2015 . . . . . . . . . . . . .
Investment in vacation ownership notes receivable on
non-accrual status at year-end 2014 . . . . . . . . . . . . .

Average investment in vacation ownership notes

receivable on non-accrual status during 2015 . . . . .

Non-Securitized
Vacation Ownership
Notes Receivable

Securitized
Vacation Ownership
Notes Receivable

Total

46,024

60,275

53,150

8,717

7,172

7,945

54,741

67,447

61,095

F-25

The following table shows the aging of the recorded investment in principal, before reserves, in vacation

ownership notes receivable as of January 1, 2016:

($ in thousands)
31 – 90 days past due . . . . . . . . . . . $
91 – 150 days past due . . . . . . . . . .
Greater than 150 days past due . . . .

Total past due . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Current

Total vacation ownership notes

Non-Securitized
Vacation Ownership
Notes Receivable

Securitized
Vacation Ownership
Notes Receivable

9,981
4,731
41,293

56,005
251,031

21,113
8,590
127

29,830
687,004

Total

31,094
13,321
41,420

85,835
938,035

receivable . . . . . . . . . . . . . . . . . . $

307,036

716,834

1,023,870

The following table shows the aging of the recorded investment in principal, before reserves, in vacation

ownership notes receivable as of January 2, 2015:

($ in thousands)
31 – 90 days past due . . . . . . . . . . . $
91 – 150 days past due . . . . . . . . . .
Greater than 150 days past due . . . .

Total past due . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Current

Total vacation ownership notes

Non-Securitized
Vacation Ownership
Notes Receivable

Securitized
Vacation Ownership
Notes Receivable

8,330
6,101
54,174

68,605
162,695

22,544
7,003
169

29,716
774,630

Total

30,874
13,104
54,343

98,321
937,325

receivable . . . . . . . . . . . . . . . . . . $

231,300

804,346

1,035,646

F-26

4. FINANCIAL INSTRUMENTS

The following table shows the carrying values and the estimated fair values of financial assets and

liabilities that qualify as financial instruments, determined in accordance with the authoritative guidance for
disclosures regarding the fair value of financial instruments. Considerable judgment is required in interpreting
market data to develop estimates of fair value. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair value amounts. The table excludes Cash and
cash equivalents, Restricted cash, Accounts and contracts receivable, Accounts payable, Advance deposits and
Accrued liabilities, all of which had fair values approximating their carrying amounts due to the short maturities
and liquidity of these instruments.

($ in thousands)
Vacation ownership notes receivable

At Year-End
2015

At Year-End
2014

Carrying
Amount

Fair
Value(1)

Carrying
Amount

Fair
Value(1)

Securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 669,179
251,452
Non-securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 803,533
274,799

$ 750,680
166,548

$ 909,391
172,103

Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 920,631

$1,078,332

$ 917,228

$1,081,494

Non-recourse debt associated with vacation ownership

notes receivable securitizations, gross . . . . . . . . . . . $ (684,604)
(3,496)

Other debt, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mandatorily redeemable preferred stock of

$ (677,595) $ (708,031) $ (712,977)
(3,306)

(3,306)

(3,496)

consolidated subsidiary, gross . . . . . . . . . . . . . . . . .

(40,000)

(42,258)

(40,000)

(43,837)

Liability for Marriott Rewards customer loyalty

program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(35)
(4,515)

(89,285)
(4,118)

(80,448)
(4,118)

Total financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . $ (732,650)

$ (727,899) $ (844,740) $ (844,686)

(1)

Fair value of financial instruments, has been determined using Level 3 inputs.

See the “Fair Value Measurements” caption of Footnote No. 1, “Summary of Significant Accounting

Policies” for additional information.

Vacation Ownership Notes Receivable

We estimate the fair value of our securitized vacation ownership notes receivable using a discounted cash
flow model. We believe this is comparable to the model that an independent third party would use in the current
market. Our model uses default rates, prepayment rates, coupon rates and loan terms for our securitized vacation
ownership notes receivable portfolio as key drivers of risk and relative value, that when applied in combination
with pricing parameters, determine the fair value of the underlying vacation ownership notes receivable.

Due to factors that impact the general marketability of our non-securitized vacation ownership notes

receivable, as well as current market conditions, we bifurcate our vacation ownership notes receivable at each
balance sheet date into those eligible and not eligible for securitization using criteria applicable to current
securitization transactions in the asset-backed securities (“ABS”) market. Generally, vacation ownership notes
receivable are considered not eligible for securitization if any of the following attributes are present:
(1) payments are greater than 30 days past due; (2) the first payment has not been received; or (3) the collateral is
located in Europe or Asia. In some cases eligibility may also be determined based on the credit score of the
borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a
securitization transaction or the cost to effectively securitize the vacation ownership notes receivable.

F-27

The following table shows the bifurcation of our non-securitized vacation ownership notes receivable into

those eligible and not eligible for securitization based upon the aforementioned eligibility criteria:

($ in thousands)
Vacation ownership notes receivable

At Year-End
2015

At Year-End
2014

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

Eligible for securitization . . . . . . . . . $
Not eligible for securitization . . . . . .

104,671
146,781

Total non-securitized . . . . . . . . . . . . . . . . $

251,452

128,018
146,781

274,799

24,194
142,354

166,548

29,749
142,354

172,103

We estimate the fair value of the portion of our non-securitized vacation ownership notes receivable that
we believe will ultimately be securitized in the same manner as securitized vacation ownership notes receivable.
We value the remaining non-securitized vacation ownership notes receivable at their carrying value, rather than
using our pricing model. We believe that the carrying value of these particular vacation ownership notes
receivable approximates fair value because the stated interest rates of these loans are consistent with current
market rates and the reserve for these vacation ownership notes receivable appropriately accounts for risks in
default rates, prepayment rates and loan terms.

Non-Recourse Debt Associated with Securitized Vacation Ownership Notes Receivable

We generate cash flow estimates by modeling all bond tranches for our active vacation ownership notes

receivable securitization transactions, with consideration for the collateral specific to each tranche. The key
drivers in our analysis include default rates, prepayment rates, bond interest rates and other structural factors,
which we use to estimate the projected cash flows. In order to estimate market credit spreads by rating, we obtain
indicative credit spreads from investment banks that actively issue and facilitate the market for vacation
ownership securities and determine an average credit spread by rating level of the different tranches. We then
apply those estimated market spreads to swap rates in order to estimate an underlying discount rate for
calculating the fair value of the active bonds payable.

Mandatorily Redeemable Preferred Stock of Consolidated Subsidiary

We estimate the fair value of the mandatorily redeemable preferred stock of our consolidated subsidiary
using a discounted cash flow model. We believe this is comparable to the model that an independent third party
would use in the current market. Our model includes an assessment of our subsidiary’s credit risk and the
instrument’s contractual dividend rate.

Liability for Marriott Rewards Customer Loyalty Program

Historically, we determined the carrying value of the future redemption obligation of our liability for the

Marriott Rewards customer loyalty program using statistical formulas that projected the timing of future
redemption of Marriott Rewards Points based on historical levels, including estimates of the number of Marriott
Rewards Points that would eventually be redeemed and the “breakage” for points that would never be redeemed,
as discussed in Footnote No. 12, “Other Liabilities.” We estimated the fair value of the future redemption
obligation by adjusting the contractual discount rate to an estimate of that of a market participant with similar
nonperformance risk. Substantially all of the liability for the Marriott Rewards customer loyalty program was
paid prior to January 1, 2016 and as such, the carrying value approximates fair value. A final payment of the
remaining liability was made in 2016.

Other Liabilities

We estimate the fair value of our other liabilities that are financial instruments using expected future

payments discounted at risk-adjusted rates. These liabilities represent guarantee costs and other structured
payments. The carrying values of our financial instruments within Other liabilities approximate their fair values.

F-28

5. ACQUISITIONS AND DISPOSITIONS

2015 Acquisitions

Surfers Paradise, Australia

During the third quarter of 2015, we completed the acquisition of an operating hotel located in Surfers

Paradise, Australia, for AUD $84.5 million ($62.3 million). The acquisition was treated as a business
combination and accounted for using the acquisition method of accounting. As such, all transaction costs were
expensed as incurred and have been included in the “Other” line of our Statements of Income. As consideration
for the acquisition, we paid AUD $82.6 million ($61.0 million) in cash and assumed net liabilities of AUD
$1.9 million ($1.3 million), which was allocated based on the fair value at the date of acquisition as follows:
AUD $28.9 million ($21.3 million) to land, AUD $49.5 million ($36.5 million) to buildings and leasehold
improvements and AUD $6.1 million ($4.5 million) to furniture and equipment. Fair value was determined using
an independent appraisal, which was primarily based on a discounted cash flow model, a Level 3 fair value
input. We intend to convert a portion of this hotel into vacation ownership interests for future use in our Asia
Pacific segment; the portion of the purchase price for this portion is classified as an operating activity on our
Cash Flows for the year ended January 1, 2016. We intend to sell the remaining downsized hotel to a third party;
the portion of the purchase price for this portion of the hotel is classified as an investing activity on our Cash
Flows for the year ended January 1, 2016.

Washington, D.C.

During the third quarter of 2015, we completed the acquisition of 71 units at The Mayflower Hotel,

Autograph Collection, an operating hotel located in Washington, D.C., for $32.0 million. The asset acquisition
was treated as a purchase of inventory and we intend to include these vacation ownership units, in their current
form, in our MVCD program.

San Diego, California

During the first quarter of 2015, we completed the acquisition of an operating hotel located in San Diego,
California, for $55.0 million. The acquisition was treated as a business combination and accounted for using the
acquisition method of accounting. As consideration for the acquisition, we paid $55.0 million in cash, which was
allocated based on the fair value at the date of acquisition as follows: $54.3 million to property and equipment
and $0.7 million to other assets. Fair value was determined using an independent appraisal, which was primarily
based on a discounted cash flow model, a Level 3 fair value input. We intend to convert this hotel, in its entirety,
into vacation ownership interests for future use in our MVCD program. In order to ensure consistency with the
expected related future cash flow presentation, $46.6 million of the cash purchase price allocated to property and
equipment was included as an operating activity in the Purchase of operating hotels for future conversion to
inventory line on our Cash Flows for the year ended January 1, 2016. The remaining $7.7 million was included
as an investing activity in the Capital expenditures for property and equipment line on our Cash Flows for the
year ended January 1, 2016, as it was allocated to assets to be used prior to conversion of the hotel to vacation
ownership interests, as well as ancillary and sales center assets to be retained after the conversion.

2015 Dispositions

Kauai, Hawaii

During the second quarter of 2014, we entered into a purchase and sale agreement to dispose of
undeveloped and partially developed land, an operating golf course and related assets, in Kauai, Hawaii (the
“Kauai Property”) for $60.0 million in gross cash proceeds. During the fourth quarter of 2014, pursuant to a
subsequent modification to the purchase and sale agreement, we completed the sale of a portion of the Kauai
Property for gross cash proceeds of $40.0 million and the buyer agreed to purchase the remaining portion of the
Kauai Property for gross cash proceeds of $20.0 million no later than April 30, 2015, unless we and the buyer
mutually agreed prior to March 31, 2015 to enter into an “alternative arrangement” regarding the remaining

F-29

portion of the Kauai Property. We accounted for the sale of the portion of the transaction closed in 2014 under
the full accrual method in accordance with the authoritative guidance on accounting for sales of real estate and
recorded a gain of $2.9 million, which is included in the Gains and other income line on the Statement of Income
for the year ended January 2, 2015.

During the second quarter of 2015, we completed the sale of the remaining portion of the Kauai Property
for gross cash proceeds of $20.0 million. We accounted for the sale under the full accrual method in accordance
with the authoritative guidance on accounting for sales of real estate and recorded a gain of $8.7 million, which is
included in the Gains and other income line on our Statements of Income for the year ended January 1, 2016.

Marco Island, Florida

During the first quarter of 2015, we sold real property located in Marco Island, Florida, consisting of
$3.1 million of vacation ownership inventory, to a third-party developer. We received consideration consisting of
$5.4 million of cash and a note receivable of $0.5 million. We did not recognize any gain or loss on this
transaction.

In accordance with our agreement with the third-party developer, we are obligated to repurchase the

completed property from the developer contingent upon the property meeting our brand standards, provided that
the third-party developer has not sold the property to another party. In accordance with the authoritative guidance
on accounting for sales of real estate, our conditional obligation to repurchase the property constitutes continuing
involvement and thus we were unable to account for this transaction as a sale. The property was sold to a variable
interest entity for which we are not the primary beneficiary as we do not control the variable interest entity’s
development activities and cannot prevent the variable interest entity from selling the property to another party.
Accordingly, we have not consolidated the variable interest entity.

As of January 1, 2016, our Balance Sheet reflects $7.7 million of Other liabilities that relate to the

deferral of gain recognition for this transaction, which will reduce our basis in the asset if we repurchase the
property. In addition, the note receivable of $0.5 million and other receivables of $0.2 million are included in the
Accounts and contracts receivable line on the Balance Sheet as of January 1, 2016. The cash consideration
received for the sale of the real property is included in Proceeds from vacation ownership inventory arrangements
on our Cash Flows for the year ended January 1, 2016. We believe that our maximum exposure to loss as a result
of our involvement with this variable interest entity is our interest in the note receivable and the other receivables
discussed above as of January 1, 2016.

Orlando, Florida

During the first quarter of 2014, we disposed of a golf course and adjacent undeveloped land in Orlando,

Florida for $24.0 million in gross cash proceeds. As a condition of the sale, we continued to operate the golf
course through the end of the first quarter of 2015 at our own risk. We utilized the performance of services
method to record a gain of $3.1 million over the period during which we operated the golf course, $0.9 million of
which is included in the Gains and other income line on our Statement of Income for the year ended January 1,
2016, and $2.2 million is included in the Gains and other income line on our Statement of Income for the year
ended January 2, 2015.

2014 Acquisitions

We made no significant acquisitions in 2014.

2014 Dispositions

The Abaco Club on Winding Bay, Bahamas

During the third quarter of 2014, we entered into a purchase and sale agreement to dispose of
undeveloped and partially developed land, an operating golf course, spa and clubhouse and related facilities at
The Abaco Club on Winding Bay (“The Abaco Club”) in the Bahamas. During the fourth quarter of 2014, we

F-30

completed the sale of The Abaco Club for gross cash proceeds of $10.0 million. We accounted for the sale under
the full accrual method in accordance with the authoritative guidance on accounting for sales of real estate and
recorded a non-cash loss of $23.8 million, which is included in the Litigation settlement line on the Statement of
Income for the year ended January 2, 2015. See Footnote No. 9, “Contingencies and Commitments,” for
additional discussion of this transaction.

Singer Island, Florida

During the second quarter of 2014, we completed the sale of a parcel of undeveloped land on Singer

Island, Florida for gross cash proceeds of $10.5 million. We accounted for the sale under the full accrual method
in accordance with the authoritative guidance on accounting for sales of real estate and recorded a gain of
$0.3 million, which is included in the Gains and other income line on the Statement of Income for the year ended
January 2, 2015.

2013 Acquisitions

In 2013, we acquired a parcel of land adjacent to one of our existing resorts in Phuket, Thailand for

$2.0 million.

2013 Dispositions

In 2013, we completed the sale of a multi-family parcel in St. Thomas, U.S. Virgin Islands. Net cash
proceeds from the sale totaled $2.2 million and we recorded a net gain of $0.5 million. We accounted for the sale
under the full accrual method in accordance with the authoritative guidance on accounting for sales of real estate.

F-31

6. EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing net income attributable to common

shareholders by the weighted average number of shares of common stock outstanding during the reporting
period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding.
Diluted earnings per common share is calculated to give effect to all potentially dilutive common shares that
were outstanding during the reporting period. The dilutive effect of outstanding equity-based compensation
awards is reflected in diluted earnings per common share by application of the treasury stock method using
average market prices during the period.

The table below illustrates the reconciliation of the earnings and number of shares used in our calculation

of basic and diluted earnings per share.

(in thousands, except per share amounts)
Computation of Basic Earnings Per Share

At Year-End 2015(1) At Year-End 2014(2) At Year-End 2013(3)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares outstanding . . . . . . . . . . . . .

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . $

122,799
31,487

3.90

Computation of Diluted Earnings Per Share

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

122,799

Weighted average shares outstanding . . . . . . . . . . . . .
Effect of dilutive shares outstanding . . . . . . . . . . . . . .
Employee stock options and SARs . . . . . . . . . . .
Restricted stock units . . . . . . . . . . . . . . . . . . . . .

31,487

446
235

80,756
33,665

2.40

80,756

33,665

543
427

Shares for diluted earnings per share . . . . . . . . . . . . .

32,168

34,635

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . $

3.82

2.33

79,730
35,373

2.25

79,730

35,373

702
546

36,621

2.18

(1) The computations of diluted earnings per share exclude approximately 136,000 shares of common
stock, the maximum number of shares issuable as of January 1, 2016 upon the vesting of certain
performance-based awards, because the performance conditions required for the shares subject to
such awards to vest were not achieved by the end of the reporting period.

(2) The computations of diluted earnings per share exclude approximately 134,000 shares of common
stock, the maximum number of shares issuable as of January 2, 2015 upon the vesting of certain
performance-based awards, because the performance conditions required for the shares subject to
such awards to vest were not achieved by the end of the reporting period.

(3) The computations of diluted earnings per share exclude approximately 229,000 shares of common
stock, the maximum number of shares issuable as of January 3, 2014 upon the vesting of certain
performance-based awards, because the performance conditions required for the shares subject to
such awards to vest were not achieved by the end of the reporting period.

In accordance with the applicable accounting guidance for calculating earnings per share, for the year

ended January 1, 2016, we excluded 62,018 shares underlying stock options or stock appreciation rights
(“SARs”) that may be settled in shares of common stock, with an exercise price of $77.42, from our calculation
of diluted earnings per share because this exercise price was greater than the average market price for the period.
For the years ended January 2, 2015 and January 3, 2014, we did not exclude any shares underlying stock options
or SARs that may be settled in shares of common stock from our calculation of diluted earnings per share as no
exercise prices were greater than the average market prices for the applicable period.

F-32

7. INVENTORY

The following table shows the composition of our inventory balances:

($ in thousands)
Finished goods(1)
Land and infrastructure(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

. . . . . . . . . . . . . . . . . . . . . . . .

Real estate inventory . . . . . . . . . . . . . . . . . .
Operating supplies and retail inventory . . . . . . . . . . . . .

At Year-End
2015

At Year-End
2014

332,888
331,042

663,930
5,313

669,243

413,066
355,198

768,264
4,520

772,784

(1) Represents completed inventory that is either registered for sale as vacation ownership interests, or

unregistered and available for sale in its current form.
Includes $72.9 million of inventory related to estimated future foreclosures at January 1, 2016.

(2)

We value vacation ownership and residential products at the lower of cost or fair market value less costs
to sell, in accordance with applicable accounting guidance, and we record operating supplies at the lower of cost
(using the first-in, first-out method) or net realizable value. Interest capitalized as a cost of inventory totaled
$0.1 million, $2.8 million and $4.2 million in 2015, 2014 and 2013, respectively.

8. PROPERTY AND EQUIPMENT

The following table details the composition of our property and equipment balances:

($ in thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and leasehold improvements . . . . . . . .
Furniture and equipment . . . . . . . . . . . . . . . . . . . .
Information technology . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . .

Accumulated depreciation . . . . . . . . . . . . . . . . . .

At Year-End
2015

At Year-End
2014

87,751
267,965
55,326
177,099
26,469

614,610
(325,807)

63,461
168,328
48,193
181,260
12,354

473,596
(326,217)

288,803

147,379

Interest capitalized as a cost of property and equipment totaled $0.3 million in 2015, $0.1 million in 2014

and $0.1 million in 2013. Depreciation expense totaled $22.2 million in 2015, $18.7 million in 2014 and
$22.6 million in 2013.

9. CONTINGENCIES AND COMMITMENTS

Guarantees

We have historically issued guarantees to certain lenders in connection with the provision of third-party

financing for our sale of vacation ownership products for the North America and Asia Pacific segments. The
terms of these guarantees generally require us to fund if the purchaser fails to pay under the term of its note
payable. Prior to the Spin-Off, Marriott International guaranteed our performance under these arrangements, and
following the Spin-Off continues to hold a standby letter of credit related to the Asia Pacific segment guarantee.
If Marriott International is required to fund any draws by lenders under this letter of credit it would seek recourse
from us. Marriott International no longer guarantees our performance with respect to third-party financing for
sales of products in the North America segment. We are entitled to recover any payments we make to third-party
lenders under these guarantees through reacquisition and resale of the financed vacation ownership product. Our
commitments under these guarantees expire as the underlying notes mature or are repaid. The terms of the
underlying notes extend to 2022.

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The following table shows the maximum potential amount of future fundings for financing guarantees

where we are the primary obligor and the carrying amount of the liability for expected future fundings, which is
included on our Balance Sheet in the Other caption within Liabilities.

($ in thousands)

Maximum Potential
Amount of Future Fundings
at Year-End 2015

Liability for Expected
Future Fundings at
Year-End 2015

Segment
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total guarantees where we are the primary

5,189 $
2,846

obligor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

8,035 $

52
164

216

Commitments and Letters of Credit

In addition to the guarantees we describe in the preceding paragraphs, as of January 1, 2016, we had the

following commitments outstanding:

• We have various contracts for the use of information technology hardware and software that we use in
the normal course of business. Our aggregate commitments under these contracts were $28.1 million,
of which we expect $12.2 million, $6.5 million, $3.1 million, $1.9 million, $1.7 million and
$2.7 million will be paid in 2016, 2017, 2018, 2019, 2020 and thereafter, respectively.

• We have commitments of $3.4 million to subsidize vacation ownership associations, which we expect

to pay in 2016.

• We have a commitment of $38.5 million to purchase vacation ownership units located on the Big

Island of Hawaii, for use in our MVCD program, contingent upon the seller subjecting the units to a
condominium regime prior to our purchase. We made a deposit of $1.5 million in connection with this
commitment in 2014, and we are committed to make the remaining payment of $37.0 million upon
satisfaction of the condition that the seller subject the units to a condominium regime, which we expect
to occur within one year. Upon acquisition, we are committed to renovate the units pursuant to a
property improvement plan to be agreed upon at a later date, for which an additional $45.0 million to
$55.0 million will be required to be funded. We are currently evaluating the use of a capital efficient
arrangement to delay the timing of this capital investment.

• We have a commitment of $137.1 million to purchase vacation ownership units located in Marco

Island, Florida, of which we expect $33.3 million, $50.0 million and $53.8 million will be paid in 2017,
2018 and 2019, respectively. See Footnote No. 5, “Acquisitions and Dispositions,” for additional
information on this transaction.

Surety bonds issued as of January 1, 2016 totaled $57.8 million, the majority of which were requested by

federal, state or local governments related to our operations.

Additionally, as of January 1, 2016, we had $3.3 million of letters of credit outstanding under our

$200 million revolving credit facility (as amended, the “Revolving Corporate Credit Facility”).

Loss Contingencies

In December 2012, Jon Benner, an owner of fractional interests at The Ritz-Carlton Club and Residences,
San Francisco (the “RCC San Francisco”), filed suit in Superior Court for the State of California, County of San
Francisco, against us and certain of our subsidiaries on behalf of a putative class consisting of all owners of
fractional interests at the RCC San Francisco who allegedly did not receive proper notice of their payment
obligations under California’s Mello-Roos Community Facilities Act of 1982 (the “Mello-Roos Act”). The
plaintiff alleged that the disclosures made about bonds issued for the project under this Act and the payment

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obligations of fractional interest purchasers with respect to such bonds were inadequate, and this and other
alleged statutory violations constituted intentional and negligent misrepresentation, fraud and fraudulent
concealment. The relief sought included damages in an unspecified amount, rescission of the purchases,
restitution and disgorgement of profits. In September 2014, we reached an agreement to settle this action on the
basis of a stipulated class; the settlement was approved by the court on March 31, 2015. At January 1, 2016, we
had an accrual of $0.3 million related to the settlement.

In April 2013, Krishna and Sherrie Narayan and other owners of 12 residential units at the resort formerly

known as The Ritz-Carlton Residences, Kapalua Bay (“Kapalua Bay”) filed an amended complaint related to a
suit originally filed in Circuit Court for Maui County, Hawaii in June 2012 against us, certain of our subsidiaries,
Marriott International, certain of its subsidiaries, and the joint venture in which we have an equity investment
that developed and marketed vacation ownership and residential products at Kapalua Bay (the “Joint Venture”).
In the original complaint, the plaintiffs alleged that defendants mismanaged funds of the residential owners
association (the “Kapalua Bay Association”), created a conflict of interest by permitting their employees to serve
on the Kapalua Bay Association’s board, and failed to disclose documents to which the plaintiffs were allegedly
entitled. The amended complaint alleges breach of fiduciary duty, violations of the Hawaii Unfair and Deceptive
Trade Practices Act and the Hawaii condominium statute, intentional misrepresentation and concealment, unjust
enrichment and civil conspiracy. The relief sought in the amended complaint includes injunctive relief,
repayment of all sums paid to us and our subsidiaries and Marriott International and its subsidiaries,
compensatory and punitive damages, and treble damages under the Hawaii Unfair and Deceptive Trade Practices
Act. We dispute the material allegations in the amended complaint and continue to defend against this action
vigorously. We filed a motion in the Circuit Court to compel arbitration of plaintiffs’ claims. That motion was
denied, but on appeal the Hawaii Intermediate Court of Appeals reversed. The Hawaii Supreme Court reversed
the decision of the Intermediate Court of Appeals and reinstated the action in Circuit Court, which set the case
for trial beginning September 16, 2016. We filed a petition with the United States Supreme Court seeking review
of the Hawaii Supreme Court’s decision. On January 11, 2016, the United States Supreme Court issued an order
vacating the Hawaii Supreme Court’s decision and remanding the case with instructions to reconsider its ruling
in light of a recent U.S. Supreme Court decision reiterating the obligation of courts to enforce arbitration
agreements. On January 27, 2016, we filed a motion to stay proceedings in the Circuit Court based on the action
of the U.S. Supreme Court. Plaintiffs opposed the motion, and at a hearing on February 22, 2016 the Circuit
Court stayed proceedings until March 22, 2016 and set a hearing for that date. On February 17, 2016, the Hawaii
Supreme Court ordered the parties to file supplemental briefs by March 2, 2016. Additionally, in 2014, owners of
two residential units agreed to release their claims in this action. Given the inherent uncertainties of litigation, we
cannot estimate a range of the potential liability, if any, at this time.

In June 2013, Earl C. and Patricia A. Charles, owners of a fractional interest at Kapalua Bay, together

with owners of 38 other fractional interests at Kapalua Bay, filed an amended complaint in the Circuit Court of
the Second Circuit for the State of Hawaii against us, certain of our subsidiaries, Marriott International, certain of
its subsidiaries, the Joint Venture, and other entities that have equity investments in the Joint Venture. The
plaintiffs allege that the defendants failed to disclose the financial condition of the Joint Venture and the
commitment of the defendants to the Joint Venture, and that defendants’ actions constituted fraud and violated
the Hawaii Unfair and Deceptive Trade Practices Act, the Hawaii Condominium Property Act and the Hawaii
Time Sharing Plans statute. The relief sought includes compensatory and punitive damages, attorneys’ fees, pre-
judgment interest, declaratory relief, rescission and treble damages under the Hawaii Unfair and Deceptive Trade
Practices Act. The complaint was subsequently further amended to add owners of two additional fractional
interests as plaintiffs. The Circuit Court granted our motion to compel arbitration of the claims asserted by the
plaintiffs. Plaintiffs appealed that decision to the Hawaii Intermediate Court of Appeals and also initiated
arbitration. On July 24, 2015, the Intermediate Court of Appeals reversed the decision of the Circuit Court and
directed that the action be reinstated in the Circuit Court, based on the Hawaii Supreme Court’s decision in the
Narayan case discussed above, which has since been vacated by the U.S. Supreme Court. We dispute the material
allegations in the amended complaint and intend to defend against this action vigorously. Given the early stages
of the action and the inherent uncertainties of litigation, we cannot estimate a range of the potential liability, if

F-35

any, at this time. Additionally, owners of two fractional interests have since agreed to release their claims in this
action, and the owners of another fractional interest, who are not parties to the Charles action, agreed to release
similar claims, in each instance for nominal sums.

In June 2013, owners of 35 residences and lots at The Abaco Club filed a complaint in Orange County,

Florida Circuit Court against us, one of our subsidiaries, certain subsidiaries of Marriott International and the
resort’s owners’ association, alleging that the defendants failed to maintain the golf course, golf clubhouse,
roads, water supply system, and other facilities and equipment in a manner commensurate with a five-star luxury
resort, and certain deficiencies in the quality of services provided at the resort. The plaintiffs also alleged that the
defendants failed to honor an obligation to extend a right of first offer to club owners in connection with plans to
sell the club property. The plaintiffs alleged statutory and common law claims for breach of contract, breach of
fiduciary duty, and fraud and sought compensatory and punitive damages. We filed a motion to dismiss the
complaint. In April 2014, this action was abated for a period after we entered into a non-binding letter of intent to
dispose of undeveloped and partially developed land, an operating golf course, spa and clubhouse and related
facilities at The Abaco Club to an entity to be comprised of certain members of The Abaco Club, including
certain of the plaintiffs, and others. Upon the closing of the sale in December 2014, all claims asserted against us
in this matter were dismissed with prejudice.

In August 2014, Michael and Marla Flynn, owners of weeks-based Marriott Vacation Club vacation

ownership products at two of our resorts in Hawaii, filed a claim with the American Arbitration Association on
behalf of a putative class consisting of themselves and all others similarly situated. The claimants alleged that the
introduction of our points-based MVCD program caused an actionable decrease in the value of their vacation
ownership interests. The relief sought included compensatory and exemplary damages, restitution, injunctive
relief, interest and attorneys’ fees pursuant to applicable timeshare and unfair trade practices acts and common-
law theories of breach of contract and breach of an implied covenant of good faith and fair dealing. On March 30,
2015, the arbitrator ruled that the Flynns’ claims are not subject to arbitration, and dismissed the Flynn
proceeding. On October 2, 2015, Michael and Marla Flynn, joined by Patrick and Mary Flynn as Trustees of the
Flynn Family Trust, filed a civil action in the United States District Court for the District of Hawaii, asserting
similar claims and seeking similar relief on behalf of themselves and a putative class consisting of themselves
and all others similarly situated. On December 24, 2015, we filed a motion to dismiss. A hearing on the motion
was held on February 16, 2016 and the motion remains pending. We dispute the material allegations in the
complaint and intend to defend against the action vigorously. Given the early stages of the action and the
inherent uncertainties of litigation, we cannot estimate a range of potential liability, if any, at this time.

On January 29, 2015, Norman and Carreen Abramson, owners of weeks-based Marriott Vacation Club

vacation ownership products at one of our resorts in California and of our points-based MVCD program, filed an
action in the United States District Court for the Central District of California on behalf of a putative class
consisting of themselves and all others similarly situated. Mr. and Mrs. Abramson alleged that the introduction of
the MVCD program caused an actionable decrease in the value of their vacation ownership interests, and sought
as relief compensatory and punitive damages, restitution, injunctive relief, interest and attorneys’ fees pursuant to
applicable timeshare, consumer protection and unfair competition acts. On March 30, 2015, we filed a motion to
dismiss. On June 30, 2015, Mr. and Mrs. Abramson filed a motion for class certification, which the Court denied
on September 28, 2015. Mr. and Mrs. Abramson also amended their complaint, and we filed a motion to dismiss
the amended complaint on October 9, 2015. The Court granted that motion and granted plaintiffs leave to file an
amended complaint. On December 31, 2015, the parties reached an agreement in principle to settle the case for a
nominal sum.

On May 26, 2015, we and certain of our subsidiaries were named as defendants in an action filed in the

Superior Court of San Francisco County, California, by William and Sharon Petrick and certain other present and
former owners of fractional interests at the RCC San Francisco. The case is not filed as a putative class action.
The plaintiffs allege that the affiliation of the RCC San Francisco with our points-based MVCD program, certain
alleged sales practices, and other alleged acts of us and the other defendants caused an actionable decrease in the
value of their fractional interests. The relief sought includes, among other things, compensatory and punitive

F-36

damages, rescission, and pre- and post-judgment interest. Plaintiffs filed an amended complaint on October 9,
2015. On January 22, 2016, we filed a motion to dismiss; a hearing on the motion is scheduled for March 21,
2016. We dispute the material allegations in the amended complaint and intend to defend against the action
vigorously. Given the early stages of the action and the inherent uncertainties of litigation, we cannot estimate a
range of the potential liability, if any, at this time.

On December 31, 2015, we and certain of our subsidiaries were named as defendants in an action filed in
the District Court of Pitkin County, Colorado by RCHFU, L.L.C., the owner of a fractional interest at The Ritz-
Carlton Club, Aspen Highlands (“RCC-Aspen Highlands”). The case is filed as a putative class action; plaintiff
seeks to represent a class consisting of itself and all others similarly situated. The plaintiff alleges that its
fractional interest was devalued by the affiliation of RCC-Aspen Highlands and other Ritz-Carlton Clubs with
our points-based MVCD program. The relief sought includes, among other things, unspecified damages, pre- and
post-judgment interest, and attorneys’ fees. We dispute the material allegations in the complaint and intend to
defend against the action vigorously. Given the early stages of the action and the inherent uncertainties of
litigation, we cannot estimate a range of the potential liability, if any, at this time.

Other

We estimate the cash outflow associated with completing the phases of our existing portfolio of vacation

ownership projects currently under development will be approximately $5.0 million, of which $4.3 million is
included within liabilities on our Balance Sheet at January 1, 2016. This estimate is based on our current
development plans, which remain subject to change, and we expect the phases currently under development will
be completed by 2016.

During 2014, we agreed to settle a dispute with a service provider relating to services provided to us prior

to 2011. In connection with the settlement, we received a one-time payment of $7.6 million from the service
provider, which no longer provides services to us. We recorded a gain of $7.6 million as a result of the
settlement, which is included in the Litigation settlement line on the Statement of Income for the year ended
January 2, 2015.

Leases

We have various land, corporate facilities, real estate and equipment operating leases. The land lease

consists of a long-term golf course land lease with a term of 30 years. The corporate facilities leases are for our
corporate headquarters and have lease terms of approximately six years. The other operating leases are primarily
for office and retail space as well as equipment supporting our operations and have lease terms of between three
and ten years. Certain of these leases provide for minimum rental payments and additional rental payments based
on our operations of the leased property. We have summarized our future obligations under operating leases at
January 1, 2016 below:

($ in thousands)
Fiscal Year
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . .

Land
Lease

Corporate
Facilities
Leases

Other
Operating
Leases

1,061
1,061
1,061
1,061
1,061
9,551

3,486
3,580
3,679
3,779
3,882
2,658

9,768 $
7,915
4,483
2,308
2,070
5,368

Total

14,315
12,556
9,223
7,148
7,013
17,577

Total minimum lease payments . . . . $

14,856

21,064

31,912

67,832

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The following table details the composition of rent expense associated with operating leases, net of

sublease income, for the last three years:

($ in thousands)
Minimum rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additional rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015

2014

2013

9,401
3,876

6,806
5,520

12,326

9,417
4,527

13,944

13,277

10. DEBT

The following table provides detail on our debt balances, net of unamortized debt issuance costs:

($ in thousands)
Vacation ownership notes receivable securitizations, gross(1) . . . . . . . . . . . . . . . $
Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other debt, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At Year-End
2015

At Year-End
2014

684,604
(9,043)

675,561
3,496
(264)

3,232
678,793

708,031
(8,090)

699,941
3,306
(234)

3,072
703,013

(1)

Interest rates as of January 1, 2016 range from 2.2% to 6.3% with a weighted average interest rate of 2.6%.

See Footnote No. 15, “Variable Interest Entities,” for a discussion of the collateral for the non-recourse
debt associated with the securitized vacation ownership notes receivable and the Warehouse Credit Facility. All
of our other debt was, and to the extent currently outstanding is, recourse to us but unsecured. The Warehouse
Credit Facility currently terminates on November 22, 2017 and if not renewed, any amounts outstanding
thereunder would become due and payable 13 months after termination, at which time all principal and interest
collected with respect to the vacation ownership notes receivable held in the Warehouse Credit Facility would be
redirected to the lenders to pay down the outstanding debt under the facility. As of January 1, 2016, there were no
cash borrowings outstanding under our Warehouse Credit Facility. We generally expect to securitize our vacation
ownership notes receivable, including any vacation ownership notes receivable held in the Warehouse Credit
Facility, in the ABS market once per year.

On August 13, 2015, we completed the securitization of a pool of $264.2 million of vacation ownership

notes receivable. In connection with the securitization, investors purchased in a private placement $255.0 million
in vacation ownership loan backed notes from the MVW Owner Trust 2015-1 (the “2015-1 Trust”). Two classes
of vacation ownership loan backed notes were issued by the 2015-1 Trust: $233.2 million of Class A Notes and
$21.8 million of Class B Notes. The Class A Notes have an interest rate of 2.52 percent and the Class B Notes
have an interest rate of 2.96 percent, for an overall weighted average interest rate of 2.56 percent.

The following table shows scheduled future principal payments for our debt:

Vacation Ownership
Notes Receivable
Securitizations (1)

Other
Debt

Total

($ in thousands)
Debt Principal Payments Year
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

95,006
90,486
85,878
77,497
74,768
260,969

60
64
69
74
80
3,149

Balance at January 1, 2016 . . . . . . .

684,604

3,496

95,066
90,550
85,947
77,571
74,848
264,118

688,100

(1) The debt associated with our vacation ownership notes receivable securitizations is non-recourse to us.

F-38

As the contractual terms of the underlying securitized vacation ownership notes receivable determine the
maturities of the non-recourse debt associated with them, actual maturities may occur earlier than shown above
due to prepayments by the vacation ownership notes receivable obligors.

We paid cash for interest, net of amounts capitalized, of $30.2 million in 2015, $31.2 million in 2014 and

$37.4 million in 2013.

Debt Associated with Vacation Ownership Notes Receivable Securitizations

Each of the transactions in which we have securitized vacation ownership notes receivable contains

various triggers relating to the performance of the underlying vacation ownership notes receivable. If a pool of
securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default
or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess
spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the
principal payments to investors (taking into account the subordination of the different tranches to the extent there
are multiple tranches) until the performance trigger is cured. During 2015 and 2014, and as of January 1, 2016
and January 2, 2015, no securitized vacation ownership notes receivable pools were out of compliance with the
established parameters. As of January 1, 2016, we had 6 securitized vacation ownership notes receivable pools
outstanding.

Renewal of Warehouse Credit Facility

The Warehouse Credit Facility allows for the securitization of vacation ownership notes receivable on a
non-recourse basis. The advance rate for vacation ownership notes receivable securitized using the Warehouse
Credit Facility varies based on the characteristics of the securitized vacation ownership notes receivable. We also
pay unused facility and other fees under the Warehouse Credit Facility.

During 2015, we amended certain agreements associated with the Warehouse Credit Facility. As a result,

The amendment also expanded the eligibility for certain collateral by permitting some vacation ownership

notes receivable that are no more than 60 days delinquent to be financed through the Warehouse Credit Facility;
prior to the amendment, only notes that were no more than 30 days delinquent could be financed. The other terms
of the Warehouse Credit Facility are substantially similar to those in effect prior to the execution of the
amendment.

Revolving Corporate Credit Facility

The Revolving Corporate Credit Facility, which currently terminates on September 10, 2019, has a
borrowing capacity of $200 million, including a letter of credit sub-facility of $100 million, and provides support
for our business, including ongoing liquidity and letters of credit. Borrowings under the Revolving Corporate
Credit Facility generally bear interest at a floating rate at the Eurodollar rate plus an applicable margin that varies
from 1.625 percent to 3.125 percent depending on our credit rating. In addition, we pay a commitment fee on the
unused availability under the Revolving Corporate Credit Agreement at a rate that varies from 20 basis points per
annum to 50 basis points per annum.

During 2015, we amended the Revolving Corporate Credit Facility, and as a result, up to $130 million of

F-39

The Revolving Corporate Credit Facility contains affirmative and negative covenants and representations

and warranties customary for financings of this type. In addition, the Revolving Corporate Credit Facility
contains financial covenants, including covenants requiring us to maintain: (1) a minimum consolidated tangible
net worth (as defined in the Revolving Corporate Credit Facility); (2) a maximum ratio of consolidated debt to
consolidated adjusted EBITDA (as defined in the Revolving Corporate Credit Facility) of 5.25 to 1; (3) a
minimum consolidated adjusted EBITDA to interest expense ratio of not less than 3 to 1; and (4) a ratio of our
borrowing base amount (as defined in the Revolving Corporate Credit Facility) to the sum of (a) total extensions
of credit under the Revolving Corporate Credit Facility and (b) the excess (if any) of all unrealized losses over all
unrealized profits of certain swap arrangements of at least 1.25 to 1.

Although no cash borrowings were outstanding as of January 1, 2016 under our Revolving Corporate

Credit Facility, any amounts that are borrowed under that facility, as well as obligations with respect to letters of
credit issued pursuant to that facility, are secured by a perfected first priority security interest in substantially all
of the assets of the borrower under, and guarantors of, that facility (which include Marriott Vacations Worldwide
and each of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy
remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions. As of
January 1, 2016, we were in compliance with the requirements of applicable financial and operating covenants.

11. MANDATORILY REDEEMABLE PREFERRED STOCK OF CONSOLIDATED SUBSIDIARY

In October 2011, our subsidiary MVW US Holdings, Inc. (“MVW US Holdings”) issued $40.0 million of

its mandatorily redeemable Series A (non-voting) preferred stock to Marriott International as part of Marriott
International’s internal reorganization prior to the Spin-Off. Subsequently, Marriott International sold all of this
preferred stock to third-party investors. Until October 2016, the Series A preferred stock will pay an annual cash
dividend equal to the five-year U.S. Treasury Rate as of October 19, 2011, plus a spread of 10.958 percent, for a
total annual cash dividend rate of 12 percent. In October 2016, if we do not elect to redeem the preferred stock,
the annual cash dividend rate will be reset to the five-year U.S. Treasury Rate in effect on such date plus the
same 10.958 percent spread. The Series A preferred stock is mandatorily redeemable by MVW US Holdings
upon the tenth anniversary of the date of issuance but can be redeemed at our option after five years (i.e.,
beginning in October 2016) at par. The Series A preferred stock has an aggregate liquidation preference of $40.0
million plus any accrued and unpaid dividends and an additional premium if liquidation occurs during the first
five years after the issuance of the preferred stock. As of January 1, 2016, 1,000 shares of Series A preferred
stock were authorized, of which 40 shares were issued and outstanding. The dividends are recorded as a
component of Interest expense as the Series A preferred stock is treated as a liability for accounting purposes.

The following table provides detail on our mandatorily redeemable preferred stock of consolidated

subsidiary balance, net of unamortized debt issuance costs:

($ in thousands)

At January 1, 2016 At January 2, 2015

Mandatorily redeemable preferred stock of consolidated

subsidiary, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . .

40,000
(1,011)

38,989

40,000
(1,184)

38,816

12. OTHER LIABILITIES

Liability for Marriott Rewards Customer Loyalty Program

We participate in the Marriott Rewards customer loyalty program. Program members earn Marriott

Rewards Points based on their purchases of vacation ownership products and/or through exchange and other
activities related to our vacation ownership products, as well as through hotel stays and other activities that are
not related to our business. Points are tracked on members’ behalf and can be redeemed for stays at most of
Marriott International’s lodging properties, airline tickets, airline frequent flyer program miles, rental cars and a
variety of other awards; however, points cannot be redeemed for cash.

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In December 2015, we made a lump sum payment of $66.0 million related to our liability for Marriott
Rewards Points issued prior to 2012. We recorded changes in the estimates for our Marriott Rewards customer
loyalty program liability of $(2.9) million, $5.6 million and $5.2 million in 2015, 2014 and 2013, respectively.

For periods subsequent to 2011, we generally pay Marriott International for Marriott Rewards Points
upon issuance. The liability for Marriott Rewards Points issued after 2011 totaled $45.8 million at January 1,
2016 and $42.6 million at January 2, 2015, and is included within Accrued liabilities on the Balance Sheets and
is generally payable within 120 days of year-end.

13. SHAREHOLDERS’ EQUITY

Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of

$0.01 per share. At January 1, 2016, there were 36,393,800 shares of Marriott Vacations Worldwide common
stock issued, of which 29,549,544 were outstanding and 6,844,256 were held as treasury stock. At January 2,
2015, there were 36,089,513 shares of Marriott Vacations Worldwide common stock issued, of which 32,092,788
were outstanding and 3,996,725 were held as treasury stock. Marriott Vacations Worldwide has 2,000,000
authorized shares of preferred stock, par value of $0.01 per share, none of which were issued or outstanding as of
January 1, 2016 or January 2, 2015.

Share Repurchase Program

On October 12, 2015, our Board of Directors approved the repurchase of up to an additional 2,000,000

shares of our common stock under our existing share repurchase program through March 24, 2017. Prior to that
authorization, our Board of Directors had authorized the repurchase of an aggregate of up to 6,900,000 shares of
our common stock under the share repurchase program since the initiation of the program in October 2013. The
specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and
regulatory requirements and other factors. Acquired shares of our common stock are held as treasury shares
carried at cost in our Financial Statements. In connection with the repurchase program, we are authorized to
adopt one or more trading plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of
1934, as amended. As of year-end 2015, 2,045,917 shares remained available for repurchase under the
authorization approved by our Board of Directors.

The following table summarizes share repurchase activity under our current share repurchase program:

($ in thousands, except per share amounts)

Number of
Shares
Repurchased

Cost of Shares
Repurchased

Average Price
Paid per Share

As of January 2, 2015 . . . . . . . . . . . . . . . . . . . .
For the year ended January 1, 2016 . . . . . . . . .

3,996,725 $
2,857,358

229,229 $
201,380

As of January 1, 2016 . . . . . . . . . . . . . . . . . . . .

6,854,083 $

430,609 $

57.35
70.48

62.92

Dividends

We declared cash dividends to holders of common stock during the year ended January 1, 2016 as

follows:

Declaration Date

Shareholder Record Date

Distribution Date

Dividend per Share

February 12, 2015
June 4, 2015
September 10, 2015
December 8, 2015

February 26, 2015
June 18, 2015
September 24, 2015
December 21, 2015

March 11, 2015
July 2, 2015
October 8, 2015
January 6, 2016

$ 0.25
$ 0.25
$ 0.25
$ 0.30

Any future dividend payments will be subject to Board approval, and there can be no assurance that we

will pay dividends in the future.

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14. SHARE-BASED COMPENSATION

Marriott Vacations Worldwide Share-Based Compensation Plans

We maintain the Stock Plan for the benefit of our officers, directors and employees. Under the Stock

Plan, we award to certain of our employees: (1) stock options to purchase Marriott Vacations Worldwide
common stock (“Stock Option Program”); (2) SARs for Marriott Vacations Worldwide common stock (“SAR
Program”); and (3) RSUs of Marriott Vacations Worldwide common stock. In addition, pursuant to the
Separation and Distribution Agreement, we agreed to issue awards under the Stock Plan to certain current and
former directors, officers, and employees of Marriott International who held awards under the Marriott
International Stock Plan relating to Marriott International common stock at November 10, 2011, the record date
for the Spin-Off. A total of 6 million shares are authorized for issuance under the Stock Plan. As of January 1,
2016, approximately 1.8 million shares were available for grants under the Stock Plan.

Deferred compensation costs as of the date of the Spin-Off reflected the unamortized balance of the

original grant date fair value of the equity awards held by Marriott Vacations Worldwide employees (regardless
of whether those awards are linked to Marriott International stock or Marriott Vacations Worldwide stock).

For share-based awards with service-only vesting conditions, we measure compensation expense related

to share-based payment transactions with our employees and non-employee directors at fair value on the grant
date. With respect to our employees, we recognize this expense on the Statements of Income over the vesting
period during which the employees provide service in exchange for the award; with respect to non-employee
directors, we recognize this expense on the grant date. For share-based arrangements with performance vesting
conditions, we recognize compensation expense once it is probable that the corresponding performance condition
will be achieved. We recognize share-based compensation expense related to our employees and Marriott
International recognizes compensation expense related to Marriott International employees, regardless of whether
the underlying awards represent Marriott International or Marriott Vacations Worldwide awards.

We recorded share-based compensation expense related to award grants to our officers, directors and
employees of $14.1 million in 2015, $13.4 million in 2014 and $12.0 million in 2013. Our deferred compensation
liability related to unvested awards held by our employees totaled $13.3 million at January 1, 2016 and
$12.2 million at January 2, 2015. As of January 1, 2016, we expect that deferred compensation expense for our
employees will be recognized over a weighted average period of two years.

For Marriott International Stock Plan awards granted after 2005, we recognized share-based

compensation expense over the period from the grant date to the date on which the award is no longer contingent
on the employee providing additional service (the “substantive vesting period”). We continued to follow the
stated vesting period for the unvested portion of Marriott International Stock Plan awards granted to our
employees before 2006 and the adoption of the current guidance for share-based compensation and follow the
substantive vesting period for Marriott International Stock Plan and Stock Plan awards granted to our employees
after 2005.

In accordance with the authoritative guidance for share-based compensation, we presented the tax
benefits and costs resulting from the exercise or vesting of Marriott International Stock Plan share-based awards
related to our employees as financing cash flows.

Marriott International received less than $1.0 million in 2015, $1.5 million in 2014 and $2.3 million in

2013 in cash from our employees for the exercise of stock options granted under the Marriott International Stock
Plan. We received no cash from our employees for the exercise of Marriott Vacations Worldwide stock options
in 2015 and less than $0.1 million in each of 2014 and 2013.

RSUs

RSUs issued to our employees under the Marriott International Stock Plan and the Stock Plan generally

vest over four years in annual installments commencing one year after the date of grant. RSUs issued to our non-
employee directors under the Stock Plan vest in full on the date of grant. We recognize compensation expense for

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the RSUs over the service period equal to the fair market value of the stock units on the date of issuance. At year-
end 2015 and 2014, we had $12.2 million and $11.1 million, respectively, in deferred compensation costs related
to RSUs for our employees granted under the Marriott International Stock Plan and the Stock Plan. The weighted
average remaining term for RSU grants outstanding at year-end 2015 for our employees was one to two years.

We granted 206,397 RSUs, exclusive of RSUs with performance vesting conditions, to our employees

and non-employee directors during 2015. RSUs granted in 2015 had a weighted average grant-date fair value of
$75.60.

During 2015, 2014 and 2013, we granted RSUs with performance vesting conditions to members of

management. The number of RSUs earned, if any, is determined following the end of a three-year performance
period based upon our cumulative achievement over that period of specific quantitative operating financial
measures. The maximum number of RSUs that may be earned under the RSUs with performance-based vesting
criteria granted during 2015, 2014 and 2013 was approximately 74,000, 62,000 and 72,000, respectively. During
2015, a total of 68,673 RSUs were earned under the RSUs with performance-based vesting criteria granted
during 2013 and were distributed subsequent to January 1, 2016.

The following table provides additional information on outstanding RSUs issued to our employees for the

last three fiscal years:

Share-based compensation expense (in thousands)(1) . . . . . . . . . $
Weighted average grant-date fair value prior to Spin-Off

(per RSU)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average grant-date fair value subsequent to Spin-Off
(per RSU)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Aggregate intrinsic value of converted and distributed RSUs

16.92

53.94

(in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,809

(1)

Includes RSUs with performance based vesting criteria.

2015

2014

2013

12,222 $

11,857 $

10,691

32.52

36.39

8,361

32.07

29.19

6,648

The following table shows the 2015 changes in Marriott Vacations Worldwide RSUs issued to Marriott
International and Marriott Vacations Worldwide employees and the associated weighted average grant date fair
values:

. . . . .
Outstanding at year-end 2014(1) (2)
Granted during 2015 . . . . . . . . . . . . . .
Distributed during 2015 . . . . . . . . . . . .
Forfeited during 2015 . . . . . . . . . . . . .

Outstanding at year-end 2015(1) (3)

. . . . .

2015

Weighted Average
Grant Date Fair
Value Per RSU

31.45
75.61
28.50
43.32

45.14

Number of
RSUs

939,080
206,530
(392,479)
(19,584)

733,547

(1)

(2)

(3)

Includes RSUs with performance based vesting criteria.
Includes 129,240 RSUs held by Marriott International employees.
Includes 79,605 RSUs held by Marriott International employees.

Stock Options and SARs

We may grant employee non-qualified stock options to employees and non-employee directors at exercise

prices or strike prices equal to the market price of our common stock on the date of grant. Non-qualified stock
options generally expire ten years after the date of grant. Most stock options are exercisable in cumulative

F-43

installments of one quarter at the end of each of the first four years following the date of grant. Stock options
awarded under the Marriott International Stock Plan were granted at exercise prices or strike prices equal to the
market price of Marriott International common stock on the date of grant.

We recognized no stock option compensation expense for our employees in each of 2015, 2014 and 2013,
and there was no deferred compensation liability related to stock options held by our employees at both year-end
2015 and 2014. Additionally, no Marriott Vacations Worldwide stock options were granted to Marriott
International or Marriott Vacations Worldwide employees in 2015, 2014 or 2013.

The following table shows the 2015 changes in outstanding Marriott Vacations Worldwide stock options

for Marriott International and Marriott Vacations Worldwide employees and the associated weighted average
exercise prices:

2015

Number of
Stock Options

Weighted Average
Exercise Price Per Option

Outstanding at year-end 2014(1) . . .
Granted during 2015 . . . . . . . . . .
Exercised during 2015 . . . . . . . .
Forfeited during 2015 . . . . . . . . .

Outstanding at year-end 2015(1) . . .

21,744
—
(6,686)
—

15,058

17.20
—
15.88
—

17.78

(1) All outstanding stock options at year-end 2015 and year-end 2014 were held by Marriott

International employees.

The following table shows the Marriott Vacations Worldwide stock options issued to Marriott International

and Marriott Vacations Worldwide employees that were outstanding and exercisable at year-end 2015:

Range of
Exercise Prices

Number of
Stock Options

Weighted Average
Exercise Price
Per Option

Weighted Average
Remaining Life
(in years)

Number of
Stock Options

Weighted Average
Exercise Price
Per Option

Weighted Average
Remaining Life
(in years)

Outstanding

Exercisable

$13 to $17 . . . . .
$18 to $22 . . . . .
$23 to $28 . . . . .

9,643
3,408
2,007

$13 to $28 . . . . .

15,058

15.63
20.41
23.67

17.78

3.42
2.14
4.95

3.33

9,643
3,408
2,007

15,058

15.63
20.41
23.67

17.78

3.42
2.14
4.95

3.33

The intrinsic value of both the outstanding Marriott International stock options and exercisable stock

options held by our employees was $0 at year-end 2015 and $0.2 million at year-end 2014. There were no
outstanding or exercisable Marriott Vacations Worldwide stock options held by our employees at year-end 2015
or 2014.

The intrinsic value of stock options for Marriott International stock exercised by our employees was $0.2 million

in 2015, $2.6 million in 2014 and $3.2 million in 2013. The intrinsic value of stock options for Marriott Vacations
Worldwide stock exercised by our employees was $0 in 2015, $0.1 million in 2014 and $0.3 million in 2013.

SARs awarded under the Marriott International Stock Plan were granted at exercise prices or strike prices

equal to the market price of Marriott International common stock on the date of grant. SARs awarded under the
Stock Plan are granted at exercise prices or strike prices equal to the market price of Marriott Vacations
Worldwide common stock on the date of grant (this price is referred to as the “base value”). SARs generally
expire ten years after the date of grant and both vest and become exercisable in cumulative installments of one
quarter of the grant at the end of each of the first four years following the date of grant. Upon exercise of SARs,
our employees and non-employee directors receive the number of shares of Marriott International common stock

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or Marriott Vacations Worldwide common stock, as applicable, equal to the number of SARs being exercised,
multiplied by the quotient of (a) the market price of the common stock on the date of exercise (this price is
referred to as the “final value”) minus the base value, divided by (b) the final value.

We recognized compensation expense associated with SARs held by our employees and non-employee
directors of $1.9 million in 2015, $1.6 million in 2014 and $1.3 million in 2013. At year-end 2015 and year-end
2014, we had $1.1 million and $1.2 million, respectively, in deferred compensation costs related to SARs held by
our employees and non-employee directors.

The following table shows the 2015 changes in outstanding Marriott Vacations Worldwide SARs issued

to both Marriott International and Marriott Vacations Worldwide employees and non-employee directors:

2015

Number of
SARs

Weighted Average
Exercise Price Per SAR

Outstanding at year-end 2014 . . . . . . . . . . .
Granted during 2015 . . . . . . . . . . . . . . . . . .
Exercised during 2015 . . . . . . . . . . . . . . . . .
Forfeited during 2015 . . . . . . . . . . . . . . . . .

Outstanding at year-end 2015 . . . . . . . . . . .

774,665
62,018
(69,206)
—

767,477

22.80
77.42
19.89
—

27.48

We use the Black-Scholes model to estimate the fair value of the SARs granted. For SARs granted under

the Stock Plan subsequent to the Spin-Off, the expected stock price volatility was calculated based on the
historical volatility from the stock prices of a group of identified peer companies. The average expected life was
calculated using the simplified method. The risk-free interest rate was calculated based on U.S. Treasury zero-
coupon issues with a remaining term equal to the expected life assumed at the date of grant. The dividend yield
assumption listed below is based on the expectation of future payouts.

The following table outlines the assumptions used to estimate the fair value of grants for the fiscal years

ended 2015 and 2014:

Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . .

2015

42.74%
1.26%
1.74%
6.25

2014

55.10%
0.00%
1.84%
6.25

Employee Stock Purchase Plan

During 2015, the Board of Directors adopted, and our shareholders subsequently approved, the Marriott
Vacations Worldwide Corporation Employee Stock Purchase Plan (the “ESPP”), which became effective during
the third quarter of 2015. A total of 500,000 shares of common stock may be purchased under the ESPP. The
ESPP allows eligible employees to purchase shares of our common stock at a price per share not less than 95% of
the fair market value per share of common stock on the purchase date, up to a maximum threshold established by
the plan administrator for the offering period.

15. VARIABLE INTEREST ENTITIES

In accordance with the applicable accounting guidance for the consolidation of variable interest entities,

we analyze our variable interests, including loans, guarantees and equity investments, to determine if an entity in
which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and
qualitative reviews. We base our quantitative analysis on the forecasted cash flows of the entity, and our
qualitative analysis on our review of the design of the entity, its organizational structure including decision-
making ability, and relevant financial agreements. We also use our qualitative analyses to determine if we must
consolidate a variable interest entity because we are its primary beneficiary.

F-45

Variable Interest Entities Related to Our Vacation Ownership Notes Receivable Securitizations

We periodically securitize, without recourse, through bankruptcy remote special purpose entities, notes

receivable originated in connection with the sale of vacation ownership products. These vacation ownership notes
receivable securitizations provide funding for us and transfer the economic risks and substantially all the benefits
of the consumer loans we originate to third parties. In a vacation ownership notes receivable securitization,
various classes of debt securities issued by a special purpose entity are generally collateralized by a single
tranche of transferred assets, which consist of vacation ownership notes receivable. We service the vacation
ownership notes receivable. With each vacation ownership notes receivable securitization, we may retain a
portion of the securities, subordinated tranches, interest-only strips, subordinated interests in accrued interest and
fees on the securitized vacation ownership notes receivable or, in some cases, overcollateralization and cash
reserve accounts.

We created these entities to serve as a mechanism for holding assets and related liabilities, and the entities

have no equity investment at risk, making them variable interest entities. We continue to service the vacation
ownership notes receivable, transfer all proceeds collected to these special purpose entities, and retain rights to
receive benefits that are potentially significant to the entities. Accordingly, we concluded that we are the entities’
primary beneficiary and, therefore, consolidate them.

F-46

The following table shows consolidated assets, which are collateral for the obligations of these variable

interest entities, and consolidated liabilities included on our Balance Sheet at January 1, 2016.

($ in thousands)
Consolidated Assets:
Vacation ownership notes

Vacation Ownership
Notes Receivable
Securitizations

Warehouse
Credit
Facility

Total

receivable, net of reserves . . . . . . $

Interest receivable . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . $

Consolidated Liabilities:
Interest payable . . . . . . . . . . . . . . . . $
Debt . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . $

669,179 $
4,893
26,884

700,956 $

619 $

684,604

685,223 $

— $
—
—

— $

50 $
—

50 $

669,179
4,893
26,884

700,956

669
684,604

685,273

The noncontrolling interest balance was zero. The creditors of these entities do not have general recourse

to us.

The following table shows the interest income and expense recognized as a result of our involvement with

these variable interest entities during 2015:

($ in thousands)
Interest income . . . . . . . . . . . . . . . . $
Interest expense to investors . . . . . . $
Debt issuance cost amortization . . . $
Administrative expenses . . . . . . . . . $

Vacation Ownership
Notes Receivable
Securitizations

Warehouse
Credit
Facility

89,693
18,841
3,246
324

$
$
$
$

—
1,386
1,185
153

$
$
$
$

Total

89,693
20,227
4,431
477

The following table shows cash flows between us and the vacation ownership notes receivable

securitization variable interest entities:

($ in thousands)
Cash inflows:
Net proceeds from vacation ownership notes receivable

securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Principal receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash outflows:
Principal to investors . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary repurchases of defaulted vacation ownership
notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary clean-up call . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest to investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funding of restricted cash . . . . . . . . . . . . . . . . . . . . . . . .

2015

2014

252,361
183,111
91,290
55,156

581,918

260,007
183,687
91,507
44,999

580,200

(176,249)

(176,799)

(24,596)
(77,582)
(19,268)
(52,756)

(25,349)
(26,722)
(21,179)
(44,797)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(350,451)

(294,846)

Net Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

231,467

285,354

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The following table shows cash flows between us and the Warehouse Credit Facility variable interest

entity:

($ in thousands)
Cash inflows:

2015

2014

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Cash outflows:
Interest to investors . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Cash Flows

(1,390)

(1,495)

Under the terms of our vacation ownership notes receivable securitizations, we have the right at our

option to repurchase defaulted vacation ownership notes receivable at the outstanding principal balance. The
transaction documents typically limit such repurchases to 15 to 20 percent of the transaction’s initial vacation
ownership notes receivable principal balance. We made voluntary repurchases of defaulted vacation ownership
notes receivable of $24.6 million during 2015, $25.3 million during 2014 and $26.4 million during 2013. We also
made voluntary repurchases of $146.2 million, $31.3 million and $69.2 million of other non-defaulted vacation
ownership notes receivable during 2015, 2014 and 2013, respectively, to retire previous vacation ownership notes
receivable securitizations. Our maximum exposure to loss relating to the special purpose entities that purchase,
sell and own these vacation ownership notes receivable is the overcollateralization amount (the difference
between the loan collateral balance and the balance on the outstanding vacation ownership notes receivable), plus
cash reserves and any residual interest in future cash flows from collateral. In addition, we could be required to
fund up to an aggregate of $5.0 million upon presentation of demand notes related to certain vacation ownership
notes receivable securitization transactions outstanding at January 1, 2016.

Other Variable Interest Entities

We have an equity investment in the Joint Venture, a variable interest entity that previously developed
and marketed vacation ownership and residential products in Hawaii. We concluded that the Joint Venture is a
variable interest entity because the equity investment at risk is not sufficient to permit it to finance its activities
without additional support from other venture parties. We determined that we are not the primary beneficiary of
the Joint Venture, as power to direct the activities that most significantly impact its economic performance is
shared among the variable interest holders and, therefore, we do not consolidate the Joint Venture. In 2009, we
fully impaired our equity investment in the Joint Venture and in certain notes receivable due from the Joint
Venture and subsequently reduced the carrying value of our investment in those receivables to zero. Following
the Joint Venture’s failure to pay promissory notes due in 2010 and 2011, the lenders initiated foreclosure
proceedings with respect to unsold interests in the project. A sale was completed following a foreclosure auction,
and on June 13, 2013, we received $7.4 million of cash as a partial repayment of our previously fully reserved
receivables due from the Joint Venture. The Joint Venture’s obligations with respect to the remaining receivables
have been terminated. At January 1, 2016, we had an accrual of $4.1 million for potential future funding
obligations, representing our remaining expected exposure to loss related to our involvement with the Joint
Venture exclusive of any future costs that may be incurred pursuant to outstanding litigation matters, including
those discussed in Footnote No. 9, “Contingencies and Commitments.”

16. ORGANIZATIONAL AND SEPARATION RELATED CHARGES

Subsequent to the Spin-Off, Marriott International continued to provide us with certain information

technology, payroll, human resources and other administrative services pursuant to transition services
agreements, most of which we had ceased using as of the end of 2013. In connection with our organizational and
separation related activities, we incurred certain expenses to complete our separation from Marriott
International. These costs primarily related to establishing our own information technology systems and services,
independent payroll and accounts payable functions and reorganizing existing human resources, information

F-48

technology and related finance and accounting organizations to support our stand-alone public company needs. We do
not expect to incur organizational and separation related expenses after 2015. Organizational and separation related
charges as reflected in our Statements of Income were $1.2 million for 2015, $3.4 million for 2014 and $12.3 million
for 2013. In addition, $3.8 million and $3.0 million of additional separation related charges were capitalized to
Property and equipment on our Balance Sheets during 2015 and 2014, respectively.

17. BUSINESS SEGMENTS

We define our reportable segments based on the way in which the chief operating decision maker, currently

our chief executive officer, manages the operations of the company for purposes of allocating resources and assessing
performance. We operate in three reportable business segments:

•

In our North America segment, we develop, market, sell and manage vacation ownership and related
products under the Marriott Vacation Club and Grand Residences by Marriott brands. We also
develop, market and sell vacation ownership and related products under The Ritz-Carlton Destination
Club brand, as well as whole ownership residential products under The Ritz-Carlton Residences brand.

In our Europe segment, we are focusing on selling our existing projects and managing existing resorts.
We do not have any current plans for new development in this segment.

In our Asia Pacific segment, we develop, market, sell and manage the Marriott Vacation Club, Asia
Pacific, a right-to-use points program that we specifically designed to appeal to the vacation
preferences of the Asian market, as well as a weeks-based right-to-use product.

We evaluate the performance of our segments based primarily on the results of the segment without allocating

corporate expenses or income taxes. We do not allocate corporate interest expense, consumer financing interest
expense, other financing expenses or general and administrative expenses to our segments. We include interest
income specific to segment activities within the appropriate segment. We allocate other gains and losses and equity in
earnings or losses from our joint ventures to each of our segments as appropriate. Corporate and other represents that
portion of our revenues, equity in earnings or losses, and other gains or losses that are not allocable to our segments.

Revenues

($ in thousands)

North America . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . .

Total segment revenues . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . .

2015

1,621,923
114,582
93,958

1,830,463
—

2014

1,549,557
131,683
54,542

1,735,782
—

2013

1,544,816
149,277
55,595

1,749,688
—

1,830,463

1,735,782

1,749,688

Net Income

($ in thousands)

North America . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . .

Total segment financial results . . .
Corporate and other . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . .

2015

409,441
13,874
7,263

430,578
(224,081)
(83,698)

2014

350,589
15,079
7,808

373,476
(222,885)
(69,835)

2013

342,695
18,564
7,688

368,947
(237,743)
(51,474)

122,799

80,756

79,730

F-49

Equity in Earnings (Losses) of Equity Method Investees

($ in thousands)

2015

2014

2013

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation

($ in thousands)

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment depreciation . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . .

200
(13)

187

2015

12,935
1,601
2,424

16,960
5,257

205
(131)

2014

8,673
1,897
354

10,924
7,758

192
(2)

190

2013

9,451
1,859
260

11,570
11,025

22,217

18,682

22,595

Assets

($ in thousands)

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment assets . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . .

At Year-End
2015

At Year-End
2014

1,900,178
80,839
134,661

2,115,678
279,348

1,879,648
88,867
85,469

2,053,984
476,595

2,395,026

2,530,579

Equity Method Investments

($ in thousands)

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At Year-End
2015

At Year-End
2014

349
571

920

394
584

978

Capital Expenditures (including inventory)

($ in thousands)

North America . . . . . . . . . . . . . . . . . . . . . . . . . $
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment capital expenditures . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . .

2015

2014

2013

179,696
2,807
72,097

254,600
10,260

94,539
3,476
9,899

107,914
4,769

166,718
4,557
8,482

179,757
7,974

264,860

112,683

187,731

F-50

Our Financial Statements include the following items related to operations located outside the

United States (which are predominately related to our Europe and Asia Pacific segments):

•

Revenues, excluding cost reimbursements, of $215.3 million in 2015, $188.3 million in 2014 and
$207.0 million in 2013; and

Fixed assets of $121.8 million in 2015 and $62.3 million in 2014. For year-end 2015 and year-end
2014, fixed assets located outside the United States are included within the “Property and
equipment” caption on our Balance Sheets.

18. QUARTERLY RESULTS (UNAUDITED)

Fiscal Year 2015(1)(2)

($ in thousands, except per share data)

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Fiscal
Year

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 454,880

$ 422,827

$ 407,136

$ 545,620

$ 1,830,463

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(395,463) $(369,812) $(362,983) $(484,202) $(1,612,460)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,054

$ 34,041

$ 21,555

$ 33,149

Basic earnings per share . . . . . . . . . . . . . . . . . $

Diluted earnings per share . . . . . . . . . . . . . . . $

1.05

1.03

1.07

1.05

0.69

0.67

1.08

1.06

122,799

3.90

3.82

Fiscal Year 2014(1)(2)

($ in thousands, except per share data)

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Fiscal
Year

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 401,947

$ 409,902

$ 413,038

$ 510,895

$ 1,735,782

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(366,999) $(352,144) $(366,883) $(493,258) $(1,579,284)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,308

$ 35,303

$ 25,648

Basic earnings per share . . . . . . . . . . . . . . . . . $

Diluted earnings per share . . . . . . . . . . . . . . . $

0.55

0.54

1.03

1.00

0.77

0.75

497

0.02

0.01

80,756

2.40

2.33

(1) The quarters consisted of 12 weeks, except for the fourth quarters of 2015 and 2014, which consisted of

16 weeks.

(2) The sum of the earnings per share for the four quarters differs from annual earnings per share due to the

required method of computing the weighted average shares in interim periods.

19. SUBSEQUENT EVENTS

Conditional Future Purchase Commitments

In the first quarter of 2016, we entered into a commitment to purchase an operating hotel located in

New York, New York for $158.5 million, in a capital efficient transaction. We expect to acquire the units in the
hotel, in their current form, over time, and we expect to make payments of $96.8 million and $61.7 million in
2018 and 2019, respectively. We are required to purchase the completed property from the third party developer
unless the developer has sold the property to another party. The property is held by a variable interest entity for
which we are not the primary beneficiary as we cannot prevent the variable interest entity from selling the
property to another party. Accordingly, we will not consolidate the variable interest entity at inception.

We have commitments to purchase vacation ownership units located in two resorts in Bali, Indonesia in

separate capital efficient transactions, contingent upon completion of construction at agreed upon standards
within specified timeframes, for use in our Asia Pacific segment. We expect to complete the acquisition of

F-51

51 vacation ownership units in 2017 pursuant to one of the commitments, and expect to make payments, when
specific construction milestones are completed, as follows: $4.8 million in 2016, $17.7 million in 2017, and $1.2
million in 2018. We expect to complete the acquisition of 88 vacation ownership units in 2019 pursuant to the
other commitment, and expect to make payments, when specific construction milestones are completed, as
follows: $7.8 million in 2016, $5.9 million in 2017, $23.5 million in 2019 and $1.9 million in 2020.

Acquisition

In the first quarter of 2016, we completed the acquisition of an operating hotel located in the South Beach

area of Miami Beach, Florida, for approximately $23.5 million. We intend to convert this hotel into vacation
ownership interests for future use in our MVCD program.

Dividends

On February 11, 2016, our Board of Directors declared a quarterly dividend of $0.30 per share to be paid

on March 10, 2016 to shareholders of record as of February 25, 2016.

Share Repurchase Program

On February 11, 2016, our Board of Directors authorized repurchase of an additional 2,000,000 shares of

our common stock under our existing share repurchase program through March 24, 2017. Prior to that
authorization, our Board of Directors had authorized the repurchase of an aggregate of up to 8,900,000 shares of
our common stock under the share repurchase program since the initiation of the program in October 2013.

Warehouse Credit Facility Borrowing

On February 24, 2016, we made a draw on the Warehouse Credit Facility. The carrying amount of the

notes receivable securitized was $60.2 million. The advance rate was 85 percent, which resulted in gross
proceeds of $51.1 million. Net proceeds were $50.7 million due to the funding of reserve accounts in the amount
of $0.4 million.

F-52

BOARD OF DIRECTORS

EXECUTIVE LEADERSHIP

INVESTOR RELATIONS

William J. Shaw
Chairman of the Board

Stephen P. Weisz
President and Chief Executive Officer

Jeff Hansen
Vice President Investor Relations

Stephen P. Weisz
President and Chief Executive Officer

C.E. Andrews

Chief Executive Officer

MorganFranklin Consulting

Raymond L. “Rip” Gellein, Jr.
Former Chairman of the Board,
President and Chief Executive Officer

Strategic Hotels & Resorts, Inc.

Thomas J. Hutchison III
Chairman and Chief Executive Officer
Legacy Companies, LLC

Melquiades R. “Mel” Martinez
Chairman of the Southeast
and Latin America
JPMorgan Chase & Co.

William W. McCarten
Chairman of the Board
DiamondRock Hospitality Company

Dianna F. Morgan
Former Senior Vice President
Walt Disney World Company

R. Lee Cunningham
Executive Vice President and
Chief Operating Officer

Clifford M. Delorey
Executive Vice President and
Chief Resort Experience Officer

John E. Geller, Jr.
Executive Vice President and
Chief Financial Officer

James H Hunter, IV

Executive Vice President and

General Counsel

Lizabeth Kane-Hanan
Executive Vice President and
Chief Growth and Inventory Officer

Brian E. Miller
Executive Vice President and
Chief Sales and Marketing Officer

Dwight D. Smith
Executive Vice President and
Chief Information Officer

Michael E. Yonker
Executive Vice President and
Chief Human Resources Officer

CORPORATE PUBLIC RELATIONS

Edward F. Kinney
Global Vice President
Corporate Affairs and Communications

TRANSFER AGENT

Computershare
P.O. Box 30170
College Station, Texas 77842-3170
866-429-5244

CORPORATE INFORMATION

Marriott Vacations Worldwide
6649 Westwood Boulevard
Orlando, Florida 32821
407-206-6000

MarriottVacationsWorldwide.com

MarriottVacationClub.com

RitzCarltonClub.com

GrandResidenceClub.com