VACATION INTERNATIONALE, INC. BELLEVUE, WASHINGTON FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30,

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1 VACATION INTERNATIONALE, INC. BELLEVUE, WASHINGTON FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2016)

2 TABLE OF CONTENTS INDEPENDENT AUDITOR S REPORT FINANCIAL STATEMENTS Balance Sheet... 4 Statement of Revenues, Expenses and Changes in Fund Balances Statement of Cash Flows Notes to Financial Statements SUPPLEMENTARY INFORMATION Supplementary Information on Future Major Repairs and Replacements... 17

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors of Vacation Internationale, Inc. We have audited the accompanying financial statements of Vacation Internationale, Inc., which comprise the balance sheet as of June 30, 2017, and the related statements of revenues, expenses and changes in fund balances and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Qualified Opinion As further described in Note 12 to the financial statements, we were unable to obtain audited financial statements for the period ended June 30, 2017, supporting the Organization s foreign subsidiaries. Therefore, assets, liabilities, revenues and expenses relating to the activities of the foreign subsidiaries have not been audited.

4 To the Board of Directors of Vacation Internationale, Inc. Qualified Opinion In our opinion, except for the effect of the matters described in the preceding paragraph on the balance sheet and statement of revenues, expenses and changes in fund balances, the financial statements referred to above present fairly, in all material respects, the financial position of Vacation Internationale, Inc. as of June 30, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Vacation Internationale, Inc. s 2016 financial statements, and we expressed a qualified opinion on those financial statements in our report dated September 13, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. Disclaimer of Opinion on Required Supplementary Information Accounting principles generally accepted in the United States of America require that the supplementary information on future major repairs and replacements on page 17 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Financial Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. MYERS, BRETTHOLTZ & COMPANY, PA Fort Myers, Florida October 6, 2017

5 VACATION INTERNATIONALE, INC. BALANCE SHEET JUNE 30, 2017 (With comparative totals for June 30, 2016) FUNDS Operating Replacement Total Total ASSETS Cash and cash equivalents $ 1,775,553 $ 2,510,198 $ 4,285,751 $ 10,387,763 Certificates of deposit - 9,272,971 9,272,971 1,766,776 Accounts receivable - members, net 327, , ,351 Accounts receivable - other 55,946-55,946 51,055 Due from VOS 1,543,384-1,543,384 1,739,107 Prepaid expenses 3,024, ,429 3,456,982 3,079,741 Inventory 64,793-64,793 72,020 Deposits 59,735-59,735 60,480 Property and equipment, net 3,815,556-3,815,556 3,866,140 Due from funds 99,753-99, ,107 Total assets $ 10,766,616 $ 12,215,598 $ 22,982,214 $ 21,484,540 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 620,448 $ 168,353 $ 788,801 $ 617,669 Accrued expenses 1,897,060-1,897,060 2,078,980 Taxes payable 222, , ,387 Rental deposits 296, , ,810 Assessments received in advance 748, , ,579 Deferred revenue 101, ,654 90,426 Due to funds - 99,753 99, ,107 Total liabilities 3,887, ,106 4,155,197 4,020,958 FUND BALANCES Common stock (no par value; 5,000 shares authorized, 1,000 shares issued and outstanding) 1,000-1,000 1,000 Equity in property and equipment 3,815,556-3,815,556 3,866,140 Fund balances 3,062,969 11,947,492 15,010,461 13,596,442 Total fund balances 6,879,525 11,947,492 18,827,017 17,463,582 Total liabilities and fund balances $ 10,766,616 $ 12,215,598 $ 22,982,214 $ 21,484,540 The accompanying notes are an integral part of the financial statements. 4

6 VACATION INTERNATIONALE, INC. STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2017 (With comparative totals for the year ended June 30, 2016) FUNDS Operating Replacement Total Total REVENUES Assessments $ 31,479,990 $ 8,467,067 $ 39,947,057 $ 39,413,066 Interest and dividends 8,581 19,270 27,851 23,208 Service charges and late fees 681, , ,857 Owner rentals 204, , ,157 Wait list/time bank 1,612,516-1,612,516 1,560,578 Miscellaneous 210, , ,079 Inventory rental and exchange 4,248,780-4,248,780 4,343,706 On-site rentals and service 425, , ,345 On-site owner activities 93,108-93, ,026 Commercial services 1,748,609-1,748,609 1,847,557 Total revenues 40,713,557 8,486,337 49,199,894 48,903,579 EXPENSES ON-SITE Management and front desk 4,235,812-4,235,812 4,447,055 Informational services 204, , ,319 Housekeeping 5,088,892-5,088,892 4,915,238 Maintenance 1,829,582-1,829,582 1,844,972 Common area 1,407,450-1,407,450 1,515,991 HOA fees 8,930,114-8,930,114 8,593,705 Owner activities 236, , ,266 Utilities 2,129,309-2,129,309 2,119,961 Property taxes 1,514,593-1,514,593 1,438,309 Other taxes and insurance 1,895,037-1,895,037 1,852,302 Land leases 948, , ,587 Commercial services 1,274,607-1,274,607 1,429,556 Refurbishments and renovations - 8,073,162 8,073,162 7,606,247 Total on-site 29,695,581 8,073,162 37,768,743 37,060,508 5

7 FUNDS Operating Replacement Total Total OFF-SITE Owner services 1,015,646-1,015, ,581 Inventory management 366, , ,080 Resort operations administration 1,266,620-1,266,620 1,437,549 Board of directors 205, , ,371 Newsletter and owner communications 264, , ,645 Information services 1,386,626-1,386,626 1,329,845 Legal, accounting and other general and administrative 3,533,845-3,533,845 3,290,414 Management and administrative fee 423, , ,499 Total off-site 8,462,116-8,462,116 8,209,984 DEPRECIATION 57,630-57,630 63,161 INCOME TAXES 198, , ,306 PROVISION FOR UNCOLLECTIBLE ACCOUNTS 1,192, ,841 1,525,000 1,375,000 Total expenses 39,606,391 8,406,003 48,012,394 46,890,959 Excess of revenues over expenses 1,107,166 80,334 1,187,500 2,012,620 FUND BALANCES - July 1, 2016 and ,996,990 10,466,592 17,463,582 15,450,962 DISTRIBUTION FROM VI ACQUISITION IV 175, ,935 - INTERFUND TRANSFER (1,400,566) 1,400, FUND BALANCES - June 30, 2017 and 2016 $ 6,879,525 $ 11,947,492 $ 18,827,017 $ 17,463,582 The accompanying notes are an integral part of the financial statements. 6

8 VACATION INTERNATIONALE, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 (With comparative totals for the year ended June 30, 2016) CASH FLOWS FROM OPERATING ACTIVITIES Excess of revenues over expenses 1,107,166 FUNDS Operating Replacement Total Total $ $ 80,334 $ 1,187,500 $ 2,012,620 Depreciation 57,630-57,630 63,161 Provision for uncollectible accounts 27,226-27,226 - Recovery of bad debt (15,634) Interest reinvested - (6,195) (6,195) (6,189) Changes in: Accounts receivable - members (34,218) - (34,218) 206,860 Accounts receivable - other (4,891) - (4,891) 87,608 Due from VOS 195, , ,116 Prepaid expenses 55,188 (432,429) (377,241) 853,011 Inventory 7,227-7,227 (13,219) Deposits (395) Accounts payable 34, , ,132 (276,297) Accrued expenses (181,920) - (181,920) 396,128 Taxes payable 91,076-91,076 9,725 Rental deposits 57,723-57,723 54,957 Assessments received in advance 26,354-26,354 46,278 Deferred revenue 11,228-11,228 15,942 Net cash provided (used) by operating activities 1,450,510 (221,411) 1,229,099 3,587,672 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from redemptions of certificates of deposit - 7,500,000 7,500,000 10,003,991 Purchases of certificates of deposit - (15,000,000) (15,000,000) (5,003,991) Purchases of property and equipment (7,046) - (7,046) (195,205) Proceeds from sale of land ,716 Net cash (used) provided by investing activities (7,046) (7,500,000) (7,507,046) 4,937,511 7

9 FUNDS Operating Replacement Total Total CASH FLOWS FROM FINANCING ACTIVITIES Distribution from VI Acquisition IV 175, ,935 - Interfund reimbursement (240,860) 240, Interfund transfer (1,400,566) 1,400, Net cash (used) provided by financing activities (1,465,491) 1,641, ,935 - Net (decrease) increase in cash (22,027) (6,079,985) (6,102,012) 8,525,183 CASH AND CASH EQUIVALENTS - July 1, 2016 and ,797,580 8,590,183 10,387,763 1,862,580 CASH AND CASH EQUIVALENTS - June 30, 2017 and 2016 $ 1,775,553 $ 2,510,198 $ 4,285,751 $ 10,387,763 SUPPLEMENTAL INFORMATION State income taxes paid $ 1,586 $ - $ 1,586 $ 1,586 Mexican income taxes paid $ 198,905 $ - $ 198,905 $ 182,306 The accompanying notes are an integral part of the financial statements. 8

10 NOTE 1 - THE ORGANIZATION VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 Vacation Internationale, Inc. (the Organization or VI ) was incorporated on April 27, 1993, under the laws of Washington as a profit corporation, to operate and maintain approximately 914 and 915 furnished resort condominium units, as of June 30, 2017 and 2016, respectively, and numerous intervals, located throughout the United States, Canada and Mexico. One hundred percent of the stock of the Organization is held by VTS Operating Fund Trust ( VI Trust ). The trustee of VI Trust is VI. The ownership rights of the condominiums are held in VI Trust, formerly known as Vacation Time Share Trust, for the benefit of VI owners. The Vacation Internationale Owners Association ( VIOA ) manages the entire Vacation Internationale program ( VI Program ), including all of its various components. Ownership interests are transferred to VI owners on a points basis. All VI owners are members of VIOA. As of June 30, 2017 and 2016, total member points were 5,049,854 and 4,981,581, respectively. NOTE 2 - DATE OF MANAGEMENT S REVIEW In preparing the financial statements, the Organization has evaluated events and transactions for potential recognition or disclosure through October 6, 2017, the date that the financial statements were available to be issued. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Accounting The Organization prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and presents them as separate funds based on its different funding policies for operations and major repairs and replacements. The operating fund reflects the operating portion of the annual assessments billed to the members to meet the various day-to-day expenditures incurred in the administration and operation of the VI Program. The replacement fund is composed of the portion of the annual assessments designated in the budget to fund major repairs and replacements, as further described in Note 10. Accounts Receivable and Allowance for Uncollectible Accounts Accounts receivable are generally considered delinquent when the payment is not received on or before the due date. The Organization accounts for potential losses in accounts receivable utilizing the allowance method. The Organization maintains an allowance for uncollectible accounts at an amount that it believes is sufficient to provide adequate protection against future losses. Provisions for losses are determined principally on the basis of experiences in the preceding years, taking into account historical losses, industry standards and current economic conditions. All accounts or portions thereof deemed to be uncollectible are written off to the allowance for uncollectible accounts. Provision for uncollectible accounts expense was $1,525,000 and $1,375,000 for the years ended June 30, 2017 and 2016, respectively. 9

11 VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Common Property The Organization is responsible to preserve and maintain the common property of the wholly owned units. Ownership of the commonly owned assets is vested directly or indirectly in the members, and those assets are not titled in the Organization s name. As a result, commonly owned assets are not presented in the Organization s financial statements. Common property not capitalized consists of interior furnishings and equipment. Additions and improvements to common property are accounted for as major repair and replacement expenditures in the replacement fund. Property and Equipment Acquisitions of certain real and personal property assets to which the Organization holds title are recorded at cost and are being depreciated over their estimated useful lives, using the straight line method, as further described in Note 8. Compensated Absences The Organization records a liability for the estimated amount of compensation for future absences. Annual leave up to 160 hours is payable upon termination of the employee. Annual leave accruals are recorded in the financial statements as an accrued liability, based on hourly rates in effect as of June 30, 2017 and The amount accrued as of June 30, 2017 and 2016 was $381,248 and $352,049, respectively, and is included in accrued expenses. Income Taxes Management has analyzed its various federal and state filing positions and believes that the Organization s income tax filing positions and deductions are well documented, supported and contain no uncertain tax positions. Additionally, management believes that no accruals for tax liabilities, interest or penalties are required. Therefore, no reserves for uncertain income tax positions have been recorded. Further, no interest or penalties have been included since no reserves were recorded. When applicable, such interest and penalties will be reported as income tax expense. The Organization s federal income tax returns remain subject to examination by the Internal Revenue Service for three years and state income tax returns remain subject to examination by the various states ranging from three to five years. The Organization files its income tax return as a homeowners association in accordance with Internal Revenue Code Section 528. Under that Section, the Organization is not taxed on uniform assessments to members and other income received from Organization members solely as a function of their membership in the Organization. The Organization is taxed at the federal rate of 32% on its investment income and other non-exempt function income, less allocable expenses. There are no temporary differences between the financial reporting and tax reporting with respect to the non-exempt function income; therefore, no deferred tax provision has been recorded. Fair Value of Financial Instruments Substantially all of the Organization s assets and liabilities, excluding prepaid expenses, property and equipment, rental deposits, assessments received in advance and deferred revenue, are considered financial instruments. These assets and liabilities are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instrument. 10

12 VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue Recognition Each member of the Organization is assessed a proportionate amount of the assessment fees based on an allotment of points. Assessments revenue is recognized monthly in the amount of the membership assessment allocation specified for current period operations based on the annual budget adopted by the Board of Directors (the Board ). Rental program revenue is recognized based on arrival date. Service charges and late fees revenue is recognized when billed. Cash Flows For purposes of the statement of cash flows, the Organization considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents, excluding certificates of deposit. The Organization made cash payments of $1,586 for state income taxes during both the years ended June 30, 2017 and The Organization made cash payments of $198,905 and $182,306 for Mexican income taxes during the years ended June 30, 2017 and 2016, respectively. The Organization made no cash payments for interest during the years ended June 30, 2017 or Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 4 - CONCENTRATION OF CREDIT RISK The Organization maintains cash balances and certificates of deposit at various financial institutions. Accounts and certificates of deposit at each institution are insured by the Federal Deposit Insurance Corporation ( FDIC ) up to $250,000. As of June 30, 2017 and 2016, the uninsured balances were $1,497,930 and $1,466,882, respectively, based on the bank statement balances less the FDIC insurance. Cash equivalents totaling $18,893 and $5,014,282, as of June 30, 2017 and 2016, respectively, are not insured by the FDIC. Accounts at Canadian commercial banking institutions are insured by the Canada Deposit Insurance Corporation ( CDIC ) up to $100,000. The uninsured balance in Canadian dollars was $463,667 and $324,589 as of June 30, 2017 and 2016, respectively, based on the bank statement balances less the CDIC insurance. 11

13 NOTE 5 - ACCOUNTS RECEIVABLE - MEMBERS VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 Accounts receivable - members consisted of the following as of June 30, Assessments, rental, service charges and late fees $ 456,238 $ 422,019 Less: allowance for uncollectible accounts (128,895) (101,668) $ 327,343 $ 320,351 NOTE 6 - DUE FROM VOS The Organization entered into an agreement to purchase the remainder interests in the Vallarta Torre resort from the founders of the VI Program. The purchase price of the remainder interests was $8,000,000 with Vacation Ownership Sales, Inc. ( VOS ), formerly VRI Development and Sales, Inc. contributing $6,000,000 and the Organization paying $2,000,000. VOS has agreed to compensate the Organization for the $2,000,000 by reducing the management fee to $250,000 per year (subject to periodic CPI increases). The Organization s contribution will be amortized as additional management fee expense through December 31, As of June 30, 2017 and 2016, the balance due from VOS related to this agreement was $1,416,665 and $1,583,332, respectively, and is included in due from VOS. NOTE 7 - PREPAID EXPENSES Prepaid expenses consisted of the following as of June 30, Association fees $ 1,417,606 $ 1,387,536 Sea Village land lease 1,117,200 1,238,400 Insurance 383, ,924 Refurbishment and renovation 432,429 - Miscellaneous 106, ,881 $ 3,456,982 $ 3,079,741 12

14 NOTE 8 - PROPERTY AND EQUIPMENT VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 Property and equipment consisted of the following as of June 30, Estimated Useful Lives Buildings and improvements 30 years $ 1,455,180 $ 1,455,180 Computer hardware 3-5 years 215, ,968 Computer software 3-5 years 345, ,846 Furniture and equipment 3-5 years 296, ,016 Leasehold improvements 3 years 9,113 9,113 Less: accumulated depreciation (1,476,930) (1,419,300) 845, ,823 Land N/A 2,970,317 2,970,317 $ 3,815,556 $ 3,866,140 Depreciation expense was $57,630 and $63,161, for the years ended June 30, 2017 and 2016, respectively. The Organization purchased land in 2004 with the intent that a new resort would be built on the property. The Organization sold the land during the year ended June 30, 2016, which was being carried at a cost value of $132,716. NOTE 9 - ASSESSMENTS RECEIVED IN ADVANCE Assessments received in advance for the years ended June 30, 2017 and 2016, consisted of future year assessments received by the Organization prior to July 1, 2017 and 2016, respectively. NOTE 10 - REPLACEMENT FUND The Organization s replacement fund is utilized to accumulate funds for major repairs and replacements, by an allocation of the assessment charged to each member and specifically designated for the fund in the annual budget. Deductions from the fund are recorded as costs are incurred for replacement and refurbishment items in accordance with the Board approved budget. Investment income earned on such funds is retained in the replacement fund. During the years ended June 30, 2017 and 2016, the Organization funded for major repairs and replacements, based on an independent appraiser s estimates of current replacement costs. The Board approved an interfund transfer of $1,400,566 and $2,464,735, during the years ended June 30, 2017 and 2016, respectively. 13

15 NOTE 10 - REPLACEMENT FUND (Continued) VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 The 2017/2018 proposed budgeted funding is $8,844,519, as shown in the unaudited supplementary information. The actual replacement costs, useful lives, and investment income may vary from the estimated amounts and the variation may be material. Therefore, the Organization s replacement fund may not be adequate to meet all future needs for major repairs and replacements. If additional funds are needed, the Board, on behalf of the Organization, has the power to increase regular assessments, pass special assessments, or delay major repairs and replacements until funds are available. NOTE 11 - COMMITMENTS VIOA has contracted with VOS to provide management and development services for the VI Program through December 31, The Organization has certain condominiums located on land leased by VI Trust under noncancelable operating leases expiring on various dates through Terms of the leases require total annual payments per condominium unit ranging from $274 to $5,803. The lease payments are made by the Organization on behalf of VI Trust. Total rental expense under operating land leases was $948,602 and $880,587 for the years ended June 30, 2017 and 2016, respectively. The Organization has a lease agreement for office space in Bellevue, Washington, ending December 31, Monthly payments for the office lease are based on a monthly base rent per rentable square footage subject to annual adjustments. Rental expense for the office lease is allocated between the Organization and VOS, as described in Note 1. Total rental expense recorded by the Organization for the office lease for the years ended June 30, 2017 and 2016, was $385,556 and $369,751, respectively, and is included in legal, accounting and other general and administrative expenses. Future minimum payments required under the lease agreements, are as follows: Years ending June 30,: Land Office Total 2018 $ 708,942 $ 465,138 $ 1,174, , ,093 1,175, , ,465 1,183, , ,269 1,179, , , ,904 Thereafter 6,955,177-6,955,177 $ 10,373,760 $ 2,203,855 $ 12,577,615 The Organization has an agreement with a financial institution to purchase $250,000 Canadian dollars on a monthly basis for the period of July 12, 2017 through June 18, 2018 at a rate option ranging from to In addition, the Organization has agreement with another financial institution to purchase $4,000,000 Mexican pesos if the rate option is favorable or $2,000,000 Mexican pesos if the rate option is unfavorable on a monthly basis for the period of July 3, 2017 through June 1, 2018 at a rate option of Due to ongoing renovation projects, the agreement also calls for the purchase of an additional $6,000,000 Mexican pesos at a rate of for the period of July 3, 2017 through November 1,

16 VACATION INTERNATIONALE, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 NOTE 12 - ACTIVITIES IN FOREIGN SUBSIDIARIES The VIOA Board of Directors acquired Torres Vallarta s.a. de c.v., Vacacionistas Internationales Vallarta s.a. de c.v. and Vacacionistas Internationales Mazatlan s.a. de c.v. and the commercial apartments of Torres Mazatlan s.a. de c.v. from Sunterra Pacific, Inc. and Sunterra Corporation, which provides the VI program with the necessary facilities to manage the Mexico resort properties. The Organization funds the operation of both hotel complexes. For the years ended June 30, 2017 and 2016, the investment balances are included in accrued expenses. The following operating and replacement fund amounts were not audited for the years ended June 30, Torres Mazatlan Revenue $ 1,110,682 $ 1,184,132 Expenses $ 4,800,293 $ 4,838,789 Investment $ (331,513) $ (623,651) Vallarta Torre Revenue $ 491,327 $ 518,136 Expenses $ 3,733,345 $ 2,505,560 Investment $ (254,846) $ (222,461) NOTE (k) PENSION PLAN The Organization has established a 401(k) pension plan for the benefit of its employees. This plan covers all eligible employees of the Organization. Eligible employees are those who have completed one year of service as defined by the plan. Under provisions of the 401(k) plan, employees are allowed to defer a percentage of their compensation each year. The Organization, at its discretion, may contribute a matching contribution. Employees are fully vested in the employer s contributions to the plan after four years. For the years ended June 30, 2017 and 2016, the Organization made matching contributions of $106,507 and $91,260, respectively. 15

17 SUPPLEMENTARY INFORMATION

18 VACATION INTERNATIONALE, INC. SUPPLEMENTARY INFORMATION ON FUTURE MAJOR REPAIRS AND REPLACEMENTS JUNE 30, 2017 (Unaudited) An independent appraiser conducted a study during 2017, to estimate the remaining useful lives and the replacement costs of the components of the wholly owned and partially owned resorts. The following table is based on the study and presents significant information about the components of the wholly owned and partially owned resorts. Amounts are based on normal operation and without the effect of potential catastrophic occurrences. Average Estimated 2017/2018 Average Estimated Current Proposed Estimated Remaining Replacement Budgeted Components Useful Lives Useful Lives Costs Funding Building and grounds 1-50 years 1-15 years $ 35,539,765 Equipment 1-30 years 1-15 years 8,203,661 Furniture and fixtures 1-40 years 2-16 years 44,270,665 $ 88,014,091 $ 8,844,519 Estimated current replacement costs are based on the assumption that the rate of investment income earned on replacement funds will be 0% and the rate of inflation will be 2.5%. As of June 30, 2017, the Organization is 14% funded, based on estimated current replacement costs. 17