UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q


[X]    Quarterly report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

       For the quarterly period ended March 31, 1998

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


Commission file number 000-22979

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


              Oregon                                  93-1004403

  (State or other jurisdiction of        (I.R.S. Employer Identification No.)
          incorporation)

                             12301 N.E. 10th Place
                           Bellevue, Washington 98005
              (Address of principal executive offices) (Zip Code)


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


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

     The  number  of shares  of the  registrant's  no-par  voting  common  stock
outstanding as of May 8, 1998:                    17,593,366 shares.


<PAGE>



PART I - FINANCIAL INFORMATION

Item I - Financial Statements

                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                    December 31,           March 31,
                                   Assets                                               1997                 1998
                                                                                   ----------------     ----------------
                                                                                                          (Unaudited)
<S>                                                                                <C>                     <C>   
Assets:
     Cash                                                                          $       70           $    4,560
     Restricted cash                                                                    1,219                1,393
     Notes receivable, net of allowance for doubtful accounts, sales
        returns and deferred gross profit                                              73,075               58,939
     Accrued interest and other receivables                                             7,435                7,393
     Residual interest in notes receivable sold                                        15,235               19,940
     Receivable from Parent                                                               --                 1,311
     Inventories                                                                       44,534               47,469
     Property and equipment, net                                                        7,057                7,961
     Deferred income taxes                                                                924                  561
     Other assets                                                                       2,201                2,766
                                                                                   ----------           ----------      

                     Total assets                                                  $  151,750           $  152,293
                                                                                   ==========           ==========


                    Liabilities and Stockholders' Equity

Liabilities:
     Accounts payable                                                                     944                1,763
     Accrued liabilities                                                                3,862                4,457
     Accrued construction in progress                                                  10,480                6,155
     Due to Parent                                                                      1,947                  --
     Allowance for recourse liability and deferred gross profit on notes
        receivable sold                                                                 8,757                9,868
     Income taxes payable to Parent                                                     2,755                  --
     Income taxes payable                                                                 880                2,061
                                                                                   ----------           ----------

                     Total liabilities                                                 29,625               24,304

Stockholders' equity:
     Preferred stock, no par value.  Authorized 10,000,000 shares;
        no shares issued or outstanding                                                    --                   --
     Common stock, no par value.  Authorized 90,000,000 shares;
        issued and outstanding 17,593,366 shares                                       66,742               66,742
     Retained earnings                                                                 55,383               61,247
                                                                                   ----------           ----------

                     Total stockholders' equity                                       122,125              127,989

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

                     Total liabilities and stockholders' equity                    $  151,750           $  152,293
                                                                                   ==========           ==========
</TABLE>


     See accompanying notes to the condensed combined and consolidated financial
statements.


<PAGE>

                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

            Condensed Combined and Consolidated Statements of Income

                  (dollars in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Three months ended March 31,
                                                                                        1997                 1998
                                                                                   ----------------     ----------------
<S>                                                                                <C>                   <C>
Revenues:
     Vacation Credit sales, net                                                    $   27,945           $   34,885
     Finance income                                                                     3,219                3,198
     Gains on sales of notes receivable                                                   --                 3,597
     Resort management services                                                           761                  629
     Other                                                                                688                  519
                                                                                   ----------           ----------

                  Total revenues                                                       32,613               42,828
                                                                                   ----------           ----------

Costs and operating expenses:
     Vacation Credit cost of sales                                                      7,553                9,513
     Resort management services                                                           259                  276
     Sales and marketing                                                               13,131               17,635
     General and administrative                                                         2,968                3,789
     Provision for doubtful accounts and recourse
        liability                                                                       1,816                2,396
     Interest                                                                             634                   36
                                                                                   ----------           ----------

             Total costs and operating expenses                                        26,361               33,645
                                                                                   ----------           ----------

             Income before income taxes                                                 6,252                9,183

Income tax expense                                                                      2,253                3,319
                                                                                   ----------           ----------

             Net income                                                            $    3,999           $    5,864
                                                                                   ==========           ==========

Basic and diluted net income per common share                                  $          .28                  .33


    Basic and diluted weighted average shares of common stock outstanding          14,417,116           17,593,366


</TABLE>

     See accompanying notes to the condensed combined and consolidated financial
statements.



<PAGE>


                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Condensed Combined and Consolidated Statements of Cash Flows

                             (dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Three months ended March 31,
                                                                                   -------------------------------------
                                                                                        1997                 1998
                                                                                   ----------------     ----------------
<S>                                                                                <C>                   <C>
Cash flows from operating activities:
     Net income                                                                    $     3,999          $     5,864
     Adjustments to reconcile net income to net cash provided by (used in)
        operating activities:
        Depreciation and amortization                                                      154                  197
        Amortization of residual interest in notes receivable sold                         949                1,402
        Provision for doubtful accounts, sales returns and recourse                      2,656                3,166
           liability
        Recoveries of notes receivable charged off                                          81                   31
        Residual interest in notes receivables sold                                         --               (4,582)
        Unrealized (gain) loss on residual interest in notes receivable sold            (1,113)                  44
        Change in deferred gross profit                                                   (441)                (226)
        Deferred income tax expense (benefit)                                               63                  363
        Issuance of notes receivable                                                   (25,277)             (31,078)
        Proceeds from sale of notes receivable                                             624               38,488
        Proceeds from repayment of notes receivable                                      5,250                5,401
        Purchase of notes receivable                                                    (1,838)              (2,104)
        Changes in certain assets and liabilities:
           Restricted cash                                                                (367)                (174)
           Inventories                                                                  (1,831)              (2,935)
           Accounts payable and accrued liabilities                                         233              (2,911)
           Income taxes payable to Parent                                                 1,516              (2,755)
           Income taxes payable                                                             --                1,181
           Other                                                                          (531)                (556)
                                                                                   ------------         -----------

               Net cash provided by (used in) operating activities                     (15,873)               8,816
                                                                                   ------------         -----------

Cash flows used in investing activities -Purchase of property and equipment               (630)              (1,068)
                                                                                   -----------          -----------

Cash flows from financing activities:
     Proceeds from notes payable                                                        14,727                   --
     Payments on notes payable                                                            (646)                  --
     Increase in Receivable from Parent                                                     --               (1,311)
     Increase (decrease) in Due to Parent                                                2,448               (1,947)
                                                                                   -----------          -----------

               Net cash provided by (used in) financing activities                      16,529               (3,258)
                                                                                   -----------          -----------

               Net increase in cash                                                         26                4,490

Cash at beginning of period                                                                 93                   70
                                                                                   -----------          -----------

Cash at end of period                                                              $       119          $     4,560
                                                                                   ===========          ===========
</TABLE>

     See accompanying notes to the condensed combined and consolidated financial
statements.


<PAGE>


                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Condensed Combined and Consolidated Statements of Cash Flows
                                   (continued)
                             (dollars in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                       Three months ended March 31,
                                                                                   -------------------------------------
                                                                                        1997                 1998
                                                                                   ----------------     ----------------
<S>                                                                                <C>                  <C>
Supplemental  disclosures of cash flow  information  cash paid during the period
     for:
        Interest                                                                   $       735          $       178
        Income taxes                                                                       675                4,530

</TABLE>

     See accompanying notes to combined and consolidated financial statements.



<PAGE>



                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES
                Notes to the Condensed Combined and Consolidated
                              Financial Statements
                             (dollars in thousands)
                                   (Unaudited)

Note 1 - Background

Trendwest  Resorts,  Inc.  (Company)  markets,   sells  and  finances  timeshare
ownership  interests  in the  form  of  perpetual  timeshare  credits  (Vacation
Credits)  in  WorldMark,  the Club  (WorldMark).  Vacation  Credits  are created
through the transfer to  WorldMark of resort units  acquired or developed by the
Company.  The Company derives revenues primarily from Vacation Credit sales and,
to a lesser  extent,  from the  financing of Vacation  Credit sales and from its
management agreement with WorldMark.

These condensed  combined and consolidated  financial  statements do not include
certain  information  and footnotes  required by generally  accepted  accounting
principles  for  complete  financial  statements.  However,  in the  opinion  of
management,  all adjustments  considered  necessary for a fair presentation have
been included and are of a normal recurring  nature.  Operating  results for the
three months ended March 31, 1998 are not necessarily  indicative of the results
that may be expected for the fiscal year ending December 31, 1998.

These  statements  should be read in conjunction  with the audited  combined and
consolidated  financial  statements and footnotes included in the Company's 1997
Form  10-K  filed  with  the  Securities  and  Exchange  Commission  (SEC).  The
accounting  policies used in preparing these condensed combined and consolidated
financial statements are the same as those described in such Form 10-K.

Note 2 - Sale and Securitization of Notes Receivable

In  March  1998,  the  Company  sold  $37.4  million  of Notes  Receivable  to a
wholly-owned  special purpose company,  Trendwest  Funding II, Inc. In addition,
the Bank  Group  sold  $93.0  million  of  Notes  Receivable  purchased  from TW
Holdings,  Inc. to Trendwest  Funding II, Inc. The special  purpose company sold
the  receivable  to TRI  Funding  II,  Inc.  (TRI),  a  special  purpose  entity
wholly-owned by Trendwest Funding II, Inc., and TRI issued $130.4 million in two
classes of senior and subordinated notes to institutional investors. The 1998-1,
Class A notes  were  issued for  $125.0  million  at a fixed rate of 6.88%.  The
1998-1, Class B notes were issued for $5.4 million at a fixed rate of 7.98%. The
Class A notes and Class B notes  were rated `A" and `BBB' by Fitch  IBCA,  Inc.,
respectively,  and are secured by the Notes Receivable owned by TRI. The ratings
reflect  credit  enhancements  of a 4%  over-collaterilization  and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009.

Note 3 - Basic and Diluted Net Income Per Common Share

On August 15, 1997, the Company  consummated the offering of 3,176,250 shares of
the Company's  common stock at $18 per share  resulting in net  proceeds,  after
deducting the related issuance costs, of approximately $51,772. In addition, the
Company  issued  5,193,693  shares of common  stock to the Parent to acquire two
wholly owned  subsidiaries,  TW Holdings and  Trendwest  Funding  (Consolidation
Transactions).  Effective June 30, 1997, TW Holdings and Trendwest  Funding were
wholly-owned subsidiaries of the Company.

Basic and diluted  net income per common  share has been  computed  based on the
number of shares of Trendwest common stock outstanding and assumes the 5,193,693
shares  issued  to  the  Parent  in  connection  with  the  1997   Consolidation
Transactions have been outstanding for all periods presented.



<PAGE>


The following illustrates the reconciliation of weighted average shares used for
basic net income per share:

<TABLE>
<CAPTION>
                                                                                 Three months ended March 31,
                                                                               1997                  1998
                                                                         -----------------     ------------------
          <S>                                                              <C>                    <C>
          Basic

          Weighted average shares - Trendwest                                9,223,423            17,593,366
          Effect of consolidation transactions                               5,193,693                    --
                                                                         -------------         -------------     

          Basic and diluted weighted average shares outstanding             14,417,116            17,593,366
                                                                         =============         =============     
</TABLE>

Net income available to common shareholders for basic net income per share was $
3,999  and  $5,864  for  the  three  months  ended  March  31,  1997  and  1998,
respectively.

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

At March 31, 1998, there were options to purchase 499,000 shares of common stock
outstanding  which were  antidilutive  in 1998 and therefore not included in the
computation of diluted net income per share.

Note 4 - Inventories

Inventories consist of Vacation Credits and construction in progress as follows:

<TABLE>
<CAPTION>
                                                                           December 31,             March 31,
                                                                               1997                  1998
                                                                         -----------------     ------------------
          <S>                                                            <C>                    <C>
          Vacation Credits                                               $      1,722           $     9,251
          Construction in progress                                             42,812                38,218
                                                                         ------------          ------------

                   Total inventories                                     $     44,534           $    47,469
                                                                         ============          ============
</TABLE>

Note 5 - Allowance For Doubtful Accounts, Recourse Liability and Sales Returns

The activity in the  allowance  for doubtful  accounts,  recourse  liability and
sales  returns is as follows for the year ended  December 31, 1997 and the three
months ended March 31, 1998:

<TABLE>
<CAPTION>
                                                                               1997                  1998
                                                                         -----------------     ------------------
          <S>                                                            <C>                   <C>
          Balances at beginning of period                                $     11,241          $     15,240

          Provision for doubtful accounts, sales returns and                                          3,166
              recourse liability                                               11,755
          Notes receivable charged-off and sales returns net of
              Vacation Credits recovered                                       (7,888)               (1,997)
          Recoveries                                                              132                    31
                                                                         ------------          ------------
          Balances at end of period                                      $     15,240          $     16,440
                                                                         ============          ============

          Allowance for doubtful accounts and sales returns              $      9,935          $      9,899
          Recourse Liability on notes receivable sold                           5,305                 6,541
                                                                         ------------          ------------
                                                                         $     15,240          $     16,440
                                                                         ============          ============
</TABLE>

Total notes receivable outstanding, including notes receivable sold, amounted to
$242,286 and $255,279 at December 31, 1997 and March 31, 1998, respectively.

Note 6 - Commitments and Contingencies

(a) Purchase Commitments
The Company routinely enters into purchase agreements with various developers to
acquire  and  build  resort  properties.  At  March  31,  1998 the  Company  had
outstanding   purchase  commitments  of  $19,020  related  to  properties  under
development.

(b) Litigation
The Company is involved in various claims and lawsuits arising from the ordinary
course of business.  Management  believes that outcome of these matters will not
have a material adverse effect on the Company's financial  position,  results of
operations, or liquidity.

Note 7 - Subsequent Event

On May 7, 1998, the Company entered into an $11.8 million  agreement to purchase
land and develop a 111 unit resort at Rancho Vistoso near Tucson, Arizona.


Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations

                              RESULTS OF OPERATIONS

The Company  achieved total revenues of $42.8 million for the three months ended
March 31, 1998  compared to $32.6  million for the three  months ended March 31,
1997, an increase of 31.3%. The principal reason for the overall improvement was
a 25.1%  increase  in  Vacation  Credit  sales from $27.9  million for the three
months  ended March 31, 1997 to $34.9  million for the three  months ended March
31, 1998.  The increase in Vacation  Credit sales was  primarily the result of a
26.6%  increase in the number of Vacation  Credits sold from 21.4 million in the
three  months  ended March 31, 1997 to 27.1  million in the three  months  ended
March 31, 1998. The increase in Vacation  Credits sold was largely  attributable
to new off-site sales offices in Costa Mesa, California opened in February 1997;
Woodland Hills,  California,  opened in October of 1997; relocating the Vallejo,
California  office to Walnut  Creek,  California  and increased  Upgrade  sales.
Revenues  from  Upgrade  Sales  increased  44.2% from $4.3 million for the three
months ended March 31, 1997 to $6.2 million for the three months ended March 31,
1998 due primarily to an increase of 55% in the number of Vacation  Credits sold
as Upgrades  during the three months ended March 31, 1997  compared to the three
months  ended  March 31,  1998.  The  average  price per  Vacation  Credit  sold
decreased  slightly  from $1.27 per credit for the three  months ended March 31,
1997  versus  $1.26  per  credit  for the three  months  ended  March  31,  1998
reflecting a greater  percentage of vacation  credits sold as Upgrades which are
sold at a lower selling price.

Finance  income for the three months ended March 31, 1997 was  comparable to the
three  months  ended  March 31, 1998 as the 1997  period  benefitted  from a $.8
million  recognition  of the  unrealized  gain on  residual  interest  in  Notes
Receivable  sold,   primarily  from  the  adoption  of  Statement  of  Financial
Accounting  Standards  Number 125 (SFAS  125).  Absent the above,  increases  in
finance income would have  reflected the increase in carrying  balances of Notes
Receivable  for the two  periods  compared.  Gains on sales of Notes  Receivable
increased in 1998 because sales of notes  receivable  for the three months ended
March 31, 1997 were  treated as secured  borrowings  because TW Holdings did not
meet the sales recognition criteria of SFAS 125. The asset backed securitization
consummated  during the first  quarter of 1998  resulted in  recording  gains on
$33.6 million of Notes  Receivable sold. TW Holdings also recorded gains on $3.8
million of Notes  Receivable  sold to the Bank Group during the first quarter of
1998.

Vacation  Credit cost of sales  increased from $7.6 million for the three months
ended March 31, 1997 to $9.5  million for the three months ended March 31, 1998,
an increase of 25.0%,  primarily  reflecting  the  increase in sales of Vacation
Credits. As a percentage of Vacation Credit sales, Vacation Credit cost of sales
were  comparable at 27.2% of Vacation  Credit sales for each of the three months
ended March 31, 1997 and 1998.

Sales and  marketing  costs  increased  34.4% from $13.1  million  for the three
months ended March 31, 1997 to $17.6  million in the three months of 1998.  As a
percentage of Vacation  Credit sales,  sales and marketing  costs increased from
47.0% for the three  months  ended March 31, 1997 to 50.4% for the three  months
ended March 31, 1998.  This increase  reflects  start-up costs  associated  with
opening the Burlingame,  California  sales office in mid-March 1998, which costs
did not produce  significant  sales to any degree.  In addition,  training costs
associated  with new salespeople  and office  personnel in the Southwest  Region
also contributed to higher sales and marketing costs for the quarter.

General and  administrative  expenses  increased 26.7% from $3.0 million for the
three  months  ended March 31, 1997 to $3.8  million for the three  months ended
March 31,  1998.  Absent  the  increase  in gains on sales of Notes  Receivable,
general and  administrative  expenses  would have been higher as a percentage of
total  revenue  for the  1998  period  as  compared  to the 1997  period  due to
increased sales growth; inflationary pressure on wages, increased administration
costs  resulting  from being a publicly  traded  company and  start-up  expenses
associated with the new Southwest Region.

Provision for doubtful  accounts and recourse  liability  increased  33.3 % from
$1.8  million for the three  months ended March 31, 1997 to $2.4 million for the
three months ended March 31, 1998. As a percentage of Vacation Credit sales, the
provision  increased from 6.5% for the three months ended March 31, 1997 to 6.9%
for the  three  months  ended  March  31,  1998 due to  continued  growth in the
carrying amount of Notes  Receivable  both on and  off-balance  sheet as well as
increased sales volume in California  which has  historically had higher default
rates than the Pacific Northwest.

The Company maintains an allowance for doubtful accounts in respect of the Notes
Receivable  owned by the Company and an  allowance  for  recourse  liability  in
respect  of the  Notes  Receivable  that  have  been  sold by the  Company.  The
aggregate  amount of these  allowances  at December  31, 1997 and March 31, 1998
were $15.2 million, and $16.4 million, respectively,  representing approximately
6.3% and 6.4%, respectively, of the total portfolio of Notes Receivable at those
dates,  including  the Notes  Receivable  that had been sold by the Company.  No
assurance can be given that these allowances will be adequate, and if the amount
of the Notes  Receivable that are ultimately  written off materially  exceed the
related allowances,  the Company's business, results of operations and financial
condition could be materially adversely affected.

The Company estimates its allowance for doubtful accounts and recourse liability
by  analysis  of bad  debts  by each  sales  site  by  year  of Note  Receivable
origination.  The Company uses this  historical  analysis,  in conjunction  with
other factors such as local economic conditions and industry trends. The Company
also utilizes  experience factors of more mature sales sites in establishing the
reserve for bad debts at new sales offices.  The Company  generally  charges off
all  receivables  when they  become 180 days past due and  returns  the  credits
associated  with such  charge-offs to inventory.  At March 31, 1998, 1.9% of the
Company's total  receivables  portfolio of $255.3 million were more than 60 days
past due.

                         LIQUIDITY AND CAPITAL RESOURCES

The  Company  generates  cash from  operations  from down  payments  on sales of
Vacation Credits which are financed,  cash sales of Vacation Credits,  principal
and  interest  on Notes  Receivable,  and  proceeds  from  sales and  borrowings
collateralized  by Notes  Receivable.  The Company  also  generates  cash on the
interest  differential  between the interest charged on the Notes Receivable and
the interest paid on loans collateralized by Notes Receivable.

During the three months  ended March 31, 1997 and 1998,  cash (used in) provided
by operating activities was ($15.9) million and $8.8 million, respectively. Cash
generated from operating activities  increased  principally due to the increased
sales of Notes  Receivable.  For the first  three  months of 1997,  cash used in
operating  activities  was  principally  for the  issuance and purchase of Notes
Receivable  of $27.1  million to finance the  purchase  of  Vacation  Credits by
Owners  and  an  increase  in  inventory  of  $1.8  million  due  to  additional
construction  in progress to meet  increasing  sales  demand.  Cash  provided by
operating  activities  resulted  primarily  from sales and  repayments  of Notes
Receivable of $5.9 million, and net income of $4.0 million. For the three months
ended March 31, 1998, cash used in operating  activities was principally for the
issuance  and  purchase  of Notes  Receivable  of $31.6  million to finance  the
purchase of Vacation  Credits by Owners and an  increase  in  inventory  of $2.9
million due to  additional  construction  in progress to meet  increasing  sales
demand.  Cash provided by operating  activities resulted primarily from the sale
and  repayment  of Notes  Receivable  of $43.9  million  and net  income of $5.9
million.  The increase in proceeds  from sales of Notes  Receivable in the first
three  months of 1998 as compared  with same period last year was due in part to
treating the  transfer of such  receivables  to the Bank Group after  January 1,
1997 and prior to June 30, 1997 as secured borrowing as TW Holdings did not meet
the sales recognition criteria of SFAS 125.

Net cash used in investing  activities for the three months ended March 31, 1997
and 1998 was $0.6 and $1.1 million,  respectively.  Cash used in the acquisition
of property and equipment was primarily  used to acquire  furniture and fixtures
and data processing equipment required to meet the growth of the Company.

Net cash provided by (used in) financing  activities  for the three months ended
March 31, 1997 and 1998, was $16.5 million and ($3.3) million, respectively. For
the three  months ended March 31, 1997,  cash  provided by financing  activities
resulted  primarily  from the  issuance  of notes  payable  of $14.7  million in
conjunction with the sale of Notes Receivable from TW Holdings which was treated
as a secured  borrowing as the  transaction  did not meet the sales  recognition
criteria of SFAS 125. For the three  months  ended March 31, 1998,  cash used in
financing activities was principally the result of payments to the Parent on the
revolving  line of credit of $1.9  million  and  advancing  excess  funds to the
Parent of $1.3 million.

Financing of Notes  Receivable has been  accomplished  by use of a $98.0 million
purchase  commitment  from the Bank Group  through TW Holdings.  As of March 31,
1998,  Notes  Receivable  totaling $5.0 million had been transferred to the Bank
Group. The agreement with the Bank Group is subject to annual renewal on June 30
of each year. The interest rate on borrowings  under the agreement with the Bank
Group is currently LIBOR plus 125 basis points.  In the future,  the Company may
hypothecate its Notes Receivable.

The Company has a $10  million  open line of credit with the Parent  which bears
interest  at prime plus 1%  (currently  9.5%) per  annum.  The line of credit is
payable  on  demand.  As of  March  31,  1998,  there  was not  any  outstanding
indebtedness  to the Parent.  The Company may advance excess funds to the Parent
at prime rate minus 2% (currently  6.5%) per annum. At March 31, 1998, there was
a $1.3 million Receivable from Parent.

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

In  March  1998,  the  Company  sold  $37.4  million  of Notes  Receivable  to a
wholly-owned  special purpose company,  Trendwest  Funding II, Inc. In addition,
the Bank  Group  sold  $93.0  million  of  Notes  Receivable  purchased  from TW
Holdings,  Inc. to Trendwest  Funding II, Inc. The special  purpose company sold
the  receivable  to TRI  Funding  II,  Inc.  (TRI),  a  special  purpose  entity
wholly-owned by Trendwest Funding II, Inc., and TRI issued $130.4 million in two
classes of senior and subordinated notes to institutional investors. The 1998-1,
Class A notes  were  issued for  $125.0  million  at a fixed rate of 6.88%.  The
1998-1, Class B notes were issued for $5.4 million at a fixed rate of 7.98%. The
Class A notes and Class B notes  were rated `A" and `BBB' by Fitch  IBCA,  Inc.,
respectively,  and are secured by the Notes Receivable owned by TRI. The ratings
reflect  credit  enhancements  of a 4%  over-collaterilization  and a 2% minimum
reserve  account.  The notes  have a stated  maturity  of April 15,  2009.  Upon
completion  of this  financing,  the Company had $93.0  million of  availability
under the TW Holdings  facility and $30.0  million  under the  revolving  credit
agreement.

Through the end of 1998, the Company  anticipates  spending  approximately $38.5
million  for  acquisitions  and  development  of new resort  properties  and for
expansion  and  development   activities.   The  Company  plans  to  fund  these
expenditures  with cash generated from operations,  including  further sales and
securitizations of Notes Receivable.  The Company believes that, with respect to
its current  operations,  cash generated from operations and future  borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the end of 1998.

WorldMark  maintains a replacement  reserve for the  WorldMark  Resorts which is
funded from the annual  assessments of the Owners. At March 31, 1998, the amount
of such reserve was  approximately  $6.0  million.  The  replacement  reserve is
utilized  to  refurbish  and  replace  the  interiors  and  furnishings  of  the
condominium  units and to maintain the  exteriors  and common areas in WorldMark
Resorts in which all units are owned by WorldMark. The Company may advance funds
to WorldMark from time to time.

Since completed units at various resort  properties are acquired or developed in
advance and a significant  portion of the purchase price of Vacation  Credits is
financed  by the  Company,  the Company  continually  needs funds to acquire and
develop  property,  to carry Notes  Receivable  contracts and to provide working
capital.  The Company has  historically  secured  additional funds through loans
from  the  Parent  and  the  sale  of  Notes  Receivable   through  the  Finance
Subsidiaries.  See "Risk  Factors - Dependence  on  Acquisitions  of  Additional
Resort Units for Growth; Need for Additional Capital" of the Company's 1997 Form
10-K.

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

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Incorporated  by  reference.  See Note 6 of "Notes  to  Condensed  Combined  and
Consolidated Financial Statements."

Item 2 - Changes in Securities and Use of Proceeds

None

Item 3 - Defaults Upon Senior Securities

None

Item 4 - Submission of Matter to a Vote of Security Holders

None

Item 5 - Other Information

None

Item 6 - Exhibits and Reports on Form 8-K

(a) Exhibits

2.1      Restated Articles of Incorporation (1)
2.2      Restated Bylaws (1)
10.31    Indenture among the Registrant, TRI Funding II, Inc. and LaSalle
         National Bank, dated as of March 1, 1998.
10.32    Series 1998-1 Supplement Dated as of March 1, 1998 to Indenture
         Dated as of March 1, 1998 among the Registrant,
         Trendwest Funding II, Inc. and LaSalle National Bank.
10.33    Servicing Agreement among the Registrant, TRI Funding II, Inc.,
         Sage Systems, Inc. and LaSalle National Bank,
         dated as of March 1,1998.
10.34    Purchase and Sale Agreement between the Registrant,
         Trendwest Funding II, Inc. and TRI Funding II, Inc.
10.35    Receivables purchase agreement among the Registrant,
         TRI Funding Company I, L.L.C., TW Holdings Inc. and
         Trendwest Funding II, Inc., Dated as of March 1, 1998.
10.36    Credit Agreement among the Registrant, Bank of America National Trust
         and Savings Association as Agent, and Other
         Financial Institutions Party Hereto, Dated as of February 12, 1998.
11       Statement re: Computation of Earnings per share
27       Financial Data Schedule

     (1)  Incorporated by reference to the Company's  Registration  Statement on
Form S-1 (File No. 333-26861).

(a) Reports on Form 8-K

None

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                  TRENDWEST RESORTS, INC.




Date:     May 14, 1998             /s/ WILLIAM F. PEARE
          ---------------------   ---------------------------------------
                                   William F. Peare
                                   President, Chief Executive Officer and
                                   Director (Principal Executive Officer)


Date:     May 14, 1998            /s/ GARY A. FLORENCE
          ---------------------   ---------------------------------------
                                   Gary A. Florence
                                   Vice President, Chief Financial Officer
                                   and Treasurer
                                   (Principal Financial Officer)


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