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 June 30, 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 August 7, 1998: 17,252,766 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,           June 30,
                                   Assets                                               1997                 1998
                                                                                   ----------------     ----------------
                                                                                                          (Unaudited)
<S>                                                                            <C>                         <C>
Assets:
     Cash                                                                      $           70                1,238
     Restricted cash                                                                    1,219                1,558
     Notes receivable, net of allowance for doubtful accounts, sales
        returns and deferred gross profit                                              73,075               72,316
     Accrued interest and other receivables                                             7,435                6,855
     Residual interest in notes receivable sold                                        15,235               20,496
     Receivable from Parent                                                               --                   123
     Inventories                                                                       44,534               43,853
     Property and equipment, net                                                        7,057               10,467
     Deferred income taxes                                                                924                1,090
     Other assets                                                                       2,201                2,513
                                                                                   ----------------     ----------------

                     Total assets                                              $      151,750              160,509
                                                                                   ================     ================


                    Liabilities and Stockholders' Equity

Liabilities:
     Accounts payable                                                                     944                1,310
     Accrued liabilities                                                                3,862                5,984
     Accrued construction in progress                                                  10,480                4,168
     Borrowing under bank line of credit                                                   --                4,000
     Due to Parent                                                                      1,947                  --
     Allowance for recourse liability and deferred gross profit on notes
        receivable sold                                                                 8,757               11,443
     Income taxes payable to Parent                                                     2,755                  --
     Income taxes payable                                                                 880                  451
                                                                                   ----------------     ----------------

                     Total liabilities                                                 29,625               27,356

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               66,411
                                                                                   ----------------     ----------------

                     Total stockholders' equity                                       122,125              133,153

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

                     Total liabilities and stockholders' equity                $      151,750              160,509
                                                                                   ================     ================

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

</TABLE>

<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                    Six months ended
                                                                     June 30,                             June 30,
                                                        -----------------------------------   ----------------------------------
                                                              1997              1998               1997              1998
                                                        -----------------  ----------------   ---------------  -----------------

<S>                                                    <C>                       <C>               <C>                 <C>
Revenues:
     Vacation Credit sales, net                       $         32,875            41,988            60,820             76,873
     Finance income                                              2,617             3,101             5,836              6,300
     Gains on sales of notes receivable                          3,164             1,537             3,164              5,135
     Resort management services                                    517               367             1,278                995
     Other                                                         663             1,000             1,351              1,519
                                                        -----------------  ----------------   ---------------  -----------------

             Total revenues                                     39,836            47,993            72,449             90,822
                                                        -----------------  ----------------   ---------------  -----------------

Costs and operating expenses:
     Vacation Credit cost of sales                               8,672            11,169            16,225             20,682
     Resort management services                                    270               322               529                599
     Sales and marketing                                        15,408            21,022            28,539             38,658
     General and administrative                                  3,298             4,281             6,266              8,069
     Provision for doubtful accounts and recourse
        liability                                                2,344             2,919             4,160              5,315
     Interest                                                      811                 2             1,445                 38
                                                        -----------------  ----------------   ---------------  -----------------

             Total costs and operating expenses                 30,803            39,715            57,164             73,361
                                                        -----------------  ----------------   ---------------  -----------------

             Income before income taxes                          9,033             8,278            15,285             17,461

Income tax expense                                               3,252             3,114             5,505              6,433
                                                        -----------------  ----------------   ---------------  -----------------

             Net income                               $          5,781             5,164             9,780             11,028
                                                        =================  ================   ===============  =================


Basic and diluted net income per common share         $            .40               .29               .68                .63


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

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

</TABLE>


<PAGE>


                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Condensed Combined and Consolidated Statements of Cash Flows

                             (dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                           Six months ended June 30,
                                                                                 -----------------------------------------------
                                                                                        1997                      1998
                                                                                 -------------------      ----------------------
<S>                                                                                   <C>                            <C>
Cash flows from operating activities:
     Net income                                                                        $    9,780                      11,028
     Adjustments to reconcile net income to net cash provided by (used
        in) operating activities:
     Depreciation and amortization                                                            319                         474
     Amortization of residual interest in notes receivable sold                             1,841                       3,108
     Provision for doubtful accounts, sales returns and recourse liability                  6,198                       7,061
     Recoveries of notes receivable charged off                                               127                          98
     Residual interest in notes receivables sold                                           (3,249)                     (6,160)
     Unrealized gain on residual interest in notes receivable sold                         (1,156)                       (399)
     Change in deferred gross profit                                                         (755)                       (510)
     Deferred income tax expense (benefit)                                                    525                        (166)
     Issuance of notes receivable                                                         (53,851)                    (67,104)
     Proceeds from sale of notes receivable                                                11,434                      55,643
     Proceeds from repayment of notes receivable                                           12,451                      13,924
     Purchase of notes receivable                                                          (4,459)                     (7,477)
     Changes in certain assets and liabilities:
          Restricted cash                                                                    (453)                       (339)
          Inventories                                                                       1,794                         681
          Accounts payable and accrued liabilities                                         (1,052)                     (3,824)
          Income taxes payable to Parent                                                    2,105                      (2,755)
          Income taxes payable                                                                 --                        (429)
          Other                                                                            (1,788)                        202
                                                                                 -------------------      ----------------------

          Net cash provided by (used in) operating activities                             (20,189)                      3,056
                                                                                 -------------------      ----------------------

Cash flows used in investing activities -Purchase of property and                            (876)                     (3,818)
     equipment
                                                                                 -------------------      ----------------------

Cash flows from financing activities:
     Proceeds from notes payable                                                           16,803                          --
     Payments on notes payable                                                               (658)                         --
     Net borrowings under bank line of credit                                                  --                       4,000
     Increase in Receivable from Parent                                                        --                        (123)
     Increase (decrease) in Due to Parent                                                   4,862                      (1,947)
                                                                                 -------------------      ----------------------

          Net cash provided by financing activities                                        21,007                       1,930
                                                                                 -------------------      ----------------------

          Net increase (decrease) in cash                                                     (58)                      1,168

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

Cash at end of period                                                        $                 35                       1,238
                                                                                 ===================      ======================


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

</TABLE>

<PAGE>


                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Condensed Combined and Consolidated Statements of Cash Flows
                                   (continued)
                             (dollars in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                            Six month ended June 30,
                                                                                 -----------------------------------------------
                                                                                        1997                      1998
                                                                                 -------------------      ----------------------
<S>                                                                              <C>                                   <C>
Supplemental  disclosures of cash flow  information
 cash paid during the period for:
        Interest                                                                 $          1,504                         265
        Income taxes                                                                        2,877                       9,783

Supplemental schedule of noncash investing and financing activities:
Reduction of notes payable through transfer of notes receivable                  $         16,803                          --

See accompanying notes to combined and consolidated financial statements.

</TABLE>


<PAGE>


                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES
                Notes to the Condensed Combined and Consolidated
                              Financial Statements
                 (dollars in thousands except per share amounts)
                                   (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 and six months ended June 30, 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 - New Accounting Pronouncements

     In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging  Activities.  This Statement is effective as of the beginning of the
first quarter of the fiscal year beginning after June 15, 1999.

     In  April,  1998,  the  Accounting  Standards  Executive  Committee  of the
American Institute of Certified Public  Accountants  (AICPA) issued Statement of
Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities.  This SOP is
effective for financial statements for fiscal years beginning after December 15,
1998.

     The Company does not anticipate a material impact on its financial position
or results of operations from the future adoption of these two standards.

Note 3 - 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.


<PAGE>


Note 4 - 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.

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

<TABLE>
<CAPTION>
                                                  Three months ended                    Six months ended
                                                       June 30,                             June 30,
                                          -----------------------------------   ----------------------------------
                                               1997                1998              1997               1998
                                          ---------------     ---------------   ----------------   ---------------
<S>                                          <C>                 <C>                <C>               <C>
Basic

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

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

     Net income available to common  shareholders for basic net income per share
was $5,781 and $5,164 for the three  months  ended June 30,  1997 and 1998,  and
$9,780 and 11,028 for the six months ended June 30, 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 June 30, 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 5 - Inventories

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

<TABLE>
<CAPTION>
                                                                            December 31,            June 30,
                                                                               1997                  1998
                                                                         -----------------     ------------------
          <S>                                                       <C>                        <C>
          Vacation Credits                                          $           1,722                 2,649
          Construction in progress                                             42,812                41,204
                                                                         -----------------     ------------------

                   Total inventories                                $          44,534                43,853
                                                                         =================     ==================
</TABLE>


<PAGE>


Note 6 - 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 six
months ended June 30, 1998:

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

          Provision for doubtful accounts, sales returns and                                          7,061
              recourse liability                                               11,755
          Notes receivable charged-off and sales returns net of
              Vacation Credits recovered                                       (7,888)               (4,483)
          Recoveries                                                              132                    98
                                                                         -----------------     ------------------
          Balances at end of period                                 $          15,240                17,916
                                                                         =================     ==================


          Allowance for doubtful accounts and sales returns         $           9,935                 9,996
          Recourse liability on notes receivable sold                           5,305                 7,920
                                                                         -----------------     ------------------
                                                                    $          15,240                17,916
                                                                         =================     ==================

</TABLE>

     Total  notes  receivable  outstanding,  including  notes  receivable  sold,
amounted  to $242,286  and  $271,781  at  December  31, 1997 and June 30,  1998,
respectively.

Note 7 - Commitments and Contingencies

     (a) Purchase Commitments

     The  Company  routinely  enters  into  purchase   agreements  with  various
developers to acquire and build resort properties.  At June 30, 1998 the Company
had  outstanding  purchase  commitments of $18,812  related to properties  under
development and $9.1 million related to the purchase of land and construction of
a new Corporate headquarters building.

     (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 8 - Subsequent Event

     On July  7,  1998,  the  Board  of  Directors  authorized  the  Company  to
repurchase  up to 436,000  shares of its common  stock on the open  market or in
privately negotiated transactions.

<PAGE>

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

                              RESULTS OF OPERATIONS

Comparison  of the three  months  ended June 30, 1998 to the
 three  months ended June 30, 1997

     The Company  achieved  total revenues of $48.0 million for the three months
ended June 30, 1998  compared to $39.9  million for the three  months ended June
30, 1997, an increase of 20.3%. The principal reason for the overall improvement
was a 27.7%  increase in Vacation  Credit sales from $32.9 million for the three
months ended June 30, 1997 to $42.0  million for the three months ended June 30,
1998. The increase in Vacation  Credit sales was primarily the result of a 28.3%
increase in the number of Vacation  Credits  sold from 25.4  million  during the
three months  ended June 30, 1997 to 32.6 million  during the three months ended
June 30, 1998. The increase in Vacation Credits sold was largely attributable to
maturation  of  off-site  sales  offices  in Costa  Mesa,  California  opened in
February  1997;  Woodland  Hills,  California,  opened in October  of 1997;  new
off-site  sales  office  in  Burlingame,  California,  opened  in  March,  1998;
relocated  the  Vallejo,  California  office to  Walnut  Creek,  California  and
increased  Upgrade sales.  Revenues from Upgrade Sales increased 33.3% from $4.8
million for the three  months  ended June 30, 1997 to $6.4 million for the three
months  ended June 30, 1998 due  primarily to an increase of 36.5% in the number
of Vacation Credits sold as Upgrades during the three months ended June 30, 1997
compared to the three months ended June 30, 1998. The average price per Vacation
Credit sold decreased  slightly from $1.27 per credit for the three months ended
June 30, 1997 versus  $1.26 per credit for the three  months ended June 30, 1998
reflecting a greater  percentage of vacation  credits sold as Upgrades which are
sold at a lower selling price.  Effective  June 29, 1998, the Company  increased
the selling price of vacation  credits,  including  upgrades,  by  approximately
4.0%.

     Finance income increased 19.2% from $2.6 million for the three months ended
June 30, 1997 to $3.1  million for the three  months  ended June 30,  1998.  The
increase in finance income  reflects the increase in carrying  balances of Notes
Receivable  for the two  periods  compared.  Gains on sales of Notes  Receivable
decreased  53.1% from $3.2  million for the three  months ended June 30, 1997 to
$1.5  million  for the three  months  ended  June 30,  1998 due  primarily  to a
decrease in the principal  balances of Notes Receivable sold of 46.0% from $27.0
million  to  $14.4  million  for  the two  periods  compared.  Notes  Receivable
transferred  to the bank  group in the  first  quarter  of 1997 did not meet the
requirements  of Statement of Financial  Accounting  Standards  Number 125 (SFAS
125) and were treated as secured  borrowings  but were qualified as sales in the
second quarter of 1997.

     Vacation  Credit cost of sales  increased  from $8.7  million for the three
months ended June 30, 1997 to $11.2  million for the three months ended June 30,
1998,  an  increase  of 28.7%,  primarily  reflecting  the  increase in sales of
Vacation Credits. As a percentage of Vacation Credit sales, Vacation Credit cost
of sales  remained  comparable  at 26.4% and 26.7% of Vacation  Credit sales for
each of the three months ended June 30, 1997 and 1998, respectively.  Management
expects   product  cost  as  a  percentage  of  vacation   credit  sales  to  be
approximately  29.0% for the remainder of the year. This is primarily the result
of the Clear Lake and Angels Camp resorts in California which are coming on line
in the third  quarter.  Clear  Lake  experienced  construction  delays  and cost
overruns due to inclement  weather and the Angels Camp resort has a product cost
higher than the historical average.

<PAGE>

     Sales and marketing  costs increased 36.4% from $15.4 million for the three
months ended June 30, 1997 to $21.0 million for the three months ending June 30,
1998.  As a percentage  of Vacation  Credit  sales,  sales and  marketing  costs
increased  from 46.8% for the three  months ended June 30, 1997 to 50.0% for the
three months ended June 30, 1998.  This  increase  reflects  start-up  costs and
delays associated with opening the Scottsdale, Arizona; Wolf Creek, Utah and San
Diego,  California sales offices in May and June of 1998, without the benefit of
a full  quarter of sales from  these  locations.  In  addition,  training  costs
associated  with new  salespeople  and office  personnel  in the  Southwest  and
Mountain  Region also  contributed  to higher sales and marketing  costs for the
quarter.  Effective  January 1, 1998, the Company  increased  commissions on new
sales and raised performance  targets for additional  bonuses.  During the three
months ended June 30, 1998,  the sales force met these new  performance  targets
resulting in net increased  commission costs.  Management  continues to evaluate
the commission program and has made changes to these performance targets as well
as other aspects of the overall commission program. Management expects sales and
marketing  costs as a percentage  of Vacation  Credit sales to decrease and come
more in line with  historical  results for the remainder of the year as a result
of the  aforementioned  changes to commissions and the effect of increased sales
at new sales offices and the increase in the selling price of vacation credits.

     General and  administrative  expenses increased 30.3% from $3.3 million for
the three  months ended June 30, 1997 to $4.3 million for the three months ended
June 30, 1998.  As a percentage  of total  revenue,  general and  administrative
costs  increased  from 8.3% for the three months ended June 30, 1997 to 9.0% for
the three months ended June 30, 1998. The increase in general and administrative
expenses  is due to  increased  sales  growth,  inflationary  pressure on wages,
increased  administration  costs  resulting from being a publicly traded company
and regionalization.

     Provision for doubtful accounts and recourse liability increased 26.1% from
$2.3  million for the three  months  ended June 30, 1997 to $2.9 million for the
three months ended June 30, 1998. As a percentage of Vacation Credit sales,  the
provision  remained  comparable at 7.0% for the three months ended June 30, 1997
and 6.9% for the three months ended June 30, 1998.

<PAGE>

Comparison of the six months ended June 30, 1998
 to the six months ended June 30, 1997

     The Company  achieved  total  revenues of $90.8  million for the six months
ended June 30, 1998  compared to $72.4 million for the six months ended June 30,
1997, an increase of 25.4%. The principal reason for the overall improvement was
a 26.5% increase in Vacation  Credit sales from $60.8 million for the six months
ended June 30, 1997 to $76.9 million for the six months ended June 30, 1998. The
increase in Vacation  Credit sales was primarily the result of a 27.6%  increase
in the number of Vacation  Credits sold from 46.8 million  during the six months
ended June 30, 1997 to 59.7  million  during the six months ended June 30, 1998.
The increase in Vacation Credits sold was largely attributable to the maturation
of off-site  sales offices in Costa Mesa,  California  opened in February  1997,
Woodland  Hills,  California,  opened in October of 1997; a new  off-site  sales
office opened in Burlingame, California, opened in March 1998; and relocated the
Vallejo,  California  office to Walnut Creek,  California and increased  Upgrade
sales. Revenues from Upgrade Sales increased 38.5% from $9.1 million for the six
months  ended June 30, 1997 to $12.6  million for the six months  ended June 30,
1998 due  primarily  to an increase  of 45.2% in the number of Vacation  Credits
sold as Upgrades  during the six months ended June 30, 1997  compared to the six
months ended June 30, 1998. The average price per Vacation Credit sold decreased
slightly  from $1.27 per credit for the six months  ended June 30,  1997  versus
$1.26 per credit for the six months  ended June 30,  1998  reflecting  a greater
percentage  of  vacation  credits  sold as  Upgrades  which  are sold at a lower
selling price.  Effective June 29, 1998, the Company increased the selling price
of vacation credits, including upgrades, by approximately 4.0%.

     Finance  income  increased  8.6% from $5.8 million for the six months ended
June 30, 1997  compared to $6.3  million for the six months ended June 30, 1998.
The 1997 period  benefitted  from an $.8 million  recognition  of the unrealized
gain on residual interest in Notes Receivable sold, resulting primarily from the
adoption of Statement of Financial  Accounting  Standards Number 125 (SFAS 125).
Absent this  benefit,  the increase in finance  income  reflects the increase in
carrying  balances of Notes  Receivable for the two periods  compared.  Gains on
sales of Notes  Receivable  increased 59.4% from $3.2 million for the six months
ended June 30, 1997 to $5.1  million for the six months  ended June 30, 1998 due
to notes receivable sold, which qualified for sales recognition, increasing from
$27.0  million  to $51.8  million,  an  increase  of 91.9%  for the two  periods
compared.  The asset backed securitization  consummated during the first quarter
of 1998 resulted in recording  gains on $33.6 million of Notes  Receivable  sold
and reduced the Company's  interest rate risk in the future,  if interest  rates
were to increase, on $130.4 million of notes receivable sold.

     Vacation  Credit  cost of sales  increased  from $16.2  million for the six
months  ended June 30, 1997 to $20.7  million for the six months  ended June 30,
1998,  an  increase  of 27.8%,  primarily  reflecting  the  increase in sales of
Vacation Credits. As a percentage of Vacation Credit sales, Vacation Credit cost
of sales were comparable at 26.6% and 26.9% of Vacation Credit sales for the six
months ended June 30, 1997 and 1998,  respectively.  Management  expects product
cost as a percentage of vacation credit sales to be approximately  29.0% for the
remainder of the year. This is primarily the result of the Clear Lake and Angels
Camp resorts in California which are coming on line in the third quarter.  Clear
lake experienced  construction delays and cost overruns due to inclement weather
and the  Angels  Camp  resort  has a product  cost  higher  than the  historical
average.

<PAGE>

     Sales and marketing  costs  increased  35.8% from $28.5 million for the six
months  ended June 30,  1997 to $38.7  million  in the six months of 1998.  As a
percentage of Vacation  Credit sales,  sales and marketing  costs increased from
46.9% for the six months  ended June 30, 1997 to 50.3% for the six months  ended
June 30, 1998. This increase  reflects start-up costs and delays associated with
opening the  Scottsdale,  Arizona;  Wolf Creek,  Utah and San Diego,  California
sales offices in May and June of 1998,  without the benefit of a full quarter of
sales from these  locations.  In addition,  training costs  associated  with new
salespeople  and office  personnel in the  Southwest  and  Mountain  Region also
contributed  to higher sales and  marketing  costs for the six months ended June
30, 1998.  Effective January 1, 1998, the Company  increased  commissions on new
sales and raised performance  targets for additional  bonuses.  During the three
months ended June 30, 1998,  the sales force met these new  performance  targets
resulting in net increased  commission costs.  Management  continues to evaluate
the commission program and has made changes to these performance targets as well
as other aspects of the overall commission program. Management expects sales and
marketing  costs as a percentage  of Vacation  Credit sales to decrease and come
more in line with  historical  results for the remainder of the year as a result
of the  aforementioned  changes to commissions and the effect of increased sales
at new sales offices and the increase in the selling price of Vacation Credits.

     General and  administrative  expenses increased 28.6% from $6.3 million for
the six months ended June 30, 1997 to $8.1 million for the six months ended June
30, 1998. As a percentage of total  revenue,  general and  administrative  costs
increased  from 8.7% of total  revenue for the six months ended June 30, 1997 to
8.9% of total  revenue for the six months ended June 30,  1998.  The increase in
general  and   administrative   expenses  is  due  to  increased  sales  growth,
inflationary  pressure on wages,  increased  administration costs resulting from
being a publicly traded company and regionalization.

     Provision for doubtful accounts and recourse liability increased 26.2% from
$4.2  million for the six months ended June 30, 1997 to $5.3 million for the six
months  ended June 30, 1998.  As a  percentage  of Vacation  Credit  sales,  the
provision remained comparable at 6.9% for each of the six months ended June 30.

     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 June 30, 1998 were
$15.2 million, and $17.9 million, respectively,  representing approximately 6.3%
and 6.6%,  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 June 30, 1998 and December 31,
1997,  1.9% of the Company's total  receivables  portfolio of $271.8 million and
$242.3 million, respectively, were more than 60 days past due.

<PAGE>

                         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 six months ended June 30, 1997 and 1998, cash (used in) provided
by operating activities was ($20.2) million and $3.1 million, respectively. Cash
generated from operating activities  increased  principally due to the increased
sales of Notes  Receivable.  For the  first  six  months  of 1997,  cash used in
operating  activities  was  principally  for the  issuance and purchase of Notes
Receivable  of $58.4  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 $23.9  million and net income of $9.8 million.  For the six months
ended June 30, 1998,  cash used in operating  activities was principally for the
issuance  and  purchase  of Notes  Receivable  of $74.6  million to finance  the
purchase of Vacation  Credits by Owners.  Cash provided by operating  activities
resulted  primarily  from the sale and  repayment of Notes  Receivable  of $69.5
million and net income of $11.0 million.

     Net cash used in  investing  activities  for the six months  ended June 30,
1997  and  1998  was  $.9  and  $3.8  million,  respectively.  Cash  used in the
acquisition  of property and equipment was primarily  used to acquire  furniture
and fixtures,  data processing  equipment,  and  construction of a new corporate
office building required to meet the growth of the Company.

     Net cash provided by financing activities for the six months ended June 30,
1997 and 1998,  was $21.0  million and $1.9 million,  respectively.  For the six
months  ended June 30, 1997,  cash  provided by  financing  activities  resulted
primarily  from the issuance of notes  payable of $16.8  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.  The note payable was  extinguished  in a non-cash  transaction  by
transferring  notes receivable to the note holder. For the six months ended June
30,  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.  Cash
provided was principally the result of outstanding borrowings of $4.0 million on
the Bank $30 million revolving credit facility.

     Financing  of  Notes  Receivable  has been  accomplished  by use of a $98.0
million  Receivable  Transfer Agreement from the Bank Group through TW Holdings.
As  of  June  30,  1998,  Notes  Receivable  totaling  $18.3  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 and was  renewed  on June 18,  1998 at a
required  yield to the bank  group of LIBOR  plus  112.5  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 June 30,  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 June 30, 1998 there was a
$.1 million Receivable from Parent.

     The  Company  has 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.  Outstanding  borrowings  under this credit
facility at June 30, 1998 were $4.0 million.

<PAGE>

     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.

     Through the end of 1998, the Company anticipates spending approximately $24
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 June 30,  1998,  the
amount of such reserve was approximately $6.8 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.


<PAGE>


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

     Trendwest  Resorts,  Inc. (Company) held its Annual Meeting of Stockholders
on May 28, 1998.  The matters  voted upon at the meeting and the votes cast with
respect thereto were as follows:

1.   Election of Directors:

        Nominee:                 Number of shares    Number of shares
                                     voted FOR           Withheld
   ------------------------------------------------------------------
   Jerol E. Andres                   17,017,909          2,040
   Roderick C. Wendt                 17,017,909          2,040
   Linda M. Tubbs                    17,017,909          2,040

2.  Proposal to Ratify the  selection of KPMG Peat Marwick LLP
    as independent auditors of the Company for the 1998 fiscal
    year:

    Number of shares    Number of shares     Number of shares
       voted FOR          voted AGAINST          Withheld
    ---------------------------------------------------------
         17,019,149           300                  500

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)

         11       Statement re: Computation of Earnings per share

         10.37    Amendment Number Two Dated June 18, 1998 to the
                    Second Amended and  Restated   Receivables  Transfer
                    Agreement  between  the Registrant,  Seafirst Bank
                    and other purchasers,  TW Holdings, and Bank of America
                    Dated June 18, 1998

         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


<PAGE>


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


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