UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 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 September 30, 1997

[      ]  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 333-26861

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


              Oregon                                      93-1004403
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  (State or other jurisdiction of        (I.R.S. Employer Identification No.)
          incorporation)

        12301 N.E. 10th Place 
        Bellevue, Washington                               98005
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(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 November 7, 1997: 17,593,366 shares.


<PAGE>


PART I - FINANCIAL INFORMATION

Item I - Financial Statements

                             TRENDWEST RESORTS, INC.
               CONDENSED COMBINED AND CONSOLIDATED BALANCE SHEETS
                             (dollars in thousands)
                                     ASSETS
<TABLE>
<CAPTION>
                                                                                December 31,             September 30,
                                                                                    1996                     1997
                                                                             --------------------    ----------------------
                                                                                                          (Unaudited)
<S>                                                                          <C>                      <C>
Assets:
       Cash and cash equivalents                                             $                93      $              1,514
       Restricted cash                                                                       709                     1,148
       Notes receivable, net of allowance for doubtful accounts, sales
           returns and deferred gross profit                                              45,448                    70,873
       Accrued interest and other receivables                                              4,606                     5,268
       Receivable from Parent                                                                ---                     7,562
       Residual interest in notes receivable sold                                         10,839                    14,207
       Inventories                                                                        16,247                    23,620
       Property and equipment, net                                                         5,912                     6,644
       Deferred income taxes                                                               2,360                     1,848
       Other assets                                                                        3,116                     3,596
                                                                             ----------------------------------------------
                 Total assets                                               $             89,330      $            136,280
                                                                             ==============================================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:

       Accounts payable                                                     $              1,037      $              1,679
       Accrued liabilities                                                                 2,100                     4,341
       Accrued construction in progress                                                    2,089                       247
       Due to Parent                                                                      21,316                      ---
       Allowance for recourse liability and deferred gross profit
           on notes sold                                                                  10,080                     8,970
       Income taxes payable to Parent                                                      1,909                     2,503
       Income taxes payable                                                                  ---                     1,671
       Notes payable                                                                       1,055                      ---
                                                                             ----------------------------------------------
                 Total liabilities                                                        39,586                    19,411
                                                                             ----------------------------------------------

Stockholders' equity:
       Common Stock
       90,000,000 shares authorized, 9,224,723 and 17,593,366
            shares issued and outstanding at December 31, 1996 and
            September 30, 1997, respectively                                              14,970                    66,882
       Retained earnings                                                                  34,774                    49,987
                                                                             ----------------------------------------------
                 Total stockholders' equity                                               49,744                   116,869
                                                                             ----------------------------------------------
                Total liabilities and stockholders' equity                   $            89,330       $           136,280
                                                                             ==============================================
</TABLE>

     See notes to condensed combined and consolidated financial statements.

<PAGE>
                             TRENDWEST RESORTS, INC.
            CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF INCOME
                  (dollars in thousands except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended                   Nine Months Ended
                                                              September 30,                       September 30,
                                                         1996              1997              1996               1997
                                                    ----------------------------------  -----------------------------------
<S>                                                 <C>                 <C>             <C>                <C>
Revenues:
      Vacation Credit sales, net                    $       26,896      $      35,575   $       75,436     $        96,395
      Finance income                                         1,748              2,930            5,012               8,766
      Gains on sales of notes receivable                     1,308              1,277            4,158               4,441
      Resort management services                               404                217              979               1,495
      Other                                                    810                473            1,799               1,825
                                                    ---------------   ----------------  ---------------   -----------------
               Total revenues                               31,166             40,472           87,384             112,922
                                                    ---------------   ----------------  ---------------   -----------------
Costs and operating expenses:
      Vacation Credit cost of sales                          7,315              9,219           20,236              25,444
      Resort management services                               220                302              636                 830
      Sales and marketing                                   12,874             16,306           36,306              44,845
      General and administrative                             2,710              3,348            7,773               9,615
      Provision for doubtful accounts
         and recourse liability                              2,012              2,494            5,646               6,654
      Interest                                                 678                294            1,787               1,739
                                                    ---------------   ----------------  ---------------   -----------------
                 Total costs and operating
                    expenses                                25,809             31,963           72,384              89,127
                                                    ---------------   ----------------  ---------------   -----------------
                 Income before income taxes                  5,357              8,509           15,000              23,795
Income tax expense                                           1,971              3,076            5,514               8,582
                                                    ---------------   ----------------  ---------------   -----------------
                 Net income                          $       3,386       $      5,433    $       9,486     $        15,213
                                                    ===============   ================  ===============   =================

Pro forma net income
      per share of common stock                                          $       0.34                      $          1.02
Pro forma shares used in computing
      net income per share of common stock                                 15,923,174                           14,920,981

</TABLE>

     See notes to condensed combined and consolidated financial statements.


<PAGE>



                             TRENDWEST RESORTS, INC.
          CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                          1996                  1997
                                                                                     --------------------------------------
<S>                                                                                   <C>                   <C>
Cash flows from operating activities:
       Net income                                                                     $        9,486        $       15,213
       Adjustments to  reconcile  net income to net cash  provided  by (used in)
            operating activities:
            Depreciation and amortization                                                        359                   487
            Amortization of excess servicing asset                                             2,085                 2,966
            Provision for doubtful accounts, recourse liability and sales
                reversals                                                                      7,659                 8,491
            Recoveries of notes receivable charged off                                            36                   151
            Excess servicing spread on notes receivables sold                                (4,219)               (4,551)
            Unrealized gain on residual interest in notes receivable sold                       ---                (1,243)
            Change in deferred gross profit                                                    2,320               (1,013)
            Deferred income tax (benefit) expense                                              (698)                   512
            Issuance of notes receivable                                                    (68,376)              (83,234)
            Proceeds from sale of notes receivable                                            49,699                23,611
            Proceeds from repayment of notes receivable                                       17,880                19,242
            Purchase of notes receivable                                                     (8,958)              (11,071)
            Changes in certain assets and liabilities:
                 Restricted cash                                                               (403)                 (439)
                 Inventories                                                                 (3,087)               (7,373)
                 Accounts payable and accrued liabilities                                      1,637                 1,041
                 Income taxes payable to Parent                                                  966                   594
                 Income taxes payable                                                            ---                 1,671
                 Other assets                                                                  (746)               (1,296)
                                                                                     --------------------------------------
                     Net cash provided by (used in) operating activities                       5,640              (36,241)
                                                                                     --------------------------------------
Cash flows used in investing activities-purchase of property and equipment                     (596)               (1,120)
                                                                                     --------------------------------------
Cash flows from financing activities:
       Proceeds from notes payable                                                              ---                 16,803
       Payments on notes payable                                                             (1,171)               (1,055)
       Decrease in due to Parent                                                             (3,903)              (21,316)
       Increase in receivable from Parent                                                       ---                (7,562)
       Issuance of common stock                                                                    1                51,912
       Payments on notes receivable for stock                                                     30                  ---
                                                                                     --------------------------------------
                    Net cash provided by (used in) financing activities                      (5,043)                38,782
                                                                                     --------------------------------------
                    Net increase in cash and cash equivalents                                      1                 1,421
Cash and cash equivalents at beginning of period                                                 135                    93
                                                                                     -------------------------------------
Cash and cash equivalents at end of period                                            $          136         $       1,514
                                                                                     ======================================

</TABLE>

See notes to condensed combined and consolidated financial statements.

                             TRENDWEST RESORTS, INC.
    CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                             (dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                  Nine Months Ended
                                                                                                     September 30,
                                                                                              1996                   1997
                                                                                     ---------------------------------------
<S>                                                                                          <C>                   <C>
Supplemental  discloses of cash flow  information  - cash paid
during the period for:
            Interest                                                                         $ 1,821               $  1,975
            Income taxes                                                                       4,842                  5,622
Supplemental schedule of non-cash investing and
       financing activities:
            Reduction of notes payable through transfer of notes receivable                     ---                $ 16,803
            Issuance of note receivable in exchange for other assets sold                       ---                $    489
</TABLE>

See notes to condensed combined and consolidated financial statements.


<PAGE>



                             TRENDWEST RESORTS, INC.
                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 three
months and nine months ended September 30, 1997 are not  necessarily  indicative
of the results  that may be expected  for the fiscal  year ending  December  31,
1997.

         These  statements  should  be  read in  conjunction  with  the  audited
combined  and  consolidated  financial  statements  and  footnotes  included  in
Amendment  No. 3 of the Company's  Registration  Statement on Form S-1 (File No.
333-26861) filed with the Securities and Exchange Commission (SEC) on August 12,
1997. The accounting  policies used in preparing  these  condensed  combined and
consolidated  financial  statements  are the  same as  those  described  in such
Registration Statement on Form S-1.


NOTE 2 - CAPITAL TRANSACTIONS AND PUBLIC OFFERING

         During  the  three  months  ended   September  30,  1997,  the  Company
consumated 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  $51,912.  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.

NOTE 3 - PRO FORMA NET INCOME PER SHARE

         Pro forma net income per share for 1997 has been computed  based on the
weighted average number of shares of Trendwest common stock outstanding assuming
the 5,193,693  shares issued to the Parent in connection with the  Consolidation
Transactions described in Note 2 had been outstanding for all periods presented.
Due to the significant impact of the Consolidation Transactions on the number of
outstanding shares of Trendwest common stock, historical net income per share is
not meaningful and is therefore not presented.

         Statements  of  Financial   Accounting   Standards  ("SFAS")  No.  128,
"Earnings Per Share"  specifies new  computation,  presentation  and  disclosure
requirements.  The  statement  will be  effective  for both  interim  and annual
periods ending after December 15, 1997 and will require retroactive application.
Management believes that the adoption of this statement will not have a material
impact on the previously reported pro forma net income per share presented.

NOTE 4 - INVENTORIES

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

<TABLE>
<CAPTION>
                                  December 31,        September 30,
                                      1996               1997
<S>                                <C>                 <C>
Vacation Credits                   $  7,784            $   205
Construction in progress              8,463             23,415
                                   --------------------------------
  Total Inventories                $ 16,247            $23,620
                                   ================================
</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, 1996 and the
nine months ended September 30, 1997:

<TABLE>
<CAPTION>
                                                                         December 31, 1996    September 30, 1997
                                                                        ------------------------------------------
         <S>                                                             <C>                   <C>
         Balances at beginning of period                                 $             7,964   $           11,241
         Provision for doubtful accounts, recourse liability and
              sales returns                                                           10,078                8,491
         Notes receivable charged-off and sales returns net of
              Vacation Credits recovered                                             (6,873)              (5,559)
         Recoveries                                                                       72                  151
                                                                        ==========================================
         Balances at end of period                                        $           11,241   $           14,324
                                                                        ==========================================
         Allowance for doubtful accounts and sales returns                             5,832                9,240
         Allowance for recourse liability on notes receivable
               sold                                                                    5,409                5,084
                                                                        ==========================================
                                                                          $           11,241   $           14,324
                                                                        ==========================================
</TABLE>


         Total notes receivable  outstanding,  including notes receivable sold,
amounted to $180,323 and $ 224,632 at December 31, 1996 and September 30, 1997,
respectively.


<PAGE>


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 September  30, 1997 the
Company had  outstanding  purchase  commitments of $41,962 related to properties
under development.

         (b) Tax Contingency
         The Internal Revenue Service (IRS) is currently auditing the 1991, 1992
and 1993 tax returns of Trendwest,  Inc., the former parent of the Company.  The
Company is a party to this  matter.  The IRS has  issued a letter to  Trendwest,
Inc.  setting forth the adjustments  proposed by the examining agent. The letter
recommends a finding for tax and interest  totaling  approximately  $9,300.  The
finding  relates  primarily to the  disallowance  of all resort  property costs.
Trendwest,  Inc.  has  appealed  the letter and the Company  believes  that this
matter is close to resolution and that the amount of any actual  deficiency will
not be material to the Company's  financial  position,  results of operations or
liquidity.

NOTE 7 - SUBSEQUENT EVENT

         On October 23, 1997 the Company granted certain executive  officers and
other  employees  options to purchase an aggregate  of 492,000  shares of common
stock at an exercise price of $26.875 per share. The options became  exercisable
at the rate of 20% per year  beginning on October 23, 1998 and expire on October
23, 2005.


<PAGE>



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

                              RESULTS OF OPERATIONS

Comparison  of the three  months  ended  September  30, 1996 to the three months
ended September 30, 1997

         For the three months ended  September  30, 1997,  the Company  achieved
total  revenues of $40.5 million  compared to $31.2 million for the three months
ended  September  30, 1996, an increase of 29.8%.  The principal  reason for the
overall  improvement  was a 32.3%  increase in Vacation  Credit sales from $26.9
million for the three months ended  September  30, 1996 to $35.6 million for the
three months ended September 30, 1997. The increase in Vacation Credit sales was
primarily the result of a 23.4% increase in the number of Vacation  Credits sold
from 22.2 million in the three months ended  September  30, 1996 to 27.4 million
in the three months ended  September 30, 1997. The increase in Vacation  Credits
sold was largely  attributable  to a new  off-site  sales  office in Costa Mesa,
California  opened in February 1997 and the  maturation of two offices opened in
February and April of 1996 and increased  Upgrade  sales.  Revenues from Upgrade
Sales increased 37.8% from $3.7 million for the three months ended September 30,
1996 to $5.1 million for the three months ended September 30, 1997 due primarily
to the increase in number of Owners who made the necessary 10% cash down payment
to allow  full  revenue  recognition  at the time of the  sale.  The  number  of
Vacation Credits sold as Upgrades  increased by approximately  1.7% in the three
months ended September 30, 1997 compared to the three months ended September 30,
1996.  The average price per Vacation  Credit sold  increased from $1.24 for the
three  months  ended  September  30,  1996 to $1.27 for the three  months  ended
September  30,  1997,  an increase of 2.4%,  which was due  primarily  to a 4.5%
increase in the sales price of Upgrade credits.

         Finance income  increased  70.6% from $1.7 million for the three months
ended  September  30, 1996 to $2.9 million for the three months ended  September
30, 1997 due primarily to increased carrying balances of Notes Receivable. Gains
on sales of Notes  Receivable  were  basically  unchanged  for the  three  month
periods  compared due to higher net interest  spreads as the principal amount of
Notes Receivables sold declined 17.0% from $14.7 million to $12.2 million.

         Vacation Credit cost of sales increased from $7.3 million for the three
months  ended  September  30, 1996 to $9.2  million for the three  months  ended
September 30, 1997, an increase of 26.0%,  primarily  reflecting the increase in
sales of Vacation  Credits.  As a percentage of Vacation Credit sales,  Vacation
Credit cost of sales  decreased from 27.2% for the three months ended  September
30, 1996 to 25.9% for the three months  ended  September  30, 1997.  The Company
believes  that the change in Vacation  Credit cost of sales as a  percentage  of
Vacation  Credit sales would have been only slightly  lower for the three months
ended  September 30, 1997 as compared with the three months ended  September 30,
1996 absent the  increase in the  percentage  of Owners who made a 10% cash down
payment on Upgrade Sales.

         Sales and marketing  costs  increased  26.4% from $12.9 million for the
three months ended  September  30, 1996 to $16.3  million in the three months of
1997.  As a percentage  of Vacation  Credit  sales,  sales and  marketing  costs
decreased from 47.9% for the three months ended  September 30, 1996 to 45.8% for
the three months ended  September 30, 1997  primarily  due to the  substantially
higher percentage of Upgrade Sales for the three months ended September 30, 1997
that were entitled to full revenue  recognition at the time of sale. The Company
believes that sales and marketing costs as a percentage of Vacation Credit sales
would have decreased  slightly for the three months ended  September 30, 1997 as
compared  with the three months ended  September 30, 1996 absent the increase in
the percentage of Owners who made a 10% cash down payment on Upgrade Sales.

         General and  administrative  expenses increased 22.2% from $2.7 million
for the three  months  ended  September  30, 1996 to $3.3  million for the three
months ended September 30, 1997 primarily  reflecting the increased sales growth
and increased  administration  costs due to regionalization.  As a percentage of
total revenues,  general and administrative expenses decreased from 8.7% for the
three  months  ended  September  30,  1996 to 8.3% for the  three  months  ended
September 30, 1997,  due  primarily to the  substantially  higher  percentage of
Upgrade  Sales for the three months ended  September 30, 1997 that were entitled
to full  revenue  recognition  at the time of sale.  The Company  believes  that
general and administrative expenses as a percentage of total revenues would have
remained  relatively  constant for the three months ended September 30, 1997 and
1996 absent the  increase in the  percentage  of Owners who made a 10% cash down
payment on Upgrade Sales.

         Provision for doubtful accounts and recourse liability increased 25.0 %
from $2.0 million for the three months ended  September 30, 1996 to $2.5 million
for the three  months ended  September  30,  1997.  As a percentage  of Vacation
Credit  sales,  the  provision  declined  from 7.5% for the three  months  ended
September 30, 1996 to 7.0% for the three months ended  September 30, 1997 due to
continued growth in the amount of Notes Receivable from Upgrade Sales as Upgrade
Sales have a historically lower default rate than new sales.



Comparison of the nine months ended  September 30, 1996 to the nine months ended
September 30, 1997

         For the nine months  ended  September  30, 1997,  the Company  achieved
total revenues of $112.9  million  compared to $87.4 million for the nine months
ended  September  30, 1996, an increase of 29.2%.  The principal  reason for the
overall  improvement  was a 27.9%  increase in Vacation  Credit sales from $75.4
million for the nine months ended  September  30, 1996 to $96.4  million for the
nine months ended  September 30, 1997. The increase in Vacation Credit sales was
primarily the result of an 18.9% increase in the number of Vacation Credits sold
from 62.4 million for the nine months ended  September  30, 1996 to 74.2 million
for the nine months ended  September 30, 1997. The increase in Vacation  Credits
sold was largely  attributable  to a new  off-site  sales  office in Costa Mesa,
California  opened in February 1997 and the  maturation of two offices opened in
February and April of 1996 and increased  Upgrade  sales.  Revenues from Upgrade
Sales  increased 54.3% from $9.2 million for the nine months ended September 30,
1996 to $14.2 million for the nine months ended September 30, 1997 due primarily
to the increase in number of Owners who made the necessary 10% cash down payment
to allow  full  revenue  recognition  at the time of the  sale.  The  number  of
Vacation Credits sold as Upgrades  increased by approximately  6.9% for the nine
months ended  September 30, 1997 compared to the nine months ended September 30,
1996.  The average price per Vacation  Credit sold  increased from $1.24 for the
nine  months  ended  September  30,  1996 to  $1.27  for the nine  months  ended
September  30,  1997,  an increase of 2.4%,  which was due  primarily  to a 4.5%
increase in the sales price of Upgrade credits.

         Finance  income  increased  76.0% from $5.0 million for the nine months
ended September 30, 1996 to $8.8 million for the nine months ended September 30,
1997 due to increased  carrying balances of Notes Receivable and the recognition
of the unrealized gain on residual interest in the Notes Receivable sold of $1.2
million. Gains on sales of Notes Receivable increased 4.8% from $4.2 million for
the nine months  ended  September  30, 1996 to $4.4  million for the nine months
ended  September  30, 1997 due to higher net  interest  spreads  which more than
offset  the  effect  of a 18.7%  reduction  in the  principal  amount  of  Notes
Receivable  sold.  For the nine month periods ended  September 30, 1996 and 1997
Notes Receivable sold amounted to $49.7 million and $40.4 million  respectively.
Net interest spreads,  however,  were higher for the nine months ended September
30, 1997 as compared  to the prior  period and largely  offset the effect of the
reduction in principal amount of Notes Receivable sold.

         Vacation Credit cost of sales increased from $20.2 million for the nine
months  ended  September  30, 1996 to $25.4  million  for the nine months  ended
September 30, 1997, an increase of 25.7%,  primarily  reflecting the increase in
sales of Vacation  Credits.  As a percentage of Vacation Credit sales,  Vacation
Credit cost of sales  decreased  slightly  from 26.8% for the nine months  ended
September 30, 1996 to 26.4% for the nine months ended  September  30, 1997.  The
Company  believes  that  the  change  in  Vacation  Credit  cost of  sales  as a
percentage  of Vacation  Credit  sales would have been  slightly  greater in the
first nine months of 1997 as compared  with the first nine months of 1996 absent
the  increase in the  percentage  of Owners who made a 10% cash down  payment on
Upgrade Sales.

         Sales and marketing  costs  increased  23.4% from $36.3 million for the
nine months ended  September 30, 1996 to $44.8 million for the nine months ended
September  30,  1997.  As a  percentage  of  Vacation  Credit  sales,  sales and
marketing  costs  decreased  from 48.1% for the nine months ended  September 30,
1996 to 46.5% for the nine months ended  September 30, 1997 primarily due to the
substantially  higher  percentage  of Upgrade  Sales in the first nine months of
1997 that were  entitled to full revenue  recognition  at the time of sale.  The
Company  believes  that sales and  marketing  costs as a percentage  of Vacation
Credit sales would have  increased  slightly for the nine months  September  30,
1997 as  compared  with the nine  months  ended  September  30,  1996 absent the
increase in the percentage of Owners who made a 10% cash down payment on Upgrade
Sales.

         General and  administrative  expenses increased 23.1% from $7.8 million
for the nine months ended September 30, 1996 to $9.6 million for the nine months
ended  September 30, 1997,  primarily  reflecting the increased sales growth and
increased administration costs due to regionalization.  As a percentage of total
revenues,  general and administrative  expenses decreased from 8.9% for the nine
months ended  September 30, 1996 to 8.5% for the nine months ended September 30,
1997, due primarily to the  substantially  higher percentage of Upgrade Sales in
the first nine months of 1997 that were entitled to full revenue  recognition at
the time of sale. The Company believes that general and administrative  expenses
as a percentage of total  revenues would have remained  relatively  constant for
the nine months ended  September 30, 1997 as compared with the nine months ended
September  30, 1996 absent the increase in the  percentage  of Owners who made a
10% cash down payment on Upgrade Sales.

         Provision for doubtful accounts and recourse liability increased 19.6 %
from $5.6 million for the nine months ended  September  30, 1996 to $6.7 million
for the nine months ended September 30, 1997. As a percentage of Vacation Credit
sales, the provision  declined from 7.5% for the nine months ended September 30,
1996  to  6.9%  for  the  nine  months  ended  September  30,  1997  due  to the
substantially  higher  percentage  of Upgrade  Sales in the first nine months of
1997 that were  entitled  to full  revenue  recognition  at the time of sale and
continued growth in the amount of Notes Receivable from Upgrade Sales as Upgrade
Sales have a historically lower default rate than new sales.


                         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 nine months  ended  September  30, 1996 and 1997,  cash flow
provided  by (used in)  operating  activities  were  $5.6  million  and  ($36.2)
million,  respectively.  While net income was higher for the nine  months  ended
September 30, 1997 compared to the same period in the prior year, cash generated
from operating activities decreased principally due to the increased issuance of
Notes  Receivable  to finance  the  purchase  of  Vacation  Credits  and reduced
proceeds from sales of Notes Receivable. For the first nine months of 1997, cash
flows from operating  activities resulted primarily from sales and repayments of
Notes Receivable of $42.9 million and net income of $15.2 million, and cash flow
used in operating  activities was  principally  for the issuance and purchase of
Notes Receivable of $94.3 million to finance the purchase of Vacation Credits by
Owners  and  an  increase  in  inventory  of  $7.4  million  due  to  additional
construction  in progress to meet increasing  sales demand.  For the nine months
ended  September  30,  1996,  cash  flows  from  operating  activities  resulted
primarily  from the sale and repayment of Notes  Receivable of $67.6 million and
net income of $9.5 million.  Cash flow used in operating activities in the first
nine  months of 1996 was  principally  for the  issuance  and  purchase of Notes
Receivable  of $77.3  million to finance the  purchase  of  Vacation  Credits by
Owners  and  an  increase  in  inventory  of  $3.1  million  due  to  additional
construction  in progress  to meet  increasing  sales  demand.  The  decrease in
proceeds  from sales of Notes  Receivable  in the first  nine  months of 1997 as
compared  with the  prior  year  same  period  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 Statement of Financial  Accounting Standards Number 125
(SFAS 125).

         Net  cash  used in  investing  activities  for the  nine  months  ended
September 30, 1996 and 1997 was $0.6 and $1.1 million,  respectively.  Cash used
in the  acquisition  of property,  plant 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 nine months
ended  September  30,  1996 and 1997,  was  ($5.0)  million  and $38.8  million,
respectively. For the nine months ended September 30, 1997, the Company received
net  proceeds of $51.9 from the offering of  3,176,250  shares of the  Company's
common stock. Net proceeds from the offering were used to repay $41.9 million of
borrowings from Jeld-Wen,  Inc. (the Parent) resulting in a net change in due to
Parent of $21.3  million.  The  balance of the  proceeds  were used for  working
capital  purposes  and to loan funds to the Parent  resulting  in an increase in
receivable  from Parent of $7.6 million  which bears  interest at prime minus 1%
(currently 7.5%) per annum, and are due on demand from the Company.

         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
Registration Statement Form S-1.

         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 September 30, 1997,  there was not any  outstanding
indebtedness to the Parent except for the balance of 1997 estimated income taxes
payable to the Parent of $2,5 million.

         Financing of Notes  Receivable has been  accomplished by use of a $93.0
million purchase commitment from the Bank Group. As of September 30, 1997, Notes
Receivable  totaling $85.0 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, through a finance subsidiary, is
presently pursuing an asset backed  securitization of $100 million to retire the
existing  off-balance  sheet  financing  with the Bank  Group  and  provide  the
potential for an additional $93 million in future financings of notes receivable
to the Bank Group.  This is targeted to take place late in the first  quarter of
1998.

         The remaining balance of the Company's $5.0 million line of credit with
FINOVA  Capital  Corporation  was paid in August 1997 and the line of credit was
terminated by the Company due to the relatively high interest rate of 10.5%. The
Company believes it can obtain more favorable  interest rates from a $30 million
line of credit which is presently  being  pursued with its Bank Group agented by
Bank of America NT&SA.

         Through the end of 1998, the Company anticipates spending approximately
$64 million for  acquisitions  and development of new resort  properties and for
expansion  and  development   activities.   The  Company  plans  to  fund  these
expenditures with the net proceeds of the Offering (after reduction of debt) and
cash generated from operations,  including further sales and  securitizations of
Notes  Receivable.  The  Company  believes  that,  with  respect to its  current
operations,  the net proceeds to the Company from the  Offering,  together  with
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  September  30,
1997, the amount of such reserve was approximately $4.7 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.

         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 rate interest,  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

                  On August 12, 1997,  the  Securities  and Exchange  Commission
                  declared  effective  the Company's  Registration  Statement on
                  Form S-1 (File No. 333-26861). On August 14, 1997, the Company
                  consummated the offering of 3,176,250  shares of the Company's
                  voting no par value common stock. The Managing  Underwriter of
                  the offering was Montgomery Securities.

                  Activity  relating to the Company and the Selling  Shareholder
is summarized below:
<TABLE>
<CAPTION>
                                                                                       Selling
                                                                  Company            Shareholder
                                                            --------------------- -------------------
                    <S>                                          <C>                      <C>
                    Shares registered (1)                              3,176,250             130,000
                    Aggregate price of the offering
                       amount registered (1)                     $    57,172,500          $2,340,000
                    Amount sold to date (1)                      $    57,172,500          $2,340,000

                    Underwriting discount                              4,002,000
                     Other expenses                                    1,258,500
                                                            ---------------------
                             Total expenses (2)                        5,260,500

                    Net proceeds to Company                     $     51,912,000
                                                            =====================


                  (1) Includes a 30-day  option  granted to and exercised by the
                      underwriters to purchase up to 431,250  additional  shares
                      of Common Stock solely to cover over-allotments.

                  (2) All such expenses were direct or indirect payments to
                      others.
</TABLE>
                  Proceeds  from the offering as of September 30, 1997 were used
                  to retire  $41.9  million of debt to the Parent  Company.  The
                  remaining  proceeds  were used to fund working  capital  which
                  includes a loan to the Parent of $7.6  million and to purchase
                  real property for development in the amount of $1.3 million.


Item 3 - Defaults Upon Senior Securities
                  None

Item 4 - Submission of Matter to a Vote of Security Holders
                  None


<PAGE>


Item 5 - Other Information

                           On July 18, 1997 the Company purchased 20.55 acres of
                  land  at  Angel's  Camp,  California  on  which  it  plans  to
                  construct  a  total  of  200  condominium  units.  Phase  I is
                  expected to include 112 condominium units, two swimming pools,
                  a sports  court,  check-in  facility and fitness  room.  It is
                  anticipated  that Phase I will be taken down as each  building
                  is completed  beginning in May or June 1998. This project will
                  provide  drive-to  inventory for WorldMark  owners in northern
                  California.

                           The Company  purchased 13 units at Schooner  Landing,
                  an existing  resort  property on the Oregon Coast on September
                  17,  1997 at a cost  of  $1,319,000.  The  units,  which  were
                  transferred to WorldMark in September,  provided approximately
                  5.2 million credits in inventory which will provide additional
                  capacity on the Oregon Coast. The WorldMark resort at Gleneden
                  Beach,   on  the  Oregon  Coast,   is  presently   running  at
                  approximately 96% occupancy year round. This brings the number
                  of WorldMark resorts in the system to twenty.

                           During  the  fourth   quarter  of  1997  the  Company
                  anticipates the completion of construction of two new resorts,
                  Clear  Lake at  Nice,  California  and Kona on the  island  of
                  Hawaii.  These two projects will provide 88 and 64 condominium
                  units,  respectively.  The  Clear  Lake  resort  will  provide
                  drive-to  inventory  for  WorldMark's  growing  owner  base in
                  northern   California   while  Kona  will  add  needed  exotic
                  inventory to the system.  The  completion of these two resorts
                  will bring the number of  resorts in the  WorldMark  system to
                  twenty-two.

                           The  above  statement  and  other  statements  herein
                  contain  forward  looking  information  which  include  future
                  financing  transactions,  acquisition of  properties,  and the
                  Company's  future prospects and other forecasts and statements
                  of  expectations.  Actual results may differ  materially  from
                  those expressed in any  forward-looking  statement made by the
                  Company,  due among other things,  to the Company's ability to
                  develop  or  acquire   additional  resort   properties,   find
                  acceptable debt or equity capital to fund such development, as
                  well as other risk  factors as outlined in the "Risk  Factors"
                  section of the  Company's  Registration  Statement on Form S-1
                  filed with the SEC (File No: 333-26861).

     Item 6 - Exhibits and Reports on Form 8-K

     (a)  Exhibits

                  2.1      Restated Articles of Incorporation (1)
                  2.2      Restated Bylaws (1)
                            Statement re: Computation of Earnings per share
                            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:     November 12, 1997              /s/ WILLIAM F. PEARE
          -------------------------      ---------------------------
                                         William F. Peare
                                         President, Chief Executive Officer and
                                         Director (Principal Executive Officer)


Date:     November 12, 1997             /s/ GARY A. FLORENCE
          ------------------------      -----------------------------
                                        Gary A. Florence
                                        Vice President, Chief Financial Officer
                                         and Treasurer
                                       (Principal Financial Officer)