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 September 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 November 6, 1998: 17,158,766 shares.


<PAGE>



PART I - FINANCIAL INFORMATION

Item I - Financial Statements
<TABLE>
<CAPTION>
                                                TRENDWEST RESORTS, INC.
                                                   AND SUBSIDIARIES

                                         Condensed Consolidated Balance Sheets

                                                (dollars in thousands)

                                                                                    December 31,         September 30,
                                   Assets                                               1997                 1998
                                                                                   ----------------     ----------------
<S>                                                                           <C>                       <C>    
                                                                                                          (Unaudited)
Assets:
     Cash                                                                      $           70                  974
     Restricted cash                                                                    1,219                2,505
     Notes receivable, net of allowance for doubtful accounts, sales
        returns and deferred gross profit                                              73,075               93,745
     Accrued interest and other receivables                                             7,435                7,510
     Residual interest in notes receivable sold                                        15,235               20,954
     Receivable from Parent                                                               --                 2,022
     Inventories                                                                       44,534               40,060
     Property and equipment, net                                                        7,057               12,580
     Deferred income taxes                                                                924                1,160
     Other assets                                                                       2,201                4,565
                                                                                   ----------------     ----------------
                     Total assets                                              $      151,750              186,075
                                                                                   ================     ================
                                                                                   ================     ================
</TABLE>

<TABLE>
<CAPTION>

                    Liabilities and Stockholders' Equity
<S>                                                                           <C>                        <C>   

Liabilities:
     Accounts payable                                                                     944                  692
     Accrued liabilities                                                                3,862                7,750
     Accrued construction in progress                                                  10,480                1,599
     Borrowing under bank line of credit                                                   --               30,000
     Due to Parent                                                                      1,947                  --
     Allowance for recourse liability and deferred gross profit on notes
        receivable sold                                                                 8,757               11,291
     Income taxes payable to Parent                                                     2,755                  --
     Income taxes payable                                                                 880                  600
                                                                                   ----------------     ----------------
                                                                                   ----------------     ----------------
                     Total liabilities                                                 29,625               51,932

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 and 17,158,766 shares at December            66,742               61,848
        31, 1997 and September 30, 1998, respectively.
     Retained earnings                                                                 55,383               72,295
                                                                                   ----------------     ----------------
                     Total stockholders' equity                                       122,125              134,143

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

                     Total liabilities and stockholders' equity                $      151,750              186,075
                                                                                   ================     ================
                                                                                   ================     ================

See  accompanying  notes to the condensed  combined and  consolidated  financial
statements.
</TABLE>


<PAGE>




<TABLE>
<CAPTION>

                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

            Condensed Combined and Consolidated Statements of Income

                  (dollars in thousands, except per share data)
                                   (Unaudited)

                                                                Three months ended                    Nine months ended
                                                                  September 30,                         September 30,
                                                        -----------------------------------   ----------------------------------
                                                              1997              1998               1997              1998
                                                        -----------------  ----------------   ---------------  -----------------
<S>                                                  <C>                   <C>                <C>               <C>    

Revenues:
     Vacation Credit sales, net                       $         35,575            46,530            96,395            123,403
     Finance income                                              2,930             3,368             8,766              9,628
     Gains on sales of notes receivable                          1,277             1,828             4,441              7,003
     Resort management services                                    217               521             1,495              1,517
     Other                                                         473               946             1,825              2,459
                                                        -----------------  ----------------   ---------------  -----------------

             Total revenues                                     40,472            53,193           112,922            144,010
                                                        -----------------  ----------------   ---------------  -----------------

Costs and operating expenses:
     Vacation Credit cost of sales                               9,219            13,438            25,444             34,119
     Resort management services                                    302               347               830                946
     Sales and marketing                                        16,306            22,346            44,845             61,003
     General and administrative                                  3,348             4,246             9,615             12,312
     Provision for doubtful accounts and recourse
        liability                                                2,494             3,220             6,654              8,535
     Interest                                                      294               204             1,739                242
                                                        -----------------  ----------------   ---------------  -----------------

             Total costs and operating expenses                 31,963            43,801            89,127            117,157
                                                        -----------------  ----------------   ---------------  -----------------

             Income before income taxes                          8,509             9,392            23,795             26,853

Income tax expense                                               3,076             3,508             8,582              9,941
                                                        -----------------  ----------------   ---------------  -----------------

             Net income                               $          5,433             5,884            15,213             16,912
                                                        =================  ================   ===============  =================
                                                        =================  ================   ===============  =================


Basic and diluted net income per common share         $            .34               .34              1.02                .97


Basic and diluted weighted average shares
of common stock outstanding                                 15,923,174        17,308,564        14,920,981         17,498,086

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

</TABLE>


<PAGE>



<TABLE>
<CAPTION>

                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Condensed Combined and Consolidated Statements of Cash Flows

                             (dollars in thousands)
                                   (Unaudited)

                                                                                        Nine months ended September 30,
                                                                                 -----------------------------------------------
                                                                                        1997                      1998

                                                                                 -------------------      ----------------------
<S>                                                                          <C>                          <C>    

Cash flows from operating activities:
     Net income                                                              $             15,213                      16,912
     Adjustments to reconcile net income to net cash used in operating
        activities:
     Depreciation and amortization                                                            487                         769
     Amortization of residual interest in notes receivable sold                             2,966                       4,882
     Provision for doubtful accounts, sales returns and recourse liability                  8,491                      11,114
     Recoveries of notes receivable charged off                                               151                         159
     Residual interest in notes receivable sold                                            (4,551)                     (7,993)
     Unrealized gain on residual interest in notes receivable sold                         (1,243)                       (534)
     Change in deferred gross profit                                                       (1,013)                       (884)
     Deferred income tax expense (benefit)                                                    512                        (236)
     Issuance of notes receivable                                                         (83,234)                   (107,651)
     Proceeds from sale of notes receivable                                                23,611                      72,152
     Proceeds from repayment of notes receivable                                           19,242                      23,302
     Purchase of notes receivable                                                         (11,071)                    (18,402)
     Changes in certain assets and liabilities:
          Restricted cash                                                                    (439)                     (1,286)
          Inventories                                                                      (7,373)                      4,474
          Accounts payable and accrued liabilities                                          1,041                      (5,245)
          Income taxes payable to Parent                                                      594                      (2,755)
          Income taxes payable                                                              1,671                        (280)
          Other                                                                            (1,296)                     (2,538)
                                                                                 -------------------      ----------------------

          Net cash used in operating activities                                           (36,241)                    (14,040)
                                                                                 -------------------      ----------------------

Cash flows used in investing activities -Purchase of property and equipment                (1,120)                     (6,193)
                                                                                 -------------------      ----------------------

Cash flows from financing activities:
     Proceeds from notes payable                                                           16,803                          --
     Payments on notes payable                                                             (1,055)                         --
     Net borrowings under bank line of credit                                                  --                      30,000
     Increase in Receivable from Parent                                                    (7,562)                     (2,022)
     Decrease in Due to Parent                                                            (21,316)                     (1,947)
     Issuance of common stock                                                              51,912                          --
     Repurchase of common stock                                                                --                      (4,894)
                                                                                 -------------------      ----------------------

          Net cash provided by financing activities                                        38,782                      21,137
                                                                                 -------------------      ----------------------

          Net increase in cash                                                              1,421                         904

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

Cash at end of period                                                        $              1,514                         974
                                                                                 ===================      ======================

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

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                             TRENDWEST RESORTS, INC.
                                AND SUBSIDIARIES

          Condensed Combined and Consolidated Statements of Cash Flows
                                   (continued)
                             (dollars in thousands)
                                   (unaudited)

                                                                         
                                                                                         Nine month ended September 30,
                                                                                 -----------------------------------------------
                                                                                        1997                      1998
                                                                                 -------------------      ----------------------
<S>                                                                              <C>                       <C> 
Supplemental  disclosures of cash flow  information  cash paid during the period
     for:
        Interest                                                             $              1,975                         422
        Income taxes                                                                        5,622                      13,212

Supplemental schedule of noncash investing and financing activities:
Reduction of notes payable through transfer of notes receivable              $             16,803                          --
Issuance of Notes Receivable in exchange for other assets sold                                489                          --

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 nine  months  ended  September  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 - Capital Transactions

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.  During the three months ended September 30, 1998, the
Company repurchased 434,600 shares.

Note 4 - 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  receivables  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-collateralization  and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009.

Note 5 - 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                    Nine months ended
                                                    September 30,                         September 30,
                                          -----------------------------------   ----------------------------------
                                               1997                1998              1997               1998
                                          ---------------     ---------------   ----------------   ---------------
<S>                                       <C>                 <C>               <C>                <C>

Basic
                                                                                    9,727,288
Weighted average shares - Trendwest          10,729,481          17,308,564                           17,498,086
Effect of consolidation transactions          5,193,693                 --          5,193,693               --
                                        ----------------   ---------------      ---------------    --------------

Basic and diluted weighted average
 shares outstanding                          15,923,174          17,308,564        14,920,981         17,498,086
                                          ===============     ===============   ================   ===============
</TABLE>


Net income  available to common  shareholders for basic net income per share was
$5,433 and $5,884 for the three months ended  September  30, 1997 and 1998,  and
$15,213  and  $16,912 for the nine  months  ended  September  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 September 30, 1998,  there were options to purchase  491,500 shares of common
stock  outstanding which were antidilutive in 1998 and therefore not included in
the computation of diluted net income per share.

Note 6 - Inventories

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

<TABLE>
<CAPTION>
                                                                         December 31,            September 30,
                                                                               1997                  1998
                                                                         -----------------     ------------------
<S>                                                                 <C>                        <C>   

          Vacation Credits                                          $           1,722                12,964
          Construction in progress                                             42,812                27,096
                                                                         -----------------     ------------------

                   Total inventories                                $          44,534                40,060
                                                                         =================     ==================

</TABLE>


<PAGE>


Note 7 - 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 nine
months ended September 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                                         11,114
              recourse liability                                               11,755
          Notes receivable charged-off and sales returns net of
              Vacation Credits recovered                                       (7,888)               (7,069)
          Recoveries                                                              132                   159
                                                                         -----------------     ------------------
          Balances at end of period                                 $          15,240                19,444
                                                                         =================     ==================


          Allowance for doubtful accounts and sales returns         $           9,935                11,140
          Recourse liability on notes receivable sold                           5,305                 8,304
                                                                         -----------------     ------------------
                                                                    $          15,240                19,444
                                                                         =================     ==================
</TABLE>

     Total  notes  receivable  outstanding,  including  notes  receivable  sold,
amounted to $242,286 and $290,982 at December 31, 1997 and  September  30, 1998,
respectively.

Note 8 - 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, 1998 the Company had
outstanding  purchase  commitments of $46.4 million related to properties  under
development and $7.3 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 9 - Related Party Transactions

On September  22, 1998 and October 13, 1998,  the Company  repurchased  from R&R
Vista $7.1 million and $3.8 million,  respectively,  of notes receivable at face
value plus accrued interest.  These notes receivable were previously sold to R&R
Vista with full recourse.  R&R Vista is an Oregon general partnership  comprised
of Richard L. Wendt,  chairman of the board of JELD-WEN  and  Roderick C. Wendt,
President of JELD-WEN and a director of the Company.

     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, 1998 to the three months
ended September 30, 1997

The Company  achieved total revenues of $53.2 million for the three months ended
September  30,  1998  compared  to $40.5  million  for the  three  months  ended
September 30, 1997, an increase of 31.4%.  The principal  reason for the overall
improvement was a 30.6% increase in Vacation Credit sales from $35.6 million for
the three months ended  September 30, 1997 to $46.5 million for the three months
ended  September 30, 1998.  The increase in Vacation  Credit sales was primarily
the result of a 30.3% increase in the number of Vacation  Credits sold from 27.4
million during the three months ended  September 30, 1997 to 35.7 million during
the three months ended September 30, 1998. The increase in Vacation Credits sold
was largely attributable the addition of new off-site sales offices opened after
September,  1997 in  Woodland  Hills,  California,  opened in  October  of 1997;
Burlingame,  California,  opened in March, 1998; Scottsdale,  Arizona, opened in
May,  1998;  and San Diego,  California  opened in June,  1998.  Wolf Creek,  an
on-site sales office in Eden Utah, opened in June, 1998, also contributed to the
increase in vacation  credits sold.  Revenue from Upgrade Sales  increased 23.5%
from $5.1 million for the three months ended  September 30, 1997 to $6.3 million
for the three months ended  September  30, 1998 due  primarily to an increase of
21.2% in the number of Vacation Credits sold as Upgrades during the three months
ended  September 30, 1997 compared to the three months ended September 30, 1998.
The average price per Vacation  Credit sold  increased from $1.27 per credit for
the three months ended  September 30, 1997 versus $1.29 per credit for the three
months ended  September  30, 1998  reflecting  the  increased  selling  price of
Vacation  Credits of  approximately  4% effective  June 29, 1998. The percentage
increase in the  average  selling  price of  Vacation  Credits was less than the
percentage  increase in the selling  price of  Vacation  Credits  because of the
recognition of sales made prior to the price increase.

Finance  income  increased  17.2% from $2.9  million for the three  months ended
September  30, 1997 to $3.4  million for the three months  ended  September  30,
1998. The increase in finance income primarily reflects the increase in carrying
balances of Notes  Receivable  for the two periods  compared.  Gains on sales of
Notes  Receivable  increased  38.5% from $1.3 million for the three months ended
September 30, 1997 to $1.8 million for the three months ended September 30, 1998
due primarily to an increase in the principal  balances of Notes Receivable sold
of 23.7% from $11.8  million to $14.6  million for the two periods  compared and
lower interest rates in 1998.

Vacation  Credit cost of sales  increased from $9.2 million for the three months
ended  September 30, 1997 to $13.4 million for the three months ended  September
30,  1998,  an increase of 45.7%.  As a  percentage  of Vacation  Credit  sales,
Vacation  Credit cost of sales  increased from 25.8% to 28.8% of Vacation Credit
sales for the two periods  compared.  This is primarily  the result of the Clear
Lake and  Angels  Camp  resorts  in  California  which came on line in the third
quarter.  Clear Lake  experienced  construction  delays and cost overruns due to
inclement  weather and the Angels Camp resort had a product cost higher than the
historical average.  Management expects product cost as a percentage of Vacation
Credit sales to remain at approximately 29.0% for the remainder of the year.

Sales and  marketing  costs  increased  36.8% from $16.3  million  for the three
months ended  September  30, 1997 to $22.3  million for the three months  ending
September  30,  1998.  As a  percentage  of  Vacation  Credit  sales,  sales and
marketing  costs  increased from 45.8% for the three months ended  September 30,
1997 to 48.0% for the three months ended September 30, 1998. Sales and marketing
costs for the three month period ended  September  30, 1998,  as compared to the
same period last year,  were impacted by three new sales offices  opened late in
the  second  quarter  of this year with no new  openings  in the second or third
quarter  last  year.  The  Scottsdale,  San Diego and Wolf Creek  sales  offices
experienced  lower closing  percentages,  which  initially  occur in a new sales
office  less  than  one year  old,  resulting  in  higher  marketing  costs as a
percentage of Vacation Credit sales. The payment of minimum compensation amounts
to  sales  representatives   during  this  initial  period  resulted  in  higher
commission  costs as a percentage of Vacation  Credit sales.  Effective  July 6,
1998 management  initiated  changes to the sales commission  program for new and
upgrade sales and raised  performance  targets for additional  bonuses which has
resulted in an overall decrease in sales and marketing costs when expressed as a
percentage  of Vacation  Credit  sales.  Management  expects sales and marketing
costs as a  percentage  of Vacation  Credit sales to continue to decrease in the
fourth quarter and come more in line with historical results.

General and  administrative  expenses  increased 27.3% from $3.3 million for the
three months ended September 30, 1997 to $4.2 million for the three months ended
September 30, 1998. As a percentage of total revenue, general and administrative
costs  decreased from 8.1% for the three months ended September 30, 1997 to 7.9%
for the three  months  ended  September  30,  1998.  The decrease in general and
administrative  expenses is due to increased  economies of scale  resulting from
increased sales without adding additional overhead.

Provision for doubtful accounts and recourse liability increased 28.0% from $2.5
million for the three  months ended  September  30, 1997 to $3.2 million for the
three months ended September 30, 1998. As a percentage of Vacation Credit sales,
the provision  remained  comparable at 7.0% for the three months ended September
30, 1997 and 6.9% for the three months ended September 30, 1998.


<PAGE>


Comparison of the nine months ended  September 30, 1998 to the nine months ended
September 30, 1997

The Company  achieved total revenues of $144.0 million for the nine months ended
September  30,  1998  compared  to  $112.9  million  for the nine  months  ended
September 30, 1997, an increase of 27.5%.  The principal  reason for the overall
improvement was a 28.0% increase in Vacation Credit sales from $96.4 million for
the nine months ended  September 30, 1997 to $123.4  million for the nine months
ended  September 30, 1998.  The increase in Vacation  Credit sales was primarily
the result of a 28.6% increase in the number of Vacation  Credits sold from 74.2
million  during the nine months ended  September 30, 1997 to 95.4 million during
the nine months ended September 30, 1998. The increase in Vacation  Credits sold
was largely  attributable  to new off-site  sales offices  opened in Burlingame,
California,  in March 1998; Woodland Hills, California,  opened in October 1997;
and increased  Upgrade  sales.  The  maturation of the off-site sales offices in
Costa Mesa,  California  opened in February  1997 and  relocating  the  Vallejo,
California  office to Walnut Creek,  California also contributed to the increase
in Vacation Credit Sales.  Revenue from Upgrade Sales increased 33.1% from $14.2
million for the nine months ended  September  30, 1997 to $18.9  million for the
nine months ended  September  30, 1998 due  primarily to an increase of 36.3% in
the number of Vacation  Credits  sold as Upgrades  during the nine months  ended
September  30, 1997 compared to the nine months ended  September  30, 1998.  The
average price per Vacation  Credit sold remained  comparable at $1.27 per credit
for the two periods compared.

Finance  income  increased  9.1% from $8.8  million  for the nine  months  ended
September 30, 1997 compared to $9.6 million for the nine months ended  September
30,  1998.  The 1997 period  benefited  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 59.1% from $4.4
million for the nine months  ended  September  30, 1997 to $7.0  million for the
nine  months  ended  September  30,  1998 due to notes  receivable  sold,  which
qualified for sales recognition, increasing from $38.9 million to $66.5 million,
an increase of 71.0% for the two periods  compared.  The percentage  increase in
gains on sales of notes receivable is less than the percentage increase in notes
receivable  sold because of a reduction to gains on sales of note  receivable of
$.7  million  from  upfront  fees  relating  to  the  March  1998  asset  backed
securitization.  The asset backed securitization  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 $25.4 million for the nine months
ended  September 30, 1997 to $34.1  million for the nine months ended  September
30, 1998, an increase of 34.3%,  primarily  reflecting  the increase in sales of
Vacation Credits. As a percentage of Vacation Credit sales, Vacation Credit cost
of sales increased from 26.3% of Vacation Credit sales for the nine months ended
September  30, 1997 to 27.6% of Vacation  Credit sales for the nine months ended
September 30, 1998.  Management expects product cost as a percentage of Vacation
Credit  sales to remain at  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  came on line in the third  quarter.  Clear  lake  experienced
construction  delays and cost  overruns due to inclement  weather and the Angels
Camp resort had a product cost higher than the historical average.

Sales and marketing costs increased 36.2% from $44.8 million for the nine months
ended  September  30,  1997 to $61.0  million in the nine  months of 1998.  As a
percentage of Vacation  Credit sales,  sales and marketing  costs increased from
46.5% for the nine months ended  September 30, 1997 to 49.4% for the nine months
ended  September 30, 1998.  This  increase  reflects  start-up  costs and delays
incurred  during the second  quarter  associated  with  opening the  Scottsdale,
Arizona;  Wolf Creek,  Utah;  and San Diego,  California  sales  offices.  These
offices also experienced lower closing  percentages,  which initially occur in a
new sales office less than one year old,  resulting in higher marketing costs as
a percentage of Vacation Credit sales. Also, the payment of minimum compensation
amounts  during this  initial  period to sales  representatives  contributed  to
higher  commission  costs as a percentage of Vacation Credit sales. In addition,
training costs  associated with new sales and office  personnel in the Southwest
and Mountain Region also contributed to higher sales and marketing costs for the
nine months ended  September 30, 1998.  Effective  January 1, 1998,  the Company
increased commissions on new sales and raised performance targets for additional
bonuses.  During  the first six  months of 1998,  the sales  force met these new
performance targets resulting in net increased commission costs.  Effective July
6, 1998,  management made changes to these performance  targets as well as other
aspects of the overall commission  program.  During the last three months of the
nine months ended  September 30, 1998,  commissions  as a percentage of Vacation
Credit  sales  have been  decreasing  and  reflected  the  changes  made and the
increase in the selling price of Vacation Credits.  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,  the effect of increased sales at
new sales offices, and the increase in the selling price of Vacation Credits.

General and  administrative  expenses  increased 28.1% from $9.6 million for the
nine months ended  September 30, 1997 to $12.3 million for the nine months ended
September 30, 1998. As a percentage of total revenue, general and administrative
costs were comparable at 8.5% of total revenue for the two periods compared.

Provision for doubtful accounts and recourse liability increased 26.9% from $6.7
million for the nine months  ended  September  30, 1997 to $8.5  million for the
nine months ended  September 30, 1998. As a percentage of Vacation Credit sales,
the  provision  remained  comparable  at 7.0% and 6.9% for the nine months ended
September 30, 1997 and 1998, respectively.

The  Company  maintains  an  allowance  for  doubtful  accounts  for  the  Notes
Receivable owned by the Company and an allowance for recourse  liability for the
Notes  Receivable  that have been sold by the Company.  The aggregate  amount of
these allowances at December 31, 1997 and September 30, 1998 were $15.2 million,
and  $19.4  million,  respectively,  representing  approximately  6.3% and 6.7%,
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 December 31, 1997, 1.9% of the
Company's total  receivables  portfolio of $242.3 million were more than 60 days
past due compared to 1.8% of the $291.0  million of receivables at September 30,
1998.

                         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, 1997 and 1998, cash used in operating
activities  was $36.2 million and $14.0  million,  respectively.  Cash generated
from operating  activities  increased  principally due to the increased sales of
Notes  Receivable.  For the first nine  months of 1997,  cash 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. Cash provided by operating  activities resulted
primarily from sales and repayments of Notes Receivable of $42.8 million and net
income of $15.2 million. For the nine months ended September 30, 1998, cash used
in operating  activities was  principally for the issuance and purchase of Notes
Receivable  of $126.1  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 $95.5  million  and net income of $16.9
million.

Net cash used in investing  activities  for the nine months ended  September 30,
1997  and  1998  was $1.1  and  $6.2  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 nine months ended  September
30, 1997 and 1998,  was $38.8 million and $21.1 million,  respectively.  For the
nine months ended  September  30, 1997,  cash  provided by financing  activities
resulted  primarily  from $51.9 million in proceeds,  net of expenses,  from the
Company's  August 15, 1997 public offering of 3,176,250  shares of common stock.
Additionally,  cash was  provided  by 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 nine months ended September 30, 1998, cash used in financing  activities was
principally  the result of  repurchasing  434,600  shares of common stock.  Cash
provided was principally  the result of outstanding  borrowings of $30.0 million
on the Company's $30.0 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
September 30, 1998, Notes Receivable totaling $27.0 million had been transferred
to the Bank  Group.  The  agreement  with the Bank  Group is  subject  to annual
renewal each year and was last  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  September  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 September 30, 1998 there
was a $2.0 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, National Trust & Savings Association 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  September  30, 1998 were $30.0  million and were
primarily the result of repurchasing common stock, payments on the new corporate
headquarters,  and higher  notes  receivable  balances  arising  from  increased
vacation credit sales.

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-collateralization  and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009.

Through the end of 1999,  the Company  anticipates  spending  approximately  $76
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 1999.

WorldMark  maintains a replacement  reserve for the  WorldMark  Resorts which is
funded from the annual  assessments  of the Owners.  At September 30, 1998,  the
amount of such reserve was approximately $7.5 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.

                                YEAR 2000 STATUS

The Company is addressing the Year 2000 issue with a corporate  wide  initiative
led by the Director of  Information  Systems and involving the Vice President of
Administration  and the Chief  Operating  Officer.  The initiative  includes the
identification  of affected  software,  the development of a plan for correcting
the software in the most effective manner,  the  implementation of that plan and
the monitoring of that implementation.  The program also includes communications
with the  company's  significant  suppliers to determine the extent to which the
company's  systems are  vulnerable  to any  failures by them to address the Year
2000  issue.  In  most  instances,  the  company  will  renovate  existing  code
applications,  replace older software with new programs and systems,  which will
significantly  upgrade the existing software as well as appropriately  interpret
the calendar Year 2000 and beyond.  Although the timing of these replacements is
influenced by the Year 2000 issue,  in most instances they will involve  capital
expenditures that would have occurred in the normal course of business.

The Company has analyzed each line of code within the specific  applications and
has determined  how any Year 2000 issues will be addressed.  Code revisions have
been  completed,  tested and released to the live  Reservations  application  on
September 10, 1998, one month ahead of schedule. All other critical applications
are currently  scheduled  for  completion  of  remediation  by April 1, 1999 and
non-critical  applications  are scheduled for completion by October 1, 1999. The
Company is  currently  on track with its  implementation  schedule and is in the
process  of  developing  a  contingency  plan in  case  the  remediation  is not
completed.

The Company is also monitoring the Year 2000 compliance program of Sage Systems,
Inc. (Sage), the Servicer of the Company's Notes Receivable portfolio.  Sage has
represented that its Year 2000 remediation is complete. The Company currently is
reviewing each line of Sage's code to verify their Year 2000 compliance.

The Company has incurred  approximately $.5 million to date to modify or replace
software  in order to  remediate  the Year  2000  issue and  anticipates  future
expenditures of approximately $.5 million. In the worst case, if the remediation
is not completed in time, management will employ additional personnel and use PC
based applications to maintain critical functions.

Based on its current  assessments  and remediation  plans,  the Company does not
expect that it will suffer any material  disruption  of its business as a result
of the Year 2000 issue.  If the  Company's  remediations  were to fail, it would
implement its contingency  plan. In such an event, it is likely that there would
be  temporary  disruption  of customer  service and customer  inconvenience  and
additional  costs from the  implementation  of the  contingency  plan. It is not
possible to  quantify  those costs at the  present  time.  Although  the company
believes its contingency plan, when completed, will satisfactorily address these
issues.  There can be no  assurance  that the  Company's  contingency  plan will
function as  anticipated  or that the results of  operations of the Company will
not be adversely affected.

Statements herein contain forward looking  information  concerning the Company's
future  prospects and other  forecasts and  statements of  expectations.  Actual
results  may differ  materially  from those  expressed  in the  forward  looking
statements made by the Company due to, among other things, the Company's ability
to develop or acquire  additional  resort  properties,  find  acceptable debt or
equity capital to fund such  development,  achieve planned sales levels, as well
as other risk factors described in the Company's SEC reports and filings.



<PAGE>


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings  Incorporated by reference. See Note 8 of "Notes
to Condensed Combined and Consolidated Financial Statements."

Item 2 - Changes in Securities and Use of Proceeds
                  None

Item 3 - Defaults Upon Senior Securities
                  None

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

Item 5 - Other Information
                  None

Item 6 -  Exhibits  and  Reports  on Form  8-K

(a)  Exhibits

     2.1    Restated Articles  of  Incorporation  (1)
     2.2    Restated  Bylaws  (1)
     11     Statement  re: Computation  of Earnings per share.
            Incorporated  by  reference.  See Note 5 of "Notes to Condensed
            and Combined and Consolidated  Financial  Statements."
     10.38 Purchase  Agreement among  Registrant,  Roderick C. Wendt,
           and Richard L. Wendt, dated September 22, 1998.

     27    Financial Data Schedule

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

(b)   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: November 13, 1998               /s/ WILLIAM F. PEARE
      ----------------------------    -----------------------------------------
                                       William F. Peare
                                       President, Chief Executive Officer and
                                       Director (Principal Executive Officer)


Date: November 13, 1998                /s/ GARY A. FLORENCE
      -----------------------------   ------------------------------------------
                                      Gary A. Florence
                                      Vice President, Chief Financial Officer
                                      and Treasurer
                                      (Principal Financial Officer)