<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                        
                                   FORM 10-K
                                        
               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
     Act of 1934
     For the fiscal year ended June 30, 1998 or
[_]  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:  0-18613
 
                            TRIMARK HOLDINGS, INC.
            (Exact name of registrant as specified in its charter)


          Delaware                                               95-4272695
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)
 
           2644 30th Street
       Santa Monica, California                                    90405
(Address of principal executive offices)                         (Zip code)

                                        
Registrant's telephone number, including area code:
                                (310) 314-2000
                                        
Securities registered pursuant to Section 12(b) of the Act:
                                    (None)
                                        
             Name of each exchange on which registered:    (None)
                                        
          Securities registered pursuant to Section 12(g) of the Act:

                                Title of Class:
                         Common Stock, $.001 par value
                                        
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 12 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  _____
                           -----                        
<PAGE>
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [_]

As of September 22, 1998, the aggregate market value of Common Stock held by
non-affiliates of the registrant was approximately $3,568,317.  All officers,
directors and more than ten percent (10%) shareholders of the registrant are
deemed "affiliates" of the registrant solely for the purpose of calculating such
aggregate market value.

The number of shares of Common Stock of the registrant outstanding as of
September 22, 1998 was 4,173,692, excluding shares held by the registrant as
treasury stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement (the "1998 Proxy
Statement") to be filed pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year (June 30, 1998) are incorporated by reference in Part
III.

                                      -2-
<PAGE>
 
                                    PART I

ITEM 1.  BUSINESS

GENERAL

Trimark Holdings, Inc., a Delaware corporation (the "Company"), through its
wholly-owned subsidiary, Trimark Pictures, Inc., a California corporation
("Trimark"), is a worldwide distributor of entertainment software, primarily
engaged in the distribution of feature films in the domestic home video and
theatrical markets and in the licensing of distribution rights to motion
pictures for international markets.  Trimark Television, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company, licenses television
rights to feature films, television series, music and children specials, and
documentaries in both the international and domestic markets.

As an independent distribution company, the Company acquires the rights to
motion pictures from a variety of sources, including studios, production
companies and independent producers. Generally, the Company acquires the rights
to completed motion pictures. However, in order to secure rights to motion
pictures which might not otherwise be available to the Company and to acquire a
wider array of distribution rights on more favorable terms, the Company also
secures the rights to motion pictures prior to or during production. The Company
distinguishes itself from the major motion picture studios and certain other
independent video distribution companies by acquiring rights to motion pictures
which may not be cost effective for many of its larger competitors to
distribute.

Distribution rights which the Company may acquire include:  (a) DOMESTIC - home
video, - free television, - pay television (including cable and pay-per-view), -
theatrical and - electronic publishing  (b) INTERNATIONAL - all media.

The Company was formed in August 1984 and began operations as a domestic home
video distributor in early calendar year 1985 by acquiring exclusive home video
distribution rights to motion pictures and other audio-visual entertainment
programs which it packaged, advertised, promoted, sold, had duplicated, and
shipped to home video wholesalers for resale to retailers throughout the
country.  The Company generally sells videocassettes to wholesale distributors
for resale to the approximately 27,500 video rental stores in the United States.

                                      -3-
<PAGE>
 
ITEM 1.  (CONTINUED)

In 1987, the Company began distributing and sublicensing motion pictures for
distribution in the international market.  The Company considered this an
opportunity to grow in an area closely related to its video business, while
offering new opportunities to acquire broader distribution rights to motion
pictures in all media.

On May 15, 1990, the Company was re-incorporated in Delaware.  The principal
assets of the Company are the capital stock of Trimark Pictures and Trimark
Television; the material business of the Company is conducted through these
companies.  Unless noted otherwise, all references to the Company in this filing
include its subsidiaries.

On June 29, 1990, the Company effected an initial public offering of 1,300,000
shares of Common Stock and an additional 200,000 shares of Common Stock were
sold by selling stockholders.

On December 31, 1991, the Company acquired Trimark Television (which at the time
was named International Broadcast Systems, Ltd.) a publicly traded company, for
$1.6 million in cash.  Trimark Television specializes in the distribution of
television programming, and licenses television productions to broadcasters
throughout the world.

On June 1, 1992, the Company changed its name from Vidmark, Inc. to Trimark
Holdings, Inc.  On June 24, 1992, Trimark changed its name from Vidmark, Inc. to
Trimark Pictures, Inc.  The name changes reflect the Company's diversification
of its distribution streams.

In March of 1993, the Company formed Trimark Interactive to expand the core
business of film production and video distribution into the emerging market for
interactive entertainment software and multimedia.  In March 1997, the Company
sold substantially all assets (primarily intellectual properties and inventory)
of Trimark Interactive to an unrelated independent entertainment and interactive
music publisher.  The Company is no longer engaged in the market for interactive
entertainment software and multimedia.

                                      -4-
<PAGE>
 
ITEM 1.  (CONTINUED)

THE UNITED STATES MOTION PICTURE INDUSTRY

The United States motion picture industry encompasses the production and
theatrical exhibition of feature-length motion pictures and the subsequent
distribution of such pictures in home video, television and other ancillary
markets.  The industry is dominated by the major studios -- some of which have
divisions which are promoted as "independent" distributors of motion pictures --
including Universal Pictures, Warner Brothers (including Turner Pictures, New
Line Cinema and Castle Rock Entertainment), Twentieth Century Fox, Sony Pictures
Entertainment (including Columbia Pictures and Tristar Pictures), Paramount
Pictures, The Walt Disney Company (including Buena Vista, Touchstone and
Miramax) and MGM (including Metro Goldwyn Mayer Pictures, United Artists
Pictures, Orion Pictures and Goldwyn Entertainment Company), which historically
have produced and distributed the majority of theatrical motion pictures
released annually in the United States.  In recent years, however, "independent"
motion picture production companies have played an important role in the
production of motion pictures for the worldwide feature film market.  There are
also a large number of smaller production companies such as the Company and
other entities that produce theatrical motion pictures.

The "majors" generally own their production studios and have national or
worldwide distribution organizations.  Major studios typically release films
with direct production costs generally ranging from approximately $25 million to
$100 million or more, and provide a continual source of motion pictures to the
nation's theatrical exhibitors.  The independents do not own production studios
and, with certain exceptions, have more limited distribution capabilities than
the major studios.  Independents typically produce fewer motion pictures at
substantially lower average production costs than major studios.

Motion Picture Production and Financing.  The production of a motion picture
begins with the screenplay adaptation of a popular novel or other literary work
acquired by the producer or the development of an original screenplay having its
genesis in a story line or scenario conceived of or acquired by the producer.
In the development phase, the producer typically seeks production financing and
tentative commitments from a director, the principal cast members and other
creative personnel.  A proposed production schedule and budget also are prepared
during this phase.

                                      -5-
<PAGE>
 
ITEM 1.  (CONTINUED)

Upon completing the screenplay and arranging financing commitments, pre-
production of the motion picture begins.  In this phase, the producer engages
creative personnel to the extent not previously committed; finalizes the filming
schedule and production budget; obtains insurance and secures completion
guarantees, if necessary or available; establishes filming locations and secures
any necessary studio facilities and stages; and prepares for the start of
principal photography.

Principal photography, the actual filming of the screenplay, may extend from
four to sixteen weeks or longer, depending upon such factors as budget,
location, weather and complications inherent in the screenplay.  Following
completion of principal photography, the motion picture is edited, opticals,
dialogue, music and any special effects are added, and voice, effects and music
sound tracks and picture are synchronized during post-production.  This results
in the production of the negative from which the release prints of the motion
picture are made.

The cost of a motion picture produced by an independent production company for
limited distribution ranges from approximately $1 million to $12 million as
compared with $25 million to $100 million or more for commercial films produced
by major studios for wide release.  Production costs consist of acquiring or
developing the screenplay, film studio rental, cinematography, post-production
costs and the compensation of creative and other production personnel.
Distribution expenses, which consist primarily of the costs of advertising and
release prints, are not included in direct production costs.

The major studios generally fund production costs from cash flow from their
motion picture and related activities, licensing fees generated from film
library holdings, and, in some cases, from unrelated businesses.  Substantial
overhead costs, consisting largely of salaries and related costs of the
development, production, distribution and marketing staff and physical
facilities maintained by the major studios, also must be funded.

Independent production companies generally avoid incurring substantial overhead
costs by hiring creative and other production personnel and retaining the other
elements required for pre-production, principal photography and post-production
activities on a project-by-project basis.  Unlike the major studios, the
independents also typically finance their production activities from bank loans,
"pre-sales" agreements, equity offerings and joint ventures.  Independents
generally attempt to 

                                      -6-
<PAGE>
 
ITEM 1.  (CONTINUED)

complete their financing of a motion picture production prior to commencement of
principal photography, at which point substantial production costs begin to be
incurred and require payment.

"Pre-sales" are often used by independent film companies to finance all or a
portion of the direct production costs of a motion picture.  Pre-sales consist
of license fees paid to the producer by third parties in return for the right to
exhibit the completed motion picture in theaters or to distribute it in home
video, television, international or other ancillary markets.  Producers with
distribution capabilities may retain the right to distribute the completed
motion picture either domestically or in one or more foreign markets.  Producers
may separately license theatrical, home video, television, foreign and all other
distribution rights among several licensees.  The producer may also at times be
able to acquire additional production funds through "gap financing," whereby a
lender loans a portion of the production funds based on a distributor's estimate
of the value of distribution rights.  Although "gap financing" is currently
available through a variety of lenders, there can be no assurance such lenders
will continue to make funds available on this basis in the future.

Both major studios and independent film companies often acquire motion pictures
for distribution through a customary industry arrangement known as a "negative
pickup," under which the studio or independent film company agrees to acquire
from an independent production company all rights to a film upon completion of
production.  The independent production company normally finances production of
the motion picture pursuant to financing arrangements with banks or other
lenders in which the lender is granted a security interest in the film and the
independent production company's rights under its arrangement with the studio or
independent.  When the studio or independent "picks up" the completed motion
picture, it assumes or pays the production financing indebtedness incurred by
the production company in connection with the film.  In addition, the
independent production company is paid a production fee and generally is granted
a participation in the net profits of the motion picture.

Both major studios and independent film companies generally incur various third-
party participations in connection with the production and distribution of a
motion picture.  These participations are contractual rights of actors,
directors, screenwriters, owners of rights and other creative and financial
contributors entitling them to share in revenues or net profits 

                                      -7-
<PAGE>
 
ITEM 1.  (CONTINUED)

(as defined in the respective agreements) from a particular motion picture.
Except for the most sought-after talent, participations are generally payable
after all distribution and marketing fees and expenses, direct production costs
and financing costs are paid in full.


MOTION PICTURE DISTRIBUTION.

Motion picture distribution encompasses the distribution of motion pictures in
theaters and in ancillary markets such as home video, pay-per-view, pay
television, broadcast television, foreign and other markets.  The distributor
typically acquires rights from the producer to distribute a motion picture in
one or more markets.  For its distribution rights, the distributor typically
agrees to advance the producer a certain minimum royalty or guarantee, which is
to be recouped by the distributor out of revenues generated from the
distribution of the motion picture and is generally nonrefundable.  The producer
also is entitled to receive a royalty equal to an agreed-upon percentage of all
revenues received from distribution of the motion picture over and above the
royalty advance.

Theatrical Distribution.  The theatrical distribution of a motion picture
involves the manufacture and transportation of release prints, the promotion of
the picture through advertising and publicity campaigns and the licensing of the
motion picture to theatrical exhibitors.  The size and success of the
promotional advertising campaign can materially affect the revenues realized
from the theatrical release of a motion picture.  The major studios can spend in
excess of $50 million to promote motion pictures, and have average combined
print and advertising costs in excess of $19 million.  The costs incurred in
connection with the distribution of a motion picture can vary significantly,
depending on the number of screens on which the motion picture is to be
exhibited and the competition among distributors for theaters during certain
seasons.  Similarly, the ability to exhibit motion pictures in the most popular
theaters can affect theatrical revenues.

The distributor and theatrical exhibitor generally enter into an arrangement
providing for the exhibitor's payment to the distributor of a percentage of the
box office receipts for the exhibition period, in some cases after deduction of
the theater's overhead, or a flat negotiated weekly amount.  The distributor's

                                      -8-
<PAGE>
 
ITEM 1.  (CONTINUED)

percentage of box office receipts varies widely, depending upon the success of
the motion picture at the box office and other factors.  Distributors carefully
monitor the theaters which have licensed the picture for exhibition to ensure
that the exhibitor promptly pays all amounts due the distributor.  Substantial
delays in collection are not unusual.

Successful motion pictures may continue to play in theaters for up to four (4)
months or longer following their initial release.  Concurrently with their
release in the United States, motion pictures generally are released in Canada
and may also be released in one or more other foreign markets. Motion pictures
are generally made available for distribution in markets subsequent to
theatrical as follows:

<TABLE>
<CAPTION>
                                         Months After        Approximate 
                                       Initial Release     Release Period
                                       ---------------     -------------- 
<S>                                    <C>                 <C>
Domestic home video                       4-6 months             ---
Domestic pay-per-view                     6-9 months            3 months
Domestic pay television                 10-18 months        12-21 months
Domestic network or basic cable         30-36 months        18-36 months
Domestic syndication                    30-36 months         3-15 years
Foreign home video                       6-12 months             ---
Foreign television                      18-24 months         3-12 years
</TABLE>

Home Video.  The home video distribution business involves the promotion and
sale of videocassettes and videodiscs to local, regional and national video
retailers (e.g., video specialty stores, convenience stores, record stores and
other outlets), which then rent or sell such videocassettes and videodiscs to
consumers primarily for private viewing.

Certain films are not initially released theatrically but may instead be
initially released to home video.  Given the increasing preference of retail
video stores for successful theatrical releases, it has become increasingly
difficult to secure the initial release of a film directly to home video, and
the economic opportunity for such films where such a release is obtained has
greatly diminished.  To address the change in preference in the domestic home
video market, the Company has focused its resources on distributing an increased
number of specialized films theatrically as well as films premiering on pay
television, and decreasing the releases of straight-to-video films.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

                                      -9-
<PAGE>
 
ITEM 1.  (CONTINUED)

Major feature films are usually scheduled for release in the home video market
within four to six months after theatrical release to capitalize on the
theatrical advertising and publicity for the film.  Promotion of new releases is
generally undertaken during the nine to twelve weeks before the release date.
Videocassettes of feature films are generally sold to domestic wholesalers at
approximately $50 to $60 per unit and generally are rented by consumers for fees
ranging from $1 to $5 per day.  Wholesalers who meet certain sales and
performance objectives may earn rebates, return credits and cooperative
advertising allowances. Selected titles, including certain made-for-video
programs, are priced significantly lower to encourage direct purchase by
consumers.  Direct sale to consumers is referred to as the "priced-for-sale" or
"sell-thru" market.  Typically, owners of films do not share in video rental
income; however, video distributors are beginning to enter into revenue sharing
arrangements with certain retail stores in some circumstances.  Under such
arrangements, videocassettes are sold at a reduced price to video rental stores
(usually $8 to $15 per video cassette) and a percentage of the video rental
revenue is then shared with the owners (or licensors) of the films.  Home video
arrangements in international territories are similar to those in domestic
territories except that the wholesale prices may differ.

Overall growth in the domestic home video market has slowed as growth in the
number of new outlets and new VCR homes has moderated.  The growth in outlets
designed to specifically serve the rental market has remained essentially flat
for the past several years, while the number of outlets which offer
videocassettes and videodiscs for sale has increased.  The sell-thru market
continues to grow with strong sales in the traditional family entertainment
market and a growing number of hit feature films initially released at prices
generally below $30.  Furthermore, technological developments which regional
telephone companies and others are developing could make competing delivery
systems economically viable and could affect the home video marketplace.

Pay-per-view.  Pay-per-view television allows cable and satellite television
subscribers to purchase individual programs, including recently released motion
pictures and live sporting, music or other events, on a "per use" basis.  The
subscriber fees are typically divided among the program distributor, the pay-
per-view operator and the cable system operator.

                                      -10-
<PAGE>
 
ITEM 1.  (CONTINUED)

Pay Television.  Pay television allows subscribers to view premium channels such
as HBO/Cinemax, Showtime/The Movie Channel and other pay television networks
offered by cable and satellite system operators for a monthly subscription fee.
The pay television networks acquire a substantial portion of their programming
from motion picture distributors.  New markets may develop with the maturation
of newly emerging direct broadcast satellite (DBS) systems and other digital
television systems.

Broadcast and Basic Cable Television.  Broadcast television allows viewers to
receive, without charge, programming broadcast over the air by affiliates of the
major networks (ABC, CBS, NBC and Fox), recently formed networks (UPN and WB
Network), independent television stations and cable and satellite networks and
stations.  In certain areas, viewers may receive the same programming via cable
transmission for which subscribers pay a basic cable television fee.
Broadcasters or cable systems operators pay fees to distributors for the right
to air programming a specified number of times.

Foreign Markets.  In addition to their domestic distribution activities, some
motion picture distributors generate revenues from distribution of motion
pictures in foreign theaters, home video, television and other foreign markets.
There has been a dramatic increase in recent years in the worldwide demand for
filmed entertainment.  This growth is largely due to the privatization of
television stations, introduction of direct broadcast satellite services, and
increased home video and cable penetration.

Other Markets.  Revenues also may be derived from the distribution of motion
pictures to airlines, schools, libraries, hospitals and the military, licensing
of rights to perform musical works and sound recordings embodied in a motion
picture, and licensing rights to manufacture and distribute merchandise,
clothing and similar commercial articles derived from characters or other
elements of a motion picture.

New Technologies.  New means of delivery of entertainment product are constantly
being developed and offered to the consumer.  The impact of emerging
technologies such as direct broadcast satellites and the internet, on the
Company's operations cannot be determined at this time.  However, as a holder of
entertainment copyrights, the Company monitors these new media possibilities.

                                      -11-
<PAGE>
 
ITEM 1.  (CONTINUED)


ACQUISITION OF MOTION PICTURE DISTRIBUTION RIGHTS BY THE COMPANY

General.  Distribution rights to motion pictures can encompass various media
(e.g., theatrical, home video, free or pay television, electronic publishing)
and various markets or territories (e.g., the United States and Canada, Great
Britain, Japan).  The Company prefers to acquire worldwide distribution rights
to a motion picture in all media wherever feasible.

The Company uses a similar decision making process in analyzing the acquisition
of a completed or an uncompleted movie.  The Company collects information
concerning new motion pictures being contemplated or entering the production
cycle.  This information is obtained from trade sources and from personal
relationships and contacts.  The acquisition process focuses on productions
which seem most likely to fit the Company's requirements.  Before the Company
acquires distribution rights for any motion picture, the Company analyzes not
only the picture's projected costs, revenues, and scheduling but also the effect
of these assumptions on overall Company performance.  Management bases its
acquisition decisions on the results of this evaluation process and will not
make offers with risks that, in management's opinion, could materially adversely
affect the Company's profitability.  The Company's credit facility imposes
limitations on the size of minimum guarantees or production or acquisition costs
the Company can incur without the lender's approval.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

When the Company acquires distribution rights to a motion picture prior to its
production, it makes only limited commitments to advance funds before
completion.  After acquisition of the rights of a motion picture prior to its
production, the Company typically has approval rights over key production
elements and maintains a production supervisory staff to monitor the production
process.  The Company's current policy is to acquire distribution rights for
motion pictures which will not be subject to material restrictions on release
and exhibition.

Domestic Home Video Distribution Rights.  The Company generally acquires
domestic (United States and Canadian) home video rights under exclusive
licenses, for terms ranging from five years to perpetuity, in return for a
minimum guarantee against future royalties based on a percentage of a
videocassette's wholesale net revenues.  The value of a motion picture's
domestic home 

                                      -12-
<PAGE>
 
ITEM 1.  (CONTINUED)

video rights generally increases as its domestic theatrical print and
advertising budget increases. Some of the Company's licenses require the
licensor or theatrical distributor to make minimum print and advertising
expenditures. In other instances, the Company has agreed to release and or pay
print and advertising expenses for a motion picture's theatrical distribution.

Domestic home video sales are promoted through regional direct sales personnel
who contact home video wholesale distributors and large retail video stores.
Substantially all of the Company's home video sales have been made to ten (10)
wholesale video distributors and two (2) retail video stores.

In February 1994, the Company formed a sell-thru unit to maximize the profit
potential of its library and acquire new products for the growing video sell-
thru market.

Domestic Theatrical Distribution Rights.  The Company acquires theatrical
distribution rights on a selective basis and distributes motion pictures for
exhibition by both major theater chains and numerous independent theaters
throughout the United States.

Management of the Company considers the theatrical distribution of film
important as a marketing tool which enhances video and international sales.
Accordingly, the Company seeks to acquire theatrical distribution rights as part
of an acquisition where possible, even if a film ultimately will not be released
theatrically.  The Company released six films during fiscal 1998.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."  The Company currently targets motion pictures for distribution to
various demographic audiences on a specialized basis, and such pictures can be
distributed less expensively on a limited or more regional basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."  Specialized motion pictures are characterized by underlying
literary and artistic elements intended to appeal primarily to sophisticated or
niche audiences and are generally substantially less expensive to produce and
distribute than films produced for wide release.  It is not uncommon for films
to suffer theatrical losses primarily due to increased advertising expenditures,
but to have increased performance in video and other ancillary media that may
partially or totally offset such losses.  The management of the Company believes
that the theatrical market has significant upside potential should any
particular film perform well.  However, no 

                                      -13-
<PAGE>
 
ITEM 1.  (CONTINUED)

assurance can be made as to results with respect to any particular release.

The Company is in various stages of post production, production, development and
pre-production on a number of projects, and intends to release theatrically five
(5) to seven (7) films in fiscal 1999.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Domestic Television Distribution Rights.  The Company acquires television
distribution rights as part of the overall acquisition whenever possible.  In
addition, television distribution rights are acquired specifically for
distribution by Trimark Television.

The Company hired additional personnel in fiscal 1998 to develop and oversee the
production and sales of long-form programming for initial release on broadcast
or major cable networks.  The Company intends to sell four (4) to six (6) films
and "movie of the weeks" which will premier on major cable networks or broadcast
stations.

Television networks, independent television networks, television stations and
cable system operators generally license television series, films and film
packages (consisting of theatrically released feature films and made-for-
television movies) pursuant to agreements with distributors or syndicators that
allow a fixed number of telecasts over a prescribed period of time for a
specified cash license fee or for barter of advertising time.

Pay/Cable television services usually license pictures for initial exhibition
commencing approximately 10 to 18 months after initial domestic theatrical
release or six months after domestic home video release.  Licensing of such
properties is generally accomplished pursuant to agreements which allow a fixed
number of telecasts over a prescribed period of time for a specified license
fee.

International Distribution Rights. International distribution rights include
rights in various media (e.g., television, theatrical and home video) and to
various territories (e.g., Germany, Italy, Japan and the United Kingdom). To
acquire these rights, the Company is usually required to pay a minimum
guarantee. The minimum guarantee, along with specific recoupable marketing and
other expenses, is recovered from the motion picture's gross revenues before the
producer begins to

                                      -14-
<PAGE>
 
ITEM 1.  (CONTINUED)

participate in the net revenues. The Company maintains a sales force to manage
international sales and to promote its motion pictures at film markets,
including the Cannes Film Festival in France, the American Film Market (AFM) in
Los Angeles and The Milan Film Festival (MIFED) in Italy.


MARKETING AND SELLING

The Company's marketing operations are focused on domestic home video,
international licensing, theatrical distribution and television distribution.
The Company designs its own promotional campaigns for each motion picture;
commissions the art work for advertising, trade show displays and packaging; and
arranges for the printing, production and distribution of all promotional
materials.

Domestic home video sales are promoted through regional direct sales personnel
who contact home video wholesale distributors and large retail video stores.
The Company's largest wholesale video customer is Ingram Entertainment which
represents approximately fifteen percent (15%) of net revenues for the fiscal
year ended June 30, 1998.

The Company, when appropriate, test markets its motion pictures in the domestic
theatrical market.  If the response is satisfactory, the Company will proceed to
distribute the picture.  The Company handles the sales, marketing and servicing
of its theatrical releases.

International sales operations consist of promoting and sublicensing the
Company's motion pictures to independent territorial distributors for release on
specified media within designated territories.

The Company maintains a sales force to manage international sales and to promote
its motion pictures at foreign film markets.  The Company continues to expand
its worldwide television distribution in order to maximize the unexploited
television rights which it holds.  The Company distributes product directly to
broadcasters in both the international and domestic markets and licenses product
for other companies and producers.

                                      -15-
<PAGE>
 
ITEM 1.  (CONTINUED)


COMPETITION

The motion picture distribution business and other related entertainment
businesses are highly competitive.  The Company's competitors in domestic home
video distribution have included the home video divisions of the major studios,
such as Warner Bros., The Walt Disney Company, Universal, Paramount, Fox and
Sony/Columbia; and independent distributors, including Artisan Entertainment.
Many of these competitors have greater access to feature films and significantly
greater resources than the Company.

In the international distribution market, the Company competes with a wide range
of companies from small independents exclusively focused upon certain classes of
motion pictures like J & M Entertainment and Mark Damon Productions, to the
major studios which have expanded distribution in international territories,
such as Disney's Buena Vista International.


INTELLECTUAL PROPERTY RIGHTS

Copyright protection is a serious problem in the video cassette distribution
industry because of the ease with which cassettes may be duplicated.  In the
past, certain countries permitted video pirating to such an extent that the
Company did not consider these markets viable for distribution.  Video
distributors, including the Company, have initiated legal actions to enforce
copyright protection and management believes the problem to be less critical at
the present time.

In April 1997 the Company changed the trademark used in connection with all of
its domestic home video distribution from "VIDMARK" to "TRIMARK HOME VIDEO."
The Company is currently using the trademark "TRIMARK PICTURES" in connection
with films distributed domestically and licensed internationally and uses
"TRIMARK TELEVISION" in connection with licenses to free, pay and cable
television.  The trademark "TRIMARK PICTURES" has been registered with the
Commissioner of Patents and Trademarks.  The Company regards its trademarks as
valuable assets and believes that its trademarks are an important factor in
marketing its products.

                                      -16-
<PAGE>
 
ITEM 1.  (CONTINUED)


REGULATION AFFECTING THE COMPANY

Distribution rights to motion pictures are granted legal protection under the
copyright law of the United States and most foreign countries, which provide
substantial civil and criminal sanctions for unauthorized duplication and
exhibition of motion pictures.  The Company endeavors to maintain copyright
protection for all its films under the laws of all applicable jurisdictions.

The Code and Ratings Administration of the Motion Picture Association of
America, an industry trade association, assigns ratings for age group
suitability for theatrical distribution of motion pictures.  The Company submits
most of its films for such ratings.  A substantial number of the Company's films
are rated "R;" under rules enforced by theatrical exhibitors, children under
certain ages may attend the applicable motion picture only if accompanied by an
adult.

In addition, United States television stations and networks as well as foreign
governments impose additional restrictions on the content of motion pictures
which may restrict in whole or in part exhibition on television or in a
particular territory.  There can be no assurance, therefore, that current or
future restrictions on the content of Company films, may not limit or affect the
Company's ability to exhibit certain of such motion pictures in such media or
markets.


EMPLOYEES

As of June 30, 1998, the Company had 91 full-time employees, 41 of whom were
engaged in sales and marketing.  None of the Company's employees are covered by
a collective bargaining agreement, although some of the Company's subsidiaries
are subject to guild agreements.  Management believes that its employee
relations are good.


ITEM 2.  PROPERTIES

The Company leases its corporate office space in Santa Monica, California for a
term of seven years expiring on April 30, 1999.  These premises contain
approximately 26,000 square feet of office space. Management is currently
negotiating new lease terms with the owners of the property.  Alternative sites
are also being 

                                      -17-
<PAGE>
 
ITEM 2.  (CONTINUED)

considered to ensure the Company will receive the most favorable terms possible.


ITEM 3.  LEGAL PROCEEDINGS

The Company is subject to claims and suits arising from disputes over
copyrights, clear title and contractual matters arising from its distribution
contracts.  Such proceedings are not considered material to the Company's
business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.  No matters were submitted to a vote by the Company's security
holders during the fourth quarter of its fiscal year.


ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages and all positions with the
Company currently held by each person who may be deemed an executive officer of
the Company.  Executive officers serve at the discretion of the Board of
Directors.  Except as otherwise indicated, each of the executive officers serves
in similar positions for both the Company and Trimark.  Unless otherwise noted,
all references to the Company include Trimark.

<TABLE>
<CAPTION>
      Name         Age                    Position
      ----         ---                    --------
<S>                <C>    <C>
Mark Amin          48     Chairman of the Board and Chief Executive Officer
Cami Winikoff      35     Executive Vice President and Chief
                          Administrative Officer of Trimark
Tim Swain          47     Executive Vice President of Trimark
Sergei Yershov     32     Senior Vice President of Trimark
Jeff Gonzalez      30     Chief Financial Officer and Secretary
</TABLE>

Mark Amin is a founder of the Company and has served as its Chairman of the
Board since November 1988 and Chief Executive Officer since January 1994.  Mr.
Amin served as a Director, President and Chief Executive Officer of the Company
from its 

                                      -18-
<PAGE>
 
ITEM 4A.  (CONTINUED)

incorporation in 1984 until December 1989. In 1981, Mr. Amin co-founded 20/20
Video, a video specialty store in Los Angeles, California, and served as a
director of 20/20 Video from 1981 until 1988. Mr. Amin sold his entire stock
interest in 20/20 Video in 1987. Mr. Amin graduated from the Graduate School of
Management at the University of California, Los Angeles with an MBA in marketing
in 1975, and was previously awarded a BA degree in economics by the University
of Kansas.

CAMI WINIKOFF joined Trimark in August 1990, in November 1991 was appointed
Director of Production, in January 1995 was appointed Vice President of
Production, in January 1997 was appointed Senior Vice President and has served
as Executive Vice President, Chief Administrative Officer since September 1997.
Before joining Trimark Ms. Winikoff was an independent producer.

TIM SWAIN joined Trimark in February 1990 as Vice President of Domestic
Theatrical Distribution, in June 1992 was appointed Vice President of Domestic
Distribution, in April 1993 was appointed Senior Vice President of Domestic
Distribution and has served as Executive Vice President since April 1996.  From
1984 to 1990, Mr. Swain was Vice President/General Sales Manager of New World
Pictures, Ltd., a diversified motion picture production and distribution company
located in Los Angeles, California.  Mr. Swain served as Head of Western
Division for Film Ventures of Los Angeles from 1983 to 1984 and served as
Assistant General Sales Manager for The Jerry Gross Organization of Los Angeles
from 1981 to 1983.

SERGEI YERSHOV joined Trimark in January 1995 as Director of International
Sales, in January 1996 was appointed Vice President of International
Distribution and has served as Senior Vice President, International since August
1998.  From November 1991 to June 1992 Mr. Yershov was Director of International
Sales for West Side Studios located in Los Angeles, California, and from July
1992 to December 1994 served as Vice President of International Distribution for
the same organization.  Mr. Yershov graduated in 1988 from Military Aerospace
Academy, St. Petersburg with a major in Computer Science and Telecommunications.

JEFF GONZALEZ joined the Company in September 1998 as Chief Financial Officer
and Secretary.  From 1994 until 1998, Mr. Gonzalez was Controller of Morgan
Creek Productions, Inc., a motion picture production company based in
Burbank,California.  From 1991 until 1994, Mr. Gonzalez was a Senior Auditor at
Price-

                                      -19-
<PAGE>
 
ITEM 4A.  (CONTINUED)

waterhouseCoopers LLP, a worldwide public accounting firm. Mr. Gonzalez
graduated in 1990 from the University of California, Los Angeles with a BA in
economics and is a certified public accountant (non-active).

                                      -20-
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

The Company's Common Stock began trading on the over-the-counter market on June
29, 1990 following the effectiveness of the Company's Registration Statement on
Form S-1.  Prior to that date, there was no public market for the Common Stock.
The Common Stock is listed and reported on the National Association of
Securities Dealers Automated Quotation National Market ("NASDAQ/NNM") under the
symbol "TMRK."  As of September 22, 1998, there were 4,173,692 shares of Common
Stock outstanding, excluding shares held by the Company as treasury stock, held
by approximately 45 shareholders of record.

As previously announced by the Company on June 19, 1998, it had received a
letter from the NASDAQ Stock Market, Inc. that the market value of the public
float (as calculated under NASDAQ Rules) of the Company's Common Stock did not
meet the NASDAQ National Market $5 million maintenance standard.  The Company
was advised that it must remedy the public float deficiency for a period of ten
consecutive days by September 2, 1998 in order to maintain listing on the NASDAQ
National Market System.  Currently the Company's Common Stock is concentrated in
the hands of founders and a registered investment advisor, which has decreased
the public float of Common Stock.

On August 31, 1998, the Company announced that it had requested a hearing with
the NASDAQ Hearings Department to review the issue, which will stay the
delisting of the Company's Common Stock pending the hearing -- the date of which
has been set for October 16, 1998.  The Company is presently assessing the
options available to it to achieve compliance with the maintenance standard, and
there can be no assurance that the hearing will resolve the matter to the
Company's satisfaction.  If the Common Stock were to be delisted from the
National Market System, the Company will request that the Common Stock be listed
for trading on the NASDAQ Small Cap market.  However, under NASDAQ Rules as
interpreted by the NASDAQ Stock Market, Inc., the Company does not currently
meet the public float requirements for initial issuance on the NASDAQ Small Cap
market and there can be no assurance as to the Company's ability to obtain
listing for the Common Stock on the NASDAQ Small Cap market, or if listed, as to
the Company's ability to continue to meet the maintenance requirements thereof.

                                      -21-
<PAGE>
 
ITEM 5.  (Continued)

If the Common Stock were to be delisted from trading on the National Market
System and were not listed for trading on the NASDAQ Small Cap market, trading,
if any, in the Common Stock, may continue to be conducted on the OTC Bulletin
Board or in the non-NASDAQ over-the counter market.  Delisting of the Common
Stock could result in limited release of the market price of the Common Stock,
limited news coverage of the Company and could restrict investors' interest in
the Common Stock and materially adversely affect the trading market and prices
for the Common Stock and the Company's ability to issue additional securities or
to secure additional financing.

The following table sets forth the high and low last sales prices as reported on
NASDAQ/NNM for fiscal 1997 and fiscal 1998.

<TABLE>
<CAPTION>
                                                      Sales Prices for Common Stock
                                                      -----------------------------
Quarter Ending                                         High                     Low
--------------                                         -----                    ---
 
<S>                                                   <C>                     <C>
September 30, 1996                                     5 3/4                  4 3/8          
December 31, 1996                                      5 5/8                  4 5/8          
March 31, 1997                                         6 1/4                  3 1/2          
June 30, 1997                                          5 1/8                  3 1/4          
                                                                                             
September 30, 1997                                     6 7/8                  4 1/4          
December 31, 1997                                      5 7/8                  4 1/8          
March 31, 1998                                         5 1/2                  4          
June 30, 1998                                          4 5/8                  3 1/8          
</TABLE>

The Company has not paid any cash dividends since its organization and has no
present intention to pay cash dividends in the foreseeable future.  The present
policy of the Company is to retain its earnings, if any, to provide funds for
the operation of its business.  See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth the selected financial data for the Company and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and with Management's Discussion and Analysis of Financial
Condition and Results of Operations which appear elsewhere in this report.

                                      -22-
<PAGE>
 
ITEM 6.  (Continued)
                             TRIMARK HOLDINGS, INC.
                            SELECTED FINANCIAL DATA
                                        
<TABLE>
<CAPTION>
                                                                     June 30,
                                    -----------------------------------------------------------------------------------
                                            1998               1997              1996            1995            1994
                                    ----------------   ----------------   --------------   -------------   -------------
<S>                                 <C>                <C>                <C>              <C>             <C>
                                                           (in thousands, except per share data)
Earnings Statement Data:
 Net revenues:
 Domestic:
  Home video                               $ 48,053           $ 38,823         $ 34,615         $52,103         $61,994
  Theatrical                                  8,297              5,380              286           1,746           2,652
  Television                                 11,622              4,824            5,063           7,861           3,019
 International:
  All media                                  12,178             12,791           17,668          21,812          14,660
 Interactive:
  All Media                                      --              1,347            2,200           1,472              --
                                           ----------------------------------------------------------------------------
   Net revenues                              80,150             63,165           59,832          84,994          82,325
Film costs and
 distribution expenses                       67,089             53,421           57,495          70,721          68,339
                                           ----------------------------------------------------------------------------
   Gross profit                              13,061              9,744            2,337          14,273          13,986
Operating expenses:
 Selling                                      7,461              6,857            6,352           5,715           4,153
 General and
  administrative                              5,100              4,239            5,447           5,873           5,049
 Bad debt                                     1,109                321               31             276             587
                                           ----------------------------------------------------------------------------
                                             13,670             11,417           11,830          11,864           9,789
                                           ----------------------------------------------------------------------------
Operating (loss)
 earnings                                      (609)            (1,673)          (9,493)          2,409           4,197
Other (income) expenses:
 Interest expense                             4,443              1,934              847           1,230             320
 Interest and
  investment income                            (172)               (84)             (95)            (38)            (73)
 Minority interest                               --                 --              (38)           (422)           (135)
                                           ----------------------------------------------------------------------------
(Loss) earnings before
 income taxes                                (4,880)            (3,523)         (10,207)          1,639           4,085
Income taxes                                    299                 --           (2,380)            656           1,675
                                           ----------------------------------------------------------------------------
Net (loss) earnings
 Before cumulative
 Effect of change in
 Accounting principle                        (5,179)            (3,523)          (7,827)            983           2,410
                                           ----------------------------------------------------------------------------
Cumulative effect of
 change in accounting
 for income taxes                                --                 --               --              --             100
                                           ---------------------------------------------------------------------------- 
Net (loss) earnings                         ($5,179)           ($3,523)         ($7,827)        $   983         $ 2,510
                                           ----------------------------------------------------------------------------
</TABLE>

                                      -23-
<PAGE>
 
ITEM 6.  (Continued)
<TABLE>
<CAPTION>
                                                                      June 30,
                                    ----------------------------------------------------------------------------------
                                          1998               1997              1996            1995            1994
                                    ----------------   ----------------   --------------   -------------   ------------
<S>                                     <C>               <C>               <C>               <C>             <C>   
Net (loss) earnings per common share:

Net (loss) earnings
 before cumulative
 effect of change in
 accounting principle                      ($1.24)           ($0.84)          ($1.83)        $  0.22        $  0.53
Cumulative effect of
 change in accounting
 for income taxes                              --                --               --              --           0.02
Net (loss) earnings              ----------------------------------------------------------------------------------
 per common share                          ($1.24)           ($0.84)          ($1.83)        $  0.22        $  0.55
                                 ----------------------------------------------------------------------------------
 
Balance Sheet Data:
Total assets                              $89,220           $90,223          $48,401         $64,385        $62,281
Total liabilities                          74,076            70,014           24,051          31,775         30,262
Retained earnings                           3,981             9,160           12,683          20,510         19,527
Stockholders' equity                       15,144            20,209           24,350          32,572         31,909
</TABLE>

                                      -24-
<PAGE>
 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
RESULTS OF OPERATIONS

Net Revenues:  Net revenues for the year ended June 30, 1998 increased $17
------------                                                              
million or 27% compared with the prior fiscal year.  The increase was primarily
attributable to increases in all major domestic revenue segments, including
domestic home video, television, and theatrical, partially offset by decreases
in revenues generated from international and interactive distribution. Net
revenues increased $3.3 million, or 6%, in fiscal 1997 compared to fiscal 1996.
The increase was primarily attributable to increases in revenues generated from
domestic theatrical and home video partially offset by decreases in revenues
generated from international distribution.

To address the continuing competition in the domestic home video market, in the
periods presented, the Company has focused its resources on distributing an
increased number of films in the specialized theatrical market and the made for
television market and decreasing the releases of straight-to-video films.  The
Company is further refining this shift in focus for future periods.  See
"Liquidity and Capital Resources."  The production and distribution of
theatrical motion pictures requires capital commitments which may not be
recouped, if at all, until the picture is released in home video, international
and ancillary markets.

Domestic Home Video:  Net revenues from domestic home video increased $9.2
-------------------                                                       
million or 24% for the year ended June 30, 1998 compared with the prior fiscal
year.  In fiscal 1998 the Company released 35 motion pictures for the domestic
home video rental market compared to 27 motion pictures released in fiscal 1997
and 34 motion pictures released in fiscal 1996.  The increase in fiscal 1998
revenues was primarily due to the initial home video distribution in fiscal 1998
of three wide theatrically released films:  "Sprung" (October 1997), "Eve's
Bayou" (March 1998, the rental title with the largest shipments in Company
history) and "Star Kid" (aka "Warrior of Waverly Street") (May 1998), compared
to the release on home video of only one comparable title "Meet Wally Sparks" in
fiscal 1997.  The overall increase in the number of titles released to the
domestic home video rental market in fiscal 1998 as compared to fiscal 1997 also
contributed to the increased revenue.  The increase in releases was primarily
due to the availability of additional titles which have had prior

                                      -25-
<PAGE>
 
ITEM 7.  (Continued)

theatrical releases. The Company plans to release approximately thirty five (35)
titles to the domestic home video rental market in fiscal 1999.

Net revenues from domestic home video increased $4.2 million or 12% for the year
ended June 30, 1997 compared with the prior year. The increase in fiscal 1997
revenues was primarily due to the release on home video of "Meet Wally Sparks"
which had a wide theatrical release and generated $7.6 million domestic home
video revenue compared to fiscal 1996 when no video releases had comparable
theatrical releases.  The decrease in the number of titles released to the
domestic home video rental market in fiscal 1997 as compared to fiscal 1996 was
due to management's strategic decision at the time to release fewer titles, due
to the crowded home video market, and endeavor to increase the number of titles
which have prior theatrical releases.  In addition, sell-thru revenue increased
to $6.7 million, a 40% increase from fiscal 1996.  The increase in sell-thru
revenue was primarily due to the release of the Director's cut edition of
"Natural Born Killers" and the release of six (6) tapes containing episodes of
the Japanese animation series "Dragon Ball".  Comparable fiscal 1996 initial
sell-thru releases were "Alien Autopsy: Fact or Fiction," "Monster in My Pocket"
and "Miracles and Visions: Fact or Fiction".

The Company anticipates that the domestic home video market will continue to be
extremely competitive.

Domestic Theatrical Distribution:  Net revenues from domestic theatrical
--------------------------------                                        
distribution increased $2.9 million or 54% for the year ended June 30, 1998
compared with the prior year.  The increase was primarily attributable to the
performance of the wide release theatrical film in the current year period,
"Eve's Bayou" (the title with the largest box office receipts in Company
history) with no comparable theatrical release in fiscal 1997.  In fiscal 1998
the Company released six (6) motion pictures theatrically, two mainstream -
"Eve's Bayou" and "Star Kid," three (3) specialized - "Box of Moonlight,"
"Chinese Box" and "The Ugly" and one limited - "Chairman of the Board" compared
to fiscal 1997 in which the Company released five motion pictures theatrically,
two mainstream - "Meet Wally Sparks" and "Sprung" and three (3) specialized -
"Kama Sutra: A Tale of Love," "Ripe" and "Nothing Personal".  The Company
anticipates releasing five(5) to seven (7) titles in the specialized theatrical
market in fiscal 1999. (see Liquidity and Capital Resources).

                                      -26-
<PAGE>
 
ITEM 7.  (Continued)

Theatrical revenues increased $5.1 million, to $5.4 million for the year ended
June 30, 1997, compared with the prior year.  The increase was primarily
attributable to the Company's then new focus on theatrical distribution in
fiscal 1997.  In fiscal 1997 the Company released five motion pictures
theatrically, two mainstream and three (3) specialized, compared to fiscal 1996
which had four (4) limited theatrical releases generating approximately 
$300,000 in revenue.

Television Distribution:  Net revenues from television distribution which
-----------------------                                                  
includes such media as basic cable, pay television, pay-per-view and syndication
increased $6.8 million or 140% for the year ended June 30, 1998 compared with
the prior year.  The increase was primarily due to the releases in the current
fiscal year of the made for cable television movies "Trucks" and "The Colony" as
well as the cable debut of "Meet Wally Sparks" and "Sprung" and the HBO premiere
of "Phoenix."  "Trucks" and "The Colony" are part of the Company's strategic
decision to increase production and acquisition of made for television product.
The Company anticipates distributing four (4) to six (6) pictures for the made
for television market (see Liquidity and Capital Resources). In fiscal 1997 the
Company's television revenues included the HBO premieres of "The Dentist" and
"Crossworlds."  Net revenues decreased $239,000 or 5% for the year ended June
30, 1997 compared with the prior year.  The decrease was due to a decrease in
basic cable sales partially offset by an increase in syndication revenue.

International Distribution:  Net revenues from international distribution
--------------------------                                               
decreased $613,000 or 5% for the year ended June 30, 1998 compared with the
prior year.  In fiscal 1998, the Company initially licensed eleven (11) motion
pictures for international distribution compared to four (4) motion pictures
initially licensed in fiscal 1997 and seven (7) motion pictures in fiscal 1996.
The decrease in revenues in fiscal 1998 as compared to fiscal 1997 was primarily
due to the release in the fiscal 1997 period of "Star Kid" without any
comparable film in the fiscal 1998 period.  During fiscal 1999 the Company plans
to release approximately seven (7) to nine (9) motion pictures initially into
international distribution.

Net revenues from international distribution decreased $4.9 million or 28% for
the year ended June 30, 1997 compared with the prior year.  The decrease was
primarily due to the timing of releases.

                                      -27-
<PAGE>
 
ITEM 7.  (Continued)

Trimark Interactive Distribution:  The Company had no net revenues from
--------------------------------                                       
interactive distribution in fiscal 1998 and does not expect any significant
future interactive revenues.  Net revenues from interactive distribution
decreased $853,000 or 39% for the year ended June 30, 1997 compared with fiscal
1996.  The Company decided to exit the interactive entertainment software and
multimedia business and to sell substantially all assets (primarily intellectual
properties and inventory) of Trimark Interactive to an unrelated independent
entertainment and interactive music publisher in March 1997.  Interactive
revenues for fiscal 1997 primarily reflect the initial release of the Sony
PlayStation version of "The Hive."  Fiscal 1996 interactive revenues primarily
reflect the initial release of the Windows 95 version of "The Hive."

Gross Profit:  The Company's gross profit for the year ended June 30, 1998
increased $3.3 million or 34% compared with the prior year.  Gross profit as a
percentage of net revenues increased to 16% for fiscal 1998 as compared to 15%
for fiscal 1997.  The increase in gross profit was primarily due to the
recognition of the increased estimated future revenue of the Company's product
from domestic distribution on DVD (digital video discs) and sell-thru home
video.  Estimated total revenues and costs are reviewed on a quarterly basis and
revisions to amortization rates are made as necessary including write downs to
net realizable value.  Gross profit for fiscal 1998 included approximately $4.5
million in write downs to net realizable value of film inventory.  These write
downs primarily related to a charge associated with the lower than anticipated
performance of the January 1998 domestic theatrical release of "Star Kid" and a
write down associated with management's decision not to release "Chairman of the
Board" with a wide theatrical release, but rather to have a selected market
theatrical release. The decision to limit the "Chairman of the Board" theatrical
release was made to mitigate the risks associated with the higher print and
advertising expenses required for wide release pictures and is consistent with
management's current strategy (see Liquidity and Capital Resources). Fiscal 1997
results were negatively impacted by a $3.0 million write down of film costs to
estimated net realizable value associated with the January 1997 theatrical
release of "Meet Wally Sparks."

In fiscal 1997 gross profit increased $7.4 million or 317% compared with the
prior year.  Gross profit as a percentage of net revenues increased to 15% for
fiscal 1997 as opposed to 4% in

                                      -28-
<PAGE>
 
ITEM 7.  (Continued)

fiscal 1996. The increase in gross profit and gross profit margins were
primarily due to the reserves and write downs taken in fiscal 1996. Fiscal 1996
results were negatively impacted by reserves and write downs taken for the
Interactive Division, write downs associated with the video releases of "Death
Machine" and "Kids", the disappointing performances of additional home video
titles released during fiscal 1996 and write downs associated with foreign
distribution.

Selling Expenses:  The Company's selling expenses increased $604,000 or 9% for
the year ended June 30, 1998 compared with the prior year and increased $505,000
or 8% in fiscal 1997 compared with fiscal 1996.  The increases in both periods
was primarily due to an increase in theatrical operations partially offset by a
decrease in interactive operations.  In the quarter ended March 31, 1997, the
Company sold substantially all assets of Trimark Interactive.

Selling expenses as a percentage of net revenues for fiscal 1998, fiscal 1997
and fiscal 1996 were 9%, 11% and 11%, respectively.

General and Administrative Expenses:  General and administrative expenses
increased $861,000 or 20% for the year ended June 30, 1998 compared with the
prior year.  The increase was primarily due to the costs associated with
establishing three regional theatrical sales offices in the beginning of the
fiscal year to support mainstream national theatrical releases and costs
associated with closing the three regional theatrical sales offices in the
fourth quarter of fiscal 1998, and increased consulting expenditures.  The
regional theatrical sales offices were set up to support wide theatrical
releases and disbanded as the Company shifted its theatrical strategy to
concentrate only on specialized releases (see Liquidity and Capital Resources)
and as of June 30, 1998 the Company had no regional theatrical sales offices and
had returned to its practice prior to fiscal 1998 of using regional independent
contractors on an as needed basis.

General and administrative expenses decreased $1.2 million or 22% for the year
ended June 30, 1997 compared with the prior year.  The decrease was primarily
attributable to savings associated with a Company reorganization and the related
layoffs undertaken in January 1996.

                                      -29-
<PAGE>
 
ITEM 7.  (Continued)

Bad Debt Expense:  Bad debt expense increased $788,000 to $1.1 million for the
year ended June 30, 1998 compared with the prior year and increased $290,000 to
$321,000 for fiscal 1997 compared with fiscal 1996.  Bad debt expenses for the
periods primarily represent reserves taken against domestic video and foreign
sales.  The increase in fiscal 1998 was primarily due to specific reserves taken
as a result of the currency crisis in Southeast Asia and an increase in past due
video receivables.  The increase for fiscal 1997 was primarily due to a $200,000
increase in past due video receivables compared to the fiscal 1996 period in
which the Company successfully collected certain past due international
receivables and settled certain past due domestic video receivables.


Interest Expense:  Interest expense increased $2.5 million or 130% for the year
ended June 30, 1998 compared with the prior year and increased $1.1 million or
128% for the year ended June 30, 1997 compared with the year ended June 30,
1996.  The increases in interest expense were primarily due to higher levels of
borrowing under the Company's credit facility for purposes of funding the costs
associated with the acquisition and distribution of theatrical motion pictures.
The Company expects to use excess cash flow generated by theatrical and library
product to decrease current borrowing levels under its revolving credit line.
See "Liquidity and Capital Resources."

Interest and Investment Income:  Interest and investment income increased
$88,000 for the year ended June 30, 1998 compared with the prior year. The
increase was primarily due to interest income from loans to officers in the
fiscal 1998 period without any similar income in the fiscal 1997 period.

Interest and investment income decreased $11,000 for the year ended June 30,
1997 compared with the prior year.  The decrease was primarily due to interest
from the federal government related to refunds on prior year amended tax returns
received in fiscal 1996 without any similar income in the fiscal 1997 period.

Net (Loss) Earnings:  The Company's net loss for fiscal 1998 was $5.1 million.
The fiscal 1998 loss was primarily due to approximately $4.5 million in non-cash
write downs to net realizable value of film inventory.  These write downs
primarily related to a charge associated with the lower than anticipated

                                      -30-
<PAGE>
 
ITEM 7.  (Continued)

performance of the January 1998 domestic theatrical release of "Star Kid" and a
write down associated with the release of "Chairman of the Board".  Earnings
were also negatively impacted by higher interest expenses resulting from the
Company's release of theatrical motion pictures as compared to release of
direct-to-video motion pictures.  Theatrical releases have a greater length of
time from initial investment in film costs to recoupment in home video and other
ancillary markets.  See "Liquidity and Capital Resources."  These negative
impacts were partially offset by the recognition of the increased estimated
future revenue of the Company's product from domestic distribution on DVD
(digital video discs) and sell-thru home video.

The Company's net loss for fiscal 1997 was $3.5 million.  The fiscal 1997 loss
was primarily due to a $3.0 million write down of film costs to estimated net
realizable value associated with the January 1997 theatrical release of "Meet
Wally Sparks."  Earnings were also negatively impacted by higher interest
expenses resulting from the Company's release of theatrical motion pictures as
compared to release of direct-to-video motion pictures.


INFLATION:

Generally, costs in connection with the acquisition and distribution of motion
pictures for release have increased in recent years.  Such cost increases may
affect results of operations in the future; however, the Company believes that
the effect of such factors has not been material to date.


LIQUIDITY AND CAPITAL RESOURCES:

The Company relies on cash generated by operations and borrowings under its
credit facility to finance its operations.  The Company's cash flows from
operating, investing and financing activities for the years ended June 30, 1998,
1997 and 1996 were as follows:

                                      -31-
<PAGE>
 
ITEM 7.  (Continued)

<TABLE>
<CAPTION>
                                                                          Year Ended June 30,
                                             -------------------------------------------------------------------------
                                                       1998                      1997                      1996
                                             --------------------      --------------------      ---------------------
<S>                                             <C>                       <C>                       <C>
                                                                            (in thousands)
Net cash (used) provided by
  operating activities                                     (1,854)                 ($38,257)                   $ 1,024
Net cash used by investing
  activities                                                 (316)                     (504)                       (20)
Net cash (used) provided by
  financing activities                                       (336)                   42,082                     (2,395)
</TABLE>

Cash used by operations decreased by $36.4 million from $38.3 million used in
fiscal year 1997 to $1.9 million used in fiscal year 1998 principally as the
result of increased film amortization of $5.5 million, a decrease in the change
in accounts receivable of $15.0 million, a decrease in additions to film costs
of $13.9 million, and an increase in the change in minimum guarantees and
royalties payable of $5.7 million, which were partially offset by a decrease in
the change in accounts payable and accrued expenses of $4.9 million.  The
Company invested $53.0 million in film inventory.  The additions were primarily
related to the theatrical wide release of "Eve's Bayou" and "Star Kid" and to
produce and acquire new films.  The Company anticipates a reduction in the level
of investment in film inventory in fiscal 1999 resulting from its decision not
to release any wide theatrical films in fiscal 1999.

Two principal factors have increased the length of time from investment in film
costs to recoupment, which has increased the Company's cash requirements.  The
first factor is the terms of the Company's current credit facility entered into
in December 1996.  Under the current credit facility, described below, the
Company directly pays production costs that generally were previously paid by
off balance sheet production company financing.  This change in financing has
accelerated certain film acquisition payments that were previously made at the
time of film delivery and are now made periodically throughout the production
process.  The production process often takes from nine months to a year or more.
Commitments to purchase films from production companies upon delivery are
included in contingent contractual obligations.  The second factor that has
increased the length of time from investment in film costs to recoupment is
increased theatrical distribution activity.  Theatrical films generally require
significant marketing expenditures for prints and advertising which are
capitalized as film costs.  Theatrical marketing campaigns begin well in advance
of the theatrical release to generate the maximum level of awareness for the
film.  The opening

                                      -32-
<PAGE>
 
ITEM 7.  (Continued)

date must be carefully selected and is often changed to address competition,
screen availability and other factors. In addition, the decision to release a
film theatrically is often not made until a theatrical test is conducted which
can take several months. The home video release and other ancillary market
revenues are also not realized for several months to years after the theatrical
release. For further information see "Results of Operations."

Investing activities for the years ended June 30, 1998, 1997 and 1996 have
primarily consisted of expenditures on equipment and leasehold improvements
related to the expansion of theatrical operations.

Financing activities, consisting primarily of activity under the Company's
credit facility, were a small use of cash in fiscal 1998, $336,000, and a large
source of cash in fiscal 1997, $42.1 million.  Borrowings under the credit
facility in fiscal 1997 were primarily the result of motion picture production,
acquisition and distribution expenditures exceeding operating cash inflows due
primarily to the Company's focus on theatrical distribution which began in
fiscal 1997.  The Company's cash requirements vary in part with the size and
timing of production advances and minimum guarantee payments along with the
timing of its theatrical, home video, television and international releases.  In
the years ended June 30, 1998, 1997 and 1996 the principal sources of funds have
been provided by the Company's credit facility and available cash.

The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., on December 20, 1996 entered into a $75 million
revolving credit facility with a consortium of banks agented and arranged by The
Chase Manhattan Bank which replaced a $25 million revolving credit facility with
Bank of America NT & SA and Westdeustche Landesbank.  The credit facility
expires December 19, 2000.  Under the credit agreement, the Company may borrow
for various corporate purposes provided that the aggregate borrowings do not
exceed the borrowing base, as defined in the Credit Agreement, which is derived
from specified percentages of approved accounts receivable and film library.
The credit agreement is guaranteed by the Company and certain of its
subsidiaries and is secured by substantially all of the assets of the Company
and its significant subsidiaries.  Loans outstanding under the credit facility
bear interest at the rate of 1.25% above Chase Manhattan's prime rate or 2.25%
above the London Interbank Offered Rate for Eurodollars for the loan term
specified.  An unused commitment fee is payable on the average unused

                                      -33-
<PAGE>
 
ITEM 7.  (Continued)

availability under the credit facility, at the rate of 0.3725% per annum.  As of
June 30, 1998 there was $57.25 million outstanding under the credit facility.
The Company expects to use excess cash flow generated by theatrical and library
product to decrease current borrowing levels.  The credit agreement contains
various financial and other covenants to which the Company must adhere.  These
covenants, among other things, require the maintenance of minimum net worth and
various financial ratios which are reported to the bank on a quarterly basis and
include limitations on additional indebtedness, liens, investments, disposition
of assets, guarantees, affiliate transactions and the use of proceeds. As
previously reported, at December 31, 1997, the Company was out of compliance
with certain financial covenants primarily as a result of the non-cash write
downs of "Star Kid" and "Chairman of the Board" to net realizable value.  In
March 1998 the Company obtained a waiver and amendment, including additional
covenants, to its credit agreement, which brought the Company into compliance
with all financial covenants.  The Company is currently in compliance with all
debt covenants as of June 30, 1998 and believes that its existing capital, funds
from operations, and other available sources of capital (including funds
obtained through pre-sales and gap financing) will be sufficient to enable the
Company to fund its presently planned productions, acquisitions, distribution
and overhead expenditures for the next twelve months as well as meet all debt
covenants provided for in the amended credit agreement.  In the event that the
motion pictures released or distributed by the Company during such period do not
meet with sufficiently positive distributor and audience response, sales and
licensing of distribution rights to films in the Company's film library and
films which the Company plans to release during such period are less than
anticipated or the Company is not able to exploit various sources of capital
(such as pre-sales and gap financing) to the extent anticipated, the Company
will likely need to significantly reduce its currently planned level of
productions, acquisitions, distribution activities and overhead as described
below and will likely need to obtain additional sources of capital.  The Company
is currently exploring obtaining additional sources of capital (including equity
and debt financing).  There can be no assurance, however, that such additional
capital will be available or available on terms advantageous to the Company.

Management of the Company conducted a strategic review of the Company's
theatrical operations in fiscal 1998.  This strategic review focused on the
increase in the theatrical exhibition of specialized films, with which the
Company has demonstrated past

                                      -34-
<PAGE>
 
ITEM 7.  (Continued)

successes including "Eve's Bayou" and "Kama Sutra: A Tale of Love," and a
reduction in the distribution of wide mainstream features. Partially as a result
of this review, the Company closed its regional theatrical offices in the fourth
quarter of fiscal 1998. The Company does not plan to release any wide theatrical
releases in fiscal 1999.

In the domestic specialized theatrical market the Company plans to release five
(5) to seven (7) motion pictures during fiscal 1999.  Furthermore, the Company
plans to release approximately thirty five (35) motion pictures into the
domestic home video rental market and to continue to expand distribution in the
sell-thru market.  The Company intends to sell four (4) to six (6) films and
"movie of the weeks" which will premier on major cable networks or broadcast
stations.  Also in fiscal 1999 the Company plans to release approximately seven
(7) to nine (9) motion pictures initially into international distribution
market.

Technicolor Videocassette, Inc. currently serves as the Company's video cassette
duplicator and fulfillment contractor.  Technicolor Videocassette, Inc. has a
general lien on all of the Company's materials and products in its possession.

On February 21, 1997, the Company announced a stock repurchase program pursuant
to which it could spend up to $1,500,000, $750,000 per fiscal year, to purchase
shares of its outstanding common stock in the open market through June 30, 1998.
During fiscal 1998, the Company made no expenditures under the repurchase
program. The Company is currently authorized to spend up to $150,000 in fiscal
1999 to purchase shares of its outstanding common stock in the open market or
otherwise.

Impact of year 2000.  The Company is currently working to resolve the potential
impact of the year 2000 on the processing of time-sensitive information by its
computerized information systems.  Year 2000 issues may arise if computer
programs have been written using two digits (rather than four) to define the
applicable year.  In such case, programs that have time-sensitive logic may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations or system failures.  Management is in the
process of completing a review of significant software and equipment used in the
Company's operations and, to the extent practicable, in the operations of its
key business partners, in order to determine if any year 2000 risks exist that
may be material to the Company as a whole. The Company has obtained written
assurance from several material customers who

                                      -35-
<PAGE>
 
ITEM 7.  (Continued)

expect to be year 2000 compliant in time. The Company estimates that repairing
all time sensitive hardware and software will cost the Company approximately
$240,000. These costs will be expensed as incurred. This process includes an
assessment of year 2000 risks on an ongoing basis to alter, validate, or replace
time sensitive software. The costs associated with this process include
independent verification and validation of the systems during the testing and
implementation phases. If the Company, its customers or vendors are unable to
resolve such processing issues in a timely manner, it could result in a material
financial risk. Accordingly, management plans to devote the resources it
concludes are appropriate to resolve all significant year 2000 issues in a
timely manner; and as such, the Company has not developed a year 2000
contingency plan.


CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

Except for the historical information contained herein, the matters discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business", and "Market for The Registrants Common Equity and
Related Stockholder Matters" are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievement of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: Changes in public
tastes, industry trends and demographic changes, which may influence the
distribution and exhibition of films in certain areas; public reaction to and
acceptance of the Company's video, theatrical and television product, which will
impact the Company's revenues; competition, including competition from major
motion picture studios, which may affect the Company's ability to generate
revenues; reliance on management and key personnel; consolidation in the retail
video industry; whether the Company's current strategy which includes theatrical
releases of only specialized films and production and acquisition of made for
television product is successful; new methods of distributing motion pictures;
whether the Company will be able to maintain listing on the NASDAQ National 
Market; the costs and risks associated with the Year 2000 issue; and other 
factors referenced in this Form 10-K

                                      -36-
<PAGE>
 
ITEM 7.  (Continued)

and the Company's other filings with the Securities and Exchange Commission.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
           RISK

The Company does not consider the potential loss of future earnings caused by
interest rate volatility to have a material impact on its financial position.

                                      -37-
<PAGE>
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                       REPORT OF INDEPENDENT ACCOUNTANTS
                                        

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF TRIMARK HOLDINGS, INC.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) on page 59 present fairly, in all material respects,
the financial position of Trimark Holdings, Inc. and its subsidiaries at June
30, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1998, in conformity with
generally accepted accounting principles.  In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 14(a) on
page 58 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.  These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

As discussed in Note 5 to the consolidated financial statements, the Company
amended its credit facility on March 31, 1998.  Management's commitments to the
lending banks with respect to the amended credit facility are also described in
Note 5.

PRICEWATERHOUSECOOPERS LLP



Century City, California
September 18, 1998

                                      -38-
<PAGE>
                            TRIMARK HOLDINGS, INC.

                          CONSOLIDATED BALANCE SHEETS
                   ----------------------------------------
                   (Dollars in Thousands, Except Share Data)

<TABLE> 
<CAPTION> 
                                                                        June 30,          June 30,
                                                                          1998              1997
                                                                      ------------      ------------
<S>                                                                 <C>               <C> 
               Assets                                     
               ------                                     

Cash and cash equivalents                                           $       1,159     $       3,665
Accounts receivable, less allowances of                   
 $6,005 and $4,010, respectively                                           16,568            23,124
Film costs, net (Note 3)                                                   65,064            57,293
Deferred marketing costs                                                    1,963             1,696
Inventories, net (Note 2)                                                   1,190               650
Property and equipment at cost, less accumulated          
 depreciation of $2,433 and $2,049, respectively (Note 2)                     741               808
Due from officers (Note 12)                                                   780               662
Other assets                                                                1,755             2,325
                                                                      ------------      ------------
                                                                    $      89,220     $      90,223
                                                                      ============      ============
         Liabilities and Stockholders' Equity             
         ------------------------------------             
Revolving line of credit (Note 5)                                   $      57,250     $      57,700
Accounts payable and accrued expenses (Note 4)                              8,060             7,575
Minimum guarantees and royalties payable                                    7,623             3,391
Deferred income                                                             1,100             1,283
Income taxes payable (Note 6)                                                  43                65
                                                                      ------------      ------------
     Total liabilities                                                     74,076            70,014
                                                                      ------------      ------------
Commitments and contingencies (Note 9)                                        --                --
                                                                      ------------      ------------
Stockholders' equity:
  Common stock, $.001 par value.  Authorized
    20,000,000 shares; 5,134,827 shares issued
    at June 30, 1998 and 5,099,081 shares
    issued at June 30, 1997                                                      5                 5
   Additional paid in capital                                               15,588            15,474
   Preferred stock, $.01 par value.  Authorized                  
    2,000,000 shares; no shares issued and                       
    outstanding                                                                --                --
   Retained earnings                                                         3,981             9,160
   Less treasury shares, at cost - 952,200 shares                
    and 952,200 shares (Note 8)                                             (4,430)           (4,430)
                                                                       ------------      ------------
     Stockholders' equity                                                   15,144            20,209
                                                                       ------------      ------------
                                                                     $      89,220     $      90,223
                                                                       ============      ============

</TABLE> 

          See accompanying notes to consolidated financial statements


                                     -39-
<PAGE>
                            TRIMARK HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
            ------------------------------------------------------
                 (Amounts in Thousands, Except Loss Per Share)
<TABLE> 
<CAPTION> 
                                                                          Year Ended June 30,
                                                                   ----------------------------------
                                                                      1998        1997        1996
                                                                   ----------   ---------   ---------
<S>                                                                <C>          <C>         <C> 
Net revenues (Note 2)                                               $ 80,150    $ 63,165    $  59,832
                                                                                              
Film costs and distribution expenses (Note 2)                         67,089      53,421       57,495
                                                                    --------    --------    ---------
    Gross profit                                                      13,061       9,744        2,337
                                                                    --------    --------    ---------
Operating expenses:                                                                           
  Selling                                                              7,461       6,857        6,352
  General and administrative                                           5,100       4,239        5,447
  Bad debt                                                             1,109         321           31
                                                                    --------    --------    ---------
                                                                      13,670      11,417       11,830
                                                                    --------    --------    ---------
    Operating earnings (loss)                                           (609)     (1,673)      (9,493)
                                                                                              
Other (income) expenses:                                                                      
  Interest expense                                                     4,443       1,934          847
  Interest and investment income                                        (172)        (84)         (95)
  Minority interest                                                       --          --          (38)
                                                                    --------    --------    ---------
                                                                       4,271       1,850          714
                                                                    --------    --------    ---------
    Loss before income taxes                                          (4,880)     (3,523)     (10,207)
                                                                                              
Income taxes (Note 6)                                                    299          --       (2,380)
                                                                    --------    --------    ---------
     Net loss                                                       $ (5,179)   $ (3,523)   $  (7,827)
                                                                    ========    ========    =========
      Weighted average number of common shares                                               
       basic and diluted (Note 2)                                      4,183       4,217        4,284
                                                                    ========    ========    =========
     Net loss per common share basic                                                         
      and diluted (Note 2)                                          $  (1.24)   $  (0.84)   $   (1.83)
                                                                    ========    ========    =========
</TABLE> 

          See accompanying notes to consolidated financial statements

                                     -40-
<PAGE>

                            TRIMARK HOLDINGS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               -------------------------------------------------
                            (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                 Common Stock
                                          -------------------------     Additional                                   Total
                                                                         paid in      Retained       Treasury    stockholders'
                                             Shares         Amount       capital      earnings         stock        equity
                                          -------------    --------     ---------     ---------      ---------   -------------
<S>                                       <C>              <C>          <C>           <C>            <C>         <C>
Balance, June 30, 1995                       4,321,981           5        15,351        20,510         (3,294)         32,572

Purchase of treasury stock (Note 8)            (55,750)                                                  (429)           (429)

Exercise of stock options                        8,500                        34                                           34

Net loss                                                                                (7,827)                        (7,827)
                                          -------------    --------     ---------     ---------      ---------   -------------
Balance, June 30, 1996                       4,274,731           5        15,385        12,683         (3,723)         24,350
                                          -------------    --------     ---------     ---------      ---------   -------------

Purchase of treasury stock (Note 8)           (162,350)                                                  (707)           (707)

Exercise of stock options                       34,500                        89                                           89

Net loss                                                                                (3,523)                        (3,523)
                                          -------------    --------     ---------     ---------      ---------   -------------
Balance, June 30, 1997                       4,146,881           5        15,474         9,160         (4,430)         20,209
                                          -------------    --------     ---------     ---------      ---------   -------------

Purchase of treasury stock (Note 8)                                                                                         --

Exercise of stock options                       35,746                       114                                          114

Net loss                                                                                (5,179)                        (5,179)
                                          -------------    --------     ---------     ---------      ---------   -------------
Balance, June 30, 1998                       4,182,627     $      5     $  15,588     $   3,981      $  (4,430)  $      15,144
                                          =============    ========     =========     =========      =========   =============
</TABLE>

          See accompanying notes to consolidated financial statements

                                     -41-
<PAGE>
                            TRIMARK HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   -----------------------------------------
                            (Dollars in Thousands)
<TABLE> 
<CAPTION> 
                                                                      Twelve Months Ended
                                                                      Year Ended June 30,
                                                           ---------------------------------------
                                                              1998           1997          1996
                                                           ----------     ----------    ---------- 
                                                                          (Unaudited)
<S>                                                        <C>            <C>           <C> 
Operating activities:
  Net loss                                                 $   (5,179)    $   (3,523)   $   (7,827)
  Adjustments to reconcile net loss to                                                                          
   net cash used by operating activities:                                                                       
    Film amortization                                          44,976         39,514        36,561
    Depreciation and other amortization                           384            300           275
    Provision for returns and bad debt                          1,995           (259)         (650)
    Provision for inventory obsolescence                          (11)          (494)          202
    Minority interest in net loss                                                --            (38)
    Change in operating assets and liabilities:                                                   
      Decrease (Increase) in accounts receivable                4,561        (10,408)        9,622
      Additions to film costs                                 (52,747)       (66,954)      (32,022)
      (Increase) decrease in deferred marketing costs            (267)          (172)        1,068
      (Increase) decrease in inventories                         (529)           468          (284)
      Increase in notes receivable from officers                 (118)          (662)          --
      Decrease (Increase) in other assets                         570            670          (159)
      (Decrease) increase in accounts payable and                                              
         accrued expenses                                         485          5,384        (1,180)
      Increase (decrease) in minimum guarantees and                                               
         royalties payable                                      4,231         (1,248)       (3,648)
      Decrease in income taxes payable                            (22)           (12)       (1,042)
      (Decrease) increase in deferred income                     (183)          (861)          146
                                                           ----------     ----------    ----------
       Net cash (used) provided by operating activities        (1,854)       (38,257)        1,024
                                                           ----------     ----------    ----------
Investing activities:                                                                             
  Acquisition of property and equipment                          (316)          (504)          (20)
                                                           ----------     ----------    ----------
       Net cash used by investing activities                     (316)          (504)          (20)
                                                           ----------     ----------    ----------
Financing activities:                                                                             
  Net (decrease) increase in revolving line of credit            (450)        42,700        (2,000)
  Exercise of stock options                                       114             89            34
  Purchase of treasury stock                                      --            (707)         (429)
                                                           ----------     ----------    ----------
       Net cash (used) provided by financing activities          (336)        42,082        (2,395)
                                                           ----------     ----------    ----------
                                                                                                  
  (Decrease) increase in cash and cash equivalents             (2,506)         3,321        (1,391)
                                                                                                  
Cash and cash equivalents at beginning of period                3,665            344         1,735
                                                           ----------     ----------    ----------
Cash and cash equivalents at end of period                 $    1,159     $    3,665    $      344
                                                           ==========     ==========    ==========
</TABLE> 


          See accompanying notes to consolidated financial statements


                                     -42-
<PAGE>
 
                             TRIMARK HOLDINGS, INC.
                                        
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        

NOTE 1 - THE COMPANY:
---------------------

Trimark Holdings, Inc., a Delaware corporation (the "Company"), is a broad-based
entertainment company which distributes and licenses motion pictures in the
international and domestic arena through its wholly owned subsidiaries Trimark
Pictures, Inc. and Trimark Television, Inc.  The significant business activities
of the Company constitute one business segment, filmed entertainment.  The
Company is primarily engaged in the distribution of feature films for the
domestic home video market, domestic theatrical and television markets, and in
the licensing of distribution rights to motion pictures for foreign markets.  As
an independent distribution company, the Company acquires distribution rights
from a wide variety of studios, production companies and independent producers.

In March of 1993, the Company formed Trimark Interactive to expand the core
business of film production and video distribution into the emerging market for
interactive entertainment software and multimedia.  The results of operations of
Trimark Interactive have been included in the Company's consolidated financial
statements since April 1, 1993.  Trimark Holdings, Inc. increased its ownership
of Trimark Interactive from 80% to 90% in fiscal 1995.  In March 1997, the
Company sold substantially all assets (primarily intellectual properties and
inventory) of Trimark Interactive to an unrelated independent entertainment and
interactive music publisher.  In consideration for the assets sold the Company
received 237,037 shares of non-registered convertible preferred stock in the
acquiring company.  The convertible preferred shares can be converted into
237,037 shares of common stock of the acquiring company and carry a mandatory
three year redemption value of $800,000 if not converted prior to three years.
The consideration received was determined by arms length negotiation and advice
from an investment banking firm retained by the Company. Due to the uncertainty
of realizing any value from the convertible preferred stock the Company is
carrying the stock at a zero value.  No gain or loss was recognized from the
sale of the assets.  The Company is no longer engaged in the market for
interactive entertainment software and multimedia.

                                      -43-
<PAGE>
 
NOTE 1 - (Continued)
--------------------

On June 1, 1992, the Company changed its name from Vidmark, Inc. to Trimark
Holdings, Inc.  Certificates that previously represented shares of Vidmark
common stock now represent an equal number of shares of Trimark Holdings, Inc.
common stock.

Purple Tree Productions, Inc., Cheap Date, Inc., Loving Gun Productions, Inc.
and Writers on the Wave are wholly-owned subsidiaries of the Company, which were
formed for the sole purpose of producing motion pictures.  Trimark Music, a
wholly-owned subsidiary of the Company, was formed for the purpose of exploiting
revenues from music rights owned by the Company.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
----------------------------------------------------

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries.  The minority interest separately disclosed
herein reflects the non-Company owned shareholder interest in Trimark
Interactive.  All significant intercompany balances and transactions have been
eliminated.

Unclassified Consolidated Balance Sheet
---------------------------------------

In accordance with the provisions of Statement of Financial Accounting Standards
No. 53 ("SFAS 53"), the Company has elected to present an unclassified
consolidated balance sheet.

Accounting Estimates
--------------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from these estimates

Net Revenues
------------

Home video revenues are recognized, net of allowances for estimated returns, as
products are shipped to customers.  Revenues from licenses of films to foreign
territories and domestic television are recognized when the films are made

                                      -44-
<PAGE>
 
NOTE 2 - (Continued)
--------------------

available to sub-distributors and other terms of the license agreements are
satisfied.  Revenues from theatrical distribution of films are recognized when
films are exhibited.

Film Costs
----------

Film costs primarily represent capitalized theatrical print and advertising
expenditures and the acquisition of film rights from producers for a guaranteed
minimum payment, with the producer retaining a participation in the profits of
the property.  The producer's share of the profits is retained by the Company
until it equals the amount of the guarantee, after which the excess is paid to
the producer.  In these instances, the Company records as participation expense
an amount equal to the producer's share of the profits.  The print and
advertising expenditures and guaranteed minimum payments are capitalized and
amortized using the individual-film-forecast-computation method in accordance
with SFAS 53.

Cash
----

Cash includes cash equivalents.  The Company considers all highly  liquid
investments purchased with a maturity of three months or less to be cash
equivalents.  The carrying value of the company's cash equivalents approximate
fair value due to their short nature.

Allowance for Doubtful Accounts
-------------------------------

The allowance for doubtful accounts charged to expense was $1.1 million for
fiscal 1998, $321,000 for 1997, and $31,000 for 1996.

Inventories
-----------

Inventories, net of an allowance for excess quantities and obsolescence, are
stated at the lower of cost or market using a first-in/first-out (FIFO) method
of accounting.

Property and Equipment
----------------------

Property and equipment is stated at cost net of depreciation.  Depreciation of
property and equipment is computed using the straight-line method, based on
estimated useful lives of three to seven years.

                                      -45-
<PAGE>
 
NOTE 2 - (Continued)
--------------------

Royalties Payable
-----------------

Payable to producers represents an accrual on a film-by-film basis of the
producers' share of revenues recognized by the Company net of the recoupable
costs incurred by the Company.  The producers' share of revenue is expensed in
conjunction with the amortization of film costs.

Interest
--------

Costs associated with the maintenance of debt are charged to expense and or
capitalized to the extent debt is used for productions.

Net Loss Per Common Share
-------------------------

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share," ("SFAS 128") which
is effective for periods ended after December 15, 1997.  The Company adopted
SFAS 128 in fiscal year 1997.  SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.

Basic loss per common share amounts are based on the weighted average number of
common shares outstanding during the respective periods.  Dilutive loss per
common share amounts are based on the weighted average common shares outstanding
during the period and shares assumed issued upon conversion of stock options
when the effect of such conversions would have been dilutive to net loss.  There
is no assumed conversion of stock options for fiscal 1998, fiscal 1997 and
fiscal 1996 as the effect would be anti-dilutive.

Prior period amounts have been restated to conform to SFAS No. 128.  The table
below presents a reconciliation of weighted average shares used in the
calculation of basic and diluted net loss per common share:

                                      -46-
<PAGE>
 
NOTE 2 - (Continued)
--------------------
<TABLE>
<CAPTION>
                                                            Year ended June 30,
                                          1998                    1997                      1996
                                 -------------------     --------------------      --------------------
<S>                                 <C>                     <C>                       <C>
                                                              (in thousands)
Basic shares - weighted average
 of common shares outstanding                  4,183                    4,217                     4,284
  
Additional shares assuming
 conversions of stock options                     --                       --                        --
                                 -------------------     --------------------      --------------------  
                                               4,183                    4,217                     4,284 
                                 -------------------     --------------------      --------------------  
                                
</TABLE>


Recent Pronouncements
---------------------

In June 1997, the FASB issued SFAS 130, "Reporting for Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997.  The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements.  Comprehensive income consists of net income
and other gains and losses affecting stockholder's equity that, under generally
accepted accounting principles, are excluded from net income, such as unrealized
gains and losses on investments available for sale, foreign currency translation
gains and losses and minimum pension liability.  The Company will adopt SFAS 130
in 1999 and does not expect that the adoption will have a material effect on its
financial statements.

In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information", ("SFAS 131") effective for fiscal years
beginning after December 15, 1997.  The new rules establish revised standards
for public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements.  The Company
will adopt SFAS 131 in 1999 and does not expect that the adoption will have a
material effect on its financial statements.

                                      -47-
<PAGE>
 

NOTE 3 - FILM COSTS:
--------------------

Film costs, net of amortization, consist of the following:

<TABLE>
<CAPTION>
                                                                         June 30,
                                                      -------------------------------------------
                                                              1998                     1997
                                                      ------------------       ------------------
                                                                      (in thousands)
<S>                                                      <C>                      <C>
Released                                                          50,541                  $32,159
Completed not released                                             3,419                    7,045
In process and development                                        11,104                   18,089
                                                                 -------                  ------- 
                                                                 $65,064                  $57,293
                                                                 -------                  ------- 

Based on the Company's estimate of future revenues as of June 30, 1998,
approximately 95% of unamortized released film costs will be amortized during
the next three years.


NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
-----------------------------------------------


<CAPTION>
                                                                        June 30,
                                                    ---------------------------------------------   
                                                              1998                      1997
                                                    ------------------      ---------------------
<S>                                                    <C>                        <C>
                                                                     (in thousands)
Accounts payable                                                  $ 7,811                   $2,178
Accrued marketing costs                                             1,963                    5,159
Accrued other expenses                                                248                      238
                                                                  -------                  ------- 
                                                                  $10,022                   $7,575
                                                                  -------                  -------  
</TABLE>


NOTE 5 - DEBT:
--------------

The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., have a $75 million revolving credit facility with a
consortium of banks agented and arranged by The Chase Manhattan Bank expiring on
December 20, 2000.  Under the credit agreement, the Company may borrow for
various corporate purposes provided that the aggregate borrowings do not exceed
the borrowing base, as defined in the Credit Agreement, which is derived from
specified percentages of approved accounts receivable and film library.  The
credit agreement is guaranteed by the Company and secured by substantially all
of the assets of the Company and its significant subsidiaries.  Loans
outstanding under the credit facility bear interest at the rate of 1.25% above
Chase Manhattan's prime rate (8.5% at June 30, 1998) or 2.25% above the London
Interbank offered rate for the loan term specified.  An unused commitment fee is
payable on the average

                                      -48-
<PAGE>
 
NOTE 5 - (Continued)
--------------------

unused availability under the credit facility, at the rate of 0.3725% per annum.
As of June 30, 1998 there was $57.25 million outstanding under the bank
facility.

The Credit Facility is collateralized by a security interest in substantially
all of the Company's assets and contains various covenants including, among
other provisions, the maintenance of a minimum consolidated tangible net worth
and certain financial ratios.  For the quarter ended December 31, 1997 the
Company was in violation of certain of these covenants, however the Banks
granted a waiver of these violations and amended the net worth covenant for the
duration of the Credit Facility. The amendment to the Credit Facility included
certain additional covenants including the limitation of the outstanding debt
balance until certain financial ratios are met.

The Company's ability to maintain availability under its Credit Facility is
primarily dependent upon the timing of collections on existing sales during the
next twelve months and the amount and timing of collection on anticipated sales
of the Company's current library and films which the Company plans to release or
make available over the next twelve months. Management believes that existing
capital, cash flow from operations and availability under the Company's amended
Credit Facility will be sufficient to enable the Company to fund its planned
productions, acquisitions, distribution and overhead expenditures for the next
twelve months. In the event that the Company's sales and collections during the
next twelve months are less than currently anticipated, the Company will need to
either alter planned productions, acquisitions, and distribution activities,
seek additional availability under its current Credit Facility or seek alternate
sources of financing. There can be no assurance, however, that such additional
capital will be available or available on terms advantageous to the Company.

In connection with the credit facility, the Company has capitalized debt
issuance costs as other assets which are being amortized on a straight line
basis over the term of the agreement.

                                      -49-
<PAGE>
 

NOTE 6 - INCOME TAXES:
----------------------

Consolidated loss before income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                  Year ended
                                                                   June 30,
                                          1998                      1997                       1996
                                 -------------------      --------------------       --------------------
                                                               (in thousands)
<S>                                 <C>                      <C>                        <C>
Domestic                                     ($4,291)                  ($5,372)                  ($11,872)
Foreign                                         (589)                    1,849                      1,665
                                            --------                   -------                   -------- 
                                             ($4,880)                  ($3,523)                  ($10,207) 
                                            --------                   -------                   -------- 

 
The provision for income taxes is summarized as follows:
                                                                 Year ended
                                                                  June 30,
                                                1998                1997                             1996
                                 -------------------      --------------------       --------------------
                                                               (in thousands)
Current
  Federal                                     $   --                $       --                    ($4,657)
  State                                           15                        16                       (453)
  Foreign                                        284                       433                        539
                                              ------                ----------                   -------- 
                                                 299                       449                     (4,572)
                                              ------                ----------                   -------- 
Deferred
  Federal                                         --                      (684)                     1,972
  State                                           --                       235                        219
                                              ------                ----------                   -------- 
                                                  --                      (449)                     2,191
                                              ------                ----------                   -------- 
                                               $ 299                $       --                   ($2,380)
                                              ------                ----------                   -------- 
</TABLE>

The components of the deferred tax assets and liabilities are summarized as
follows:

<TABLE>
<CAPTION>
                                                                     Year ended June 30,
                                                      ---------------------------------------------
                                                               1998                      1997
                                                      -------------------       -------------------
<S>                                                      <C>                       <C>
                                                                       (in thousands)
Deferred Tax Assets:
  Net operating loss carryforward                                 $ 7,620                   $ 7,232
  Foreign tax credit carryforward                                   2,095                     2,095
  Reserves and allowances                                           1,297                       816
  Bad debts                                                         1,041                       768
  Deferred income                                                     489                       418
  State income taxes                                                    8                        39
  Other                                                               205                       145
                                                                  -------                   -------
                                                                   12,755                    11,513
</TABLE> 
 

                                      -50-
<PAGE>
 
<TABLE> 

NOTE 6 - (Continued)
--------------------
<S>                                                  <C>                           <C> 
Deferred Tax Liabilities:
  Film cost amortization                                           (5,331)                   (5,519)
  State taxes                                                          --                        --
                                                                  -------                   ------- 
Net deferred tax asset before
  valuation allowance                                               7,424                     5,994
Valuation allowance                                                (7,478)                   (6,045)
                                                                  -------                   ------- 
    Net deferred tax (liability)
      asset                                                       ($   54)                  ($   51)
                                                                  -------                   -------  

</TABLE>

A reconciliation of the federal statutory tax rate to the Company's effective
tax rate is as follows:


<TABLE>
<CAPTION>
                                                                       Year ended June 30,
                                             ------------------------------------------------------------------
                                                      1998                    1997                     1996
                                             -----------------        ----------------        -----------------
<S>                                             <C>                      <C>                     <C>
Federal income tax rate                                 (34.0 %)                (34.0 %)                 (34.0 %)
State taxes, net of
 federal income tax benefit                              (0.2)%                   4.7 %                   (1.5 %)
Foreign taxes, net of
 federal income tax benefit                                5.8%                   8.1%                      --
Meals and entertainment
 disallowance                                              1.0%                   1.2 %                    0.5 %
Utilization of loss
 carryforward                                               --                     --                       --
Valuation Allowance                                       29.4%                  19.5 %                   11.8 %
Other                                                      3.8%                   0.5 %                   (0.2 %)
                                                        -------               ------- 
                                                           6.1%                   0.0 %                  (23.4 %)
                                                        -------               -------                    -----
</TABLE>

The net increase of approximately $1.4 million in the valuation allowance is
primarily attributable to the establishment of reserves against the current year
net operating loss ("NOL").  For federal income tax purposes, NOLs may be
carried forward 15 years, or until such time as they are fully utilized.  For
California purposes NOLs may be carried forward for 5 years or until such time
as they are fully utilized.  The valuation allowance was established as a result
of the uncertainty of the utilization of the current year NOLs.

As a result of the acquisition of Trimark Television (formerly IBS) by the
Company, approximately $5.5 million in federal income tax NOLs were acquired.
The NOLs expire in the years 2004-2006.  The Internal Revenue Code of 1986, as
amended, imposes

                                      -51-
<PAGE>
 
NOTE 6 - (Continued)
--------------------

substantial limitations on the use of NOL carryforwards acquired in such an
acquisition. Accordingly, a valuation allowance has been established related to
the Federal income tax NOL's acquired from Trimark Television in prior
years and the related balance at June 30, 1998 is approximately $2.6 million.

As of June 30, 1998, the deferred tax liability balance of $54,000 and current
income taxes receivable of $10,000 is included in income taxes payable. At June
30, 1997, a deferred tax liability balance of $51,000 and a current income taxes
payable balance of $13,500 were included in income taxes payable.


NOTE 7 - STOCK OPTIONS:
-----------------------

Under the Company's stock option plans, employees and directors may be granted
nonqualified stock options ("options").  Generally, options are exercisable
contingent upon the grantee's continued employment with the Company and
generally have been granted with an exercise price equal to the fair market
value of the underlying Common Stock on the date of grant.  Each option is
granted subject to various terms and conditions established on the date of
grant, including vesting periods and expiration dates.  The options typically
become exercisable at the rate of 33.3% annually, beginning one year after the
date of grant.  Options generally expire 10 years after the date of grant.  As
of June 30, 1998 and 1997, a total of 979,369 options had been approved for
issue under employee option plans and other arrangements.  As of June 30, 1998
and 1997, a total of 40,000 options had been approved for issue under the
director option plan.  Stock option data follows:


<TABLE>
<CAPTION>
                                                     1998                                1997                         1996
                                     --------------------------------  -------------------------------- ---------------------------
                                                         Weighted                            Weighted                     Weighted
                                                         Average                             Average                       Average
                                                         Exercise                            Exercise                     Exercise 
                                         Shares           Price            Shares             Price       Shares           Price    
                                     --------------  ---------------   --------------    --------------  ------------ -------------
<S>                                     <C>              <C>              <C>                   <C>           <C>    
Outstanding at July 1                   691,809             $5.20           715,476            $5.30       552,910           $6.33
    Granted                              13,500             $5.22            83,500            $5.73       360,100           $5.32
    Exercised                           (35,746)            $3.20           (34,500)           $2.59        (8,500)          $4.01
    Purchased                           (20,000)            $4.09                --               --            --           --
    Terminated                          (66,604)            $5.95           (72,667)           $8.05      (189,034)          $8.87
                                     ----------                          ----------                      ---------  
Outstanding at June 30                  582,959             $5.28           691,809            $5.20       715,476           $5.30
                                     ==========                           =========                      =========  
Exercisable at June 30                  441,408             $5.25           438,559            $5.11       445,965           $5.01
                                     ==========                           =========                      =========      
Available for grant at                                                                                                       
   June 30                              272,265                             199,161                        209,994     
                                     ==========                           =========                      =========      
</TABLE>

                                      -52-
<PAGE>
 
During fiscal 1998, the Board authorized the purchase of 20,000 shares from a
former employee at a negotiated price.

The following table summarizes information concerning outstanding and
exercisable stock options at June 30, 1998:

<TABLE>
<CAPTION>
                                           Options Outstanding                          Options Exercisable
                   -----------------------------------------------------     -----------------------------------
                                         Weighted   
                                          Average    
                                         Remaining          Weighted                               Weighted 
 Range of                               Contractual          Average                                Average
 Exercise             Number              Life in           Exercise              Number           Exercise 
  Prices             of Shares             Years             Price              of Shares           Price           
-------------      -----------        --------------    ---------------        -----------       ----------- 
<S>                  <C>              <C>                <C>                 <C>                <C>
$ 3.50 - $5.50        487,959                  6.56               $4.90            365,408             $4.86
$6.25 - $11.50         95,000                  7.11               $7.21             76,000             $7.12
                     --------                ------               -----            -------            ------  
$3.50 - $11.50        582,959                  6.65               $5.28            441,408             $5.25
                     ========                ======               =====            =======            ======
</TABLE>

The Company has adopted SFAS No. 123, "Accounting of Stock-Based Compensation,"
which establishes a fair value based method of accounting for compensation cost
related to stock option plans and other forms of stock-based compensation plans,
by providing the pro forma disclosures as if the fair value based method had
been applied for the current period and prior comparable period.  In accordance
with SFAS No. 123, the Company applies the intrinsic value based method of
accounting defined under Accounting Principles Board Opinion No. 25 and
accordingly, does not recognize compensation expense for its plans.

Had compensation cost for the plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's pretax and after tax income would decrease by
$457,000 or $0.11 per share, $440,000 or $0.10 per share and $136,000 or $0.03
per share in fiscal 1998, fiscal 1997 and fiscal 1996, respectively.  These pro
forma amounts may not be representative of future disclosures since the
estimated fair value of stock options is amortized to expense over the vesting
period, and additional options may be granted in future years.

The weighted average fair value of each option as of the grant date was $2.97,
$3.41 and $4.15 for fiscal 1998, fiscal 1997 and fiscal 1996, respectively.  The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:

                                      -53-
<PAGE>
 
<TABLE>
<CAPTION>
                                                      fiscal 1998                 fiscal 1997                 fiscal 1996
                                               ----------------------      ----------------------      ----------------------
<S>                                               <C>                         <C>                         <C> 
Expected dividend yield (a)                                --                          --                          --
Expected stock price volatility                         78.45%                      81.42%                      81.42%
Risk-free interest rate                                  5.37%                       6.40%                       6.36%
Expected life of options (years)                         5.48                        5.94                        5.94
</TABLE>

(a) During fiscal 1998, 1997 and 1996, the Company did not declare any cash
    dividends on its common stock.  The Company does not have any present
    intention to declare a dividend on its common stock in the foreseeable
    future.


NOTE 8 - TREASURY STOCK:
------------------------

On February 21, 1997, the Company announced a stock repurchase program pursuant
to which it could spend up to $1,500,000, $750,000 per fiscal year, to purchase
shares of its outstanding common stock in the open market through June 30, 1998.
During fiscal 1998, the Company did not purchase any shares under the repurchase
program.  During fiscal 1997, the Company spent approximately $707,000 to
purchase 162,350 shares under the repurchase program.

On December 6, 1994, the Company announced a stock repurchase program pursuant
to which it could buy up to $1,250,000 of its outstanding common stock in the
open market.  During fiscal 1996, the Company spent approximately $429,094 to
purchase 55,750 shares under the repurchase program.

At June 30, 1998, the Company held 952,200 shares of treasury stock.


NOTE 9 - COMMITMENTS AND CONTINGENCIES:
---------------------------------------

The Company has entered into certain agreements which provide for guaranteed
royalty advances and promotional and advertising payments totaling $11.1
million.  If the provisions of these agreements are not met by the licensors,
the Company may withdraw from the arrangements.  These commitments extend to
January 1999.

As of June 30, 1998, the Company had an operating lease for its corporate office
space for a remaining term of ten months.  Rent expense was $433,000 for the
year ended June 30, 1998 and 

                                      -54-
<PAGE>
 
$368,000 and $363,000 for the years ended June 30, 1997 and 1996, respectively.

The future minimum rental commitments as of June 30, 1998 are as follows (in
thousands):

<TABLE>
<CAPTION>
                      Year Ended
                       June 30,
                   ------------------
<S>                                               <C>
                         1998                      $360
                         1999                        --
                         2000                        --
                         2001                        --
                      Thereafter                     --
                                                   ----
                                                   $360
                                                   ----
</TABLE>


NOTE 10 - MAJOR CUSTOMERS:
--------------------------

For the years ended June 30, 1998, 1997 and 1996, Ingram, the Company's major
customer, accounted for 15%, 12% and 12% of net revenues, respectively.  For the
year ending June 30, 1996 East Texas accounted for 10% of net revenues.  With
regard to foreign distribution net revenues, there are no individual geographic
areas that account for more than 10% of total net revenues.

In carrying out its film distribution activities, the Company grants credit to
customers, primarily all of whom are in the film distribution segment of the
entertainment industry.  This customer base is sufficiently diversified by
number of customers, channels of distribution (theatrical exhibition, video
distribution, pay television, cable television and other) and geographic
location to prevent any undue risk related to concentration of credit.


NOTE 11 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
------------------------------------------------------------

Cash paid during the year for:

<TABLE>
<CAPTION>
                                                               Year ended June 30,
                                       ----------------------------------------------------------------
                                               1998                    1997                    1996
                                       -----------------       -----------------       -----------------
<S>                                       <C>                     <C>                     <C>
                                                                  (in thousands)
Interest                                          $4,931                  $2,593                  $1,186
Income Taxes                                         323                     433                   1,322
</TABLE>

                                      -55-
<PAGE>
 
NOTE 11 - (Continued)
---------------------

Interest costs capitalized as film costs in fiscal 1998, fiscal 1997 and fiscal
1996 were $1,031,000, $935,000 and $396,000, respectively.

NOTE 12 - DUE FROM OFFICERS:
----------------------------

Notes receivable from officers are secured by Trimark Holdings stock which
equaled at least 200% of the outstanding loan amounts at the time the original
notes were executed.  The loans bear interest at the Company's weighted average
cost of capital and interest is due quarterly.  One loan was outstanding as of
June 30, 1998 which is due on June 30, 2000.

                                      -56-
<PAGE>
 
                                                                     SCHEDULE II



                             TRIMARK HOLDINGS, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
 
 
                                       Balance        Additions     Additions                   Balance
                                    at Beginning     Charged to     Charged to                  at End
 Description                         of Period        Expense      Net Revenues   Deductions   of Period
 -------------                      ----------      ----------     ------------   ----------   ---------
<S>                                  <C>              <C>          <C>            <C>          <C> 
Provision for returns and
 bad debts (1):
  Year Ended June 30, 1996            $4,919         $ 30            ($501)        $179  (2)     $4,269
  Year Ended June 30, 1997             4,269          321               72          652  (2)      4,010
  Year Ended June 30, 1998             4,010        1,109            1,092          206  (2)      6,005

Provision for inventory
 obsolescence:
  Year Ended June 30, 1996               618          202               --           --             820
  Year Ended June 30, 1997               620           --               --         (494)            326
  Year Ended June 30, 1998               326           --               --          (28)            298
</TABLE> 
___________________________


(1) Returns are reflected in net revenues and bad debt expense is recorded
    separately in the statement of operations.

(2)  Doubtful receivables written-off, net of recoveries.

                                      -57-
<PAGE>
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning directors and executive officers is incorporated herein
by reference from the sections entitled "Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Registrant's 1998 Proxy
Statement.


ITEM 11.  EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by
reference from the sections entitled "Executive Compensation and Related
Matters," "Compensation Committee Interlocks and Insider Participation,"
"Compensation Committee and Stock Option and Stock Appreciation Rights Plan
Committee Report on Executive Compensation" and "Stock Performance" in the
Registrant's 1998 Proxy Statement.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the section entitled
"Security Ownership of Certain Beneficial Owners and Management" in the
Registrant's 1998 Proxy Statement.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED MATTERS

Information concerning certain relationships and related transactions is
incorporated herein by reference from the section entitled "Executive
Compensation and Related Matters" in the Registrant's 1998 Proxy Statement.

                                      -58-
<PAGE>
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Financial Statements included in Part II of this report:

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                  ----------
<S>                                                                               <C>
Report of Independent Accountants                                                      38
Consolidated Balance Sheets at June 30, 1998 and 1997                                  39
For the years ended June 30, 1998, 1997 and 1996:
  Consolidated Statements of Operations                                                40
  Consolidated Statements of Stockholders' Equity                                      41
  Consolidated Statements of Cash Flows                                                42
  Notes to Consolidated Financial Statements                                        43-56
Financial Statement Schedules:
  II. Valuation and Qualifying Accounts                                                57
</TABLE>


All other schedules have been omitted either as inapplicable or not required
under the instructions contained in Regulation S-X or because the information is
included in the financial statements or the notes thereto.

(b)  Reports on Form 8-K:

On May 26, 1998, the Company filed a Current Report on Form 8-K, under Item 5,
to file a corrected version of a recent credit agreement amendment.


(c)  Exhibits:

    (i) Except as noted, all Exhibits, numbered as they were numbered for filing
        as Exhibits to the Company's Form S-1 Registration Statement, No. 33-
        35053, effective June 26, 1990, are incorporated herein by this
        reference to such Registration Statements.  All filings were made at the
        Commission's office in Washington D.C.  The registrant's SEC file number
        is 0-18613:

<TABLE>
<CAPTION>

                  
Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------    
<S>                 <C>                                                                              
 2.1                Asset Purchase Agreement between the Registrant, Trimark Interactive, and
                    Graphix Zone, Inc. dated February 26, 1997.  15
</TABLE> 

                                      -59-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------    
<S>                 <C>                                                                              
 3.1                Certificate of Incorporation of the Registrant, as amended to date.  4
 
 3.2                By-laws of the Registrant, as amended.  8
 
 4.2                Form of Common Stock Certificate.  4
 
10.2                Stock Purchase and Option Agreement, dated as of September 1, 1987, as
                    amended, by and between Vidmark, Inc., a California corporation and Said
                    (Sam) Pirnazar.  +
 
10.4                Stock Purchase and Option Agreement, dated as of September 1, 1989, by and
                    between Vidmark, Inc., a California corporation and Said (Sam) Pirnazar.  +
 
10.13               1990 Stock Option and Stock Appreciation Rights Plan of the Registrant, as
                    amended.  13+
 
10.15               Amendment to Stock Option Agreements, dated as of May 17, 1990, by and
                    among the Registrant, Vidmark, Inc., a California corporation and Said
                    (Sam) Pirnazar.  +
 
10.22               Standard Office Lease - Gross, dated as of March 9, 1992, and amendments
                    thereto, by and between Vidmark, Inc., a California corporation and 2644
                    SM Partners, a California limited partnership.  4
 
10.25               Non-Qualified Stock Option Agreement dated December 5, 1991, by and
                    between the Registrant and Gordon Stulberg.  4+
 
10.29               Non-Qualified Stock Option Agreement dated December 2, 1992, by and
                    between the Registrant and Gordon Stulberg.  5+
 
10.32               Directors' Stock Option Plan of the Registrant.  13+
</TABLE> 

                                      -60-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------     
<S>                 <C> 
10.35               Technicolor Videocassette, Inc. Fulfillment Agreement with Trimark
                    Pictures, Inc. dated as of March 1, 1994, by and between Trimark Pictures,
                    Inc., a California corporation and Technicolor Videocassette, Inc.  7
 
10.38               Employment Agreement, dated February 11, 1994, by and between Trimark
                    Pictures, Inc., a California corporation and Timothy Swain.  8+
 
10.39               Employment Agreement, dated February 22, 1994, by and between Trimark
                    Pictures, Inc., a California corporation and Sergio Aguero.  8+
 
10.41               Non-Qualified Stock Option Agreement dated March 31, 1994, by and between
                    the Registrant and Timothy Swain.  8+
 
10.42               Non-Qualified Stock Option Agreement dated March 31, 1994, by and between
                    the Registrant and Sergio Aguero.  8+
 
10.43               Non-Qualified Stock Option Certificate dated January 14, 1994, by and
                    between the Registrant and Gordon Stulberg.  8+
 
10.45               Non-Qualified Stock Option Certificate dated January 14, 1995, by and
                    between the Registrant and Gordon Stulberg.  10+
 
10.46               Non-Qualified Stock Option Certificate dated January 14, 1995, by and
                    between the Registrant and Matthew Saver.  10+
 
10.47               Non-Qualified Stock Option Certificate dated January 14, 1995, by and
                    between the Registrant and Tofigh Shirazi.  10+
 
10.48               Non-Qualified Stock Option Agreement dated October 11, 1994, by and
                    between the Registrant and Barry Barnholtz.  10+
</TABLE> 

                                      -61-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------      
<S>                 <C> 
10.50               Letter amendment to Stock Option Agreements dated August 10, 1995 by and
                    between the Registrant and Said (Sam) Pirnazar.  10+
 
10.53               Non-Qualified Stock Option Agreement, dated January 30, 1996 by and
                    between the Registrant and Mark Amin.  11+
 
10.54               Amendment to Non-Qualified Stock Option Agreement, dated January 30, 1996
                    by and between the Registrant and Timothy Swain.  11+
 
10.55               Amendment to Non-Qualified Stock Option Agreement, dated January 30, 1996
                    by and between the Registrant and Barry Barnholtz.  11+
 
10.56               Amendment to Non-Qualified Stock Option Agreement dated March 31, 1994, by
                    and between the Registrant and Sergio Aguero.  12+
 
10.57               Non-Qualified Stock Option Agreement dated August 10, 1995, by and between
                    the Registrant and Sergio Aguero.  12+
 
10.58               Non-Qualified Stock Option Certificate dated January 14, 1996. by and
                    between the Registrant and Matthew Saver.  12+
 
10.59               Non-Qualified Stock Option Certificate dated January 14, 1996, by and
                    between the Registrant and Tofigh Shirazi.  12+
 
10.60               Non-Qualified Stock Option Certificate dated January 14, 1996, by and
                    between the Registrant and Gordon Stulberg.  12+
 
10.61               Employment Agreement dated July 1, 1996 between the Registrant and Timothy
                    Swain.  12+
 
10.62               Non-Qualified Stock Option Agreement dated July 2, 1996, by and between
                    the Registrant and Timothy Swain.  13+
</TABLE> 

                                      -62-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------     
<S>                 <C>  
10.63               Employment Agreement, dated August 30, 1995, by and between Trimark
                    Pictures, Inc., a California corporation and Sergio Aguero, as amended to
                    date.  14+
 
10.65               Credit, Security, Guaranty and Pledge Agreement, dated December 20, 1996,
                    by and between the Registrant's principal operating subsidiaries, Trimark
                    Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan Bank,
                    as Administrative Agent and Fronting Bank.  14
 
10.66               Pledge Agreement, dated February 28, 1997, by and between Trimark
                    Pictures, Inc. and Johan Wassenaar and Anne Wassenaar.  16+
 
10.67               Secured Promissory Note, dated February 28, 1997, executed in favor of
                    Trimark Pictures, Inc. by Johan Wassenaar.  16+
 
10.68               Letter waiver and amendment to Credit, Security, Guaranty and Pledge
                    Agreement, dated February 20, 1997, by and between the Registrant's
                    principal operating subsidiaries, Trimark Pictures, Inc. and Trimark
                    Television, Inc., and The Chase Manhattan Bank, as Administrative Agent
                    and Fronting Bank.  16
 
10.69               Non-Qualified Stock Option Certificate dated January 14, 1997, by and
                    between the Registrant and Matthew Saver.  16+
 
10.70               Non-Qualified Stock Option Certificate dated January 14, 1997, by and
                    between the Registrant and Tofigh Shirazi.  16+
 
10.71               Non-Qualified Stock Option Certificate dated January 14, 1997, by and
                    between the Registrant and Gordon Stulberg.  16+
 
10.72               Pledge Agreement, dated May 1, 1997, by and between Trimark Pictures, Inc.
                    and Mark Amin and Susan Amin.  17+
</TABLE> 

                                      -63-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------     
<S>                 <C> 
10.73               Secured Promissory Note, dated May 1, 1997, by and between Trimark
                    Pictures, Inc. and Mark Amin.  17+
 
10.74               Employment Agreement, dated February 21, 1995, by and between Trimark
                    Pictures, Inc., a California corporation and Don Gold.  17+
 
10.75               Addendum dated October 23, 1996 to Employment Agreement, dated February
                    21, 1995, by and between Trimark Pictures, Inc., a California corporation
                    and Don Gold.  17+
 
10.76               Letter amendment to Stock Purchase and Option Agreement, dated July 25,
                    1997, by and between the Registrant and Sam Pirnazar.  17+
 
10.77               Letter waiver and amendment to Credit, Security, Guaranty and Pledge
                    Agreement, dated June 9, 1997, by and between the Registrant and The Chase
                    Manhattan Bank, as Administrative Agent and Fronting Bank.  17
 
10.78               Employment Agreement, dated July 31, 1995, by and between the Registrant
                    and James Keegan.  17+
 
10.79               Amendment no. 1 to the Credit, Security, Guaranty and Pledge Agreement,
                    dated June 30, 1997, by and between the Registrant's principal operating
                    subsidiaries, Trimark Pictures, Inc. and Trimark Television, Inc., and The
                    Chase Manhattan Bank, as Administrative Agent and Fronting Bank.  17
 
10.80               Non-Qualified Stock Option Certificate dated January 14, 1998, by and
                    between the Registrant and Gordon Stulberg.  18+
 
10.81               Non-Qualified Stock Option Certificate dated January 14, 1998, by and
                    between the Registrant and Matthew H. Saver.  18+
</TABLE> 

                                      -64-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                             
 Number                                             Description 
-------             -----------------------------------------------------------------------------     
<S>                 <C> 
10.82               Non-Qualified Stock Option Certificate dated January 14, 1998, by and
                    between the Registrant and Tofigh Shirazi.  18+
 
10.83               Amendment no. 2 to the Credit, Security, Guaranty and Pledge Agreement,
                    dated March 31, 1998, by and between the Registrant's principal operating
                    subsidiaries, Trimark Pictures, Inc. and Trimark Television, Inc., and The
                    Chase Manhattan Bank, as Administrative Agent and Fronting Bank.  19
 
10.84               Consulting Agreement, dated April 2, 1998, by and between Trimark
                    Pictures, Inc. and Burlage\Edell Productions, Inc. f/s/o Roger Burlage.
                    18+
 
10.85               Letter Agreement, dated April 2, 1998, by and between Trimark Holdings,
                    Inc. and Roger Burlage.  18+
 
21.1                Subsidiaries of Registrant.  12
 
23.1                Consent of PricewaterhouseCoopers LLP.  1
 
27                  Financial Data Schedule.  1

99.4                Press Release of the Registrant dated June 19, 1998.  1
 
99.5                Press Release of the Registrant dated August 17, 1998.  1
 
99.6                Press Release of the Registrant dated August 25, 1998.  1
 
99.7                Press Release of the Registrant dated August 31, 1998.  1
 
</TABLE>

_______________________________

                                      -65-
<PAGE>
 
Item 14. (Continued)


<TABLE>

<S>                 <C> 
  1                 Filed herewith.
  2                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1991.
  3                 Intentionally omitted.
  4                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
  5                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1993.
  6                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended December 31, 1993.
  7                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
  8                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1994.
  9                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
 10                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1995
 11                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
 12                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1996
 13                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
 14                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended December 31, 1996.
 15                 Incorporated by reference to the identical exhibit number in Registrant's
                    Current Report on Form 8-K dated February 21, 1997.
 16                 Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
 17                 Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K 
</TABLE> 

                                      -66-
<PAGE>
 
ITEM 14. (Continued)

<TABLE> 

<S>                 <C> 
                    for the fiscal year ended June 30, 1997
   18               Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
   19               Incorporated by reference to the identical exhibit number in Registrant's
                    Current Report on Form 8-K dated May 15, 1998 (filed May 26, 1998).
   +                This is a management contract or compensatory plan or arrangement.
</TABLE>

                                      -67-
<PAGE>
 
                                   SIGNATURES
                                        
          Pursuant to the requirements of Section 13 or 15(d) 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.

                                 TRIMARK HOLDINGS, INC.


                            By:  /s/ Mohammed Mark Amin      
                                 ----------------------      
                                 Mohammed Mark Amin                
                                 Chairman of the Board              

Date: September 28, 1998
      ------------------

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
 
       Signature            Title                           Date
       ---------            -----                           ----
<S>                         <C>                             <C>
/s/ Mohammed Mark Amin                                               
-------------------------   Chairman of the Board           09/28/98 
Mohammed Mark Amin          and Chief Executive Officer     -------- 
                            [Principal Executive Officer]
 

/s/ Roger A. Burlage        Director                        09/28/98
-------------------------                                   --------
Roger A. Burlage
 

/s/ Gordon Stulberg         Director                        09/28/98
-------------------------                                   --------
Gordon Stulberg
 

/s/ Tofigh Shirazi          Director                        09/28/98
-------------------------                                   --------
Tofigh Shirazi
 

/s/ Matthew Saver           Director                        09/28/98
-------------------------                                   --------
Matthew Saver

 
/s/ Jeff Gonzalez           Chief Financial                 09/28/98
-------------------------   Officer, and Secretary          --------
Jeff Gonzalez               [Principal Financial and
                            Accounting Officer]
</TABLE>

                                      -68-
<PAGE>
 
                               INDEX TO EXHIBITS

<TABLE> 
<CAPTION> 
Exhibit                                                                                                                 Method  
 Number                                     Description                                                                of Filing 
-------             ----------------------------------------------------------------------------------                 ---------
<S>                 <C>                                                                                                <C>        
 2.1                Asset Purchase Agreement between the Registrant, Trimark Interactive, and Graphix
                    Zone, Inc. dated February 26, 1997.  15
 
 3.1                Certificate of Incorporation of the Registrant, as amended to date.  4
 
 3.2                By-laws of the Registrant, as amended.  8
 
 4.2                Form of Common Stock Certificate.  4
 
10.2                Stock Purchase and Option Agreement, dated as of September 1, 1987, as amended,
                    by and between Vidmark, Inc., a California corporation and Said (Sam) Pirnazar.
                    3+
 
10.4                Stock Purchase and Option Agreement, dated as of September 1, 1989, by and
                    between Vidmark, Inc., a California corporation and Said (Sam) Pirnazar.  3+
 
10.13               1990 Stock Option and Stock Appreciation Rights Plan of the Registrant, as
                    amended.  13+
 
10.15               Amendment to Stock Option Agreements, dated as of May 17, 1990, by and among the
                    Registrant, Vidmark, Inc., a California corporation and Said (Sam) Pirnazar.  3+
 
10.22               Standard Office Lease - Gross, dated as of March 9, 1992, and amendments thereto,
                    by and between Vidmark, Inc., a California corporation and 2644 SM Partners, a
                    California limited partnership.  4
 
10.25               Non-Qualified Stock Option Agreement dated December 5, 1991, by and between the
                    Registrant and Gordon Stulberg.  4+
 
10.29               Non-Qualified Stock Option Agreement dated December 2, 1992, by and between the
                    Registrant and Gordon Stulberg.  5+
 
10.32               Directors' Stock Option Plan of the Registrant.  13+
</TABLE> 

                                      -69-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                                                                                                 Method  
 Number                                     Description                                                                of Filing 
-------             ----------------------------------------------------------------------------------                 ---------
<S>                 <C>                                                                                                <C>         
10.35               Technicolor Videocassette, Inc. Fulfillment Agreement with Trimark Pictures, Inc.
                    dated as of March 1, 1994, by and between Trimark Pictures, Inc., a California
                    corporation and Technicolor Videocassette, Inc.  7
 
10.38               Employment Agreement, dated February 11, 1994, by and between Trimark Pictures,
                    Inc., a California corporation and Timothy Swain.  8+
 
10.39               Employment Agreement, dated February 22, 1994, by and between Trimark Pictures,
                    Inc., a California corporation and Sergio Aguero.  8+
 
10.41               Non-Qualified Stock Option Agreement dated March 31, 1994, by and between the
                    Registrant and Timothy Swain.  8+
 
10.42               Non-Qualified Stock Option Agreement dated March 31, 1994, by and between the
                    Registrant and Sergio Aguero.  8+
 
10.43               Non-Qualified Stock Option Certificate dated January 14, 1994, by and between the
                    Registrant and Gordon Stulberg.  8+
 
10.45               Non-Qualified Stock Option Certificate dated January 14, 1995, by and between the
                    Registrant and Gordon Stulberg.  10+
 
10.46               Non-Qualified Stock Option Certificate dated January 14, 1995, by and between the
                    Registrant and Matthew Saver.  10+
 
10.47               Non-Qualified Stock Option Certificate dated January 14, 1995, by and between the
                    Registrant and Tofigh Shirazi.  10+
 
10.48               Non-Qualified Stock Option Agreement dated October 11, 1994, by and between the
                    Registrant and Barry Barnholtz.  10+
</TABLE> 

                                      -70-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                                                                                                 Method  
 Number                                     Description                                                                of Filing 
-------             ----------------------------------------------------------------------------------                 ---------
<S>                 <C>                                                                                                <C>         
10.50               Letter amendment to stock options agreements dated August 10, 1995 by and between
                    the Registrant and Said (Sam) Pirnazar.  10+
 
10.53               Non-Qualified Stock Option Agreement, dated January 30, 1996 by and between the
                    Registrant and Mark Amin.  11+
 
10.54               Amendment to Non-Qualified Stock Option Agreement, dated January 30, 1996 by and
                    between the Registrant and Timothy Swain.  11+
 
10.55               Amendment to Non-Qualified Stock Option Agreement, dated January 30, 1996 by and
                    between the Registrant and Barry Barnholtz.  11+
 
10.56               Amendment to Non-Qualified Stock Option Agreement, dated March 31, 1994, by and
                    between the Registrant and Sergio Aguero.  12+
 
10.57               Non-Qualified Stock Option Agreement dated August 10, 1995, by and between the
                    Registrant and Sergio Aguero.  12+
 
10.58               Non-Qualified Stock Option Certificate dated January 14, 1996. by and between the
                    Registrant and Matthew Saver.  12+
 
10.59               Non-Qualified Stock Option Certificate dated January 14, 1996, by and between the
                    Registrant and Tofigh Shirazi.  12+
 
10.60               Non-Qualified Stock Option Certificate dated January 14, 1996, by and between the
                    Registrant and Gordon Stulberg.  12+
 
10.61               Employment Agreement dated July 1, 1996 between the Registrant and Timothy Swain.
                    12+
 
10.62               Non-Qualified Stock Option Agreement dated July 2, 1996, by and between the
                    Registrant and Timothy Swain.  13+
</TABLE> 

                                      -71-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                                                                                                 Method  
 Number                                     Description                                                                of Filing 
-------             ----------------------------------------------------------------------------------                 ---------
<S>                 <C>                                                                                                <C>         
10.63               Employment Agreement, dated August 30, 1995, by and between Trimark Pictures,
                    Inc., a California corporation and Sergio Aguero, as amended to date.  14+
 
10.65               Credit, Security, Guaranty and Pledge Agreement, dated December 20, 1996, by and
                    between the Registrant's principal operating subsidiaries, Trimark Pictures, Inc.
                    and Trimark Television, Inc., and The Chase Manhattan Bank, as Administrative
                    Agent and Fronting Bank.  14
 
10.66               Pledge Agreement, dated February 28, 1997, by and between Trimark Pictures, Inc.
                    and Johan Wassenaar and Anne Wassenaar.  16+
 
10.67               Secured Promissory Note, dated February 28, 1997, executed in favor of Trimark
                    Pictures, Inc. by Johan Wassenaar.  16+
 
10.68               Letter waiver and amendment to Credit, Security, Guaranty and Pledge Agreement,
                    dated February 20, 1997, by and between the Registrant's principal operating
                    subsidiaries, Trimark Pictures, Inc. and Trimark Television, Inc., and The Chase
                    Manhattan Bank, as Administrative Agent and Fronting Bank.  16
 
10.69               Non-Qualified Stock Option Certificate dated January 14, 1997, by and between the
                    Registrant and Matthew Saver.  16+
 
10.70               Non-Qualified Stock Option Certificate dated January 14, 1997, by and between the
                    Registrant and Tofigh Shirazi.  16+
 
10.71               Non-Qualified Stock Option Certificate dated January 14, 1997, by and between the
                    Registrant and Gordon Stulberg.  16+
 
10.72               Pledge Agreement, dated May 1, 1997, by and between Trimark Pictures, Inc. and
                    Mark Amin and Susan Amin.  17+
</TABLE> 

                                      -72-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                                                                                                 Method  
 Number                                     Description                                                                of Filing 
-------             ----------------------------------------------------------------------------------                 ---------
<S>                 <C>                                                                                                <C>         
10.73               Secured Promissory Note, dated May 1, 1997, by and between Trimark Pictures, Inc.
                    and Mark Amin.  17+
 
10.74               Employment Agreement, dated February 21, 1995, by and between Trimark Pictures,
                    Inc., a California corporation and Don Gold.  17+
 
10.75               Addendum dated October 23, 1996 to Employment Agreement, dated February 21, 1995,
                    by and between Trimark Pictures, Inc., a California corporation and Don Gold.  17+
 
10.76               Letter amendment to Stock Purchase and Option Agreement, dated July 25, 1997, by
                    and between the Registrant and Sam Pirnazar.  17+
 
10.77               Letter waiver and amendment to Credit, Security, Guaranty and Pledge Agreement,
                    dated June 9, 1997, by and between the Registrant and The Chase Manhattan Bank,
                    as Administrative Agent and Fronting Bank.  17
 
10.78               Employment Agreement, dated July 31, 1995, by and between the Registrant and
                    James Keegan.  17+
 
10.79               Amendment no. 1 to the Credit, Security, Guaranty and Pledge Agreement, dated
                    June 30, 1997, by and between the Registrant's principal operating subsidiaries,
                    Trimark Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan
                    Bank, as Administrative Agent and Fronting Bank.  17
 
10.80               Non-Qualified Stock Option Certificate dated January 14, 1998, by and between the
                    Registrant and Gordon Stulberg.  18+
 
10.81               Non-Qualified Stock Option Certificate dated January 14, 1998, by and between the
                    Registrant and Matthew H. Saver.  18+
 
10.82               Non-Qualified Stock Option Certificate dated January 14, 1998, by and between the
                    Registrant and Tofigh Shirazi.  18+
</TABLE> 

                                      -73-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE> 
<CAPTION> 

Exhibit                                                                                                            Method  
 Number                                     Description                                                           of Filing 
-------             ----------------------------------------------------------------------------------         --------------- 
<S>                 <C>                                                                                        <C>  
10.83               Amendment no. 2 to the Credit, Security, Guaranty and Pledge Agreement, dated
                    March 31, 1998, by and between the Registrant's principal operating subsidiaries,
                    Trimark Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan
                    Bank, as Administrative Agent and Fronting Bank.  19
 
10.84               Consulting Agreement, dated April 2, 1998, by and between Trimark Pictures, Inc.
                    and Burlage\Edell Productions, Inc. f/s/o Roger Burlage.  18+
 
10.85               Letter Agreement, dated April 2, 1998, by and between Trimark Holdings, Inc. and
                    Roger Burlage.  18+

21.1                Subsidiaries of Registrant.  12
 
23.1                Consent of PricewaterhouseCoopers LLP.  1                                                  filed herewith
                                                                                                               electronically
                                                                                                                             
27                  Financial Data Schedule.  1                                                                filed herewith
                                                                                                               electronically
                                                                                                                             
99.4                Press Release of the Registrant dated June 19, 1998.  1                                    filed herewith
                                                                                                               electronically
                                                                                                                             
99.5                Press Release of the Registrant dated August 17, 1998.  1                                  filed herewith
                                                                                                               electronically
                                                                                                                             
99.6                Press Release of the Registrant dated August 25, 1998.  1                                  filed herewith
                                                                                                               electronically
                                                                                                                             
99.7                Press Release of the Registrant dated August 31, 1998.  1                                  filed herewith
                                                                                                               electronically 
</TABLE>
_______________________________

                                      -74-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE>

<S>                 <C> 
   1                Filed herewith.
   2                Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1991.
   3                Incorporated by reference to the identical exhibit number in Registrant's
                    Form S-1 Registration Statement, No. 33-35053, effective June 26, 1990
   4                Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
   5                Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1993.
   6                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended December 31, 1993.
   7                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
   8                Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1994.
   9                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
  10                Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1995
  11                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
  12                Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1996
  13                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
  14                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended December 31, 1996.
  15                Incorporated by reference to the identical exhibit number in Registrant's
                    Current Report on Form 8-K dated February 21, 1997.
  16                Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
</TABLE> 

                                      -75-
<PAGE>
 
Index to Exhibits (Continued)

<TABLE> 
<CAPTION> 

<S>                 <C> 
   17               Incorporated by reference to the identical exhibit number in Registrant's
                    Annual Report on Form 10-K for the fiscal year ended June 30, 1997
   18               Incorporated by reference to the identical exhibit number in Registrant's
                    Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
   19               Incorporated by reference to the identical exhibit number in Registrant's
                    Current Report on Form 8-K dated May 15, 1998 (filed May 26, 1998).
   +                This is a management contract or compensatory plan or arrangement.
</TABLE>

                                      -76-