<TABLE>
<CAPTION>

THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT ON FORM 10K FILED ON APRIL 1, 1997
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.

                                        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
                                       ------------------------------------



For the Fiscal Year Ended December 31, 1996                                          Commission File No. 33-72114
                                                                                                      33-77444

                                            CINEMARK MEXICO (USA), INC.
                                         CINEMARK DE MEXICO, S.A. DE C.V.
                              (Exact Name of registrants as Specified in its Charter)

<S>     <C>                                                                    <C>
                          Texas                                                    75-2493459
                         Mexico                                                        N/A
              (State or Other Jurisdiction                                      (I.R.S. Employer
            of incorporation or Organization)                                  Identification No.)


                 7502 Greenville Avenue
                        Suite 800
                      Dallas, Texas                                                75231-3830
        (Address of principal executive offices)                                   (Zip Code)
<FN>


                        Registrant's Telephone Number, including area code:  (214)696-1644

                            Securities  Registered  pursuant to Section 12(b) of the Act:

                                                       None
                                                 (Title of Class)

                            Securities  Registered  pursuant to Section 12(g) of the Act:

                                                       None
                                                 (Title of Class)
</FN>
</TABLE>


     Indicate by check mark whether the  registrants  (1) have 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
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days.

                            Yes X     No ____.

     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 registrants'  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.

                                                       [ X ]

     As of March 27, 1997,  4,109,299  shares of Common Stock of Cinemark Mexico
(USA), Inc. (including options to acquire 835 shares of common stock exercisable
within 60 days of such date) and  21,728,663  shares of Common Stock of Cinemark
de Mexico, S.A. de C.V. were issued and outstanding.



<PAGE>



<TABLE>
<CAPTION>
                                                       Index

                                                                                                                  Page

<S>                                                                                                               <C>
PART I .........................................................................................................  1
       Item 1:     Business.....................................................................................  1
                   (a)   General Development of Business........................................................  2
                   (b)   Financial Information About Industry Segments..........................................  2
                   (c)   Narrative Description of Business......................................................  7
       Item 2:     Properties...................................................................................  7
       Item 3:     Legal Proceedings............................................................................  7
       Item 4:     Submission of Matters to a Vote of Security Holders..........................................  7

PART II.........................................................................................................  7
       Item 5:     Market for Registrant's Common Equity and Related Stockholder Matters........................  7
       Item 6:     Selected Financial Information...............................................................  7
       Item 7:     Management's Discussion and Analysis of Financial Condition
                   and Results of Operation...................................................................... 9
       Item 8:     Financial Statements and Supplementary Data.................................................. 14
       Item 9:     Changes in and Disagreements with Accountants on Accounting
                   and Financial Disclosure..................................................................... 14

PART III........................................................................................................ 14
       Item 10:    Directors and Executive Officers of the Registrant........................................... 14
       Item 11:    Executive Compensation....................................................................... 16
       Item 12:    Security Ownership of Certain Beneficial Owners and Management............................... 17
       Item 13:    Certain Relationships and Related Transactions............................................... 21


PART IV..........................................................................................................23
       Item 14: Exhibits, Financial Statement Schedules and Reports on 8-K.......................................23
         (a)  Documents filed as part of this report.............................................................23
         (b)  Reports on Form 8-K................................................................................23
         (c)  Exhibits..........................................................................................E-1
         (d)  Financial Statement Schedule......................................................................S-1
</TABLE>








<PAGE>



                                                      PART I


Item 1:  Business.

(a)  General Development of Business.

General

     Cinemark Mexico (USA), Inc., a Texas corporation  ("Cinemark Mexico" or the
"Company"), is an indirect subsidiary of Cinemark USA, Inc., a Texas corporation
("Cinemark USA"). Cinemark USA is the fourth largest motion picture exhibitor in
the United States in terms of number of screens operated. The Company, which was
organized  to own and  operate  movie  theatres  in Mexico  through  one or more
subsidiaries, has constructed state-of- the-art multiplex theatres comparable to
new  theatres  developed  by  Cinemark  USA in the United  States.  The  Company
currently  operates 11 theatres  (114  screens).  The  Company's  revenues  have
increased from $6.6 million in 1994 to $22.4 million in 1996. At March 27, 1997,
the Company had one theatre (15 screens) under construction and two theatres (20
screens) under commitment with executed leases. Mexico is beginning the recovery
from the  depression  resulting  from the  collapse  of the  peso  beginning  in
December 1994. Cinemark Mexico's debt and some theatre leases are denominated in
U.S.  dollars while their revenues are collected in Mexican pesos.  As such, the
devaluation  and  resulting  depression  has  significantly  impacted  and  will
continue to effect the short term  profitability of the theatres.  Additionally,
there is a lack of available capital in the Mexican financial market as a result
of the significant rise in interest rates resulting in the reduced  availability
of developer financing for future projects.  Such events have caused a reduction
in the rate of expansion  initially  anticipated  by Cinemark  Mexico.  Cinemark
Mexico will continue to evaluate the market for appropriate locations to develop
state-of-the-art  multiplex theatres.  See "Peso Devaluation,"  "Properties" and
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operation." The Company's  operations are being conducted by Cinemark de Mexico,
S.A. de C.V. ("Cinemark de Mexico"), a Mexican corporation which is 99.99% owned
by the Company.

     The  Company  was  formed  on July 28,  1993 as a  subsidiary  of  Cinemark
International,  Inc. (f/k/a Cinemark II, Inc.), a Texas  corporation  ("Cinemark
International") and wholly owned unrestricted  subsidiary of Cinemark USA. As of
March  27,  1997,  Cinemark  International  and New  Wave  Investments  AVV,  an
unaffiliated  Aruba corporation owned by Mexican citizens ("New Wave") own 95.6%
(95.1% on a fully diluted basis) and 4.4%, respectively,  of the common stock of
Cinemark  Mexico.  Additionally,  warrants to purchase  22,222  shares of Common
Stock of the Company are issued and outstanding. See "Exchange Offer."

Exchange Offer

     As of September  30, 1996,  the Company had  outstanding  (i) $22.4 million
aggregate  principal  amount of 12% Series A, Series B and Series C Subordinated
Promissory  Notes due 2003 (the  "Cinemark  Mexico  Notes") and (ii) warrants to
purchase  379,073  shares of common  stock of the Company (the  "Warrants").  On
September  30,  1996,  the  Company  completed  an  Exchange  Offer and  Consent
Solicitation  (the  "Exchange  Offer")  pursuant  to which the  Company  and the
holders of all of the Cinemark Mexico Notes exchanged all of the Cinemark Mexico
Notes  for  a  new  issuance  of  promissory  notes  of  the  same  series,  and
substantially  all of the holders of Warrants  exchanged  Warrants for a new 12%
Series D Senior  Subordinated Note (collectively,  the "New Mexico Notes").  The
form and terms of the New Mexico Notes are identical in all material respects to
the Cinemark  Mexico Notes except that  interest on the New Mexico Notes may, on
each interest payment date from February 1, 1997 through and including  February
1, 2000, be paid at the option of the Company in cash or through the issuance of
additional  notes of the same series (the  "Additional  Notes").  If the Company
elects to pay accrued  interest in  Additional  Notes in lieu of cash,  interest
during the relevant  interest  period shall accrue at the rate of 13% per annum.
The The  Series  A and  Series  D New  Mexico  Notes  are  entitled  to  certain
registration  rights  agreements  and the Series B and Series C New Mexico Notes
are registered under the Securities Act of 1933, as amended. Holders of

                                                     - 1 -

<PAGE>



Warrants to purchase 22,222 shares of Common Stock of the Company elected not to
participate  in the Exchange  Offer.  The purpose of the  Exchange  Offer was to
exchange New Securities for all  outstanding  Cinemark  Mexico Notes in order to
improve  the  Company's  and  Cinemark  de  Mexico's   financial  and  operating
flexibility.  The Company  exercised its option to pay Additional  Notes for the
interest period ended February 1, 1997.

     In connection with the Exchange Offer,  the Company obtained the consent of
the holders of the  Cinemark  Mexico Notes to amend the  Indenture.  The Company
executed that certain Third Supplemental Indenture dated September 30, 1996 (the
"Third Supplemental Indenture"),  which among other things, (i) provided for the
issuance  of the New  Mexico  Notes and the  Additional  Notes and (ii)  amended
certain  restrictions  relating to financial  ratios with which the Company must
comply.

     Simultaneously  with  the  completion  of  the  Exchange  Offer,   Cinemark
International  acquired an  additional  2,661,450  shares of Common Stock of the
Company  for $10.0  million.  On  January  9, 1997,  New Wave also  acquired  an
additional 64,032 shares of common stock of Cinemark Mexico for $240,591.

Senior Secured Credit Facility

     On December 4, 1995, Cinemark  International,  Cinemark Mexico and Cinemark
de Mexico entered into that certain Senior Secured Credit  Facility (the "Mexico
Senior Credit  Facility") which provides for loans by Cinemark  International to
Cinemark  Mexico of up to $10.0  million in the aggregate at an interest rate of
12% per annum.  The loans are  payable as  follows:  (i) all  accrued and unpaid
interest  shall be  payable on the first  anniversary  of the  initial  loan and
quarterly thereafter on January 15, April 15, July 15 and October 15 and (ii) on
December 31, 2001, all unpaid  principal,  accrued,  unpaid interest and fees on
the loan shall be paid.  Borrowing  under the Mexico Senior  Credit  Facility is
secured by a pledge of all of the assets of Cinemark Mexico.

     Simultaneously   with  the  closing  of  the   Exchange   Offer,   Cinemark
International  and the  Company  agreed to amend the terms of the Mexico  Senior
Credit  Facility.  The amendment  provides that if Cinemark Mexico exercises its
options to pay accrued and unpaid  interest on the New Mexico Notes  through the
issuance of Additional Notes, Cinemark International will add accrued and unpaid
interest  on the  indebtedness  under  the  Mexico  Senior  Credit  Facility  to
principal at the next two consecutive interest payment dates.

(b)  Financial Information About Industry Segments.

     The Company and its operations in conjunction  with Cinemark USA, Inc. is a
unitary  business as described  above,  and as a result,  does not break out its
business into industry segments.

(c)  Narrative Description of Business.

General

     At March 27, 1997, the Company operated 11 theatres (114 screens),  had one
theatre (15 screens)  under  construction  and two  theatres (20 screens)  under
commitment  with  executed  leases.   The  Company's  theatres  are  all  modern
facilities equipped with state-of-the-art projection and sound equipment.

     The Company's revenues are generated primarily from box office receipts and
concession  sales.  Additional  revenues are generated by electronic video games
installed in video arcades located off the lobbies in the Company's theatres.

     The  Company  relies  principally  upon  newspaper  display   advertisement
(substantially  paid for by distributors) and newspaper directory film schedules
(generally  paid for by the  Company)  to inform its  patrons of film titles and
exhibition  times. The Company also exhibits in its theatres  previews of coming
attractions  and films  presently  playing on the other screens  operated by the
Company in the same theatre and market area.

                                                     - 2 -

<PAGE>



     The film  distributors  generally  release  during the  summer and  holiday
sessions   those  films  which  they   anticipate   will  be  most   successful.
Consequently, the Company has historically generated higher revenues during such
periods.

     The Company's strategy is to enter into leases with terms of 15 to 20 years
plus  renewal  options  for the  development  of theatre  facilities  instead of
purchasing them due to the lower capital requirements for developing a leasehold
theatre.  A typical leasehold theatre requires a capital outlay of approximately
$100,000  to  $200,000  per  screen,  representing  the costs of  equipment  and
interior  finishout,  whereas,  the  development  of a fee owned or ground lease
theatre is  estimated  to range  between  $4.0  million and $10.0  million,  per
theatre.  The  Company  attempts  to  obtain  lease  terms  that  are  typically
built-to-suit  construction  obligations of the landlord with Cinemark de Mexico
being responsible for theatre equipment.  However, due to inability of landlords
to obtain financing in Mexico,  many landlords have requested Cinemark de Mexico
to contribute to the cost of construction and recapture such contributions (with
interest)  through rent  abatements.  Management  has in the past and may in the
future make, such contributions to construction in markets it deems appropriate.
The Company  will also  consider a desirable  location on a fee or ground  lease
basis if there is no developer  willing to construct  the theatre on the site on
terms  acceptable  to the  Company.  In such  events,  the Company may  consider
alternative  financing  sources allowed under the Indenture  governing the Notes
(the "Indenture"),  such as additional  borrowings,  sales of equity or entering
into joint ventures.

Theatre Operations

     Cinemark USA manages all of the Company's theatres pursuant to the Cinemark
Management  Agreements.  The  Company's  theatres  are  operated as Cinemark USA
theatres  and are staffed  primarily  with Mexican  nationals  who report to the
Cinemark  USA  regional  and home office  personnel.  Cinemark  USA provides all
"corporate" operating functions,  including film booking and accounting,  in the
same manner as such  functions  are  performed  by Cinemark  USA  personnel  for
Cinemark USA owned or leased theatres.  Cinemark de Mexico pays all development,
operating and maintenance  expenses of its theatres.  Management of Cinemark USA
will  make  all  major  decisions  regarding  the  operations  of the  Company's
theatres.  See "Certain Relationships and Related  Transactions-Agreements  with
Cinemark USA."

     The Company  believes  that  Cinemark USA  operates its theatres  with high
standards and the Cinemark  Management  Agreements will require  Cinemark USA to
operate the Company's  theatres with the same high  standards.  To maintain this
consistency,  the Company  hires  Mexican  nationals  with  college  degrees for
management  positions and trains them in theatres currently  operating in Mexico
and in Cinemark  USA's Rio Grande Valley  theatres,  which employ many bilingual
managers  and  employees.   These   managers  learn  Cinemark  USA's   operating
philosophies  and are given the  responsibility  to instill a  customer  service
focus in their employees. The Company also uses Cinemark USA's training programs
including  "Cinemark  Customer Service  University" which is designed to empower
each employee to fulfill  customer needs and be problem  solvers.  Management of
the Company's operations is coordinated through Cinemark USA's senior management
personnel based in Dallas, Texas. Film bookings, purchasing concession items and
equipment,  landlords relations,  construction oversight and accounting services
are supervised  from Cinemark  USA's  corporate  offices in Dallas.  Each of the
departments  has  bilingual  employees  and  experience in dealing with Hispanic
markets.  Additionally,  Cinemark  de Mexico  operates  an office in Mexico City
which is currently used for development and real estate coordination.

     The Company  has  established  its ticket  admission  structure  to provide
affordable  entertainment to a broad base of the Mexican population.  Currently,
the ticket price  charged in Mexican  theatres  ranges  between  US$1.25 (10 new
pesos) to  US$3.35  (27 new  pesos),  compared  to an  average  ticket  price of
approximately  $4.35 in the U.S. In addition,  the Company  will provide  senior
citizen discounts, family discounts and bargain days designed to increase volume
for the theatres at non-peak times.


                                                     - 3 -

<PAGE>



     The Company will continue to build multiplex  theatres ranging from 8 to 15
screens per location as the Company locates suitable development opportunities).
Multiplex theatres enable the Company to present a variety of films appealing to
several segments of the movie-going  public residing within the market area of a
particular theatre complex, while serving patrons from common support facilities
(such as box office,  concession  areas,  restrooms  and lobby).  This  strategy
enhances attendance,  utilization of theatre capacity and operating efficiencies
(relating to theatre  staffing,  performance  scheduling and space and equipment
utilization).  Staggered  scheduling of movie starting times minimizes  staffing
requirements  for  auditorium  entry  and exit  and box  office  and  concession
services while reducing  congestion  throughout the theatre.  Multiplex theatres
also provide increased flexibility in determining the length of time that a film
will run and the size of auditorium in which it is shown.

Business Strategy

     Using  Cinemark  USA's  management  expertise  and  experience in operating
border  theatres,  together with Cinemark USA's multiplex  theatre  format,  the
Company has been  organized  to bring to the Mexican  public  state-  of-the-art
multiplex  theatres  designed  to  create an  exciting  atmosphere  for  theatre
patrons. These theatres will be built based on the Company's market research and
Mexican census data, in middle and upper income neighborhoods, which the Company
believes,  based on industry standards, are under screened, and will be designed
to provide reasonably priced family entertainment.

     Some of the factors the Company considers in determining whether to develop
a theatre are the  market's  population  and general  standards  of living.  The
Company  generally  builds  theatres in Mexico's  new  regional  malls and power
centers  (large  outdoor  malls with one or more anchor  tenants) that are being
developed in Mexico's suburban  markets.  These suburban malls and power centers
are located near Mexico's middle and upper income neighborhoods.  The ability of
the  Company  to  continue  to  identify  desirable  locations  in such areas is
dependent  upon the continued  development  of the new malls and power  centers,
which has been significantly  curtailed due to the current economic  instability
in Mexico.

     The  theatres  opened by the  Company  and  those  under  construction  are
state-of-the-art  multiplex  theatres  with between 8 and 15 screens and include
Cinemark USA's  distinctive  design of bright colors,  neon,  plush  high-backed
rocking chairs with cupholder armrests,  multiple large concession stands and an
overall fun,  family  atmosphere.  Many  facilities will also include game rooms
located in separate  areas off of the lobby  offering  the latest  video  arcade
equipment in an environment of lights,  musical sound and high technology.  High
quality, modern sound systems and projection equipment will be incorporated with
the  theatres.  These  new  theatres  make  the  movie-going  experience  a fun,
enjoyable experience that compares favorably to other forms of entertainment for
the price. In May 1995, the Company opened its premiere theatre in Mexico at the
National Center for the Arts in Mexico City. The Company funded the construction
of the complex which includes twelve auditoriums,  three concession stands and a
coffee  bar.  In  1997,  the  Company  plans  to  open  its  first  all  stadium
entertainment complex in Mexico, a 15 screen theatre in Mexico City.

     The  majority of theatre  equipment  and finish out  materials  used in the
Company's  theatres  is  imported  from the  United  States.  As a result of the
Mexican peso devaluation,  these costs have dramatically increased.  The Company
is currently reviewing  alternative  manufacturing  sources in Mexico that could
provide the Company with comparable equipment at more reasonable costs. However,
it is unlikely  that the Company will be able to locate a  replacement  supplier
for most of its imports.

     The Company may also consider  entering into joint venture  agreements with
third parties for the acquisition and development of theatres.


                                                     - 4 -

<PAGE>



Film Licensing

     Licensing of films for exhibition in Mexico is coordinated through Cinemark
USA's  international  film bookers based in Dallas.  One of Cinemark  USA's head
film bookers is in charge of international bookings. This individual has over 20
years of experience in the industry and has longstanding  relationships with all
of the major distributors of American film product.

     As in  the  U.S.,  the  Company  licenses  films  from  all  of  the  major
distributors  and is not dependent on any one studio for motion picture product.
Cinemark USA enjoys strong  relationships with the major U.S. film distributors.
U.S. film product is distributed  in Mexico  through the American  distributors'
offices or their agents' office in Mexico City. Paramount, Universal and MGM are
distributed by the worldwide organization of United International Pictures. 20th
Century Fox and Warner Brothers distribute their own film product through branch
offices.  Columbia and Tri-Star have a joint office and distribute their own and
Walt  Disney's  film  product.  There are  numerous  companies  that  distribute
independent film product,  Mexican film product and international  film product.
Prior to signing a lease,  the Company  confirms  with the Mexican and U.S. film
distributors the ability to get new film product for the identified location.

     In the U.S.,  distributors  typically establish  geographic zones and offer
each available film to all theatres in a zone.  These film zones generally range
in size from three to 30 miles, depending primarily upon population density. The
film is  generally  licensed  to only one  theatre  in each  zone,  either on an
allocation or bidding  process.  Under an allocation  process,  the  distributor
will,  within each film zone in which  there are  competing  exhibitors,  rotate
which exhibitor is offered a film.  Historically,  in Mexico,  the  distributors
chose a group to which they would release their films and entered into exclusive
arrangements with the exhibitor, without regard to the location of the theatres.
Before multiplexing was introduced in the United Kingdom, distributors generally
had similar  exclusive  relationships.  As multiplexing  took hold in the United
Kingdom,  these exclusive  relationships were terminated because of the enhanced
revenue  opportunities  for the  distributor.  This same trend has  developed in
Mexico over the last three years, with  distributors  moving away from exclusive
arrangements  with  exhibitors and allocating film based on locations and market
potential.

     Optimally,  a film  will  play so long as the  weekly  gross of box  office
receipts reaches a specified minimum.  Due to a lack of screens in Mexico, there
is usually a backlog of films and many times the release of new films will cause
existing films that are still  producing  strong box office sales to be replaced
to make room for a new film release. As a result, the Company believes that many
films in Mexico do not reach their maximum  potential for either the  exhibitors
or the  distributors.  Also,  due to a lack of quality  theatres  and  available
playtime,   the  distributors  are  not  always  able  to  release  their  films
simultaneously  throughout Mexico.  However,  with the addition of the Company's
new multiplexes as well as that of competitors, the gap between release dates of
American  movies in the U.S. and in Mexico has  narrowed  from two to six months
down to a week to three months. The Company believes that this gap will close as
the number of multiplex screens increases,  permitting  exhibitors to move still
successful films to other  auditoriums to make room for new releases.  For these
reasons, multiplexing should increase revenue opportunities for distributors.

     Prior to  negotiating  for a film  license,  Cinemark  USA's  international
booking personnel,  in consultation with Cinemark Mexico's  President,  evaluate
the prospects for upcoming films. The criteria  considered for each film include
cast, director,  plot, performance of similar films, estimated film rental costs
and the film's  performance in the U.S.  market.  Successful  licensing  depends
greatly upon the knowledge of the tastes of residents in markets  served by each
theatre and insight into the trends in those tastes, as well as the availability
of commercially popular motion pictures.

     In Mexico,  the film rental system is based on the gross  receipts  formula
with a  percentage,  in most  cases,  of 40% for the first  week and 35% for the
balance. The film rental for anticipated blockbuster films begins at 50% for the
first two weeks, then declines to 35% for the remainder of the run.


                                                     - 5 -

<PAGE>



Concessions

     Concession  sales are the second  largest source of revenue for the Company
after box office  sales.  The  concessions  menu are geared to local  tastes and
include freshly popped popcorn,  fountain soft drinks with ice, U.S. and Mexican
candy and hot dogs. The Company's  strategy  emphasizes  prominent and appealing
concession  counters  designed  for rapid  service  and  efficiency.  The larger
multiplex  theatres will have two or three refreshment  stands to make it easier
for  larger  numbers  of  patrons to access  counters.  The  Company  focuses on
maximizing  per  capita  concession  sales  through   optimizing   product  mix,
introducing new products, "cross selling" and "upselling." The food distribution
network in Mexico is extremely  fragmented,  typically  only providing for local
distribution. As a result, the Company's theatres are required to hold inventory
levels sufficient to supply the theatre for up to six weeks compared to one week
for Cinemark USA's theatres in the U.S. The Company is established relationships
with Mexican concession vendors for the sourcing of concession inventory.

Competition

     The theatre industry in Mexico is highly fragmented, with a large number of
"mom and pop"  operators.  Since the  Company's  entry  into the  market,  three
significant   competitors  have  arisen.  The  Ramirez  theatre  circuit,  which
currently  operates  over 400  screens,  Cinemex,  which  has  built  eight  new
multiplexes  in and around Mexico City, and United  Artists,  which has opened a
limited number of screens in Mexico.

     The Company believes that the principal competitive factors with respect to
film licensing  include  licensing  terms,  the seating  capacity,  location and
prestige  of an  exhibitor's  theatres,  the  quality  of  projection  and sound
equipment at the theatres and the exhibitor's ability and willingness to promote
the films.  The  competition  for patrons is dependent  upon factors such as the
availability of popular films, the location of theatres, the comfort and quality
of theatres, and ticket prices.

     It is anticipated that the Company's  theatres will face competition from a
number of motion picture delivery systems,  such as network,  syndicated and pay
television, pay per view and home video cassette systems. The Company's theatres
will also face competition  from other forms of entertainment  competing for the
public's leisure time and disposable income.

Employees

     At March 27, 1997,  the Company and Cinemark de Mexico,  through its wholly
owned subsidiaries Servicios Cinemark, S.A. de C.V. and Cinemark del Norte, S.A.
de C.V., had approximately  525 employees,  all of whom are full time employees.
Cinemark  Mexico's  subsidiaries are party to collective  bargaining  agreements
with two unions of which  approximately  460 employees are members.  The Company
considers its relations with its employees to be satisfactory.

Regulation

     On December 17, 1992,  Mexico,  the U.S. and Canada  signed and  ultimately
approved the North American Free Trade Agreement ("NAFTA").  NAFTA removes, over
a transition  period which began in 1994,  most customs  duties imposed on goods
traded   among  the  three   countries;   removes  or  limits  many   investment
restrictions;  liberalizes  trade in services;  provides a specialized means for
settlement of, and remedies for, trade disputes arising under NAFTA; and results
in new laws and regulations to further these goals.

     In  December  1992,  the  Mexican   congress  passed  the  Federal  Law  of
Cinematography.  Mexico's  Secretary of the Interior has issued new  regulations
under the  Federal  law  relaxing  the laws  governing  the  operating  of movie
theatres.  Most  notably,  previously  established  price  controls on admission
prices were lifted and replaced with a system that allows exhibitors to increase
pricing.  The Federal law currently  requires that Mexican films comprise 30% of
the number of film screenings at each theatre. The percentage gradually declines
to 10% in 1997.

                                                     - 6 -

<PAGE>



There is no required minimum percentage after December 31, 1997.  However,  this
requirement  has not been  enforced  due to the lack of Mexican  film  releases.
Currently,  approximately  90% of the films shown in Mexico are U.S.  films with
Spanish  subtitles or dubbing,  with  approximately 10% of the films produced by
Mexican film makers.  Notwithstanding laws requiring the exhibition of a minimum
amount of Mexican  films,  the  percentage  of U.S.  films  shown is expected to
increase  as the number of screens  increases,  due to the lack of Mexican  film
product.  Each film that is made available to Mexico must be either subtitled or
dubbed into  Spanish.  The majority of the  American  films are  subtitled.  The
animated and family oriented films are dubbed.

Seasonality

     The major film distributors generally release during the summer and holiday
seasons  those  films  which  they  anticipate  will  be  the  most  successful.
Consequently,  the  Company  expects to  generate  higher  revenues  during such
periods.

Item 2:  Properties

     As of March  27,  1997,  Cinemark  de  Mexico  operates  11  theatres  (114
screens),  one theatre (15 screens) is under  construction and an additional two
theatres (20 screens) are under  commitment  with executed  leases.  Cinemark de
Mexico generally enters into leases with terms of 15 to 20 years for its theatre
sites. The leases generally  provide for contingent  rental based upon operating
results (subject to minimum annual rent).  Generally,  these leases will include
renewal options for various periods at stipulated rates. The Company attempts to
obtain lease terms that provide for  build-to-suit  construction  obligations of
the landlord with Cinemark de Mexico being responsible for providing the theatre
equipment.  However,  due to the  inability of landlords to obtain  financing in
Mexico,  many landlords  have requested  Cinemark de Mexico to contribute to the
cost of construction  and recapture such  contribution  (with interest)  through
rent  abatement.  Management  has in the past and may in the future  make,  such
contributions to construction in markets it deems appropriate.

Item 3:  Legal Proceedings

     From time to time, the Company may be involved in various legal proceedings
arising from the ordinary  course of its business  operations,  such as personal
injury claims, employment matters and contractual disputes.
As of March 27, 1997, there are no such proceedings currently pending.

Item 4:  Submission of Matters to a Vote of Security Holders

     There have not been any matters  submitted  to a vote of  security  holders
during the fourth  quarter of the fiscal year covered by this report through the
solicitation of proxies or otherwise.

                                                      PART II

Item 5:  Market for Registrants' Common Equity and Related Stockholder Matters.

     There is no established public trading market for the Company's or Cinemark
de Mexico's common stock. As of March 27, 1997, there were two holders of record
of  Cinemark  Mexico's  common  stock and two  holders of record of  Cinemark de
Mexico's  common stock.  Neither  company has paid dividends on its common stock
and does not  expect to pay  dividends  on its  respective  common  stock in the
foreseeable future. The Indenture contains restrictions on the Company's ability
to pay dividends on its common stock.

   
Item 6:  Selected Financial Information

     The  following  table  sets forth  selected  financial  information  of the
Company and its subsidiaries  for the periods and at the dates  indicated.  This
information should be read in conjunction with Management's Discussion

                                                     - 7 -

<PAGE>



and Analysis of financial  Condition and Results of Operations and the Company's
Consolidated Financial Statements included elsewhere in this report.


<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                               (In thousands, except theatres and screens)
                                                  1996              1995           1994            1993           1992
Statement of Operations Data:
<S>                                                  <C>             <C>             <C>               <C>           <C>   
     Revenue (1)                                     $22,376         $ 12,265        $  6,594          $  N/A        $  N/A
     Depreciation and amortization                     1,746              720             355             N/A           N/A
     Operating income (loss)                             610            (687)         (1,089)           (572)         (104)

     Interest expense(2)                               4,136            2,805           2,794           1,111           N/A
     Net loss                                        (2,799)          (2,955)         (2,821)           (908)         (104)

     Ratio of earnings to
      fixed charges (3)                                   --               --              --              --            --
Operating Data:
     Theatres owned at period end                         11                9               4
     Screens owned at period end                         114               92              42
     Total attendance                                  8,675            4,210           1,407
     Cash flow from (used for):
      Operations                                         409            1,268         (3,538)
      Investing activities                           (8,983)         (14,101)        (16,431)
      Financing activities                            18,083            4,127           6,830
Balance Sheet Date (at period
end):
     Cash and temporary investments                  $10,363         $  1,423        $ 10,927        $ 24,565        $  342
     Theatre properties and equip - net               26,439           18,401           8,111             758            34
     Total assets                                     43,133           25,192          28,205          26,566           609
     Total long-term liabilities                      36,963           23,272          20,467          18,352           N/A
     Shareholders equity (deficiency)                  2,396          (5,010)           3,761           5,988           471
<FN>

--------------------------
(1)   The Company  began  operations in April of 1994.  Prior to that time,  the
      Company was in the  development  stage and did not generate any  revenues.
      Results of  operations  include  Cinemark  de Mexico  for the period  from
      inception,  September 10, 1992, to December 31, 1992, and Cinemark  Mexico
      (USA) and its  subsidiaries for calendar years 1993 through 1996. See Note
      1 to the Consolidated Financial Statements.
(2)   Interest expense includes amortization of deferred debt issue costs and discount.  See Consolidated
      Statements of Operations.
(3)   For the purpose of calculating the ratio of earnings to fixed charges, (i)
      earnings  consist of income  (loss)  before income taxes and fixed charges
      and (ii) fixed charges consist of interest expense,  capitalized interest,
      amortization  of debt issue  costs and debt  discount  and the  portion of
      rental  expense  which is  deemed  to be  representative  of the  interest
      factor.  The period ended  December 31, 1992 is not applicable as no fixed
      charges were incurred.  Earnings were  insufficient to cover fixed charges
      by $1.2 million for  calendar  year 1993,  $3.6 million for calendar  year
      1994,  $2.9 million for  calendar  year 1995 and $2.6 million for calendar
      year 1996.
</FN>
</TABLE>
    
                                                     - 8 -

<PAGE>




Item 7: Management's  Discussion and Analysis of Financial Condition and Results
of Operation

Overview

      The  following is an analysis of the  financial  condition  and results of
operations of Cinemark Mexico (USA) and its subsidiary,  Cinemark de Mexico, for
calendar years 1994,  1995 and 1996. This analysis should be read in conjunction
with the  Consolidated  Financial  Statements  and  including  the notes thereto
appearing elsewhere in this report.

      The  Company's and Cinemark de Mexico's  revenues are generated  primarily
from box office receipts and concession sales. Additional revenues are generated
by electronic  video games installed in video arcades located off the lobbies in
the  theatres.  Cinemark de Mexico opened its first theatre in April of 1994 and
opened three  additional  theatres during the year.  Prior to April of 1994, the
companies  had  been in the  development  stage,  since  inception,  and had not
generated any revenues. All operations are conducted by the subsidiary, Cinemark
de Mexico.  As of March 27, 1997,  Cinemark de Mexico  operates  eleven theatres
(114 screens),  one theatre (15 screens) is under construction and an additional
two theatres (20 screens) are under commitment with executed leases.


                                                     - 9 -

<PAGE>



Results of Operations

      Set forth below is a summary of operating  revenues and expenses,  certain
income statement items expressed as percentages of revenue, average screen count
and  revenues per average  screen  count for the three most recent  fiscal years
ended December 31, 1996.

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                            -----------------------
                                                                1996                  1995                   1994
                                                                ----                  ----                   ----
<S>                                                        <C>                    <C>                    <C>     
Operating data (in thousands):
Revenues
      Admissions                                           $  14,425              $  7,992               $  4,229
      Concessions                                              7,734                 4,156                  2,097
      Other                                                      217                   117                    268
                                                                 ---                   ---                    ---
        Total revenues                                      $ 22,376             $  12,265                $ 6,594
                                                            ========             =========                -------
Operating data as a percentage of total
revenues (1):
Revenues                                                        1996                  1995                   1994
                                                                ----                  ----                   ----
      Admissions                                                 64.4%                  65.1%                  64.1%
      Concessions                                                34.6                   33.9                   31.8
      Other                                                       1.0                    1.0                    4.1
                                                                  ---                    ---                    ---
         Total revenues                                         100.0                  100.0                  100.0
Cost of operations                                                80.6                  83.8                   86.7
General and administrative expenses                                8.9                  15.9                   24.4
Depreciation and amortization                                      7.8                   5.9                    5.3
Operating income (loss)                                            2.7                  (5.6)                 (16.5)
Interest expense                                                  18.5                  22.9                   42.4
Income before income taxes                                       (11.7)                (22.6)                 (54.1)
Net loss                                                         (12.5)                (24.1)                 (42.8)
                                                                            Year Ended December 31,
                                                                            -----------------------
                                                                1996                  1995                   1994
                                                                ----                  ----                   ----
Average screen count                                             107                    57                     22
                                                                 ===                    ==                     ==
  (month end average)
Revenues per average screen count                          $ 209,126              $215,169               $299,735
                                                           =========              ========               ========
<FN>

-------------------
(1)   All costs are  expressed as a percentage  of total  revenues,  except film
      rentals,  which are expressed as a percentage of admissions revenues,  and
      concession  supplies,  which are expressed as a percentage of  concessions
      revenues.
</FN>
</TABLE>

Comparison of Years Ended December 31, 1996 and December 31, 1995

Revenues.  Revenues  increased 82.4% in 1996 to $22.4 million from $12.3 million
in 1995. The increase is primarily  attributable to an increase in attendance as
a result of the first full year of  operation  of 50 screens  opened in 1995 and
the addition of 22 screens in spring of 1996. On a dollar  equivalent basis, the
revenues were  negatively  impacted by the  devaluation of the Mexican peso that
began in late  December  1994.  Although  the peso only  declined  2.2% from the
beginning  to the end of the year in 1996  compared to the  dollar,  the average
exchange rate  deteriorated from N$6.44 pesos per $1 in 1995 to N$7.59 per $1 in
1996 ( a  15.2%  decline).  On a peso  denominated  basis,  average  per  screen
revenues  increased  14.5%  in 1996  over  1995,  however,  as a  result  of the
devaluation, on a dollar denominated basis average per screen revenues decreased
2.8%.

                                                     - 10 -

<PAGE>




Cost of Operations.  Cost of operations, as a percentage of revenues,  decreased
to 80.6% in 1996 from 83.8% in 1995. The decrease resulted from a reduction as a
percentage of revenues in facility leases (12.5% in 1996 from 15.1% in 1995) and
utility and other costs (15.0 in 1996 from 16.3% in 1995).  The  decreases  were
partially  offset by increases in film costs as a percentage of revenues  (43.1%
in 1996 from 42.5% in 1995) and  concession  costs  (34.2% in 1996 from 32.3% in
1995).

General and Administrative Expenses. Cinemark de Mexico conducts its real estate
and  administrative   operations  from  its  Mexico  City  office.  General  and
administrative  expenses  incurred  during 1996  decreased  as a  percentage  of
revenues  to  8.9%  from  15.9%  in  1995.  In  absolute   terms,   general  and
administrative  expenses remained relatively flat in 1996 increasing 2.0% to 2.0
million  in 1996  from  $1.9  million  in 1995.  The  increase  in  general  and
administrative  expenses is  attributable  to an increase in the management fee,
resulting from the increase in total  revenues  during 1996 paid to Cinemark USA
(5% of revenues). The increase was offset by a decrease in costs incurred by the
Mexico City office for travel expenses, legal fees and consulting fees.

Depreciation  and  Amortization.  Depreciation  and  amortization  expenses as a
percentage of revenues increased 142.2% to $1.7 million in 1996 from $.7 million
in 1995.  The  increase  reflects  the  investment  in new theatre  property and
equipment made during 1996 of $9.7 million, a 50% increase over 1995.

Interest Expense. Interest costs incurred,  including amortization of debt issue
cost and debt  discount,  increased  to $4.1  million in 1996 from $3.0  million
(including the capitalization of $.2 million of interest to fee properties under
construction) in 1995, a 39.2% increase. The increase in interest costs incurred
for 1996 is the result of borrowings  under the Company's  senior secured credit
facility  and the  issuance  of  additional  notes in exchange  for  outstanding
warrants  and in  payment  of  accrued  interest  (see  "Liquidity  and  Capital
Resources").

Income Taxes.  The Company has provided income taxes under FASB 109. The Company
will file a  consolidated  U.S.  federal  income tax return with  Cinemark  USA.
Income  tax  expense  has  been  recorded   primarily   related  to  the  income
attributable to Cinemark Mexico (USA).  The tax benefit of the loss generated by
Cinemark de Mexico,  which files a separate tax return in Mexico, has been fully
reserved  and will be  realized in future  periods as Cinemark de Mexico  begins
generating a profit form operations.

Inflation and Foreign  Currency.  The Company has invested  approximately  $40.5
million in Cinemark de Mexico to fund the initial development operations. Due to
the devaluation of the Mexican currency, pesos, that began in December 1994, the
Company has recognized an $11.1 million unrealized  cumulative  translation loss
adjustment in equity at December 31, 1996. The cumulative unrealized translation
loss increased $.6 million in 1996 as a result of the devaluation of the Mexican
peso from N$7.68 per $1 at the end of 1995 to N$7.86 at the end of the year. The
Company's  debt and certain of its current  theatre lease rent is denominated in
U.S.  dollars while revenues are in Mexican pesos.  Additionally,  almost all of
the equipment and interior  finish  materials of the Company's new theatres have
been imported from the U.S. As a result of the devaluation, certain costs of the
Company (principally equipment, interest and lease expenses) have almost doubled
in relation to the  Company's  revenues.  The Company plans to raise prices over
time in an  attempt  to  compensate  for the  devaluation.  Currently,  however,
management does not believe that it can raise prices  sufficiently to offset the
devaluation without dramatically reducing patronage and concession  consumption.
The devaluation has  significantly  impacted the Mexican economy and will affect
the  short  term  profitability  of the  theatres.  Additionally,  the  lack  of
available capital in the Mexican market as a result of a significant rise in the
interest  rates has reduced the  availability  of developer  financing on future
projects resulting in a reduction in the rate of expansion initially anticipated
by the Company. In 1997,  generally accepted accounting  principles will require
that the dollar be used as the  functional  currency  of the  Company's  foreign
subsidiary for U.S. reporting  purposes.  Thus,  devaluations in the peso during
1997 that  affect the  Company's  investment  will be charged to  exchange  loss
rather than to the cumulative adjustment account. The exchange rate at March 27,
1997 had increased slightly to approximately N$8.0.


Comparison of Years Ended December 31, 1995 and December 31, 1994

Revenues. Revenues in 1995 increased to $12.3 million from $6.6 million in 1994,
an 86.0%  increase.  The  increase is primarily  attributable  to an increase in
attendance of 199% resulting from the first full year of operation of 42 screens
opened in 1994 and the  addition of 50 screens in 1995.  On a dollar  equivalent
basis, revenues were negatively impacted

                                                     - 11 -

<PAGE>



by the  devaluation of the Mexican peso that began in late December  1994,  with
the average  exchange  rate  deteriorating  in 1995 to N$6.44  pesos per $1 from
N$3.39 per $1 in 1994 ( a 90.0% decline).  On a peso denominated basis,  average
per screen revenues increased 36.4% in 1995 over 1994,  however,  as a result of
the  devaluation,  on a dollar  denominated  basis  average per screen  revenues
decreased 28.2% to $215,169 in 1995 from $299,755 in 1994.

Cost of Operations.  Cost of operations, as a percentage of revenues,  decreased
to 83.8% in 1995 from 86.7% in 1994.  The decrease  resulted from a reduction in
concession  costs as a percentage of concession  revenues (to 32.3% in 1995 from
34.1% in 1994),  and a decrease  as a  percentage  of total  revenues in payroll
costs (to 11.4% in 1995 from 15.1% in 1994),  advertising costs (to 2.4% in 1995
from 4.1% in 1994) and  utility  and other costs (to 16.3% in 1995 from 19.4% in
1994) all of which reflect increased efficiencies associated with the first full
year of operations.  The decreases  were  partially  offset by increases in film
costs as a  percentage  of  admission  revenues  (to 42.5% in 1995 from 39.3% in
1994) and an increase in facility leases as a percentage of total revenue (15.1%
in 1995 from  12.1% in 1994)  resulting  from  certain of the  Company's  leases
obligations being denominated in U.S. dollars.

General  and  Administrative   Expense.   General  and  administrative  expenses
increased in 1995 to $1.9  million  from $1.6 million in 1994.  These costs were
primarily  related to the  identification  of theatre sites and  negotiation  of
leases  including  salaries and wages  (including  payroll taxes and  benefits),
legal fees, and a management fee equal to 5% of revenues for services  performed
by Cinemark USA, Inc.

Depreciation  and  Amortization.  Depreciation  and  amortization  expenses as a
percentage of revenues remained  relatively  constant at 5.3%.  Depreciation and
amortization  increased 102.8% to $.7 million in 1995 from $.35 million in 1994.
The  increase is a result of the addition of $12.0  million in theatre  property
and equipment  during 1995. The 126.9% increase in assets is not fully reflected
in  depreciation  expense as a result of many of the additions  occurring at the
end of 1995.

Interest Expense. Interest costs incurred,  including amortization of debt issue
cost and debt discount,  increased  4.8% during 1995 to $3.0 million  (including
the   capitalization  of  $.2  million  of  interest  to  fee  properties  under
construction,  versus $2.8  million of interest  costs in 1994.  The increase in
interest  costs incurred for 1995 is the result of the issuance of an additional
$2.0 million of 12% Senior Subordinated Notes on May 6, 1994.

Income Taxes.  The Company has provided income taxes under FASB 109. The Company
will file a  consolidated  U.S.  federal income tax return with Cinemark USA. An
income tax  expense  has been  recorded  primarily  related to the income  taxes
withheld on interest paid by Cinemark de Mexico to the Company.  The tax benefit
of the loss  generated by Cinemark de Mexico has been fully reserved and will be
realized in future periods as Cinemark de Mexico begins generating a profit from
operations.

Inflation  and  Foreign  Currency.   The  Mexican  currency  has  experienced  a
significant  devaluation  since December  1994. As a result of the  devaluation,
certain costs of the Company's unrestricted Mexican subsidiary, Cinemark Mexico,
have almost doubled in relation to Cinemark Mexico's revenues. Cinemark Mexico's
debt and certain of Cinemark  Mexico's  theatre lease rents are  denominated  in
U.S. dollars while the revenues are in Mexican pesos.  Additionally,  almost all
of the equipment and interior finish material of Cinemark Mexico's theatres have
been imported from the U.S. As a result of the devaluation,  Cinemark Mexico has
recognized a $10.5 million unrealized translation loss adjustment in equity. The
devaluation  has  significantly  and adversely  affected the Mexican economy and
will affect the short term profitability of the theatres. Additionally, there is
a lack of available  capital in the Mexican  financial market as a result of the
significant  rise in interest  rates  resulting in the reduced  availability  of
developer  financing  for future  projects.  Such events  have caused  delays in
Cinemark  Mexico's  current  projects  and a reduction  in the rate of expansion
initially anticipated by Cinemark Mexico.

The cumulative  unrealized  translation loss increased $6.1 million in 1995 as a
result of the continued devaluation of the Mexican peso from N$5.0 per $1 at the
end of 1994 to  N$7.68 at the end of the year.  As of March 22,  1996,  the Peso
remained relatively unchanged from year end at an exchange rate of N$7.6 per $1.

Liquidity and Capital Resources

     Cinemark de Mexico's revenues are collected in cash,  primarily through box
office admissions and the sale of concession items.

                                                     - 12 -

<PAGE>




     The Company's strategy is to enter into leases with terms of 15 to 20 years
plus  renewal  options  for the  development  of theatre  facilities  instead of
purchasing them due to the lower capital requirements for developing a leasehold
theatre.  A typical leasehold theatre requires a capital outlay of approximately
$100,000  to  $200,000  per  screen,  representing  the costs of  equipment  and
interior  finishout,  whereas,  the  development  of a fee owned or ground lease
theatre is  estimated  to range  between  $4.0  million and $10.0  million,  per
theatre.  The  Company  attempts  to  obtain  lease  terms  that  are  typically
built-to-suit construction obligations with Cinemark de Mexico being responsible
for  theatre  equipment.  However,  due to  inability  of  landlords  to  obtain
financing  in  Mexico,  many  landlords  have  requested  Cinemark  de Mexico to
contribute to the cost of construction  and recapture such  contributions  (with
interest)  through rent  abatements.  Management  has in the past and may in the
future make, such contributions to construction in markets it deems appropriate.
The Company  will also  consider a desirable  location on a fee or ground  lease
basis if there is no developer  willing to construct  the theatre on the site on
terms  acceptable  to the  Company.  In such  events,  the Company may  consider
alternative  financing  sources allowed under the Indenture  governing the Notes
(the "Indenture"),  such as additional  borrowings,  sales of equity or entering
into joint ventures.

         On August 3,  1993,  the  Company  issued  $20.4  million of 12% Senior
Subordinated  Notes due 2003 (the "Old Notes")  with  detachable  warrants  (the
"Warrants").  The Old Notes  were  bearing  interest  at 12% per  annum  payable
semi-annually  on August 1 and  February 1 of each year  commencing  February 1,
1994. The Company was required to make a sinking fund payment of $6.7 million on
each of August 1, 2001 and August 1, 2002,  which amounts were to be utilized on
such respective dates to retire a like face amount of the outstanding Old Notes.

     On May 6, 1994,  the  Company  issued,  at a discount  of $55.00 per $1,000
note, an additional $2.0 million of 12% Senior  Subordinated Notes due 2003 with
the  terms  governed  by the  Indenture  from the  initial  offering  of  Senior
Subordinated Notes.

     On  September  30,  1996,  the Company  exchanged  new notes (New Notes) in
exchange for the Cinemark Mexico Old Notes (which included the $2 million issued
in May of 1994).  The New Notes are Senior  Subordinated  Notes due 2003 with an
annual stated interest rate of 12% payable semiannually on February 1 and August
1. The Company has the ability to issue  additional  notes,  subject to the same
terms as the New  Notes,  in payment of  interest  due on any of the  semiannual
interest  payment  dates  through  February 1, 2000.  If the  Company  elects to
exercise this option, the interest rate for the applicable semiannual period for
which the  additional  bonds are issued is accruable at 13% rather than 12%. The
election is at the  discretion  of the  Company  and applies to all  outstanding
bonds for the relevant  semiannual  interest period. The Indenture governing the
New  Notes is the same as the old  Indenture  with  certain  modifications.  The
Indenture  requires  Cinemark  Mexico to maintain a Cash Flow Coverage Ratio (as
defined in the new  Indenture) of 2.0 to 1.0 beginning  after December 31, 1999.
Sinking  fund  payments  as  previously  described  are  required  under the new
Indenture.  The Company  exercised its option to issue  additional notes for the
interest payment due on the New Notes on February 1, 1997.

            As part of the exchange agreement the note holders agreed to receive
additional notes in payment of the accrued interest due on the Old Notes for the
period  February 1 1996 through the date of the exchange.  The interest for this
period  was paid at the rate of 13% per annum  ($2.0  million  of New Notes were
issued).  Additionally,  the Company repurchased the majority of its outstanding
warrants (94.1%) for the issuance of $1.3 million of additional New Notes. Also,
Cinemark  International  contributed  an  additional  $10  million  of equity to
Cinemark  Mexico  pursuant  to the  exchange.  On  January  9,  1997,  New  Wave
Investment  also  acquired an  additional  64,032  shares of common stock of the
Company for $.3 million.

         The  exchange  created a net  benefit  of $.8  million,  including  tax
benefits,  from the retirement of the warrants,  which was reduced by the charge
off of the unamortized  debt discount  associated  with the Old Notes.  This net
benefit was credited to additional paid in capital.

       The  indenture  for the Old and New Notes  allows for the  incurrence  of
$10.0 million of senior debt. On December 4, 1995, the Company  entered into the
Mexico  Senior  Credit  Facility  allowing  for the  borrowing of $10 million of
senior  secured debt from  Cinemark  international  to fund Cinemark de Mexico's
capital  needs for  theatre  construction.  The Mexico  Senior  Credit  Facility
permits  the  Company  to relend to  Cinemark  de Mexico any funds  borrowed  to
finance construction of uncompleted locations,  the acquisition and installation
of furniture, fixtures and equipment of such

                                                     - 13 -

<PAGE>



locations and for general corporate purposes and working capital. At of December
31, 1996, the Company had borrowed fully drawn the $10.0 million available under
the Mexico Senior Credit Facility.

     At March 27, 1997,  Cinemark de Mexico was operating  eleven  theatres (114
screens),  had one theatre (15 screens) under  construction and two theatres (20
screens)  under  commitment  with executed  leases.  The  construction  of these
theatres  will  require  additional  capital  expenditures  by  the  Company  of
approximately $16.0 million, which will be funded with cash currently available.
Funding beyond these sources required to construct these and additional theatres
is subject to Cinemark de Mexico achieving  sufficient  levels of cash flow from
operations or raising additional equity.


Item 8:  Financial Statements

         The financial statements are listed on the Index at F-1. Such financial
statements and supplementary data are included herein beginning on page F-3.


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

         The directors and executive officers of the Company are:

<TABLE>
<CAPTION>
         Name                     Age                                         Position


<S>                                 <C>      <C>                                                             
Lee Roy Mitchell                    60       Vice Chairman of the Board; Chief Executive Officer; Director
Tandy Mitchell                      46       Chairman of the Board; Secretary; Director
Alan W. Stock                       36       President; Chief Operating Officer; Director
Jeffrey J. Stedman                  34       Vice President; Treasurer; Chief Financial Officer; Assistant Secretary
Margaret E. Richards                38       Vice President-Real Estate; Assistant Secretary
Guillermo (William) Jenkins         65       Director
Heriberto Guerra, Jr.               47       Director
</TABLE>

     The directors of the Company are elected each year by the  shareholders  to
serve for a one-year term and until their  successors are elected and qualified.
Cinemark  International  and New Wave have  agreed to vote all  shares of common
stock of the Company owned by them for the election of Mr.  Jenkins to the Board
of   Directors  of  the  Company.   See  "Certain   Relationships   and  Related
Transactions-Shareholders  Agreement." The executive officers of the Company are
elected by the Board of Directors to serve at the discretion of the Board.

     Directors  of the  Company  receive no  compensation  from the  Company for
serving as directors.  However,  directors are reimbursed for expenses  actually
incurred for each Board  meeting  which they  attend.  The  Company's  executive
officers  are  employees of Cinemark  USA and receive no  compensation  from the
Company for their services as officers,  although they may receive options under
the Company's Stock Option Plan.

     The directors and executive officers of the Company have held their current
positions  with the Company  since its inception in July 1993 with the exception
of Mr.  Jenkins.  Mr.  Jenkins has been a director of the Company  since  August
1993.  The following is a brief  description  of the business  experience of the
directors  and  executive  officers  of the  Company  for at least the past five
years, other than Mr. Higgins.

     Lee Roy  Mitchell has served as Chairman of the Board of Cinemark USA since
March 1996,  as Director and Chief  Executive  Officer of Cinemark USA since its
inception  in 1987 and Vice  Chairman of the Board of  Directors of Cinemark USA
from March 1993 to March 1996.  Mr.  Mitchell was President of Cinemark USA from
its inception in

                                                     - 14 -

<PAGE>



1987 until March 1993.  From 1985 to 1987, Mr.  Mitchell served as President and
Chief  Executive  Officer of a  predecessor  of Cinemark  USA. Mr.  Mitchell has
served on the Board of Directors of the National  Association  of Theatre Owners
since 1991.  Mr.  Mitchell  has been  engaged in the motion  picture  exhibition
business for more than 35 years.

     Tandy  Mitchell  has served as Vice  Chairman of the Board of Cinemark  USA
since March 1996,  as Director of Cinemark  USA since April 1992,  as  Executive
Vice  President of Cinemark USA since  October 1989 and as Secretary of Cinemark
USA since its  inception  in 1987.  Mrs.  Mitchell  was  General  Manager of the
theatre  division of a predecessor of Cinemark USA from 1985 to 1987.  From 1978
to 1985,  Mrs.  Mitchell  was employed by Southwest  Cinemas  Corporation,  most
recently  as  director  of  operations.  Mrs.  Mitchell  is the  wife of Lee Roy
Mitchell.

     Alan W. Stock has served as  President  of Cinemark USA since March 1993, a
Director of  Cinemark  USA since  April 1992 and as Chief  Operating  Officer of
Cinemark USA since March 1992. Mr. Stock was Vice President of Cinemark USA from
October  1989 to March 1993 and was  General  Manager of  Cinemark  USA from its
inception in 1987 to March 1992. Mr. Stock was employed by the theatre  division
of a predecessor  of Cinemark USA from January 1986 to December 1987 as Director
of Operations. From 1981 to 1985, he was employed by Consolidated Theatres, most
recently as District Manager.

     Jeffrey J.  Stedman was elected  Director of Cinemark USA in March 1996 and
has served as Vice President,  Treasurer and Chief Financial Officer of Cinemark
USA since April 1993. From December 1989 to April 1993, Mr. Stedman was Director
of Finance of Cinemark USA. Prior to joining  Cinemark USA in December 1989, Mr.
Stedman was a Manager in the tax  department of Deloitte & Touche,  where he was
employed from December 1984 to December 1989. Mr. Stedman is a certified  public
accountant.

     Margaret E. Richards has served as a Vice President and Assistant Secretary
of Cinemark USA since October 1989 and as Vice President-Real Estate of Cinemark
USA since March 1994. Ms.  Richards has been Director of Leasing of Cinemark USA
since its  inception  in 1987 and was  employed  by the  theatre  division  of a
predecessor  of  Cinemark  USA in its real  estate  section  from August 1986 to
December 1987.

     Guillermo (William) A. Jenkins is Chairman of the Board of Confraco S.A. de
C.V., a construction  company in Mexico.  He serves on the Board of Directors of
the Mary Street Jenkins Foundation, founded by his father, who was in the past a
major exhibitor in the movie industry in Mexico. He also was a founder and Chief
Executive Officer of a leading insurance company in the Mexican market.

     Heriberto  Guerra,  Jr. has served as Director of Cinemark  since  December
1993 and as Director of the Company  since  February  1996.  Mr. Guerra has been
Managing  Director-Corporate  Development for Southwestern  Bell Telephone since
1995.  From  September  1985 to  January  1987,  he was  Area  Manager-Marketing
Operations  for  Southwestern  Bell,  and from  1987 to 1995,  he was  Executive
Director-Government Relations for Southwestern Bell. Prior to that, he served in
an owner or manager  capacity for various  hotel,  restaurant  and movie theatre
businesses in Texas. Mr. Guerra is also a director of Inc. and Play by Play Toys
and Novelties.


                                                     - 15 -

<PAGE>



Directors and Executive Officers of Cinemark de Mexico

     The directors and executive officers of Cinemark de Mexico are as follows:




     Name                          Age                     Position
Ken Higgins                        46          Chairman of the Board; President
Lee Roy Mitchell                   59          Vice Chairman of the Board
Tandy Mitchell                     46          Director
Alan W. Stock                      36          Director
Jeffrey J. Stedman                 34          Director

     The  directors  of  Cinemark  de  Mexico  are  elected  each  year  by  the
shareholders to serve for a one-year term and until their successors are elected
and  qualified.  The  president of Cinemark de Mexico is elected by the Board of
Directors  to serve at the  discretion  of the Board.  Directors  of Cinemark de
Mexico receive no compensation from Cinemark de Mexico for serving as directors.
However,  directors are reimbursed for expenses actually incurred for each Board
meeting which they attend. Cinemark de Mexico's executive officers are employees
of Cinemark USA and receive no  compensation  from  Cinemark de Mexico for their
services as officers.

     The directors and executive  officers of Cinemark de Mexico have held their
current  positions  with the Company since its inception in September  1992 with
the  exception of Mr.  Higgins and Mr.  Stedman.  See  "Directors  and Executive
Officers of the Registrant" for a description of the business  experience of the
executive  officers and directors of Cinemark de Mexico for the past five years.
Mr. Stedman has been a Director of Cinemark de Mexico since November 1993.

     Ken D. Higgins has served as President of the Company  since April 4, 1994.
From 1987 to April 4, 1994,  Mr.  Higgins  was the head film buyer for  Cinemark
USA.  Prior to joining  Cinemark  USA,  Mr.  Higgins  was  employed  by Santikos
Theatres,  a San  Antonio  based  theatre  circuit,  where he began as a theatre
manager and rose to Vice President of Film/Advertising/Marketing.


Item 11: Executive Compensation

     Executive  officers of the Company and Cinemark de Mexico are  employees of
Cinemark USA with the exception of Mr. Jenkins and receive no compensation  from
the Company or Cinemark de Mexico for their services as officers.

     The Company has  established a Nonqualified  Stock Option Plan (the "Plan")
under which the Chief Executive Officer of the Company,  in his sole discretion,
may grant  employees  of the Company  options to purchase up to an  aggregate of
100,000 shares of the Company's Common Stock. The Chief Executive Officer of the
Company has the ability to set the exercise  price and term of the options.  All
options  vest at the  rate of  one-fifth  per  year,  commencing  on the  second
anniversary  of the date of grant  and  subject  to  acceleration  by the  Chief
Executive  Officer  of the  Company.  In the event of a public  offering  of the
Company's  stock, a sale of all or  substantially  all of the Company's  assets,
certain mergers, consolidations, liquidation, or other reorganizations involving
the Company's capital structure or certain changes of control,  each option will
become  exercisable in full prior to such public  offering,  sale of assets,  or
reorganization  or upon the occurrence of the change of control,  as applicable.
An employee's  options are  forfeited if the employee is  terminated  for cause.
Upon termination of an employee's  employment with the Company,  the Company has
the option to  repurchase  any shares of capital  stock of the Company that were
acquired by the employee pursuant to the Plan at a specified formula price based
on theatre cash flow. If an employee has any exercisable  options at the time of
termination of the employee's  employment with the Company,  the Company has the
option to repurchase  such  exercisable  options in the same manner as shares of
capital stock of the Company  acquired  pursuant to the Plan at the same formula
price less the exercise  price of the options.  As of March 27, 1997,  there are
outstanding  options to purchase 11,676 shares of the Company's common stock. In
1996, 7,500 options were granted to executive officers of the Company.


                                                     - 16 -

<PAGE>



Item 12: Security Ownership of Certain Beneficial Owners and Management

     The following table and the  accompanying  footnotes set forth, as of March
27, 1997,  the  beneficial  ownership of the Company's  common stock by (i) each
person  who is known to the  Company  to own  beneficially  more  than 5% of the
Company's  outstanding  common  stock,  (ii) each  director  of the  Company and
Cinemark  de Mexico and (iii) all  officers  and  directors  of the Company as a
group:


<TABLE>
<CAPTION>
                                                                           Number
                                                                              of                    Percent
Names and Addresses (1)                                                     Shares                  of Shares
<S>                                                                        <C>                      <C>  
Cinemark International, Inc.(2)                                            3,926,118                  95.6%
7502 Greenville Avenue, Suite 800
Dallas, Texas 75231
New Wave Corporation, A.V.V.                                                 182,346                   4.4%
c/o Mees Pierson Trust (Aruba) N.V.
P.O. Box 3889
Curacao, Netherlands Antilles
Lee Roy Mitchell(3)                                                        3,926,118                  95.6%
Tandy Mitchell(4)                                                                 --                  --
Alan W. Stock                                                                     --                  --
Jeffrey J. Stedman                                                                --                  --
Guillermo (William) Jenkins(5)                                               182,346                   4.4%
Heriberto Guerra                                                                  --                  --
Margaret E. Richards                                                              --                  --
Directors and Officers as a Group (7 persons)                              4,108,464                 100.0%
<FN>




(1)  Unless otherwise  indicated,  the Company believes the beneficial owner has
     both sole voting and investment powers over such shares.
(2)  Cinemark International is a wholly owned subsidiary of Cinemark USA.  See the table on page 19 of this report
     for a listing of the beneficial ownership of Cinemark USA's common stock.
(3)  The Company is a subsidiary of Cinemark International.  Cinemark International is a wholly owned subsidiary of
     Cinemark USA.  Mr. Mitchell, a director of Cinemark USA, Cinemark International and the Company, is the
     majority shareholder of Cinemark USA.  As a result, Mr. Mitchell may be deemed to beneficially own the
     3,926,118 of the common stock owned by Cinemark International.  Mr. Mitchell disclaims beneficial ownership
     of the common stock of the Company owned by Cinemark International.
(4)  Excludes any shares owned by Mr. Mitchell that Mrs. Mitchell may be deemed to own as a result of community
     property laws.
(5)  Mr. Jenkins may be deemed to beneficially own shares of common stock of the Company owned by New Wave
     Corporation, A.V.V.  Mr. Jenkins disclaims beneficial ownership of the common stock of the Company owned by
     New Wave.
</FN>
</TABLE>

     The following table and the  accompanying  footnotes set forth, as of March
27, 1997, the beneficial  ownership of Cinemark de Mexico's  common stock by (i)
each person who is known to Cinemark de Mexico to own beneficially  more than 5%
of Cinemark de Mexico's  outstanding  common  stock,  (ii) each  director of the
Company  and  Cinemark de Mexico and (iii) all  officers  and  directors  of the
Company and Cinemark de Mexico as a group:

                                                     - 17 -

<PAGE>




<TABLE>
<CAPTION>
                                                                      Number
                                                                         of                   Percent
                                                                  Series B Shares           of Shares
Name and Addresses(1)                                     Class I              Class II
---------------------                                     -------              --------
<S>                                                       <C>            <C>                <C>  
Cinemark Mexico (USA), Inc.(2)                             49,999         21,678,663               99.9%
7502 Greenville Avenue, Suite 800
Dallas, Texas 75231
Lee Roy Mitchell(3)                                        50,000         21,678,663              100.0%
Tandy Mitchell(4)                                                     --                           --
Ken Higgins                                                           --                           --
Alan W. Stock                                                         --                           --
Jeffrey J. Stedman                                                    --                           --
Directors and Officers as                                  50,000         21,678,663              100.0%
a Group (8 persons)
<FN>




(1)  Unless otherwise  indicated,  the Company believes the beneficial owner has
     both sole voting and investment powers over such shares.
(2)  Cinemark  Mexico (USA) is an indirect  subsidiary  of Cinemark USA. See the
     tables on pages 18 and 20 of this  report for a listing  of the  beneficial
     ownership  of Cinemark  Mexico  (USA)'s and Cinemark  USA's  common  stock,
     respectively.
(3)  Cinemark de Mexico is a  subsidiary  of  Cinemark  Mexico  (USA).  Cinemark
     Mexico  (USA)  is  a  subsidiary   of  Cinemark   International.   Cinemark
     International is a wholly owned subsidiary of Cinemark USA. Mr. Mitchell, a
     director of Cinemark USA, Cinemark International, Cinemark Mexico (USA) and
     Cinemark de Mexico,  is the  majority  shareholder  of  Cinemark  USA. As a
     result, Mr. Mitchell may be deemed to beneficially own the 49,999 shares of
     Class I Series B common stock and the 21,678,663  shares of Class II Series
     B common stock owned by Cinemark Mexico (USA), Inc. Mr. Mitchell  disclaims
     beneficial  ownership  of the common  stock of Cinemark de Mexico  owned by
     Cinemark Mexico (USA).
(4)  Excludes any shares of Cinemark de Mexico owned by Mr.  Mitchell  that Mrs.
     Mitchell may be deemed to own as a result of community property laws.
</FN>
</TABLE>



                                                     - 18 -

<PAGE>



     The following table and the  accompanying  footnotes set forth, as of March
27, 1997,  the  beneficial  ownership of Cinemark USA's Common Stock by (i) each
person who is known to the  Company to own  beneficially  more than 5% of either
class of its  outstanding  Common Stock,  (ii) each director and named executive
officer, and (iii) all officers and directors as a group:



<TABLE>
<CAPTION>
                                                                                                                Combined
                                                                      Number of                                  Percent
Names and Addresses(1)          Title of Class                        Shares (2)     Percent of Class         of Classes
----------------------          --------------                        ----------     ----------------         ----------

<S>                             <C>                                   <C>            <C>   
Lee Roy Mitchell(3)             Class A Common Stock                      1,500                   100.0%
7502 Greenville Ave.                                                                                                  42.6%
Suite 800                       Class B Common Stock                     77,687                    42.1%
Dallas, TX 75231
Cypress Merchant                Class A Common Stock                         --                    --
Banking Partners, L.P.                                                                                                42.2%
65 East 55th St.                Class B Common Stock                     78,469                    42.5%
New York, NY 10022
Cypress Pictures Ltd.           Class A Common Stock                         --
c/o W.S. Walker Co.                                                                                 2.2%              *2.2%
Second Floor                    Class B Common Stock                      4,079                  ____
Caledonian House
Mary St., P.O. Box 265
George Town, Grand
Cayman
Cayman Islands
The Mitchell Special            Class A Common Stock                         --                    --
Trust                                                                                                                  7.9%
7502 Greenville Ave.            Class B Common Stock                     14,667                     8%
Suite 800
Dallas, TX 75231
Tandy Mitchell(4)               Class A Common Stock                         --                    --
                                                                                                                      --
                                Class B Common Stock                         --                    --
Alan W. Stock(5)                Class A Common Stock                         --                    --
                                                                                                                       *
                                Class B Common Stock                      2,137                     *
Jeffrey J. Stedman(6)           Class A Common Stock                         --                    --
                                                                                                                       *
                                Class B Common Stock                        380                     *
Gary R. Gibbs(7)                Class A Common Stock                         --                    --
                                                                                                                       *
                                Class B Common Stock                        600                     *


                                                     - 19 -

<PAGE>




Margaret E. Richards(8)         Class A Common Stock                         --                    --
                                                                                                                       *
                                Class B Common Stock                        534                     *


W. Bryce Anderson               Class A Common Stock                         --                    --
                                                                                                                      --
                                Class B Common Stock                         --                    --
Sheldon I. Stein                Class A Common Stock                         --                    --
                                                                                                                      --
                                Class B Common Stock                         --                    --
Heriberto Guerra, Jr.           Class A Common Stock                         --                    --
                                                                                                                      --
                                Class B Common Stock                         --                    --
James A. Stern                  Class A Common Stock                         --                    --
                                                                                                                      --
                                Class B Common Stock                         --                    --
James L. Singleton              Class A Common Stock                         --                    --
                                                                                                                      --
                                Class B Common Stock                         --                    --
Directors and Officers as       Class A Common Stock                      1,500                   100.0%
a Group (13 persons) (9)                                                                                              43.9%
                                Class B Common Stock                     81,778                    43.3%
<FN>
--------------------
  *  Less than 1%.
(1)  Unless otherwise  indicated,  the Company believes the beneficial owner has
     both sole voting and investment powers over such shares.
(2)  As of March 27,  1997,  1,500  shares of Class A Common  Stock and  184,589
     shares of Class B Common Stock were issued and outstanding.  Includes 6,645
     shares of Class B Common Stock  issuable  upon the exercise of options that
     may be exercised within 60 days of the date of this Report.
(3)  Does not include  15,937  shares of Class B Common  Stock held in trust for
     the  benefit of certain of Mr.  Mitchell's  grandchildren,  as to which Mr.
     Mitchell disclaims beneficial ownership.  Mr. Mitchell is the co-trustee of
     such trusts.
(4)  Excludes any shares owned by Mr. Mitchell that Mrs.  Mitchell may be deemed
     to own as a result of community property laws.
(5)  Includes 1,817 shares of Class B Common Stock issuable upon the exercise of
     options that may be exercised within 60 days of the date of this Report.
(6)  Includes 305 shares of Class B Common Stock  issuable  upon the exercise of
     options that may be exercised within 60 days of the date of this Report.
(7)  Includes 510 shares of Class B Common Stock  issuable  upon the exercise of
     options that may be exercised within 60 days of the date of this Report.
(8)  Includes 453 shares of Class B Common Stock  issuable  upon the exercise of
     options that may be exercised within 60 days of the date of this Report.
(9)  Includes 3,525 shares of Class B Common Stock issuable upon the exercise of
     options that may be exercised within 60 days of the date of this Report.
</FN>
</TABLE>


                                                     - 20 -

<PAGE>



Item 13: Certain Relationships and Related Transactions

Warrant Registration Rights Agreement

     Pursuant to the Registration Rights Agreement, the Company granted Cinemark
International  and New Wave certain  demand and incidental  registration  rights
with  respect  to the  shares  of  common  stock of the  Company  owned by them.
Pursuant to the Warrant  Registration Rights Agreement,  the Company granted the
purchasers of the Warrants  certain demand  registration  rights with respect to
the Warrants and  incidental  registration  rights with respect to the shares of
common stock  issuable upon exercise of the Warrants.  In addition,  the Company
agreed to use its reasonable best efforts to cause a registration  statement for
the public  distribution of the shares of common stock issuable upon exercise of
the Warrants and the shares of common stock owned by Cinemark  International and
New Wave to  become  effective  (i) upon  certain  events of  default  under the
Indenture,  (ii) a payment default under Senior Debt, or (iii) if the Company is
prohibited by law or agreement from repurchasing the warrants as required by the
Warrant   Certificate.   The  Company  may  suspend  its  efforts  to  have  the
registration  statement  declared  effective  if any Event of Default  under the
Indenture or default in the payment of Senior Debt (as defined in the Indenture)
is cured.

     Pursuant to the Warrant  Registration  Rights  Agreement,  the Company also
agreed, jointly and severally,  to indemnify Cinemark  International,  New Wave,
each holder of  Warrants,  each holder of shares of common stock  issuable  upon
exercise of the Warrants, each Person who participates as an underwriter and any
person  who  controls  any of the  foregoing  against  certain  losses,  claims,
damages,  judgments and expenses  arising under the federal  securities laws. In
addition,  Cinemark  International,  New Wave, each holder of Warrants, and each
holder of shares of common stock issuable upon exercise of the Warrants  agreed,
severally,  but not jointly, to indemnify the Company,  each underwriter and the
other  selling  holders of warrants and shares of common stock  against  certain
losses,  claims,  damages,  judgments and expenses  arising under the securities
laws with  respect  to  written  information  furnished  to the  Company by such
person.

Shareholders Agreement

     The  Company,  Cinemark  International  and  New  Wave  are  parties  to  a
Shareholders  Agreement  dated  July 30,  1993 (the  "Shareholders  Agreement").
Pursuant  to the  terms of the  Shareholders  Agreement,  New Wave  granted  the
Company,  Cinemark International and their affiliates (the "Cinemark Group") (i)
an option to purchase at their  appraised  value all of the common  stock of the
Company owned by New Wave in the event of an involuntary transfer of such shares
by New Wave; (ii) a right of first refusal to purchase some or all of the shares
of  common  stock  of the  Company  owned  by New Wave  which  New Wave  desires
voluntarily to transfer to any person other than Roberto Jenkins ("Jenkins") and
members of his family  group;  and (iii) an option to purchase at the  appraised
value all of the shares of common stock of the Company  owned by New Wave in the
event that Jenkins and his family group own,  directly or indirectly,  less than
75% of the equity of New Wave or otherwise no longer control New Wave.  Jenkins'
"family group" means Jenkins' parents,  brothers and sisters,  father-in-law and
mother-in-law, spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Jenkins and/or Jenkins' spouse and/or descendants.  In
addition, New Wave agreed to raise no objection to the sale of the Company to an
independent  third party, if such sale is approved by the Board of Directors and
a majority  of the  Company's  shareholders.  In  addition,  if such sale of the
Company is  structured  as a sale of stock,  New Wave  agreed to sell all of its
shares of common  stock on the terms  and  conditions  approved  by the Board of
Directors and a majority of the Company's shareholders.

     Prior to the  consummation of the first public offering of shares of common
stock of the  Company:  (i)  Cinemark  International  and New Wave will vote all
shares of common stock owned by them for the election of William  Jenkins to the
Board of  Directors  of the  Company;  (ii) the Company  will not,  and will not
permit any subsidiary of the Company to, directly or indirectly,  enter into any
transaction not in the ordinary course of its business  (excluding  transactions
between the Company and its subsidiaries or between subsidiaries of the Company)
with any  affiliate,  unless a majority of the Board of Directors of the Company
determines in its good faith  judgment that the  transaction is on terms no less
favorable to the Company or such subsidiary than those that could be obtained in
a comparable  arm's length  transaction  with an entity that is not an affiliate
and (iii) the parties to the Shareholders  Agreement will not take any action to
amend the  Company's  Articles of  Incorporation  to  eliminate  or restrict the
preemptive rights of the Company's shareholders; except that the shareholders of
the Company  will not have any  preemptive  rights with respect to any shares of
common stock to be issued pursuant to the Warrants.  Cinemark  International and
New Wave agreed that, in connection  with the first public offering of shares of
common stock of the Company, they would upon the request of the Company take all

                                                     - 21 -

<PAGE>



such  actions as may be required to amend the Articles of  Incorporation  of the
Company to deny  shareholders  the  preemptive  right to acquire  additional  or
treasury shares of the Company.

     The  Shareholders  Agreement  will terminate upon the first to occur of the
following: (i) the merger or consolidation of the Company with or into any other
corporation, or the merger into the Company of any other corporation,  where the
holders  of  the  Company's  voting   securities  (on  a  fully-diluted   basis)
immediately prior to the merger or consolidation own less than a majority of the
ordinary  voting  power to elect  directors of the new  surviving  company (on a
fully-diluted basis) immediately subsequent to such merger or consolidation; and
(ii) a sale of all, or  substantially  all, of the  Company's  assets or capital
stock in any transaction or series of related transactions.

Series D Registration Rights Agreement

     Pursuant to the Series D Registration Rights Agreement, the Company granted
to holders of the Company's 12% Series D Senior  Subordinated PIK Notes ("Series
D Notes") certain demand and incidental  registration rights with respect to the
Series  D Notes  owned by them.  In  addition,  the  Company  agreed  to use its
reasonable  best  efforts  to  cause  a  registration  statement  for  a  public
distribution  of Series D Notes to become  effective  (i) upon certain  defaults
under the Indenture or (ii) a payment default under Senior Debt. The Company may
suspend its efforts to have the registration statement declared effective if any
Event of Default under the Indenture or default in the payment of Senior Debt is
cured.

     Pursuant to the Series D Registration  Rights  Agreement,  the Company also
agreed, jointly and severally,  to indemnify each holder of Series D Notes, each
person who participates as an underwriter and any person who controls any of the
foregoing against certain losses, claims damages,  judgment and expenses arising
under the federal  securities  laws. In addition,  each holder of Series D Notes
agreed,  severally,  but not jointly, to indemnify the Company, each underwriter
and the other  selling  holders of warrants and shares of common  stock  against
certain  losses,  claims,  damages,  judgments  and expenses  arising  under the
securities laws with respect to written information  furnished to the Company by
such person.

Agreements with Cinemark USA

     Cinemark Management Agreements

     The Company and  Cinemark de Mexico have each entered into (and each future
subsidiary of the Company,  immediately upon its formation or acquisition,  will
enter  into) a  Cinemark  Management  Agreement  pursuant  to the terms of which
Cinemark USA will operate all  theatres of the managed  corporation  as Cinemark
theatres for a period of 10 years in consideration  for an annual management fee
equal to the sum of (i) 5.0% of the  revenues of the managed  corporation  up to
$50.0  million  in  revenues  and  (ii)  3.0%  of the  revenues  of the  managed
corporation  over $50.0  million in revenues.  The  Company's  theatres  will be
operated as Cinemark  USA theatres  and will be staffed  primarily  with Mexican
nationals  who  will  report  to the  Cinemark  USA  regional  and  home  office
personnel.  Cinemark  USA will  provide  all  "corporate"  operating  functions,
including film booking and accounting,  in the same manner as such functions are
performed by Cinemark USA personnel  for Cinemark USA owned or leased  theatres.
The managed  corporation  will pay all  development,  operating and  maintenance
expenses  of its  theatres.  Management  of  Cinemark  USA will  make all  major
decisions  regarding  the  operations  of the  managed  corporation's  theatres,
including  whether to develop a new theatre or to acquire an existing theatre or
theatre circuit through  Cinemark USA or the Company or one of its  Subsidiaries
after evaluating the specific site,  whether Cinemark USA, the Company or one of
its  Subsidiaries  currently has a theatre in the  particular  film market,  the
sources of funding available and other relevant factors.  However,  the Cinemark
Management Agreements will provide that Cinemark USA and the managed corporation
may not own,  lease or manage  any  theatre  that is (i)  within 20 miles of any
theatre  owned,  leased or managed by the other if neither of such  theatres  is
located in a city having a population  of greater than 50,000 at the time of the
proposed  transaction  or (ii) within 10 miles of any theatre  owned,  leased or
managed by the other if either of such  theatres  is located in a city  having a
population greater than 50,000 at the time of the proposed  transaction,  unless
in either case a majority of the Board of Directors of Cinemark USA  including a
majority of the  independent  directors of Cinemark  USA,  determines  that such
action is in the best  interests  of  Cinemark  USA.  A theatre  is deemed to be
located in each city whose  boundaries fall within a radius of 10 miles from the
theatre.  The Company  believes that the Cinemark  Management  Agreements are on
terms as favorable as would be available from  unaffiliated  third parties.  See
"Cinemark  USA  Indenture."  The Company  paid  $777,713 in  management  fees to
Cinemark USA in 1996.

                                                     - 22 -

<PAGE>



     Tax Sharing Agreements

     The Company and Cinemark USA will file a  consolidated  federal  income tax
return and have entered into a tax sharing agreement providing for their sharing
of the federal income tax burdens of the  consolidated  group.  In general,  the
Company will pay to Cinemark  USA the amount of federal  income tax it would owe
as if it were filing a separate  return and will receive  payments from Cinemark
USA to the extent tax attributes  (such as net operating  losses and foreign tax
credits)  are used to offset the  consolidated  income or the tax  liability  of
Cinemark USA. The tax sharing agreement will similarly apply with respect to any
combined  tax returns for state or local taxes.  In  addition,  the Cinemark USA
Indenture  requires Cinemark USA to cause each future subsidiary of the Company,
immediately upon its formation or acquisition,  to enter into an appropriate tax
sharing arrangement with Cinemark USA. See "Cinemark USA Indenture."

Indemnification of Directors

     The Company has adopted  provisions  in its Articles of  Incorporation  and
Bylaws which  provide for  indemnification  of its officers and directors to the
maximum extent permitted under the Texas Business Corporation Act.

Cinemark USA Indenture

     The  Cinemark  USA  Indenture  requires  Cinemark  USA  to  cause  Cinemark
International  and  its  subsidiaries  on a  consolidated  basis  to be  engaged
principally  in the  acquisition,  construction  and  operation of indoor motion
picture theatres and other activities incidental thereto.


                                                      PART IV

Item 14:  Exhibits, Financial Statement Schedules and Reports on form 8-K

(a)  Documents filed as part of this Report

     1. The financial  statements listed in the accompanying  Index beginning on
page F-1 are filed as a part of this report.

     2. The  financial  statement  schedules  and  related  data  listed  in the
accompanying Index beginning on page S-1 are filed as a part of this report.

     3. The exhibits listed in the accompanying  Index beginning on page E-1 are
filed as a part of this report.

(b)  Reports on Form 8-K

     The  following  reports on Form 8-K have been filed during the last quarter
of the period covered by this report:
None

(c)  Exhibits

     See the accompanying Index beginning on page E-1.

(d)  Financial Statement Schedules

     See the accompanying Index beginning on page S-1.


                                                     - 23 -

<PAGE>



                                                    SIGNATURES


     Pursuant  to the  requirement  of  Section  13 or 15(d)  of the  Securities
Exchange  Act of 1934,  each of the  registrants  has caused  this  report to be
signed on its behalf by the undersigned, thereunto duly authorized.

     Dated:  March 27, 1997              CINEMARK MEXICO (USA), INC.


                                            By:  /s/ Alan W. Stock
                            Alan W. Stock, President 


                                            CINEMARK de MEXICO, S.A. de C.V.


                                            By:  /s/ Ken Higgins
                             Ken Higgins, President


     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
registrants and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                                            CINEMARK MEXICO (USA), INC.


    Name                                         Title                                                    Date

<S>                                   <C>                                                       <C>
   /s/ Lee Roy Mitchell               Vice Chairman of the Board of Directors; Chief            March  27, 1997
--------------------------------------    -
Lee Roy Mitchell                      Executive Officer; Director

   /s/ Alan W. Stock                  Director                                                  March  27, 1997
--------------------------------------        --
Alan W. Stock

   /s/ Tandy Mitchell                 Director                                                  March  27, 1997
--------------------------------------  
Tandy Mitchell

   /s/ Jeffrey J. Stedman             Vice President and Treasurer (Chief Financial and         March  27, 1997
--------------------------------------    -
Jeffrey J. Stedman                    Accounting Officer)

_________________________             Director                                                  March ___, 1997
Guillermo (William) Jenkins

_________________________             Director                                                  March ___, 1997
Heriberto Guerra, Jr.





                                                     - 24 -

<PAGE>





                                         CINEMARK DE MEXICO, S.A. de C.V.


      Name                                 Title                                                     Date

   /s/ Ken Higgins                    President; Chairman of the Board of Directors             March  27, 1997
--------------------------------------
Ken Higgins                           (Principal Executive Officer)

   /s/ Lee Roy Mitchell               Director                                                  March  27, 1997
--------------------------------------        --
Lee Roy Mitchell

   /s/ Tandy Mitchell                 Director                                                  March  27, 1997
--------------------------------------        --
Tandy Mitchell

   /s/ Alan W. Stock                  Director                                                  March  27, 1997
 -------------------------------------        ---
Alan W. Stock

   /s/ Jeffrey J. Stedman             Director (Principal Financial and Accounting Officer)     March  27, 1997
--------------------------------------        -
Jeffrey J. Stedman
</TABLE>




     Supplemental  Information  to be Furnished  with Reports Filed  Pursuant to
Section 15(d) of the Act by  Registrants  Which Have Not  Registered  Securities
Pursuant to Section 12 of the Act

     No  annual  report  or proxy  material  has been  sent to the  Registrants'
shareholders.   An  annual  report  and  proxy  material  may  be  sent  to  the
Registrants'  shareholders  subsequent  to the  filing  of this Form  10-K.  The
Registrants  shall furnish to the Securities and Exchange  Commission  copies of
any  annual  report  or  proxy  material  that  is  sent  to  the   Registrants'
shareholders.


                                                     - 25 -

<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS
(ITEMS 8 AND 14 OF FORM 10-K) AND SUPPLEMENTAL SCHEDULES
--------------------------------------------------------------------------------------------------------------------
                                                                                                              Page
<S>                                                                                                           <C>
INDEPENDENT AUDITORS' REPORT                                                                                  F-2
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:
          Consolidated Balance Sheets, December 31, 1996 and 1995                                             F-3
          Consolidated Statements of Operations for the Years Ended
          December 31, 1996, 1995 and 1994                                                                    F-4
          Consolidated Statements of Shareholders' Equity (Deficit) for the
          Years Ended December 31, 1996, 1995 and 1994                                                        F-5
          Consolidated Statements of Cash Flows for the Years Ended
          December 31, 1996, 1995 and 1994                                                                    F-6
          Notes to Consolidated Financial Statements                                                          F-7
SUPPLEMENTAL SCHEDULES:
 Schedule
    A     Consolidating Balance Sheet Information, December 31, 1996                                          S-1
    B     Consolidating Statement of Operations Information for the
          Year Ended December 31, 1996                                                                        S-2
    C     Consolidating Statement of Cash Flows Information for the
          Year Ended December 31, 1996                                                                        S-3
</TABLE>



<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Cinemark Mexico (USA), Inc.:

We have audited the accompanying  consolidated balance sheets of Cinemark Mexico
(USA),  Inc. and  subsidiary  as of December 31, 1996 and 1995,  and the related
consolidated  statements of operations,  shareholders' equity (deficit) and cash
flows for each of the three years in the period ended  December 31, 1996.  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  in  accordance  with  generally   accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial  position of Cinemark Mexico (USA),  Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three  years in the period  ended  December
31, 1996, in conformity with generally accepted accounting principles.

Our audits  were  conducted  for the  purpose of forming an opinion on the basic
consolidated  financial statements taken as a whole. The supplemental  schedules
of  certain  consolidating  information  listed  in the  index  on page  F-1 are
presented  for the  purpose of  additional  analysis  of the basic  consolidated
financial  statements rather than to present the financial position,  results of
operations  and cash flows of the individual  companies,  and are not a required
part of the basic  consolidated  financial  statements.  These schedules are the
responsibility of the Company's  management.  Such schedules have been subjected
to the  auditing  procedures  applied  in our  audits of the basic  consolidated
financial  statements  and, in our  opinion,  are fairly  stated in all material
respects  when  considered  in  relation  to the  basic  consolidated  financial
statements taken as a whole.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Dallas, Texas
March 10, 1997



<PAGE>




<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

--------------------------------------------------------------------------  --------------------- -------------------

ASSETS                                                                              1996                 1995


<S>                                                                         <C>                   <C>                
CURRENT ASSETS:
   Cash and cash equivalents                                                $          10,362,911 $         1,423,029
   Inventories                                                                            109,055              64,811
   Value added tax refunds and other receivables                                        2,186,814             957,257
   Prepaid expenses and other                                                             644,250              51,156
                                                                            --------------------- -------------------

                    Total current assets                                               13,303,030           2,496,253

THEATRE PROPERTIES AND EQUIPMENT:
   Leasehold interests and improvements                                                14,561,039           8,897,581
   Theatre furniture and equipment                                                     13,281,678           9,266,792
   Theatres under construction                                                          1,025,670             997,428
                                                                            --------------------- -------------------

                    Total theatre properties and equipment                             28,868,387          19,161,801

   Less accumulated depreciation                                                        2,429,362             760,463
                                                                            --------------------- -------------------

                    Theatre property and equipment - net                               26,439,025          18,401,338

OTHER ASSETS (Notes 3 and 4)                                                            3,391,289           4,294,337
                                                                            --------------------- -------------------

TOTAL                                                                       $          43,133,344 $        25,191,968
                                                                            ===================== ===================



LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                    $           2,802,727 $         1,750,543
   Accrued interest expense                                                               771,327           1,120,000
   Accounts payable - affiliates (primarily due to Cinemark International, Inc.)                              635,089
                                                                            --------------------- -------------------

                  Total current liabilities                                             3,574,054           3,505,632

LONG-TERM LIABILITIES:
   12% senior subordinated notes, due 2003 (Note 5)                                    25,710,900          20,549,249
   Senior secured credit notes - Cinemark International, Inc. (Note 5)                 10,919,761           2,520,548
   Deferred lease expense (Note 7)                                                        332,042             201,915
                                                                            --------------------- -------------------

                   Total long-term liabilities                                         36,962,703          23,271,712

COMMITMENTS (Note 7)

COMMON STOCK WARRANTS (Note 6)                                                            200,729           3,424,132

SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value, 100,000,000 authorized, 4,044,432 and
          1,382,982 issued and outstanding, respectively                                    4,044               1,383
   Additional paid-in capital                                                          23,146,551          12,350,824
   Unearned compensation - stock options                                                 (37,658)            (12,922)
   Accumulated deficit                                                                (9,586,624)         (6,787,389)
   Cumulative foreign currency translation adjustment                                (11,130,455)        (10,561,404)
                                                                            --------------------- -------------------

                   Total shareholders' equity (deficit)                                 2,395,858         (5,009,508)
                                                                            --------------------- -------------------

TOTAL                                                                       $          43,133,344 $        25,191,968
                                                                            ===================== ===================
<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>


                                     F - 3
<PAGE>




<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------  ------------------  ------------------ ------------------


                                                           1996                1995               1994


<S>                                                 <C>                 <C>                <C>               
REVENUES:
   Admissions                                       $       14,424,686  $        7,992,034 $        4,228,507
   Concessions                                               7,733,918           4,156,273          2,097,214
   Other                                                       217,881             116,309            268,455
                                                    ------------------  ------------------ ------------------

                    Total                                   22,376,485          12,264,616          6,594,176

COSTS AND EXPENSES:
   Cost of operations:
          Film rentals                                       6,226,352           3,396,803          1,660,615
          Concession supplies                                2,648,914           1,341,311            714,987
          Salaries and wages                                 2,560,231           1,395,043            996,685
          Facility leases                                    2,802,205           1,846,925            794,877
          Advertising                                          432,372             299,347            268,615
          Utilities and other                                3,363,521           2,002,808          1,280,879
                                                    ------------------  ------------------ ------------------

                    Total                                   18,033,595          10,282,237          5,716,658

   General and administrative expenses                       1,986,955           1,948,556          1,611,127
   Depreciation                                              1,745,830             720,705            355,295
                                                    ------------------  ------------------ ------------------

                  Total                                     21,766,380          12,951,498          7,683,080

OPERATING INCOME (LOSS)                                        610,105           (686,882)        (1,088,904)

OTHER INCOME (EXPENSE):
   Interest expense                                        (3,894,758)         (2,541,449)        (2,550,165)
   Amortization of debt issue cost                           (102,268)            (99,242)          (101,271)
   Amortization of debt discount                             (139,205)           (164,468)          (143,063)
   Interest income                                             768,887             773,714            528,995
   Foreign currency exchange gain (loss)                       131,297            (55,098)          (210,414)
                                                    ------------------  ------------------ ------------------

                    Total                                  (3,236,047)         (2,086,543)        (2,475,918)
                                                    ------------------  ------------------ ------------------

LOSS BEFORE INCOME TAXES (Note 8)                          (2,625,942)         (2,773,425)        (3,564,822)

INCOME TAX EXPENSE (BENEFIT)                                   173,293             181,305          (744,000)
                                                    ------------------  ------------------ ------------------

NET LOSS                                            $      (2,799,235)  $      (2,954,730) $      (2,820,822)
                                                    ==================  ================== ==================
<FN>


See notes to consolidated financial statements.
</FN>
</TABLE>











                                     F - 4
<PAGE>






<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
YEARS ENDED DECEMBER 31, 1996, 1995
--------------------------------------------------- ------- ------------- ----------- ------------ ------------ -----------




                                           Common Stock      Additional    Unearned                 Cumulative
                                        -------------------
                                          Shares               Paid-In     Compensa    Accumulat   Translation
                                          Issued    Amount     Capital       Stock      Deficit     Adjustment     Total
                                                                            Options
                                        ----------- ------- ------------- ----------- ------------ ------------ -----------

<S>                                     <C>         <C>     <C>           <C>         <C>          <C>          <C>        
BALANCE JANUARY 1, 1994                     773,338 $   773 $   6,999,227           - $(1,011,837)            - $ 5,988,163

Net loss                                                                               (2,820,822)              (2,820,822)
Issuance of common stock                    574,851     575     4,999,425                                         5,000,000
Unearned compensation from stock
          options granted                                         183,292   (183,292)                                        
Foreign currency translation adjustment                                                             (4,406,407) (4,406,407)
                                        ----------- ------- ------------- ----------- ------------ ------------ -----------

BALANCE DECEMBER 31, 1994                 1,348,189   1,348    12,181,944   (183,292)  (3,832,659)  (4,406,407)   3,760,934

Net loss                                                                               (2,954,730)              (2,954,730)
Issuance of common stock (Note 6)            34,793      35       302,590                                           302,625
Amortization of unearned compensation                                          36,660                                36,660
Cancellation of stock options                                   (133,710)     133,710                                     -
Foreign currency translation adjustment                                                             (6,154,997) (6,154,997)
                                        ----------- ------- ------------- ----------- ------------ ------------ -----------

BALANCE DECEMBER 31, 1995                 1,382,982   1,383    12,350,824    (12,922)  (6,787,389) (10,561,404) (5,009,508)

Net loss                                                                               (2,799,235)              (2,799,235)
Issuance of common stock                  2,661,450   2,661     9,997,339                                        10,000,000
Unearned compensation from
         stock options granted                                     28,180    (28,180)
Amortization of unearned compensation                                           3,444                                 3,444
Net effect of exchange of Subordinated
         conversion of Warrants to
         Subordinated
         Notes, including tax benefit                             770,208                                           770,208
Foreign currency translation adjustment                                                               (569,051)   (569,051)
                                        ----------- ------- ------------- ----------- ------------ ------------ -----------

BALANCE DECEMBER 31, 1996               $ 4,044,432 $ 4,044 $  23,146,551 $  (37,658) $(9,586,624) $(11,130,455)$ 2,395,858
                                        =========== ======= ============= =========== ============ ============ ===========
</TABLE>


                                     F - 5
<PAGE>




<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                                                 1996               1995               1994
<S>                                                       <C>                 <C>                <C>              
OPERATING ACTIVITIES:
   Net loss                                               $      (2,799,235)  $     (2,954,730)  $     (2,820,822)
   Noncash items in net loss:
          Depreciation                                             1,745,830            720,705            241,042
          Amortization                                               102,268             99,242            101,272
          Deferred lease expenses                                    130,127            119,338             82,577
          Amortization of debt discount                              139,205            164,468            143,063
          Debt issued for accrued interest                         2,885,734             20,548
          Amortized compensation - stock options                       3,444             36,660
   Cash from (used for) operating working capital:
          Inventories                                               (44,244)           (20,906)           (43,905)
          Value added tax refunds and other receivables          (1,229,557)            330,320          (817,320)
          Prepaid expenses and other                               (593,094)          1,123,779        (1,174,935)
          Accounts payable and accrued expenses                    1,052,184            993,812            717,401
          Accrued interest expense                                 (348,673)                               100,000
          Accounts payable - affiliates                            (635,089)            635,089           (66,661)
                                                          ------------------  -----------------  -----------------

                       Net cash from (used for) operations           408,700          1,268,325        (3,538,288)
INVESTING ACTIVITIES:
   Additions to theatre properties                               (9,783,517)       (16,367,568)       (11,502,478)
   Decrease (increase) in temporary cash investments                                  3,724,905        (3,724,905)
   Decrease (increase) in other assets                               800,820        (1,458,228)          1,203,748
                                                          ------------------  -----------------  -----------------
    Net cash used for investing activities                       (8,982,697)       (14,100,891)       (16,431,131)
FINANCING ACTIVITIES:
   Issuance of senior subordinated notes                                                                 1,890,000
   Borrowing under senior secured credit agreement                 7,500,000          2,500,000
   Payments on senior secured credit agreement                      (15,021)
   Issuance of common stock and capital contributions             10,000,000            302,625          5,000,000
   Issuance of common stock warrants                                                  1,324,132
   Increase in deferred debt issue costs                                                                  (60,377)
   Tax benefit from debt exchage                                     597,751
                                                          ------------------  -----------------  -----------------
                    Net cash from financing activities            18,082,730          4,126,757          6,829,623
FOREIGN CURRENCY TRANSLATION ADJUSTMENT                            (569,051)          (798,305)          (498,394)
                                                          ------------------  -----------------  -----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   8,939,882        (9,504,114)       (13,638,190)
CASH AND CASH EQUIVALENTS:
   Beginning of period                                             1,423,029         10,927,143         24,565,333
                                                          ------------------  -----------------  -----------------
   End of period                                          $       10,362,911  $       1,423,029        $10,927,143
                                                          ==================  =================  =================
<FN>
SUPPLEMENTAL INFORMATION (Note 10)

See notes to consolidated financial statements.
</FN>
</TABLE>


                                     F - 6
<PAGE>



CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Cinemark Mexico (USA), Inc. (the "Company"), a Texas corporation,
was formed on July 28, 1993,  as a subsidiary of Cinemark  International,  Inc.,
(f/k/a Cinemark II, Inc.) a Texas Corporation ("Cinemark International"),  which
is wholly  owned by  Cinemark  USA,  Inc.  ("Cinemark  USA").  The  Company  was
established to serve as a holding  company to facilitate  investments in Mexico.
The  Company's  operations  are  conducted  by  Cinemark  de Mexico S.A. de C.V.
("Cinemark  de  Mexico"),  which was formed on September  10, 1992,  as a 99.99%
owned  subsidiary  of Cinemark  International  (which  subsequently  contributed
Cinemark de Mexico's stock to the Company,  Note 6), to own or lease and operate
movie theatres in Mexico. From inception to April 13, 1994, the Company had been
in the development  stage.  At December 31, 1996,  Cinemark de Mexico has eleven
theatres (114 screens) in operation.

Consolidated  Financial  Statements  include the accounts of the Company and its
subsidiary,  Cinemark de Mexico,  collectively referred to as the Companies,  as
though the  Company  was the  initial  owner of all of the stock of  Cinemark de
Mexico  (owned  by  Cinemark   International)   for  the  period  prior  to  the
contribution of such stock to the Company. Significant intercompany balances and
transactions have been eliminated in the consolidation.

Basis of Presentation - The  consolidated  financial  statements are prepared in
U.S.  dollars  under  generally  accepted  accounting  principles  in the United
States.  In preparing the financial  statements,  management is required to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities as of the date of the financial statements and revenues and expenses
for the period.  Actual results could differ significantly from those estimates.

The estimate most  susceptible  to  significant  change is the evaluation of the
effect of the Mexican  economy on the  recoverability  of the Company's  assets.
Although some variability is inherent in this estimate,  management believes the
amounts provided are adequate.

Revenues are recognized when  admissions and  concessions  sales are received at
the theatres.  Film rental costs are accrued based on the  applicable box office
receipts and the terms of the film licenses.

Cash  and  Cash  Equivalents  consist  of  operating  funds  held  in  financial
institutions, petty cash held by the theatres and highly liquid investments with
original  maturities  of three  months or less when  purchased.

Inventories  of concession  products are stated at the lower of cost  (first-in,
first-out method) or market.

Theatre   Properties   and  Equipment  are  stated  at  cost  less   accumulated
depreciation.  At December  31, 1995,  property  additions  include  $167,099 of
capitalized interest, incurred during development and construction. There was no
capitalized interest included in property additions for


<PAGE>



1996. Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows:  buildings and leasehold interests, 18 to
40 years;  theatre  furniture and equipment,  5 to 15 years. On January 1, 1996,
the Company adopted Statement of Financial  Accounting Standards (SFAS) No. 121,
"Accounting  for the Impairment of Long-Lived  Assets and for Long- Lived Assets
to be Disposed Of. The  adoption of SFAS No. 121 did not have a material  effect
on the consolidated financial statements.

Deferred Debt Issue Costs are amortized using the straight-line  method over the
primary financing term ending August 1, 2003.


Fair Value of Financial  Instruments - It is the belief of management that it is
not  practicable  for the  Company to estimate  the fair value of the  Company's
long-term  debt,  based on the lack of available  market  quotes and the lack of
comparable  financial  instruments  (see  Note  5 for  the  carrying  amount  of
long-term debt, the expected  maturities and effective interest rates). The fair
value of other financial instruments  approximates the related recorded value at
December 31, 1996.

Reclassifications  have been make to certain 1994 and 1995 amounts to conform to
1996 presentation.

2.       FOREIGN CURRENCY TRANSLATION
Cumulative foreign currency  translation  adjustment in shareholder's  equity of
$11,130,455  and  $10,561,404,  respectively,  at  December  31,  1996 and 1995,
reflects the unrealized  adjustments  resulting from  translating  the financial
statements of Cinemark de Mexico, the Company's consolidated foreign subsidiary.
The  functional  currency of the foreign  subsidiary  is the peso.  Accordingly,
assets and liabilities of the foreign  subsidiary are translated to U.S. dollars
at year-end  exchange  rates.  Income and expense  items are  translated  at the
average rates prevailing during the year. Changes in exchange rates which affect
cash flows and the related payables are recognized as realized transaction gains
and losses in the determination of net income.

In 1997,  the  Company  will be  required  to  utilize  the U.S.  dollar  as the
functional  currency for Cinemark de Mexico for U.S.  reporting  purposes due to
Mexico's highly inflationary  economy. Thus devaluations in the peso during 1997
that will  effect the  Company's  investment  will be charged to  exchange  loss
rather than to the cumulative adjustment account.

Intercompany borrowing from the Company to Cinemark de Mexico of $39,708,140 and
$29,562,584  at  December  31,  1996 and 1995,  respectively,  is  considered  a
long-term  investment.  Accordingly,  the related foreign  currency  translation
adjustment  of $822,276  and  $7,567,351  for 1996 and 1995,  respectively,  are
eliminated from the statement of operations in consolidation.



<PAGE>



3.       DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets at December 31 consist of the following:


<TABLE>
<CAPTION>
                                                            1996                1995
                                                            ----                ----
<S>                                                           <C>                 <C>      
Debt issue cost                                               1,047,985           1,022,420
Less accumulated amortization                                   341,647             239,379
                                                                -------             -------
Net                                                             706,338             783,041
Equipment deposits and prepaid rent                           2,684,951           1,877,656
                                                              ---------           ---------
Total                                                         3,391,289           2,660,697
                                                              =========           =========
</TABLE>

4.       THEATRE DEVELOPMENT ADVANCE
Theater  development  advance of $1,633,680 at December 31, 1995,  represents an
advance  made  pursuant  to a lease  agreement  with a  developer  of one of the
Company's theatre properties for the construction of the theatre. The Company is
recapturing the theatre advance (prepaid rent) through monthly rent abatement.

5.       LONG-TERM DEBT
Senior  Subordinated Notes - In 1993,  Cinemark Mexico issued $20,400,000 of 12%
Senior Subordinated Notes due 2003 (the "Subordinated  Notes"),  with detachable
warrants (the "Warrants") (Note 6). Cinemark de Mexico guarantees the notes on a
senior  subordinated  basis. The Subordinated Notes were issued at a discount of
$102.94 per $1,000 note, totaling $2,100,000, and bear interest at 12% per annum
payable semiannually on August 1 and February 1. In 1994, Cinemark Mexico issued
an additional  $2,000,000 of  Subordinated  Notes governed by the indenture from
the initial offering at a discount of $55 per $1,000 note, totaling $110,000.

The entire  $22,400,000 in Subordinated Notes and $1,971,500 of accrued interest
were  exchanged in September  1996 for new senior  subordinated  notes (the "New
Mexican  Notes") with form and terms  identical in all material  respects to the
previous notes except that interest on the New Mexican Notes may be paid through
the issuance of additional notes of the same series at the option of the Company
through and  including  February 1, 2000.  If the Company  elects to pay accrued
interest in the form of  additional  notes,  interest  will accrue at 13% during
that period.  In connection  with the exchange,  Warrants for 356,851  shares of
common stock were exchanged for $1,339,400 in New Mexican Notes.  As a result of
the  exchange  and  retirement  of the  Warrants,  a net benefit of $.8 million,
including tax benefit, was credited to additional paid in capital.

The  indenture  for the New Mexican  Notes  requires a sinking  fund  payment of
$6,667,000 on each of August 1, 2001,  and August 1, 2002,  which amounts are to
be  utilized  on such  respective  dates to  retire a like  face  amount  of the
outstanding New Mexican Notes. The indenture governing all the New Mexican Notes
restricts  the  ability of the Company  and  Cinemark de Mexico to,  among other
things, pay dividends; make investments;  incur additional indebtedness;  redeem
stock;  use proceeds of asset  disposals;  create liens;  engage in transactions
with affiliates; and to merge, consolidate or


<PAGE>



sell all or substantially all the assets of the companies.

Senior Secured  Credit Notes - In 1995,  the Company  entered into a $10,000,000
senior   secured   credit   agreement   ("Credit   Agreement")   with   Cinemark
International.  The notes bear interest at 12%, payable on the first anniversary
date and  quarterly  thereafter on January 15, 1997 through the majority date of
December 31, 2001,  when all accrued and unpaid  interest and all  principal are
due. The Company is required to maintain certain restrictive covenants,  and all
borrowings are  collateralized by certain assets of the Company.  Simultaneously
with the debt exchange of the Subordinated Notes, Cinemark International and the
Company amended the terms of the Credit Agreement  wherein if the Company issues
additional Senior  Subordinated Notes for accrued and unpaid interest on the New
Mexican Notes,  Cinemark  International  will add accrued and unpaid interest to
principal relating to the Credit Agreement at the next two consecutive  interest
payment dates at a rate of 13% per annum.

6.       CAPITAL STOCK

Common  Stock  -  In  December  1994,  Cinemark  International   contributed  an
additional  $5,000,000 in exchange for 574,851  shares of the  Company's  common
stock.  In June 1995, the Company  issued an additional  34,793 shares of common
stock for $302,625 to New Wave. In connection  with the debt exchange  (Note 5),
the Company issued  Cinemark  International  an additional  2,661,450  shares of
common stock for $10,000,000.  At December 31, 1996, Cinemark International owns
97.1% (96.5% on a fully diluted  basis) of the common  stock,  and New Wave owns
2.9% of the  Company's  common  stock,  and the total number of shares of common
stock,  issued and  outstanding,  is  4,044,432.  On  January 9, 1997,  New Wave
acquired an additional 64,032 shares of common stock for $240,591.




Common Stock  Warrants - In  connection  with the  issuance of the  Subordinated
Notes (Note 5), the Company issued Warrants at fair value for $2,100,000,  which
were  exercisable  into 226,662 shares of the Company's  common stock. In August
1995,  Cinemark Mexico issued additional  Warrants at fair value for $1,324,132,
which were  exercisable  into  152,411  shares  which when  aggregated  with the
previously  purchased  Warrants  converted  to 20% of the  ownership  on a fully
diluted basis at December 31, 1995, of the Company's  common stock. In September
1996,  356,851  Warrants  were  exchanged  for  $1,339,400  in New Mexican Notes
resulting  in a remaining  balance of $200,729 for 22,222  Warrants  outstanding
(Note 5). The remaining  Warrants are  exercisable at $.001 per share subject to
the following  terms and expire on August 1, 2003. At any time after January 31,
1998, the Company may redeem the Warrants in whole or in part at their appraised
value.  If the Warrants  have not been  redeemed by August 1, 1998,  the Company
must offer to purchase one-third of the Warrants on each July 31, 1998, 1999 and
2000,  utilizing the appraised  value on such dates.  At December 31, 1996,  the
Company has reserved 22,222 shares of common stock for the potential  conversion
of the Warrants.

Stock  Option  Plan - The  Company  has a  nonqualified  stock  option plan (the
"Plan") under which


<PAGE>



key  employees  may be granted  options to purchase up to 100,000  shares of the
Company's  common  stock.  The  exercise  price  and  terms of the  options  are
discretionary and determined when the options are granted.  In 1994, the Company
granted  options to purchase  16,704 shares of common stock at an exercise price
of $.10 per share to certain  employees  resulting in unearned  compensation  of
$183,292.  In 1995, the Company canceled 12,528 options granted under this Plan.
In 1996, 7,500  additional  options to purchase shares under the same terms were
issued,  resulting in unearned  compensation of $28,180. The outstanding options
vest over a six year period from the date of grant and expire ten years from the
date of grant.  Compensation  expense  under the Plan was $3,444 and  $36,660 in
1996 and 1995,  respectively.  At December 31, 1996,  835 of the 11,676  options
outstanding were exercisable.

The Company applies APB Opinion 25 and related interpretations in accounting for
its stock option plan.  Had  compensation  costs for the Company's  stock option
plan been  determined  based on the fair  value at the date of grant for  awards
under the plan consistent  with the method of Statement of Financial  Accounting
Standards (SFAS) No. 123, utilizing the Black-Scholes  option pricing model, the
effect on income and  earnings per share would not have changed from the amounts
presented in the financial  statements.  The results are  substantially the same
pursuant to SFAS No. 123 as a result of the value of the underlying stock at the
date of grant being significantly higher than the exercise price of the options.

7. LEASE  COMMITMENTS
The Company  conducts a  significant  part of its theatre  operations  in leased
premises under noncancelable  operating leases with terms of 5 to 30 years. Most
of these  leases  provide for  contingent  rentals  based on  operating  results
(subject to minimum  annual  rents).  Generally,  these leases  include  renewal
options for various  periods at stipulated  rates.  Some leases also provide for
escalating  rent payments  throughout the lease term.  Deferred lease expense of
$130,127  and  $119,338 at December  31, 1996 and 1995,  respectively,  has been
provided to account for lease  expenses on a  straight-line  basis,  where lease
payments are not made on such basis.  Rent expense for the years ended  December
31, 1996 and 1995, totaled $2,802,205 and $1,846,925, respectively.


Future minimum  payments under  noncancelable  operating  leases with initial or
remaining terms in excess of one year at December 31, 1996, are due as follows:

1997                           $       2,676,660
1998                                   2,676,660
1999                                   2,710,993
2000                                   2,773,894
2001                                   2,827,041
Thereafter                            30,594,802
                                    ------------
Total                          $      44,260,050
                               =================
After  December  31,  1996,  the  Company had one  theatre  (15  screens)  under
construction  and two theatres  (20  screens)  under  commitment  with  executed
leases.  The three leases  require  future minimum lease payments by Cinemark de
Mexico  estimated to be $8 million payable over 15- 20 years.  The completion of
the three  theatres  currently to be  constructed  will require an estimated $16
million as of December 31, 1996.



<PAGE>



8.       INCOME TAXES
The Company files a  consolidated  U.S.  federal income tax return with Cinemark
USA. The Company and  Cinemark  USA have  entered into a tax sharing  agreement.
Pursuant to the  agreement,  the Company  will pay to Cinemark USA the amount of
federal income tax it would owe as if it were filing a separate  return and will
receive  payments from  Cinemark USA to the extent the Company's tax  attributes
are used to offset the  consolidated  group's  income.  An income tax expense of
$173,293 and $181,305 for 1996 and 1995,  respectively,  has been recorded.  The
1996 income tax expense reflects income earned by Cinemark Mexico (USA), and the
1995 expense is primarily  related to the income taxes withheld on interest paid
by Cinemark  de Mexico to the  Company.  Based on the  Company's  separate  loss
(without  Cinemark de Mexico),  a tax benefit of $744,000  was  recorded in 1994
equal to the benefit of the loss  available  to the  Cinemark  USA  consolidated
group.

Cinemark  de Mexico  files a tax return in Mexico but is not  required to file a
consolidated  or separate  U.S.  income tax return.  The losses  incurred can be
utilized only to offset any future income which would otherwise be includable in
the income of the Company as a result of Cinemark de Mexico  being a  controlled
foreign corporation. The tax benefits for the net operating loss carryforward of
approximately  $2.7 million at December 31, 1996,  have been fully  reserved and
will not be recognized as deferred tax assets until  realization  is more likely
than not.

Through   December  31,  1996,  the  Companies  had  no  significant   temporary
differences between tax return and financial reporting.


9.       AGREEMENTS WITH CINEMARK USA, INC.
Cinemark USA has entered into a senior note indenture  which  requires  Cinemark
USA and its direct and indirect  subsidiaries  (including the Company) to engage
principally  in the  acquisition,  construction  and  operation of indoor motion
picture theatres and other activities  incidental  thereto and provides Cinemark
USA the right to elect a majority of the board of directors of its subsidiaries.
The indenture of Cinemark USA restricts its subsidiaries, including the Company,
to purchasing or retiring  their stock and paying  dividends on a pro rata basis
only. All proceeds from the issuance of additional  capital stock of the Company
or  other  Cinemark  USA  subsidiaries  are  required  to be  invested  in their
respective operations.

The Company has entered into  management  agreements  with Cinemark  USA.  Under
these  agreements,  Cinemark  USA  will  operate  all  theatres  of the  managed
corporations as Cinemark  theatres for a period of ten years.  Cinemark receives
an annual management fee equal to 5.0% of the respective  managed  corporations'
revenues  up to  $50,000,000  and 3.0% of the  revenues  over  $50,000,000.  The
management agreements restrict the Company and Cinemark USA from owning, leasing
or managing any theatre that is within a specified  distance of either  entity's
theatres.

The Cinemark USA senior note indenture  requires each  subsidiary of the Company
to enter into similar  agreements.  During 1996 and 1995,  the Company paid fees
relating to the management agreements of $777,713 and $578,399, respectively.




<PAGE>




10.      SUPPLEMENTAL CASH FLOW INFORMATION

The  following  is  provded  as  supplemental  information  to the  consolidated
statment of cash flows:


<TABLE>
<CAPTION>

                                                                 1996           1995          1994
                                                                 ----           ----          ----

<S>                                                         <C>            <C>            <C>          
Interest paid                                               $    1,344,000 $    2,708,548
                                                            ============== ============== =============

Noncash investing and financing activities:
   Retirement of Cinemark Mexico senior
          subordinated notes and issuance of
          new senior subordinated notes (Note5)             $   22,400,000
   Issuance of Cinemark Mexico senior
          subordinated notes for redeemed
          warrants (Notes 5 and 6)                               1,339,400
   Net effect of exchange of Cinemark Mexico
          senior subordinated notes and
          conversion of warrants to senior
          subordinated notes on additional paid-in
          capital (Notes 5 and 6)                                  172,456
<FN>

                                                      ******
</FN>
</TABLE>


<PAGE>




<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

SUPPLEMENTAL SCHEDULE A
CONSOLIDATING STATEMENT OF  BALANCE SHEET INFORMATION
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------




---------------------------------------------- ----------------  ----------------
                                                   Cinemark          Cinemark
ASSETS                                           Mexico (USA)       de Mexico      Eliminations      Consolidated
<S>                                            <C>               <C>               <C>            <C>               
CURRENT ASSETS:
   Cash and cash equivalents                   $      8,673,582  $      1,689,329  $        -     $       10,362,911
   Inventories                                                            109,055                            109,055
   Value-added tax refunds and other receivables        140,751         2,046,063                          2,186,814
   Prepaid expenses and other                           254,955           389,295                            644,250
                                               ----------------  ----------------  -------------  ------------------
         Total current assets                         9,069,288         4,233,742                         13,303,030
THEATRE PROPERTIES AND EQUIPMENT - NET                                 26,439,025                         26,439,025
OTHER ASSETS:
   Deferred charges and other - net                     706,337         2,684,952                          3,391,289
   Investment in subsidiary                         (9,451,590)                        9,451,590                   0
   Intercompany advances                             39,708,140                     (39,708,140)                   0
                                               ----------------  ----------------  -------------  ------------------
         Total other assets                          30,962,887         2,684,952   (30,256,550)           3,391,289
                                               ----------------  ----------------  -------------  ------------------
TOTAL                                          $     40,032,175  $     33,357,719  $(30,256,550)  $       43,133,344
                                               ================  ================  =============  ==================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Accounts payable and accrued expenses       $         33,600  $      2,769,127  $        -     $        2,802,727
   Accrued interest expense                             771,327                                              771,327
                                               ----------------  ----------------  -------------  ------------------
         Total current liabilities                      804,927         2,769,127                          3,574,054
LONG-TERM LIABILITIES:
   12% senior subordinated notes, due 2003           25,710,900                                           25,710,900
   Intercompany advances                                               39,708,140   (39,708,140)
   Senior secured notes                              10,919,761                                           10,919,761
   Deferred lease expense                                                 332,042                            332,042
                                               ----------------  ----------------  -------------  ------------------
         Total long-term liabilities                 36,630,661        40,040,182   (39,708,140)          36,962,703

COMMON STOCK WARRANTS                                   200,729                                              200,729
SHAREHOLDERS' EQUITY (DEFICIT):
   Common stock                                           4,044                                                4,044
   Additional paid-in capital                        23,146,551         9,500,000    (9,500,000)          23,146,551
   Unearned compensation - stock options               (37,658)                                             (37,658)
   Accumulated deficit                              (9,586,624)      (19,624,038)     19,624,038         (9,586,624)
   Cumulative foreign currency translation
   adjustment                                      (11,130,455)           672,448      (672,448)        (11,130,455)
                                               ----------------  ----------------  -------------  ------------------
         Total shareholders' equity                   2,395,858       (9,451,590)      9,451,590           2,395,858
                                               ----------------  ----------------  -------------  ------------------

TOTAL                                          $     40,032,175  $     33,357,719  $(30,256,550)  $       43,133,344
                                               ================  ================  =============  ==================
</TABLE>





                                     S - 1
<PAGE>





<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------  ---------------  ----------------  -------------  ---------------

                                                    Cinemark          Cinemark
                                                  Mexico (USA)       de Mexico      Eliminations    Consolidated

<S>                                              <C>              <C>               <C>            <C>            
REVENUES:
   Admissions                                    $        -       $     14,424,686  $        -     $    14,424,686
   Concessions                                                           7,733,918                       7,733,918
   Other                                                                   217,881                         217,881
                                                 ---------------  ----------------  -------------  ---------------

                  Total                                                 22,376,485                      22,376,485


COSTS AND EXPENSES:
   Cost of operations:
          Film rentals                                                   6,226,352                       6,226,352
          Concession supplies                                            2,648,914                       2,648,914
          Salaries and wages                                             2,560,231                       2,560,231
          Facility leases                                                2,802,205                       2,802,205
          Advertising                                                      432,372                         432,372
          Utilities and other                                            3,363,521                       3,363,521
                                                 ---------------  ----------------  -------------  ---------------

                  Total                                                 18,033,595                      18,033,595

    General and administrative expenses                   26,121         1,960,834                       1,986,955
    Depreciation                                                         1,745,830                       1,745,830
                                                 ---------------  ----------------  -------------  ---------------

                  Total                                   26,121        21,740,259                      21,766,380
                                                 ---------------  ----------------  -------------  ---------------

OPERATING INCOME (LOSS)                                 (26,121)           636,226                         610,105

OTHER INCOME (EXPENSE):
   Interest expense                                  (3,882,441)       (4,568,748)      4,556,431      (3,894,758)
   Amortization of debt issue cost                     (102,268)                                         (102,268)
   Amortization of debt discount                       (139,205)                                         (139,205)
   Interest income                                     4,645,157           669,381    (4,545,651)          768,887
   Foreign currency exchange gain (loss):
          Other                                                            163,936       (32,639)          131,297
          Intercompany borrowing                                         (822,276)        822,276
   Equity in loss of affiliates                      (3,121,064)                        3,121,064       
                                                 ---------------  ----------------  -------------  ---------------

                  Total                              (2,599,821)       (4,557,707)      3,921,481      (3,236,047)
                                                 ---------------  ----------------  -------------  ---------------

LOSS BEFORE INCOME TAXES                             (2,625,942)       (3,921,481)      3,921,481      (2,625,942)

INCOME TAXES                                             173,293                                           173,293
                                                 ---------------  ----------------  -------------  ---------------

NET LOSS                                         $   (2,799,235)  $    (3,921,481)  $   3,921,481  $   (2,799,235)
                                                 ===============  ================  =============  ===============
</TABLE>


                                     S - 2
<PAGE>



<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY

SUPPLEMENTAL SCHEDULE  C
CONSOLIDATING STATEMENT OF CASH FLOW
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------  ---------------------------------- ----------------  ----------------
                                                  Cinemark          Cinemark
                                                Mexico (USA)       de Mexico       Eliminations      Consolidated

<S>                                           <C>               <C>              <C>               <C>             
OPERATING ACTIVITIES:
Net loss                                      $    (2,799,235)  $    (3,921,481) $      3,921,481  $    (2,799,235)
Noncash items in net loss:
   Depreciation                                                        1,745,830                          1,745,830
   Amortization                                        102,268                                              102,268
   Deferred lease expenses                                               130,127                            130,127
   Amortization of debt discount                       139,205                                              139,205
   Debt issued for accrued interest                  2,885,734                                            2,885,734
   Amortized compensation - stock options                3,444                                                3,444
   Equity in loss of subsidiary                      3,921,481                        (3,921,481)
Cash from (used for) operating working capital:
   Inventories                                                          (44,244)                           (44,244)
   Other current assets                              (395,706)       (1,426,945)                        (1,822,651)
   Accounts payable and other accrued expenses         (4,900)         1,057,084                          1,052,184
   Accrued interest expense                          (348,673)                                            (348,673)
   Accounts payable - affiliates                                       (635,089)                          (635,089)
                                              ----------------  ---------------- ----------------  ----------------

             Net cash from (used for) operations     3,503,618       (3,094,718)                            408,900

INVESTING ACTIVITIES:
   Additions to theatre properties                                   (9,783,517)                        (9,783,517)
   Decrease (increase) in other assets             (2,525,564)           826,384        2,500,000           800,820
   Intercompany advances                          (10,145,556)                         10,145,556                 0
                                              ----------------  ---------------- ----------------  ----------------

           Net cash used for investing activities (12,671,120)       (8,957,133)       12,645,556       (8,982,697)


FINANCING ACTIVITIES:
   Capital contributions                            10,000,000         2,500,000      (2,500,000)        10,000,000
   Borrowings under senior secured credit agreement  7,500,000                                            7,500,000
   Payments on senior secured credit agreement        (15,021)                                             (15,021)
   Intercompany advances                                              10,145,556     (10,145,556)
   Tax benefit from debt exchange                      597,751                                              597,751
                                              ----------------  ---------------- ----------------  ----------------
             Net cash from financing activities     18,082,730        12,645,556     (12,645,556)        18,082,730

FOREIGN CURRENCY TRANSLATION                         (800,417)           231,366                          (569,051)
                                              ----------------  ---------------- ----------------  ----------------

INCREASE IN CASH AND CASH EQUIVALENTS                8,114,811           825,071                          8,939,882

   Beginning of period                                 558,771           864,258                          1,423,029
                                              ----------------  ---------------- ----------------  ----------------

   End of period                              $      8,673,582  $      1,689,329 $        -        $     10,362,911
                                              ================  ================ ================  ================
</TABLE>


                                     S - 3
<PAGE>














                                                     EXHIBITS

                                                        TO

                                                     FORM 10-K



                                   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                                      OF THE SECURITIES EXCHANGE ACT OF 1934


                                                        FOR


                                            CINEMARK MEXICO (USA), INC.
                                         CINEMARK DE MEXICO, S.A. DE C.V.


                                               FOR FISCAL YEAR ENDED
                                                 DECEMBER 31, 1996


                                                      E-1


<PAGE>




<TABLE>
<CAPTION>
                                                   EXHIBIT INDEX


Exhibit No.                                 Description                                      Page No.


<S>            <C>                                                                 <C>       
3.1            Articles of Incorporation of Cinemark Mexico (USA), Inc. (the       Exhibit 3.1 to the
               "Company").                                                         Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
3.2            Bylaws of the Company                                               Exhibit 3.2 to the
                                                                                   Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
3.3            Bylaws of Cinemark de Mexico, S.A. de C.V. ("Cinemark de            Exhibit 3.3 to the
               Mexico")                                                            Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
4.1            Indenture, dated as of July 30, 1993, among the Company,            Exhibit 4.1 to the
               Cinemark de Mexico, as Guarantor, and United States Trust           Company's
               Company of New York, as trustee (the "Trustee"), related to         Registration
               $22,400,000 principal amount of 12% Series A Senior                 Statement (33-
               Subordinated Notes due 2003 and 12% Series B Senior                 72114) on Form
               Subordinated Notes.                                                 S-4 filed on
                                                                                   November 24,
                                                                                   1994
4.2            Purchase Agreement, dated as of July 30, 1993, among the            Exhibit 4.2 to the
               Company, Cinemark de Mexico and each of the purchasers of           Company's
               the Old Notes named on the signature pages thereof (the             Registration
               "Purchasers").                                                      Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994


                                                      E-2


<PAGE>




4.3            Registration Rights Agreement, dated as of July 30, 1993, among     Exhibit 4.3 to the
               the Company, Cinemark de Mexico and the Purchasers of the           Company's
               Old Notes.                                                          Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
4.4(a)         First Supplemental Indenture dated May 2, 1994 among the            Exhibit 4.7 to the
               Company, Cinemark de Mexico and the Trustee.                        Company's
                                                                                   Annual Report
                                                                                   (33-72114) on
                                                                                   Form 10-K filed
                                                                                   on March 27,
                                                                                   1995
4.4(b)         Second Supplemental Indenture dated August 30, 1995 among           Exhibit 4.4(b) to
               the Company, Cinemark de Mexico and the Trustee                     the Company's
                                                                                   Annual Report
                                                                                   (33-72114) on
                                                                                   Form 10-K filed
                                                                                   on March 31,
                                                                                   1996
4.4(c)         Third Supplemental Indenture dated September 30, 1996 among         Page _____
               the Company, Cinemark de Mexico and the Trustee
4.5(a)         Purchase Agreement dated May 6, 1994 among the Company,             Exhibit 4.5 to the
               Cinemark de Mexico and each of the purchasers of the Series C       Company's
               Notes named on the signature pages thereto.                         Annual Report
                                                                                   (33-72114) on
                                                                                   Form 10-K filed
                                                                                   on March 27,
                                                                                   1995
4.5(b)         Purchase Agreement dated August 30, 1995 among the                  Exhibit 4.5(b) to
               Company, Cinemark de Mexico and each of the purchasers              the Company's
               named on the signature pages thereto                                Annual Report
                                                                                   (33-72114) on
                                                                                   Form 10-K filed
                                                                                   on March 31,
                                                                                   1996

10.1           Warrant Registration Rights Agreement, dated as of July 30,         Exhibit 10.1 to
               1993, among the Company, Cinemark International, Inc.               the Company's
               ("Cinemark International"), New Wave Investments A.V.V.             Registration
               ("New Wave") and the purchasers of the warrants named on the        Statement (33-
               signature pages thereof.                                            72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994


                                                      E-3


<PAGE>




10.2           Warrant Certificates.                                               Exhibit 10.2 to
                                                                                   the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
10.3           Shareholder Agreement, dated July 30, 1993, among the               Exhibit 10.3 to
               Company, Cinemark International and New Wave.                       the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994


10.4(a)        Subscription Agreement, dated as of July 30, 1993, between the      Exhibit 10.4 to
               Company and Cinemark International                                  the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994



10.4(b)        Subscription Agreement dated as of December 31, 1994 between        Exhibit 10.4(a) to
               the Company and Cinemark International                              Company's
                                                                                   Annual Report
                                                                                   (33-72114) on
                                                                                   Form 10-K filed
                                                                                   on March 27,
                                                                                   1995
10.4(c)        Subscription Agreement dated as of September 30, 1996 between       Page _____
               the Company and Cinemark International


10.5(a)        Subscription Agreement, dated as of July 30, 1993, between the      Exhibit 10.5 to
               Company and New Wave.                                               the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994


                                                      E-4


<PAGE>




10.5(b)        Subscription Agreement, dated as of January 10, 1995, between       Exhibit 10.5(b) to
               the Company and New Wave                                            the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   March 31, 1996
10.5(c)        Subscription Agreement dated as of January 9, 1997 between the      Page _____
               Company and New Wave
10.6           Indenture, dated as of June 10, 1992, between Cinemark USA,         Exhibit 10.6 to
               Inc. ("Cinemark USA") and NationsBank of Texas, N.A., as            the Company's
               trustee, relating to Cinemark USA's 12% Senior Notes due June       Registration
               1, 2002.                                                            Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
10.7           Management Agreement, dated as of July 28, 1993, between            Exhibit 10.7 to
               Cinemark USA and the Company.                                       the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
10.8           Management Agreement, dated as of September 10, 1992,               Exhibit 10.8 to
               between Cinemark USA and Cinemark de Mexico.                        the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
10.9           Cinemark Mexico (USA), Inc. Nonqualified Stock Option Plan.         Exhibit 10.9 to
                                                                                   the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994
10.10          Tax Sharing Agreement dated as of July 28, 1993, between            Exhibit 10.10 to
               Cinemark USA and the Company.                                       the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   November 24,
                                                                                   1994


                                                      E-5


<PAGE>



10.11(a)       Senior Secured Credit Agreement dated as of December 4, 1995        Exhibit 10.11(a)
               among the Company, Cinemark de Mexico and Cinemark                  to the Company's
               International.                                                      Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   March 31, 1996
10.11(b)       Note of Cinemark Mexico dated December 4, 1996 payable to           Exhibit 10.11(b)
               Cinemark International in a principal amount of up to $10.0         to the Company's
               million                                                             Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   March 31, 1996
10.11(c)       Note of Cinemark de Mexico dated February 14, 1996 payable to       Exhibit 10.11(c)
               Cinemark Mexico in the principal amount of $3,650,000               to the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   March 31, 1996

10.11(d)       Note of Cinemark de Mexico dated February 27, 1996 payable to       Exhibit 10.11(d)
               Cinemark Mexico in the principal amount of $450,000                 to the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   March 31, 1996

10.11(e)       Note of Cinemark de Mexico dated March 22, 1996 payable to          Exhibit 10.11(e)
               Cinemark Mexico in the principal amount of $1,000,000               to the Company's
                                                                                   Registration
                                                                                   Statement (33-
                                                                                   72114) on Form
                                                                                   S-4 filed on
                                                                                   March 31, 1996

10.11(f)       First Amendment to Senior Credit Facility dated September 30,       Page ____
               1996 among Cinemark International, the Company and
               Cinemark de Mexico
10.12          Series D Registration Rights Agreement dated September 30,          Page ____
               1996 between the Company and the holders of Series D Notes
12             Computation of Ratio of Earnings to Fixed Charges.                  Page ______
21             Subsidiaries of the Company.                                        Page ______
</TABLE>




                                                      E-6


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