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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, 1997 COMMISSION FILE NOS. 33-47040
333-11895
333-45417

CINEMARK USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

TEXAS 75-2206284
(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)

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)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [ X ] No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

[ X ] [ ]

As of March 27, 1998, 1,500 shares of Class A Common Stock and 183,802
shares of Class B Common Stock (including options to acquire 7,000 shares of
Class B Common Stock exercisable within 60 days of such date) were outstanding.
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INDEX

Page
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1: Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) General Development of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Financial Information About Industry Segments. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Narrative Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2: Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 3: Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 4: Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 13

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . 14
Item 6: Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operation. . . . . . . . . 17
Item 8: Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . 24

PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 10: Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 11: Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 12: Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . 32
Item 13: Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . 35

PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 38
(a) Documents filed as part of this Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(d) Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

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PART I

Item 1: Business.

(a) General Development of Business.

CONTINUED EXPANSION

The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. At March 27, 1998, the Company
operated 1,890 screens in 195 theatres located in 30 states, Canada, Chile,
Mexico, Brazil, Argentina, Peru, El Salvador, Ecuador and Costa Rica consisting
of 1,549 screens in 152 "first run" theatres and 341 screens in 43 "discount"
theatres. Of the Company's 1,890 screens, 1,453 (or 77%) were built by the
Company during the 1990's, and, as a result, the Company believes it operates
one of the most modern theatre circuits in the industry. All of the Company's
theatres are multiplex facilities with approximately 94% of the Company's
screens located in theatres of six or more screens. The Company believes that
its ratio of screens to theatres (9.7 to 1 at March 27, 1998) is the highest of
the five largest theatre circuits in the U.S. and is more than 50% higher than
the industry average. From its fiscal year ended December 31, 1992 through the
fiscal year ended December 31, 1997, the Company has increased consolidated
revenues approximately 123% from $194.7 million to $434.6 million and has
increased EBITDA (as defined herein) approximately 176% from $32.1 million to
$88.5 million.

The Company maintains its principal executive offices at 7502 Greenville
Avenue, Suite 800, Dallas, Texas 75231. Its telephone number at such address
is (214) 696-1644.

SENIOR SUBORDINATED NOTES OFFERINGS

On June 26, 1997, the Company issued $75 million aggregate principal amount
of 9-5/8% Series C Senior Subordinated Notes (the "Series C Notes") pursuant to
Rule 144A (the "Offering"). The net proceeds of the Offering were used by the
Company to reduce the Company's indebtedness under the then existing credit
facility. The Company exchanged the Series C Notes on October 30, 1997 for
9-5/8% Series D Senior Subordinated Notes (the "Senior Subordinated Notes"),
which Senior Subordinated Notes have been registered under the Securities Act
of 1933, as amended.

On January 14, 1998, the Company issued $105 million aggregate principal
amount of 8-12% Series A Senior Subordinated Notes (the "Series A Notes")
pursuant to Rule 144A (the "Offering"). The net proceeds of the Offering were
used by the Company to reduce the Company's indebtedness under the then
existing credit facility. The Company exchanged the Series A Notes on March
17, 1998 for 8-1/2% Series B Senior Subordinated Notes (the "Senior
Subordinated Notes"), which Senior Subordinated Notes have been registered
under the Securities Act of 1933, as amended.

NEW CREDIT FACILITY

On February 12, 1998, the Company replaced its existing credit facility
with a reducing revolving credit agreement (the "Credit Facility") through a
group of banks for which Bank of America National Trust and Savings Association
acts as administrative agent (the "Administrative Agent"). The Credit Facility
provides for loans to the Company of up to $350.0 million in the aggregate.
The Credit Facility is a reducing revolving credit facility; therefore, at the
end of each quarter during the calendar year 2001, 2002, 2003 and 2004, the
aggregate commitment shall automatically be reduced by $8,750,000, $11,812,500,
$13,125,000, $12,031,250 and $6,562,000 respectively. The Company is required
to prepay all loans outstanding in excess of the aggregate

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commitment as reduced pursuant to the terms of the Credit Facility. Borrowings
under the Credit Facility are secured by a pledge of a majority of the issued
and outstanding capital stock of the Company.

As of March 27, 1998, the interest rate was 6.9%. The Credit Facility
requires the Company to comply with certain financial covenants and other
covenants customary for this type of financing.

SALE LEASEBACK TRANSACTION

On February 24, 1998, the Company completed a sale leaseback transaction
with affiliates of Primus Capital L.L.C. (the "Sale Leaseback"). Pursuant to
the Sale Leaseback, the Company sold the land, buildings and site improvements
of twelve theatre properties to special purpose entities formed by Primus
Capital L.L.C. for an aggregate purchase price equal to approximately $131.5
million. The Company leased such properties for a base term equal to
approximately 20 years with fixed rate options to extend each lease for up to
an additional 25 years in five, five-year increments. The properties conveyed
consist of larger multiplex theatre formats, eight of which were located in
Texas, one in California, two in Colorado and one in Indiana.

FOREIGN DEVELOPMENTS

On November 18, 1997, Cinemark International executed a credit agreement
with Bank of America National Trust and Savings Association for itself and as
Administrative Agent, as amended in December 1997 (the "Cinemark International
Credit Agreement"). The Cinemark International Credit Agreement is a revolving
credit facility and provides for a loan to Cinemark International of $30
million aggregate. The Cinemark International Credit Agreement is secured by a
pledge of substantially all of the stock of Cinemark Mexico and an
unconditional guaranty by Cinemark Mexico. Cinemark International loaned the
$30 million proceeds from the Cinemark International Credit Agreement to
Cinemark Mexico evidenced by a five year promissory note bearing interest at a
rate equal to 10% per annum. Cinemark Mexico utilized such funds to repurchase
all of its outstanding 12% Senior Subordinated PIK Notes at a purchase price
equal to $99.53 per $100 principal amount plus accrued and unpaid interest up
to the date of the repurchase. As of March 27, 1998, Cinemark International
has borrowed $30 million under the Cinemark International Credit Agreement and
the effective interest rate on such borrowings was 7.2% per annum. The
Cinemark International Credit Agreement requires Cinemark International to
comply with certain financial covenants and other covenants customary for this
type of financing.

(b) Financial Information About Industry Segments.

The Company is a unitary business as described above and as a result does
not break out its business into industry segments.

GENERAL

THE COMPANY

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modern theatre circuits in the industry. All of the Company's theatres are
multiplex facilities with approximately 94% of the Company's screens located in
theatres of six or more screens. The Company believes that its ratio of screens
to theatres (9.7 to 1 at March 27, 1998) is the highest of the five largest
theatre circuits in the U.S. and is more than 50% higher than the industry
average. From its fiscal year ended December 31, 1992 through the fiscal year
ended December 31, 1997, the Company has increased consolidated revenues
approximately 123% from $194.7 million to $434.6 million and has increased
EBITDA (as defined herein) approximately 176% from $32.1 million to $88.5
million.

The Company is an industry leader in new theatre construction and operation
and, according to industry sources, has constructed more screens than any other
exhibitor during the 1990s. The Company believes that the attractiveness,
comfort and viewing experience provided by its modern facilities result in the
Company's theatres more often being the preferred destination for moviegoers in
its markets.

The Company is actively participating in the ongoing trend toward the
development of larger multiplexes, commonly referred to as "the rescreening of
America." The Company's management experience and financial flexibility permit
it to introduce larger multiplex theatre facilities into areas previously
served by smaller theatres, thereby capturing moviegoers who seek more
attractive surroundings, wider variety of films, better customer service,
shorter lines, more convenient parking and a greater choice of seating to view
popular movies. The Company's larger multiplex facilities increase per screen
revenues and operating margins and enhance its operating efficiencies. Such
theatres enable the Company to present films appealing to several segments of
the moviegoing public while serving patrons from common support facilities
(such as box office, concession areas, rest rooms and lobby). In addition,
larger multiplex facilities provide the Company with greater flexibility in
staffing, movie scheduling and equipment utilization while reducing congestion
throughout the theatre. Larger multiplex facilities also provide increased
flexibility in determining the length of time that a film will run. The Company
can lengthen the run of a film by switching it to a smaller auditorium after
peak demand has subsided and has the potential to generate higher profits as
film license agreements typically provide for a lower film rent to be paid
later in a film's run.

OVERVIEW OF THE THEATRE INDUSTRY

The theatre exhibition industry in the U.S. is comprised of approximately
490 exhibitors, approximately 257 of which operate four or more screens. As of
May 1997, the 10 largest exhibitors (in terms of number of screens) operated
approximately 52% of the total screens, with no one exhibitor operating more
than 10% of the total screens.

U.S. box office sales of approximately $6.4 billion in 1997 was a record
for the industry. Overall attendance has remained stable during this decade
with no single year varying more than 10% from the average. The Company
believes that the primary reason for the variances in the year-to-year
attendance is the overall audience appeal of the films released. The following
table represents the results of a survey by the National Association of Theatre
Owners outlining the historical trends in U.S. theatre attendance, average
ticket prices and box office sales for the last eight years.

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U.S. Box
Attendance Average Office Sales
Year (Millions) Ticket Price (Millions)
---- ---------- ------------ ----------

1990 1,189 $4.225 $5,022
1991 1,141 $4.211 $4,803
1992 1,173 $4.152 $4,871
1993 1,244 $4.143 $5,154
1994 1,292 $4.178 $5,386
1995 1,263 $4.351 $5,494
1996 1,339 $4.416 $5,912
1997 1,388 $4.587 $6.366

Theatrical exhibition is the primary distribution channel for new motion
picture releases. The Company believes that the successful theatrical release
of a movie abroad and in "downstream" distribution channels, such as home video
and pay-per-view, network and syndicated television, is largely dependent on
its successful theatrical release in the U.S. The Company further believes
that the emergence of new motion picture distribution channels has not
adversely affected attendance at theatres and that these distribution channels
do not provide an experience comparable to the out-of-home experience of
viewing a movie in a theatre. The Company believes that the public will
continue to recognize the advantages of viewing a movie on a large screen with
superior audio and visual quality, while enjoying a variety of concessions and
sharing the experience with a large audience.

The Company believes that as a result of increased revenues from the
successful release of films in both movie theatres and other distribution
channels, major film production companies have increased and will continue to
increase the number of films being produced. Film producers have increased
their revenues from these distribution channels by approximately 237% since
1985 to $19.9 billion in 1996. The increased revenue potential from film
distribution in recent years can be attributed to increased demand resulting
from the domestic and international growth of the movie theatre industry and
the home video industry, and the significantly increased channel capacity
created by enhanced cable and satellite-based transmission systems. Moreover,
the Company believes independent producers and distributors, such as Gramercy
Pictures, Turner Pictures (which includes New Line Cinemas and Castle Rock
Entertainment) and Dreamworks SKG, the highly-publicized partnership among
Jeffrey Katzenberg, Steven Spielberg and David Geffen, should help increase
motion picture production. Additionally, increased revenues permit major film
production companies to create "event" films such as Jurassic Park, Twister,
Independence Day and Titanic which utilize the latest advances in computer
technology to enhance production quality and special effects. The Company
believes that an increasing supply of quality feature films and "event" films
exhibited with advanced projection and stereo sound equipment such as Digital
Theatre Sound Systems, Dolby Digital Sound and Sony Dynamic Digital Sound will
enhance the moviegoing experience and will increase the theatre attendance of
exhibitors with modern multiplex theatres designed to exhibit such motion
pictures.

Increased international distribution is also producing important sources of
revenue for film distributors and growth opportunities for exhibitors. The
international market share of total box office receipts in 1996 was 50% up from
30.4% in 1985. Since 1985, international box office receipts have grown at a
11.9% compounded annual rate. The Company believes that many international
markets for theatrical exhibition, which have historically been underserved due
to antiquated and/or run-down theatres, will continue to experience rapid
growth as additional multiplex theatres are introduced.

In addition, the Company believes that certain demographic trends favor the
theatre exhibition industry. Information obtained from the U.S. Bureau of
Census indicates that the number of 12 to 20 year olds in the U.S., the largest
moviegoing segment of the population, is projected to grow an aggregate of 7.5%
through the year 2000. Furthermore, according to MPAA, the number of patrons
over 40 years old as a percentage of the total movie audience has more than
doubled from approximately 14% in 1986 to approximately 33% in 1996. The

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Company believes that film producers have recognized the importance of this
segment of the population and are producing an increased number of films
primarily targeted to this more mature audience, including films such as
Forrest Gump, Apollo 13, Sense and Sensibility, The English Patient and As Good
as it Gets.

BUSINESS STRATEGY

The Company intends to continue to grow through new theatre development by
applying the same techniques it has implemented since it was founded. The
Company believes that it is unique among major theatre exhibitors in the
development and execution of the following four-part business strategy:

Continue to build in underserved mid-sized markets. The Company intends to
continue to build first run theatres in underserved mid-sized markets and
suburbs of major metropolitan areas with populations of 50,000 to 200,000 where
the Company frequently will be the sole or leading exhibitor in terms of first
run screens operated. The Company believes it gains maximum access to film
product, and thereby realizes a competitive advantage, by locating its modern
multiplex theatres in new and existing film zones where little or no
competition for film product exists.

Capitalize on popularity of "megaplex" concept. The Company intends to
expand its construction of larger "megaplex" entertainment centers in major
metropolitan areas. In December 1992, the Company opened its first megaplex,
Hollywood USA , a 15-screen, 52,000 square-foot complex containing a large
video arcade and a pizzeria. The Company subsequently opened two additional
megaplexes styled after the original Hollywood USA. Based upon the success of
these complexes, which consistently rank among the Company's top grossing
facilities on a per screen basis, the Company expanded the megaplex concept. In
the last 24 months, the Company has developed fifteen megaplexes (270 screens),
each exceeding 65,000 square feet and featuring 15 or more screens with 75 foot
screens in the largest auditoriums, stadium seating, digital sound, a pizzeria,
a coffee bar and a large video arcade room.

Continue to exploit discount theatre niche. The Company intends to maintain
its discount theatre operations (admission of $1 to $2 per ticket) to serve
patrons who miss a film during its first run exhibition or who may not be able
to afford to attend first run theatres on a frequent basis. The Company
believes that its discount theatres allow it to serve these segments of the
total moviegoing population, increasing the number of potential customers
beyond traditional first run moviegoers. The Company's multiplex discount
theatres offer many of the same amenities as its first run theatres, including
wall-to-wall screens, comfortable seating with cupholder armrests, digital
sound, multiple concession stands and a video game room. The Company's discount
theatres generally have higher attendance, lower film costs and a greater
proportion of concession revenues than its first run theatres. As of March 27,
1998, approximately 20% of the Company's screens were housed in its discount
theatres.

Develop modern American-style theatres in underserved international
markets. The Company intends to continue to develop multiplex theatres directly
or through joint venture arrangements with local partners in underserved
international markets. The Company's activities to date in international
markets have been primarily directed toward Latin America, which the Company
believes is severely underscreened and is still typically served by one- and
two-screen theatres which are often antiquated and/or run-down. The Company
believes that the same economic factors giving rise to the multiplex
rescreening trend in the U.S. are similarly applicable to international
markets. The Company believes that it was the first U.S. circuit to open
American-style modern multiplex theatres in Chile and Mexico, and has begun
developing multiplex theatres directly or through joint venture arrangements
with local partners in Argentina, Brazil, Peru, Ecuador, El Salvador and Costa
Rica.

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OPERATIONS

The Company's corporate office, which employed approximately 160
individuals as of March 27, 1998, is responsible for theatre development and
site selection, lease negotiation, theatre design and construction, film
licensing and settlements, concession vendor negotiations and financial and
accounting activities. The Company's theatre operations are divided into six
geographic divisions, each of which is headed by a regional leader. The
Company's regional leaders have an average of 10 years experience in the movie
theatre industry and each is responsible for supervising approximately 15% of
the Company's theatre managers. Theatre managers are responsible for the
day-to-day operations of the Company's theatres including optimizing staffing,
developing innovative theatre promotions, preparing movie schedules, purchasing
concession inventory, maintaining a clean and functioning facility and training
theatre staff.

To maintain quality and consistency within the Company's theatres, the
Company conducts regular inspections of each theatre and operates a program
which involves unannounced visits by unidentified customers who report on the
quality of service, film presentation and cleanliness of the theatre.

Theatre Development

The Company continually evaluates existing and new markets for potential
theatre locations. The Company generally seeks to develop theatres in markets
that are underscreened as a result of changing demographic trends or that are
served by aging theatre facilities. Some of the factors the Company considers
in determining whether to develop a theatre in a particular location are the
market's population and average household income, the proximity to retail
corridors, convenient roadway access, the proximity to competing theatres and
the effect on the Company's existing theatres in the market, if any.

The Company designs its multiplex theatres with bright colors, neon, tile
and marble and state-of-the-art technology, to create a festive and memorable
experience for the customer. The Company has designed several prototype
theatres, each of which can be adapted to suit the size requirements of a
particular location and the availability of parking, and to respond to
competitive factors or specific area demographics. The Company believes the
fully designed prototypes result in significant construction and operating cost
savings. More importantly, the Company believes that construction and operation
of high quality theatres provides significant competitive advantages as theatre
patrons, and therefore film distributors, seek clean, conveniently located,
modern facilities with state-of-the-art equipment.

The Company's theatres typically contain auditoriums consisting of 100 to
400 seats each and feature wall-to-wall screens, high back rocking chairs with
cupholder armrests, digital sound, multiple concession stands and video game
rooms. The Company's megaplex facilities typically will exceed 65,000 square
feet, feature 15 or more screens with 75 foot screens in the largest
auditoriums, stadium seating, digital sound, a pizzeria, a coffee bar and a
large video arcade room. The Company believes that, in particular, stadium
style auditoriums with digital sound provide an entertainment experience which
is superior to that available at a conventional theatre. Jurassic Park,
released in the summer of 1993, was the first major motion picture to utilize
digital sound. The majority of the films produced in 1997 had digital
soundtracks available as an alternative to the standard stereo soundtrack. More
than 90% of the Company's first run theatres have one or more auditoriums with
digital sound capabilities, and the Company is continuing to add digital sound
capabilities.

Film Licensing

Films are typically licensed from film distributors owned by major film
production companies and from independent film distributors that distribute
films for smaller production companies. For first run films, film distributors
typically establish geographic zones and offer each available film to all
theatres in a zone. The size

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of a film zone is generally determined by the population density, demographics
and box office potential of a particular market or region, and can range from a
radius of three to five miles in major metropolitan and suburban areas to up to
15 miles in small towns. The Company currently operates theatres in
approximately 110 first run film zones. Each film, regardless of the
distributor, is generally licensed to only one theatre in each zone. New film
releases are licensed at the discretion of the film distributors on an
allocation or previewed bid basis. In film zones where the Company has little
or no competition, the Company selects those pictures it believes will be most
successful. In film zones where the Company faces competition, the Company
usually licenses films on an allocation basis. Under an allocation process, a
particular distributor will rotate films among exhibitors, typically providing
movies to competing exhibitors solely based on the order of their release. For
second run films, film distributors establish availability on a market-by-
market basis after the completion of exhibition at first run theatres, and
permit each theatre within a market to exhibit such films without regard to
film zones.

The Company licenses films through its booking office located at the
Company's corporate headquarters in Dallas, Texas. All of the major motion
picture studios and distributors also maintain offices in Dallas. The Company's
film bookers have significant experience in the theatre industry and have
developed long-standing relationships with the film distributors. Each film
booker is responsible for a geographic region and maintains relationships with
representatives of each of the major motion picture studios and distributors
having responsibility for their respective geographic regions. The Company
licenses films from all of the major distributors and is not dependent on any
one studio for motion picture product.

Prior to negotiating for a film license, the Company's booking personnel
evaluate the prospects for the film. The criteria considered for each film
include cast, director, plot, performance of similar films, estimated film
rental costs, expected MPAA rating and the outlook for other upcoming films.
Successful licensing depends upon knowledge of the tastes of local residents.

A film license typically specifies a rental fee to be paid to the
distributor based on the higher result of either a gross receipts formula or a
theatre admissions revenue sharing formula. Under a gross receipts formula, the
distributor receives a specified percentage of box office receipts, with the
percentage generally declining over the term of the run. First run film rental
percentages usually begin at 70% of box office receipts and gradually decline
to as low as 30% over a period of four to seven weeks. Second run film rental
percentages typically begin at 35% of box office receipts and often decline to
30% after the first week. Under the theatre admissions revenue sharing formula
(commonly known as the "90/10" clause), the distributor receives a specified
percentage (i.e., 90%) of the excess of box office receipts over a negotiated
reimbursement for theatre expenses. In general, most distributors follow an
industry practice of adjusting or renegotiating the terms of a film license
subsequent to exhibition based upon the film's success.

Concessions

Concession sales are the Company's second largest revenue source,
representing 34.4% of total revenues for 1997. The Company has devoted
considerable management effort to increasing concession sales and improving the
operating income margins from concession sales. These efforts include
implementation of the following strategies:

o Optimization of product mix. The Company's primary concession products
are various sizes of popcorn, soft drinks, candy and hot dogs, all of which the
Company sells at each of its theatres. However, different varieties and brands
of candy and soft drinks are offered at theatres based on preferences in that
particular geographic region. The Company has also implemented "combo-meals,"
and "movie meals" for children and senior citizens, both of which offer a pre-
selected assortment of concession products.

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o Introduction of new products. The Company continues to introduce new
concession products designed to attract additional concession purchases. New
offerings have recently included bottled water, bulk candy, frozen yogurt and
ice cream. Additionally, the Company has introduced pizza, pastries and
specialty coffee in many of its megaplexes.

o Staff training. Employees are continually trained in "cross-selling" and
"upselling" techniques. This training occurs through situational role-playing
conducted at the Company's "Customer Service University" as well as continual
on-the-job training. Individual theatre managers receive a portion of their
compensation based on concession sales at their theatres and are therefore
motivated to maximize concession purchases.

o Theatre design. Newer theatres are designed to include at least two to
three concession stands, with each stand having multiple service stations to
make it easier to serve larger numbers of customers rapidly. Strategic
placement of large concession stands within theatres heightens their
visibility, aids in reducing the length of concession lines and improves
traffic flow around the concession stands.

o Cost control. The Company negotiates prices for its concession supplies
directly with concession vendors on a bulk rate basis and distributes its
concession supplies through a national concession contract distributor. The
concession distributor provides inventory and distribution services to the
theatres, which place volume orders directly with the concession distributor.
The concession distributor is paid a fee for such service equal to a percentage
of the Company's concession supply purchases. The Company believes that
utilization of a concession distributor is more cost effective than
establishing a concession warehousing network owned by the Company.

Marketing

In order to attract customers, the Company relies principally upon
newspaper display advertisements (substantially paid for by film distributors)
and newspaper directory film schedules (generally paid for by the exhibitor) to
inform its patrons of film titles and show times. Radio and television
advertising spots (generally paid for by film distributors) are used to promote
certain motion pictures and special events. The Company also exhibits previews
in its theatres of coming attractions and films presently playing on the other
screens which it operates in the same theatre or market.

Theatre Management

Each theatre is managed by one theatre manager and a number of assistant
managers. A typical ten screen movie theatre has approximately 40 employees and
two to three assistant managers, while a 16-screen megaplex has approximately
200 employees, including eight assistant managers. The theatre manager is paid
a salary and a commission based upon concession sales. A theatre manager can
increase the profitability of the theatre and his/her own compensation by
ensuring that the staff is properly trained to encourage patrons to "trade up"
in size or purchase additional concession items. The goal of a theatre manager
is to operate a theatre in the most efficient and profitable manner in order to
be promoted from managing a smaller theatre to managing a megaplex.

The Company believes strongly in customer service and it promotes this
through employee empowerment. Each theatre employee is authorized to deal with
all customer needs and complaints in a variety of ways, including offering free
tickets or free concession items, if necessary. Prior to peak seasons, the
Company teaches its employees customer service at its Customer Service
University training program. The Customer Service University is an active
training program consisting of role-playing exercises as well as typical
classroom instruction.

8
11
Management Information Systems

The Company has developed its own point of sale ("POS") management
information system to further enhance its ability to maximize revenues, control
costs and efficiently manage the Company's theatre circuit. The POS information
system provides corporate management with a detailed daily admission and
concession revenue report by the start of business the following morning. This
information allows management to make real-time adjustments to movie schedules,
prolong runs or increase the number of screens on which successful movies are
being played and substitute films when gross receipts cease to meet expected
goals. Real-time seating and box office information is available to box office
personnel, making it possible for theatre management to avoid overselling a
particular film and providing faster and more accurate response to customer
inquiries regarding showings and available seating. The POS information system
also tracks concession sales and provides weekly in-theatre inventory reports,
leading to better inventory management and control.

Cinemark is currently developing a Windows based version of our POS system
for our larger domestic and international theatres. This enhanced system will
have multiple language capabilities, unlimited ticket pricing options, and the
ability to process credit cards. The Windows platform permits the addition of
barcode scanners, pole displays, touch screens, credit card readers and other
equipment specific to individual country requirements. Cinemark anticipates
initial deployment of this system during the third quarter of 1998.

INTERNATIONAL

The motion picture exhibition business has become increasingly global and
rising box office receipts from international markets indicate that some
international markets are poised for rapid growth. The Company believes that
its experience in developing and operating multiplex theatres provides it with
a significant advantage in developing multiplex facilities in international
markets. The Company's strategy in these markets is to form partnerships or
joint ventures with local operators, sharing risk and obtaining valuable market
insight.

Due to the enormous potential of the international markets, Cinemark
International is introducing state-of-the-art multiplex theatres to
"under-screened" international markets. As of March 27, 1998, Cinemark
International operates twenty-nine first-run theatres (287 screens) in Mexico,
Chile, Brazil, Argentina, Peru, Ecuador and El Salvador, with an aggregate of
24 theatres (219 screens) scheduled to open or begin construction during the
remainder of 1998. Additionally, Cinemark International operates two discount
theatres (24 screens) in Alberta, Canada. Cinemark International's strategy
will be to continue to form strategic partnerships or joint ventures with local
partners, thereby sharing risk and obtaining valuable market insight.

Mexico

Cinemark International, through its subsidiary Cinemark Mexico (USA), Inc.
("Cinemark Mexico"), is developing state-of-the-art multiplex theatres
comparable to theatres developed by the Company in the U.S. Cinemark Mexico's
operations are conducted through its subsidiary Cinemark de Mexico, S.A. de
C.V. Cinemark Mexico currently operates 13 theatres (141 screens) and has
begun or intends to begin construction on four theatres (32 screens) in 1998.
The Company manages all of Cinemark Mexico's theatres pursuant to a management
agreement. Cinemark Mexico's theatres are staffed primarily with Mexican
nationals who report to the Company's regional and corporate office personnel.
The Company provides all corporate operating functions, including film booking
and accounting.

Chile

In November 1992, Cinemark International entered into a joint venture
agreement with Conate, S.A., a Chilean movie theatre operator ("Conate"), to
develop state-of-the-art multiplex theatres in Chile. The joint venture
provides for the development of multiplex theatres and the licensing of the
Company's technology, trademark and name. The joint venture conducts its
business through Cinemark Chile, S.A. which is 50% owned by Inversiones
Cinemark, S.A., a subsidiary of Cinemark International, and 50% owned by
Conate. Cinemark Chile, which is based in Santiago, Chile, currently operates
three theatres (25 screens), and plans to open or begin construction on four
additional theatres (34 screens) in 1998.

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12
Argentina

In December 1995, Cinemark International entered into a joint venture
agreement with D'Alimenti S.A., an Argentinean corporation ("DASA"), and
Prodecine S.A., an Argentinean corporation ("Prodecine"), to develop
state-of-the-art multiplex theatres in Argentina. The joint venture agreement
also provides for the licensing of the Company's technology, trademark and
name. The joint venture's business is conducted through Cinemark Argentina,
S.A., which is owned by Cinemark Investments Argentina S.A. and Prodecine
(which acquired DASA's interest in the joint venture). Cinemark International
and Conate each own 50% of Cinemark Investments Argentina S.A. Cinemark
Argentina S.A. currently operates three theatres (28 screens) and intends to
begin construction on three theatres (28 screens) in 1998.

In December 1997, the Company formed a wholly-owned Argentine subsidiary,
Cinemark Rio de la Plata Associates S.R.L. through which the Company plans to
begin construction on three theatres (31 screens) during the remainder of 1998.

Brazil

In 1996, Cinemark LTDA was organized as an indirect subsidiary of Cinemark
International. In November 1997, Cinemark International, through a
wholly-owned subsidiary, entered into a joint venture agreement with Brazilian
strategic partners and converted Cinemark LTDA to a Brazilian corporation,
Cinemark Brasil S.A., which is approximately 60% indirectly owned by Cinemark
International and approximately 40% owned by Brazilian strategic partners.
Cinemark Brazil currently operates five theatres (55 screens) and expects to
begin construction on six theatres (64) screens in 1998.

Ecuador

In September 1996, Cinemark International entered into a joint venture
agreement with The Wright Group, a group of prominent Ecuadorian individuals
and companies, to develop state-of-the-art multiplex theatres in Ecuador. The
joint venture agreement provides for the licensing of the Company's technology,
trademark and name. The joint venture conducts its business through Cinemark
del Ecuador, S.A. ("Cinemark Ecuador") which is 60% owned by Cinemark
International and 40% owned by The Wright Group. Cinemark Ecuador currently
operates two theatres (16 screens).

Peru

In December 1996, Cinemark International and Conate entered into a joint
venture agreement to develop state-of-the-art multiplex theatres in Peru. The
joint venture provides for the licensing of the Company's technology, trademark
and name. The joint venture conducts its business through Cinemark del Peru,
S.A., which is 50% owned by Cinemark International and 50% owned by Conate.
Cinemark del Peru, S.A. currently operates one theatre (12 screens) and plans
to begin construction on two theatres (16 screens) during the remainder of
1998.

Central America

In January 1997, Cinemark International entered into a joint venture
agreement with Cines de Centroamerica to develop state-of-the-art multiplex
theatres throughout Central America. The joint venture provides for the
licensing of the Company's technology, trademarks and name. The Central
America joint venture currently operates one theatre (eight screens) in Costa
Rica and one theatre (two screens) in El Salvador. During 1998, the Central
American joint venture plans to begin construction on two theatres (14
screens).

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COMPETITION

The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. The Company competes against
both local and national exhibitors, some of which may have substantially
greater financial resources than the Company.

In film zones where the Company has little or no direct competition
(approximately 70% of the Company's theatres), the Company selects those
pictures it believes will be most successful in its markets from among those
offered to it by distributors. Where the Company faces competition, it usually
licenses films based on an allocation process. The Company currently operates
in approximately 110 first run film zones in the U.S. The Company believes that
no individual film zone is material to the Company. See "-- Operations -- Film
Licensing." The Company believes that the principal competitive factors with
respect to film licensing include capacity and location of an exhibitor's
theatre, theatre comfort, quality of projection and sound equipment, level of
customer service and licensing terms. The competition for customers is
dependent upon factors such as the availability of popular films, the location
of theatres, the comfort and quality of theatres and ticket prices. The Company
believes its admission prices at its first run and discount theatres are
competitive with admission prices of respective competing theatres.

The Company's theatres face competition from a number of other motion
picture exhibition delivery systems, such as network, syndicated and pay
television, pay-per-view and home video systems. The impact of such delivery
systems on the motion picture exhibition industry is difficult to determine,
and there can be no assurance that existing or future alternative delivery
systems will not have an adverse impact on attendance. The Company's theatres
also face competition from other forms of entertainment competing for the
public's leisure time and disposable income.

EMPLOYEES

As of March 27, 1998, the Company had approximately 7,000 employees in the
U.S., approximately 15% of whom are full time employees in the U.S. and 85% of
whom are part time employees. The Company is a party to collective bargaining
agreements with five unions of which approximately 10 employees are members.
The Company's international operations typically utilize union labor. The
Company considers its relations with its employees to be satisfactory.

REGULATION

The Company is subject to various general regulations applicable to its
operations including the Americans with Disabilities Act (the "ADA"). The
Company has established a program to review and evaluate the Company's existing
theatres and its specifications for new theatres and to make any changes to
such theatres and specifications required by the ADA. The Company develops new
theatres to be accessible to the disabled and believes that it is otherwise in
substantial compliance where readily achievable with current regulations
relating to accommodating the disabled. The Company believes that the cost of
complying with the ADA will not be material.

11
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MAP

12
15
Item 2: Properties.

Of the 1,579 screens operated by the Company in the U.S. at March 27, 1998,
22 theatres (270 screens) were owned, 139 theatres (1,272 screens) are leased
pursuant to building leases, one theatre (10 screens) is leased pursuant to
ground leases and two theatres (27 screens) are managed. The Company's leases
are generally entered into on a long term basis with terms (including options)
generally ranging from 20 to 40 years. Approximately 27 of the Company's
theatre leases (covering 135 screens) have remaining terms (including renewal
periods) of less than five years and approximately 54 of the Company's theatre
leases (covering 654 screens) have remaining terms (including renewal periods)
more than 15 years. Rent is typically calculated as a percentage of box office
receipts or total theatre revenues, subject to an annual minimum. The Company
leases office space in Dallas, Texas for its corporate office which expires on
June 30, 1998. See note 9 of the Company's Notes to the Consolidated Financial
Statements for information with respect to the Company's lease commitments.

As of March 27, 1998, the Company operated 31 theatres (311 screens)
outside of the U.S. Of the 31 theatres operated outside of the U.S., 30
theatres (299 screens) are leased pursuant to ground or building leases and one
theatre (12 screens) is fee owned. The leases generally provide for contingent
rental based upon operating results (subject to an annual minimum). 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.

Item 3: Legal Proceedings.

El Paso Litigation

On December 10, 1997, Jose G. Lara, E.J. Lozano, Alfredo Juarez, G. Tim
Hervey, Earl L. Harbeck, Volar Center for Independent Living, Luis Enrique
Chew, Desert Adapt and Myra Murillo filed suit in the United States District
Court, Western District of Texas, El Paso Division, against the Company
alleging certain violations of the Americans with Disabilities Act of 1990 (the
"ADA"). The Company has filed an answer denying the allegations and claims
contained in the suit. Although the Company cannot predict the outcome of such
litigation, management believes that the Company's potential liability with
respect to such proceeding is not material in the aggregate to the Company's
financial position, results of operation and cash flows.

Austin Litigation

On July 25, 1997, David Witte, Rona Schnall and Laura Brown filed suit in
District Court No. 345 of Travis County, Texas against the Company alleging
certain violations of the ADA relating to the accessibility of a certain
theatre to patrons using wheelchairs. The Company is currently negotiating a
settlement agreement with the plaintiffs.

From time to time, the Company is involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. The Company
believes that its potential liability with respect to proceedings currently
pending is not material in the aggregate to the Company's consolidated
financial position, results of operations and cash flows.

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.

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PART II

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

There is no established public trading market for the Company's Common
Stock. As of March 27, 1998, there were 12 holders of record of the Company's
Common Stock. The Company has not paid dividends on its Common Stock and does
not expect to pay dividends on its Common Stock in the foreseeable future. The
Subordinated Notes Indentures and the Credit Facility contain restrictions on
the Company's ability to pay dividends on its Common Stock.

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17
Item 6: Selected Financial Data.

The following tables set forth selected consolidated financial data for
the Company for the periods and at the dates indicated for each of the five
most recent fiscal years ended December 31, 1997. This information should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Company's Consolidated Financial
Statements, including the notes thereto, included elsewhere in this report.

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following tables set forth selected consolidated financial data for the
Company for the periods and at the dates indicated for each of the five most
recent fiscal years ended December 31, 1997.

Year Ended December 31,
-----------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(In thousands, except theatres, screen and ratio data)

INCOME STATEMENT DATA (CONSOLIDATED):
Revenues $ 239,659 $ 283,077 $ 298,559 $ 341,731 $ 434,598
Theatre operating costs 185,100 218,748 227,719 262,138 322,462
General and administrative expenses 12,162 17,095 19,555 23,486 27,598
Depreciation and amortization 10,939 15,121 15,925 21,799 27,587
Operating income 31,458 32,113 35,361 34,308 56,951
Interest expense(1) 17,102 18,917 19,374 20,376 33,487
Income before extraordinary items 9,720 7,006 13,155 14,616 15,019
Net income(2) 9,720 7,006 13,155 5,230 14,705
Diluted earnings per share (3):
Before extraordinary items 60.15 43.21 80.32 79.93 80.45
Net income 60.15 43.21 80.32 28.60 78.77
Shares outstanding 162 162 164 183 187

OTHER FINANCIAL DATA (CONSOLIDATED):
Cash flow from (used for)
Operations $ 27,181 $ 32,665 $ 36,090 $ 58,754 $ 51,244
Investing activities (35,560) (62,876) (80,268) (177,423) (219,104)
Financing activities 25,051 13,273 32,031 119,690 185,558
Theatre level cash flow(4) 54,559 64,329 70,840 79,593 112,136
EBITDA(5) 45,508 50,851 55,708 62,579 88,485
Ratio of earnings to fixed charges(6) 1.61x 1.46x 1.69x 1.65x 1.49x
OPERATING DATA:
United States (Restricted Group)
Theatres owned (at period end)(7) 153 154 150 158 155
Screens owned (at period end)(7) 1,084 1,121 1,155 1,339 1,437
Total attendance 59,632 63,401 61,006 63,774 74,592
Outside United States (Unrestricted Group)
Theatres owned (at period end)(8) -- 4 9 11 18
Screens owned (at period end)(8) -- 42 92 114 187
Total attendance -- 1,407 4,210 8,675 11,668

BALANCE SHEET DATA (CONSOLIDATED):
Cash and temporary cash investments $ 44,454 $ 31,056 $ 13,925 $ 14,383 $ 32,120
Theatre properties and equipment-net 117,017 155,798 224,482 377,421 548,942
Total assets 189,361 217,185 267,747 432,905 661,597
Total long-term debt, including
current portion 152,787 167,374 198,145 297,206 463,501
Shareholders' equity (deficiency) (760) 2,732 11,345 57,363 69,982

15
18

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

(1) Includes amortization of debt issue cost and debt discount and excludes
capitalized interest of $0.6 million, $1.7 million, $3.9 million and
$2.2 million in 1994, 1995, 1996 and 1997, respectively.

(2) In 1996, an extraordinary loss of $9 million (net of related tax
benefit) was recognized in connection with the premium paid and the
write-off of the unamortized debt issue costs associated with the
Senior Notes repurchased.

(3) In December 1997, the Company adopted SFAS No. 128, "Earnings Per
Share," which established new standards for computing and presenting
earnings per share ("EPS"). The data as of period end 1993, 1994,
1995, 1996 and 1997 are presented in conformity with diluted EPS, and
as such, have no effect on prior periods. The Company's financial
statements and notes reflect basic EPS in addition to diluted EPS and
the necessary restatement of prior periods.

(4) Revenues less theatre operating costs (which is not a measure of
financial performance under generally accepted accounting principles)
("GAAP"). Theatre level cash flow is a financial measure commonly used
in the Company's industry and should not be construed as an alternative
to cash flow from operations (as determined in accordance with GAAP) as
an indicator of operating performance or as a measure of liquidity.

(5) Represents net income before depreciation and amortization, interest
expense, changes in deferred lease expense, accrued and unpaid
compensation expense relating to any stock appreciation and stock
option plans, equity in income (loss) of affiliates, gain (loss) of
affiliates, gain (loss) on sale of assets, minority interests,
provision for income taxes and extraordinary items. EBITDA is a
financial measure commonly used in the Company's industry and should
not be construed as an alternative to cash flows from operating
activities (as determined in accordance with GAAP), as an indicator of
operating performance or as a measure of liquidity.

(6) For the purpose of calculating the ratio of earnings to fixed charges,
(i) earnings consist of income (loss) before income taxes and
extraordinary items plus fixed charges excluding capitalized interest
and (ii) fixed charges consist of interest expense, capitalized
interest, amortization of debt issue and debt discount and the portion
of rental expense which is deemed to be representative of the interest
factor.

(7) The data as of period end 1993, 1994, 1995, 1996 and 1997 exclude two
theatres (23 screens), three theatres (33 screens), four theatres (54
screens), five theatres (64 screens), and five theatres (64 screens),
respectively, operated by the Company pursuant to management
agreements.

(8) The data as of period end 1993, 1994, 1995, 1996 and 1997 excludes two
theatres (18 screens), two theatres (18 screens), three theatres (25
screens), four theatres (37 screens) and eleven theatres (94 screens),
respectively, operated through affiliates of the Company in Canada,
Chile, Argentina, Peru, El Salvador, Costa Rica and Japan.

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19
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations.

OVERVIEW

The following is an analysis of the financial condition and results of
operations of the Company. This analysis should be read in conjunction with the
Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this report.

The Company's revenues are generated primarily from box office
receipts and concession sales. The Company's revenues are affected by changes in
attendance and average admission and concession revenues per patron. Attendance
is primarily affected by the commercial appeal of the films released during the
period or year reported. Since the Company's formation, attendance has grown
principally from the development and acquisition of theatres. The Company has
generally experienced increases in average admission and concession revenues per
patron from ticket and concession price increases as well as the development of
theatres in markets that can support higher ticket and concession prices.
Additional revenues related to theatre operations are generated by electronic
video games installed in video arcades located in some of the Company's
theatres.

Film rentals, concession supplies and salaries and wages vary
directly with changes in revenues. These expenses have historically represented
approximately 65% of all theatre operating expenses and approximately 50% of
revenues. Film rental costs are based on a percentage of admissions revenues as
determined by film license agreements. The Company purchases concession supplies
to replace units sold. Although salaries and wages include a fixed component of
cost (i.e., the minimum staffing cost to operate a theatre facility during
non-peak periods), salaries and wages move in relation to revenues as theatre
staffing is adjusted to handle attendance volume.

Conversely, facility lease expense is primarily a fixed cost at the
theatre level as the Company's facility leases generally require a fixed monthly
minimum rent payment. Facility lease expense as a percentage of revenues is also
affected by the number of leased versus fee owned facilities. The addition of a
larger proportion of fee owned properties in the future should result in a
decrease in facility lease expense as a percentage of revenues and an increase
in the level of depreciation expense.

Additionally, advertising cost is primarily fixed at the theatre level
as daily movie directories placed in newspapers represent the largest component
of advertising costs. The monthly cost of these ads is based on the size of the
directory. However, advertising costs have remained relatively constant when
expressed as a percentage of revenues as screen growth results in the addition
of new or larger directory ads.

Utilities and other costs include certain costs that are fixed such as
property taxes, certain costs which are variable such as liability insurance,
and certain costs that possess both fixed and variable components such as
utilities, repairs and maintenance and security services.

The results of operations of acquired theatres are included in the
Company's Consolidated Financial Statements from their date of acquisition.
Fiscal years ended December 31, 1995, 1996 and 1997 are not directly comparable
due to the effects of new theatre openings, acquired theatres and the impact of
the debt service associated with certain financings undertaken. Theatre
closings have had no significant effect on the operations of the Company. See
notes 1 and 3 of the Company's Notes to the Consolidated Financial Statements.

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20
RESULTS OF OPERATIONS

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

Year Ended December 31,
-----------------------
-------------------------------------------------
1995 1996 1997
---- ---- ----

OPERATING DATA (In millions)
Revenues
Admissions $ 183.1 $ 211.6 $ 274.8
Concessions 102.1 116.9 149.2
Other 13.4 13.2 10.6
------- ------- --------
Total revenues $ 298.6 $ 341.7 $ 434.6
======= ======= ========
Cost of operations
Film rentals $ 89.0 $ 104.1 $ 137.9
Concession supplies 17.3 18.4 22.5
Salaries and wages 40.6 46.9 56.0
Facility leases 30.9 34.4 38.7
Advertising 7.6 8.5 10.8
Utilities and other 42.3 49.8 56.6
------- ------- --------
Total cost of operations $ 227.7 $ 262.1 $ 322.5
======= ======= ========

OPERATING DATA AS A PERCENTAGE OF TOTAL
REVENUES(1):
Revenues
Admissions 61.3% 61.9% 63.2%
Concessions 34.2 34.2 34.4
Other 4.5 3.9 2.4
------- ------- --------
Total revenues 100.0 100.0 100.0

Cost of operations
Film rentals(1) 48.6 49.2 50.2
Concession supplies(1) 16.9 15.8 15.1
Salaries and wages 13.6 13.7 12.9
Facility leases 10.3 10.1 8.9
Advertising 2.5 2.5 2.5
Utilities and other 14.2 14.6 13.0

Total cost of operations 76.3 76.7 74.2
General and administrative expenses 6.6 6.9 6.4
Depreciation and amortization 5.3 6.4 6.4
Operating income 11.8 10.0 13.1
Interest expense 6.4 6.0 7.7
Income before income taxes and
extraordinary items 7.8 7.9 5.9
Net income 4.4 1.5 3.4

Year Ended December 31,
-----------------------
-------------------------------------------------
1995 1996 1997
---- ---- ----

Average screen count (month end average) 1,195 1,322 1,523
===== ===== =====
Revenues per average screen count $249,840 $258,495 $285,357
======== ======== ========

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

(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.

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21
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

Revenues. Revenues in 1997 increased to $434.6 million from $341.7
million, a 27.2% increase. The increase in revenues is primarily attributable
to a 16.4% increase in attendance as the result of the first full year of
operations of 237 screens opened in 1996 and the net addition of 181 screens in
1997. Revenues were also positively affected by an increase in admission and
concession revenues per patron of 7.2%. Revenues per average screen increased
10.4% to $285,357 for 1997 period from $258,495 for 1996.

Cost of Operations. Cost of operations, as a percentage of revenues,
decreased to 74.2% in 1997 from 76.7% in 1996. The decrease as a percentage of
revenues resulted from a decrease in concession supplies as a percentage of
concession revenues to 15.1% in 1997 from 15.8% in 1996, a decrease in salaries
and wages as a percentage of revenues to 12.9% in 1997 from 13.7% in 1996, a
decrease in facility leases as a percentage of revenues to 8.9% in 1997 from
10.1% in 1996 and a decrease in utilities and other as a percentage of revenues
to 13.0% in 1997 from 14.6% in 1996 which was partially offset by an increase
in film rentals as a percentage of admission revenues to 50.2% in 1997 from
49.2% in 1996.

General and Administrative Expenses. General and administrative expenses,
as a percentage of revenues, decreased to 6.4% in 1997 from 6.9% in 1996. The
decrease is primarily attributable to the 27.2% increase in revenues from
screen additions and increases in admissions and concessions per patron. The
absolute level of general and administrative expenses increased to $27.6
million for 1997 from $23.5 million for 1996. The increase in general and
administrative expenses is attributed to costs (primarily salaries and wages)
associated with the Company's expansion program.

Depreciation and Amortization. Depreciation and amortization increased
$5.8 million in 1997 to $27.6 million from $21.8 million in 1996. The increase
includes a $2.2 million charge pursuant to Statement of Financial Accounting
Standards No. 121 (FASB 121). In accordance with FASB 121, the Company wrote
down the assets of certain theatres to their realizable value which exceeded
their carrying value. Depreciation and amortization before the affect of FASB
121 increased $3.6 million for 1997. The increase is a result of the net
addition of $171.5 million in theatre property and equipment during 1997, a
45.5% increase over 1996. The difference in the percentage increase in
depreciation and amortization compared to the increase in theatre property and
equipment is a result of the timing of when the additions were placed in
service during the period.

Interest Expense. Interest costs incurred, including amortization of debt
issue cost and debt discount, increased 46.6% to $35.6 million (including the
capitalization of $2.2 million of interest to properties under construction)
from $24.3 million in 1996 (including the capitalization of $3.9 million of
interest to properties under construction). The increase in interest costs
incurred during 1997 was due principally to an increase in average debt
outstanding resulting from borrowings under the Company's Credit Facility and
the issuance of the Senior Subordinated Indenture.

Other Gains and Losses. Other gains and losses for 1996 of $11.1 million
is attributable to a gain from the settlement of litigation and the sale of 2
Day Video, Inc., an 82% subsidiary of the Company.

Extraordinary Items. In the third quarter of 1996, the Company issued $200
million aggregate principle of 9-5/8 Senior Subordinated Notes, a portion of
the proceeds of $193.2 million (net of discount, fees and expenses) were used
to repurchase 98.7% of the Company's $125 million 12% Senior Notes at a price
of $1,098.33 per $1,000 principle amount. As a result, an extraordinary loss
of $8.9 million (net of related tax benefit) was recognized in connection with
the premium paid and the write-off of the unamortized debt issue cost
associated with the Senior Notes repurchased. The remaining loss is
attributable to the refinancing of the Company's bank line of credit during
1996.

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Net Income. Net income before extraordinary items of $15.0 million for
1997 and $14.6 million for 1996 included the capitalized losses of foreign
subsidiary operations of $2.3 million (net of minority interest)and $2.8
million (net of minority interest), respectively.

Income Taxes. Income taxes decreased to $10.7 million in 1997 compared to
$12.3 million in 1996, a 13% decrease, resulting primarily from the decrease in
income before taxes and permanent differences associated with the sale of
certain assets in 1996. The Company's effective rate for 1997 decreased to
41.5% from 45.8% in 1996. The effective rates reflect a reduction in overall
foreign losses which are fully reserved and a reduction in other permanent
differences, primarily goodwill.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995

Revenues. Revenues in 1996 increased to $341.7 million from $298.6
million, a 14.5% increase. The increase in revenues is primarily attributable
to a 11.1% increase in attendance resulting from strong industry performance,
the first full year of operations of 130 screens opened in 1995 and the net
addition of 206 screens in 1996. The contribution from the new screens opened
in 1996 is not fully reflected in the Company's operations as a majority of the
new screens were not opened until late 1996. Revenues were also positively
affected by an increase in admission and concession revenues per patron of
6.2%. The strong industry performance and new screen openings contributed to
an increase of 3.5% in the revenues per average screen to $258,495 for 1996
from $249,840 for 1995.

Cost of Operations. Cost of operations, as a percentage of revenue,
increased slightly to 76.7% in 1996 from 76.3% in 1995. The increase as
percentage of revenues resulted from increases during the period in film
rentals as a percentage of admission revenues to 49.2% in 1996 from 48.6% in
1995 and an increase in utilities and other as a percentage of revenues to
14.6% in 1996 from 14.2% in 1995. This increase was partially offset by a
decrease in concession supplies as a percentage of concession revenues to 15.8%
in 1996 from 16.9% in 1995.

General and Administrative Expenses. General and administrative
expenses, as a percentage of revenues, increased to 6.9% in 1996 from 6.6% in
1995. General and administrative expenses in absolute terms increased to $23.5
million in 1996 from $19.6 million in 1995. The increase as a percentage of
revenues and in absolute terms is primarily the result of a $1.8 million
special bonus payment paid to key employees during the second quarter of 1996
to provide for the estimated taxes due on the exercise of non-qualified stock
options and increases in salaries and wages, travel, and miscellaneous expenses
associated with the Company's international expansion.

Depreciation and Amortization. Depreciation and amortization increased
to $5.9 million in 1996 to $21.8 million from $15.9 million in 1995. The
increase includes a $2.4 million charge pursuant to Statement of Financial
Accounting Standards No. 121 (FASB 121). In accordance with FASB 121, the
Company wrote down the assets of certain theatres to their realizable value
which exceeded their carrying value. Depreciation and amortization before the
affect of FASB 121 increased $3.5 million for 1996. The increase is a result
of the net addition of $163.3 million in theatre property and equipment during
1996, a 56.8% increase over 1995. The difference in the percentage increase in
depreciation and amortization compared to the increase in theatre property and
equipment is a result of the timing of when the additions were placed in
service during the period.

Interest Expense. Interest costs incurred, including amortization of
debt issue cost and debt discount, increased 15.1% to $24.3 million (including
the capitalization of $3.9 million of interest to properties under
construction) from $21.1 million in 1995 (including capitalized interest of
$1.7 million) . The increase in interest costs incurred during 1996 was due
principally to an increase in average debt outstanding resulting from
borrowings under the Credit Facility and the Senior Subordinated Indenture.

Income Taxes. Income taxes increased to $12.3 million in 1996 compared
to $10.1 million in 1995, a 22.2% increase, resulting primarily from the
increase in income before taxes and permanent differences associated with the
sale of certain assets. The Company's effective rate for 1996 increased to
45.8% from 43.4% in 1995. The effective tax rates reflect the full reserve of
the potential tax benefit associated with the loss incurred by Cinemark Mexico.

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Other Gains and Losses. Other gains and losses for 1996 of $11.1 million
is primarily attributable to a gain from the settlement of litigation and the
sale of 2 Day Video, Inc., an 82% subsidiary of the Company.

Extraordinary Items. In the third quarter of 1996, the Company issued $200
million aggregate principle of 9-5/8% Senior Subordinated Notes. A portion of
the proceeds of $193.2 million (net of discount, fees and expenses) were used
to repurchase 98.7% of the Company's $125 million 12% Senior Notes at a price
of $1,098.33 per $1,000 principal amount. As a result, an extraordinary loss
of $9.0 million (net of related tax benefit) was recognized in connection with
the premium paid and the write-off of the unamortized debt issue costs
associated with the Senior Notes repurchased. The remaining loss is
attributable to the refinancing of the Company's bank line of credit during
1996.

Net Income. Net income before extraordinary items of $14.6 million for
1996 and net income of $13.2 million for 1995 included the consolidated losses
of Cinemark Mexico of $2.6 million (net of minority interest) and $2.7 million
(net of minority interest), respectively.

INFLATION AND FOREIGN CURRENCY

The Mexican currency experienced a significant devaluation in December 1994
and 1995. Cinemark Mexico's debt and certain of Cinemark Mexico's theatre lease
rents are denominated in U.S. dollars while its revenues are denominated in
Mexican pesos. As a result of the devaluation, certain costs of Cinemark Mexico
have almost doubled in relation to Cinemark Mexico's revenues. Additionally,
the majority 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 $11.1 million cumulative unrealized currency
translation loss adjustment in shareholders' equity as of December 31, 1997.

In 1997, generally accepted accounting principles require that the U.S.
dollar be used as the functional currency of the Company's Mexican and
Brazilian subsidiaries for U.S. reporting purposes. As a result, fluctuations
in the peso and real during 1997 affected the Company's investment in Mexico
and Brazil were charged to exchange gain or loss rather than to cumulative
foreign currency translation adjustment included in shareholders equity. The
Company recorded an exchange loss of less than $100,000 during 1997 as the
Mexican peso and Brazilian real were stable during the year.

LIQUIDITY AND CAPITAL RESOURCES

The Company's revenues are collected in cash, primarily through box office
receipts and the sale of concession items. Because its revenues are received
in cash prior to the payment of related expenses, the Company has an operating
"float" and, as a result, historically has not required traditional working
capital financing. Primarily due to the lack of significant inventory and
accounts receivable, the Company has typically operated with a negative working
capital position for its ongoing theatre operations. 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 typically generates higher revenues during such periods. The Company's
cash flow from operations was $51.2 million in 1997 compared to $58.8 million
in 1996 and $36.1 million in 1995.

The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 77% of the screens operated by the Company
having been built during the 1990's. Maintenance capital expenditures for all
theatres operated by the Company for 1997 were $5.9 million or approximately
1.4% of revenues. The Company believes that future annual maintenance capital
expenditures will not significantly change as a percentage of revenues. The
Company's investing activities have been principally in connection with new
theatre openings and acquisitions of existing theatres and theatre circuits and
have amounted to $219.1 million, $177.4 million and $80.3 million in 1997, 1996
and 1995, respectively. New theatre openings and acquisitions historically have
been financed with internally generated cash and by debt financing, including
borrowings under the Company's bank line of credit. Cash flow from financing
activities amounted to $185.6 million, $119.7 million and $32 million in 1997,
1996 and 1995, respectively. During 1997, the Company opened in the U.S. 12
theatres (165 screens) and added an aggregate of 11 screens to two existing
theatres. In addition,

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as of March 27, 1998, the Company opened five theatres (78 screens), opened a
four screen expansion to one theatre and has approximately 17 theatres (298
screens) under construction or scheduled to begin construction and be completed
by the end of 1998. Certain of these theatres will be megaplexes which may cost
in excess of $15 million per theatre. The Company also plans to open
approximately 300 screens in the U.S. in 1999. The Company currently estimates
that its capital expenditures for the development of these approximately 680
screens in the U.S. in 1998 and 1999 will be approximately $350 million. As of
March 27, 1998, the Company had expended approximately $70.6 million toward the
development of these screens. The Company plans to fund capital expenditures
for its development from cash flow from operations and borrowings under the
Credit Facility. Actual expenditures for theatre development and acquisitions
during 1998 and 1999 are subject to change based upon the availability of
attractive opportunities for expansion of the Company's theatre circuit.

On August 15, 1996, the Company issued the Series B Notes which bear
interest at a rate of 9-5/8% per annum, payable semi-annually on February 1 and
August 1 of each year. The Series B Notes were issued at 99.553% of the
principal face amount (a discount of $4.47 per $1,000 principal amount). The
net proceeds to the Company from the issuance of the Series B Notes (net of
discount, fees and expenses) were approximately $193.2 million. The proceeds
from the Series B Notes were used to repurchase 98.7% of the Company's $125
million aggregate principal amount 12% Senior Notes due 2002 (the "Senior
Notes") pursuant to a tender offer which expired on August 15, 1996. The
Senior Notes were purchased at a premium of $1,098.33 (including a consent fee
of $25) per $1,000 principal amount, plus accrued and unpaid interest up to the
date of repurchase. Excess proceeds were utilized to reduce borrowings under
the Company's Credit Facility and for general corporate purposes. On June 2,
1997 the Company redeemed the remaining outstanding Senior Notes ($1.6
million). The Senior Notes were redeemed at a premium of $1,060 per $1,000
principal amount, plus accrued and unpaid interest up to the date of
redemption.

In January 1997, the Company repurchased an aggregate of 267 shares of
Class B Common Stock from a retiring employee for approximately $.5 million.
In April 1997, the Company repurchased an aggregate of 1,242 shares of Class B
Common Stock issued to optionholders upon the exercise of options in April
1996. The aggregate purchase price for such shares was $2.2 million. In June
1997, the Company repurchased options to purchase an aggregate 737 shares of
Class B Common Stock from retiring employees. The aggregate purchase price for
such options was approximately $1.3 million.

On June 26, 1997, the Company issued the Series D Notes due 2008 which bear
interest at a rate of 9-5/8% per annum, payable semi-annually on February 1 and
August 1 of each year. The Series D Notes were issued at 103% of the principal
face amount. The net proceeds to the Company from the issuance of the Series D
Notes (net of fees and expenses) was approximately $77.1 million. The proceeds
of the Series D Notes were applied to reduce the Company's indebtedness under
the Credit Facility.

In 1992, the Company formed Cinemark International to develop and acquire
theatres in international markets. As of March 27, 1998, Cinemark
International operated 29 theatres (287 screens) principally in Latin America.
The following table summarizes Cinemark International's holdings in each
international market, the number of theatres and screens in such market as of
March 27, 1998 and the number of theatres and screens under construction in
1998.

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Year of Operating 1998 Construction
Country Formation Ownership% Theatres/Screens Theatres/Screens
------- --------- ---------- ---------------- ----------------

Mexico 1992 95% 13 theatres (141 screens) 4 theatres (32 screens)
Chile 1992 50% 3 theatres (25 screens) 4 theatres (34 screens)
Argentina 1995 25% 3 theatres (28 screens) 3 theatres (28 screens)
Argentina 1997 100% 3 theatres (31 screens)
Brazil 1996 60% 5 theatres (55 screens) 6 theatres (64 screens)
Ecuador 1996 60% 2 theatres (16 screens)
Peru 1996 50% 1 theatre (12 screens) 2 theatres (16 screens)
Central America 1997 50% 2 theatres (10 screens) 2 theatres (14 screens)

Total 29 theatres (219 screens) 24 theatres (219 screens)

Cinemark International plans to invest up to an additional $75 million in
international ventures, principally in Latin America, over the next two to
three years. The Company anticipates that investments in excess of Cinemark
International's available cash will be funded by the Company or by debt or
equity financing to be provided by third parties directly to Cinemark
International or its subsidiaries.

In 1993, the Company incorporated Cinemark de Mexico, S.A. de C.V.
("Cinemark de Mexico") as an indirect subsidiary of Cinemark International to
pursue new development opportunities in Mexico. As of March 27, 1998, Cinemark
International and New Wave Investments AVV, an unaffiliated Aruba corporation
owned by Mexican citizens ("New Wave"), own 95.6% (95% on a fully diluted
basis, including the exercise of outstanding warrants) and 4.4% (4.4% on a
fully diluted basis, including the exercise of outstanding warrants),
respectively, of the common stock of Cinemark Mexico. As of March 27, 1998,
Cinemark Mexico operated 13 theatres (141 screens) and plans to open or begin
construction on four theatres (32 screens) in 1998.

On November 18, 1997, Cinemark International executed a credit agreement
with Bank of America National Trust and Savings Association for itself and as
Administrative Agent as amended in December 1997 (the "Cinemark International
Credit Agreement"). The Cinemark International Credit Agreement is a revolving
credit facility and provides for a loan to Cinemark International of up to $30
million in the aggregate. The Cinemark International Credit Agreement is
secured by a pledge of substantially all of the stock of Cinemark Mexico and an
unconditional guaranty of Cinemark Mexico. Pursuant to the terms of the
Cinemark International Credit Agreement, funds borrowed bear interest at a rate
per annum equal to the Offshore Rate (as defined in the Cinemark International
Credit Agreement) or the Base Rate (as defined in the Cinemark International
Credit Agreement) as the case may be, plus the Applicable Margin (as defined in
the Cinemark International Credit Agreement). As of March 27, 1998, Cinemark
International has borrowed $30 million under the Cinemark International Credit
Agreement and the effective interest rate on such borrowings was 7.2% per
annum, the proceeds of which were used to repurchase all of the outstanding 12%
Senior Subordinated PIK Notes of Cinemark Mexico.

RECENT DEVELOPMENTS

$105 Million Note Offering

On January 14, 1998, the Company issued $105 million aggregate principal
amount of 8-1/2% Series A Senior Subordinated Notes due 2008 (the "Series A
Notes") pursuant to Rule 144A (the "Offering"). The net proceeds of the
Offering were used by the Company to reduce the Company's indebtedness under
the then existing credit facility. The Company exchanged the Series A Notes on
March 17, 1998 for 8-1/2% Series B Senior

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Subordinated Notes (the "Senior Subordinated Notes"), which Senior
Subordinated Notes have been registered under the Securities Act of 1933, as
amended.

Credit Agreement

On February 12, 1998, the Company replaced its existing credit facility
with a reducing revolving credit agreement (the "Credit Facility") through a
group of banks for which Bank of America National Trust and Savings Association
acts as administrative agent (the "Administrative Agent"). The Credit Facility
provides for loans to the Company of up to $350.0 million in the aggregate.
The Credit Facility is a reducing revolving credit facility; therefore, at the
end of each quarter during the calendar year 2001, 2002, 2003 and 2004, the
aggregate commitment shall automatically be reduced by $8,750,000, $11,812,500,
$13,125,000, $12,031,000 and $6,562,500, respectively. The Company is required
to prepay all loans outstanding in excess of the aggregate commitment as
reduced pursuant to the terms of the Credit Facility. Borrowings under the
Credit Facility are secured by a pledge of a majority of the issued and
outstanding capital stock of the Company.

Sale Leaseback

On February 24, 1998, the Company completed a sale leaseback
transaction with affiliates of Primus Capital L.L.C. (the "Sale Leaseback").
Pursuant to the Sale Leaseback, the Company sold the land, buildings and site
improvements of twelve theatre properties to special purpose entities formed by
Primus Capital L.L.C. for an aggregate purchase price equal to approximately
$131.5 million. The Company leased such properties for a base term equal to
approximately 20 years with fixed rate options to extend each lease for up to an
additional 25 years in five, five-year increments. The properties conveyed
consist of larger multiplex theatre formats, eight of which were located in
Texas, one in California, two in Colorado and one in Indiana.

Year 2000 Compliance

The Company recognizes that the arrival of the Year 2000 poses a unique
worldwide challenge to the ability of all systems to recognize the date change
from December 31, 1999 to January 1, 2000 and, like other companies, has
assessed and is updating its computer applications and business processes to
provide for their continued functionality. An assessment of the readiness of
external entities which it interfaces with, such as vendors, counterparties,
customers, payment systems, and others, is ongoing.

The Company expects that the principal costs will be those associated
with the remediation and testing of its computer applications. This effort is
under way across the Company, and is following a process of inventory, scoping
and analysis, modification, testing and certification, and implementation. The
Company does not anticipate that the related overall costs will be material and
will be funded through operating cash flow. The Company anticipates completing
the Year 2000 project by no later than June 30, 1999, which is prior to any
anticipated impact on its operating systems.

Item 8: Financial Statements and Supplementary Data.

The financial statements and supplementary data 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 on Accounting and Financial Disclosure.

None.

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PART III

Item 10: Directors and Executive Officers of the Registrant.

The directors and executive officers of the Company are:

NAME AGE POSITION

Lee Roy Mitchell* 61 Chairman of the Board; Chief Executive Officer; Director
Tandy Mitchell 47 Vice Chairman of the Board; Executive Vice President;
Secretary; Director
Alan W. Stock+ 37 President; Chief Operating Officer; Director
Jeffrey J. Stedman 35 Senior Vice President; Treasurer; Chief Financial Officer; Assistant
Secretary; Director
Margaret E. Richards 39 Vice President-Real Estate; Assistant Secretary
Rob Carmony 40 Senior Vice President-Director of Operations
Jerry Brand 52 Vice President-Film Licensing
Walter Hebert 52 Vice President-Purchasing
Don Harton 40 Vice President-Construction
Randy Hester 45 Vice President-Marketing
Philip Wood 34 Vice President
W. Bryce Anderson*+ 55 Director
Heriberto Guerra, Jr.+ 48 Director
James A. Stern 47 Director
James L. Singleton+ 42 Director
Denny Rydberg 52 Director

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

* Member Audit Committee

+ Member Compensation Committee

The Shareholders' Agreement (as defined herein) contains a voting agreement
pursuant to which Mr. Mitchell agreed to vote his share of common stock of the
Company to elect designees of CALP to the Board of Directors of the Company.
As of March 27, 1998, CALP had the right to designate two board members.
Additionally, the Shareholders' Agreement provides that the Company must obtain
the written consent of CALP for certain corporate acts.

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.
Directors of the Company are reimbursed for expenses actually incurred for each
Board meeting which they attend. In addition, Directors who are not employees
of the Company receive a fee of $1,000 for each meeting of the Board of
Directors attended by such person. The executive officers of the Company are
elected by the Board of Directors to serve at the discretion of the Board.

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. All compensation of directors and officers is paid by the Company.

Lee Roy Mitchell has served as Chairman of the Board since March 1996 and
as Chief Executive Officer and a Director of the Company since its inception
in 1987. Mr. Mitchell was Vice Chairman of the Board of Directors from

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March 1993 to March 1996 and was President of the Company from its inception
in 1987 until March 1993. From 1985 to 1987, Mr. Mitchell served as President
and Chief Executive Officer of a predecessor corporation. 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 36 years.

Tandy Mitchell has served as Vice Chairman of the Board since March 1996,
as a Director of the Company since April 1992, as Executive Vice President of
the Company since October 1989 and as Secretary of the Company since its
inception in 1987. Mrs. Mitchell was General Manager of the theatre division
of a predecessor corporation 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 the Company since March 1993, as a
Director of the Company since April 1992 and as Chief Operating Officer of the
Company since March 1992. Mr. Stock was Senior Vice President of the Company
from October 1989 to March 1993. Mr. Stock was General Manager of the Company
from its inception in 1987 to March 1992. Mr. Stock was employed by the
theatre division of a predecessor corporation from January 1986 to December
1987 as Director of Operations. From 1981 to 1985, he was employed by
Consolidated Theaters, most recently as District Manager.

Jeffrey J. Stedman has served as a Director of the Company since March
1996, as Senior Vice President since July 1997 and as Vice President, Treasurer
and Chief Financial Officer of the Company since April 1993. From December
1989 to April 1993, Mr. Stedman was Director of Finance of the Company. Prior
to joining the Company in December 1989, Mr. Stedman was a Manager in the tax
department of Deloitte & Touche, LLP where he was employed from December 1984
to December 1989. Mr. Stedman is a certified public accountant.

Robert F. Carmony has served as Senior Vice President-Director of
Operations since July 1997, as Vice President- Director of Operations since
March 1996 and has served as Director of Operations of the Company since June
1988. Prior to joining the Company, Mr. Carmony was owner of O.C. Enterprises,
a software development firm, from 1986 to 1988. Prior to forming his own
software company, Mr. Carmony worked for Plitt-Cineplex Odeon theatres from
1985 to 1986. He worked as a Systems Analyst for Electronic Data Systems (EDS)
from 1984 to 1985.

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

Jerry Brand has served as Vice President-Film Licensing since March 1996.
Mr. Brand has over 27 years of experience in the theatre industry, beginning
his career with Paramount Pictures in 1968. Prior to joining the Company, Mr.
Brand served as Senior Vice President and Head Film Buyer with Cobb Theatres
where he was employed from 1983 to March 1996.

Walter Hebert has served as Vice President-Purchasing of the Company since
July 1997 and was the Director of Purchasing from October 1996 until July 1997.
Mr. Hebert was the President of 2 Day Video, Inc., a 21-store video chain that
was a subsidiary of the Company, from December 1995 until October 1996. Prior
to joining the Company, Mr. Hebert worked for Dillards Department Stores from
1973 to 1993, serving as a Divisional Merchandise Manager in the Arkansas
Division from 1981 until 1993.

Don Harton has served as Vice President-Construction since July 1997. From
August 1996 to July 1997, Mr. Harton was Director of Construction of the
Company. Prior to joining the Company in August 1996, Mr. Harton was an
architect with Urban Architecture, where he was employed from October 1983
until July 1996.

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Randy Hester has served as Vice President-Marketing since July 1997. From
January 1989 to July 1997, Mr. Hester was Director of Corporate Development of
the Company. Prior to joining the Company in January 1989, Mr. Hester was
Chief Financial Officer of Presidio Theatres in Austin, Texas, where he was
employed from 1986 to 1989.

Philip Wood has served as Vice President since July 1997. From February
1988 to July 1997 Mr. Wood was MIS Director of the Company. Prior to joining
the Company in February 1988, Mr. Wood was a systems organizer with Electronic
Data Systems where he was employed from 1986 to 1988.

W. Bryce Anderson has served as a Director of the Company since June 1992.
Mr. Anderson has been Chairman of the Board of Directors of Ennis Steel
Industries, Inc., a steel fabricator, since 1980 and Chairman of the Board of
Directors of Reflex Glass Bead Co., Inc., a manufacturer of glass beads, since
September 1990. Mr. Anderson was Chairman of the Board of Centerline
Industries, Inc., an industrial paint manufacturer, from January 1989 to
December 1992. From 1976 to 1989, Mr. Anderson was Chairman of the Board of
Directors and Chief Executive Officer of Ennis Paint Manufacturing, Inc., an
industrial paint manufacturer.

Heriberto Guerra, Jr. has served as a Director of the Company since
December 1993. 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 Cinemark Mexico (USA), Inc. and Play by Play Toys and Novelties.

James A. Stern was elected Director of the Company in March 1996. Mr.
Stern has been Chairman of The Cypress Group L.L.C. ("Cypress Group") since its
formation in April 1994. Prior to joining Cypress Group, Mr. Stern spent his
entire career with Lehman Brothers, an investment banking firm, most recently
as head of the Merchant Banking Group. He served as head of Lehman's High
Yield and Primary Capital Markets Groups, and was co-head of Investment
Banking. In addition, Mr. Stern was a member of the firm's Operating
Committee. Mr. Stern is a director of Noel Group, Inc., Lear Corporation, R.P.
Scherer Corporation and K&F Industries.

James L. Singleton was elected Director of the Company in March 1996. Mr.
Singleton has been Vice Chairman of Cypress since its formation in April 1994.
Prior to joining Cypress Group, Mr. Singleton was a Managing Director with
Lehman Brothers, Inc., an investment banking firm. Mr. Singleton is a director
of Able Body Corporation and L.P.Thebault Company.

Denny Rydberg was elected Director of the Company in July 1997. Mr.
Rydberg has been President of Young Life since July 1993. Prior to joining
Young Life, Mr. Rydberg was Director of University Ministries at University
Presbyterian Church, Vice President of Youth Specialties and Director of
Operations for Inspirational Films.

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Item 11: Executive Compensation

SUMMARY COMPENSATION TABLE

Annual Compensation Long Term
------------------- Compensation
Awards
------

Securities
Underlying All Other
Salary (A) Bonus Options/SARs Compensation
Name and Principal Position Year ($) ($) (#) ($)
--------------------------- ---- ---------- ---------- --------- ------------

Lee Roy Mitchell, Chairman of the Board 1997 $324,101 1,675,910 - $120,794(B)
and Chief Executive Officer 1996 294,632 1,703,357 - 120,794(C)
1995 267,852 1,733,976 120,828(D)

Alan Stock, President and Chief 1997 $252,484 75,000 - 7,125(E)
Operating Officer 1996 192,500 83,739 - 921,623(F)
1995 175,000 80,043 - 6,930(E)

Jeffrey J. Stedman, Senior Vice 1997 $175,000 57,500 - $7,125(E)
President, Treasurer and Chief 1996 125,000 102,160 - 221,311(G)
Financial Officer 1995 110,000 46,809 6,930(E)

Gary R. Gibbs, Vice President 1997 $87,500 $20,193 1,584,191(H)
and General Counsel (J) 1996 110,000 24,136 600 264,188(I)
1995 100,000 26,153 6,930(E)

Jerry Brand, Vice President-Film 1997 $187,250 42,131 7,125(E)
Licensing(K) 1996 149,616 31,827 --
1995 -- -- --
=============================================================================================================

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

(A) Amounts shown include cash and non-cash compensation earned and
received by executive officers as well as amounts earned but deferred
at the election of those officers.

(B) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $1,950 annual contribution to the
Company's 401(k) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.

(C) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $1,950 annual contribution to the
Company's 401(k) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.

(D) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $1,984 annual contribution to the
Company's 401(k) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.

(E) Represents the Company's annual contribution to the Company's 401(k)
savings plan.

(F) Represents a $6,930 annual contribution by the Company to the
Company's 401(k) savings plan, $535,402 of compensation relating to
the value of stock options exercised over the exercise price of $1.00
per share, and $379,291 reimbursement for estimated tax obligations
incurred upon exercise of stock options.

(G) Represents a $6,930 annual contribution by the Company to the
Company's 401(k) savings plan, $125,485 of compensation relating to
the value of stock options exercised over the exercise price of $1.00
per share, and $88,896 reimbursement for estimated tax obligations
incurred upon exercise of stock options.

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(H) Represents $937,742 of compensation relating to the value of stock
options exercised over the exercise price of $1.00 per share, and
$646,450 reimbursement for estimated tax obligations incurred upon
exercise of stock options.

(I) Represents a $6,930 annual contribution by the Company to the
Company's 401(k) savings plan, $150,582 of compensation relating to
the value of stock options exercised over the exercise price of $1.00
per share and $106,676 reimbursement for estimated tax obligations
incurred upon exercise of stock options.

(J) Mr. Gibbs retired from the Company as Vice President-General Counsel
effective June 27, 1997.

(K) Mr. Brand joined the Company as Vice President-Film Licensing in March
1996.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

There were no Options/SAR grants to the named Executive Officers for
fiscal year ended December 31, 1997.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Name Shares Acquired on Value Realized ($) Options/SARs at Options/SARs at
Exercise (#) FY End (#) FY-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable

Lee Roy Mitchell -- -- -- --
Alan Stock -- -- 1817/0 (A)
Jeffrey J. Stedman -- -- 405/20 (A)
Gary R. Gibbs 510 937,742 0/0 (A)
Jerry Brand -- -- 80/120 (A)

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

(A) The Company has the right to call the shares issuable upon exercise of
the options for terminating employees. The call price increases over
the five year vesting period of the options.

(B) Mr. Gibbs retired as Vice President-General Counsel effective June 27,
1997.

401(k) PENSION PLAN

The Company sponsors a defined contribution savings plan (the "401(k)
Plan") whereby certain employees of the Company or its subsidiaries may (under
current administrative rules) elect to contribute, in whole percentages between
1% and 15% of such employee's compensation, provided no employee's elective
contribution shall exceed the amount permitted under Section 402(g) of the
Internal Revenue Code of 1986, as amended ($9,500 in 1997). A discretionary
matching contribution is made by the Company annually ($744,913 in 1997). The
Company's matching contribution is subject to vesting and forfeitures. The
Company's contributions vest at the rate of twenty percent (20%) per year
beginning two years from the date of employment. After an employee has worked
for seven years, employees have full and immediate vesting rights to all of
the Company's matching contributions. The Company's contributions to the
accounts of the named Executive Officers are included in the Summary
Compensation Table.

29
32
EMPLOYMENT AGREEMENTS

Mr. and Mrs. Mitchell each have an employment agreement with the Company
which contains the terms described below.

Lee Roy Mitchell's 1997 base salary was $324,101 and will increase
thereafter at the rate of 10% per year. In addition, Mr. Mitchell (i) is
entitled to receive an annual bonus, subject to approval by the Board of
Directors, in an amount not exceeding 10% of the aggregate amount of
consolidated theatre level cash flow of the Company in excess of $25 million
for each year (which together with base salary may not exceed $2 million),
which bonus was approximately $1.7 million for the year ended December 31,
1997, (ii) is reimbursed for expenses incurred by him in connection with his
duties, and (iii) receives the use of an automobile of his choice to be
replaced at his election every three years, a club membership of his choice, a
whole life insurance policy in the amount of $3,300,000 insuring his life
during the period of his employment and any other benefits generally available
to the executives of the Company. The maximum base salary and bonus which Mr.
Mitchell is entitled to receive for any calendar year is limited to $2 million
and the payment of any bonus requires board approval. The employment agreement
terminates on the earlier of (i) Mr. Mitchell's death or permanent disability
(except with respect to amounts payable as described in the following sentence)
or (ii) December 31, 2001. In the event of Mr. Mitchell's permanent
disability, he will be entitled to receive $10,000 per month for a period of 60
months.

Tandy Mitchell's 1997 base salary was $144,946 and will increase thereafter
at the rate of 10% per year. In addition, Mrs. Mitchell (i) is reimbursed for
expenses incurred by her in connection with her duties and (ii) receives the
use of an automobile of her choice to be replaced at her election every three
years, a whole life insurance policy in the amount of $1,000,000 insuring her
life during the period of her employment and any other benefits generally
available to the executives of the Company. The employment agreement
terminates on the earlier of (i) Mrs. Mitchell's death or permanent disability
or (ii) December 31, 2001.

The employment agreements of Mr. and Mrs. Mitchell provide that their
employment may be terminated by the unanimous decision of the Board of
Directors of the Company (other than the terminated party) for cause if the
terminated party is convicted of a felony and incarcerated or willfully refuses
to perform any of the duties required under the employment agreement for a
period of 60 days after notice from the Board of Directors.

The employment of Mr. and Mrs. Mitchell will be deemed to be constructively
terminated if, among other things, there is a change of control (as defined in
Item 6(c) under Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended) of the Company, a merger or consolidation of the Company, a
sale of all or substantially all of the assets of the Company, or if certain
changes related to their respective status or compensation by the Company
occur. In the event of termination of employment by the Company without cause,
Mr. and Mrs. Mitchell will be entitled to receive the amounts that would
otherwise be paid under their respective employment agreements for the
remaining term of such agreements.

The employment agreements of Mr. and Mrs. Mitchell further provide that
they will be indemnified against certain liabilities that may arise by reason
of their status or service as executive officers of the Company. The
employment agreements of Mr. and Mrs. Mitchell do not prohibit their engaging
in activities competitive with those of the Company, including the acquisition
of theatres (subject to fiduciary duties to the Company imposed by applicable
law or contractual obligation imposed upon Mr. Mitchell by the Shareholders'
Agreement). See "Certain Transactions--Competing Businesses Owned by Mr.
Mitchell" and "--Cypress Investment."

30
33
STOCK OPTIONS

Employee Stock Option Plan

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
10,685 shares of the Company's Class B Common Stock. The Chief Executive
Officer of the Company has the ability to set the exercise price and the term
(of up to ten years) of the options. All options vest at the rate of one-fifth
of the total options granted per year generally beginning one year from the
date of grant, subject to acceleration by the Chief Executive Officer of the
Company. An employee's options are forfeited if the employee is terminated for
cause. Upon termination of an employee's employment with the Company and
provided that no public market exists for any class of common stock of the
Company at such time, 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. As of March 27,
1998, there were outstanding options to purchase 7,635 shares of the Company's
Class B Common Stock.

During 1997, the Company granted options under the Plan to purchase 260
shares of Class B Common Stock of the Company at an exercise price of $1.00 per
share. The options expire 10 years from the date of grant. The Company
accrued $1.3 million for unearned compensation and will amortize this noncash
expense at a rate of approximately $260,000 per year during the five year
vesting period for the options granted.

In April 1996, employees exercised options to purchase 1,509 shares of
Class B Common Stock of the Company. In January 1997, the Company repurchased
an aggregate 267 shares of Class B Common Stock from a retiring employee for
approximately $.5 million. In April 1997, the Company repurchased an aggregate
of 1,242 shares of Class B Common Stock issued to employees upon exercise of
options exercised in April 1996. The aggregate purchase price for such shares
was $2.2 million. In June 1997, the Company repurchased options to purchase an
aggregate 737 shares of Class B Common Stock from retiring employees. The
aggregate purchase price for such options was approximately $1.3 million.

Independent Director Stock Options

The Company has granted the unaffiliated directors of the Company options
to purchase up to an aggregate of 600 shares of the Company's Class B Common
Stock at an exercise price of $1 per share (the "Director Options"). The
options vested on June 1, 1997. The options expire ten years from the date of
grant. A director's options are forfeited if the director resigns or is
removed from the Board of Directors of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In January 1995, the Board of Directors established a Compensation
Committee of the Board to study senior management compensation and make
recommendations to the Board of Directors as a whole relating to said
compensation. Messrs. Stock, Anderson, Guerra and Singleton currently serve
as members of the Compensation Committee, with Mr. Stock being the only member
who is an officer or employee of the Company or any of its subsidiaries.

31
34
Item 12: Security Ownership of Certain Beneficial Owners and Management.

The following table and the accompanying footnotes set forth, as of March
27, 1998, 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 either
class of its outstanding Common Stock, (ii) each director and named executive
officer, and (iii) all officers and directors as a group:

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

Lee Roy Mitchell(3) Class A Common Stock 1,500 100.0%
7502 Greenville Ave. 42.7%
Suite 800 Class B Common Stock 77,687 42.3%
Dallas, TX 75231

Cypress Merchant Banking Class A Common Stock -- --
Partners, L.P. 42.3%
65 East 55th St. Class B Common Stock 78,469 42.7%
New York, NY 10022

Cypress Pictures Ltd. Class A Common Stock -- --
c/o W.S. Walker Co. 2.2%
Second Floor Class B Common Stock 4,079 2.2%
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 1,817 *

Jeffrey J. Stedman(6) Class A Common Stock -- -
*
Class B Common Stock 405 *

32
35

Jerry Brand(7) Class A Common Stock -- --
*
Class B Common Stock 80 *

Gary R. Gibbs(8) Class A Common Stock -- --
*
Class B Common Stock -- *

W. Bryce Anderson Class A Common Stock -- --
--
Class B Common Stock 200 --

Heriberto Guerra, Jr. Class A Common Stock -- --
--
Class B Common Stock 200 --

James A. Stern Class A Common Stock -- --
--
Class B Common Stock -- --

James L. Singleton Class A Common Stock * --
--
Class B Common Stock -- --

Denny Rydberg Class A Common Stock -- --
--
Class B Common Stock -- --
Directors and Officers as Class A Common Stock 1,500 100.0%
a Group (16 persons)(9) 45.2%
Class B Common Stock 82,190 44.7%

33
36

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

* 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, 1998, 7,000 shares of Class A Common Stock and 183,802
shares of Class B Common Stock were issued and outstanding. Includes 6,148
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 405 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 40 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) Mr. Gibbs retired as Vice President-General Counsel effective June 27,
1997. The Company repurchased Mr. Gibbs' options to purchase 510 shares of
Class B Common Stock on June 27, 1997.

(9) Includes 4,503 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.
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.

COMMON STOCK

The rights of the holders of Class A and Class B common stock are identical
except for voting and conversion rights. Each share of Class A Common Stock is
entitled to one vote on all matters submitted to a vote of the Company's
shareholders. Class B Common Stock is non-voting. Subject to contractual
limitations regarding conversion of Class B Common Stock into Class A Common
Stock contained in the Shareholders' Agreement and in Stock Transfer
Restriction Agreements between the Company and certain former employees, each
share of Class B Common Stock is convertible at any time, at the option of and
without cost to the shareholder, into the same number of shares of Class A
Common Stock upon surrender to the Company of the certificate or certificates
evidencing the Class B Common Stock to be converted, together with a written
notice of the election of such shareholder to convert such shares into Class A
Common Stock. Holders of Class A and Class B Common Stock are entitled to
receive pro rata per share such dividends as the Board of Directors may from
time to time declare out of funds of the Company legally available for the
payment of dividends. Upon liquidation, dissolution or winding-up of the
Company, the holders of Class A and Class B Common Stock are entitled to share
ratably in all assets available for distribution after payment in full of
creditors. In a merger, consolidation or other business combination, the
consideration to be received per share by holders of Class A and Class B Common
Stock must be identical, except that in any such transaction in which shares of
common stock are distributed, such shares may differ to the extent that voting
rights differ among existing classes of Common Stock. See "Certain
Transactions--Cypress Investment."

34
37
Item 13: Certain Relationships and Related Transactions.

MANAGEMENT AGREEMENTS

The Company currently manages four theatres (53 screens) for affiliates
under long term management agreements. The Company provides all operating
functions, including film booking, accounting and the operation and maintenance
of the theatres, in the same manner as such functions are performed by Company
personnel for Company owned or leased theatres. The operating and maintenance
expenses of the theatres are paid by the owners of the theatres. The Company
receives a specified percentage of the gross revenues of the theatres managed
by the Company and in some cases a percentage of the theatre cash flow above
certain targeted amounts. The Company may in the future enter into additional
management agreements with affiliates and/or third parties to manage theatres.

Movie Theatre Investors

During 1997, the Company managed three theatres (37 screens) for Movie
Theatre Investors, Ltd. Mr. Mitchell is the sole shareholder of one of the
general partners of Movie Theatre Investors. In addition, Mr. Mitchell owns
10.1%, Mrs. Mitchell and affiliates own 7.4% and the Company owns 1.1% of the
limited partnership interests in Movie Theatre Investors. The Company received
$245,693 in management fees from Movie Theatre Investors in 1997. See
"Business - Management Agreements." In February 1998, the Company acquired
these three theatres from Movie Theatre Investors, Ltd. for an aggregate
purchase price of $19 million.

Laredo Joint Venture

The Company manages one theatre (12 screens) for Laredo Theatre, Ltd.
("Laredo"). Lone Star Theatres, Inc. owns 25% of the limited partnership
interests in Laredo. Cinemark International is the sole general partner and
owns the remaining limited partnership interests. Lone Star Theatres, Inc. is
owned 100% by Mr. David Roberts, who is Mr. Mitchell's son-in-law. The Company
received $134,663 in management fees from Laredo in 1997.

Cinemark Partners II

The Company manages one theatre (17 screens) for Cinemark Partners II, Ltd.
("Cinemark Partners II"). Cinemark Partners I, Inc., a wholly owned subsidiary
of the Company, is the sole general partner of Cinemark Partners II. During
1998, Mr. Mitchell owned 10.1% and Cinemark Partners I, Inc. owns 1% of the
limited partnership interests in Cinemark Partners II. The Company received
$148,023 in management fees from Cinemark Partners II in 1997. On January 5,
1998, the Company purchased approximately 31% of the limited partnership
interests in Cinemark Partners II, Ltd. for $3,024,000. Additionally, the
Company purchased 77.1 units for an aggregate purchase price of $3,700,000.
After consummating such transactions, the Company owns approximately 50.1% of
Cinemark Partners II, Ltd.

Cinemark Alberta

The Company manages two discount theatres (24 screens) for Cinemark
Alberta. Cinemark Holdings Canada, Inc., a wholly owned subsidiary of Cinemark
International, runs 50% of Cinemark Alberta. The Company received $108,258 in
management fees from Cinemark Alberta in 1997.

35
38
STARPLEX CINEMAS, INC.

On June 21, 1994, the Company executed a ground lease on property located
in Lewisville, Texas. The Company constructed and equipped an eight screen
multiplex theatre. The Company leases the theatre and the equipment to
Starplex Cinemas, Inc. ("Starplex"). The Company has recorded only $450,000 of
rental income since the inception of this lease as the theatre is performing
below expectations and Starplex is delinquent in making its required rent
payments. Starplex Cinemas, Inc. is 100% owned by Mr. Mitchell's brother.

In February 1998, the Company acquired from Mid States Development, L.L.C.
certain land and theatre improvements located in Amarillo, Texas for an
aggregate purchase price equal to approximately $10.6 million. The Company also
acquired as part of the same transaction theatre equipment, furniture and
fixtures located at such theatre for an aggregate purchase price of $2.6
million. Mr. Mitchell's brother is a controlling member in Mid States
Development, L.L.C. and is the sole shareholder of Starplex Cinemas, Inc.

SHAREHOLDERS' AGREEMENT

The Company entered into the Shareholders' Agreement dated March 12, 1996
with Mr. Mitchell, his affiliates and Cypress (the "Shareholders' Agreement").
Among other things, the Shareholders' Agreement provides that, subject to
certain conditions, the Company must obtain (with certain exceptions) the
consent of CALP for certain corporate acts including, but not limited to,
amendments to the Articles of Incorporation of the Company, approval of annual
budgets under certain circumstances, asset dispositions or acquisitions in
excess of specified amounts, merger or consolidation of the Company, incurrence
of indebtedness over specified amounts, certain stock redemptions or dividends,
transactions with affiliates over specified amounts, certain management changes
or new compensation plans, financing theatres through limited partnerships,
settlements of litigation over specified amounts and issuance of common stock
under certain conditions. The Shareholders' Agreement also provides that
Cypress may not convert its Class B Common Stock to Class A Common Stock unless
certain events occur such as a Change of Control (as defined in the
Shareholders' Agreement) or the consummation of a public offering of the
Company's common stock. The above-described provisions terminate on the earlier
of (i) the public owning 25% or more of the common stock of the Company, (ii)
the merger of the Company with and into any publicly traded company or (iii)
ten years after the date of the Shareholders' Agreement. The Shareholders'
Agreement also contains a voting agreement pursuant to which Mr. Mitchell
agrees to vote his shares of common stock to elect certain designees of CALP
to the Board of Directors of the Company.

Mr. Mitchell also agreed that in the event any corporate opportunity is
presented to Mr. Mitchell or any of his affiliates to acquire or enter into any
business transaction involving the motion picture exhibition business that
would be significant to the Company, he would submit such opportunity to the
Board of Directors of the Company before taking any action.

The Shareholders' Agreement further provides that the shareholders agree to
form a new corporation as the parent corporation of the Company and to
contribute their respective shares for like shares of this new corporation. The
Company is currently pursuing plans to create such a holding company.

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. In
addition, the Company has entered into separate indemnification agreements with
each of its directors which requires the Company, among other things, to
indemnify them against certain liabilities that may

36
39
arise by reason of their status or service as directors to the maximum extent
permitted under the Texas Business Corporation Act. The Company has obtained
an insurance policy providing for indemnification of officers and directors of
the Company and certain other persons against liabilities and expenses incurred
by any of them in certain stated proceedings and under certain stated
conditions.

37
40
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
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 S-1 are filed as a part of this report.

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

(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:

1. None.

See the accompanying Index beginning on page E-1, which exhibits are bound
separately.

(d) Financial Statement Schedules.

See the accompanying Index beginning on page S-1.

38
41
CINEMARK USA, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

(ITEMS 8 AND 14 OF FORM 10-K) AND SUPPLEMENTAL SCHEDULES
- --------------------------------------------------------------------------------

Page
----

INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:

Consolidated Balance Sheets, December 31, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Income for the Years Ended
December 31, 1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

SUPPLEMENTAL SCHEDULES REQUIRED BY THE INDENTURES
FOR THE SENIOR SUBORDINATED NOTES:

Schedule

A Consolidating Balance Sheet Information, December 31, 1997 . . . . . . . . . . . . . . . S-1

B Consolidating Statement of Operations Information for the Year Ended
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2

C Consolidating Statement of Cash Flows Information for the Year Ended
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3

[THIS PAGE INTENTIONALLY LEFT BLANK]
43
INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Cinemark
USA, Inc. and subsidiaries as of December 31, 1996 and 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. 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 USA, Inc. and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

At January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," as discussed in Note 1.

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 6, 1998
44
CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
================================================================================

ASSETS 1996 1997

CURRENT ASSETS:
Cash and cash equivalents $ 14,081,226 $ 31,788,380
Temporary cash investments 301,408 331,156
Inventories 1,296,323 2,234,231
Co-op advertising and other receivables (Note 11) 8,631,462 23,336,391
Prepaid expenses and other 2,638,991 8,115,825
------------ ------------

Total current assets 26,949,410 65,805,983

THEATRE PROPERTIES AND EQUIPMENT:
Land 39,734,644 45,933,669
Buildings 143,907,477 209,117,345
Leasehold interests and improvements 69,172,660 101,918,512
Theatre furniture and equipment 166,596,341 211,928,488
Theatres under construction 31,431,790 75,294,931
------------ ------------

Total 450,842,912 644,192,945

Less accumulated depreciation and amortization 73,421,992 95,251,013
------------ ------------

Theatre properties and equipment - net 377,420,920 548,941,932

OTHER ASSETS:
Certificates of deposit (Note 8) 1,525,852 1,525,852
Investments in and advances to affiliates (Note 11) 6,049,992 23,931,120
Intangible assets - net (Note 3) 5,417,049 4,413,301
Deferred charges and other - net (Note 4) 15,542,244 16,978,652
------------ ------------

Total other assets 28,535,137 46,848,925
------------ ------------

TOTAL $432,905,467 $661,596,840
============ ============

(Continued)

F - 3

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1997

CURRENT LIABILITIES:
Current portion of long-term liabilities (Note 5) $ 1,002,313 $ 380,730
Accounts payable 24,831,236 27,382,918
Accrued film rentals 9,753,208 15,206,349
Accrued interest 8,267,591 12,672,981
Accrued payrolls 3,094,472 3,998,856
Accrued property taxes and other liabilities 13,022,916 17,395,339
------------- -------------

Total current liabilities 59,971,736 77,037,173

LONG-TERM LIABILITIES:
Long-term debt, less current portion (Note 5) 296,553,642 463,470,009
Deferred lease expenses 11,580,629 13,064,630
Theatre development advance, less current portion 769,657 373,562
Deferred income taxes (Note 9) 5,926,609 10,937,029
------------- -------------

Total long-term liabilities 314,830,537 487,845,230

COMMITMENTS AND CONTINGENCIES (Note 8)

MINORITY INTERESTS IN SUBSIDIARIES (Note 7):
Common shareholders' equity 539,853 26,531,832
Common stock warrants with mandatory redemption
requirements 200,729 200,729

SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value; 10,000,000 shares
authorized, 1,500 issued and outstanding 15 15
Class B common stock, no par value; 1,000,000 shares
authorized, 233,176 and 234,013 shares issued, respectively 49,536,710 49,537,547
Additional paid-in capital 9,182,880 10,201,882
Unearned compensation - stock options (2,434,717) (1,534,791)
Retained earnings 32,391,591 47,096,688
Treasury stock, 54,965 and 57,211 Class B shares
at cost, respectively (20,184,416) (24,198,890)
Cumulative foreign currency translation adjustment (11,129,451) (11,120,575)
------------- -------------

Total shareholders' equity 57,362,612 69,981,876
------------- -------------

TOTAL $ 432,905,467 $ 661,596,840
============= =============

See notes to consolidated financial statements

(Concluded)

F - 4
46

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
================================================================================

1995 1996 1997

REVENUES:
Admissions $ 183,100,626 $ 211,581,569 $ 274,800,669
Concessions 102,077,542 116,943,658 149,243,137
Other (Note 10) 13,380,589 13,205,703 10,554,519
------------- ------------- -------------

Total 298,558,757 341,730,930 434,598,325

COSTS AND EXPENSES:
Cost of operations (Note 10):
Film rentals 88,978,423 104,156,508 137,924,941
Concession supplies 17,277,411 18,431,926 22,472,659
Salaries and wages 40,653,338 46,868,814 56,003,650
Facility leases 30,873,208 34,406,046 38,735,067
Advertising 7,623,475 8,500,631 10,749,310
Utilities and other 42,312,878 49,774,114 56,576,786
------------- ------------- -------------

Total cost of operations 227,718,733 262,138,039 322,462,413

General and administrative expenses 19,554,615 23,486,530 27,598,119
Depreciation and amortization 15,924,794 21,798,673 27,586,519
------------- ------------- -------------

Total 263,198,142 307,423,242 377,647,051
------------- ------------- -------------

OPERATING INCOME 35,360,615 34,307,688 56,951,274

OTHER INCOME (EXPENSE):
Interest expense (Note 10) (18,549,833) (19,551,655) (32,703,303)
Amortization of debt issue cost and discount (824,014) (824,743) (783,972)
Interest Income (Note 10) 1,779,339 1,393,441 1,171,516
Gain (loss) on sale of assets and other (Notes 3 and 8) 4,796,727 11,130,996 (246,772)
Equity in income of affiliates (Note 11) 693,415 362,443 954,847
Minority interests in (income) loss of subsidiaries (Note 7) 288 144,291 346,423
------------- ------------- -------------

Total (12,104,078) (7,345,227) (31,261,261)
------------- ------------- -------------

INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 23,256,537 26,962,461 25,690,013

INCOME TAXES (Note 9) 10,101,405 12,346,451 10,671,089
------------- ------------- -------------

INCOME BEFORE EXTRAORDINARY ITEMS 13,155,132 14,616,010 15,018,924

EXTRAORDINARY ITEMS (Note 5):
Losses on early extinguishments of debt, net of
income tax benefit of $6,057,922 and $256,768, respectively (9,386,111) (313,827)
------------- ------------- -------------

NET INCOME $ 13,155,132 $ 5,229,899 $ 14,705,097
============= ============= =============

EARNINGS PER SHARE: (Note 1)
Before extraordinary item:
Basic $ 85.55 $ 84.00 $ 84.13
============= ============= =============
Diluted $ 80.32 $ 79.93 $ 80.45
============= ============= =============

Net income:
Basic $ 85.55 $ 30.06 $ 82.37
============= ============= =============
Diluted $ 80.32 $ 28.60 $ 78.77
============= ============= =============

See notes to consolidated financial statements.

F - 5

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Class A Class B
Common Stock Common Stock
------------------------ ---------------------------
Additional
Shares Shares Paid-In
Issued Amount Issued Amount Capital
----------- ----------- ----------- ------------ ------------

- ---------------------------------------------------------
BALANCE JANUARY 1, 1995 3,000 $ 30 205,570 $ 10,967,419 $ 4,325,887

Net income
Unearned compensation from stock
options granted 2,278,150
Amortization of unearned compensation
Foreign currency translation adjustment
-------------------------- --------------------------- -------------
BALANCE DECEMBER 31, 1995 3,000 30 205,570 10,967,419 6,604,037

Net income
Issuance of common stock to Cypress (1,500) (15) 25,393 38,567,078
Unearned compensation from stock options
granted 1,127,117
Unearned compensation from stock options
forfeited (216,282)
Amortization of unearned compensation
Stock options exercised, including tax
benefit 2,213 2,213 897,800
Net effect of exchange of Cinemark Mexico
Senior Notes and conversion of warrants to
Senior Notes, including tax benefit 770,208
Foreign currency translation adjustment
Purchase of treasury stock, 174 Class B shares,
at cost
-------------------------- --------------------------- -------------
BALANCE DECEMBER 31, 1996 1,500 15 233,176 49,536,710 9,182,880

Net income
Unearned compensation from stock options
granted 1,073,296
Unearned compensation from stock options
forfeited (74,386)
Amortization of unearned compensation
Stock options exercised, including tax
benefit 837 837 20,092
Foreign currency translation adjustment
Purchase of treasury stock, 2,242 Class B shares,
at cost
-------------------------- --------------------------- -------------

BALANCE DECEMBER 31, 1997 1,500 $ 15 234,013 $ 49,537,547 $ 10,201,882
========================== =========================== =============

Unearned Cumulative
Compensation Retained Treasury Translation
Stock Options Earnings Stock Adjustment Total
------------ ------------ ------------ ------------ ------------

- -------------------------------------------------------
BALANCE JANUARY 1, 1995 ($ 2,161,610) $ 14,006,560 ($20,000,000) ($ 4,405,980) $ 2,732,306

Net income 13,155,132 13,155,132
Unearned compensation from stock
options granted (2,278,150) --
Amortization of unearned compensation 1,591,022 1,591,022
Foreign currency translation adjustment (6,133,418) (6,133,418)
---------------------------------------------------------------------------

BALANCE DECEMBER 31, 1995 (2,848,738) 27,161,692 (20,000,000) (10,539,398) 11,345,042

Net income 5,229,899 5,229,899
Issuance of common stock to Cypress 38,567,063
Unearned compensation from stock options
granted (1,127,117)
Unearned compensation from stock options
forfeited 151,810 (64,472)
Amortization of unearned compensation 1,389,328 1,389,328
Stock options exercised, including tax
benefit 900,013
Net effect of exchange of Cinemark Mexico
Senior Notes and conversion of warrants to
Senior Notes, including tax benefit 770,208
Foreign currency translation adjustment (590,053) (590,053)
Purchase of treasury stock, 174 Class B shares,
at cost (184,416) (184,416)
---------------------------------------------------------------------------

BALANCE DECEMBER 31, 1996 (2,434,717) 32,391,591 (20,184,416) (11,129,451) 57,362,612

Net income 14,705,097 14,705,097
Unearned compensation from stock options
granted (1,073,296)
Unearned compensation from stock options
forfeited 61,988 (12,398)
Amortization of unearned compensation 1,911,234 1,911,234
Stock options exercised, including tax
benefit (737) 20,192
Foreign currency translation adjustment 8,876 8,876
Purchase of treasury stock, 2,242 Class B shares,
at cost (4,013,737) (4,013,737)
---------------------------------------------------------------------------

BALANCE DECEMBER 31, 1997 ($ 1,534,791) $ 47,096,688 ($24,198,890) ($11,120,575) $ 69,981,876
==========================================================================

F-6

See notes to consolidated financial statements.
48

CINEMARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
===============================================================================

1995 1996 1997

OPERATING ACTIVITIES:

Net Income $ 13,155,132 $ 5,229,899 $ 14,705,097
Loss on early extinguishment of debt 15,444,033 607,033
Noncash items in net income :
Depreciation 12,716,099 18,633,707 26,455,599
Amortization - intangibles and other assets 3,868,241 3,819,462 2,573,587
Deferred lease expenses 1,051,774 2,199,854 1,484,001
Deferred income tax expense 1,213,034 1,630,398 5,010,420
Debt issued for accrued interest 184,134 2,006,371 2,850,100
Amortization of debt discount and premium 164,468 170,247 (27,004)
Amortized compensation - stock options 1,591,022 1,324,856 1,898,836
(Gain) loss on sale of assets (5,196,922) (7,760,774) 558,254
Equity in income of affiliates (693,415) (362,443) (954,847)
Minority interests in income (loss) of subsidiaries (288) (144,291) (346,423)

Cash from (used for) operating working capital:
Inventories (176,881) (234,743) (937,908)
Co-op advertising and other receivables (1,000,649) (3,902,355) (14,704,929)
Prepaid expenses and other 1,356,167 (2,493,331) (5,476,834)
Accounts payable 5,111,906 12,111,884 2,551,682
Accrued liabilities 1,451,003 12,729,888 15,132,006
Income taxes payable 1,295,074 (1,648,629)
------------- ------------- -------------

Net cash from operating activities 36,089,899 58,754,033 51,378,670

INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (89,287,667) (177,953,281) (200,272,497)
Sale of Theatre properties and equipment 8,022,500 206,537 1,737,632
Proceeds from 2 Day Video Inc. sale 9,439,466
Proceeds from affiliate sale 800,000 781,300
Decrease (increase) in certificates of deposit (323,034) 297,102
Decrease (increase) in temporary cash investments 4,207,280 (26,282) (29,748)
Increase in investments in and advances to affiliates (828,065) (1,715,364) (16,926,281)
Increase in other assets (2,859,127) (8,452,094) (3,613,280)
------------- ------------- -------------

Net cash used for investing activities (80,268,113) (177,422,616) (219,104,174)

FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 199,106,000 77,250,000
Retirement of Senior Subordinated Notes (28,561,000)
Retirement of Senior Notes (123,370,000) (1,630,000)
Repurchase premium on retired Senior Notes (12,371,954)
Increase in long-term debt 46,000,000 97,510,000 194,065,000
Reductions of long-term debt (15,025,359) (77,530,536) (77,648,980)
Payment on notes payable to related parties (2,086,513)
Decrease in Theatre development advance (370,808) (356,046) (396,095)
Minority investment in subsidiaries, net 102,625 (677,889) 26,338,402
Issuance of common stock to Cypress 38,567,063
Common stock issued for options exercised 900,013 20,192
Purchase of treasury stock (4,013,737)
Issuance of subsidiary common stock warrants 1,324,132
------------- ------------- -------------

Net cash from financing activities 32,030,590 119,690,138 185,423,782

FOREIGN CURRENCY TRANSLATION ADJUSTMENT (776,726) (590,053) 8,876
------------- ------------- -------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,924,350) 431,502 17,707,154

CASH AND CASH EQUIVALENTS:
Beginning of period 26,574,074 13,649,724 14,081,226

------------- ------------- -------------
End of period $ 13,649,724 $ 14,081,226 $ 31,788,380
============= ============= =============

SUPPLEMENTAL INFORMATION (Note 12):

See notes to consolidated financial statements.

F - 7
49
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS - Cinemark USA, Inc. and its subsidiaries (the Company) own or
lease and operate motion picture theatres in 30 states, Mexico, Brazil and
Ecuador at December 31, 1997. The following summarizes theatre transactions
during 1995, 1996 and 1997:

Theatres Screens
-------- -------

Active at January 1, 1995 158 1,163
Openings 11 130
Closings/Sales (10) (46)
-------------------
Active at December 31, 1995 159 1,247
Openings 17 237
Sales (7) (31)
-------------------
Active at December 31, 1996 169 1,453
Openings 19 249
Closings/Sales (14) (68)
-------------------
Active at December 31, 1997 174 1,634
===================

At December 31, 1997, the Company also manages three theatres (37 screens)
for Movie Theatre Investors, Ltd.; one theatre (17 screens) for Cinemark
Partners II; and two theatres (24 screens) for Cinemark Theatres Alberta, Inc.,
a Canadian corporation, all related parties (Notes 10 and 11).

CONSOLIDATED FINANCIAL STATEMENTS include the accounts of Cinemark USA,
Inc. and its wholly owned subsidiaries, which include Cinemark International,
Inc. (f/k/a Cinemark II, Inc.). Cinemark International, Inc. ("Cinemark
International") owns 95.0% of Cinemark Mexico (USA), Inc. (Cinemark Mexico),
which owns 95.6% of Cinemark de Mexico S.A. de C.V. (Cinemark de Mexico), a
Mexican corporation and 50% of Cinemark Equity Holdings Corporation which owns
100% of Cinemark Costa Rica, S.A. and Cinemark El Salvador, S.A. Cinemark de
Mexico includes the operations of Cinemark del Norte S.A. de C.V. and Servicio
Cinemark S.A. de C.V. Cinemark International owns 100% of Cinemark
Empreendimentos e Participacoes, LTDA, which owns 60% of Cinemark LTDA, a
Brazilian corporation operating theatres in Brazil. Cinemark International
also owns 50% interests in affiliates operating in Chile, Canada and Peru and a
60% interest in an affiliate operating in Ecuador. The consolidated financial
statements also include 2 Day Video, Inc. (2 Day) and subsidiary, a video
rental "superstore" chain through the date of its sale in October 1996,
Entertainment Amusements, Inc., a 50%-owned holding company whose subsidiary
provides video game machines to many of the Company's theatres, and a 50%
interest in Brainerd, Ltd, a theatre joint venture. Majority-owned companies
are consolidated; 50% and greater than 20% equity owned businesses are
accounted for under the equity method (Note 11). The results of all of these
subsidiaries and affiliates are included in the financial statements effective
with their formation or from their dates of acquisition. Significant
intercompany balances and transactions are eliminated in the consolidation.

BASIS OF PRESENTATION - In preparing the consolidated 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.

F - 8
50
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

TEMPORARY CASH INVESTMENTS consist primarily of time deposits and
government securities which are classified as available for sale and are stated
at amortized cost which approximates market.

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 and amortization. Property additions include $3,928,454 and
$2,152,816 of interest incurred during development and construction and
capitalized in 1996 and 1997, respectively. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets as follows:
buildings - 18 to 40 years, theatre furniture and equipment - 5 to 15 years.
Leasehold interests and improvements are amortized using the straight-line
method over the lesser of the lease period or the estimated useful lives of the
leasehold improvements. 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 Company's financial
statements. The Company determined that impairment charges of $2,381,998 and
$2,213,696 were required for certain theatres in 1996 and 1997, respectively.
For purposes of this calculation, fair value of operating theatres was
determined based on cash flows.

INTANGIBLE ASSETS represent primarily the excess of cost over the fair
values of the net assets of theatre businesses acquired, less accumulated
amortization ($8,616,821 and $9,454,265 at December 31, 1996 and 1997,
respectively). For financial reporting purposes, these goodwill amounts are
being amortized primarily over 10 to 20 years, which approximate the remaining
lease terms of the businesses acquired.

DEFERRED CHARGES AND OTHER ASSETS, as applicable, are amortized using the
straight-line method over the primary financing terms ended June 2000 to August
2003 for debt issue costs and over the three to eight year terms of the
noncompete agreements.

DEFERRED INCOME TAXES are provided under the liability method for temporary
differences between revenue and expenses that are recognized for tax return and
financial reporting purposes.

EARNINGS PER SHARE are computed using the weighted average number of shares
of Class A common stock outstanding during each period, including, when
applicable, the Class B common shares. On December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share", which established new standards for
computing and presenting earnings per share ("EPS") by replacing the
presentation of primary EPS with a presentation of basic EPS. Primary EPS
included common stock equivalents while basic EPS excludes them. This change
simplifies the computation of EPS and requires the dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures. Prior year amounts have been restated to reflect
the new method of calculation.

Earnings per common and common share equivalent share were computed as
follows:

1995 1996 1997
------- -------- --------

Net income (in thousands)............................. $ 13,155 $ 5,230 $ 14,705
======== ======== ========

Basic:
Weighted average common shares outstanding.......... 153,779 173,996 178,524
======== ======== ========
Earnings per common share........................... $ 85.55 $ 30.06 $ 82.37
======== ======== ========

Diluted:
Weighted average common shares outstanding.......... 153,779 173,996 178,524
Common equivalent shares for stock options.......... 9,997 8,870 8,167
-------- -------- --------
Weighted average shares outstanding................. 163,776 182,866 186,691
======== ======== ========
Earnings per common and common equivalent share..... $ 80.32 $ 28.60 $ 78.77
======== ======== ========

F - 9
51
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUES OF FINANCIAL INSTRUMENTS are estimated by the Company using
available market information and other valuation methodologies in accordance
with Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments." The estimated fair value amounts
for specific groups of financial instruments are presented in Note 5. Values
are based on available market quotes or estimates using a discounted cash flow
approach based on the interest rates currently available for similar debt. The
fair value of financial instruments for which estimated fair value amounts are
not specifically presented are estimated to approximate the related recorded
value.

2. FOREIGN CURRENCY TRANSLATION

The cumulative foreign currency translation adjustment in shareholders'
equity of $11,129,451 and $11,120,575 at December 31, 1996 and 1997,
respectively, primarily relates to the unrealized adjustments resulting from
translating the financial statements of Cinemark de Mexico. The functional
currency of Cinemark de Mexico is the peso. Accordingly, assets and
liabilities of Cinemark de Mexico 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. At December 31, 1997, the total
assets of Cinemark de Mexico were $46,484,210.

In 1997 the Company was required to utilize the U.S. dollar as the
functional currency of Cinemark de Mexico and Cinemark LTDA for U.S. reporting
purposes due to the highly inflationary economies of Mexico and Brazil. Thus,
devaluations in the peso and real during 1997 that affected the Company's
investments are charged to exchange loss rather than to the cumulative
adjustment account.

3. ACQUISITIONS AND AFFILIATE ACTIVITY

In 1996, Cinemark International acquired an additional 2,661,450 shares of
common stock of Cinemark Mexico for $10.0 million. As of December 31, 1997,
Cinemark International owns a cumulative interest of 95.6% (95.0% on a fully
diluted basis) of Cinemark Mexico. In 1996, Cinemark International also
contributed funding of $1,200,000 to its Brazilian subsidiary, $600,000 to its
Argentine affiliate and $100,000 to its Peruvian affiliate. Additional funding
contributed in 1997 consisted of $24,800,000 to its 60% owned Brazilian
subsidiary, $1,251,000 to its 60% owned Ecuadorian subsidiary, $3,900,000 to
its Argentine affiliate, $1,400,000 to its Peruvian affiliate, $501,000 to its
El Salvadorian affiliate, and $6,535,948 to its Japanese affiliate.

In August 1995, Cinemark Inversiones, Inc., a 100%-owned subsidiary of
Cinemark International and 50% owner of Cinemark Chile, contributed an
additional $500,000 to Cinemark Chile to fund theatre construction. The other
50% owner of Cinemark Chile contributed an equal amount. In 1997, Cinemark
International and the other 50% owner of Cinemark Chile each contributed
$1,500,000 to fund additional theatre construction.

In October 1996, the Company sold its entire interest in 2 Day (Class A
common stock) for cash of $9,439,466 and a receivable of $633,288, resulting in
a gain of $7 million.

In September 1997, Cinemark International paid $1.5 million to Cinemark del
Peru in exchange for a 8% note receivable, due September 1999.

F - 10
52
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. DEFERRED CHARGES AND OTHER ASSETS

Deferred charges and other assets at December 31 consist of the following:

1996 1997
----- ----

Debt issue costs $ 9,741,136 $ 9,347,303
Noncompete agreements 758,145 758,145
----------------------------
Total 10,499,281 10,105,448
Less accumulated amortization 3,345,867 4,073,242
----------------------------
Net 7,153,414 6,032,206
Equipment, lease and other deposits 1,064,123 1,159,370
Funtime International, Inc.:
Note receivable, 10% interest, paid in 1996
$600,000 convertible note receivable - net, due 2005 445,224

Entertainment Technologies, Inc:
Note receivable, 10% interest, due June 2000 358,269
Construction advances and other 6,521,214 9,787,076
----------------------------
Total $15,542,244 $16,978,652
============================

In 1997 the Company recognized a loss of $747,606 in relation to the
writeoff of the uncollectible balance of the notes from Funtime International,
Inc. and Entertainment Technologies, Inc.

5. LONG-TERM DEBT AND THEATRE DEVELOPMENT ADVANCE

Long-term debt at December 31 consists of the following:

1996 1997
---- ----

Senior Notes due 2002, discussed below $ 1,630,000 $ --
Series B Senior Subordinated Notes due 2008,
discussed below 199,137,042 199,211,542
Series D Senior Subordinated Notes due 2008,
discussed below 77,148,496

Senior Subordinated Notes of Cinemark Mexico due 2003,
discussed below 25,710,900
Revolving credit line of $225,000,000, discussed below 70,000,000 155,000,000
Revolving credit line of $30,000,000, discussed below 30,000,000
Other notes payable 728,013 2,140,701
----------------------------------
Total long-term debt 297,205,955 463,500,739
Less current portion 652,313 30,730
----------------------------------
Long-term debt, less current portion $296,553,642 $463,470,009
==================================

F - 11
53
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SENIOR NOTES - In June 1992, the Company completed a public offering of
$125,000,000 senior notes payable ("Senior Notes"). The Senior Notes bear
interest at the rate of 12% per annum, payable semiannually on June 1 and
December 1 of each year. In August 1996, the Company utilized proceeds from a
$200 million issuance of Senior Subordinated Notes, due 2008, to repurchase
$123,370,000 of the Senior Notes at $1,098.33 per $1,000.00 principal amount.
This resulted in a net outstanding balance of $1,630,000 in Senior Notes at
December 31, 1996. An extraordinary loss of $9.0 million, net of related tax
benefit, was recognized in connection with the premium paid and the write-off
of the unamortized debt issue costs ($2,463,560) associated with the
repurchased Senior Notes. In June 1997, the Company redeemed the remaining
outstanding Senior Notes at a premium of $1,060 per $1,000 principal amount,
resulting in an extraordinary loss of $53,789, net of related tax benefit.

SENIOR SUBORDINATED NOTES - In August 1996, the Company issued $200,000,000
of Senior Subordinated Notes due 2008 (the "Subordinated Notes"). The
Subordinated Notes bear interest at the rate of 9-5/8% per annum, payable
semi-annually on February 1 and August 1 of each year. The Subordinated Notes
were issued at 99.553% of the principal face amount (a discount of $4.47 per
$1,000 principal amount) for an aggregate discount of $894,000. The net
proceeds to the Company from the issuance of the Subordinated Notes (net of
discount, fees and expenses) were approximately $193.2 million. The
Subordinated Notes require the Company to maintain a specified interest expense
coverage ratio; restricts the payment of dividends, payment of subordinated
debt prior to maturity and issuance of preferred stock and other indebtedness;
and other restrictive covenants. The Subordinated Notes are redeemable at the
option of the Company, beginning August 2001, ranging in redemption price from
104.8% in 2001 to 100% in 2003 and thereafter. Any outstanding Subordinated
Note are due August 1, 2008.

In June 1997, the Company issued $75 million of Senior Subordinated Notes
due 2008 ("New Subordinated Notes") The New Subordinated Notes are
substantially identical in all material respects to the Subordinated Notes,
including rate of interest. The New Subordinated Notes were issued at 103.0%
of the principal face amount (a premium of $30.00 per $1,000 principal amount).

SENIOR SUBORDINATED NOTES, MEXICO - In 1993, Cinemark Mexico issued
$20,400,000 of 12% Senior Subordinated Notes due 2003 (the "Mexican
Subordinated Notes") with detachable warrants (the Warrants) (Note 7). The
Mexican 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 Mexican Subordinated Notes due 2003 with the terms
governed by the indenture from the initial offering of Mexican Subordinated
Notes.

The entire $22,400,000 in Mexican Subordinated Notes and $1,971,500 of
accrued interest were exchanged in September 1996 for new senior subordinated
notes (the "New Mexican Notes"). The form and terms are 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 Cinemark Mexico 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 (Note 7) for 356,851 shares of common stock were exchanged
for $1,339,400 in New Mexican Notes. As a result of the note exchange and
retirement of the Warrants, a net benefit of $.8 million, including tax
benefit, was credited to additional paid in capital in 1996.

F - 12
54
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1997, Cinemark Mexico repurchased all of the outstanding New
Mexico Notes at 99.53% of the principal face amount for a total of $28.4
million, resulting in an extraordinary gain of $73,830, net of related tax
expense. An extraordinary loss of $333,868, net of related tax benefit, was
recognized in connection with the write-off of unamortized debt issue costs
associated with the New Mexico Notes.

REDUCING, REVOLVING CREDIT FACILITY - In December 1996, the Company amended
its revolving credit line with a reducing, revolving credit facility (the
"Credit Facility") with a group of banks. The Credit Facility provides for
loans of up to $225,000,000 in the aggregate and bears interest at a defined
floating rate, adjusted in accordance with certain financial ratios. The
weighted average interest rate and current interest rate at December 31, 199y
and 1996, was 7.3% and 7.4%, respectively.

The Credit Facility is a reducing revolving credit facility, with
commitments automatically reduced each calendar quarter by $8,437,500,
$11,250,000, $14,062,500 and $22,500,000 in calendar year 2000, 2001, 2002 and
2003, respectively. The Company is required to prepay all loans outstanding in
excess of the aggregate commitment as reduced pursuant to the terms of the
Credit Facility. Borrowings are secured by a pledge of a majority of the
issued and outstanding capital stock of the Company, and the credit agreement
requires that the Company maintains certain financial ratios; restricts the
payment of dividends, payment of subordinated debt prior to maturity and
issuance of preferred stock and other indebtedness; and other restrictive
covenants. This credit facility amended a revolving credit line of
$175,000,000 that the Company had entered into on February 1996. The
$175,000,000 credit facility replaced the Company's previous credit facility.
An extraordinary loss of $.4 million, net of related tax benefit, was
recognized in connection with the write-off of debt issue costs related to the
Company's previous credit facility.

REVOLVING CREDIT FACILITY, CINEMARK INTERNATIONAL - In November 1997,
Cinemark International executed a credit agreement (the "Cinemark International
Credit Agreement") with a bank. As amended in December 1997, the Cinemark
International Credit Agreement is a revolving credit facility and provides for
a loan to Cinemark International of up to $30,000,000 in the aggregate with a
maturity date of November 17, 1999. The Cinemark International Credit
Agreement is secured by a pledge of substantially all of the stock of Cinemark
Mexico and an unconditional guaranty by Cinemark Mexico. Pursuant to the terms
of the Cinemark International Credit Agreement, funds borrowed bear interest at
a rate per annum equal to a defined floating rate, adjusted in accordance with
certain financial ratios. As of December 31, 1997, Cinemark International has
borrowed $30 million under the Cinemark International Credit Agreement at an
effective rate of 7.6% per annum.

Long-term debt at December 31, 1997, matures as follows: $30,730 in 1998;
$32,590 in 1999; $32,368 in 2000; $35,300 in 2001; $38,420 in 2002; and
$463,331,331 thereafter.

The estimated fair value of the Company's long-term debt of $463.5 million
at December 31, 1997, was approximately $462.1 million. Such amounts do not
include prepayment penalties which would be incurred upon the early
extinguishment of certain debt issues.

DEBT ISSUE COSTS - Debt issue costs of $9,741,136 and $9,347,303, net of
accumulated amortization of $2,664,766 and $3,374,238 related to the
Subordinated Notes, the New Mexican Notes, the Credit Facility and the Cinemark
International Credit Agreement, are included in deferred charges at December
31, 1996 and 1997, respectively. The 1996 and 1997 periods include
extraordinary losses recognized in connection with the

F - 13
55
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

writeoffs of debt issue costs relating to the Company's prior bank lines of
credit, repurchase of Senior Notes and repurchase of New Mexican Notes.

THEATRE DEVELOPMENT ADVANCE - The current portion of long-term liabilities
also includes $350,000 at December 31, 1996 and 1997, for the estimated amount
to be payable in the following year on a theatre development advance. The
remaining long-term portion of this advance of $373,562 at December 31, 1997,
will be repayable based on the future operations of a theatre opened in 1992.

6. CAPITAL STOCK

COMMON AND PREFERRED STOCKS - Class A common shareholders have exclusive
voting rights. Class B common shareholders have no voting rights except upon
any proposed amendments to the articles of incorporation. However they may
convert at their option to Class A common stock. In the event of any
liquidation, the Class A and Class B shareholders will be entitled to their pro
rata share of assets remaining after any preferred shareholders have received
their preferential amounts based on their respective shares held.

In February 1996, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") pursuant to which the Company issued to Cypress
Merchant Banking Partners L.P. and Cypress Pictures Ltd. (collectively,
"Cypress") an aggregate 23,893 shares of Class B Common Stock for an aggregate
purchase price of $41.0 million. As part of the Purchase Agreement, existing
shareholders sold an additional 58,655 of Class B Common Stock, including 1,500
shares of Class A Common stock that were exchanged for Class B Common Stock, to
Cypress for a total purchase price of approximately $98.2 million. The closing
of the issuance and sale of common stock of the Company to Cypress occurred in
March 1996. The net proceeds from the issuance of stock by the Company were
$38,567,063.

At December 31, 1997, the Company has reserved Class A common stock in the
amount of 176,802 shares for potential conversions of outstanding Class B
common stock and 7,765 shares for potential conversions of Class B common stock
issuable under the stock option plan. The Company has 1,000,000 shares of
preferred stock, $1.00 par value, authorized with none issued or outstanding.
The rights and preferences of preferred stock will be determined by the board
of directors at the time of issuance.

STOCK OPTION PLAN - Under terms of the Company's stock option plan,
nonqualified options to purchase up to 10,685 shares of the Company's Class B
common stock may be granted to key employees. At January 1, 1995, 8,504
options with an exercise price of $1.00 per share were outstanding.

The total options granted in 1995, 1996 and 1997 were 1,381, 600 and 260
shares, respectively, of the Class B common stock at an exercise price of $1.00
per share. All options vest and are exercisable over a period of five years
from the date of grant and expire ten years from date of grant. During 1996,
2,213 vested options were exercised and an additional 430 options were
forfeited. In 1997, 837 vested options were exercised and 100 options were
forfeited. At December 31, 1997, 6,148 options were exercisable out of a total
of 7,165 outstanding.

INDEPENDENT DIRECTOR STOCK OPTIONS - In 1993, the Company granted the
unaffiliated directors of the Company options to purchase up to an aggregate of
900 shares of the Company's Class B Common Stock at an exercise price of
$833.34 per share (the "Director Options"). In 1995, the Company amended the
Director

F - 14
56
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Options to reduce the aggregate number of shares of Common Stock issuable
pursuant to the Director Options from 900 to 600 shares and to reduce the
exercise price of the Director Options from $833.34 per share to $1.00 per
share. The options vested on June 1, 1997 and expire ten years from the date
of grant. A director's options are forfeited if the director resigns or is
removed from the Board of Directors of the Company. Compensation expense of
$414,000 was immediately recognized in 1995, with unearned compensation expense
of $276,000 recognized over the remaining vesting period of 15 months.

The excess of the estimated fair market value of the stock at the dates of
the grant over the exercise price of the options are accounted for as
additional paid-in capital and as unearned compensation, which is amortized to
operations over the vesting period. As a result of the above grants unearned
compensation of $2,278,150, $1,127,117 and $1,073,296 was recorded in 1995,
1996 and 1997, respectively. Compensation expense under this stock option plan
was $1,591,022, $1,324,856 and $1,898,836 in 1995, 1996 and 1997, respectively.

The Company applies APB Opinion 25 and related interpretations in
accounting for the Company's stock option plan and Cinemark Mexico's stock
option plan, as described below. 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.

The Company repurchased 174 and 2,246 shares of Class B common stock as
treasury stock in 1996 and 1997, respectively.

7. MINORITY INTERESTS IN SUBSIDIARIES

COMMON SHAREHOLDERS' EQUITY - Minority ownership interests in subsidiaries
and affiliates of the Company are as follows at December 31:

1996 1997
---- ----

Cinemark Mexico - 2.93% interest $187,103 $ 415,751
Laredo Theatres, Ltd. - 25% interest (owned by a
relative of the majority shareholder) 362,176 406,932
Cinemark LTDA - 40% interest -- 24,866,366
Cinemark del Ecuador, S.A. - 40% interest (9,426) 842,783
------------------------------
Total $539,853 $26,531,832
==============================

COMMON STOCK WARRANTS - In connection with the issuance of the Subordinated
Notes (Note 5), Cinemark Mexico issued Warrants for $2.1 million which were
exercisable into 226,662 shares of Cinemark Mexico's common stock. In August
1995, Cinemark Mexico sold additional Warrants for $1,324,132 exercisable into
152,411 shares, which when aggregated with the previously purchased Warrants
convert to 20% of the ownership on a fully diluted basis at December 31, 1995,
of Cinemark Mexico'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 (1% of fully diluted ownership)
(Note 5). The remaining

F - 15
57
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, Cinemark Mexico
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 of July 31, 1998, 1999, and 2000,
utilizing the appraised value on such dates. At December 31, 1997, Cinemark
Mexico has reserved 22,222 shares of common stock for the potential conversion
of the Warrants.

8. COMMITMENTS AND CONTINGENCIES

LEASES - The Company conducts a significant part of its theatre operations
in leased premises under noncancelable operating leases with terms of 5 to 30
years. In addition to the minimum annual lease payment, most of these leases
provide for contingent rentals based on operating results and require the
payment of taxes, insurance and other costs applicable to the property.
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 expenses of $11,580,629 and
$13,064,630 at December 31, 1996 and 1997, respectively, have 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, 1995,
1996 and 1997, totaled $31,273,367, $34,841,041 and $39,190,388 respectively.

Future minimum payments under noncancelable operating leases with initial
or remaining terms in excess of one year at December 31, 1997, are due as
follows:

1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,028,770
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,655,603
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,846,080
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,983,327
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,741,696
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . 371,076,162
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $557,331,638
============

The Company entered into other lease agreements that are contingent on the
lessors' obtaining financing and completing construction of theatre facilities
for theatres opening after December 31, 1997. Upon satisfaction of the
contingency, the agreements will require future minimum lease payments over 15
to 25 years estimated to be $531 million for 25 theatre facilities in the
United States, five theatres in Mexico and eight theatres in Brazil.

F - 16
58
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EMPLOYMENT AGREEMENTS - As of December 31, 1997, the Company has employment
agreements with certain principal officers and a shareholder providing for
total minimum future annual payments as follows:

1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 515,967
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,564
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624,320
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,752
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,394,603
==========

These employment agreements terminate on the earlier of death, permanent
disability or December 31, 2001.

RETIREMENT SAVINGS PLAN - The Company has a 401(k) profit sharing plan for
the benefit of all employees and makes contributions as determined annually by
the Board of Directors. Contributions of $415,121, $613,213 and $744,913 were
made in 1995, 1996 and 1997, respectively.

LETTERS OF CREDIT AND COLLATERAL - At December 31, 1997, the Company has
outstanding letters of credit of $1,525,852 in connection with property and
liability insurance coverage and certain lease matters. Certificates of deposit
of $1,525,852 are pledged as collateral on the letters of credit.

LITIGATION SETTLEMENT - In April 1996, the Company entered into a
settlement agreement regarding litigation on the development of a proposed
theatre. The Company recognized a gain of $3,667,646 net of expenses, as a
result of the settlement. The Company currently is a defendant in litigation
alleging certain violations of the Americans with Disabilities Act of 1990.
Although the Company cannot predict the outcome of such litigation, management
believes that the Company's potential liability with respect to such
proceedings is not material in the aggregate to the Company's financial
position, results of operations and cash flows.

9. INCOME TAXES

Income tax expense below includes benefits from the extraordinary losses on
early extinguishment of debt in 1996 and 1997 of $6,057,922 and $256,768,
respectively, and consists of the following:

1995 1996 1997
---- ---- ----

Current:
Federal - before utilization of credits $8,927,814 $3,909,114 $3,451,118
Foreign income taxes 1,081,501
Utilization of tax credits (1,908,821)
State 1,869,378 749,017 871,282
------------------------------------------------
Total current expense 8,888,371 4,658,131 5,403,901
Deferred:
Temporary differences
Federal (481,087) 1,475,670 4,418,329
State 14,731 154,728 592,091
Reestablished from utilization of
tax credits 1,679,390
------------------------------------------------
Total deferred expense 1,213,034 1,630,398 5,010,420
------------------------------------------------
Income tax expense $10,101,405 $6,288,529 $10,414,321
================================================

F - 17
59
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation between income tax expense and taxes computed by applying
the applicable statutory federal income tax rate to income before income taxes
follows:

1995 1996 1997
---- ---- ----

Computed normal tax expense $8,139,788 $4,031,450 $8,851,079
Goodwill amortization, not deductible
for tax purposes 361,647 363,044 209,907
State and local income taxes, net of federal
income tax benefit 1,151,411 501,887 773,078
Foreign subsidiaries losses (recognized/not
recognized for tax purposes) 874,897 997,056 (374,232)
Foreign tax rate differential in deferred inventory
Foreign tax rate differential 469,054
Jobs tax credits (127,267) (59,728)
Other - net (299,071) 395,092 545,163
----------------------------------------------
$10,101,405 $6,288,529 $10,414,321
==============================================

Deferred U.S. income taxes are not provided on certain undistributed
earnings of foreign subsidiaries as management plans to continue reinvesting
these earnings outside the United States. Determination of such tax amounts is
not practical because potential offset by U.S. foreign tax credits would not be
available under various assumptions involving the tax calculation.

The tax effects of significant temporary differences and carryforwards
comprising the net long-term deferred income tax liability at December 31, 1996
and 1997, consist of the following:

1996 1997
---- ----

Deferred liabilities:
Accelerated tax depreciation $15,165,608 $21,235,479
Basis difference of assets acquired 220,610 50,623
Other 473,371 1,016,064
--------------------------------
Total 15,859,589 22,302,166
Deferred assets:
Deferred lease expense 4,404,794 4,881,461
Section 263(a) inventory adjustment 1,191,173 1,724,941
Amortization of unearned compensation 1,461,548 1,643,395
Self-insurance accruals 1,233,432 1,273,477
Asset Impairment loss 737,578 1,145,829
Tax operating loss carryforward for foreign subsidiaries 2,317,825 2,526,322
Valuation allowance - operating loss carryforward (2,317,825) (2,526,322)
Other expenses, not currently deductible for tax purposes 583,026 696,034
--------------------------------
Total 9,932,980 11,365,137
--------------------------------
Net long-term deferred income tax liability $5,926,609 $10,937,029
================================

The Company's income tax return for 1994 is currently under examination by
the Internal Revenue Service (IRS). To date, the IRS has not proposed any
adjustments and company management is of the opinion that no significant
liability will result from the IRS examination.

F - 18
60
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. OTHER RELATED PARTY TRANSACTIONS

In addition to transactions discussed in other notes to the financial
statements, the following transactions with related companies are included in
the Company's financial statements:

1995 1996 1997
---- ---- ----

Facility lease expense - theatre and equipment
leases with shareholder affiliates $306,937 $306,238 $293,504
Video game machine income - a subsidiary
of Entertainment Amusements, Inc.(Note 11) 1,394,467 1,745,731 1,961,032
Management fees for property and theatre management 547,090 413,900 501,974
Rental revenue - theatre lease with shareholder affiliate 200,000 250,000

The majority shareholder and certain employees of the Company own a
minority portion of both Cinemark Partners II, Ltd. and Movie Theatre
Investors, Ltd. The Company leases a theatre facility to a relative of the
Company's majority shareholder.

11. INVESTMENTS IN AND ADVANCES TO AFFILIATES

The Company has the following investments and advances to affiliates at
December 31:

1996 1997
---- ----

Cinemark Chile, S.A. - investment, at equity (Note 3) $2,225,518 $4,131,041
Cinemark Theatres Alberta, Inc. - investment,
at equity (Note 3) 1,848,316 1,883,200
Cinemark Argentina, S.A. (Note 3) 606,144 4,596,817
Cinemark del Peru, S.A. (Note 3) 137,586 1,551,376
Cinemark del Peru, S.A.:
Note receivable, 8% interest, due Sept. 1999 1,500,000
Cinemark Partners II, Ltd:
Note receivable, 9.25% interest, due 2002 1,600,000
Shochiku Cinemark Theatres 6,535,948
Other 1,232,428 2,132,738
-----------------------------
Total $6,049,992 $23,931,120
=============================

F - 19
61
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other receivables at December 31 include amounts due from the following:

1996 1997
---- ----

Cinemark Chile, S.A. 46,654 1,846,555
Cinemark Argentina 3,806,982
Cinemark El Salvador 1,240,542
Cinemark Costa Rica 1,466,401
Other 3,084,874 1,837,799

12. SUPPLEMENTAL CASH FLOW INFORMATION

The following is provided as supplemental information to the consolidated
statement of cash flows:

1995 1996 1997
---- ---- ----

Interest paid $19,864,594 $17,928,251 $27,721,091
===============================================
Income taxes paid $7,195,765 $4,974,320 $10,978,902
===============================================

Noncash investing and financing activities:
Canceled note payable and accrued interest
due to former owners for Funtime
Pizza $552,192
Canceled investment, note receivable and
accrued interest due from Funtime
International, Inc. 2,291,837
Issued note receivable due from Funtime
International, Inc. 445,224
Issued note receivable for sale of Funtime
Pizza Two, Inc. stock and related assets $400,000
Issued receivable due from sale of 2 Day Video, Inc. 633,288
Issued note payable for purchase of treasury
stock, less related taxes 130,156
Retirement of Cinemark Mexico senior subordinated
notes and issuance of new senior subordinated
notes (Note 5) 22,400,000
Issuance of Cinemark Mexico senior subordinated
notes for redeemed warrants (Notes 5 and 7) 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 7) 172,456
Canceled note receivable from Funtime International,
L.C. (Note 4) $ 445,224
Canceled note receivable from Entertainment
Technologies, Inc. (Note 4) 302,382
Issued note payable to Melvin and Mattie Loeffler
in sale of land (Note 5) 365,000

F - 20
62
CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. REPORTING SEGMENTS

The Company operates in a single industry as a motion picture exhibitor.
The Company is a multinational corporation with consolidated operations in the
United States, Chile, Mexico, Brazil and Ecuador. In prior years, foreign
operations did not meet the requirements for disclosure. Information about the
Company's operations in different geographic areas for the year ended December
31, 1997 is as follows:

Other Foreign
1997 United States Subsidiaries Eliminations Consolidated
---- ------------- ------------ ------------ ------------

Total revenues $399,687,048 $ 37,720,351 $ (2,809,074) $434,598,325
============ ============ ============= ============
Operating income $ 56,542,666 $ 1,248,341 $ (839,733) $ 56,951,274
============ ============ ============= ============
Identifiable assets $716,869,033 $117,056,632 $(176,742,126) $657,183,539
============ ============ ============= ============

14. SUBSEQUENT EVENTS

In 1998, the Company entered into several financing arrangements to raise
capital for projected growth. These financings include the issuance in January
1998 of $105 million Senior Subordinated Notes, due 2008. The notes were issued
at 99.787%of the principal face amount and bear an interest rate of 8.5%. In
February 1998 the Company increased its Credit Facility to provide for loans up
to $350 million in the aggregate. At the end of each quarter during the
calendar year 2001, 2002, 2003 and 2004, the aggregate commitment shall
automatically be reduced by $8,750,000, $11,812,500, $13,125,000, $12,031,000
and $6,562,500, respectively. The Company is required to prepay all loans
outstanding in excess of the aggregate commitment as reduced pursuant to the
terms of the Credit Facility. Borrowings under the Credit Facility are secured
by a pledge of a majority of the issued and outstanding capital stock of the
Company. Also, in February 1998, the Company completed a sale leaseback
transaction of 12 properties for an aggregate sales price of $131.5 million.
The Company will lease these properties for 20 years at a fixed aggregate annual
rental payment of $13.4 million.

F - 21
63

CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE A
CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 1997
===================================================================

RESTRICTED CINEMARK INT'L
ASSETS GROUP GROUP ELIMINATIONS CONSOLIDATED

CURRENT ASSETS:

Cash and cash equivalents $ 3,343,220 $ 28,445,160 $ -- $ 31,788,380
Temporary cash investments 331,156 331,156
Inventories 1,642,855 591,376 2,234,231
Other current assets 9,276,477 23,294,563 (1,118,824) 31,452,216
----------------------------------------------------------------

Total current assets 14,262,552 52,662,255 (1,118,824) 65,805,983

THEATRE PROPERTIES AND EQUIPMENT - Net 486,036,529 62,905,403 548,941,932

OTHER ASSETS:
Certificates of deposit 1,525,852 1,525,852
Investments in and advances to affiliates 73,630,136 19,199,264 (71,998,280) 20,831,120
Intangible assets - net 6,591,783 (2,178,482) 4,413,301
Deferred charges and other - net 13,692,989 6,385,663 20,078,652
----------------------------------------------------------------

Total other assets 95,440,760 25,584,927 (74,176,762) 46,848,925
----------------------------------------------------------------

TOTAL $ 595,739,841 $ 141,152,585 ($ 75,295,586) $ 661,596,840
================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term liabilities $ 380,730 $ -- $ -- $ 380,730
Accounts payable, accrued expenses and other
current liabilities 69,419,573 8,355,325 (1,118,455) 76,656,443
----------------------------------------------------------------

Total current liabilities 69,800,303 8,355,325 (1,118,455) 77,037,173

LONG-TERM LIABILITIES:
Long term debt, less current portion 431,770,009 31,700,000 463,470,009
Deferred lease expenses 12,470,130 594,500 13,064,630
Other long-term liabilities 373,562 373,562
Deferred income taxes 10,937,029 10,937,029
----------------------------------------------------------------

Total long-term liabilities 455,550,730 32,294,500 487,845,230

MINORITY INTERESTS IN SUBSIDIARIES 406,932 26,325,629 26,732,561

SHAREHOLDERS' EQUITY:
Common stock 49,537,562 1,000 (1,000) 49,537,562
Additional paid-in capital 10,201,882 92,488,088 (92,488,088) 10,201,882
Unearned compensation - stock options (1,534,791) (1,534,791)
Retained earnings (deficit) 47,096,688 (7,167,450) 7,167,450 47,096,688
Treasury stock (24,198,890) (24,198,890)
Cumulative foreign currency translation adjustment (11,120,575) (11,144,507) 11,144,507 (11,120,575)
----------------------------------------------------------------

Total shareholders' equity 69,981,876 74,177,131 (74,177,131) 69,981,876
----------------------------------------------------------------

TOTAL $ 595,739,841 $ 141,152,585 ($ 75,295,586) $ 661,596,840
================================================================

Note: "Restricted Group" and "Cinemark International Group" are defined in the
Indenture (Section 4.02) for the Senior Notes dated June 10, 1992.

S -1

CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1997
===============================================================================

RESTRICTED CINEMARK INT'L
GROUP GROUP ELIMINATIONS CONSOLIDATED

REVENUES $ 398,599,698 $ 37,720,351 ($ 1,721,724) $ 434,598,325

COSTS AND EXPENSES:
Cost of operations 292,685,950 31,498,187 (1,721,724) 322,462,413
General and administrative expenses 23,050,289 4,547,830 27,598,119
Depreciation and amortization 25,231,285 2,492,102 (136,868) 27,586,519
----------------------------------------------------------------

Total 340,967,524 38,538,119 (1,858,592) 377,647,051
----------------------------------------------------------------

OPERATING INCOME (LOSS) 57,632,174 (817,768) 136,868 56,951,274

OTHER INCOME (EXPENSE):
Interest expense (28,562,089) (4,141,214) (32,703,303)
Amortization of debt issue cost and discount (670,359) (113,613) (783,972)
Equity in income (loss) of affiliates (2,733,780) 596,023 3,092,604 954,847
Other income, net 577,075 347,669 924,744
Minority interests in subsidiaries (44,756) 391,179 346,423
----------------------------------------------------------------

Total (31,433,909) (2,919,956) 3,229,472 (31,261,261)
----------------------------------------------------------------

INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 26,198,265 (3,737,724) 3,229,472 25,690,013

INCOME TAXES 11,439,378 (768,289) 10,671,089
----------------------------------------------------------------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 14,758,887 (2,969,435) 3,229,472 15,018,924

EXTRAORDINARY ITEMS:
Loss on early extinguishments of debt, net of
income tax benefit of $256,768 (53,790) (260,037) (313,827)
----------------------------------------------------------------

NET INCOME (LOSS) $ 14,705,097 ($ 3,229,472) $ 3,229,472 $ 14,705,097
================================================================

Note: "Restricted Group" and "Cinemark International Group" are defined in the
Indenture (Section 4.02) for the Senior Notes dated June 10, 1992.

S -2

CINEMARK USA, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE C
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1997
===============================================================================

RESTRICTED CINEMARK INT'L
GROUP GROUP ELIMINATIONS CONSOLIDATED

OPERATIONS:

Net income (loss) $ 14,705,097 ($ 3,229,472) $ 3,229,472 $ 14,705,097
Loss on early extinguishment of debt 607,033 607,033
Noncash items in net income (loss):
Depreciation 23,965,929 2,489,670 26,455,599
Amortization - intangibles and other assets 1,861,215 849,240 (136,868) 2,573,587
Deferred lease expenses 1,221,543 262,458 1,484,001
Deferred income tax expense 5,110,779 (100,359) 5,010,420
Debt issued for accrued interest 2,850,100 2,850,100
Amortization of debt discount (27,004) (27,004)
Amortized compensation - stock options 1,898,836 1,898,836
Gain on sale of assets 558,434 (180) 558,254
Equity in (income) loss of affiliates 2,870,648 (596,023) (3,229,472) (954,847)
Minority interest in income (loss) of subsidiaries 44,756 (391,179) (346,423)
Cash used for operating working capital 16,441,714 (19,877,697) (3,435,983)
-----------------------------------------------------------------

Net cash from operations 68,651,947 (17,136,409) (136,868) 51,378,670

INVESTING ACTIVITIES:
Additions to theatre properties and equipment (161,748,924) (38,523,573) (200,272,497)
Sale of Theatre properties and equipment 1,737,632 1,737,632
Increase in temporary cash investments (29,748) (29,748)
Increase in investments in and advances to affiliate (64,614,483) (13,785,678) 61,473,880 (16,926,281)
Decrease (increase) in other assets 316,585 (4,066,733) 136,868 (3,613,280)
-----------------------------------------------------------------

Net cash used for investing activities (224,309,190) (56,405,732) 61,610,748 (219,104,174)

FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 77,250,000 77,250,000
Retirement of Senior Subordinated Notes (28,561,000) (28,561,000)
Retirement of Senior Notes (1,630,000) (1,630,000)
Increase in long-term debt 162,365,000 31,700,000 194,065,000
Reductions of long-term debt (77,648,980) (77,648,980)
Decrease in Theatre development advance (396,095) (396,095)
Minority investment in subsidiaries, net 26,338,402 26,338,402
Common stock issued for options exercised (3,993,545) (3,993,545)
Cinemark USA investment in Cinemark International 61,473,880 (61,473,880)
-----------------------------------------------------------------

Net cash from financing activities 155,946,380 90,951,282 (61,473,880) 185,423,782

FOREIGN CURRENCY TRANSLATION ADJUSTMENT (2,292) 11,168 8,876
-----------------------------------------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 286,845 17,420,309 0 17,707,154

CASH AND CASH EQUIVALENTS:
Beginning of period 3,056,375 11,024,851 14,081,226
-----------------------------------------------------------------

End of period $ 3,343,220 $ 28,445,160 $ 31,788,380
=================================================================

Note: "Restricted Group" and "Cinemark International Group" are defined in the
Indenture (Section 4.02) for the Senior Notes dated June 10, 1992.

S -3
66
SIGNATURES

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

Dated: March 27, 1998 CINEMARK USA, INC.

BY: /s/ Alan W. Stock
-----------------------------------
Alan W. Stock, 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
registrant and in the capacities and on the dates indicated.

Name Title Date
---- -----

/s/ Lee Roy Mitchell Chairman of the Board of Directors March 27, 1998
--------------------------------------------- and Chief Executive Officer
Lee Roy Mitchell

/s/ Tandy Mitchell Director March 27, 1998
---------------------------------------------
Tandy Mitchell

/s/ Alan W. Stock Director March 27, 1998
---------------------------------------------
Alan W. Stock

/s/ Jeffrey J. Stedman Director; Vice President and Treasurer March 27, 1998
--------------------------------------------- (Chief Financial and Accounting
Jeffrey J. Stedman Officer)

/s/ W. Bryce Anderson Director March 27, 1998
---------------------------------------------
W. Bryce Anderson

/s/ Heriberto Guerra Director March 27, 1998
---------------------------------------------
Heriberto Guerra

/s/ James A. Stern Director March 27, 1998
---------------------------------------------
James A. Stern

/s/ James L. Singleton Director March 27, 1998
---------------------------------------------
James L. Singleton

39
67

/s/ Denny Rydberg Director March 27, 1998
---------------------------------------------
Denny Rydberg

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 Company's
shareholders. An annual report and proxy material may be sent to the Company's
shareholders subsequent to the filing of this Form 10-K. The Company shall
furnish to the Securities and Exchange Commission copies of any annual report
or proxy material that is sent to the Company's shareholders.

40
68
EXHIBIT INDEX

Page Number or
Exhibit Incorporation by
Number Description Reference to
------ ----------- ------------

3.1(a) Amended and Restated Articles of Incorporation of the Company Exhibit 3.1(a) to the
filed with the Texas Secretary of State on June 3, 1992 Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993
3.1(b) Articles of Merger filed with the Texas Secretary of State on Exhibit 3.1(b) to the
June 27, 1988 merging Gulf Drive-In Theatres, Inc. and Cinemark Company's Registration
of Louisiana, Inc. into the Company Statement (file 33-
47040) on Form S-1
filed on April 9, 1992

3.1(c) Articles of Merger filed with the Texas Secretary of State dated Exhibit 3.1(d) to the
October 27, 1989 merging Premiere Cinemas Corp. into the Company Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992

3.1(d) Articles of Merger filed with the Texas Secretary of State dated Exhibit 3.1(e) to the
October 27, 1989 merging Tri-State Entertainment Incorporated Company's Registration
into the Company Statement (file 33-
47040) on Form S-1
filed on April 9, 1992
3.1(e) Articles of Merger filed with the Texas Secretary of State on Exhibit 3.1(f) to the
December 27, 1990 merging Cinema 4, Inc. into the Company Company's
Registration Statement
(file 33-47040) on form
S-1 filed on April 9,
1992

3.1(f) Articles of Merger filed with the Texas Secretary of State on Exhibit 3.1(f) to the
December 27, 1990 merging Cinema 4, Inc. into the Company Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993
3.2(a) Bylaws of the Company, as amended Exhibit 3.2 to the
Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992

Page Number or
Exhibit Incorporation by
Number Description Reference to
------ ----------- ------------

3.2(b) Amendment to Bylaws of the Company dated March 12, 1996 Exhibit 3.2(b) to the
Company's Annual Report
(file 33-47040) on Form
10-K filed March 26,
1997
10.1(a) Indenture for Series B Notes, with form of Series B Note Exhibit 4.1 to the
attached. Company's Registration
Statement (file 33-
41895) on Form S-4
filed September 13,
1996

10.1(b) Indenture dated June 26, 1997 between the Company and U.S. Trust Exhibit 4.1 to the
Company of Texas, N.A. governing the Notes, with a form of Series Company's Registration
C Note attached Statement (file 333-
32949) on Form S-4
filed August 6, 1997

10.2 Indenture dated January 14, 1998 between the Company and U.S. Exhibit 4.1 to the
Trust Company of Texas, N.A. governing the Notes, with a form of Company's Registration
Series A Note attached Statement (file 333-
45417) on Form S-4
filed February 2, 1998
10.3(a) Management Agreement between the Company and Cinemark II, Inc. Exhibit 10.6(c) to the
("Cinemark II") dated as of June 10, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

10.3(b) Management Agreement, dated as of July 28, 1993, between the Exhibit 10.7 to
Company and Cinemark Mexico (USA). Cinemark Mexico (USA)'s
Registration Statement
(file 33-72114) on Form
S-4 filed on November
24, 1994.
10.3(c) Management Agreement, dated as of September 10, 1992, between the Exhibit 10.8 to
Company and Cinemark de Mexico. Cinemark Mexico (USA)'s
Registration Statement
(file 33-72114) on Form
S-4 filed on November
24, 1994.

PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------ ----------- ------------

10.3(d) Management Agreement dated December 10, 1993 between Laredo Exhibit 10.14(b) to the
Joint Venture and the Company. Company's Annual Report
(file 33-47040) on form
10-K filed March 31,
1994.
10.3(e) Management Agreement dated September 1, 1994 between Cinemark Exhibit 10.4(i) to the
Partners II, Ltd. and the Company. Company's Annual Report
(file 33-47040) on Form
10-K filed March 29,
1995.

10.4(a) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(a) to the
Company and Lee Roy Mitchell. Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992.

10.4(b) First Amendment to Employment Agreement dated as of April 7, 1992 Exhibit 10.11(b) to the
between the Company and Lee Roy Mitchell. Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992.
**10.4(c) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(c) to the
Company and Tandy Mitchell. Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992.

10.4(d) First Amendment to Employment Agreement dated as of April 7, 1992 Exhibit 10.11(d) to the
between the Company and Tandy Mitchell. Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992.
10.4(e) Second Amendment to Employment Agreement between the Company and Exhibit 10.11(e) to the
Lee Roy Mitchell dated as of June 10, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------ ----------- ------------

10.5(a) 1991 Nonqualified Stock Option Plan of Cinemark USA, Inc. Exhibit 10.14 to the
Company's Registration
Statement (file 33-
47040) on Form S-1
filed on April 9, 1992.
10.5(b) Cinemark Mexico Nonqualified Stock Option Plan. Exhibit 10.9 to
Cinemark Mexico (USA)'s
Registration Statement
(file 33-72114) on Form
S-4 filed on November
24, 1994.

10.6(a) License Agreement dated December 10, 1993 between Laredo Joint Exhibit 10.14(c) to the
Venture and the Company. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1994

10.6(b) License Agreement dated September 1, 1994 between Cinemark Exhibit 10.10(c) to the
Partners II, Ltd. and the Company. Company's Annual Report
(file 33-47040) on Form
10-K filed March 29,
1995.
10.7(a) Tax Sharing Agreement between the Company and Cinemark II dated Exhibit 10.22 to the
as of June 10, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

10.7(b) Tax Sharing Agreement dated as of July 28, 1993, between the Exhibit 10.10 to
Company and Cinemark Mexico (USA). Cinemark Mexico (USA)'s
Registration Statement
(33-72114) on Form S-4
filed on November 24,
1994.
10.8(a) Indemnification Agreement between the Company and Lee Roy Exhibit 10.23(a) to the
Mitchell dated as of July 13, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------ ----------- ------------

10.8(b) Indemnification Agreement between the Company and Tandy Mitchell Exhibit 10.23(b) to the
dated as of July 13, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.
10.8(c) Indemnification Agreement between the Company and Alan W. Stock Exhibit 10.23(d) to the
dated as of July 13, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

10.8(d) Indemnification Agreement between the Company and W. Bryce Exhibit 10.23(f) to the
Anderson dated as of July 13, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

10.8(e) Indemnification Agreement between the Company and Sheldon I. Exhibit 10.23(g) to the
Stein dated as of July 13, 1992. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.
10.8(f) Indemnification Agreement between the Company and Heriberto Exhibit 10.13(f) to the
Guerra dated as of December 3, 1993 Company's Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996

10.8(g) Indemnification Agreement between the Company and Gary R. Gibbs Exhibit 10.13(g) to the
dated as of July 19, 1995. Company's Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996

*10.9(a) Credit Agreement dated as of February 12, 1998 among the Banks Page ______
and the Agent.

*10.9(b) Pledge Agreement dated as of February 12, 1998 executed by the Page ______
pledgors listed on the signature page thereto for the benefit of
the Agent and the Banks.

10.9(c) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $50,000,000 payable to the order of Bank of
America National Trust and Savings Association

PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------ ----------- ------------

10.9(d) Note of the Company dated as of February 12, 1998 in the Page ______
original principal amount of $50,000,000 payable to the order of
NationsBank of Texas, N.A.

10.9(e) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $30,000,000 payable to the order of
BankBoston, N.A.

10.9(f) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $30,000,000 payable to the order of Fleet
Bank, N.A.

10.9(g) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of The Fuji
Bank, Limited
10.9(h) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of Bank of
New York

10.9(i) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $30,000,000 payable to the order of CIBC,
Inc.
10.9(j) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $30,000,000 payable to the order of Bank of
Nova Scotia

10.9(k) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $25,000,000 payable to the order of Comerica
Bank-Texas

10.9(l) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of First
Hawaiian Bank
10.9(m) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of Bank of
Montreal

10.9(n) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of PNC Bank

10.9(o) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of Sumitoto
Bank, Limited

10.9(p) Note of the Company dated as of February 12, 1998 in the original Page ______
principal amount of $15,000,000 payable to the order of Union
Bank of California, N.A.

PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------ ----------- ------------

10.10(a) Letter Agreements with directors of the Company regarding stock Exhibit 10.15 to the
options. Company's Annual Report
(file 33-47040) on Form
10-K filed March 31,
1993.

10.10(b) Letter Agreements with directors of the Company amending stock Exhibit 10.15(c) to the
options Company's Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996

10.11(a) Credit Agreement dated November 18, 1997 between Cinemark Exhibit 10.13(a) to the
International and the Banks Company's Registration
Statement (file 333-
45417) on Form S-4
filed February 2, 1998

10.11(b) First Amendment to Credit Agreement dated December 16, 1997 Exhibit 10.13(b) to the
between Cinemark International and the Banks Company's Registration
Statement (file 333-
45417) on Form S-4
filed February 2, 1998

10.11(c) Pledge Agreement dated November 18, 1997 between Cinemark Exhibit 10.13(c) to the
International and the Banks Company's Registration
Statement (file 333-
45417) on Form S-4
filed February 2, 1998

10.11(d) Guaranty of Cinemark Mexico (USA), Inc. for the benefit of the Exhibit 10.13(d) to the
Banks Company's Registration
Statement (file 333-
45417) on Form S-4
filed February 2, 1998

10.12 Senior Secured Credit Agreement dated December 4, 1995 among Exhibit 10.18 to the
Cinemark II, Cinemark Mexico (USA) and Cinemark de Mexico Company's Annual Report
(file 33-47040) on Form
10-K filed April 1,
1996

PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
------ ----------- ------------

10.13 Shareholders' Agreement dated March 12, 1996 among the Company, Exhibit 10.19(b) to the
Mr. Mitchell, Cypress Merchant Banking Partners L.P., Cypress Company's Annual Report
Pictures Ltd. and Mr. Mitchell and Mr. Don Hart as Co-Trustees of (file 33-47040) on Form
certain trusts signatory thereto 10-K filed April 1,
1996

12 Calculation of Earnings to Fixed Charges. Exhibit 12 to the
Company's Registration
Statement (file 333-
45417) on Form S-4
filed February 2, 1998

21 Subsidiaries of the Registrant Exhibit 21 to the
Company's Registration
Statement (file 333-
45417) on Form S-4
filed February 2, 1998

23.1 Consent of Deloitte & Touche LLP, Independent Auditors Page ______

27.1 Financial Data Schedule