<PAGE>

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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, 2000

                        Commission file number 1-12246

                        NATIONAL GOLF PROPERTIES, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                  Maryland                                       95-4549193
          (State of incorporation)                  (I.R.S. Employer Identification No.)
        2951 28th Street, Suite 3001
              Santa Monica, CA                                     90405
  (Address of principal executive offices)                       (Zip Code)

                                (310) 664-4100
             (Registrant's telephone number, including area code)

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

             Title of each class                 Name of each exchange on which registered
             -------------------                 -----------------------------------------
         Common Stock $.01 par value                      New York Stock Exchange
</TABLE>

       Securities registered pursuant to Section 12(g) of the Act: None

  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 6, 2001, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $254.1 million, based upon
the closing price ($21.50) on the New York Stock Exchange on that date. (For
this computation, the registrant has excluded the market value of all shares
of its common stock reported as owned by executive officers and directors of
the registrant and certain other stockholders; such exclusion shall not be
deemed to constitute an admission that any such person is an "affiliate" of
the registrant.)

  Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:

    12,963,845 shares of common stock, $.01 par value, as of March 6, 2001

                      Documents Incorporated By Reference

  Portions of the registrant's Proxy Statement in connection with its Annual
Meeting of Stockholders to be held May 29, 2001, are incorporated by reference
in Part III.

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<PAGE>

                                    PART I

Item 1. BUSINESS

  a) General Development of Business

  National Golf Properties, Inc. (the "Company") commenced operations
effective with the completion of its initial public stock offering (the
"Offering") of common stock, par value $.01 per share (the "Common Stock"), on
August 18, 1993. The Company qualifies as a Real Estate Investment Trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").

  The Company became the general partner in National Golf Operating
Partnership, L.P. (the "Operating Partnership") when the Operating Partnership
was formed as a Delaware limited partnership in June 1993. On July 8, 1994,
the Operating Partnership acquired an 89% general partner interest in Royal
Golf, L.P. II ("Royal Golf"). Royal Golf owns four golf courses on Hilton Head
Island, South Carolina. In August 2000, the Company acquired the remaining 11%
interest in Royal Golf from the limited partner. Unless the context otherwise
requires, all references to the Company's business and properties include the
business and properties of the Operating Partnership and Royal Golf.

  In 1997, the Company acquired a 50% general partnership interest in Pumpkin
Ridge Joint Venture ("Pumpkin Ridge"). Pumpkin Ridge owns two golf courses in
Cornelius, Oregon. The Company accounts for its investment in Pumpkin Ridge
under the equity method of accounting.

  The Company is the sole general partner in the Operating Partnership and
currently owns 63.4% of the common partnership interest in the Operating
Partnership. The limited partners are individuals, partnerships, corporations
and trusts who have contributed their properties in exchange for units of
common partnership interest ("Common Units") or who have contributed cash in
exchange for units of preferred partnership interest ("Preferred Units").

  On March 31, 1999, the Company purchased fee interests in 15 golf courses,
long-term leasehold interests in two golf courses and leasehold rights in
three golf courses and made a mortgage loan collateralized by an additional
golf course, El Camino Country Club (the "El Camino Mortgage") (collectively,
the "Acquired Cobblestone Courses"). During the three months ended March 31,
2000, the Company finalized the fair value allocation of purchase price among
the Acquired Cobblestone Courses. In addition, there were reclassifications
among the components of property.

  In 2000, the Company purchased two golf courses for an aggregate initial
investment of approximately $11 million, excluding El Camino Country Club,
described below, which investment was financed by approximately $1.6 million
of cash from operations, $4.7 million of advances under the Company's credit
facility and $4.7 million of proceeds from sale of properties in section 1031
exchange transactions. On December 28, 2000, the fee interest in El Camino
Country Club was transferred to the Company in satisfaction of the El Camino
Mortgage entered into in March 1999 as part of the acquisition of the Acquired
Cobblestone Courses. Between December 31, 2000 and March 6, 2001, the Company
entered into agreements to purchase one golf course and sell one golf course.

                                       1
<PAGE>

  The following diagram depicts the beneficial ownership of the Company, the
Operating Partnership and Pumpkin Ridge as of March 6, 2001:


<TABLE>
<S>                              <C>                                                          <C>
                                    National Golf Properties, Inc.
                                 .  91.2% owned by public stockholders
                                 .   2.7% owned by David G. Price
                                 .   6.1% owned by employees of
                                          National Golf Properties and
                                          American Golf Corporation
                                              |
                                              |
                                              |
                                    National Golf Operating Partnership, L.P.
                                 .  63.4% owned by National Golf
                                          Properties, the managing general
                                          partner of National Golf
                                          Operating Partnership
                                 .  16.7% owned by David G. Price
                                 .  19.9% owned by limited partners
                                              |
       _______________________________________|_____________________________________
       |                                                                           |
       |                                                         Pumpkin Ridge Joint Venture*
       |
       |                                                       .  50% owned by National Golf
       |                                                              Operating Partnership
       |                                                       .  50% owned by two other general
       |                                                              partners
     ____________________________________________________________                  |
     |                                                          |                  |
2 Golf Courses    1 Golf Course      1 Golf Course     140 Golf Courses**   2 Golf Courses
 . 100% owned by   . 100% owned by    . 100% owned by   . 100% owned by      . 100% owned by
  National Golf     National Golf      National Golf     National Golf        Pumpkin
  Operating         Operating          Operating         Operating            Ridge
  Partnership       Partnership        Partnership       Partnership
    |                    |                 |                   |                   |
    |                    |                 |                   |                   |
    |                    |                 |                   _____________________
    |                    |                 |                            |
    |                    |                 |                            |
  Golf               The Links      Evergreen Alliance             American Golf
Enterprises, Inc.    Group, Inc.      Golf Limited                  Corporation

   (Lessee)           (Lessee)          (Lessee)                     (Lessee)
</TABLE>

--------
 * The Company accounts for its investment in Pumpkin Ridge under the equity
   method of accounting.

** The Company has a participating mortgage loan on one golf course which it
   does not own.

  b) Narrative Description of Business

  As of March 6, 2001, the Company's portfolio of 146 golf courses consists of
one participating mortgage loan, which is collateralized by a mortgage on the
golf course, and ownership interests in 145 golf courses, including the two
golf courses owned by Pumpkin Ridge, in 133 separate locations in 23 states
(collectively, the "Golf Courses"). As a self-administered REIT, the Company's
own employees perform its administrative and management functions, rather than
the Company relying on an outside manager for these services.

                                       2
<PAGE>

  The Golf Courses include facilities such as clubhouses with restaurants,
banquet space, locker rooms and retail pro shops, driving ranges, pools,
tennis courts and fitness facilities. Services provided at such properties
include golf cart rentals, golf and tennis lessons, banquets and tournaments.
In order to maintain qualification as a REIT, the Company's income must be
derived from real-property related sources, including rents from real property
and generally excluding income from the operation of a golf course.
Accordingly, the Company is generally precluded from operating golf courses
and, as a consequence, leases the Golf Courses to experienced and creditworthy
golf course operators. In selecting operators, the Company considers factors
such as the number of years that the operator has been in operation, the
experience of the management team, the number of golf courses currently owned,
leased or managed by the operator, the operator's net worth or ability to
provide credit support to the Company's satisfaction, and the operator's
ability to maximize the revenues of the golf course and to improve the long-
term value of the golf course.

Business Objectives and Operating Strategies

  The Company's primary business objective is to maximize stockholder return
through the ownership and acquisition of quality golf courses and the
subsequent lease of such properties to experienced and creditworthy operators.
The Company focuses on the ownership and acquisition of golf course properties
that have strong revenue and cash flow growth potential and expects to hold
such properties for long-term investment and capital appreciation. The
Company's business and operating strategies include:

  .  Increasing income and portfolio value by continuing the strategic
     expansion of its golf course portfolio through the selective acquisition
     of golf course properties in major metropolitan areas or resort
     locations having strong golf characteristics, which properties
     demonstrate potential for significant revenue and cash flow increases.
     For the period August 18, 1993 to December 31, 2000, the Company
     purchased 116 Golf Courses, including the two Golf Courses owned by
     Pumpkin Ridge and the three leasehold interests in the Golf Courses at
     Carmel Mountain Ranch Country Club and Sweetwater Country Club, in which
     the Company already owned the fee interest, for an aggregate initial
     investment of approximately $711.3 million. For the period January 1,
     2001 to March 6, 2001, the Company entered into an agreement to purchase
     one golf course;

  .  Structuring favorable leases for the Company with experienced and
     creditworthy golf course operators under which the operators pay base
     rent and percentage rent based on revenues and pay substantially all
     expenses in connection with the operation of such properties, including
     all real and personal property taxes, utility costs, insurance costs,
     irrigation costs, maintenance costs and other operating expenses;

  .  Working with golf course operators on strategies to increase revenues,
     which in turn would increase percentage rent to the Company;

  .  Working with golf course operators on strategies to improve and enhance
     golf course holdings through proper maintenance and capital
     improvements;

  .  Monitoring on an ongoing basis the operating performance of the Golf
     Courses, compliance by its operators with their lease obligations and
     other market factors that could affect the financial performance of its
     courses; and

  .  Maintaining a ratio of debt-to-total market capitalization of 50% or
     less. Such ratio is calculated as total debt of the Company as a
     percentage of the market value of issued and outstanding shares of
     Common Stock, Preferred Units and Common Units that are exchangeable for
     shares of Common Stock plus total debt. At December 31, 2000, the
     Company's total debt constituted approximately 46% of its total market
     capitalization.

Seasonality

  Although the results of operations of the Company and its predecessors have
not been significantly impacted by seasonality, the Company generally expects
that its results of operations may be adversely affected as a

                                       3
<PAGE>

function of reduced payments of percentage rent in the first and fourth
quarters of each year due to adverse weather conditions and the scheduled
closure of the Golf Courses located in harsh winter climates.

Tenant and Leases

  All but four of the Golf Courses in the Company's portfolio are currently
leased to AGC pursuant to long-term triple net leases (the "Leases"). AGC is
one of the largest and most experienced operators of golf courses and related
facilities in the world and currently manages and operates 271 golf courses
and related facilities in 30 states. In addition, AGC, through its
subsidiaries American Golf (U.K.) Limited, and American Golf Australia Pty
Limited, manages 42 golf courses and related facilities in the United Kingdom
and two in Australia. AGC operates a diverse portfolio of golf courses for a
variety of golf course owners including municipalities, counties and others.
AGC was founded in 1973 by David G. Price, the Chairman of the Company's Board
of Directors and AGC's Chairman and principal shareholder. Including the Golf
Courses, AGC manages 198 daily fee golf courses and 73 private club courses.
AGC oversees the management and operations of championship golf courses
throughout the United States and manages municipal golf courses for such
cities as Atlanta, New York and San Diego and for the County of Los Angeles.

  AGC does not own any golf courses, but rather manages and operates golf
courses either as a lessee under leases, generally triple net, or pursuant to
management agreements. AGC derives revenues from the operation of golf courses
principally through the receipt of green fees, membership initiation fees,
membership dues, golf cart rentals, driving range charges and sales of food,
beverages and merchandise.

  In connection with our Golf Courses, each Lease has an initial term ranging
between 15 and 20 years. The Leases are triple net leases which require AGC to
pay substantially all expenses associated with the operation of the Golf
Courses, such as all real and personal property taxes, utility costs,
insurance costs, irrigation costs, maintenance costs and other operating
expenses. In addition, AGC has options to extend the term of each Lease for
one to three five-year terms. Each Lease permits AGC to operate the leased
property as a golf course, along with a clubhouse and other activities
customarily associated with or incidental to the operation of a golf course.

  The base rent for the first year for each Golf Course under the Leases is
initially set at a fixed amount. Generally for the Leases entered into by the
Company with respect to its remaining portfolio of 41 initial golf courses at
the time of the Offering (the "Initial Golf Courses"), base rent is increased
each year by 4% or, if lower, 150% of the annual percentage increase in the
Consumer Price Index ("CPI") (the "Base Rent Escalation"). In addition,
generally percentage rent is paid each year in the amount, if any, by which
the sum of 35% of Course Revenue in excess of a baseline amount and 5% of
Other Revenue in excess of a baseline amount exceeds the cumulative Base Rent
Escalation since the commencement date of such Leases. "Course Revenue" is
generally defined in the Leases to include all revenue received from the
operation of the applicable Golf Course, including revenues from memberships,
initiation fees, dues, green fees, guest fees, driving range charges and golf
cart rentals, but excluding those revenues described as Other Revenue. "Other
Revenue" is generally defined in the Leases to include all revenue received
from food and beverage and merchandise sales and other revenue not directly
related to golf activities. Generally, the baseline amounts for the Initial
Golf Courses were established based on revenues for each such Initial Golf
Course for the twelve months ended February 28, 1993. Payment of percentage
rent based upon the revenues of the Golf Courses allows the Company to
participate in growth in revenues at the Golf Courses.

  For the Leases entered into subsequent to the Offering, the rent generally
is based upon the greater of (a) the base rent or (b) a specified percentage
of Course Revenue and Other Revenue. The base rent under these Leases is
increased for specified years during the Lease term based upon increases in
the CPI, provided that each such annual CPI increase shall not exceed five
percent. The Leases for the Acquired Cobblestone Courses specify that the base
rent for such properties will increase by a fixed 0.5% each year for specified
years during the term of each Lease.

  The Leases for the Initial Golf Courses required AGC to post and maintain an
irrevocable letter of credit in an amount equal to approximately $13.6
million, which is comprised of six monthly installments of the annual

                                       4
<PAGE>

rent, to collateralize its obligations under such Leases. On March 31, 2000,
the Independent Committee, comprised of all four independent directors of the
Company, waived the requirement that AGC continue to maintain an irrevocable
letter of credit.

  The obligations of AGC under each Lease are cross-defaulted to each of the
other Leases with respect to monetary defaults and all other defaults except
those not within the reasonable control of AGC. The Company has general
recourse to AGC under the Leases, but such Leases are not collateralized by
any assets of AGC. The stockholders of the Company have no recourse to AGC
under the Leases.

  The Independent Committee oversees the selection of operators and approves
transactions between the Company and David G. Price and his affiliates,
including AGC.

  In addition to AGC, the Company leases four of its Golf Courses to three
other operators: GE; The Links Group, Inc. ("TLG"); and Evergreen Alliance
Golf Limited ("EAGL"). Unless the context otherwise requires, all references
to the Leases include the leases with GE, TLG and EAGL.

  GE operates Sweetwater Country Club (two courses) near Houston, Texas. GE,
which is owned by David G. Price and Dallas P. Price, is a golf course
operating company with 18 golf courses under management in seven states.

  TLG operates Colonial Charters Golf Course near Myrtle Beach, South
Carolina. TLG is a golf course operating company that operates ten golf
courses in two states.

  EAGL operates San Geronimo Golf Course near San Francisco, California. EAGL
is a golf course acquisition and operating company with 40 golf courses under
ownership or management in 12 states.

Competitive Conditions

  The Golf Courses are, and any additional golf courses and related facilities
acquired by the Company will be, subject to competition for players and
members from other golf courses located in the same geographic areas,
including golf courses owned by municipalities or other third parties that are
operated by the Company's lessees. The number and quality of golf courses in a
particular area also could have a material effect on the revenues of the Golf
Courses. In addition, revenues of the Golf Courses will be affected by a
number of factors including the demand for golf and the availability of other
forms of recreation.

  According to its published data (1999 editions), the National Golf
Foundation, an independent industry organization, estimates that the number of
golfers in the United States is approximately 26 million. In addition,
favorable demographic trends offer encouraging growth prospects for the golf
course industry both in terms of the participation rate and the number of
rounds. The National Golf Foundation reports that the annual average rounds
played per golfer increases significantly as golfers age. Golfers in their
fifties generally play twice as many rounds annually as golfers in their
thirties. Golfers age 65 and older generally play three times as many rounds
annually as golfers in their thirties. Currently, approximately 75% of all
golfers are less than 50 years old and approximately 45% of all golfers are
between the ages of 30 and 49. Accordingly, the Company expects an increase in
the demand for golf as the younger segment of the golfing population reaches
its prime golfing age over the next 20 years. In addition, the children of the
baby boom generation are entering their twenties and thirties, an age range in
which they are most likely to begin playing golf.

  The Company is also subject to competition for the acquisition of golf
courses and related facilities with other purchasers of golf course
properties, including other golf course acquisition companies. According to
the National Golf Foundation, there are approximately 16,000 golf courses in
the United States. Ownership of these courses is extremely fragmented. The
Company believes that the nation's 15 largest golf course owners and operators
collectively own, lease, or manage less than ten percent of the courses in the
United States. This fragmentation provides an excellent opportunity for the
selective acquisition of quality golf course properties; however, the market
for golf course acquisitions remains competitive.

                                       5
<PAGE>

  In certain markets, construction of new golf courses has increased in the
last several years. Although such construction activity may add excess
capacity to some local markets, the Company's experience indicates that well-
managed and properly located facilities should continue to generate stable
revenue growth. The Company's courses are generally located in communities
with populations sufficient to absorb additional course development or in
areas with significant barriers to new course construction (i.e., limited
supply of suitable land, governmental restrictions, etc.). Consequently, new
course development has not had a material adverse effect on the Company's
portfolio. In addition, the Company expects that new course development will
provide numerous acquisition opportunities. Moreover, the new courses offer
improved access for golfers, particularly beginners, women and juniors, which
should ultimately increase the pool of golf customers.

Employees

  As of March 6, 2001, the Company and the Operating Partnership had 12 full-
time employees.

  The President of the Company is employed and compensated by both the
Operating Partnership and the Company. The Company believes that the
allocation of his compensation between the Company and the Operating
Partnership reflects the services provided by him with respect to each entity.
The remainder of the employees are employed solely by the Operating
Partnership. Royal Golf had no employees.

  The Company and the Operating Partnership have entered into a services
agreement pursuant to which the Operating Partnership provides the Company
with administrative, accounting and other services relating to the operations
and administration of the Company at a rate equal to the cost (including
allocable overhead) to the Operating Partnership of providing such services
plus 15% of such costs.

Government Regulation

  Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of any hazardous substances
released on its property. These laws often impose liability without regard to
whether the owner or operator knew of, or was responsible for, the release of
hazardous substances. The presence of such substances, or the failure to
remediate such substances properly when released, may adversely affect the
owner's ability to sell or rent such real estate or to borrow using such real
estate as collateral.

  The Company has not been notified by any governmental authority of any
material non-compliance, liability or other claim in connection with any of
the Golf Courses. The Company is not aware of any other environmental
condition with respect to any of the Golf Courses that is likely to be
material to the Company. All of the Golf Courses have been subjected to a
preliminary environmental investigation. Such investigation generally involves
an examination of public records for ownership, use and current permitting
status, site visits, visual inspections for indications of contamination or
potential contamination and interviews with the on-site managers. Such
investigation generally does not involve invasive procedures, such as soil
sampling or ground water analysis. No assurance can be given that such
investigation would reveal all potential environmental liabilities, that no
prior owner or adjacent landowner created any material environmental condition
not known to the Company or that future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulations) will not
result in imposition of environmental liability. Also, environmental
conditions, liabilities or compliance concerns may have arisen at a Golf
Course after the related review was completed. Although the Leases provide
that the lessees will indemnify the Company for certain potential
environmental liabilities at the Golf Courses, there can be no assurance that
the indemnification provided by such Leases would be sufficient to satisfy all
environmental liabilities.

  Americans with Disabilities Act. The Golf Courses are subject to the
Americans with Disabilities Act of 1990 (the "ADA"). The ADA has separate
compliance requirements for "public accommodations" and "commercial
facilities" but generally requires that public facilities such as clubhouses
and recreation areas be made accessible to people with disabilities.
Noncompliance could result in imposition of fines or an award of

                                       6
<PAGE>

damages to private litigants. Under the Leases, the lessees are required to
make any necessary modifications or improvements to comply with the ADA. The
lessees and the Company have undertaken, where necessary, a capital
improvement program to cause the public facilities at the Golf Courses to
comply with the ADA. The expenditures for the modifications and improvements
have not been material to the lessees.

Item 2. PROPERTIES

  As of March 6, 2001, the Golf Courses consisted of 146 golf courses that are
geographically diversified and located in 23 states, with 26 Golf Courses in
California, 25 in Texas, 19 in Arizona, seven in each of Ohio and South
Carolina, six in each of Georgia and Virginia, five in Minnesota, four in each
of Colorado, Florida, Illinois, Kansas, Nevada, Oregon, Pennsylvania, and
Washington, three in New Jersey, two in each of New Mexico, North Carolina,
Oklahoma and Tennessee and one in each of Idaho and Maryland. The distribution
of the Golf Courses reflects the Company's belief that geographic
diversification provides stability of our income and helps insulate the
portfolio from regional economic and climatic influences. Substantially all of
the Golf Courses are located in areas with populations in excess of 250,000
people.

  As of March 6, 2001, the Golf Courses consist of 90 daily fee courses and 56
private club courses. All of the Golf Courses are owned 100% in fee by either
the Operating Partnership or Pumpkin Ridge except for the three Golf Courses
at Bear Creek Golf World, which are leased by the Operating Partnership under
a ground lease expiring in 2022; Mesquite Golf & Country Club, of which a
portion of the Golf Course is leased under various ground leases expiring
between 2041 and 2043; Ridgeview Ranch Golf Course which is leased by the
Operating Partnership under a ground lease expiring 2025; The Vineyard at
Escondido Golf Club which is leased by the Operating Partnership under a
ground lease expiring 2025; and The Badlands Golf Club upon which the Company
holds a participating mortgage loan which matures in 2013.

  Daily Fee Courses. Daily fee courses are open to the public. Related
amenities at these courses generally include practice facilities, small
clubhouses with pro shops offering limited merchandise and a moderate food and
beverage operation. Daily fee courses generate revenues principally through
green fees, golf cart rentals and food, beverage and merchandise sales. Daily
fee courses generated $66.5 million of rent revenues to the Company in 2000
($54.7 million, excluding the Acquired Cobblestone Courses) compared to $54
million, excluding the Acquired Cobblestone Courses, in 1999.

  Private Club Courses. Private club courses are generally closed to the
public. Related amenities at these courses typically include practice
facilities, large clubhouses with pro shops offering extensive merchandise,
locker room facilities and multiple food and beverage outlets, including
grills, restaurants and banquet facilities. Private club courses generate
revenues principally through initiation fees, membership dues, guest fees, and
food, beverage and merchandise sales. As of December 31, 2000, the Company's
private club courses had approximately 45,000 members. Private club courses
generated $51.4 million of rent revenues to the Company in 2000
($39.5 million, excluding the Acquired Cobblestone Courses) compared to $35.6
million, excluding the Acquired Cobblestone Courses, in 1999.

  The Company's portfolio provides golfers with an enjoyable experience
regardless of skill levels or price sensitivities. The Company's facilities
cover the full spectrum: entry-level to premium private clubs; nine-hole
executive courses to extremely challenging championship courses; affordable
community-based courses to upscale golf facilities in resort destinations such
as Las Vegas, Scottsdale and Hilton Head Island. While several of the
Company's daily fee courses may charge green fees in excess of $100 per round,
the average price at our daily fee courses, including green fee and cart
rental, is approximately $33 per round. At the Company's private clubs,
initiation fees generally range from $5,000 to $15,000 for a family
membership.

                                       7
<PAGE>

  The following table sets forth certain information regarding the Golf
Courses as of March 6, 2001. The number of locations (133) differs from the
number of Golf Courses because in some cases there is more than one Golf
Course at a specific location. The number of golf courses at each location is
indicated for locations with more than one course.

                      The Golf Courses--Daily Fee Courses

<TABLE>
<CAPTION>
                                                          No. of      2000
     Course Name                 Location (City, State)   Holes  Rent Revenues
     -----------                 ----------------------   ------ --------------
                                                                 (In thousands)
 <C> <S>                        <C>                       <C>    <C>
  1  Canoa Hills Golf
     Course..................   Green Valley, Arizona       18       $ 328(1)
  2  Continental Golf
     Course..................   Scottsdale, Arizona         18         424
  3  Coyote Lakes Golf Club..   Surprise, Arizona           18         417
  4  Desert Lakes Golf Club..   Fort Mojave, Arizona        18         443
  5  El Caro Golf Club.......   Phoenix, Arizona            18         260
  6  Foothills Golf Club,
     The.....................   Phoenix, Arizona            18       1,115
  7  Kokopelli Golf Resort...   Gilbert, Arizona            18         765
  8  Lakes at Ahwatukee Golf
     Club, The...............   Phoenix, Arizona            18         563
  9  Legend at Arrowhead,
     The.....................   Glendale, Arizona           18         611
 10  London Bridge Golf Club
     (2 Courses).............   Lake Havasu City, Arizona   36         630
 11  Stonecreek Golf Course..   Phoenix, Arizona            18       1,099
 12  Superstition Springs
     Golf Club...............   Mesa, Arizona               18         788
 13  Villa De Paz Golf
     Course..................   Phoenix, Arizona            18         328
 14  BlackLake Golf Course...   Nipomo, California          27       1,158
 15  Camarillo Springs Golf
     Course..................   Camarillo, California       18       1,201
 16  Carmel Mountain Ranch
     Country Club............   San Diego, California       18       1,715
 17  Casta del Sol Golf
     Course..................   Mission Viejo, California   18         901
 18  Eagle Crest Golf Club...   Escondido, California       18       1,062
 19  Lomas Santa Fe Executive
     Golf Course.............   Solana Beach, California    18         603
 20  Mesquite Golf & Country
     Club....................   Palm Springs, California    18         664
 21  Rancho San Joaquin Golf
     Course..................   Irvine, California          18       2,709
 22  San Geronimo Golf
     Course..................   San Geronimo, California    18         694
 23  Seascape Golf Course....   Aptos, California           18       1,722
 24  Summitpointe Golf Club..   Milpitas, California        18       1,228
 25  Upland Hills Country
     Club....................   Upland, California          18       1,054
 26  Vineyard at Escondido
     Golf Club, The..........   Escondido, California       18       1,412
 27  Vista Valencia Golf
     Course (2 Courses)......   Valencia, California        27         959
 28  Arrowhead Golf Club.....   Littleton, Colorado         18       1,290
 29  Eagle Golf Club.........   Broomfield, Colorado        18         417
 30  Arrowhead Golf & Sports
     Club....................   Davie, Florida              18         407
 31  Baymeadows Golf Club....   Jacksonville, Florida       18         498
 32  Sabal Palm Golf Course..   Tamarac, Florida            18         566
 33  Summerfield Crossing
     Golf Club...............   Tampa, Florida              18         295
 34  Bradshaw Farm, The Golf
     Club at.................   Woodstock, Georgia          18         860
 35  Goshen Plantation
     Country Club............   Augusta, Georgia            18         338
 36  River's Edge Golf Club..   Fayetteville, Georgia       18         472
 37  Trophy Club of
     Appalachee, The.........   Dacula, Georgia             18         874
 38  Trophy Club of Atlanta,
     The.....................   Alpharetta, Georgia         18       1,177
 39  Ruffled Feathers Golf
     Course..................   Lemont, Illinois            18       1,132
 40  Tamarack Golf Club......   Naperville, Illinois        18         589
 41  Deer Creek Golf Club....   Overland Park, Kansas       18         874
</TABLE>
--------
(1) Purchased in 2000

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                   No. of     2000
            Course Name               Location (City, State)       Holes  Rent Revenues
            -----------               ----------------------       ------ -------------
                                                                               (In
                                                                           thousands)
 <C> <S>                        <C>                                <C>    <C>
 42  Dub's Dread Golf
     Course..................   Kansas City, Kansas                  18          398
 43  Westwinds Country Club..   New Market, Maryland                 18          225(2)
 44  Majestic Oaks Golf Club
     (3 Courses).............   Ham Lake, Minnesota                  45        1,327
 45  Links at Northfork,
     The.....................   Ramsey, Minnesota                    18          422
 46  Woodland Creek Golf
     Course..................   Andover, Minnesota                    9           59
 47  Royal Meadows Golf
     Course (2 courses)......   Kansas City, Missouri                27          263(2)
 48  Las Vegas National Golf
     Club....................   Las Vegas, Nevada                    18        2,606
 49  Painted Desert Golf
     Course..................   Las Vegas, Nevada                    18          991
 50  Wildhorse Country Club..   Henderson, Nevada                    18        1,431
 51  Beaver Brook Country
     Club....................   Clinton, New Jersey                  18          875
 52  Brigantine Golf Links...   Brigantine, New Jersey               18          409
 53  Rancocas Golf Club......   Willingboro, New Jersey              18          491
 54  Paradise Hills Golf
     Course..................   Albuquerque, New Mexico              18          587
 55  Carolina Shores Golf &
     Country Club............   Calabash, North Carolina             18          734
 56  Paw Creek, The Golf Club
     at......................   Charlotte, North Carolina            18          245
 57  Bent Tree Golf Club.....   Columbus, Ohio                       18          486
 58  Fowler's Mill Golf
     Course..................   Chesterland, Ohio                    27          725
 59  Royal American Golf
     Links...................   Township of Harlem, Ohio             18          418
 60  Country Club of Hershey,
     South Course............   Hershey, Pennsylvania                18          260
 61  Golden Oaks Country
     Club....................   Fleetwood, Pennsylvania              18          623
 62  Hickory Heights Golf
     Club....................   Bridgeville, Pennsylvania            18          177(2)
 63  Colonial Charters Golf
     Course..................   Longs, South Carolina                18          524
 64  Port Royal Golf &
      Racquet Club
      (3 Courses)............   Hilton Head Island, South Carolina   54        2,659
 65  Shipyard Golf Club......   Hilton Head Island, South Carolina   27        1,340
 66  Stono Ferry, The Links
     at......................   Charleston, South Carolina           18          208
 67  Forrest Crossing Golf
     Course..................   Nashville, Tennessee                 18          376
 68  Bear Creek Golf World (3
     Courses)................   Houston, Texas                       54        1,440
 69  Lake Houston Golf Club..   Huffman, Texas                       18           21(2)
 70  Longwood Golf Club......   Houston, Texas                       27        1,059
 71  Pecan Valley Golf Club..   San Antonio, Texas                   18          990
 72  Ridgeview Ranch Golf
     Course..................   Plano, Texas                         18        1,489
 73  Riverchase Golf Club....   Coppell, Texas                       18        1,223
 74  Riverside Golf Club.....   Grand Prairie, Texas                 18          715
 75  Southwyck Golf Club.....   Pearland, Texas                      18          552
 76  Trails of Frisco, The...   Frisco, Texas                        18          322
 77  Woodlake Country Club...   San Antonio, Texas                   18           12(2)
 78  Chesapeake Golf Club....   Chesapeake, Virginia                 18          511
 79  Honey Bee Golf Club.....   Virginia Beach, Virginia             18          589
 80  Kiskiack Golf Club......   Williamsburg, Virginia               18          694
 81  Reston National Golf
     Course..................   Reston, Virginia                     18        1,149
 82  Virginia Oaks Golf
     Club....................   Gainesville, Virginia                18        1,320
 83  Capitol City Golf Club..   Olympia, Washington                  18          339
 84  Classic Golf Club, The..   Spanaway, Washington                 18          291
 85  Lake Wilderness Golf
     Course..................   Maple Valley, Washington             18          323
                                                                             -------
              Total Daily Fee
     Courses.................                                                $66,540
                                                                             =======
</TABLE>
--------
(2) Sold in 2000

                                       9
<PAGE>

                     The Golf Courses--Private Club Courses

<TABLE>
<CAPTION>
                                                                   No. of      2000
            Course Name               Location (City, State)       Holes  Rent Revenues
            -----------               ----------------------       ------ --------------
                                                                          (In thousands)
 <C> <S>                        <C>                                <C>    <C>
  1  Ahwatukee Country Club..   Phoenix, Arizona                     18       $1,255
  2  Ancala Country Club.....   Scottsdale, Arizona                  18        1,097
  3  Arrowhead Country Club..   Glendale, Arizona                    18          661
  4  Red Mountain Ranch
     Country Club............   Mesa, Arizona                        18        1,208
  5  Tatum Ranch Golf Club...   Cave Creek, Arizona                  18        1,160
  6  Canyon Oaks Country
     Club....................   Chico, California                    18          497
  7  El Camino Country Club..   Oceanside, California                18            5(3)
  8  Escondido Country Club..   Escondido, California                18          851
  9  Monterey Country Club...   Palm Desert, California              27          926
 10  Oakhurst Country Club...   Clayton, California                  18        1,492
 11  Palm Valley Country Club
     (2 Courses).............   Palm Desert, California              36        1,663
 12  SeaCliff Country Club...   Huntington Beach, California         18        2,018
 13  Spanish Hills Country
     Club....................   Camarillo, California                18        1,801
 14  Sunset Hills Country
     Club....................   Thousand Oaks, California            18        1,429
 15  Wood Ranch Golf Club....   Simi Valley, California              18        1,296
 16  Heather Ridge Country
     Club....................   Aurora, Colorado                     18          361
 17  Pinery Country Club.....   Denver, Colorado                     27          707
 18  Brookstone Golf &
     Country Club............   Acworth, Georgia                     18          964
 19  The Plantation Golf
     Club....................   Boise, Idaho                         18          304
 20  Eagle Brook Country
     Club....................   Geneva, Illinois                     18        1,086
 21  Mission Hills Country
     Club....................   Northbrook, Illinois                 18          892
 22  Highlands Golf & Supper
     Club....................   Hutchinson, Kansas                   18          124
 23  Tallgrass Country Club..   Wichita, Kansas                      18          392
 24  Shenandoah Country
     Club....................   Baton Rouge, Louisiana               18          169(2)
 25  Hunt Valley Golf Club...   Phoenix, Maryland                    27        1,855
 26  Tanoan Country Club.....   Albuquerque, New Mexico              27        1,486
 27  Brandywine Country
     Club....................   Maumee, Ohio                         27          851
 28  Ivy Hills Country Club..   Cincinnati, Ohio                     18          230
 29  Oakhurst Country Club...   Grove City, Ohio                     18          477
 30  Royal Oak Country Club..   Cincinnati, Ohio                     18          434
 31  Meadowbrook Country
     Club....................   Tulsa, Oklahoma                      18          471
 32  The Trails..............   Norman, Oklahoma                     18          282
 33  Creekside Golf Club.....   Salem, Oregon                        18          669
 34  Oregon Golf Club, The...   West Linn, Oregon                    18        1,258
 35  Country Club of Hershey
     (2 Courses).............   Hershey, Pennsylvania                36        1,178
 36  Oyster Reef Golf Club...   Hilton Head Island, South Carolina   18          673(1)
 37  Gettysvue Polo, Golf &
     Country Club............   Knoxville, Tennessee                 18          830
 38  Berry Creek Country
     Club....................   Georgetown, Texas                    18          695
 39  Diamond Oaks Country
     Club....................   Fort Worth, Texas                    18          624
 40  Eldorado Country Club...   McKinney, Texas                      18        1,013
 41  Great Southwest Golf
     Club....................   Grand Prairie, Texas                 18          941
 42  Los Rios Country Club...   Plano, Texas                         18          822
 43  Oakridge Country Club...   Garland, Texas                       18          485
 44  Pecan Grove Country        Richmond, Texas                      27        1,447
     Club....................
 45  Sonterra, The Club at (2   San Antonio, Texas                   36        3,104
     Courses)................
 46  Sweetwater Country Club    Sugarland, Texas                     36        4,797
     (2 Courses).............
</TABLE>
--------
(1) Purchased in 2000

(2) Sold in 2000

(3) Fee ownership interest transferred to the Company in 2000 in satisfaction
    of the El Camino Mortgage

                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                          No. of   2000 Rent
             Course Name          Location (City, State)  Holes     Revenues
             -----------          ----------------------  ------ --------------
                                                                 (In thousands)
 <C> <S>                          <C>                     <C>    <C>
 47  Thorntree Country Club....   DeSoto, Texas             18         1,216
 48  Walden on Lake Houston
     Country Club..............   Humble, Texas             18           477
 49  Willow Fork Country Club..   Katy, Texas               18           442
 50  Woodhaven Country Club....   Forth Worth, Texas        18           348
 51  Brandermill Country Club..   Midlothian, Virginia      18         1,057
 52  Bear Creek Country Club...   Woodinville, Washington   18           921
                                                                    --------
     Total Private Club
     Courses...................                                     $ 51,441
                                                                    ========
     Total All Courses.........                                     $117,981
                                                                    ========
</TABLE>

                 The Golf Courses--Participating Mortgage Loan

<TABLE>
<CAPTION>
                                                             No. of  Type of
     Course Name                      Location (City, State) Holes    Course
     -----------                      ---------------------- ------ ----------
 <C> <S>                              <C>                    <C>    <C>
  1  Badlands Golf Club, The .......    Las Vegas, Nevada      18    Daily Fee

                   The Golf Courses--Owned by Joint Venture

<CAPTION>
                                                             No. of  Type of
               Course Name            Location (City, State) Holes    Course
               -----------            ---------------------- ------ ----------
 <C> <S>                              <C>                    <C>    <C>
  1  Pumpkin Ridge Golf Club (Ghost
     Creek)............................ Cornelius, Oregon      18   Daily Fee
  2  Pumpkin Ridge Golf Club (Witch                                 Private
     Hollow)........................... Cornelius, Oregon      18   Club
</TABLE>

Capital Improvements

  Under the Leases, the lessees are required to maintain each Golf Course in
good order, repair and appearance. Capital improvements for which the Company
is responsible would be limited to projects that the Company agreed to fund at
the time a property was acquired or projects subsequently identified by the
Company or its operators that enhance the revenue potential and long-term
value of a property. For the Golf Courses acquired through March 6, 2001, the
Company is required under the Leases to pay for various remaining capital
improvements totaling approximately $12.7 million, $12.6 million of which will
be paid by the end of 2002. The Company believes these improvements will add
value to the Golf Courses and bring the quality of the Golf Courses up to our
expected standards. Upon the Company's funding of such capital improvements,
the base rent payable under the Leases with respect to these Golf Courses will
be adjusted to reflect, over the term of the Leases, the Company's investment
in such improvements. Any subsequent capital improvements are the
responsibility of the lessees.

Item 3. LEGAL PROCEEDINGS

  Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course,
including proceedings relating to personal injury and property damage. Such
proceedings are generally brought against the operator of a golf course, but
may also be brought against the owner. Although neither the Company nor the
predecessor owners of the Golf Courses are currently parties to any legal
proceedings relating to the Golf Courses that would have a material adverse
effect upon the Company's business or financial position, it is possible that
in the future the Company could become a party to such proceedings. The
lessees are a party to certain litigation relating to the Golf Courses arising
in the ordinary course of operations. The lessees have advised the Company
that they do not believe that such litigation, if resolved against the
lessees, would have a material adverse effect upon their business or financial
position. The Leases provide that the lessees are responsible for claims based
on personal injury and property damage at the Golf Courses and require the
lessees to maintain insurance for such purposes.

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

  None.

                                      11
<PAGE>

                                    PART II

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

  a) Market Information

  The following table sets forth for periods shown the high and low sales
price for the Company's Common Stock on the New York Stock Exchange under the
symbol "TEE" and distributions declared.

<TABLE>
<CAPTION>
                                                                   Distributions
                                                  High      Low      Declared
                                                -------- --------- -------------
   <S>                                          <C>      <C>       <C>
   2000
   Fourth quarter.............................. $21.0000 $ 19.2500     $.46
   Third quarter...............................  22.6250   20.2500      .46
   Second quarter..............................  22.2500   18.8750      .45
   First quarter...............................  23.1875   19.3125      .45

   1999
   Fourth quarter.............................. $22.2500 $ 18.6875     $.45
   Third quarter...............................  24.4375   20.4375      .45
   Second quarter..............................  27.5000   23.0000      .44
   First quarter...............................  29.2500   21.3125      .44
</TABLE>

  b) Holders

  The number of record holders of the Company's Common Stock was 683 as of
March 6, 2001. The number of street name stockholders is estimated at 13,008.

  c) Distributions

  The Company paid distributions to stockholders of $1.81 per share in 2000,
of which $1.50 represents ordinary income, $0.11 represents capital gains,
$0.09 represents unrecaptured section 1250 gains and $0.11 represents return
of capital on a tax basis. In 1999, the Company paid distributions to
stockholders of $1.77 per share, of which $1.56 represents ordinary income and
$0.21 represents return of capital on a tax basis. In order to maintain its
qualification in 2000 and 1999 as a REIT for federal income tax purposes, the
Company was required to make distributions to its stockholders of at least
$1.60 and $1.44 per share, respectively. In addition, on January 12, 2001, the
Company declared a quarterly distribution for the fourth quarter of 2000 of
$0.46 per share to stockholders of record on January 31, 2001, which was paid
on February 15, 2001.

                                      12
<PAGE>

Item 6. SELECTED FINANCIAL DATA

  The following sets forth selected financial data for the Company on a
historical basis. The following data should be read in conjunction with the
financial statements (and the notes thereto) of the Company and "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
each included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                                        Year ended December 31,
                              ------------------------------------------------
                                2000      1999      1998      1997      1996
                              --------  --------  --------  --------  --------
                                 (In thousands, except per share data)
<S>                           <C>       <C>       <C>       <C>       <C>
Statement of Operations
 Data:
Revenues
  Rent......................  $117,981  $106,682  $ 83,350  $ 74,316  $ 58,898
  Equity in income from
   joint venture............       471       428       385       119       --
  Gain on sale of
   properties...............     5,564     3,216       --        158     1,199
                              --------  --------  --------  --------  --------
    Total revenues..........   124,016   110,326    83,735    74,593    60,097
                              ========  ========  ========  ========  ========
Expenses
  General & administrative..     5,642     4,933     5,156     5,336     4,734
  Depreciation &
   amortization.............    40,118    36,398    27,079    24,758    19,124
                              --------  --------  --------  --------  --------
    Total...................    45,760    41,331    32,235    30,094    23,858
                              --------  --------  --------  --------  --------
  Interest expense..........   (40,060)  (34,030)  (20,350)  (19,810)  (14,067)
  Interest income...........     2,453     2,640     1,170       364     2,110
  Gain on property
   condemnation.............       --        --      1,493       --        --
  Gain on insurance
   proceeds.................       378     2,002       --      2,231       --
  Treasury lock settlement..       --     (2,016)      --        --        --
  Other income..............       394       267       352       521       238
                              --------  --------  --------  --------  --------
Income before provision for
 taxes and minority
 interest...................    41,421    37,858    34,165    27,805    24,520
(Provision) benefit for
 taxes......................       (36)       19      (231)     (223)     (256)
                              --------  --------  --------  --------  --------
Income before minority
 interest...................    41,385    37,877    33,934    27,582    24,264
Income applicable to
 minority interest..........   (21,955)  (20,617)  (17,292)  (12,003)  (10,852)
                              --------  --------  --------  --------  --------
Net income..................  $ 19,430  $ 17,260  $ 16,642  $ 15,579  $ 13,412
                              ========  ========  ========  ========  ========
Basic earnings per share....  $   1.52  $   1.41  $   1.33  $   1.26  $   1.19
Weighted average number of
 shares.....................    12,778    12,245    12,497    12,368    11,317
Diluted earnings per share..  $   1.48  $   1.37  $   1.32  $   1.25  $   1.17
Weighted average number of
 shares.....................    13,092    12,598    12,599    12,512    11,420
<CAPTION>
                                              December 31,
                              ------------------------------------------------
                                2000      1999      1998      1997      1996
                              --------  --------  --------  --------  --------
                                 (In thousands, except per share data)
<S>                           <C>       <C>       <C>       <C>       <C>
Balance Sheet Data:
Real estate before
 accumulated depreciation...  $906,474  $878,070  $663,018  $601,882  $515,794
Total assets................   766,106   781,905   597,295   535,314   469,945
Total debt..................   456,813   450,331   283,405   299,032   230,590
Minority interest...........   177,356   194,071   166,655    96,007    98,551
Stockholders' equity........   121,834   121,501   132,224   134,890   137,670
Cash distributions declared
 per share..................      1.82      1.78      1.74      1.70      1.66
</TABLE>

                                      13
<PAGE>

<TABLE>
<CAPTION>
                                        Year ended December 31,
                             -------------------------------------------------
                               2000      1999       1998      1997      1996
                             --------  ---------  --------  --------  --------
                                 (In thousands, except property data)
<S>                          <C>       <C>        <C>       <C>       <C>
Other Data:
Company's funds from
 operations(1).............  $ 38,149  $  34,087  $ 31,203  $ 27,851  $ 23,215
Cash flows provided by
 (used in):
  Operating activities.....    80,577     68,228    60,333    55,576    44,217
  Investing activities.....   (30,156)  (204,343)  (77,483)  (94,408)  (68,481)
  Financing activities.....   (51,384)   136,895    17,163    29,306    28,399
Number of owned courses....       145        149       130       123       114
Number of owned locations..       132        135       116       112       104
</TABLE>
--------
(1) The Company believes that to facilitate a clear understanding of the
    historical consolidated operating results, funds from operations should be
    examined in conjunction with net income. Funds from operations is
    considered by the Company's management as an appropriate measure of the
    performance of an equity REIT because it is predicated on cash flow
    analyses, which the Company's management believes is more reflective of
    the value of real estate companies such as the Company rather than a
    measure predicated on generally accepted accounting principles which gives
    effect to non-cash expenditures such as depreciation. Funds from
    operations is generally defined as net income (loss) plus certain non-cash
    items, primarily depreciation and amortization. Funds from operations
    should not be considered as an alternative to net income as an indication
    of the Company's performance or as an alternative to cash flow, as defined
    by generally accepted accounting principles, as a measure of liquidity.
    The funds from operations presented may not be comparable to funds from
    operations for other REITs. The following table summarizes the Company's
    funds from operations for the years ended December 31, 2000, 1999, 1998,
    1997 and 1996.

<TABLE>
<CAPTION>
                                       For the year ended December 31,
                                   -------------------------------------------
                                    2000     1999     1998     1997     1996
                                   -------  -------  -------  -------  -------
                                               (In thousands)
<S>                                <C>      <C>      <C>      <C>      <C>
  Net income...................... $19,430  $17,260  $16,642  $15,579  $13,412
  Distributions--Preferred Units..  (9,255)  (7,392)  (4,797)     --       --
  Minority interest...............  21,955   20,617   17,292   12,003   10,852
  Depreciation and amortization...  40,466   36,758   27,472   24,883   19,124
  Gain on property condemnation...     --       --    (1,493)     --       --
  Gain on insurance proceeds......    (378)  (2,002)     --    (2,231)     --
  Gain on sale of properties......  (5,564)  (3,216)     --      (158)  (1,199)
  Treasury lock...................      --    2,016      --       --       --
  Straight-line rent and
   interest.......................  (3,643)  (3,391)     --       --       --
  Deferred compensation plan
   adjustment.....................     (58)    (589)     --       --       --
  Excess land sales...............    (363)    (259)    (342)    (469)     --
  Amortization--loan costs .......     --       --      (241)    (227)    (147)
  Depreciation--corporate ........     (50)     (74)     (87)     (69)     (47)
                                   -------  -------  -------  -------  -------
  Funds from operations .......... $62,540  $59,728  $54,446  $49,311  $41,995
  Company's share of funds from
   operations.....................      61%   57.07%   57.31%   56.48%   55.28%
                                   -------  -------  -------  -------  -------
  Company's funds from operations
   ............................... $38,149  $34,087  $31,203  $27,851  $23,215
                                   =======  =======  =======  =======  =======
</TABLE>

  In order to maintain its qualification as a REIT for federal income tax
purposes, the Company is required to make distributions to its stockholders.
The Company's distributions to stockholders have been less than the total
funds from operations because the Company is obligated to make certain
payments with respect to principal debt and capital improvements. Management
believes that funds from operations in excess of distributions, principal
reductions and capital improvement expenditures should be used to pay down
debt, to repurchase the Company's Common Stock if authorized by the Board of
Directors, or to invest in assets expected to generate returns on investment
to the Company commensurate with the Company's investment objectives and
policies.

                                      14
<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

Overview

  The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto. The forward-looking
statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") relating to certain matters
involve risks and uncertainties, including anticipated financial performance,
business prospects, anticipated capital expenditures and other similar
matters, which reflect management's best judgement based on factors currently
known. Actual results and experience could differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements as a result of a number of factors, including but not
limited to those discussed in MD&A.

  The discussion of the results of operations compares the year ended December
31, 2000 with the year ended December 31, 1999 and the year ended December 31,
1999 with the year ended December 31, 1998.

Results of Operations

 Comparison of year ended December 31, 2000 to year ended December 31, 1999

  Net income increased by approximately $2,170,000 to $19,430,000 for the year
ended December 31, 2000 compared to $17,260,000 for the year ended December
31, 1999. The increase was primarily attributable to an increase in (i) rent
revenues of approximately $11,299,000; (ii) gain on sale of properties of
approximately $2,348,000; and (iii) a decrease in gain on insurance proceeds
of approximately $1,624,000, which was offset by (i) an increase in
depreciation and amortization expense of approximately $3,720,000 (ii) an
increase in interest expense of approximately $6,030,000; and (iv) a decrease
in treasury lock settlement expense of approximately $2,016,000.

  The increase in rent revenues was due to (i) the acquisition of two golf
course properties during 2000, which accounted for approximately $1,001,000 of
the increase; (ii) a full year of rent in 2000 on 22 golf course properties
and three leasehold rights acquired in 1999, which accounted for approximately
$7,835,000 of the increase; (iii) an increase in base rent of approximately
$2,552,000 for the Golf Courses owned as of December 31, 1998; and (iv) a
decrease in percentage rent of approximately $90,000 for the Golf Courses
owned as of December 31, 1998. The increase in depreciation and amortization
expense was due to an increase in depreciation expense of approximately
$3,159,000 and an increase in amortization expense of approximately $561,000.
The increase in depreciation expense was primarily due to (i) the acquisition
of two golf course properties during 2000, which accounted for approximately
$452,000 of the increase and (ii) a full year of depreciation expense in 2000
on 21 golf course properties acquired in 1999, which accounted for
approximately $2,638,000 of the increase, which was offset by a decrease in
depreciation expense due to the sale of seven Golf Courses at six properties,
which accounted for approximately $348,000 of the decrease. The increase in
amortization expense was primarily due to a full year of amortization on three
leasehold rights acquired in 1999, which accounted for approximately $565,000
of the increase.

  The decrease in gain on insurance proceeds was due to various claims made at
four of the Golf Courses in 2000 compared to seven of the Golf Courses in
1999. The Company intends to apply the insurance proceeds to repairs and
improvements at such Golf Courses.

  The increase in interest expense was primarily due to the increase in
outstanding advances and LIBOR and base rate margins under the Company's
credit facility. At April 30, 1999, the Operating Partnership settled its
treasury lock swap transaction, resulting in a loss of approximately
$2,345,000. Such loss was netted with a gain of approximately $329,000 from
two other treasury lock swap transactions, resulting in a net loss of
approximately $2,016,000 which was recorded in the consolidated statement of
operations for the year ended December 31, 1999.

                                      15
<PAGE>

 Comparison of year ended December 31, 1999 to year ended December 31, 1998

  Net income increased by approximately $618,000 to $17,260,000 for the year
ended December 31, 1999 compared to $16,642,000 for the year ended December
31, 1998. The increase was primarily attributable to an increase in (i) rent
revenues of approximately $23,332,000; (ii) gain on sale of properties of
approximately $3,216,000; (iii) interest income of approximately $1,470,000;
and (iv) gain on insurance proceeds of approximately $2,002,000, which was
offset by (i) an increase in depreciation and amortization expense of
approximately $9,319,000; (ii) a decrease in gain on property condemnation of
approximately $1,493,000; (iii) an increase in interest expense of
approximately $13,680,000; (iv) an increase in treasury lock settlement
expense of approximately $2,016,000; and (v) an increase in income applicable
to minority interest of approximately $3,325,000.

  The increase in rent revenues is due to (i) the acquisition of 22 golf
course properties and three leasehold rights during 1999, which accounted for
approximately $18,628,000 of the increase; (ii) a full year of rent in 1999 on
seven golf course properties acquired in 1998, which accounted for
approximately $2,684,000 of the increase; (iii) an increase in base rent of
approximately $405,000 for the Golf Courses owned as of December 31, 1997; and
(iv) an increase in percentage rent of approximately $1,615,000 for the Golf
Courses owned as of December 31, 1997. The increase in depreciation and
amortization expense was due to an increase in depreciation expense of
approximately $7,870,000 and an increase in amortization expense of
approximately $1,449,000. The increase in depreciation expense was primarily
due to (i) the acquisition of 22 golf course properties during 1999, which
accounted for approximately $6,047,000 of the increase and (ii) a full year of
depreciation expense in 1999 on seven golf course properties acquired in 1998,
which accounted for approximately $1,468,000 of the increase, which is offset
by a decrease in depreciation expense due to the sale of three Golf Courses,
which accounted for approximately $163,000 of the decrease. The increase in
amortization expense was primarily due to the acquisition of three leasehold
rights, which accounted for approximately $1,758,000 of the increase.

  The increase in interest income was primarily due to (i) the mortgage loan
of approximately $12.6 million made during the year and (ii) a full year of
interest income in 1999 on the participating mortgage loan made in 1998. The
increase in gain on insurance proceeds was due to various claims made at seven
of the Golf Courses. The Company intends to apply the insurance proceeds to
repairs and improvements at such Golf Courses.

  The increase in interest expense was primarily due to the increase in
outstanding advances and LIBOR and base rate margins under the Company's
credit facility. At April 30, 1999, the Operating Partnership settled its
treasury lock swap transaction, resulting in a loss of approximately
$2,345,000. Such loss was netted with a gain of approximately $329,000 from
two other treasury lock swap transactions, resulting in a net loss of
approximately $2,016,000 which was recorded in the consolidated statement of
operations. The increase in income applicable to minority interest was
primarily due to income allocated to holders of Preferred Units.

Liquidity and Capital Resources

  At December 31, 2000, the Company had approximately $1.7 million in cash and
investments, mortgage notes receivable of approximately $15.4 million,
mortgage indebtedness of approximately $28.3 million and uncollateralized
indebtedness of approximately $428.5 million. The $456.8 million aggregate
principal amount of mortgage and uncollateralized indebtedness bears interest
at a weighted average rate of 8.71%. Of the $456.8 million of debt,
$187.6 million is fixed-rate debt and is payable either monthly, quarterly,
semi-annually or annually and matures between 2001 and 2008.

  In order to maintain its qualification as a REIT for federal income tax
purposes, the Company is required to make substantial distributions to its
stockholders. The following factors, among others, will affect cash flow from
operations and will influence the decisions of the Company's Board of
Directors regarding distributions: (i) increase in debt service resulting from
additional indebtedness; (ii) scheduled increases in base rent under the
Leases with respect to the Golf Courses; (iii) any payment to the Company of
percentage rent under the Leases with respect to the Golf Courses; and (iv)
increase in preferred distributions resulting from the issuance of

                                      16
<PAGE>

Preferred Units. Although the Company receives most of its rental payments on
a monthly basis, it has and intends to continue to pay distributions
quarterly.

  The Company anticipates that its cash from operations and its bank line of
credit, described below, will provide adequate liquidity to conduct its
operations, fund administrative and operating costs, interest payments,
capital improvements and acquisitions and allow distributions to the Company's
stockholders in accordance with the Code's requirements for qualification as a
REIT and to avoid any corporate level federal income or excise tax. Capital
improvements for which the Company is responsible are limited to projects that
the Company agreed to fund at the time a property was acquired or projects
subsequently identified by the Company or its operators that enhance the
revenue potential and long-term value of a property. For the Golf Courses
acquired through March 6, 2001, the Company is required under the Leases to
pay for various remaining capital improvements totaling approximately $12.7
million, $12.6 million of which will be paid by the end of 2002. The Company
believes these improvements will add value to the Golf Courses and bring the
quality of the Golf Courses up to the Company's expected standards in order to
enhance revenue growth. Upon the Company's funding of the capital
improvements, the base rent payable under the Leases with respect to these
Golf Courses will be adjusted to reflect, over the term of the Leases, the
Company's investment in such improvements. Any subsequent capital improvements
are the responsibility of the lessees.

  Future acquisitions will be made subject to the Company's investment
objectives and policies established to maximize both current income and long-
term growth in income. The Company's liquidity requirements with respect to
future acquisitions may be reduced to the extent the Company uses Common Stock
or Common Units as consideration for such purchases.

  In September 1999, the Board of Directors authorized, subject to certain
business and market conditions, the purchase of up to $20 million of the
Company's Common Stock. The stock repurchase plan was completed in 2000. At
March 6, 2001, the number of shares purchased under this authorization was
967,200 for a total cost of approximately $19.9 million. The shares
repurchased are considered "authorized but unissued."

  On July 30, 1999, the Company amended its $300 million uncollateralized
revolving credit facility with a group of lenders led by The First National
Bank of Chicago, as Administrative Agent (now known as Bank One). The amended
credit facility divided the $300 million revolving credit facility into (i) a
$200 million revolver (the "Revolver") and (ii) a $100 million term note (the
"Term Note") (collectively, the "New Credit Facility"). Advances under the New
Credit Facility bear interest at the Administrative Agent's alternate base
rate plus the then-applicable base rate margin or, at the option of the
Company, LIBOR plus the then-applicable LIBOR rate margin. The Administrative
Agent's alternate base rate for any day means the greater of (i) a rate per
annum equal to the corporate base rate of interest announced by the
Administrative Agent from time to time, and (ii) the federal funds rate as
published by the Federal Reserve Bank plus one-half percent (0.50%) per annum.
With respect to advances under the Revolver, the amount of the base rate
margin and LIBOR rate margin vary depending upon the amount of the Company's
outstanding indebtedness compared to its capitalization. The initial rate of
interest for borrowings under the Revolver was equal to LIBOR plus a margin of
2.25% or the alternate base rate plus 1.00%. The Revolver terminates on March
29, 2002, but may be extended by the Company for an additional year if
approved by a specified number of the lenders under the New Credit Facility.
The rate of interest for the Term Note will be equal to LIBOR plus a margin of
3.00% or the alternate base rate plus 1.75%. The Term Note terminates on March
29, 2004. The New Credit Facility eliminated the requirement under the old
credit facility for the Company to obtain certain modifications of the
covenants applicable to its $175 million fixed-rate uncollateralized senior
notes. At December 31, 2000 and March 6, 2001 there were outstanding advances
under the New Credit Facility of $264 million and $258 million, respectively.

  On July 28, 1999, the Operating Partnership completed the private placement
of 1,400,000 9.3% Series B Cumulative Redeemable Preferred Units ("Series B
Preferred Units"), representing limited partnership interests in the Operating
Partnership, to institutional investors in exchange for a contribution to the
Operating Partnership of $35 million. The Series B Preferred Units, which may
be called by the Operating Partnership at par on or after July 28, 2004, have
no stated maturity or mandatory redemption and pay a cumulative, quarterly
dividend

                                      17
<PAGE>

at an annualized rate of 9.3%. The Series B Preferred Units are not
convertible into Common Stock, but are convertible into preferred stock of the
Company under certain circumstances. The Operating Partnership used the
proceeds from such private placement to reduce outstanding indebtedness under
the Operating Partnership's revolving credit facility.

  The Company may finance future acquisitions of golf course properties with
additional borrowings under the Revolver or with issuances of the Company's or
the Operating Partnership's equity or debt securities. In the future, the
Company also may refinance a portion of the New Credit Facility with issuances
of such debt or equity securities. Any such offering which involves the sale
of the equity securities of the Company could adversely affect the market
price of shares of the Company's Common Stock held by the Company's existing
stockholders.

  In 2000, the Company purchased two Golf Courses for an aggregate initial
investment of approximately $11 million, excluding El Camino Country Club,
described below, which investment was financed by approximately $1.6 million
of cash from operations, approximately $4.7 million of advances under the
Company's credit facility, and $4.7 million of proceeds from sale of
properties in section 1031 exchange transactions. On December 28, 2000, the
fee interest in El Camino Country Club was transferred to the Company in
satisfaction of the El Camino Mortgage entered into in March 1999 as part of
the acquisition of the Acquired Cobblestone Courses. Between December 31, 2000
and March 6, 2001, the Company entered into agreements to purchase one golf
course and sell one Golf Course.

  The limited partners of the Operating Partnership have the right, in each
twelve-month period ending August 18, to sell up to one-third of their Common
Units to the Company or exchange for shares of Common Stock up to the greater
of 75,000 Common Units or one-third of their Common Units. If the Common Units
are sold for cash, the Company will have the option to pay for such Common
Units with available cash, borrowed funds or from the proceeds of an offering
of Common Stock. If the Common Units are exchanged for shares of Common Stock,
the limited partners will receive one share of Common Stock for each Common
Unit exchanged.

 Comparison of cash flow statement for year ended December 31, 2000 to year
ended December 31, 1999

  Net cash provided by operating activities increased by $12,349,000 to
$80,577,000 for the year ended December 31, 2000 compared to $68,228,000 for
the year ended December 31, 1999. The increase was primarily attributable to
(i) an increase in rent revenues of approximately $11,299,000 and (ii) an
increase in depreciation and amortization of $3,720,000, which was offset by
an increase in interest expense of approximately $6,030,000.

  Net cash used in investing activities decreased by approximately
$174,187,000 to $30,156,000 for the year ended December 31, 2000 compared to
$204,343,000 for the year ended December 31, 1999. The decrease in cash
payments was primarily attributable to decreases in (i) the issuance of
mortgage notes receivable of approximately $12,189,000; (ii) the purchase of
properties and related assets of approximately $165,356,000; and (iii)
payments for treasury lock settlements of approximately $2,345,000. The
decrease in cash payments was offset by (i) a net decrease in cash receipts
from purchases and sales of available-for-sale securities of approximately
$1,095,000; (ii) a decrease in principal payments received on mortgage notes
receivable of approximately $9,649,000; and (iii) an increase in proceeds from
the sale properties and related assets of approximately $4,974,000.

  Net cash used in financing activities increased by approximately
$188,279,000 to $51,384,000 for the year ended December 31, 2000 compared to
net cash provided by financing activities of $136,895,000 for the year ended
December 31, 1999. The change was primarily attributable to a decrease in (i)
proceeds from notes payable of approximately $482,350,000 and (ii) a decrease
in net proceeds from Preferred Units of approximately $34,067,000, which was
offset by a decrease in principal payments on notes payable of approximately
$327,664,000.

                                      18
<PAGE>

 Comparison of cash flow statement for year ended December 31, 1999 to year
ended December 31, 1998

  Net cash provided by operating activities increased by $7,895,000 to
$68,228,000 for the year ended December 31, 1999 compared to $60,333,000 for
the year ended December 31, 1998. The increase was primarily attributable to
an increase in rent revenues of approximately $23,332,000, which was offset by
an increase in interest expense of approximately $13,680,000.

  Net cash used in investing activities increased by $126,860,000 to
$204,343,000 for the year ended December 31, 1999 compared to $77,483,000 for
the year ended December 31, 1998. The increase was primarily attributable to
an increase in the purchase of Golf Courses of approximately $153,728,000.

  Net cash provided by financing activities increased by $119,732,000 to
$136,895,000 for the year ended December 31, 1999 compared to $17,163,000 for
the year ended December 31, 1998. The increase was primarily attributable to
an increase in proceeds from notes payable of approximately $490,850,000,
which was offset by (i) an increase in principal payments on notes payable of
approximately $313,823,000, and (ii) a decrease in net proceeds from Preferred
Units of approximately $38,943,000.

Other Data

  The Company believes that to facilitate a clear understanding of the
historical consolidated operating results, funds from operations should be
examined in conjunction with net income as presented in the audited
Consolidated Financial Statements. Funds from operations is considered by
management as an appropriate measure of the performance of an equity REIT
because it is predicated on cash flow analyses, which management believes is
more reflective of the value of real estate companies such as the Company
rather than a measure predicated on generally accepted accounting principles
which gives effect to non-cash expenditures such as depreciation. Funds from
operations is generally defined as net income (loss) plus certain non-cash
items, primarily depreciation and amortization. Funds from operations should
not be considered as an alternative to net income as an indication of the
Company's performance or as an alternative to cash flow, as defined by
generally accepted accounting principles, as a measure of liquidity.

  The funds from operations presented may not be comparable to funds from
operations for other REITs. The following table summarizes the Company's funds
from operations for the years ended December 31, 2000, 1999 and 1998.

<TABLE>
<CAPTION>
                                                     For the year ended
                                                        December 31,
                                                   ---------------------------
                                                    2000      1999      1998
                                                   -------   -------   -------
                                                       (In thousands)
<S>                                                <C>       <C>       <C>
Net income........................................ $19,430   $17,260   $16,642
Distributions--Preferred Units....................  (9,255)   (7,392)   (4,797)
Minority interest.................................  21,955    20,617    17,292
Depreciation and amortization.....................  40,466    36,758    27,472
Gain on property condemnation.....................     --        --     (1,493)
Gain on insurance proceeds........................    (378)   (2,002)      --
Gain on sale of properties........................  (5,564)   (3,216)      --
Treasury lock.....................................     --      2,016       --
Straight-line rent and interest...................  (3,643)   (3,391)      --
Deferred compensation plan adjustment.............     (58)     (589)      --
Excess land sales.................................    (363)     (259)     (342)
Amortization--loan costs..........................     --        --       (241)
Depreciation--corporate...........................     (50)      (74)      (87)
                                                   -------   -------   -------
Funds from operations............................. $62,540   $59,728   $54,446
Company's share of funds from operations..........      61 %   57.07 %   57.31 %
                                                   -------   -------   -------
Company's funds from operations................... $38,149   $34,087   $31,203
                                                   =======   =======   =======
</TABLE>

                                      19
<PAGE>

  In order to maintain its qualification as a REIT for federal income tax
purposes, the Company is required to make distributions to its stockholders.
The Company's distributions to stockholders have been less than the total
funds from operations because the Company is obligated to make certain
payments with respect to principal debt and capital improvements. Management
believes that funds from operations in excess of distributions, principal
reductions and capital improvement expenditures should be used to pay down
debt, to repurchase the Company's Common Stock if authorized by the Board of
Directors, or to invest in assets expected to generate returns on investment
to the Company commensurate with the Company's investment objectives and
policies.

 Comparison of funds from operations for year ended December 31, 2000 to year
ended December 31, 1999

  Funds from operations increased by $2,812,000 to $62,540,000 for the year
ended December 31, 2000 compared to $59,728,000 for the year ended December
31, 1999. The increase was primarily attributable to an increase in rent
revenues of approximately $11,299,000, which was offset by increases in (i)
interest expense of approximately $6,030,000 and (ii) distributions on
Preferred Units of approximately $1,863,000.

 Comparison of funds from operations for year ended December 31, 1999 to year
ended December 31, 1998

  Funds from operations increased by $5,282,000 to $59,728,000 for the year
ended December 31, 1999 compared to $54,446,000 for the year ended December
31, 1998. The increase was primarily attributable to an increase in rent
revenues of approximately $23,332,000, which was offset by an increase in (i)
interest expense of approximately $13,680,000 and (ii) distributions on
Preferred Units of approximately $2,595,000.

Inflation

  All the Leases of the Golf Courses provide for base and participating rent
features. All of such Leases are triple net leases requiring the lessees to
pay for all maintenance and repair, insurance, utilities and services, and,
subject to certain limited exceptions, all real and personal property taxes,
thereby minimizing the Company's exposure to increases in costs and operating
expenses resulting from inflation.

New Pronouncements Issued But Not Yet Effective

  In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 138, "Accounting for
Derivative Instruments and Hedging Activities--An Amendment of SFAS No. 133"
was issued in June 2000. SFAS No. 133, as amended, will require the Company to
recognize all derivatives on the balance sheet at fair value. The accounting
for the changes in the fair values of such derivatives would depend on the use
of the derivative and whether it qualifies for hedge accounting. SFAS No. 133
is effective for the Company's financial statements issued for periods
beginning January 1, 2000. However, SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS
Statement No. 133," defers the effective date for one year to January 1, 2001.
The Company has determined that implementing SFAS No. 133 will not materially
impact the Company's financial condition or results of operations. As of
December 31, 2000 and March 6, 2001, the Company was not participating in any
such activities and does not have any such instruments recorded on the balance
sheet.

                                      20
<PAGE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The Company's primary market risk exposure is interest rate risk. The
Company has and will continue to manage interest rate risk by (1) maintaining
a conservative ratio of fixed rate, long-term debt to total debt such that
variable-rate exposure is kept at an acceptable level, (2) using interest rate
fixing strategies where appropriate to fix rates on anticipated debt
transactions, and (3) taking advantage of favorable market conditions for
long-term debt and/or equity.

  The following table sets forth the Company's long-term debt obligations,
principal cash flows by scheduled maturity and weighted average interest rates
at December 31, 2000 (dollars in thousands):

<TABLE>
<CAPTION>
                             For the year ended December 31,
                         --------------------------------------------
                          2001      2002     2003     2004     2005    Thereafter  Total
                         -------  --------  ------  --------  -------  ---------- --------
<S>                      <C>      <C>       <C>     <C>       <C>      <C>        <C>
Long-term debt:
  Fixed-rate............ $26,048  $  7,176  $7,748  $ 47,975  $41,066   $57,616   $187,629
  Average interest
   rate.................    8.06%     8.39%   8.39%     8.58%    7.95%     7.95%      8.38%
  Variable-rate.........   1,175   166,185   1,197    96,312      279     4,036    269,184
  Average interest
   rate.................    9.68%     8.63%   9.71%     9.57%   10.29%    10.29%      9.00%
                         -------  --------  ------  --------  -------   -------   --------
    Total debt.......... $27,223  $173,361  $8,945  $144,287  $41,345   $61,652   $456,813
                         =======  ========  ======  ========  =======   =======   ========
</TABLE>

  In addition, the Company has assessed the market risk for its variable-rate
debt and believes that a 1% change in interest rates will increase or decrease
interest expense by approximately $2.7 million annually based on
$269.2 million outstanding at December 31, 2000.

                                      21
<PAGE>

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of National Golf Properties, Inc.

  In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 46 present fairly, in all material
respects, the financial position of National Golf Properties, Inc. at December
31, 2000 and 1999, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 14(a)(2) on page 46 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

  As described in Note 1(i), the Company changed its method of accounting for
contingent rental income during the year ended December 31, 1998.

PricewaterhouseCoopers LLP

Los Angeles, California
February 28, 2001

                                      22
<PAGE>

                         NATIONAL GOLF PROPERTIES, INC.

                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                             December 31,
                                                          --------------------
                                                            2000       1999
                                                          ---------  ---------
<S>                                                       <C>        <C>
                         ASSETS
                         ------

Property
  Land................................................... $  91,414  $  98,918
  Buildings..............................................   246,158    255,833
  Ground improvements....................................   457,607    417,941
  Furniture, fixtures and equipment......................    49,740     49,893
  Leasehold rights ......................................    32,081     31,543
  Construction in progress...............................    29,474     23,942
                                                          ---------  ---------
                                                            906,474    878,070
  Less: accumulated depreciation.........................  (185,453)  (152,974)
                                                          ---------  ---------
    Net property.........................................   721,021    725,096
Cash and cash equivalents................................     1,528      2,491
Investments..............................................       200        200
Mortgage notes receivable................................    15,442     27,855
Investment in joint venture..............................     6,949      7,286
Due from affiliate.......................................     1,895        --
Other assets, net .......................................    19,071     18,977
                                                          ---------  ---------
    Total assets......................................... $ 766,106  $ 781,905
                                                          =========  =========

          LIABILITIES AND STOCKHOLDERS' EQUITY
          ------------------------------------

Notes payable............................................ $ 456,813  $ 450,331
Accounts payable and other liabilities...................    10,103      9,632
Due to affiliate ........................................       --       6,370
                                                          ---------  ---------
    Total liabilities....................................   466,916    466,333
                                                          ---------  ---------
Minority interest........................................   177,356    194,071
                                                          ---------  ---------
Commitments and contingencies (Note 8)

Stockholders' Equity:
  Preferred stock, $.01 par value, 5,000,000 shares
   authorized--none issued...............................       --         --
  Common stock, $.01 par value, 40,000,000 shares
   authorized, 12,963,845 and 12,204,245 shares issued
   and outstanding at December 31, 2000 and 1999,
   respectively..........................................       130        122
  Additional paid in capital.............................   124,741    125,597
  Unamortized restricted stock compensation..............    (3,037)    (4,218)
                                                          ---------  ---------
    Total stockholders' equity...........................   121,834    121,501
                                                          ---------  ---------
    Total liabilities and stockholders' equity........... $ 766,106  $ 781,905
                                                          =========  =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       23
<PAGE>

                         NATIONAL GOLF PROPERTIES, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                       For the year ended
                                                          December 31,
                                                   ----------------------------
                                                     2000      1999      1998
                                                   --------  --------  --------
<S>                                                <C>       <C>       <C>
Revenues:
  Rent from affiliate............................. $116,763  $104,817  $ 79,652
  Rent............................................    1,218     1,865     3,698
  Equity in income from joint venture.............      471       428       385
  Gain on sale of properties......................    5,564     3,216       --
                                                   --------  --------  --------
    Total revenues................................  124,016   110,326    83,735
                                                   --------  --------  --------
Expenses:
  General and administrative......................    5,642     4,933     5,156
  Depreciation and amortization...................   40,118    36,398    27,079
                                                   --------  --------  --------
    Total expenses................................   45,760    41,331    32,235
                                                   --------  --------  --------
  Operating income................................   78,256    68,995    51,500
Other income (expense):
  Interest income from affiliates.................      649       833       --
  Interest income.................................    1,804     1,807     1,170
  Gain on property condemnation...................      --        --      1,493
  Gain on insurance proceeds......................      378     2,002       --
  Other income....................................      394       267       352
  Treasury lock settlement........................      --     (2,016)      --
  Interest expense................................  (40,060)  (34,030)  (20,350)
                                                   --------  --------  --------
Income before taxes and minority interest ........   41,421    37,858    34,165
Benefit (provision) for taxes.....................      (36)       19      (231)
                                                   --------  --------  --------
Income before minority interest...................   41,385    37,877    33,934
Income applicable to minority interest............  (21,955)  (20,617)  (17,292)
                                                   --------  --------  --------
Net income........................................ $ 19,430  $ 17,260  $ 16,642
                                                   ========  ========  ========

Basic earnings per share.......................... $   1.52  $   1.41  $   1.33
Weighted average number of shares.................   12,778    12,245    12,497
Diluted earnings per share........................ $   1.48  $   1.37  $   1.32
Weighted average number of shares.................   13,092    12,598    12,599
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       24
<PAGE>

                         NATIONAL GOLF PROPERTIES, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                             Additional             Unamortized
                          Number of   Common  Paid in   Accumulated Restricted
                           Shares     Stock   Capital     Deficit      Stock     Total
                         -----------  ------ ---------- ----------- ----------- --------
<S>                      <C>          <C>    <C>        <C>         <C>         <C>
Balance at December 31,
 1997...................  12,408,195   $124   $139,222   $ (1,360)    $(3,096)  $134,890
 Amortization of
  restricted stock......         --     --         --         --        1,560      1,560
 Issuance of restricted
  stock.................      52,000    --       1,570        --       (1,570)       --
 Exercise of stock
  options...............      59,550      1      1,210        --          --       1,211
 Distributions paid
  ($1.73 per share).....         --     --      (6,346)   (15,282)        --     (21,628)
 Allocation for minority
  interest in the
  Operating
  Partnership...........         --     --        (451)       --          --        (451)
 Net income.............         --     --         --      16,642         --      16,642
                         -----------   ----   --------   --------     -------   --------
Balance at December 31,
 1998...................  12,519,745    125    135,205        --       (3,106)   132,224
 Amortization of
  restricted stock......         --     --         --         --        1,533      1,533
 Issuance of restricted
  stock.................      97,000      1      2,645        --       (2,645)         1
 Exercise of stock
  options...............      32,300    --         658        --          --         658
 Repurchase of stock....    (444,800)    (4)    (9,097)       --          --      (9,101)
 Distributions paid
  ($1.77 per share).....         --     --      (5,002)   (17,260)        --     (22,262)
 Deferred compensation
  plan adjustment.......         --     --      (2,974)       --          --      (2,974)
 Allocation for minority
  interest in the
  Operating
  Partnership...........         --     --       4,162        --          --       4,162
 Net income.............         --     --         --      17,260         --      17,260
                         -----------   ----   --------   --------     -------   --------
Balance at December 31,
 1999...................  12,204,245    122    125,597        --       (4,218)   121,501
 Amortization of
  restricted stock......         --     --         --         --        1,536      1,536
 Issuance of stock in
  exchange for OP
  units.................   1,260,000     13      1,439        --          --       1,452
 Issuance of restricted
  stock.................      42,000      1        908        --         (909)       --
 Repurchase of
  restricted stock......     (20,000)   --        (554)       --          554        --
 Repurchase of stock....    (522,400)    (6)   (10,751)       --          --     (10,757)
 Distributions paid
  ($1.81 per share).....         --     --      (3,854)   (19,430)        --     (23,284)
 Contribution to
  deferred compensation
  plan..................         --     --        (790)       --          --        (790)
 Distribution from
  deferred compensation
  plan..................         --     --         335        --          --         335
 Allocation for minority
  interest in the
  Operating
  Partnership...........         --     --      12,411        --          --      12,411
 Net income.............         --     --         --      19,430         --      19,430
                         -----------   ----   --------   --------     -------   --------
Balance at December 31,
 2000...................  12,963,845   $130   $124,741   $    --      $(3,037)  $121,834
                         ===========   ====   ========   ========     =======   ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       25
<PAGE>

                         NATIONAL GOLF PROPERTIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                For the year ended December
                                                            31,
                                               -------------------------------
                                                 2000       1999       1998
                                               ---------  ---------  ---------
<S>                                            <C>        <C>        <C>
Cash flows from operating activities:
  Net income.................................. $  19,430  $  17,260  $  16,642
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization.............    40,118     36,398     27,079
    Amortization of loan costs................     1,402      1,082        --
    Amortization of restricted stock..........     1,536      1,533      1,560
    Minority interest in earnings.............    21,955     20,617     17,292
    Distributions from joint venture, net of
     equity in income.........................       338        344        393
    Gain on property condemnation.............       --         --      (1,493)
    Gain on insurance proceeds................      (378)    (2,002)       --
    Gain on sale of properties................    (5,564)    (3,216)       --
    Straight-line rent and interest...........    (3,643)    (3,391)       --
    Other adjustments.........................       (10)     1,746         11
    Changes in assets and liabilities:
      Other assets............................     2,247     (1,684)    (2,331)
      Accounts payable and other liabilities..      (274)       767      2,378
      Due from/to affiliate...................     3,420     (1,226)    (1,198)
                                               ---------  ---------  ---------
        Net cash provided by operating
         activities...........................    80,577     68,228     60,333
                                               ---------  ---------  ---------
Cash flows from investing activities:
  Purchase of available-for-sale securities...       --      (1,954)    (5,607)
  Proceeds from sale of available-for-sale
   securities.................................       --       3,049      5,526
  Issuance of mortgage note receivable........      (466)   (12,655)   (22,649)
  Proceeds from mortgage notes receivable.....       --       9,649        --
  Loan costs on mortgage note issued..........       --         (67)      (147)
  Proceeds from short-term investment.........       --         --         366
  Treasury lock settlement....................       --      (2,345)       --
  Purchase of property and related assets.....   (45,105)  (210,461)   (56,733)
  Investment in joint venture.................       --         --         (19)
  Proceeds from sale of properties and related
   assets.....................................    15,415     10,441      1,780
                                               ---------  ---------  ---------
        Net cash used in investing
         activities...........................   (30,156)  (204,343)   (77,483)
                                               ---------  ---------  ---------
Cash flows from financing activities:
  Principal payments on notes payable.........  (100,718)  (428,382)  (114,559)
  Proceeds from notes payable.................   107,000    589,350     98,500
  Purchase of stock under repurchase plan.....   (10,757)    (9,101)       --
  Loan costs..................................       (60)    (4,737)       (15)
  Proceeds from Preferred Units, net of
   offering expenses..........................       --      34,067     73,010
  Proceeds from stock options exercised.......       --         658      1,212
  Cash distributions..........................   (23,284)   (22,262)   (21,628)
  Limited partners' cash distributions........   (23,565)   (22,698)   (19,357)
                                               ---------  ---------  ---------
        Net cash (used in) provided by
         financing activities.................   (51,384)   136,895     17,163
                                               ---------  ---------  ---------
Net (decrease) increase in cash and cash
 equivalents..................................      (963)       780         13
Cash and cash equivalents at beginning of
 period.......................................     2,491      1,711      1,698
                                               ---------  ---------  ---------
Cash and cash equivalents at end of period.... $   1,528  $   2,491  $   1,711
                                               =========  =========  =========
Supplemental cash flow information:
  Interest paid............................... $  39,200  $  32,007  $  20,232
  Taxes paid..................................        44        117         38
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       26
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Summary of Significant Accounting Policies

 a) Organization

  National Golf Properties, Inc. (the "Company") commenced operations
effective with the completion of its initial public stock offering (the
"Offering") of common stock (the "Common Stock"), on August 18, 1993. The
Company owns and acquires golf courses located throughout the United States.
At December 31, 2000, the Company leased all but four of its golf courses to
American Golf Corporation ("AGC") pursuant to long-term triple net leases (the
"Leases"). David G. Price, the Chairman of the Board of Directors of the
Company, owns approximately 2.7% of the Company's outstanding Common Stock and
approximately 16.7% of National Golf Operating Partnership, L.P. (the
"Operating Partnership") and a controlling interest in AGC. The Company owns
substantially all of the golf courses through its 63.4% general partner
interest in the Operating Partnership. On July 8, 1994, the Operating
Partnership acquired an 89% general partner interest in Royal Golf, L.P. II
("Royal Golf"). Royal Golf owns four golf courses on Hilton Head Island, South
Carolina. On August 8, 2000, the Operating Partnership acquired the remaining
11% of Royal Golf from the limited partner. Unless the context otherwise
requires, all references to the Company's business and properties include the
business and properties of the Operating Partnership and Royal Golf.

  In conjunction with the formation of the Company and the Operating
Partnership, the partners of the entities transferring their interest in the
initial portfolio of golf courses (the "Initial Golf Courses") to the
Operating Partnership became limited partners in the Operating Partnership and
received units of common limited partnership interest in the Operating
Partnership (the "Common Units"). Their interests in the Initial Golf Courses
were carried over to the Operating Partnership on a historical cost basis
similar to pooling of interest accounting and became part of the beginning
balance of minority interest. Minority interest is primarily adjusted for the
limited partners' proportionate share of net income or loss of the Company and
any additional contributions or distributions to the limited partners.

  A Common Unit and a share of Common Stock of the Company have the same
economic characteristics inasmuch as they effectively share equally in the net
income or loss and any distributions of the Operating Partnership. The limited
partners of the Operating Partnership have the right, in each twelve-month
period ending August 18, to sell up to one-third of their Common Units to the
Company or exchange into shares of Common Stock up to the greater of 75,000
Common Units or one-third of their Common Units.

  In order for the Company to maintain its qualification as a real estate
investment trust ("REIT"), not more than 50% in value of its Common Stock may
be owned, directly or constructively, by five or fewer individuals. For the
purpose of preserving the Company's REIT qualification, the Certificate of
Incorporation prohibits direct or constructive ownership of more than 9.8% of
the Common Stock by any person. Thus, although a Common Unit is convertible
into a share of Common Stock, the conversion of the majority of the Common
Units owned by David G. Price is restricted by the Company and the ownership
limitations in order to preserve its REIT status.

  The consolidated financial statements include the accounts of the Company,
the Operating Partnership and Royal Golf. All significant intercompany
transactions and balances have been eliminated.

 b) Cash Equivalents

  The Company considers all money market funds with an original maturity of
three months or less at the date of purchase to be cash equivalents with cost
approximating fair value.

                                      27
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 c) Investments

  Debt securities that the Company expects to hold to maturity are classified
as held-to-maturity securities and reported at amortized cost. Debt securities
not classified as either held-to-maturity securities or bought and held
principally for the purpose of selling them in the near term are classified as
available-for-sale securities and reported at fair value with unrealized gains
and losses excluded from earnings and reported as a separate component of
stockholders' equity. Cost of investments sold is determined on the average
cost method.

 d) Concentration of Credit Risk

  The Company's portfolio of 146 golf courses consists of one participating
mortgage loan, which is collateralized by a mortgage on the golf course, and
ownership interests in 145 golf courses, including the two golf courses owned
by Pumpkin Ridge, in 133 separate locations in 23 states (collectively, the
"Golf Courses").

  Concentration of credit risk with respect to the Golf Courses, the majority
of which are leased to AGC, is limited due to the geographic diversification
among 23 states. The distribution of the golf courses reflects the Company's
belief that geographic diversification helps insulate the portfolio from
regional economic and climatic influences. As of December 31, 2000, the
Company had no significant concentration of credit risk.

  The Company has cash in financial institutions which is insured by the
Federal Deposit Insurance Corporation ("FDIC") up to $100,000 per institution.
At December 31, 2000 and 1999, the Company had cash accounts in excess of FDIC
insured limits.

 e) Segment Reporting

  During 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 established standards for disclosure about
operating segments and related disclosures about products and services,
geographic areas, and major customers. The Company currently operates in one
geographic area, the United States. The rent revenues from one major lessee,
AGC, amounted to approximately 99%, 98% and 96% of total rent revenues for the
years ended December 31, 2000, 1999 and 1998, respectively.

 f) Property

  Property is carried at cost. Depreciation is computed on a straight-line
basis over the estimated useful lives of the assets as follows:

<TABLE>
     <S>                                                           <C>
     Buildings....................................................      30 years
     Ground improvements..........................................      20 years
     Furniture, fixtures & equipment.............................. 3 to 10 years
</TABLE>

  Leasehold rights are carried at cost and amortized on a straight-line basis
over the lease term.

  The Leases presently provide that at the end or termination of the existing
Leases, all improvements and fixtures placed on the rental property become the
property of the Company.

  The Company assesses whether there has been an impairment in the value of
rental property by considering factors such as expected future operating
income, trends and prospects, as well as the effects of demand, competition
and other economic factors. Such factors include a lessee's ability to perform
its duties and pay rent under the terms of the lease. If the property was
leased at a significantly lower rent, the Company may recognize

                                      28
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

an impairment loss if the income stream were not sufficient to recover its
investment. Such a loss would be determined as the difference between the
carrying value, including any allocated goodwill, and the fair value of the
property, with the carrying value of the intangible asset reduced first. The
Company determines whether there has been impairment by comparing the expected
undiscounted future cash flows from each golf course with the net carrying
value for such golf course, including any related intangible asset. Management
believes no such impairment has occurred in its net property carrying values.

  When assets are sold or retired, the asset and related depreciation
allowance is eliminated from the records and any gain or loss on disposal is
included in operations.

 g) Income Taxes

  The Company qualifies as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"). A REIT will generally not be subject to federal income
taxation to the extent that it distributes at least 95% of its taxable income
to its stockholders (90% in 2001 and beyond) and complies with other
requirements. The Company paid distributions to stockholders of $1.81 per
share in 2000, of which $1.50 represents ordinary income, $0.11 represents
capital gains, $0.09 represents unrecaptured section 1250 gains and $0.11
represents return of capital on a tax basis. In addition, on January 12, 2001,
the Company declared a quarterly distribution for the fourth quarter of 2000
of $0.46 per share to stockholders of record on January 31, 2001, payable on
February 15, 2001. The Company is subject to state income and franchise taxes
in certain states in which it operates. Therefore, a tax provision has been
reflected for these income and franchise taxes.

 h) Revenue Recognition

  The Company recognizes rental revenue on an accrual basis over the terms of
the Leases. In addition, for Leases with fixed increases in rent, the total
rent revenue over the lease period is recognized on a straight-line basis.

 i) Accounting for Contingent Rent

  In May 1998, the Emerging Issues Task Force (the "EITF") of the Financial
Accounting Standards Board ("FASB") issued Issue No. 98-9, "Accounting for
Contingent Rent in Interim Financial Periods." This statement provides that
recognition of contingent rental income should be deferred until specified
targets that trigger the contingent rent are achieved. This statement applies
to all contingent rental income effective with the second quarter of 1998, at
which time the Company adopted the policy. On a quarterly basis, there was a
material impact to the Company's earnings per share, financial condition, and
results of operations. Contingent rent not recorded in the second or third
quarters was recognized in the fourth quarter. Therefore, on an annual basis,
there was no impact to the Company's earnings per share, financial condition,
or results of operations. In November 1998, Issue No. 98-9 was withdrawn by
the EITF. However, the Company continued to account for contingent rent in
accordance with Issue No. 98-9. In December 1999, the Securities and Exchange
Commission (the "SEC") issued Staff Accounting Bulletin Number 101 which
reaffirms Issue No. 98-9.

 j) Intangible Assets

  Included in other assets are intangible assets which consist of covenants
not to compete, goodwill, straight-line rent and other intangibles. Intangible
assets are carried at cost less accumulated amortization and are amortized on
a straight-line basis. Goodwill, arising from golf course acquisitions, is
amortized over the life of the Leases (15 to 20 years). Straight-line rent is
recognized over the life of the Leases. Other intangibles are amortized over
periods from one to ten years. The Company assesses whether there has been an
impairment in

                                      29
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the value of intangible assets by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's
ability to perform its duties and pay rent under the terms of the lease. If
the property was leased at a significantly lower rent, the Company may
recognize an impairment loss if the income stream is not sufficient to recover
its investment. Such a loss would be determined as the difference between the
carrying value, including any allocated goodwill, and the fair value of the
property, with the carrying value of the intangible asset reduced first. The
Company determines whether there has been impairment by comparing the expected
undiscounted future cash flow from each golf course with the net carrying
value for such golf course, including any related intangible asset. Management
believes no such impairment in the carrying value of its intangible assets has
occurred. Accumulated amortization at December 31, 2000 and 1999, was
approximately $6,483,000 and $6,689,000, respectively.

 k) Use of Estimates

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

 l) Fair Value of Financial Instruments

  To meet the reporting requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," the Company calculates the fair value of
financial instruments and includes this additional information in the notes to
the consolidated financial statements when the fair value is different than
the carrying value of those financial instruments. When the fair value
reasonably approximates the carrying value, no additional disclosure is made.
The estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.

 m) Earnings Per Share

  The Company utilizes SFAS No. 128, "Earnings Per Share." Basic net income
per share is computed based on the weighted average number of outstanding
common shares during the period. The computation of diluted earnings per share
is based on the weighted average number of outstanding common shares during
the period and the incremental shares, using the treasury stock method, from
stock options and unvested restricted stock. The incremental shares for the
years ended December 31, 2000, 1999 and 1998 were 313,887, 353,244 and
101,790, respectively.

 n) Accounting for Stock-Based Compensation

  The Company measures compensation cost for their plans using the accounting
principles prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." The pro forma disclosures of net
income, basic earnings per share and diluted earnings per share as if the fair
value based method of accounting defined in SFAS No. 123, "Accounting for
Stock-Based Compensation" had been applied, have been disclosed.

                                      30
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 o) Accounting for Derivative Instruments and Hedging Activities

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 138, "Accounting for Derivative
Instruments and Hedging Activities--An Amendment of SFAS No. 133" was issued
in June 2000. SFAS No. 133, as amended, will require the Company to recognize
all derivatives on the balance sheet at fair value. The accounting for the
changes in the fair values of such derivatives would depend on the use of the
derivative and whether it qualifies for hedge accounting. SFAS No. 133 is
effective for the Company's financial statements issued for periods beginning
January 1, 2000. However, SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective date of SFAS No. 133,"
defers the effective date for one year to January 1, 2001. The Company has
determined that implementing SFAS No. 133 will not materially impact the
Company's financial condition or results of operations. As of December 31,
2000 and 1999, the Company was not participating in any such activities and
does not have any such instruments recorded on the balance sheet.

(2) Property Acquisitions and Sales

  In 2000, the Company purchased two Golf Courses for an aggregate initial
investment of approximately $11 million. The acquisitions have been accounted
for utilizing the purchase method of accounting and, accordingly, the acquired
assets are included in the statement of operations from the date of
acquisition. The initial investment amount includes purchase price, closing
costs and other direct costs associated with the purchase. The aforementioned
golf courses are leased to AGC pursuant to long-term triple net leases.

<TABLE>
<CAPTION>
   Acquisition                                                          Initial
      Date              Course Name                 Location           Investment
   -----------          -----------                 --------         --------------
                                                                     (In thousands)
   <C>         <C>                           <S>                     <C>
     2/24/00   Canoa Hills Golf Course       Green Valley, Arizona      $ 3,493
      3/7/00   Oyster Reef Golf Club         Hilton Head Island,          7,462
                                             South Carolina
                                                                        -------
               Total Initial Investment............................     $10,955
                                                                        =======
</TABLE>

  In November 2000, the Company entered into an agreement to sell one Golf
Course.

  On October 12, 2000, the Company sold Royal Meadows Golf Course for
approximately $3 million. The Company recognized a gain of approximately $2.1
million. On September 21, 2000, the Company sold Shenandoah Country Club for
approximately $1.9 million. The Company recognized a gain of approximately
$661,000. On July 21, 2000, the Company sold Hickory Heights Golf Club and
Westwinds Country Club for a total amount of approximately $8.1 million. The
Company recognized a gain of approximately $2.2 million. On February 4, 2000,
the Company sold Lake Houston Golf Club and Woodlake Country Club for a total
amount of approximately $3.2 million. The Company recognized a gain of
approximately $564,000.

  In 2000, the Company recognized a gain on insurance proceeds of
approximately $378,000 due to various claims made at four of the Golf Courses.
The Company is applying the insurance proceeds to repairs and improvements at
such Golf Courses.

  On March 31, 1999, the Company purchased fee interests in 15 golf courses,
long-term leasehold interests in two golf courses and leasehold rights in
three golf courses and made a mortgage loan collateralized by an additional
golf course, El Camino Country Club (the "El Camino Mortgage") (collectively,
the "Acquired Cobblestone Courses"). During the three months ended March 31,
2000, the Company finalized the fair value allocation of purchase price among
the Acquired Cobblestone Courses. In addition, there were reclassifications
among the components of property.

                                      31
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  On November 12, 1999, the Company sold Binks Forest Country Club in
Wellington, Florida for approximately $6 million. The Company recognized a
gain of approximately $2 million. On September 7, 1999, the Company sold
Crescent Oaks Country Club in Clearwater, Florida for approximately $1.5
million. The Company recognized a gain of approximately $583,000. On May 25,
1999, the Company sold Sugar Ridge Golf Course in Lawrenceburg, Indiana for
approximately $3 million. The Company recognized a gain of approximately
$357,000.

  In 1999, the Company recognized a gain on insurance proceeds of
approximately $2 million due to various claims made at seven of the Golf
Courses. The Company is applying the insurance proceeds to repairs and
improvements at such Golf Courses.

  In 1998, the Company recognized a gain on property condemnation of
approximately $1.5 million due to the State of North Carolina condemning four
golf holes at one of the Company's Golf Courses for a state highway project.
The Company purchased land, for approximately $356,000, adjacent to this Golf
Course sufficient to replace the condemned holes and the condemnation proceeds
were used to design and construct the new golf holes.

(3) Investments

<TABLE>
<CAPTION>
                                                     December 31,
                                                -----------------------
                                                   2000        1999
                                                ----------- -----------
                                                Cost Market Cost Market Maturity
                                                ---- ------ ---- ------ --------
                                                    (In thousands)
   <S>                                          <C>  <C>    <C>  <C>    <C>
   Available-for-sale securities:
     Corporate Note............................ $--   $--   $200  $200   3/2000
     Corporate Note............................  200   200   --    --    3/2001
                                                ----  ----  ----  ----
       Total................................... $200  $200  $200  $200
                                                ====  ====  ====  ====
</TABLE>

  No available-for-sale securities were sold in 2000. In 1999, available-for-
sale securities were sold resulting in proceeds of $3,049,000. There were no
gross realized gains or losses in 1999.

(4) Mortgage Notes Receivable

  At December 31, 2000 and 1999, the Company held collateralized mortgage
notes receivable of approximately $15,442,000 and $27,855,000, respectively,
The range of interest rates for mortgage notes receivable was 9.25% to 12% in
2000, 8.75% to 12% in 1999 and 8.75% to 11.5% in 1998. Interest recognized for
the years ended December 31, 2000, 1999 and 1998 totaled approximately
$2,047,000, $2,410,000 and $989,000, respectively.

  The fair value of mortgage notes receivable at December 31, 2000 and 1999 is
estimated to be approximately $15,381,000 and $28,322,000, respectively, based
on current interest rates for comparable loans.

(5) Investment in Joint Venture

  On September 8, 1997, the Operating Partnership acquired a 50% general
partner interest in Pumpkin Ridge Joint Venture ("Pumpkin Ridge") for
approximately $8.1 million. Pumpkin Ridge owns two golf courses in Cornelius,
Oregon. The Company accounts for its investment in Pumpkin Ridge under the
equity method of accounting. The aforementioned golf courses are leased to AGC
pursuant to a long-term triple net lease.


                                      32
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(6) Treasury Lock Swap Transactions

  On June 15, 1998, in anticipation of the Operating Partnership placing $100
million of fixed-rate, ten-year notes or some similar security, the Operating
Partnership entered into a $100 million treasury lock swap transaction with a
financial institution in order to hedge its exposure to interest rate
fluctuations. Under this agreement, the Operating Partnership pays or receives
an amount equal to the difference between the treasury lock rate and the
market rate on the date of settlement, based on the principal of $100 million.
At April 30, 1999, the Operating Partnership settled its treasury lock swap
transaction, resulting in a loss of approximately $2,345,000. Such loss was
netted with a gain of approximately $329,000 from two other treasury lock swap
transactions, resulting in a net loss of approximately $2,016,000 which was
recorded in the consolidated statement of operations for the year ended
December 31, 1999.

(7) Notes Payable

  Notes payable consist of the following:

<TABLE>
<CAPTION>
                                                       December 31,
                             Interest    Interest    -----------------
   Type of Collateral          Rate       Payment      2000     1999   Maturity
   ------------------        --------  ------------- -------- -------- --------
                                                      (In thousands)
<S>                          <C>       <C>           <C>      <C>      <C>
Mortgage note..............     6.00%        Monthly $    --  $  1,500  8/2000
Mortgage note..............     5.50%      Quarterly      100      292  5/2001
Mortgage note..............     7.86%      Quarterly   19,301   20,000  7/2001
Uncollateralized note--
 revolver .................  Various         Various  165,000  149,000  3/2002
Uncollateralized note--term
 note .....................     9.57%        Various   99,000  100,000  3/2004
Mortgage note..............     6.00%       Annually    3,750    3,750 10/2004
Uncollateralized note......                                73       67 11/2004
Uncollateralized notes ....     8.68%  Semi-annually   44,088   45,760 12/2004
Uncollateralized notes ....     8.73%  Semi-annually   44,964   46,560  6/2005
Uncollateralized notes ....     7.90%  Semi-annually   37,672   38,881  6/2006
Uncollateralized notes ....                             2,404    2,710  7/2006
Uncollateralized notes ....     8.00%  Semi-annually   33,517   34,525 12/2006
Uncollateralized notes.....     8.00%        Monthly      189      213  8/2007
Uncollateralized notes.....     8.00%      Quarterly    1,571    1,725  1/2008
Mortgage notes ............    10.29%        Monthly    5,184    5,348  8/2014
                                                     -------- --------
                                                     $456,813 $450,331
                                                     ======== ========
</TABLE>

  The following is a schedule of maturities on notes payable for the next five
years ending December 31 and in total thereafter:

<TABLE>
<CAPTION>
                                                                      Amount
                                                                  --------------
                                                                  (In thousands)
       <S>                                                        <C>
       2001......................................................    $ 27,223
       2002......................................................     173,361
       2003......................................................       8,945
       2004......................................................     144,287
       2005......................................................      41,345
       Thereafter................................................      61,652
                                                                     --------
                                                                     $456,813
                                                                     ========
</TABLE>

                                      33
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The note agreements contain, among other things, covenants restricting the
sale of property and certain financial ratios and reporting requirements.

  On July 30, 1999, the Company amended its $300 million uncollateralized
revolving credit facility with a group of lenders led by The First National
Bank of Chicago, as Administrative Agent (now known as Bank One). The amended
credit facility divided the $300 million revolving credit facility into (i) a
$200 million revolver (the "Revolver") and (ii) a $100 million term note (the
"Term Note") (collectively, the "New Credit Facility"). Advances under the New
Credit Facility bear interest at the Administrative Agent's alternate base
rate plus the then-applicable base rate margin or, at the option of the
Company, LIBOR plus the then-applicable LIBOR rate margin. The Administrative
Agent's alternate base rate for any day means the greater of (i) a rate per
annum equal to the corporate base rate of interest announced by the
Administrative Agent from time to time, and (ii) the federal funds rate as
published by the Federal Reserve Bank plus one-half percent (0.50%) per annum.
With respect to advances under the Revolver, the amount of the base rate
margin and LIBOR rate margin vary depending upon the amount of the Company's
outstanding indebtedness compared to its capitalization. The initial rate of
interest for borrowings made under the Revolver was equal to LIBOR plus a
margin of 2.25% or the alternate base rate plus 1.00%. The Revolver terminates
on March 29, 2002, but may be extended by the Company for an additional year
if approved by a specified number of the lenders under the New Credit
Facility. The rate of interest for the Term Note will be equal to LIBOR plus a
margin of 3.00% or the alternate base rate plus 1.75%. The Term Note
terminates on March 29, 2004. The New Credit Facility eliminated the
requirement under the old facility for the Company to obtain certain
modifications of the covenants applicable to its $175 million fixed-rate
uncollateralized senior notes. There were outstanding advances of $264 million
and $249 million under the New Credit Facility as of December 31, 2000 and
1999, respectively. The Company intends to roll over the advances due in 2001
to a future period.

  In connection with the purchase of Eagle Brook Country Club during 1997, the
Company entered into a three year collateralized note for $1.5 million with
the seller of the property. During the first year of the note, no interest was
paid or accrued on the outstanding principal balance. Thereafter, interest
accrues on the outstanding principal balance at the rate of 6% per annum. The
interest rate used to discount the note was 6%. The discount was amortized
over the first year of the note using the effective interest method. The note
was paid at maturity in August, 2000.

  In connection with the purchase of Gettysvue Polo, Golf & Country Club
during 1997, the Company entered into a seven-year, interest bearing,
collateralized note for $3,750,000 with the seller of the property. During the
first year of the note, no interest was paid or accrued on the outstanding
principal balance. For years two through four, the interest rate is 6% per
annum. For years five through seven, the interest rate is 8% per annum. The
interest rate used to discount the note was 6%. The discount was amortized
over the first year of the note using the effective interest method.

  In 1996, the Operating Partnership placed $75 million of fixed-rate,
uncollateralized notes due 2006 with a group of institutional investors. The
notes were issued in two series. The first note series in the amount of
$40 million was issued in July 1996 with a fixed interest rate of 7.9%, and
the second note series in the amount of $35 million was issued in December
1996 with a fixed interest rate of 8%.

  In connection with the combined purchase of Monterey Country Club and Palm
Valley Country Club during 1995, the Company entered into an eleven-year, non-
interest bearing, uncollateralized note for $4,000,000 with the seller of the
properties. The interest rate used to discount the note was 7.75%. The
discount is being amortized over the life of the loan using the effective
interest method. The note requires fixed payments of $500,000 annually
beginning in 1999 and ending in 2006. The discounted note balance at December
31, 2000 and 1999 was approximately $2,404,000 and $2,710,000, respectively.
The unamortized discount balance at December 31, 2000 and 1999 was
approximately $596,000 and $790,000, respectively.

                                      34
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  In 1994, the Operating Partnership placed $100 million of fixed-rate,
uncollateralized notes due 2004 and 2005 with a group of institutional
investors. The notes were issued in two series of $50 million. The first note
series was issued with a fixed interest rate of 8.68%, and the second note
series was issued with a fixed interest rate of 8.73%.

  A limited partner who owns or controls 65,003 Common Units is the holder of
a promissory note for approximately $1.6 million that the Company assumed at
the time of the Offering in connection with the Company's acquisition of four
golf courses from a corporation that previously had been 50% owned by such
limited partner. The interest rate is 8% per annum with a maturity date in
January 2008. The Company made interest payments in 2000 and 1999 of
approximately $133,000 and $145,000, respectively.

  The fair value of notes payable at December 31, 2000 and 1999 is estimated
to be approximately $458,965,000 and $443,425,000, respectively, based on
current interest rates for comparable loans. The net book value at December
31, 2000 and 1999 of the assets collateralizing the notes payable is $43.1
million and $52.8 million, respectively.

(8) Commitments and Contingencies

  The Company is required under the Leases to pay for various remaining
capital improvements totaling approximately $12.7 million, $12.6 million of
which will be paid by the end of 2002. Any subsequent capital improvements to
these golf courses are the responsibility of the Lessees.

  In addition, the Company leases the land associated with Bear Creek Golf
World from a local municipality pursuant to a ground lease. At December 31,
2000, there was a net book value of approximately $2,095,000 of improvements
at this property included in buildings, ground improvements and furniture,
fixtures and equipment on the consolidated balance sheet. At the termination
of the lease in June 2022, all fixed improvements are surrendered to the local
municipality. Under the terms of the ground lease, the Company remits a
percentage of the green fees and net profits from the sale of food and
beverages to the local municipality. For the years ended December 31, 2000,
1999 and 1998, the ground lease expense was approximately $387,000, $447,000
and $375,000, respectively.

  Also, the Company leases a portion of land associated with Mesquite Golf &
Country Club from various landowners. The leases for this property expire
between 2041 and 2043. AGC, as the lessee under the Lease, is required to make
all ground lease payments. In addition, the Company leases the land associated
with Ridgeview Ranch Golf Course and The Vineyard at Escondido Golf Club
pursuant to long-term ground leases which expire in 2025.

  Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course,
including proceedings relating to personal injury and property damage. Such
proceedings are generally brought against the operator of a golf course, but
may also be brought against the owner. Although neither the Company nor the
predecessor owners of the Golf Courses are currently parties to any legal
proceedings relating to the Golf Courses that would have a material adverse
effect upon the Company's business or financial position, it is possible that
in the future the Company could become a party to such proceedings.

(9) Stock Repurchase Plan

  In September 1999, the Board of Directors authorized, subject to certain
business and market conditions, the purchase of up to $20 million of the
Company's Common Stock. The stock repurchase plan was completed during 2000.
At December 31, 2000 and 1999, the number of shares purchased under this
authorization was

                                      35
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

967,200 and 444,800 for a total cost of approximately $19.9 million and $9.1
million, respectively. The shares repurchased are considered "authorized but
unissued."

(10) Preferred Units

  On July 28, 1999, the Operating Partnership completed the private placement
of 1,400,000 9.3% Series B Cumulative Redeemable Preferred Units ("Series B
Preferred Units"), representing limited partnership interests in the Operating
Partnership, to institutional investors in exchange for a contribution to the
Operating Partnership of $35 million. The Series B Preferred Units, which may
be called by the Operating Partnership at par on or after July 28, 2004, have
no stated maturity or mandatory redemption and pay a cumulative, quarterly
dividend at an annualized rate of 9.3%. The Operating Partnership used the
proceeds from such private placement to reduce outstanding indebtedness under
the Operating Partnership's revolving credit facility.

  On March 4, 1998, the Operating Partnership completed the private placement
of 1,200,000 8% Series A Cumulative Redeemable Preferred Units ("Series A
Preferred Units") (collectively, with Series B Preferred Units, "Preferred
Units"), representing a limited partnership interest in the Operating
Partnership, to an institutional investor in exchange for a contribution to
the Operating Partnership of $60 million. The Series A Preferred Units, which
may be called by the Operating Partnership at par on or after March 4, 2003,
have no stated maturity or mandatory redemption and pay a cumulative,
quarterly dividend at an annualized rate of 8%. The Operating Partnership used
$58 million of the approximately $58.5 million of net proceeds from such
private placement to reduce outstanding indebtedness under the Operating
Partnership's revolving credit facility.

  Also, on April 20, 1998, the Operating Partnership completed on the same
terms as above the private placement of an additional 300,000 Series A
Preferred Units to the same institutional investor in exchange for a
contribution to the Operating Partnership of $15 million. The Operating
Partnership used $14.5 million of the approximately $14.6 million of net
proceeds from such private placement to reduce outstanding indebtedness under
the Operating Partnership's revolving credit facility.

  The Preferred Units and the dividends attributable to such Preferred Units
have been reported as a component of minority interest in the related
consolidated financial statements. The Preferred Units are not convertible
into Common Stock, but are convertible into preferred stock of the Company.

(11) Lease Rental Agreements

  Future base rents to be received by the Company under the Leases for the
next five years ending December 31 and in total thereafter are as follows:

<TABLE>
<CAPTION>
                                                                      Amount
                                                                  --------------
                                                                  (In thousands)
       <S>                                                        <C>
       2001......................................................   $  114,924
       2002......................................................      114,924
       2003......................................................      114,924
       2004......................................................      114,924
       2005......................................................      114,924
       Thereafter................................................      730,112
                                                                    ----------
                                                                    $1,304,732
                                                                    ==========
</TABLE>

  The base rent for the first year for each golf course under the Leases is
initially set at a fixed amount. Thereafter, generally with respect to the
Leases for the Initial Golf Courses, minimum rent is increased each

                                      36
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

year by 4% or, if lower, 150% of the annual percentage increase in the
Consumer Price Index ("CPI") (the "Base Rent Escalation"). For these Leases,
generally percentage rent is paid to the Company each year in the amount, if
any, by which the sum of 35% of Course Revenue in excess of a baseline amount
plus 5% of Other Revenue in excess of a baseline amount exceeds the cumulative
Base Rent Escalation since the commencement date of such Leases. "Course
Revenue" is generally defined in the Leases to include all revenue received
from the operation of the applicable golf course, including revenues from
memberships, initiation fees, dues, green fees, guest fees, driving range
charges and golf cart rentals, but excluding those revenues described as Other
Revenue. "Other Revenue" is generally defined in the Leases to include all
revenue received from food and beverage and merchandise sales and other
revenue not directly related to golf activities. AGC has options to extend the
term of each lease for one to three five-year terms. Generally, for the Leases
entered into subsequent to the Offering, the rent is based upon the greater of
(a) the minimum base rent or (b) a specified percentage of Course Revenue and
Other Revenue. The minimum base rent under these Leases is increased for
specified years during the Lease term based upon increases in the CPI,
provided that each such annual CPI increase shall not exceed five percent.
Percentage rent income for the years ended December 31, 2000, 1999 and 1998
was approximately $8,340,000, $8,453,000 and $6,691,000, respectively.

  For the leases of the Acquired Cobblestone Courses, the base rent generates
an initial return on the Operating Partnership's investment of 8.75% and will
step-up on a sequential basis each year to 9.25%, 9.75%, 10.25%, 10.75%,
11.25%, and finally to 11.75% in 2005. GAAP requires, for leases with fixed
increases in rent, the total rent revenue over the lease period be straight-
lined. For the years ended December 31, 2000 and 1999, the straight-lining of
rent resulted in additional rent revenue of approximately $3,530,000 and
$3,391,000, respectively.

(12) Stock Options and Awards

  The Company has established the 1993 Stock Incentive Plan (the "1993 Plan")
and the 1997 Equity Participation Plan (the "1997 Plan"), under which
executive officers and other key employees of the Company and AGC may be
granted stock options or restricted stock. Restricted stock is subject to
restrictions determined by the Company's Compensation Committee. The
Compensation Committee, comprised of Directors who are not officers of the
Company, determines compensation, including awards under the 1993 Plan and
1997 Plan, for the Company's executive officers. The shares of restricted
stock will be sold at a purchase price equal to $.01 and will vest 20% per
year over a five year period. Restricted stock has the same dividend and
voting rights as other common stock and is considered to be currently issued
and outstanding. Compensation expense is determined by reference to the market
value on the date of grant and is being amortized on a straight-line basis
over the five year vesting period. Such expense amounted to approximately
$1,536,000, $1,533,000 and $1,560,000 for the years ended December 31, 2000,
1999 and 1998, respectively.

                                      37
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Stock options vest at 25% per year over four years and are exercisable at
the market value on the date of grant. The options' maximum term is ten years.
The following table summarizes the restricted stock and stock option
transactions pursuant to the 1993 Plan for the years ended December 31, 2000,
1999 and 1998:

<TABLE>
<CAPTION>
                            Number of Shares-   Number of      Weighted Average
                            Restricted Stock  Shares-Options Option Exercise Price
                            ----------------- -------------- ---------------------
   <S>                      <C>               <C>            <C>
   Outstanding at December
    31, 1997...............      140,000         395,125            $20.57
     Vested................      (66,500)            --                --
     Cancelled.............          --           (1,600)            20.38
     Exercised.............          --          (59,550)            20.34
                                 -------         -------            ------
   Outstanding at December
    31, 1998...............       73,500         333,975            $20.61
     Vested................      (23,500)            --                --
     Exercised.............          --          (32,300)            20.38
                                 -------         -------            ------
   Outstanding at December
    31, 1999...............       50,000         301,675            $20.63
     Vested................      (20,000)            --                --
     Cancelled.............          --          (24,350)            20.38
     Forfeited.............       (4,000)            --                --
                                 -------         -------            ------
   Outstanding at December
    31, 2000...............       26,000         277,325            $20.66
                                 =======         =======            ======
</TABLE>

<TABLE>
<CAPTION>
                                                   Number
                                                     of      Weighted Average
                                                   Shares  Option Exercise Price
                                                   ------- ---------------------
   <S>                                             <C>     <C>
   Options exercisable at:
     December 31, 2000 ........................... 277,325        $20.66
     December 31, 1999 ........................... 296,675        $20.11
     December 31, 1998 ........................... 323,975        $20.45
</TABLE>

  The range of exercise prices for the options outstanding at December 31,
2000 under the 1993 Plan is $18.50 through $25.875 with a weighted average
remaining contractual life of 2.9 years. The range of exercise prices for
options exercisable at December 31, 2000 is $18.50 through $25.875 with a
weighted average remaining contractual life of 2.9 years.

  As of December 31, 2000, a total of 807,925 additional shares remain
unissued under the 1993 Plan. There were 1,600,000 shares originally reserved
for issuance under the 1993 Plan. When the 1997 Plan was established, the 1993
Plan was terminated regarding future grants of restricted stock and stock
options.

                                      38
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The following table summarizes the restricted stock and stock option
transactions pursuant to the 1997 Plan for the years ended December 31, 2000,
1999 and 1998:

<TABLE>
<CAPTION>
                            Number of Shares-   Number of      Weighted Average
                            Restricted Stock  Shares-Options Option Exercise Price
                            ----------------- -------------- ---------------------
   <S>                      <C>               <C>            <C>
   Outstanding at December
    31, 1997...............          --           22,500            $30.06
   Granted.................       50,000          50,000             30.31
                                 -------         -------            ------
   Outstanding at December
    31, 1998...............       50,000          72,500            $30.23
   Granted.................       95,000          80,000             27.42
   Vested..................      (10,000)            --                --
                                 -------         -------            ------
   Outstanding at December
    31, 1999...............      135,000         152,500            $28.76
   Granted.................       40,000          55,000             21.00
   Vested..................      (29,000)            --                --
   Cancelled...............          --          (20,000)            27.42
   Forfeited...............      (16,000)            --                --
                                 -------         -------            ------
   Outstanding at December
    31, 2000...............      130,000         187,500            $23.02
                                 =======         =======            ======
</TABLE>

<TABLE>
<CAPTION>
                                                  Number     Weighted Average
                                                 of Shares Option Exercise Price
                                                 --------- ---------------------
   <S>                                           <C>       <C>
   Options exercisable at:
     December 31, 2000..........................  56,875          $29.47
     December 31, 1999..........................  23,750          $30.19
     December 31, 1998..........................   5,625          $30.06
</TABLE>

  The range of exercise prices for the options outstanding at December 31,
2000 under the 1997 Plan is $21.00 through $30.31 with a weighted average
remaining contractual life of 7.9 years. The range of exercise prices for
options exercisable at December 31, 2000 is $27.42 through $30.31 with a
remaining contractual life of 7.2 years.

  As of December 31, 2000, a total of 433,500 additional shares remain
reserved for issuance under the 1997 Plan. There were 800,000 shares
originally reserved for issuance under the 1997 Plan.

                                      39
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The Company also has adopted the 1995 Independent Director Equity
Participation Plan, pursuant to which directors of the Company may be granted
stock options and restricted stock. The shares of restricted stock will be
sold at a purchase price equal to $.01 and will vest at the earlier of (i) the
fifth anniversary of the date of grant or (ii) the directors' normal
retirement at or after age 65. Restricted stock has the same dividend and
voting rights as other common stock and is considered to be currently issued
and outstanding. Stock options vest on the first anniversary of the date on
which the option was granted and are exercisable at the market value on the
date of grant. The options' maximum term is ten years. The following table
summarizes the restricted stock and stock option transactions pursuant to the
1995 Independent Director Equity Participation Plan for the years ended
December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                            Number of Shares-   Number of     Weighted Average
                            Restricted Stock  Share-Options Option Exercise Price
                            ----------------- ------------- ---------------------
   <S>                      <C>               <C>           <C>
   Outstanding at December
    31, 1997...............       14,000         32,000            $25.44
   Granted.................        2,000          8,000             27.25
                                 -------         ------            ------
   Outstanding at December
    31, 1998...............       16,000         40,000            $25.80
   Granted.................        2,000          8,000             21.25
                                 -------         ------            ------
   Outstanding at December
    31, 1999...............       18,000         48,000            $25.04
   Granted.................        2,000          8,000            $19.63
   Vested..................      (10,000)           --                --
                                 -------         ------            ------
   Outstanding at December
    31, 2000...............       10,000         56,000            $24.27
                                 =======         ======            ======
</TABLE>

<TABLE>
<CAPTION>
                                                  Number     Weighted Average
                                                 of Shares Option Exercise Price
                                                 --------- ---------------------
   <S>                                           <C>       <C>
   Options exercisable at:
     December 31, 2000..........................  48,000          $25.04
     December 31, 1999..........................  40,000          $25.80
     December 31, 1998..........................  32,000          $25.44
</TABLE>

  The range of exercise prices for the options outstanding at December 31,
2000 under the 1995 Independent Director Equity Participation Plan is $19.63
through $31.50 with a weighted average remaining contractual life of 6.9
years. The range of exercise prices for options exercisable at December 31,
2000 is $19.75 through $31.50 with a weighted average remaining contractual
life of 6.5 years.

  As of December 31, 2000, a total of 72,000 shares remain reserved for
issuance under the 1995 Independent Director Equity Participation Plan. There
were 148,000 shares originally reserved for issuance under the 1995
Independent Director Equity Participation Plan.

                                      40
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" and will continue to use the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, no compensation cost
has been recognized for the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant date for awards in 2000, 1999 and 1998 consistent with the provisions of
SFAS No. 123, the Company's net income, basic earnings per share and diluted
earnings per share would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                                          For the year ended
                                                             December 31,
                                                        -----------------------
                                                         2000    1999    1998
                                                        ------- ------- -------
                                                         (In thousands, except
                                                            per share data)
   <S>                                                  <C>     <C>     <C>
   Net income, as reported............................. $19,430 $17,260 $16,642
   Net income, pro forma............................... $19,313 $16,953 $16,479
   Basic earnings per share, as reported............... $  1.52 $  1.41 $  1.33
   Basic earnings per share, pro forma................. $  1.51 $  1.38 $  1.32
   Diluted earnings per share, as reported............. $  1.48 $  1.37 $  1.32
   Diluted earnings per share, pro forma............... $  1.48 $  1.35 $  1.31
</TABLE>

  The weighted average fair value of options granted during 2000, 1999 and
1998 are $1.79, $2.59 and $3.61, respectively. The fair value of each option
grant issued in 2000, 1999 and 1998 is estimated at the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions: (a) dividend yield of 8.24% in 2000, 8.52% in 1999 and 5.92% in
1998, (b) expected volatility of the Company's stock of 22.12% in 2000, 21.2%
in 1999 and 20.63% in 1998, (c) a risk free interest rate based on U.S. Zero
Coupon Bonds with time of maturity approximately equal to the options'
expected time to exercise, and (d) expected option lives of four years for
options granted in 2000, 1999 and 1998, respectively.

(13) 401(k) Plan

  The Company established a qualified retirement plan designed to qualify
under Section 401(k) of the Code (the "401(k) Plan"). The 401(k) Plan allows
participants to defer up to 20% of their eligible compensation on a pre-tax
basis subject to certain maximum amounts. Matching contributions may be made
in amounts and at times determined by the Company. The 401(k) Plan provides
for matching contributions by the Company in an amount equal to fifty-cents
for each one dollar of participant contributions up to a maximum of three
percent of the participant's salary per year. Participants received credit for
employment with the predecessors of the Company and affiliates. Amounts
contributed by the Company for a participant will vest over five years.
Employees of the Company will be eligible to participate in the 401(k) Plan if
they meet certain requirements concerning minimum age and period of credited
service.

  For the years ended December 31, 2000, 1999 and 1998 the Company's
contributions to the 401(k) Plan were approximately $19,000, $20,000 and
$21,000, respectively.

(14) Deferred Compensation Plan

  The Company has a deferred compensation arrangement whereby vested
restricted shares of the Company's stock are placed in a "Rabbi Trust." The
executive will not be taxed on the stock until taking possession at the end of
the deferred period. At the end of the deferral period, the deferred
compensation liability will be settled in stock or cash by having the trust
sell the stock in the open market. In accordance with EITF 97-14 "Accounting
for Deferred Compensation Arrangements Where Amounts Earned Are Held in a
Rabbi Trust and Invested," the Company has consolidated the net assets of the
trust into its financial statements. In accordance with EITF 97-14, changes in
the share price of the Company's stock falling outside of the transition
differential

                                      41
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

will be recognized as either an increase or decrease in expense. During the
years ended December 31, 2000 and 1999, respectively, the Company recognized a
decrease in expense of approximately $58,000 and $549,000, before minority
interest adjustment of approximately $22,000 and $242,000, due to a decrease
in the Company's stock price. Additionally, the Company recognized a reduction
in additional paid in capital of approximately $3 million before minority
interest adjustment of approximately $1.1 million related to the transition
adjustment in 1999. In addition, key executives of the Company may elect to
defer receiving up to 100% of their compensation in any one year until a later
year.

(15) Related Party Transactions

  The Company has in the past and will continue to identify golf courses it
seeks to acquire and will lease such acquired golf courses to AGC and other
golf course operators. The Company evaluates potential golf course
acquisitions based on a golf course's ability to generate cash flows
sufficient to enable an operator to operate the course profitably and provide
the Company its desired rate of return on its capital investment. Such
evaluation is integral to the Company's determination of the price it is
willing to pay for a particular course. The Company's acquisition of a course
is recorded in the Company's financial statements at cost and the value of
such course then is evaluated periodically to determine its carrying value
based on the cash flow from the lease of such property. Because AGC may be
deemed to be an affiliate of the Company, the Company's leases with AGC may
not reflect arms-length transactions. As a result, there is a risk that the
terms of such leases are not as favorable to the Company as the terms would
have been if the Company leased its golf courses to unaffiliated operators
and, if the Company could have obtained more favorable terms, that the
Company's financial statements understate the returns that the Company could
obtain on leases of such properties. It is management's belief, however, that
the terms and conditions of its leases with AGC are no less favorable to the
Company than the terms and conditions that the Company could obtain if it
leased its golf courses to operators other than AGC.

(16) Statement of Cash Flows--Supplemental Disclosures

  Non-cash transactions for the year ended December 31, 2000 include a limited
partner's exchange on March 14, 2000, of all of its 1,250,000 Common Units for
1,250,000 shares of Common Stock. Additionally, on December 28, 2000, the fee
interest in El Camino Country Club was transferred to the Company in
satisfaction of the El Camino Mortgage entered into in March 1999 as part of
the acquisition of the Acquired Cobblestone Courses.

  Non-cash transactions for the year ended December 31, 1999 include
approximately $13.3 million in capital improvements accrued but not paid and
approximately $5.7 million of golf course acquisitions which were financed by
notes payable.

(17) Other Data

  AGC is the lessee of all but four of the golf courses in the Company's
portfolio. AGC is a golf course management company that operates a diverse
portfolio of golf courses for a variety of golf course owners including
municipalities, counties and others. AGC does not own any golf courses, but
rather manages and operates golf courses either as a lessee under leases,
generally triple net, or pursuant to management agreements. AGC derives
revenues from the operation of golf courses principally through receipt of
green fees, membership initiation fees, membership dues, golf cart rentals,
driving range charges and sales of food, beverages and merchandise.

                                      42
<PAGE>

                         NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The following table sets forth certain condensed financial information
concerning AGC:

<TABLE>
<CAPTION>
                                                                December 31,
                                                              -----------------
                                                                2000     1999
                                                              -------- --------
                                                               (In thousands)
   <S>                                                        <C>      <C>
   Current assets............................................ $ 93,851 $ 99,292
   Non-current assets........................................  179,140  179,566
                                                              -------- --------
   Total assets.............................................. $272,991 $278,858
                                                              ======== ========
   Total current liabilities................................. $119,739 $102,701
   Total long-term liabilities...............................  136,910  161,204
   Minority interest.........................................      158      760
   Total shareholders' equity................................   16,184   14,193
                                                              -------- --------
   Total liabilities and shareholders' equity................ $272,991 $278,858
                                                              ======== ========
</TABLE>

<TABLE>
<CAPTION>
                                                          For the year ended
                                                             December 31,
                                                      --------------------------
                                                        2000     1999     1998
                                                      -------- -------- --------
                                                            (In thousands)
   <S>                                                <C>      <C>      <C>
   Total revenues.................................... $746,348 $697,575 $575,853
                                                      -------- -------- --------
   Net income........................................ $  2,133 $  8,656 $  4,746
                                                      ======== ======== ========
</TABLE>

(18) Quarterly Financial Information (Unaudited)

  Summarized quarterly financial data for the Company for the years ended
December 31, 2000 and 1999 is as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                    Quarter ended
                                      -----------------------------------------
   Fiscal 2000                        March 31 June 30 September 30 December 31
   -----------                        -------- ------- ------------ -----------
   <S>                                <C>      <C>     <C>          <C>
   Revenues.......................... $27,982  $27,523   $31,252      $37,259
   Operating income.................. $15,678  $16,387   $20,208      $25,983
   Net income........................ $ 2,192  $ 2,618   $ 5,265      $ 9,355
   Basic earnings per share ......... $  0.18  $  0.20   $  0.40      $  0.74
   Diluted earnings per share........ $  0.18  $  0.19   $  0.39      $  0.72
</TABLE>

<TABLE>
<CAPTION>
                                                    Quarter ended
                                      -----------------------------------------
   Fiscal 1999                        March 31 June 30 September 30 December 31
   -----------                        -------- ------- ------------ -----------
   <S>                                <C>      <C>     <C>          <C>
   Revenues.......................... $20,612  $26,224   $27,701      $35,789
   Operating income.................. $11,883  $15,432   $17,158      $24,522
   Net income........................ $ 2,914  $ 1,541   $ 3,735      $ 9,070
   Basic earnings per share.......... $  0.23  $  0.12   $  0.30      $  0.75
   Diluted earnings per share........ $  0.23  $  0.12   $  0.30      $  0.73
</TABLE>

                                       43
<PAGE>

                        NATIONAL GOLF PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(19) Pro Forma Financial Information (Unaudited)

  The pro forma financial information set forth below is presented as if the
2000 acquisitions (Note 2) had been consummated as of January 1, 1999.

  The pro forma financial information is not necessarily indicative of what
actual results of operations of the Company would have been assuming the
acquisitions had been consummated as of January 1, 1999, nor does it purport
to represent the results of operations for future periods (in thousands,
except per share amounts).

<TABLE>
<CAPTION>
                                                                For the year
                                                               ended December
                                                                     31,
                                                              -----------------
                                                                2000     1999
                                                              -------- --------
   <S>                                                        <C>      <C>
   Revenues from rental property............................. $118,185 $107,888
   Net income................................................ $ 19,283 $ 16,855
   Basic earnings per share.................................. $   1.51 $   1.38
   Diluted earnings per share................................ $   1.47 $   1.34
</TABLE>

  The pro forma financial information includes the following adjustments: (i)
an increase in depreciation and amortization expense; (ii) an increase in
interest expense; and (iii) a decrease in income applicable to minority
interest.

(20)  Subsequent Events

  Between December 31, 2000 and March 6, 2001, the Company entered into
agreements to purchase one golf course and sell one Golf Course.

  On January 12, 2001, the Company declared a quarterly distribution for the
fourth quarter of 2000 of $0.46 per share to stockholders of record on January
31, 2001, which was paid on February 15, 2001.


                                      44
<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE

  None.

                                   PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Incorporated by reference to the sections entitled (i) "Nominees for
Election as Director"; (ii) "Directors Continuing in Office"; and (iii)
"Executive Officers" contained in the Company's Proxy Statement to be filed
pursuant to Regulation 14A.

Item 11. EXECUTIVE COMPENSATION

  Incorporated by reference to the section entitled "Executive Compensation"
contained in the Company's Proxy Statement to be filed pursuant to Regulation
14A.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  Incorporated by reference to the section entitled "Security Ownership of
Certain Beneficial Owners and Management" contained in the Company's Proxy
Statement to be filed pursuant to Regulation 14A.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Incorporated by reference to the section entitled "Certain Relationships and
Related Transactions" contained in the Company's Proxy Statement to be filed
pursuant to Regulation 14A.

                                      45
<PAGE>

                                    PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
 <C>    <S>                                                             <C>
 (a) 1. Financial Statements

        Report of Independent Accountants.............................     22

        Consolidated Balance Sheets of National Golf Properties, Inc.
         as of December 31, 2000 and 1999.............................     23

        Consolidated Statements of Operations of National Golf
         Properties, Inc. for the years ended December 31, 2000, 1999
         and 1998.....................................................     24

        Consolidated Statements of Stockholders' Equity of National
         Golf Properties, Inc. for the years ended December 31, 2000,
         1999 and 1998................................................     25

        Consolidated Statements of Cash Flows of National Golf
         Properties, Inc. for the years ended December 31, 2000, 1999
         and 1998.....................................................     26

        Notes to Consolidated Financial Statements....................     27

     2. Financial Statement Schedules

        Schedule III--Real Estate and Accumulated Depreciation........     47
</TABLE>

                                       46
<PAGE>

                                                                    SCHEDULE III

                         NATIONAL GOLF PROPERTIES, INC.

                  REAL ESTATE AND ACCUMULATED DEPRECIATION(1)

                               December 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                  Initial Cost                    Gross Amount at Which
                                   to Company         Cost     Carried at Close of Period
                               ------------------- Capitalized ---------------------------
                                                   Subsequent          Total Cost
                                      Buildings &      To             Buildings &          Accumulated     Date       Date
Description       Encumbrances  Land  Improvements Acquisition  Land  Improvements  Total  Depreciation Constructed Acquired
-----------       ------------  ----  ------------ ----------- ------ ------------ ------- ------------ ----------- --------
<S>               <C>          <C>    <C>          <C>         <C>    <C>          <C>     <C>          <C>         <C>
DAILY FEE
COURSES:
Canoa Hills,
Green Valley,
AZ..............     $  --     $  126   $ 3,727      $  --     $  126   $ 3,727    $ 3,853    $  138       1984       2000
Continental,
Scottsdale, AZ..        --         64       881          12        66       891        957       582       1974       1986
Los Coyote
Lakes, Surprise,
AZ..............        --        215     3,766          30       215     3,796      4,011       265       1993       1999
Desert Lakes,
Fort Mojave,
AZ..............        --        163     3,102          53       163     3,155      3,318     1,050       1990       1993
El Caro,
Phoenix, AZ.....        --         61       553          13        63       564        627       563       1975       1983
The Foothills,
Phoenix, AZ.....        --        648     9,318         776       648    10,094     10,742       980       1988       1999
Kokopelli,
Gilbert, AZ.....        --      1,177     4,261         170     1,177     4,431      5,608     1,604       1993       1994
The Lakes at
Ahwatukee,
Phoenix, AZ.....        --        296     4,468          46       296     4,514      4,810       437       1970's     1999
Legend at
Arrowhead,
Glendale, AZ....        --        502     3,408       1,664       503     5,071      5,574     1,576       1986       1992
London Bridge,
Lake Havasu
City, AZ........        --        301     1,699          24       305     1,719      2,024       923       1968       1986
Stonecreek,
Phoenix, AZ.....        --      1,197     8,250         500     1,197     8,750      9,947     1,859       1983       1997
Superstition
Springs, Mesa,
AZ..............        --        698     3,771          32       702     3,799      4,501     1,761       1986       1992
Villa De Paz,
Phoenix, AZ.....        --        186       397          18       188       413        601       375       1974       1981
BlackLake,
Nipomo, CA......        --      1,744     9,299          20     1,747     9,316     11,063     2,022       1965       1996
Camarillo
Springs,
Camarillo, CA...        --        141     2,880         710       143     3,588      3,731     2,097       1972       1984
Carmel Mountain,
San Diego, CA...        --      1,669     5,865         757     1,669     6,622      8,291     1,693       1986       1995
Casta del Sol,
Mission Viejo,
CA..............        --      3,488     4,666       1,178     3,488     5,844      9,332       282       1972       1999
Lomas Santa Fe
Exec., Solana
Beach, CA.......        --        175       575          20       177       593        770       550       1974       1982
Eagle Crest,
Escondido, CA...        --      1,418     8,526          21     1,418     8,547      9,965       902       1993       1999
Mesquite, Palm
Springs, CA.....        --      1,057     5,140         225     1,061     5,361      6,422     1,699       1985       1993
Rancho San
Joaquin, Irvine,
CA..............        --        871     8,375       2,412       873    10,785     11,658     4,026       1962       1992
San Geronimo,
San Geronimo,
CA..............        --        846     5,426         454       847     5,879      6,726     1,192       1964       1996
Seascape, Aptos,
CA..............        --        901     3,491       1,701       904     5,189      6,093     1,468       1926       1986
Summitpointe,
Milpitas, CA....        --      2,315     4,813       1,000     2,315     5,813      8,128     1,865       1977       1994
Upland Hills,
Upland, CA......        --      1,835     6,312         (50)    1,796     6,301      8,097     1,737       1982       1995
Vineyard at
Escondido,
Escondido, CA...      5,184       --      9,530         --        --      9,530      9,530       982       1993       1999
Vista Valencia,
Valencia, CA....        --        652     5,369         663       657     6,027      6,684     3,418       1963       1987
Arrowhead,
Littleton, CO...        --        302     3,245       1,950       304     5,193      5,497     1,647       1972       1988
Eagle,
Broomfield, CO..        --        400     2,425          28       404     2,449      2,853     1,726       1961       1988
Arrowhead,
Davie, FL.......        --        601     2,190          20       604     2,207      2,811       980       1967       1993
Baymeadows,
Jacksonville,
FL..............        --        226     4,337         349       226     4,686      4,912       930       1968       1997
Sabal Palm,
Tamarac, FL.....        --        441     3,357          20       444     3,374      3,818     2,096       1967       1990
Summerfield
Crossing, Tampa,
FL..............        --        105     2,508         213       105     2,721      2,826       606       1987       1996
Bradshaw Farm,
Woodstock, GA...        --        238     6,365         127       238     6,492      6,730     1,214       1995       1997
Goshen
Plantation,
Augusta, GA.....        --        195     3,042         256       196     3,297      3,493       982       1971       1994
River's Edge,
Fayetteville,
GA..............        --        250     4,069         154       143     4,330      4,473     1,329       1989       1994
Trophy Club of
Appalachee,
Dacula, GA......        --        300     7,687          93       300     7,780      8,080       762       1994       1999
Trophy Club of
Atlanta,
Alpharetta, GA..        --        499    10,203         105       499    10,308     10,807       970       1991       1999
Ruffled
Feathers,
Lemont, IL......        --        293     9,316         (18)      293     9,298      9,591     2,542       1992       1995
Tamarack,
Naperville, IL..        --        326     5,067         197       326     5,264      5,590     1,128       1989       1997
Deer Creek,
Overland Park,
KS..............        --        695     7,147         471       696     7,617      8,313     1,972       1989       1996
Dub's Dread,
Kansas City,
KS..............        --        135     2,997         355       135     3,352      3,487     1,104       1963       1994
</TABLE>

                                       47
<PAGE>

                                                                    SCHEDULE III
                                                                     (Continued)

                         NATIONAL GOLF PROPERTIES, INC.

                  REAL ESTATE AND ACCUMULATED DEPRECIATION(1)

                               December 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                                        Initial Cost                         Gross Amount at Which
                                                         to Company                       Carried at Close of Period
                                                   ----------------------      Cost      -----------------------------
                                                                           Capitalized            Total Cost
                                                              Building &    Subsequent            Building &
Description                          Encumbrances    Land    Improvements to Acquisition  Land   Improvements  Total
-----------                          ------------  --------- ------------ -------------- ------- ------------ --------
<S>                                  <C>           <C>       <C>          <C>            <C>     <C>          <C>
DAILY FEE
COURSES:
Majestic Oaks,
Ham Lake, MN....                            --         1,713     10,194         1,479      1,713     11,673     13,386
Links at
Northfork,
Ramsey, MN......                            --           280      3,770            75        280      3,845      4,125
Woodland Creek,
Andover, MN.....                            --            86        473            41         87        513        600
Las Vegas National, Las Vegas, NV..         --           261      3,727         1,642        263      5,367      5,630
Painted Desert,
Las Vegas, NV...                            --         1,355      4,741           --       1,355      4,741      6,096
Wildhorse,
Henderson, NV...                            --         4,677      6,557         2,578      4,679      9,133     13,812
Beaver Brook,
Clinton, NJ.....                            --         1,184      6,999           289      1,184      7,288      8,472
Brigantine,
Brigantine, NJ..                            --           194      1,768         1,472        197      3,237      3,434
Rancocas,
Willingboro,
NJ..............                            --           239      1,816         1,206        241      3,020      3,261
Paradise Hills,
Albuquerque,
NM..............                            --           350      5,181           315        363      5,483      5,846
Carolina Shores,
Calabash, NC....                            --           588      5,903           192        590      6,093      6,683
Paw Creek,
Charlotte, NC...                            --            63      1,563         2,085        405      3,306      3,711
Bent Tree,
Columbus, OH....                            --           123      4,207           332        123      4,539      4,662
Fowler's Mill,
Chesterland,
OH..............                            --           346      1,760         1,380        349      3,137      3,486
Royal American Links, Harlem, OH..          --           146      3,981           192        146      4,173      4,319
Hershey South,
Hershey, PA.....                            --           150      1,995           424        150      2,419      2,569
Golden Oaks,
Fleetwood, PA...                            --           989      4,677           331      1,008      4,989      5,997
Colonial
Charters, Longs,
SC..............                            --           213      4,579             5        213      4,584      4,797
Port Royal,
Hilton Head
Island, SC......                         19,302(2)     6,289     15,190         4,247      6,289     19,437     25,726
Shipyard, Hilton
Head Island,
SC..............                            -- (2)     4,773      9,756         2,107      4,773     11,863     16,636
Stono Ferry,
Charleston, SC..                            --            44      1,582           118         57      1,687      1,744
Forrest
Crossing,
Nashville, TN...                            --           140      2,829           602        140      3,431      3,571
Bear Creek,
Houston, TX.....                            --           --       6,163           761        --       6,924      6,924
Trails, Frisco,
TX..............                            --         1,498      1,156         7,731      1,498      8,887     10,385
Longwood,
Houston, TX.....                            --         1,558      8,148           555      1,556      8,705     10,261
Pecan Valley,
San Antonio,
TX..............                            --           389      3,989         5,196        391      9,183      9,574
Ridgeview Ranch,
Plano, TX.......                            --           --      11,394             7        --      11,401     11,401
Riverchase,
Coppell, TX.....                            --           250      1,658         1,220        252      2,876      3,128
Riverside, Grand
Prairie, TX.....                            --           574      4,445           105        576      4,548      5,124
Southwyck,
Pearland, TX....                            --           672      3,492           275        673      3,766      4,439
Chesapeake,
Chesapeake, VA..                            --           321      3,490         1,086        321      4,576      4,897
Honey Bee,
Virginia Beach,
VA..............                            --           556      5,009           --         556      5,009      5,565
Kiskiack,
Williamsburg,
VA..............                            --            70      5,999           985         70      6,984      7,054
Reston National,
Reston, VA......                            --           996      4,584         1,149        999      5,730      6,729
Virginia Oaks,
Gainesville,
VA..............                            --         1,400      9,291         1,418      1,400     10,709     12,109
Capitol City,
Olympia, WA.....                            100          437      2,572           163        437      2,735      3,172
Classic,
Spanaway, WA....                            --           363      2,112           253        363      2,365      2,728
Lake Wilderness,
Maple Valley,
WA..............                            --           110      1,665           332        110      1,997      2,107
                                       --------    ---------   --------     ---------    -------   --------   --------
                                       $ 24,586    $  61,149   $388,307     $  61,283    $61,464   $439,040   $500,504
                                       --------    ---------   --------     ---------    -------   --------   --------
<CAPTION>
                                     Accumulated     Date       Date
Description                          Depreciation Constructed Acquired
-----------                          ------------ ----------- --------
<S>                                  <C>          <C>         <C>
DAILY FEE
COURSES:
Majestic Oaks,
Ham Lake, MN....                          1,608      1972       1998
Links at
Northfork,
Ramsey, MN......                          1,189      1992       1994
Woodland Creek,
Andover, MN.....                             66      1989       1998
Las Vegas National, Las Vegas, NV..       3,744      1961       1982
Painted Desert,
Las Vegas, NV...                          1,036      1987       1996
Wildhorse,
Henderson, NV...                          2,430      1959       1994
Beaver Brook,
Clinton, NJ.....                            734      1964       1999
Brigantine,
Brigantine, NJ..                          1,541      1926       1989
Rancocas,
Willingboro,
NJ..............                          1,426      1963       1989
Paradise Hills,
Albuquerque,
NM..............                          1,271      1963       1996
Carolina Shores,
Calabash, NC....                          3,186      1974       1986
Paw Creek,
Charlotte, NC...                            388      1971       1996
Bent Tree,
Columbus, OH....                            990      1988       1996
Fowler's Mill,
Chesterland,
OH..............                          1,355      1972       1986
Royal American Links, Harlem, OH..          251      1992       1999
Hershey South,
Hershey, PA.....                            767      1927       1994
Golden Oaks,
Fleetwood, PA...                          1,335      1994       1996
Colonial
Charters, Longs,
SC..............                            988      1989       1996
Port Royal,
Hilton Head
Island, SC......                          5,360      1985       1994
Shipyard, Hilton
Head Island,
SC..............                          3,386      1969       1994
Stono Ferry,
Charleston, SC..                            374      1989       1996
Forrest
Crossing,
Nashville, TN...                            693      1988       1996
Bear Creek,
Houston, TX.....                          4,829      1966       1985
Trails, Frisco,
TX..............                            --       2000       1999
Longwood,
Houston, TX.....                          1,729      1995       1997
Pecan Valley,
San Antonio,
TX..............                          2,163      1962       1990
Ridgeview Ranch,
Plano, TX.......                          1,125      1996       1999
Riverchase,
Coppell, TX.....                          1,486      1987       1988
Riverside, Grand
Prairie, TX.....                          1,842      1986       1990
Southwyck,
Pearland, TX....                          1,285      1988       1993
Chesapeake,
Chesapeake, VA..                          1,044      1984       1996
Honey Bee,
Virginia Beach,
VA..............                          1,601      1987       1995
Kiskiack,
Williamsburg,
VA..............                            651      1997       1999
Reston National,
Reston, VA......                          1,902      1968       1993
Virginia Oaks,
Gainesville,
VA..............                            930      1994       1999
Capitol City,
Olympia, WA.....                            871      1961       1994
Classic,
Spanaway, WA....                            244      1991       1999
Lake Wilderness,
Maple Valley,
WA..............                            622      1974       1994
                                     ------------
                                       $112,476
                                     ------------
</TABLE>

                                       48
<PAGE>

                                                                    SCHEDULE III
                                                                     (Continued)
                         NATIONAL GOLF PROPERTIES, INC.

                  REAL ESTATE AND ACCUMULATED DEPRECIATION(1)

                               December 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                 Initial Cost to                       Gross Amount at Which
                                     Company                        Carried at Close of Period
                               --------------------      Cost      -----------------------------
                                                     Capitalized            Total Cost
                                       Buildings &    Subsequent           Buildings &           Accumulated     Date       Date
Description       Encumbrances  Land   Improvements To Acquisition  Land   Improvements  Total   Depreciation Constructed Acquired
-----------       ------------ ------- ------------ -------------- ------- ------------ -------- ------------ ----------- --------
<S>               <C>          <C>     <C>          <C>            <C>     <C>          <C>      <C>          <C>         <C>
PRIVATE COUNTRY
CLUBS:
Ahwatukee,
Phoenix, AZ.....    $    --    $   605   $  9,940     $     173    $   605   $ 10,113   $ 10,718   $   942       1973       1999
Ancala,
Scottsdale, AZ..         --        207      8,319           --         207      8,319      8,526     1,530       1990       1996
Arrowhead,
Glendale, AZ....         --        185      5,816         1,350        185      7,166      7,351     1,108       1986       1996
Red Mountain
Ranch, Mesa,
AZ..............         --        650      9,581           171        650      9,752     10,402       886       1986       1999
Tatum Ranch,
Cave Creek, AZ..         --      1,000      3,972         2,889      1,002      6,859      7,861     1,964       1986       1992
Canyon Oaks,
Chico, CA.......         --        309      2,172         2,350        309      4,522      4,831     1,044       1987       1994
El Camino,
Oceanside, CA...         --        800      5,430           --         800      5,430      6,230        12       1959       2000
Escondido,
Escondido, CA...         --        114      2,382           587        116      2,967      3,083     1,725       1962       1983
Monterey, Palm
Desert, CA......         --      1,294      6,584           311      1,294      6,895      8,189     2,080       1978       1995
Oakhurst,
Clayton, CA.....         --      1,596      8,069         2,166      1,644     10,187     11,831     1,522       1997       1997
Palm Valley,
Palm Desert,
CA..............         --      1,750     13,769           447      1,750     14,216     15,966     3,658       1985       1995
SeaCliff,
Huntington
Beach, CA.......         --      2,430      7,602           762      2,451      8,343     10,794     1,625       1975       1996
Spanish Hills,
Camarillo, CA...         --      2,975     14,076           515      3,024     14,542     17,566     2,445       1993       1997
Sunset Hills,
Thousand Oaks,
CA..............         --        302      1,378            18        304      1,394      1,698     1,254       1966       1975
Wood Ranch, Simi
Valley, CA......         --        481      9,111         1,235        481     10,346     10,827     2,782       1984       1995
Heather Ridge,
Aurora, CO......         --        992      1,500           715        995      2,212      3,207     1,284       1970       1990
Pinery, Denver,
CO..............         --        174      5,380           542        174      5,922      6,096     1,334       1972       1996
Brookstone,
Acworth, GA.....         --        557      2,608           410        559      3,016      3,575     1,235       1987       1993
The Plantation,
Boise, ID.......         --         87      2,562           221         87      2,783      2,870       607       1920       1996
Eagle Brook,
Geneva, IL......         --        701      9,739           291        701     10,030     10,731     1,846       1992       1997
Mission Hills,
Northbrook, IL..         --        400      3,600           531        402      4,129      4,531     2,600       1980       1988
Highlands Golf,
Hutchinson, KS..         --         40        576           252         40        828        868       182       1972       1996
Tallgrass,
Wichita, KS.....         --         43      2,409           255         43      2,664      2,707       599       1980       1996
Hunt Valley,
Phoenix, MD.....         --        515      1,662         1,208        517      2,868      3,385     1,541       1972       1983
Tanoan,
Albuquerque,
NM..............         --         12      3,241            20         14      3,259      3,273     2,711       1978       1982
Brandywine,
Maumee, OH......         --        814      2,861            82        816      2,941      3,757     1,356       1967       1991
Ivy Hills,
Cincinnati, OH..         --         30      1,776           256         30      2,032      2,062       278       1992       1998
Oakhurst, Grove
City, OH........         --        344      1,776         1,156        346      2,930      3,276     1,241       1959       1980
Royal Oak,
Cincinnati, OH..         --        175        822         2,127        178      2,946      3,124       565       1963       1985
Meadowbrook,
Tulsa, OK.......         --         89      3,236         1,537         89      4,773      4,862       886    mid 1950's    1996
The Trails,
Norman, OK......         --         42      2,361           261        163      2,501      2,664       641       1982       1996
Creekside,
Salem, OR.......         --        128      3,456         2,507        128      5,963      6,091     1,562       1993       1995
</TABLE>

                                       49
<PAGE>

                                                                    SCHEDULE III
                                                                     (Continued)
                         NATIONAL GOLF PROPERTIES, INC.

                  REAL ESTATE AND ACCUMULATED DEPRECIATION(1)

                               December 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                    Initial Cost to                       Gross Amount at Which
                                        Company                        Carried at Close of Period
                                  --------------------      Cost      -----------------------------
                                                        Capitalized            Total Cost
                                          Buildings &    Subsequent           Buildings &           Accumulated     Date
Description          Encumbrances  Land   Improvements To Acquisition  Land   Improvements  Total   Depreciation Constructed
-----------          ------------ ------- ------------ -------------- ------- ------------ -------- ------------ -----------
<S>                  <C>          <C>     <C>          <C>            <C>     <C>          <C>      <C>          <C>
PRIVATE COUNTRY
CLUBS:
Oregon Golf,
West Linn, OR...           --         433     10,230           534        435     10,762     11,197      2,667      1992
Hershey,
Hershey, PA.....           --       1,624      6,400         1,332      1,624      7,732      9,356      2,558      1915
Oyster Reef,
Hilton Head
Island, SC......           --         668      7,048           --         668      7,048      7,716        314      1983
Gettysvue,
Knoxville, TN...         3,750        753      5,550           495        753      6,045      6,798        946      1995
Berry Creek,
Georgetown, TX..           --         204      4,876           350        204      5,226      5,430      1,230      1986
Diamond Oaks,
Fort Worth, TX..           --         132      3,577         2,203        132      5,780      5,912        998      1959
Eldorado,
McKinney, TX....           --         221      6,247         3,881        221     10,128     10,349      1,298      1981
Great Southwest,
Grand Prairie, TX..        --         442      7,825           608        442      8,433      8,875      1,794      1964
Los Rios, Plano,
TX..............           --         279      6,587           132        279      6,719      6,998        639      1971
Oakridge,
Garland, TX.....           --          87      3,439           996         87      4,435      4,522        854      1982
Pecan Grove
Plantation,
Richmond, TX....           --         380     11,725           396        380     12,121     12,501      1,134      1980
Sweetwater,
Sugarland, TX...           --         207     11,783         2,629        207     14,412     14,619      3,632      1983
Sonterra, San
Antonio, TX.....           --       2,686     25,867         1,892      2,686     27,759     30,445      3,428      1978
Thorntree,
DeSoto, TX......           --         300      9,822           482        300     10,304     10,604      1,025      1983
Walden, Humble,
TX..............           --         178      3,425           698        180      4,121      4,301        826      1984
Willow Fork,
Katy, TX........           --          44      2,742           318         44      3,060      3,104        606      1990
Woodhaven, Fort
Worth, TX.......           --          43      2,022           670         43      2,692      2,735        576      1972
Brandermill,
Midlothian, VA..           --         450      8,329           355        450      8,684      9,134        794      1978
Bear Creek,
Woodinville,
WA..............           --         705      4,823           310        711      5,127      5,838      2,272      1983
                       -------    -------   --------      --------    -------   --------   --------   --------
                       $ 3,750    $29,677   $300,083      $ 43,626    $29,950   $343,436   $373,386   $ 72,636
                       -------    -------   --------      --------    -------   --------   --------   --------
Total Courses...       $28,336    $90,826   $680,321      $102,743    $91,414   $782,476   $873,890   $185,112
                       =======    =======   ========      ========    =======   ========   ========   ========
<CAPTION>
                       Date
Description          Acquired
-----------          --------
<S>                  <C>
PRIVATE COUNTRY
CLUBS:
Oregon Golf,
West Linn, OR...       1995
Hershey,
Hershey, PA.....       1994
Oyster Reef,
Hilton Head
Island, SC......       2000
Gettysvue,
Knoxville, TN...       1997
Berry Creek,
Georgetown, TX..       1995
Diamond Oaks,
Fort Worth, TX..       1996
Eldorado,
McKinney, TX....       1996
Great Southwest,
Grand Prairie, TX..    1996
Los Rios, Plano,
TX..............       1999
Oakridge,
Garland, TX.....       1996
Pecan Grove
Plantation,
Richmond, TX....       1999
Sweetwater,
Sugarland, TX...       1996
Sonterra, San
Antonio, TX.....       1998
Thorntree,
DeSoto, TX......       1999
Walden, Humble,
TX..............       1996
Willow Fork,
Katy, TX........       1996
Woodhaven, Fort
Worth, TX.......       1996
Brandermill,
Midlothian, VA..       1999
Bear Creek,
Woodinville,
WA..............       1993
Total Courses...
</TABLE>
----
(1) Corporate assets are not included within the amounts.

(2) Combined encumbrance for Port Royal and Shipyard golf courses.

                                       50
<PAGE>

                                                                   SCHEDULE III
                                                                    (Continued)
                        NATIONAL GOLF PROPERTIES, INC.

                   REAL ESTATE AND ACCUMULATED DEPRECIATION
                               December 31, 2000
                                (In thousands)

  Depreciation of the Company's investment in Buildings and Improvements
reflected in the statements of operations are calculated over the estimated
useful lives of the assets as follows:

<TABLE>
     <S>                                                           <C>
     Buildings....................................................      30 years
     Ground improvements..........................................      20 years
     Furniture, fixtures and equipment............................ 3 to 10 years
</TABLE>

  The changes in total real estate assets and accumulated depreciation
(excluding corporate assets and related accumulated depreciation) for the
years ended December 31, 2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                    Total Real Estate Assets
                                                   ----------------------------
                                                     2000      1999      1998
                                                   --------  --------  --------
     <S>                                           <C>       <C>       <C>
     Balance, beginning of year................... $845,981  $662,387  $601,375
     Acquisitions.................................   17,185   167,449    43,181
     Improvements.................................   26,290    25,842    18,155
     Dispositions.................................  (15,566)   (9,697)     (324)
                                                   --------  --------  --------
     Balance, end of year......................... $873,890  $845,981  $662,387
                                                   ========  ========  ========
<CAPTION>
                                                    Accumulated Depreciation
                                                   ----------------------------
                                                     2000      1999      1998
                                                   --------  --------  --------
     <S>                                           <C>       <C>       <C>
     Balance, beginning of year................... $152,647  $120,841  $ 94,678
     Depreciation for year........................   37,259    34,077    26,193
     Dispositions.................................   (4,794)   (2,271)      (29)
                                                   --------  --------  --------
     Balance, end of year......................... $185,112  $152,647  $120,842
                                                   ========  ========  ========
</TABLE>

                                      51
<PAGE>

3. Exhibits

<TABLE>
   <C>  <S>
    3.1 Articles of Incorporation of National Golf Properties, Inc. (incorporated by
         reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated
         September 26, 1995)

    3.2 By-Laws of National Golf Properties, Inc. (incorporated by reference to
         Exhibit 3.2 to the Company's Current Report on Form 8-K dated September 26,
         1995)

    3.3 Specimen of certificate representing shares of Common Stock (incorporated by
         reference to Exhibit 3.3 to the Company's Report on Form 8-B dated December
         29, 1995)

    3.4 Articles Supplementary of National Golf Properties, Inc. (incorporated by
         reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated
         March 4, 1998)

    3.5 Articles Supplementary of National Golf Properties, Inc. (incorporated by
         reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for
         the period ended March 31, 1998)

    3.6 Articles Supplementary of National Golf Properties, Inc. (incorporated by
         reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for
         the period ended June 30, 1999)

    4.1 The 1995 Independent Director Equity Participation Plan of National Golf
         Properties, Inc. (incorporated by reference to Exhibit 4.1 to the Company's
         Registration Statement on Form S-8 dated August 15, 1997)

    4.2 The 1997 Equity Participation Plan of National Golf Properties, Inc.,
         National Golf Operating Partnership, L.P. and American Golf Corporation
         (incorporated by reference to Exhibit 4.2 to the Company's Registration
         Statement on Form S-8 dated August 15, 1997)

   10.1 Third Amended and Restated Agreement of Limited Partnership of National Golf
         Operating Partnership, L.P., dated as of July 28, 1999, (incorporated by
         reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
         the period ended June 30, 1999)

   10.2 Form of Lease Agreement between the Company and AGC with respect to the
         Initial Golf Courses and the Mesquite and Desert Lakes golf courses
         (incorporated by reference to Exhibit 10.2 to the Company's Registration
         Statement on Form S-11 No. 33-63110)

   10.3 Form of Lease Agreement between the Company and AGC with respect to the
         following golf courses: Southwyck, Dub's Dread, Kokopelli, Summitpointe,
         Lake Wilderness, Links at Northfork, Hershey, Hershey South, Canyon Oaks,
         Capitol City, Port Royal, Shipyard, Wildhorse, Goshen Plantation, River's
         Edge, Berry Creek, Carmel Mountain, Creekside, Honey Bee, Wood Ranch,
         Monterey, Palm Valley, Ruffled Feathers, Upland Hills, Oregon Golf, Golden
         Oaks, Paradise Hills, Chesapeake, SeaCliff, Ancala, Arrowhead (AZ),
         BlackLake, Painted Desert, Pinery, Summerfield Crossing, The Plantation,
         Highlands, Tallgrass, Paw Creek, Bent Tree, Meadowbrook, The Trails (OK),
         The Links, Forrest Crossing, Diamond Oaks, Eldorado, Great Southwest,
         Oakridge, Willow Fork, Woodhaven, Walden, Deer Creek, Stonecreek, Tamarack,
         Baymeadows, Bradshaw Farm, Longwood, Eagle Brook, Gettysvue, Oakhurst, Ivy
         Hills, Majestic Oaks, Woodland Creek, Sonterra, Beaver Brook, Classic,
         Coyote Lakes, Casta del Sol, Royal American, Canoa Hills Golf Course and
         Oyster Reef Golf Club (incorporated by reference to Exhibit 10.3 to the
         Company's Annual Report on Form 10-K dated February 29, 1996)

   10.4 Registration Rights Agreement, made and entered into as of August 18, 1993,
         by and among National Golf Properties, Inc. and the persons named therein
         (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
         Form 10-K dated February 29, 1996)

   10.5 Shelf Registration Rights Agreement, made and entered into as of August 18,
         1993, by and among National Golf Properties, Inc. and the persons named
         therein (incorporated by reference to Exhibit 10.5 to the Company's Annual
         Report on Form 10-K dated February 29, 1996)
</TABLE>

                                       52
<PAGE>

<TABLE>
   <C>    <S>
   *10.6  National Golf Properties, Inc. Stock Incentive Plan for Key Employees of
           National Golf Properties, Inc., National Golf Operating Partnership, L.P.
           and American Golf Corporation, effective August 18, 1993 (incorporated by
           reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K dated
           February 29, 1996)

   *10.7  Indemnification Agreement, made as of August 18, 1993, by and between
           National Golf Properties, Inc. and its directors and officers (incorporated
           by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K
           dated February 29, 1996)

    10.8  Director Designation Agreement, dated as of March 29, 1999 by and among David
           G. Price, National Golf Properties, Inc. and National Golf Operating
           Partnership, L.P. (incorporated by reference to Exhibit 10.8 to the
           Company's Annual Report on Form 10-K dated February 28, 2000)

    10.9  Services Agreement, entered into as of August 18, 1993, by and between
           National Golf Properties, Inc. and National Golf Operating Partnership, L.P.
           (incorporated by reference to Exhibit 10.10 to the Company's Annual Report
           on Form 10-K dated February 29, 1996)

    10.10 Partnership Interests Exchange Agreement, dated as of August 18, 1993, by and
           among National Golf Operating Partnership, L.P. and Partners of Partnerships
           Controlling 21 Courses (incorporated by reference to Exhibit 10.13 to the
           Company's Annual Report on Form 10-K dated February 29, 1996)

    10.11 Agreement for Transfer of Realty and Assets, dated as of August 18, 1993, by
           and among The Price Revocable Trust, Myershan, Inc. and National Golf
           Operating Partnership, L.P. (incorporated by reference to Exhibit 10.14 to
           the Company's Annual Report on Form 10-K dated February 29, 1996)

    10.12 Plan and Agreement of Merger, dated as of August 18, 1993, by and among Bear
           Creek Enterprises, Inc., National Golf Properties, Inc., The Price Revocable
           Trust and David G. Price (incorporated by reference to Exhibit 10.15 to the
           Company's Annual Report on Form 10-K dated February 29, 1996)

    10.13 Partnership Interests Acquisition Agreement, dated as of August 18, 1993, by
           and among The Price Revocable Trust, American Golf Investment, Inc.,
           Supermarine Aviation, Limited, David G. Price and National Golf Properties,
           Inc. (incorporated by reference to Exhibit 10.16 to the Company's Annual
           Report on Form 10-K dated February 29, 1996)

    10.14 Contribution Agreement, dated as of August 18, 1993, by and between National
           Golf Operating Partnership, L.P. and National Golf Properties, Inc.
           (incorporated by reference to Exhibit 10.17 to the Company's Annual Report
           on Form 10-K dated February 29, 1996)

    10.15 Option Courses Agreement, dated as of August 18, 1993, by and among David G.
           Price, The Price Revocable Trust, Black Lake/Penasquitos, American Golf
           Corporation and National Golf Operating Partnership, L.P. (incorporated by
           reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K dated
           February 29, 1996)

    10.16 Agreement relating to prohibition on acquisitions of golf courses by David G.
           Price and his affiliates, made and entered into as of August 18, 1993, by
           and among National Golf Properties, Inc., National Golf Operating
           Partnership, L.P., American Golf Corporation, David G. Price, Dallas P.
           Price and The Price Revocable Trust (incorporated by reference to Exhibit
           10.19 to the Company's Annual Report on Form 10-K dated February 29, 1996)

    10.17 Amendment to agreement relating to prohibition on acquisitions of golf
           courses by David G. Price and his affiliates among National Golf Properties,
           Inc., National Golf Operating Partnership, L.P., American Golf Corporation,
           David G. Price, Dallas P. Price and The Price Revocable Trust (incorporated
           by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q/A
           for the period ended September 30, 1995)

    10.18 Note Purchase Agreement ("Note Purchase Agreement"), dated as of December 15,
           1994, with respect to National Golf Operating Partnership, L.P.'s Series A
           8.68% Guarantied Senior Promissory Notes due December 15, 2004 and Series B
           8.73% Guarantied Senior Promissory
</TABLE>

                                       53
<PAGE>

<TABLE>
   <C>   <S>
          Notes due June 15, 2005 (incorporated by reference to Exhibit 10.21
          to the Company's Annual Report on Form 10-K dated February 29, 1996)

   10.19 Series A 8.68% Guarantied Senior Promissory Notes and Series B 8.73%
          Guarantied Senior Promissory Notes (incorporated by reference to
          Exhibit 10.22 to the Company's Annual Report on Form 10-K dated
          February 29, 1996)

   10.20 General Continuing Guaranty of National Golf Properties, Inc.
          ("General Continuing Guaranty"),
          dated as of December 15, 1994, with respect to National Golf
          Operating Partnership, L.P.'s Series A 8.68% Guarantied Senior
          Promissory Notes due December 15, 2004 and Series B 8.73% Guarantied
          Senior Promissory Notes due June 15, 2005 (incorporated by reference
          to Exhibit 10.15 to the Company's Report on Form 8-B dated December
          29, 1995)

   10.21 First Amendment to Note Purchase Agreements, dated as of August 31,
          1995 (incorporated by reference to Exhibit 10.17 to the Company's
          Report on Form 8-B dated December 29, 1995)

   10.22 First Amendment to General Continuing Guaranty, dated as of August 31,
          1995 (incorporated by reference to Exhibit 10.18 to the Company's
          Report on Form 8-B dated December 29, 1995)

   10.23 Agreement of Limited Partnership of Royal Golf, L.P., II, dated as of
          July 7, 1994 (incorporated by reference to Exhibit 10.19 to the
          Company's Report on Form 8-B dated December 29, 1995)

   10.24 Amended and Restated Loan Agreement, dated as of July 7, 1994, by and
          between Royal Golf, L.P., II and NationsBank of South Carolina, N.A.
          (incorporated by reference to Exhibit 10.19 to the Company's Report
          on Form 8-B dated December 29, 1995)

   10.25 Restated Note Agreement, dated as of July 1, 1996, with respect to
          National Golf Operating Partnership, L.P.'s Series A-1, Series A-2
          and Series A-3 7.9% Guarantied Senior Promissory Notes due June 15,
          2006 and Series B 8% Guarantied Senior Promissory Notes due
          December 12, 2006 (incorporated by reference to Exhibit 10.30 to the
          Company's Annual Report on Form 10-K dated March 14, 1997)

   10.26 Form of Series A 7.9% Guarantied Senior Promissory Notes and Series B
          8% Guarantied Senior Promissory Notes (incorporated by reference to
          Exhibit 10.31 to the Company's Annual Report on Form 10-K dated March
          14, 1997)

   10.27 Amended and Restated General Continuing Guaranty of National Golf
          Properties, Inc., dated as of July 1, 1996, with respect to National
          Golf Operating Partnership, L.P.'s Series A-1, Series A-2 and Series
          A-3 7.9% Guarantied Senior Promissory Notes due June 15, 2006 and
          Series B 8% Guarantied Senior Promissory Notes due December 12, 2006
          (incorporated by reference to Exhibit 10.32 to the Company's Annual
          Report on Form 10-K dated March 14, 1997)

   10.28 Assumption Agreement, dated as of July 1, 1996, by National Golf
          Operating Partnership, L.P. and the Purchasers named therein
          (incorporated by reference to Exhibit 10.33 to the Company's Annual
          Report on Form 10-K dated March 14, 1997)

   10.29 Assumption Agreement, dated as of July 1, 1996, by National Golf
          Operating Partnership, L.P. and the Purchasers named therein
          (incorporated by reference to Exhibit 10.34 to the Company's Annual
          Report on Form 10-K dated March 14, 1997)

   10.30 Lease Agreement, dated as of July 11, 1996, between the Company and
          The Links Group, Inc. with respect to Colonial Charters Golf Course
          (incorporated by reference to Exhibit 10.35 to the Company's Annual
          Report on Form 10-K dated March 14, 1997)

   10.31 Lease Agreement, dated as of December 17, 1996, between the Company
          and Evergreen Alliance Golf Limited with respect to San Geronimo Golf
          Course (incorporated by reference to Exhibit 10.36 to the Company's
          Annual Report on Form 10-K dated March 14, 1997)

   10.32 Lease Agreement, dated as of October 22, 1997, between the Company and
          Camarillo Golf, LLC with respect to Spanish Hills Country Club
          (incorporated by reference to Exhibit 10.33 to the Company's Annual
          Report on Form 10-K dated February 6, 1998)

</TABLE>


                                       54
<PAGE>

<TABLE>
   <C>    <S>
    10.33 Assignment Agreement, dated as of July 30, 1996, between National
           Golf Properties, Inc. and National Golf Operating Partnership, L.P.
           (incorporated by reference to Exhibit 2.3 to the Company's Current
           Report on Form 8-K dated August 13, 1996)

    10.34 Lease Agreement, dated as of July 30, 1996, between National Golf
           Operating Partnership, L.P. and American Golf Corporation
           (incorporated by reference to Exhibit 2.4 to the Company's Current
           Report on Form 8-K dated August 13, 1996)

    10.35 Amended and Restated Credit Agreement, dated as of July 30, 1999
           among National Golf Operating Partnership, L.P., National Golf
           Properties, Inc., The First National Bank of Chicago, Merrill Lynch
           Capital Corporation, ING (U.S.) Capital LLC, Union Bank of
           California, N.A., Banc One Capital Markets, Inc., Merrill Lynch,
           Pierce, Fenner & Smith Incorporated, and the several other lenders
           from time to time parties hereto (incorporated by reference to
           Exhibit 10.4 to the company's Quarterly Report on Form 10-Q for the
           period ended June 30, 1999)

    10.36 Amended and Restated Guaranty, dated as of July 30, 1999 between
           National Golf Properties, Inc., and The First National Bank of
           Chicago and the lenders under the Amended and Restated Credit
           Agreement (incorporated by reference to Exhibit 10.5 to the
           Company's Quarterly Report on Form 10-Q for the period ended June
           30, 1999)

   *10.37 National Golf Properties, Inc. Deferred Compensation Plan, effective
           June 1, 1997 (incorporated by reference to Exhibit 10.2 to the
           Company's Quarterly Report on Form 10-Q dated July 29, 1997)

   *10.38 National Golf Properties, Inc. Deferred Compensation Plan Trust
           Agreement, dated as of June 1, 1997, by and between National Golf
           Properties, Inc. and Imperial Trust Company (incorporated by
           reference to Exhibit 10.3 to the Company's Quarterly Report on Form
           10-Q dated July 29, 1997)

   *10.39 Consulting Agreement, entered into as of the 30th day of April, 1997,
           between National Golf Properties, Inc. and Edward R. Sause
           (incorporated by reference to Exhibit 10.4 to the Company's
           Quarterly Report on Form 10-Q dated July 29, 1997)

    10.40 Pumpkin Ridge Joint Venture Agreement, dated as of September 8, 1997,
           by and among National Golf Operating Partnership, L.P. and Pumpkin
           Ridge Partners (incorporated by reference to Exhibit 10.2 to the
           Company's Quarterly Report on Form 10-Q dated October 30, 1997)

    10.41 Lease Agreement, dated as of September 8, 1997, between Pumpkin Ridge
           Joint Venture and American Golf Corporation (incorporated by
           reference to Exhibit 10.3 to the Company's Quarterly Report on Form
           10-Q dated October 30, 1997)

    10.42 USGA Agreement, made and entered into as of September 8, 1997, by and
           between Pumpkin Ridge Joint Venture and American Golf Corporation
           (incorporated by reference to Exhibit 10.4 to the Company's
           Quarterly Report on Form 10-Q dated October 30, 1997)

    10.43 Amended and Restated Registration Rights Agreement, dated as of April
           20, 1998, by and among National Golf Properties, Inc., National Golf
           Operating Partnership, L.P. and the unit holders named therein
           (incorporated by reference to Exhibit 10.2 to the Company's
           Quarterly Report on Form 10-Q for the period ended March 31, 1998)

    10.44 Amended and Restated Registration Rights Agreement, dated as of July
           28, 1999, by and among National Golf Properties, Inc., National Golf
           Operating Partnership, L.P. and the unit holders named therein
           (incorporated by reference to Exhibit 10.2 to the Company's
           Quarterly Report on Form 10-Q for the period ended June 30, 1999)

    10.45 Contribution Agreement, dated as of March 4, 1998, between Belair
           Capital Fund LLC, National Golf Operating Partnership, L.P. and
           National Golf Properties, Inc. (incorporated by reference to Exhibit
           10.3 to the Company's Current Report on Form 8-K dated March 4, 1998)

</TABLE>


                                       55
<PAGE>

<TABLE>
   <C>     <S>
   10.46   Contribution Agreement, dated as of April 20, 1998, between Belair
            Capital Fund LLC, National Golf Operating Partnership, L.P. and
            National Golf Properties, Inc. (incorporated by reference to
            Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
            period ended March 31, 1998)

   10.47   Contribution Agreement, dated as of July 28, 1999, between Belcrest
            Realty Corporation, Belair Real Estate Corporation, National Golf
            Operating Partnership, L.P. and National Golf Properties, Inc.
            (incorporated by reference to Exhibit 10.3 to the Company's
            Quarterly Report on Form 10-Q for the period ended June 30, 1999)

   10.48   Loan Agreement between The Badlands Golf Club, Inc. and National
            Golf Operating Partnership, L.P. dated as of August 18, 1998
            (incorporated by reference to Exhibit 10.45 to the Company's Annual
            Report on Form 10-K dated March 31, 1999)

   10.49   Senior Secured Participating Promissory Note made and entered into
            as of August 18, 1998, between National Golf Operating Partnership,
            L.P. and The Badlands Golf Club, Inc. (incorporated by reference to
            Exhibit 10.46 to the Company's Annual Report on Form 10-K dated
            March 31, 1999)

   10.50   First Deed of Trust, Assignment of Rents, Security Agreement and
            Fixture Filing relating to the Senior Secured Participating
            Promissory Note made and entered into as of August 18, 1998, by and
            among The Badlands Golf Club, Inc. and National Golf Operating
            Partnership, L.P. (incorporated by reference to Exhibit 10.47 to
            the Company's Annual Report on Form 10-K dated March 31, 1999)

   10.51   Asset Purchase Agreement dated as of March 30, 1999 by and among
            National Golf Properties, Inc., National Golf Operating
            Partnership, L.P., American Golf Corporation and Golf Acquisitions,
            L.L.C. (incorporated by reference to Exhibit 2.1 to the Company's
            Current Report on Form 8-K filed on April 15, 1999)

   21.1    List of Subsidiaries of National Golf Properties, Inc. (incorporated
            by reference to Exhibit 22.1 to the Company's Report on Form 8-B
            dated December 29, 1995)

   23.1(1) Consent of Independent Accountants

</TABLE>

--------
 * Management contract or compensatory plan or arrangement.

(1)  Filed herewith.

                                       56
<PAGE>

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
 <C> <S>                                                                <C>
 (b) Reports on Form 8-K filed during the Last Quarter

     None.

 (c) Additional Information Regarding American Golf Corporation and
      Subsidiaries

     Analysis of American Golf Corporation's Consolidated Financial
      Information.....................................................     58

     American Golf Corporation's Consolidated Financial Statements

     Report of Independent Accountants................................     60

     Consolidated Balance Sheets as of December 31, 2000 and 1999.....     61

     Consolidated Statements of Operations and Comprehensive Income
      for the years ended December 31, 2000, 1999 and 1998............     62

     Consolidated Statements of Shareholders' Equity for the years
      ended December 31, 2000, 1999 and 1998..........................     63

     Consolidated Statements of Cash Flows for the years ended
      December 31, 2000, 1999 and 1998................................     64

     Notes to Consolidated Financial Statements.......................     65
</TABLE>

                                       57
<PAGE>

         ANALYSIS OF AMERICAN GOLF CORPORATION'S FINANCIAL INFORMATION

 Overview

  The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto of American Golf
Corporation and Subsidiaries ("AGC" or "the Company"). The forward-looking
statements included in Analysis of American Golf Corporation's Financial
Information relating to certain matters involve risks and uncertainties,
including anticipated financial performance, business prospects, anticipated
capital expenditures and other similar matters, which reflect management's
best judgement based on factors currently known. Actual results and experience
could differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements as a result of a number
of factors, including but not limited to those discussed in Analysis of
American Golf Corporation's Financial Information.

  The discussion of the results of operations compares the year ended December
31, 2000 with the year ended December 31, 1999 and the year ended December 31,
1999 with the year ended December 31, 1998.

Results of Operations

 Comparison of the year ended December 31, 2000 to the year ended December 31,
1999.

  Total revenues from golf course operations and management agreements for AGC
increased by $48.7 million, or 7%, to $746.3 million for the year ended
December 31, 2000 as compared to $697.6 million for the year ended December
31, 1999. The increase in revenues is primarily attributable to a full twelve
months of revenues in 2000 related to the acquisition of 23 leased courses on
March 31, 1999 plus additional revenues related to a net increase of 16 other
golf courses acquired throughout 1999 and 2000. Green fees for the year ended
December 31, 2000, $252.8 million, increased by $9.8 million, or 4%, as
compared to $243 million for the year ended December 31, 1999. Cart rental
revenues for the year ended December 31, 2000, $78.2 million, increased by
$2.5 million, or 3.3%, from $75.7 million for the year ended December 31,
1999. Member dues and initiation fees for the year ended December 31, 2000,
$140.4 million, increased by $14.1 million, or 11.2%, from $126.3 million for
the year ended December 31, 1999. Food and beverage revenues for the year
ended December 31, 2000, $150 million, increased by $15.9 million, or 11.9%,
from $134.1 million for the year ended December 31, 1999. Merchandise sales
were $63.1 million, an increase of $4.8 million, or 8.2%, from $58.3 million
for the year ended December 31, 1999. Other operating revenue, which includes
range income, increased by $2.3 million, or 4.4%, to $54.8 million for the
year ended December 31, 2000, from $52.5 million for the year ended December
31, 1999. Management fees revenue of $7.1 million decreased $.6 million, or
7.8%, for the year ended December 31, 2000, from $7.7 million for the year
ended December 31, 1999.

  Total operating expenses increased by $58 million, or 8.5%, to $740.7
million for the year ended December 31, 2000 as compared to $682.7 million for
the year ended December 31, 1999. Payroll and related expenses increased by
$16.7 million, or 7%, to $256.9 million for the year ended December 31, 2000,
from $240.2 million for the year ended December 31, 1999. Rent expense
increased by $18.3 million, or 11.3%, to $179.7 million for the year ended
December 31, 2000, from $161.4 million for the year ended December 31, 1999.
General and administrative expenses increased by $8.4 million, or 16.1%, to
$60.6 million for the year ended December 31, 2000 from $52.2 million for the
year ended December 31, 1999. Other operating expenses increased by $10.5
million, or 9.1%, to $126.3 million for the year ended December 31, 2000 from
$115.8 million for the year ended December 31, 1999. These expenses increased
primarily due to the addition of the new courses noted above.

  Net income decreased by $6.6 million to $2.1 million for the year ended
December 31, 2000, from $8.7 million for the year ended December 31, 1999.
This decrease is principally a result of unfavorable weather conditions during
2000 as compared to 1999 in the northeastern portion of the United States,
Texas and the United Kingdom.

                                      58
<PAGE>

 Comparison of the year ended December 31, 1999 to the year ended December 31,
1998.

  Total revenues from golf course operations and management agreements for AGC
increased by $121.7 million, or 21.1%, to $697.6 million for the year ended
December 31, 1999 as compared to $575.9 million for the year ended December
31, 1998. The increase in revenues was primarily attributable to the net
increase of 35 new leased courses and one new course under a management
agreement. Green fees for the year ended December 31, 1999, $243.0 million,
increased by $38.8 million, or 19%, as compared to $204.2 million for the year
ended December 31, 1998. Cart rental revenues for the year ended December 31,
1999, $75.7 million, increased by $10.1 million, or 15.4%, from $65.6 million
for the year ended December 31, 1998. Member dues and initiation fees for the
year ended December 31, 1999, $126.3 million, increased by $26.3 million, or
26.3%, from $100.0 million for the year ended December 31, 1998. Food and
beverage revenues for the year ended December 31, 1999, $134.1 million,
increased by $25.4 million, or 23.4%, from $108.7 million for the year ended
December 31, 1998. Merchandise sales were $58.3 million, an increase of $7.5
million, or 14.8%, from $50.8 million for the year ended December 31, 1998.
Other operating revenue, which includes range income, increased by $12.4
million, or 30.9%, to $52.5 million for the year ended December 31, 1999, from
$40.1 million for the year ended December 31, 1998. Management fees revenue of
$7.7 million increased $1.1 million, or 16.7%, for the year ended December 31,
1999, from $6.6 million for the year ended December 31, 1998.

  Total operating expenses increased by $115.0 million, or 20.3%, to $682.7
million for the year ended December 31, 1999 as compared to $567.7 million for
the year ended December 31, 1998. Rent expense increased by $34.6 million, or
27.3%, to $161.4 million for the year ended December 31, 1999, from
$126.8 million for the year ended December 31, 1998. General and
administrative expenses for the year ended December 31, 1999, $52.2 million,
increased by $6.1 million, or 13.2%, from $46.1 million for the year ended
December 31, 1998. These expenses increased primarily due to the addition of
new courses.

  Net income increased by $4.0 million to $8.7 million for the year ended
December 31, 1999, from $4.7 million for the year ended December 31 1998. The
increase in net income is principally attributable to the increase in same
course revenue from the improvement in weather conditions in 1999 compared to
the unfavorable weather brought about by the El Nino phenomenon in 1998.

Liquidity and Capital Resources

  On December 31, 1997, the Company entered into a $40 million revolving
credit facility and a $13.5 million standby letter of credit facility with a
commercial bank that bears interest at prime or a LIBOR based rate. Letters of
credit issued under these credit facilities are charged a 1.5% annual letter
of credit fee. On April 1, 2000, the Company amended its revolving credit
facility. The amendment includes an increase in the amount available under the
line of credit to $60 million, of which $10 million expired on July 31, 2000
and $50 million will expire on March 29, 2002. The amendment also includes the
Company's guarantee of approximately $12 million of debt outstanding under the
term loan and line of credit of an affiliate. The revolving credit facility is
used to finance working capital requirements. At December 31, 2000, there was
$5 million outstanding and $296,000 in standby letters of credit issued
against the revolving credit facility. The $13.5 million standby letter of
credit facility supported letters of credit issued in favor of National Golf
Properties, Inc. ("NGP"), pursuant to the terms of the leases between NGP and
AGC. As of March 31, 2000, NGP waived the Company's obligation to maintain the
letter of credit. Under the terms of the credit facilities, the Company is
also required to maintain specified financial ratios and levels of net worth.

  AGC believes it will be able to satisfy its liquidity requirements,
including capital expenditures and rental payments due under its leases, with
cash flow available from operations and borrowings. AGC has capital
expenditure commitments related to acquiring and renewing leases. These
commitments are typically satisfied over several years. The material capital
commitments are clubhouse renovations, building and course improvements and
irrigation systems. At December 31, 2000, AGC's capital expenditure commitment
was approximately $689,000. The improvements will be funded from AGC's
operating cash flow and from borrowings under the bank credit facilities.

                                      59
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
American Golf Corporation and Subsidiaries

  In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, shareholders'
equity and cash flows present fairly, in all material respects, the financial
position of American Golf Corporation and Subsidiaries at December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California
March 2, 2001

                                      60
<PAGE>

                   AMERICAN GOLF CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
                          ------

Current assets:
  Cash and cash equivalents................................ $    341  $  3,536
  Accounts receivable--members (less allowance for doubtful
   accounts of $1,757 and $1,364 at December 31, 2000 and
   1999, respectively).....................................   27,138    24,940
  Other receivables........................................   13,183    36,735
  Receivables from affiliates, net.........................   27,146    13,502
  Inventories..............................................   19,122    17,259
  Prepaid expenses.........................................    6,921     3,320
                                                            --------  --------
      Total current assets.................................   93,851    99,292
Property, equipment and capital leases, net................  123,395   118,962
Leasehold rights...........................................   18,460    19,486
Deposits, licenses and other assets........................   10,965    12,579
Note receivable from shareholders..........................   26,320    28,539
                                                            --------  --------
      Total assets......................................... $272,991  $278,858
                                                            ========  ========

           LIABILITIES AND SHAREHOLDERS' EQUITY
           ------------------------------------

Current liabilities:
  Accounts payable......................................... $ 17,479  $ 13,327
  Notes payable--current portion:
    Shareholders...........................................       39        36
    Capital leases.........................................    1,545     2,776
    Other..................................................    5,288     3,322
  Accrued expenses.........................................   39,891    43,610
  Other liabilities........................................   17,065    12,855
  Other deferred revenue...................................   19,469    10,996
  Deferred initiation fee revenue..........................   18,963    15,779
                                                            --------  --------
      Total current liabilities............................  119,739   102,701
  Notes payable--long-term portion:
    Shareholders...........................................      313       352
    Capital leases.........................................    1,141     2,860
    Other..................................................   53,359    86,646
  Accrued expenses.........................................   32,181    28,732
  Deferred initiation fee revenue..........................   49,916    42,614
                                                            --------  --------
      Total liabilities....................................  256,649   263,905
                                                            --------  --------
Minority interest..........................................      158       760
                                                            --------  --------
Shareholders' equity:
  Common stock--no par value; 10,000,000 shares authorized;
   6,280,917 and 6,312,617 shares issued and outstanding at
   December 31, 2000 and 1999, respectively................      --        390
  Retained earnings........................................   19,162    19,651
  Notes receivable from shareholders.......................   (2,564)   (5,576)
  Cumulative foreign currency translation adjustment.......     (414)     (272)
                                                            --------  --------
      Total shareholders' equity...........................   16,184    14,193
                                                            --------  --------
      Total liabilities and shareholders' equity........... $272,991  $278,858
                                                            ========  ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       61
<PAGE>

                   AMERICAN GOLF CORPORATION AND SUBSIDIARIES

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                 (In thousands)

<TABLE>
<CAPTION>
                                                     For The Years Ended
                                                         December 31,
                                                  ----------------------------
                                                    2000      1999      1998
                                                  --------  --------  --------
<S>                                               <C>       <C>       <C>
Revenues:
  Green fees..................................... $252,750  $242,998  $204,189
  Cart rentals...................................   78,152    75,711    65,594
  Member dues and initiation fees................  140,419   126,312    99,955
  Food and beverage sales........................  150,026   134,092   108,665
  Merchandise sales..............................   63,066    58,281    50,790
  Other revenue..................................   54,813    52,473    40,074
  Management fees................................    7,122     7,708     6,586
                                                  --------  --------  --------
    Total revenues...............................  746,348   697,575   575,853
                                                  --------  --------  --------
Costs & expenses:
  Payroll and related expenses...................  256,888   240,179   203,265
  Cost of food and beverage sold.................   46,192    41,573    34,240
  Cost of merchandise sold.......................   36,536    34,652    31,682
  General and administrative.....................   60,611    52,232    46,121
  Repairs and maintenance........................   19,644    21,888    14,748
  Other operating expenses.......................  126,333   115,843    99,998
  Rents..........................................  179,703   161,436   126,779
  Depreciation and amortization..................   14,818    14,858    10,914
                                                  --------  --------  --------
    Total costs & expenses.......................  740,725   682,661   567,747
                                                  --------  --------  --------
Operating income.................................    5,623    14,914     8,106
                                                  --------  --------  --------
Other income (expense):
  Interest income................................    6,155     4,765     4,506
  Interest expense...............................   (9,835)   (9,103)   (7,594)
                                                  --------  --------  --------
    Income before provision for state income
     taxes and minority interest.................    1,943    10,576     5,018
Provision for state income taxes.................      (41)   (1,245)     (270)
                                                  --------  --------  --------
    Income before minority interest..............    1,902     9,331     4,748
Minority interest in (income) loss...............      231      (675)       (2)
                                                  --------  --------  --------
    Net income...................................    2,133     8,656     4,746
Other comprehensive income, net of tax:
    Foreign currency translation adjustment......     (142)     (228)       19
                                                  --------  --------  --------
    Comprehensive income......................... $  1,991  $  8,428  $  4,765
                                                  ========  ========  ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       62
<PAGE>

                   AMERICAN GOLF CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                       Cumulative
                                                                         Foreign
                          Common Stock               Notes Receivable   Currency       Total
                         ---------------  Retained         From        Translation Shareholders'
                         Shares  Amount   Earnings  Officers/Directors Adjustment     Equity
                         ------  -------  --------  ------------------ ----------- -------------
<S>                      <C>     <C>      <C>       <C>                <C>         <C>
Balance, December 31,
 1997................... 6,438   $ 6,594  $28,066        $(6,591)         $ (63)     $ 28,006
  Net income............   --        --     4,746            --             --          4,746
  Dividends.............   --        --    (6,314)           --             --         (6,314)
  Issuance of shares for
   notes receivable.....    32     3,012      --          (3,012)           --            --
  Purchase of shares
   from shareholders....  (175)   (9,606)  (7,503)         4,027            --        (13,082)
  Foreign currency
   translation
   adjustment...........   --        --       --             --              19            19
                         -----   -------  -------        -------          -----      --------
Balance, December 31,
 1998................... 6,295       --    18,995         (5,576)           (44)       13,375
  Net income............   --        --     8,656            --             --          8,656
  Dividends.............   --        --    (8,000)           --             --         (8,000)
  Exercise of stock
   options..............    18       390      --             --             --            390
  Foreign currency
   translation
   adjustment...........   --        --       --             --            (228)         (228)
                         -----   -------  -------        -------          -----      --------
Balance, December 31,
 1999................... 6,313       390   19,651         (5,576)          (272)       14,193
  Net income............   --        --     2,133            --             --          2,133
  Purchase of shares
   from shareholders....   (32)     (390)  (2,622)         3,012            --            --
  Foreign currency
   translation
   adjustment...........   --        --       --             --            (142)         (142)
                         -----   -------  -------        -------          -----      --------
Balance, December 31,
 2000................... 6,281   $   --   $19,162        $(2,564)         $(414)     $ 16,184
                         =====   =======  =======        =======          =====      ========
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       63
<PAGE>

                   AMERICAN GOLF CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                      For The Years Ended
                                                         December 31,
                                                  -----------------------------
                                                    2000       1999      1998
                                                  ---------  --------  --------
<S>                                               <C>        <C>       <C>
Cash flows from operating activities:
  Net income....................................  $   2,133  $  8,656  $  4,746
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization...............     14,818    14,858    10,914
    Minority interest in income (loss)..........       (231)      675         2
    Increase (decrease) from changes in:
      Accounts receivable--members..............     (2,243)   (2,326)   (3,775)
      Other receivables.........................     23,510   (10,153)   (8,282)
      Receivable from affiliates, net...........    (13,082)   (1,679)   (1,858)
      Inventories...............................     (1,956)   (2,622)   (2,334)
      Prepaid expenses..........................     (3,684)    2,523    (2,153)
      Licenses, deposits and other assets.......      1,551    (2,395)    2,736
      Accounts payable..........................      4,529     2,304     5,181
      Accrued expenses..........................        162     8,210    (4,962)
      Other liabilities.........................      4,613     2,689    (1,723)
      Other deferred revenue....................      8,326      (316)    5,339
      Deferred initiation fee revenue...........     10,490     8,442     8,780
                                                  ---------  --------  --------
        Net cash provided by operating
         activities.............................     48,936    28,866    12,611
                                                  ---------  --------  --------
Cash flows from investing activities:
  Acquisition of property and equipment.........    (19,549)  (24,130)  (26,220)
  Acquisition of leasehold rights...............     (1,129)   (2,764)   (1,759)
  Proceeds from note receivable from
   shareholders.................................      2,219       461       --
                                                  ---------  --------  --------
        Net cash used in investing activities...    (18,459)  (26,433)  (27,979)
                                                  ---------  --------  --------
Cash flows from financing activities:
  Proceeds from notes payable
        Other...................................    109,657    78,386    65,500
        Capital leases..........................         27     2,213       --
  Payments on notes payable
        Shareholders............................        (36)      (34)      (31)
        Other...................................   (139,774)  (69,287)  (43,910)
        Capital leases..........................     (2,991)   (3,547)   (2,070)
  Purchase of shares from officers/directors....        --        --    (13,082)
  Exercise of stock options.....................        --        390       --
  Dividends paid................................        --     (8,000)   (6,314)
  Limited partner cash distributions............       (371)     (418)      --
                                                  ---------  --------  --------
        Net cash provided by (used in) financing
         activities.............................    (33,488)     (297)       93
        Effect of exchange rate changes on cash
         and cash equivalents...................       (184)      (53)      (10)
                                                  ---------  --------  --------
        Net increase (decrease) in cash and cash
         equivalents............................     (3,195)    2,083   (15,285)
Cash and cash equivalents, beginning of period..      3,536     1,453    16,738
                                                  ---------  --------  --------
Cash and cash equivalents, end of period........  $     341  $  3,536  $  1,453
                                                  =========  ========  ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       64
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Summary of Significant Accounting Policies:

 Organization

  The consolidated financial statements include the accounts of American Golf
Corporation ("AGC" or "the Company"), a California subchapter S Corporation,
and its majority-owned subsidiaries, American Golf of Atlanta ("Atlanta"), a
Georgia general partnership, American Golf of Detroit ("Detroit"), a Michigan
general partnership, American Golf (UK) Limited ("AG(UK)"), a United Kingdom
limited liability company, CW Golf Partners ("CWP"), a California limited
partnership, AGC-Park Hill Joint Venture ("Park Hill"), a Colorado general
partnership, and American Golf Australia Pty Limited ("AG(AUS)"), an Australia
limited liability company (collectively, the "Company"). AGC was formed in
1973 for the purpose of operating public and private golf and tennis
facilities on leased premises. At both December 31, 2000 and 1999, 71% of the
Company was owned by David G. Price and Dallas P. Price ("The Prices"). The
following table lists AGC's majority-owned subsidiaries and selected
information:

<TABLE>
<CAPTION>
                                              AGC
   Entity                   Formation Date Ownership                      Purpose
   ------                   -------------- ---------                      -------
   <S>                      <C>            <C>       <C>
   Atlanta................. June 1986          65%   To operate four courses in Atlanta, Georgia.
   Detroit................. December 1990      80%   To operate four courses in Detroit, Michigan.
   AG(UK).................. August 1993        75%   To operate courses in the United Kingdom.
   CWP..................... September 1993     75%   To operate one course in Los Angeles, California.
   Park Hill............... December 1998      75%   To operate one course in Denver, Colorado.
   AG(AUS)................. July 2000         100%   To operate courses in Australia.
</TABLE>

  The remaining 25% interest in AG(UK) is owned by European Golf Corporation,
an affiliate of AGC.

  The term "affiliate", as used in these financial statements, refers to any
entity in which The Prices have a controlling interest.

  At December 31, 2000, the Company leases 142 golf courses in which National
Golf Properties, Inc. ("NGP") has an ownership or mortgage interest. David G.
Price, Chairman of the Board of Directors of NGP, owns 2.7% of NGP's
outstanding stock and 16.7% of the common units of National Golf Operating
Partnership, L.P. ("NGOP"). Dallas P. Price owns 2.7% of NGP's outstanding
stock and 14.2% of the common units of NGOP.

  On March 31,1999, Golf Acquisitions, LLC ("Golf Acquisitions"), a new
limited liability company formed by a subsidiary of AGC and a subsidiary of
ClubCorp International ("ClubCorp"), purchased the Meditrust Corporation
("Meditrust") subsidiaries comprising the "Cobblestone Golf Group" for
approximately $391.3 million in cash and assumed debt. Upon the closing of the
stock purchase, AGC and ClubCorp divided the Cobblestone portfolio of 48 golf
courses with AGC allocated 24 owned, leased and managed golf courses.
Concurrently with closing its purchase, the Company and Golf Acquisitions sold
to NGP its interest in 20 of the golf courses. The Company entered into
agreements to lease or sublease 18 of the Cobblestone courses from NGP.

  On February 14, 2000 the Company entered into a letter of intent with
Book4golf.com Corporation ("Book4golf") to become the Company's exclusive
internet tee-time provider. The letter of intent provided for the immediate
payment of $400,000 and delivery of 150,000 common shares of Book4golf to the
Company. On December 22, 2000 the Company entered into a stock agreement and a
five year license and service agreement with Book4golf. The stock agreement
provided for the immediate payment of $575,000 with an additional $1,250,000
due to the Company after 180 days. In addition, 2,500,000 shares of Book4golf
were delivered with the signing of the stock agreement. The stock agreement
represents consideration for the Company entering into the license and service
agreement and makes Book4golf the Company's exclusive internet tee-time
provider. The revenue from the stock agreement will be recognized on a
straight-line basis over the life of the license and service agreement.

                                      65
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Principles of Consolidation

  All material intercompany transactions and balances have been eliminated in
consolidation.

 Use of Estimates

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

 Inventories

  Inventories are stated at the lower of cost (using the first-in, first-out
method) or market. Inventories consist primarily of food, beverage, golf and
tennis equipment, and clothing and accessories.

 Revenue Recognition

  Revenue from green fees, cart rentals, food and beverage sales, merchandise
sales and range income are generally recognized at the time of sale.

  Revenue from membership dues are generally billed monthly and recognized in
the month earned. The monthly dues are structured to cover the club operating
costs and membership services. Initiation fees are generally refundable in 30
years. Accordingly, the difference between the amount of the fees and the net
present value of the future obligation is recognized as revenue on a straight-
line basis over the expected average life of active membership, unless
uncertainty surrounding collectibility exists for initiation fees paid either
on terms or an installment basis. In addition, related incremental direct
costs (primarily commissions and percentage rent) are recorded in the same
manner as the revenues are recognized.

  The initiation fee deposit liability accretes over 30 years using the
interest method. The accretion is recorded to interest expense in the
accompanying consolidated statements of operations and comprehensive income.
At December 31, 2000, there are no initiation fee deposits that are
contractually due and payable during the next five years.

 Property, Equipment, Capital Leases and Leasehold Rights

  Property, equipment and leasehold rights are carried at the lower of cost or
net realizable value. Property and equipment under capital leases are stated
at the lower of the present value of the future minimum lease payments at the
beginning of the lease term or the fair value at the inception of the lease.

  Depreciation of property and equipment is computed using the straight-line
method over the lesser of the estimated useful life of the asset (3 to 30
years) or the remaining term of the lease. Property and equipment held under
capital leases and leasehold rights are amortized using the straight-line
method over the lesser of the lease term or the estimated useful life of the
asset.

  When property and equipment are sold or otherwise disposed of, the asset
account and related accumulated depreciation and amortization account are
relieved, and any gain or loss is included in operations. Expenditures for
maintenance and repairs are charged to operations. Significant expenditures
which extend the useful life of existing assets are capitalized.

                                      66
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Impairment of Long-Lived and Intangible Assets

  The Company follows the provisions of 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." SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Certain long-lived assets and certain identifiable intangibles to
be disposed of must be reported at the lower of carrying amount or fair value
less cost to sell. The Company periodically assesses whether there has been an
impairment in the value of long-lived assets and certain identifiable
intangibles by considering factors such as expected future operating income,
trends and prospects, as well as the effects of demand, competition and other
economic factors. The Company determines whether there has been impairment by
comparing the expected undiscounted future cash flow from each golf course
with the net carrying value for such golf course, including any related
intangible asset. Management believes no impairment exists at December 31,
2000.

 Stock-Based Employee Compensation Awards

  The Company has adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," which involves proforma disclosure
of net income under SFAS No. 123 and detailed descriptions of plan terms and
assumptions used in valuing stock option grants. The Company has chosen to
continue to account for stock-based employee compensation awards in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees."

 Comprehensive Income

  Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption had
no impact on the Company's net income or shareholders' equity. Comprehensive
income includes foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity, but under SFAS No.
130 are to be included in other comprehensive income.

 Concentration of Credit Risk

  Financial instruments which potentially subject the Company to concentration
of credit risk consist primarily of cash and cash equivalents and trade
receivables.

  The Company has cash in financial institutions which is insured by the
Federal Deposit Insurance Corporation ("FDIC") up to $100,000 per account. At
various times throughout the year and as of December 31, 2000, the Company had
cash in financial institutions which was in excess of the FDIC insurance
limit.

  Concentration of credit risk with respect to trade receivables, which
consists primarily of membership dues and charges, is limited due to the large
number of club members comprising the Company's customer base, and their
dispersion across many different geographic areas. The trade receivables are
billed and due monthly, and all probable bad debt losses have been
appropriately considered in establishing an allowance for doubtful accounts.
As of December 31, 2000, the Company had no significant concentration of
credit risk.

 Fair Value of Financial Instruments

  To meet the reporting requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," the Company calculates the fair value of
financial instruments and includes this additional

                                      67
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

information in the notes to the consolidated financial statements when the
fair value is materially different than the carrying value of those financial
instruments. When the fair value reasonably approximates the carrying value,
no additional disclosure is made. The Company uses quoted market prices, when
available, or discounted cash flows to calculate these fair values.

 Cash and Cash Equivalents

  The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

 Advertising

  The Company expenses advertising costs as incurred. Advertising costs for
the years ended December 31, 2000, 1999 and 1998 were approximately
$8,551,000, $7,667,000 and $7,375,000, respectively.

 Foreign Currency Translation

  The Company translates foreign currency financial statements by translating
balance sheet accounts at the year-end exchange rate and income statement
accounts at the average exchange rate for the year. Translation gains and
losses are recorded in shareholders' equity and comprehensive income. Realized
gains and losses are included in operations.

 Accounting for Derivative Instruments and Hedging Activities

  SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 138, establishes accounting and reporting
standards for derivatives and hedging activities. This Standard requires that
all derivatives be recognized as assets or liabilities in the balance sheet
and that these instruments be measured at fair value through adjustments to
either other comprehensive income or to current earnings, depending on the
purpose for which the derivative is held. This Standard, which is effective
January 1, 2001, by the issuance of SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS No.
133," significantly changes the accounting for hedge-related derivatives. The
Company has not engaged in hedging activities or purchased derivative
instruments; accordingly, the adoption of SFAS No. 133 will not have a
material impact on the results of operations of the Company.

 Reclassifications

  Certain amounts in the 1999 and 1998 consolidated financial statements have
been reclassified to conform to the current year presentation and had no
effect on the Company's finacial position or results of operations.

(2) Change in Accounting Policy:

  During 1998, based on a recent Securities and Exchange Commission
pronouncement, the Company changed its accounting policy for member initiation
fees to defer such revenues and recognize them on a straight-line basis over
the expected average life of active membership. The Company previously
recognized as revenue the difference between the amount of the fees and the
net present value of the future obligation at the time of sale, unless for
initiation fees paid either on terms or an installment basis uncertainty
surrounding collectibility existed. In addition to the deferral of member
initiation fees, the Company has deferred the related incremental direct costs
(primarily commissions and percentage rent) and is recording such costs in the
same manner as the

                                      68
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

revenues are recognized. As noted below, this change in accounting policy
resulted in a reduction to previously reported revenues and net income. The
deferred member initiation fees and related incremental direct costs will be
recognized in future periods over the expected average life of active
membership. Accordingly, the accompanying consolidated financial statements
have been retroactively adjusted to reflect this change for all periods
presented. The impact of the restatement is summarized as follows:

<TABLE>
<CAPTION>
                                                                       1998
                                                                  --------------
                                                                  (In thousands)
   <S>                                                            <C>
   Total revenue.................................................    $(10,422)
   Net income....................................................      (8,780)
</TABLE>

  In addition, this change resulted in a decrease in retained earnings of
$49,952,000 and $41,172,000 at December 31, 1998 and 1997, respectively.

(3) Receivables from Affiliates, net:

  The receivables from affiliates are uncollateralized and due within one
year.

(4) Property, Equipment and Capital Leases:

  Property, equipment and capital leases consist of the following:

<TABLE>
<CAPTION>
                                                  Estimated
                                                   Useful     December 31,
                                                    Lives   ------------------
                                                   (Years)    2000      1999
                                                  --------- --------  --------
                                                             (In thousands)
<S>                                               <C>       <C>       <C>
Golf course improvement..........................   10-20   $ 90,762  $ 80,782
Building.........................................   15-30     48,374    45,825
Furniture, fixtures, machinery and equipment.....    3-7      39,987    38,777
Equipment under capital leases...................    3-7      12,149    12,149
                                                            --------  --------
                                                             191,272   177,533
Less: accumulated depreciation...................            (77,576)  (65,498)
                                                            --------  --------
                                                             113,696   112,035
Construction-in-progress.........................              9,699     6,927
                                                            --------  --------
                                                            $123,395  $118,962
                                                            ========  ========
</TABLE>

  Equipment under capital leases includes golf carts, turf and maintenance
equipment, computers, and other office equipment.

  The Company capitalized approximately $566,000 of interest for the year
ended December 31, 2000. No interest was capitalized for the years ended
December 31, 1999 and 1998.

(5) Note Receivable from Shareholder:

  During 1996, the Company loaned $29,000,000 to The Prices. The note is due
in 2004. The note bears interest at 9.35% that is payable semi-annually.

(6) State Income Taxes:

  The Company has elected to be taxed as an S corporation under the Internal
Revenue Code of 1986, as amended. Accordingly, corporate income is taxed
directly to the shareholders for federal income tax reporting

                                      69
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

purposes. The Company therefore has no provision in its consolidated financial
statements for federal income taxes. The following is the provision for state
franchise and income taxes for the years ended December 31, 2000, 1999 and
1998:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                               ----------------
                                                               2000  1999  1998
                                                               ---- ------ ----
                                                                (In thousands)
   <S>                                                         <C>  <C>    <C>
   Current.................................................... $--  $  --  $--
   Deferred...................................................  41   1,245  270
                                                               ---  ------ ----
     Total provision for state income taxes................... $41  $1,245 $270
                                                               ===  ====== ====
</TABLE>

(7) Notes Payable--Shareholders:

  The notes are due in 2007 and bear interest at 8%. Interest expense to the
shareholders for the years ended December 31, 2000, 1999 and 1998 was
approximately $30,000, $33,000 and $35,000, respectively.

  The following are annual maturities on notes payable to shareholders:

<TABLE>
<CAPTION>
     Years Ended December 31,                                        Amount
     ------------------------                                     -------------
                                                                  (In thousands)
     <S>                                                          <C>
       2001......................................................     $ 39
       2002......................................................       42
       2003......................................................       46
       2004......................................................       50
       2005......................................................       54
       Thereafter................................................      121
                                                                      ----
                                                                      $352
                                                                      ====
</TABLE>

(8) Notes Payable--Others:

  Notes payable to others consist of the following:

<TABLE>
<CAPTION>
                                                           December 31,
                                                  -------------------------------
                                                       2000            1999
                                                  --------------- ---------------
                                                          (In thousands)
                                                           Long-           Long-
                          Interest    Interest    Current  Term   Current  Term
   Type of Collateral       Rate      Payments    Portion Portion Portion Portion Maturity
   ------------------     --------- ------------- ------- ------- ------- ------- --------
<S>                       <C>       <C>           <C>     <C>     <C>     <C>     <C>
Uncollateralized line of
 credit.................  Reference    Monthly    $  --   $ 5,000 $  --   $32,490  3/2002
Uncollateralized note...    6.1%      Annually       817      --     817      817  1/2002
Uncollateralized note...    8.3%      Quarterly       54       29     50       83  6/2002
Collateralized note.....    9.4%    Semi-Annually  3,479   34,185  1,624   37,664  7/2004
Collateralized note.....    8.0%      Quarterly      290    3,106    290    3,670  7/2009
Collateralized note.....    9.5%      Quarterly      281    3,508    277    4,085 12/2009
Collateralized note.....    8.8%      Quarterly      154    2,875    153    3,267 10/2012
Collateralized note.....    8.8%      Quarterly      --       635    --       --  10/2012
Collateralized note.....    9.2%      Quarterly      114    1,835    111    2,105 11/2012
Collateralized note.....    7.6%      Quarterly       99    2,186    --     2,465  1/2014
                                                  ------  ------- ------  -------
                                                  $5,288  $53,359 $3,322  $86,646
                                                  ======  ======= ======  =======
</TABLE>

  At December 31, 2000 and 1999, the bank prime and reference rate was 9.5%
and 8.5%, respectively.

                                      70
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The following are annual maturities on notes payable to others:

<TABLE>
<CAPTION>
     Years ended December 31,                                         Amount
     ------------------------                                     --------------
                                                                  (In thousands)
     <S>                                                          <C>
       2001......................................................    $ 5,288
       2002......................................................      9,881
       2003......................................................      5,341
       2004......................................................     27,463
       2005......................................................      1,376
       Thereafter................................................      9,298
                                                                     -------
                                                                     $58,647
                                                                     =======
</TABLE>

  The note agreements and credit facilities contain, among other covenants,
working capital maintenance, fixed charge and debt to net worth ratios,
minimum tangible net worth amounts, and certain restrictions regarding
indebtedness to others.

  On December 31, 1997, the Company entered into a $40 million revolving
credit facility and a $13.5 million standby letter of credit facility with a
commercial bank that bears interest at prime or a LIBOR based rate. Letters of
credit issued under these credit facilities are charged a 1.5% annual letter
of credit fee. On April 1, 2000, the Company amended its revolving credit
facility. The amendment includes an increase in the amount available under the
line of credit to $60 million, of which $10 million expired on July 31, 2000
and $50 million will expire on March 29, 2002. The amendment also includes the
Company's guarantee of approximately $12 million of debt outstanding under the
term loan and line of credit of an affiliate. The revolving credit facility is
used to finance working capital requirements. At December 31, 2000, there was
$5 million outstanding and $296,000 in standby letters of credit issued
against the revolving credit facility. The $13.5 million standby letter of
credit facility supported letters of credit issued in favor of NGP, pursuant
to the terms of the leases between NGP and AGC. As of March 31, 2000, NGP
waived the Company's obligation to maintain the letter of credit.

  In December 1996, the Company placed $41.5 million of fixed rate senior
collateralized notes due 2004 with a group of institutional investors. The net
proceeds from the private placement were used to repay bank debt and provide a
$29 million loan to The Prices.

  The credit facilities and the private placement loan are collateralized by
the issued and outstanding stock of an affiliate.

                                      71
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(9) Notes Payable--Capital Leases:

  Future minimum payments, by year and in the aggregate, under capital leases
with initial remaining terms of one year or more consist of the following at
December 31, 2000:

<TABLE>
<CAPTION>
     Years ended December 31,                                         Amount
     ------------------------                                     --------------
                                                                  (In thousands)
     <S>                                                          <C>
        2001.....................................................     $1,755
        2002.....................................................        958
        2003.....................................................        272
        2004.....................................................          1
        2005.....................................................        --
        Thereafter...............................................        --
                                                                      ------
      Total minimum lease payments ..............................      2,986
      Amount representing interest ..............................        300
                                                                      ------
      Present value of net minimum lease payments ...............      2,686
      Current portion ...........................................      1,545
                                                                      ------
      Long-term portion .........................................     $1,141
                                                                      ======
</TABLE>

(10) Employee Benefit Plans:

 1994 Equity Participation Plan

  In 1994, the Company established the 1994 Equity Participation Plan, as
amended (the "1994 Plan"). Under the 1994 Plan, 1,200,000 shares may be
awarded to key employees as either nonqualified stock options, performance
awards, or the right to purchase common stock. There were 101,806 and 133,506
shares available under the 1994 Plan as of December 31, 2000 and 1999,
respectively. In 2000, the Company repurchased 31,700 shares of common stock
at $95.00 per share. These shares were issued in 1998 at the same price. As
part of the repurchase, notes receivable totaling $3,012,000 were paid off. In
1998 the Company repurchased 175,307 shares of common stock issued under the
1994 Plan at prices ranging from $80.55 to $95.00 per share. As part of the
repurchase, notes receivable totaling $4,026,000 were paid off. In 1997, the
Company issued 149,264 shares of common stock at prices ranging from $22.05 to
$43.12 per share and received notes receivable totaling $4,115,000. The
Company also repurchased 65,236 shares of common stock issued under the 1994
Plan at prices ranging from $87.05 to $88.06 per share. As part of the
repurchase, notes receivable totaling $1,823,000 were paid off.

  Stock options granted vest over a three to five year period and are subject
to continued employment and the Company achieving certain financial
performance targets. The fair value of stock options granted is estimated
using the minimum value pricing method with the following assumptions: (i)
risk-free interest rate of 7.0%, (ii) expected option life of seven years,
(iii) forfeiture rate of zero, (iv) no expected volatility and (v) dividend
yield of 5%.

                                      72
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The summary of the status of the Company's stock options as of December 31,
2000, 1999 and 1998, and the activity with executives, key employees and
members of the AGC Board of Directors during the years then ended is presented
below:

<TABLE>
<CAPTION>
                                2000               1999              1998
                          ------------------ ----------------- -----------------
                                    Weighted          Weighted          Weighted
                                    Average           Average           Average
                           Number    Option  Number    Option  Number    Option
                             of     Exercise   of     Exercise   of     Exercise
                           Shares    Price   Shares    Price   Shares    Price
                          --------  -------- -------  -------- -------  --------
<S>                       <C>       <C>      <C>      <C>      <C>      <C>
Outstanding at beginning
 of year................   626,102   $53.61  642,835   $50.56  440,424   $26.60
Granted--price equals
 fair value.............    12,680    75.68   76,080    75.68  259,071    86.28
Granted--price greater
 than fair value........       --       --       --       --       --       --
Exercised...............       --       --   (17,699)   22.05   (9,395)   22.05
Canceled................  (227,553)   62.41  (75,114)   57.30  (47,265)   28.77
                          --------   ------  -------   ------  -------   ------
Options outstanding at
 year end...............   411,229   $49.42  626,102   $53.61  642,835   $50.56
                          ========   ======  =======   ======  =======   ======
Options exercisable at
 year end...............   252,729           366,206           347,516
                          ========           =======           =======
</TABLE>

  The following table summarizes information about stock options outstanding
at December 31, 2000:

<TABLE>
<CAPTION>
                           Options Outstanding         Options Exercisable
                    --------------------------------- ---------------------
                       Number     Weighted               Number
                    Outstanding    Average   Weighted Outstanding  Weighted
                         at       Remaining  Average       at      Average
                    December 31, Contractual Exercise December 31, Exercise
   Exercise price       2000        Life      Price       2000      Price
   --------------   ------------ ----------- -------- ------------ --------
   <S>              <C>          <C>         <C>      <C>          <C>
       22.05          209,174        5.0      22.05     209,174     22.05
       43.12           43,555        0.9      43.12      43,555     43.12
       95.00           95,100        4.0      95.00         --        --
       75.68           63,400        6.0      75.68         --        --
                      -------                           -------
                      411,229                           252,729
                      =======                           =======
</TABLE>

  The Company adopted the disclosure only provision of SFAS No. 123 and
accordingly, no compensation expense has been recognized for stock option
grants to executives, key employees and members of the AGC Board of Directors.
Had compensation expense for such grants been determined based on the fair
value of the award, at the grant date, consistent with the provisions of SFAS
No. 123, the Company's net income would have been reduced to the proforma
amounts indicated below:

<TABLE>
<CAPTION>
                                                           For the years ended
                                                               December 31,
                                                           --------------------
                                                            2000   1999   1998
                                                           ------ ------ ------
                                                              (In thousands)
   <S>                                                     <C>    <C>    <C>
   Net income--as reported ............................... $2,133 $8,656 $4,746
                                                           ====== ====== ======
   Net income--pro forma.................................. $2,053 $8,656 $4,746
                                                           ====== ====== ======
</TABLE>

  In 1995, performance awards were granted to key members of management who
were not awarded the right to purchase common stock or nonqualified stock
options. The 1994 Plan provides that holders of performance awards have the
right to receive an amount equal to the appreciation in share value (as
measured by a predetermined formula based on the Company's earnings). All
performance awards were scheduled to mature on December 31, 1998. In 1998, the
Company granted the holders of performance awards the right to receive, as a

                                      73
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

prepayment, a portion of their appreciation in share value based on the 1997
share price, payable in 1999, and extended the maturity date of the
performance shares to December 31, 1999. The appreciation in share value, less
the prepayment, is payable in three equal annual installments, beginning in
early 2000. In 1999, the Company issued 66,496 performance awards with a
maturity date of December 31, 2001 payable in annual installments beginning in
early 2002. Performance awards vest based on achieving certain earnings
targets of the Company and are subject to continued employment. Performance
awards outstanding totaled 235,057 and 246,742 as of December 31, 2000 and
1999, respectively. For the year ended December 31, 2000, compensation expense
of $1,981,000 was reversed related to compensation expense recorded in 1999 as
earnings estimates were revised. For the year ended December 31, 1999,
compensation expense recorded was $4,429,000. For the year ended December 31,
1998, no compensation expense was recorded with respect to the performance
awards as management determined that the accrual recorded in 1997 was adequate
based on earnings estimates of the Company for the year ended December 31,
1998.

 401(k) Employee Savings Plan

  The Company has a 401(k) Employee Savings Plan available to all employees
who have earned one year of vesting service and are at least 21 years of age.
Participants may contribute from 1% to 20% of their earnings, in whole
percentages, on a before-tax basis. The Company contributes to participants'
accounts based on the amount the participant elects to defer and a matching
contribution equal to $0.50 on each dollar contributed by a participant up to
3% of the participant's gross pay. The Company's expense for the plan for the
years ended December 31, 2000, 1999 and 1998 was approximately $1,273,000,
$1,046,000 and $947,000, respectively.

(11) Commitments and Contingencies:

  The Company is the lessee under long-term operating leases for golf courses
and equipment. At December 31, 2000, future minimum rental payments required
pursuant to the terms of all lease obligations are as follows:

<TABLE>
<CAPTION>
   Years ended December 31,         Related Parties Unrelated Parties   Total
   ------------------------         --------------- ----------------- ----------
                                                   (In thousands)
   <S>                              <C>             <C>               <C>
     2001.........................    $  112,401        $ 56,142      $  168,543
     2002.........................       112,581          51,126         163,707
     2003.........................       112,771          46,238         159,009
     2004.........................       112,970          38,455         151,425
     2005.........................       113,179          35,595         148,774
     Thereafter...................       746,748         410,257       1,157,005
                                      ----------        --------      ----------
                                      $1,310,650        $637,813      $1,948,463
                                      ==========        ========      ==========
</TABLE>

  In addition to minimum rental payments, certain leases require payment of
the excess of various percentages of gross revenue over the minimum rental
payments. During the years ended December 31, 2000, 1999 and 1998, percentage
rentals paid to unrelated parties were approximately $13,664,000, $11,963,000
and $9,572,000, respectively.

  Under the terms of certain leases, the Company is committed to make
improvements at golf courses. At December 31, 2000, approximately $689,000 of
such improvements remain to be made.

  At December 31, 2000, the Company was contingently liable for outstanding
letters of credit in the amount of approximately $296,000.

                                      74
<PAGE>

                  AMERICAN GOLF CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The Company has continuing litigation matters and other contingencies
incurred in the ordinary course of business and has recorded allowances for
the payment of these contingencies when such amounts can be estimated and are
considered material to the results of operations. Where no allowance has been
recorded, the Company does not consider the contingencies material to its
consolidated financial position, results of operations or cash flows.

(12) Related Party Transactions:

  The Company rents golf and tennis facilities from NGP and related entities
in which The Prices have a controlling interest. Rent expense paid to NGP was
approximately $107,680,000, $98,705,000 and $80,027,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.

  The Company recorded management and consulting fees from related entities in
the amount of approximately $3,813,000, $2,128,000 and $1,504,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.

  The Company has accumulated costs in Other Receivables relating to
construction in progress at certain golf and tennis facilities owned by NGP.
Periodically, substantially all of these costs are reimbursed by NGP and
related entities. At December 31, 2000 and 1999 these accumulated costs
amounted to approximately $773,000 and $17,535,000, respectively.

  The Company earns interest on receivables from affiliates at a prime based
rate. Interest income from affiliates was approximately $1,591,000, $222,000
and $247,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

  Included in Other Receivables are receivables from employees at December 31,
2000 and 1999 of $422,000 and $426,000, respectively.

(13) Statement of Cash Flows--Supplemental Disclosures:

  Interest paid for the years ended December 31, 2000, 1999 and 1998 was
approximately $7,534,000, $7,524,000 and $6,815,000, respectively.

  State income taxes paid for the years ended December 31, 2000, 1999 and 1998
were approximately $120,000, $50,000 and $259,000, respectively.

  During 1999, the Company assumed capital leases for equipment of $2,850,000.

(14) Shareholders' Equity:

  As discussed in Note 10 to the consolidated financial statements, the
Company has notes receivable from key employees with a balance of $2,564,000
as of December 31, 2000 resulting from the purchase of 123,218 shares of
common stock. The notes had a balance of $5,576,000 at December 31, 1999. The
notes bear interest ranging from 6 to 6.54% and the principal is due in 2004.
The notes are collateralized by the common stock issued and are shown on the
consolidated balance sheets as a reduction in shareholders' equity. Interest
income accrued on the notes was approximately $195,000 for the year ended
December 31, 2000. For the years ended December 31, 1999 and 1998 interest
accrued was $425,000.

  Interest is paid with proceeds from shareholder distributions and, if
necessary, a portion of their annual bonus. To the extent these amounts are
insufficient to cover the current year interest, the unpaid interest may be
added to the principal of the note. No amounts were added to principal for the
years ended December 31, 2000, 1999 and 1998.

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<PAGE>

                                  SIGNATURES

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

                                          NATIONAL GOLF PROPERTIES, INC.

                                                /s/ James M. Stanich
                                          By: _________________________________
                                                    James M. Stanich
                                                        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.

<TABLE>
<CAPTION>
              Signatures                          Title                  Date
              ----------                          -----                  ----

 <C>                                  <S>                           <C>
        /s/ David G. Price            Chairman of the Board         March 30, 2001
 ____________________________________
            David G. Price

       /s/ James M. Stanich           President and Director        March 30, 2001
 ____________________________________  (Principal Executive
           James M. Stanich            Officer)

        /s/ Neil M. Miller            Chief Financial Officer       March 30, 2001
 ____________________________________
            Neil M. Miller

      /s/ Richard A. Archer           Director                      March 30, 2001
 ____________________________________
          Richard A. Archer

     /s/ John C. Cushman, III         Director                      March 30, 2001
 ____________________________________
         John C. Cushman, III

         /s/ Bruce Karatz             Director                      March 30, 2001
 ____________________________________
             Bruce Karatz

       /s/ Charles S. Paul            Director                      March 30, 2001
 ____________________________________
           Charles S. Paul

       /s/ Edward R. Sause            Director                      March 30, 2001
 ____________________________________
           Edward R. Sause
</TABLE>

                                      76