<PAGE>
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                      
                                  FORM 10-K/A      
                                AMENDMENT NO. 1
             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
 
                        COMMISSION FILE NUMBER 1-12246
 
                        NATIONAL GOLF PROPERTIES, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
               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:
 
<TABLE>
<CAPTION>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
                 COMMON STOCK                             NEW YORK STOCK EXCHANGE
                $.01 PAR VALUE
</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 January 5, 1998, the aggregate market value of the voting stock held
by nonaffiliates of the registrant was approximately $373.1 million, based
upon the closing price ($32.6875) 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:
 
   12,418,195 SHARES OF COMMON STOCK, $.01 PAR VALUE, AS OF JANUARY 5, 1998
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
  Portions of the registrant's Proxy Statement in connection with its Annual
Meeting of Stockholders to be held May 5, 1998, are incorporated by reference
in Part III.
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA
 
  The selected financial data included in this table by the Company is derived
from the Company's consolidated financial statements and the Company's
predecessors' (Golf Properties Group ("GPG")) combined financial statements
for those years, which have been audited by Coopers & Lybrand L.L.P.
Historical operating results of GPG may not be comparable to future operating
results of the Company because: (i) the Leases with AGC have materially
different terms from the terms of the leases with GPG; (ii) historical
operating revenues and operating expenses include revenues and expenses
relating to five courses that were operated by AGC pursuant to management
agreements (under which GPG received revenues and bore expenses and paid the
operator a fee) rather than leases; and (iii) management fee expense reflects
consulting services provided by AGC to GPG, which were not continued following
the Offering.
 
<TABLE>
<CAPTION>
                                                                               GOLF PROPERTIES
                                  NATIONAL GOLF PROPERTIES, INC.                    GROUP
                         ----------------------------------------------------- ---------------
                               YEAR ENDED DECEMBER 31,           AUG. 18, 1993  JAN. 1, 1993
                         --------------------------------------     THROUGH        THROUGH
                           1997      1996      1995      1994    DEC. 31, 1993  AUG. 17, 1993
                         --------  --------  --------  --------  ------------- ---------------
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                      <C>       <C>       <C>       <C>       <C>           <C>
STATEMENT OF OPERATIONS
 DATA:
Revenues
 Rent................... $ 74,316  $ 58,898  $ 45,931  $ 36,637     $10,787        $10,678
 Equity in income from
  joint venture.........      119       --        --        --          --             --
 Gain on sale of
  properties............      158     1,199     1,893       --          --             --
 Operating..............      --        --        --        --          --           4,708
 Other income...........      --        --        --        --           17            499
                         --------  --------  --------  --------     -------        -------
Total revenues..........   74,593    60,097    47,824    36,637      10,804         15,885
                         --------  --------  --------  --------     -------        -------
Expenses
 Operating..............      --        --        --        --          --           3,950
 Management fee.........      --        --        --        --          --           2,193
 General &
  administrative........    5,336     4,734     4,258     4,709       1,374            --
 Depreciation &
  amortization..........   24,758    19,124    14,027    10,413       3,384          4,661
                         --------  --------  --------  --------     -------        -------
Total expenses..........   30,094    23,858    18,285    15,122       4,758         10,804
                         --------  --------  --------  --------     -------        -------
 Interest expense.......  (19,810)  (14,067)   (8,793)   (2,212)       (335)        (4,627)
 Interest income........      364     2,110     4,144     3,459       1,584             24
 Gain on insurance
  proceeds..............    2,231       --        --        --          --             --
 Other income...........      521       238       114       194         --             --
                         --------  --------  --------  --------     -------        -------
Income before provision
 for taxes and minority
 interest...............   27,805    24,520    25,004    22,956       7,295            478
Provision for taxes.....     (223)     (256)     (352)     (368)       (158)           --
                         --------  --------  --------  --------     -------        -------
Income before minority
 interest...............   27,582    24,264    24,652    22,588       7,137            478
Minority interest.......  (12,003)  (10,852)  (11,366)  (10,712)     (3,317)           --
                         --------  --------  --------  --------     -------        -------
Net income.............. $ 15,579  $ 13,412  $ 13,286  $ 11,876     $ 3,820        $   478
                         ========  ========  ========  ========     =======        =======
Basic earnings per
 share.................. $   1.26  $   1.19  $   1.25  $   1.12     $  0.36            --
Weighted average number
 of shares..............   12,368    11,317    10,622    10,612      10,603            --
Diluted earnings per
 share.................. $   1.25  $   1.17  $   1.25  $   1.12     $  0.36            --
Weighted average number
 of shares..............   12,512    11,420    10,643    10,616      10,603            --
</TABLE>
 
<TABLE>      
<CAPTION>
                                         NATIONAL GOLF PROPERTIES, INC.
                                  --------------------------------------------
                                                  DECEMBER 31,
                                  --------------------------------------------
                                    1997     1996     1995     1994     1993
                                  -------- -------- -------- -------- --------
                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>      <C>      <C>      <C>      <C>
BALANCE SHEET DATA:
Real estate before accumulated
 depreciation.................... $601,882 $515,794 $362,068 $272,034 $166,410
Total assets.....................  535,314  469,945  347,967  275,071  222,739
Total debt.......................  299,032  230,590  144,983   66,441   12,666
Minority interest(1).............   96,007   98,551   90,609   92,938   91,091
Stockholders' equity(1)..........  134,890  137,670  110,298  113,134  110,885
Cash distributions declared per
 share...........................     1.70     1.66     1.61     1.49     0.51
</TABLE>       
 
                                       2
<PAGE>
 
<TABLE>      
<CAPTION>
                                                                               GOLF PROPERTIES
                                  NATIONAL GOLF PROPERTIES, INC.                    GROUP
                         ----------------------------------------------------- ---------------
                               YEAR ENDED DECEMBER 31,           AUG. 18, 1993  JAN. 1, 1993
                         --------------------------------------     THROUGH        THROUGH
                           1997      1996      1995      1994    DEC. 31, 1993  AUG. 17, 1993
                         --------  --------  --------  --------  ------------- ---------------
                                       (IN THOUSANDS, EXCEPT PROPERTY DATA)
<S>                      <C>       <C>       <C>       <C>       <C>           <C>
OTHER DATA:
Company's funds from
 operations(2).......... $ 27,851  $ 23,215  $ 19,641  $ 17,209    $   5,587       $ 5,129
Cash flows from (used
 in):
 Operating activities...   55,576    44,217    36,383    34,241        9,282         6,649
 Investing activities...  (94,408)  (68,481)  (76,019)  (32,003)    (106,728)       (8,763)
 Financing activities...   29,306    28,399    42,639       (52)      99,346         1,188
Number of courses.......      123       114        81        71           51            47
Number of locations.....      112       104        72        63           46            42
</TABLE>       
--------
    
(1) Minority interest and stockholders' equity have been restated to reflect an
    accounting allocation for reporting purposes from additional paid in capital
    to minority interest for the OP Limited Partners' interest in the net assets
    of the Company after giving effect to their exchange rights of OP Units into
    the Company's Common Stock. While the OP Limited Partners have not indicated
    such a desire to convert their OP Units, generally accepted accounting
    principles require the reporting of such exchange rights "as if converted."
    This reallocation had no effect on earnings per share or results of
    operations or allocations of net income to the general partner and OP
    Limited Partners of the Operating Partnership. The reallocation at December
    31, 1997, 1996, 1995, 1994 and 1993 was approximately $78.1 million, $77.7
    million, $67.6 million, $70 million, and $71.1 million, respectively.     
    
(2) The Company believes that to facilitate a clear understanding of the
    historical consolidated and combined operating results, funds from
    operations should be examined in conjunction with net income. 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, 1997, 1996, 1995
    and 1994, and the period August 18, 1993 through December 31, 1993, and
    GPG's funds from operations for the period January 1, 1993 through August
    17, 1993.       
 
<TABLE>
<CAPTION>
                                                                               GOLF PROPERTIES
                                    NATIONAL GOLF PROPERTIES, INC.                  GROUP
                             ------------------------------------------------- ---------------
                                                                        FOR THE PERIOD
                                                                 -----------------------------
                             FOR THE YEAR ENDED DECEMBER 31,     AUG. 18, 1993  JAN. 1, 1993
                             ----------------------------------     THROUGH        THROUGH
                              1997     1996     1995     1994    DEC. 31, 1993  AUG. 17, 1993
                             -------  -------  -------  -------  ------------- ---------------
                                                    (IN THOUSANDS)
   <S>                       <C>      <C>      <C>      <C>      <C>           <C>
   Net income..............  $15,579  $13,412  $13,286  $11,876     $ 3,820        $  478
   Minority interest.......   12,003   10,852   11,366   10,712       3,317           --
   Depreciation and
    amortization...........   24,883   19,124   14,027   10,413       3,384         4,661
   Gain on insurance
    proceeds...............   (2,231)     --       --       --          --            --
   Gain on sale of
    properties.............     (158)  (1,199)  (1,893)     --          --            --
   Excess land sales.......     (469)     --       --       --          --            --
   Write off of option
    payable................      --       --      (101)     --          --            --
   Discount on payoff of
    note payable...........      --       --       --      (175)        --            --
   Amortization--loan
    costs..................     (227)    (147)    (195)     (66)        (78)          (10)
   Depreciation--
    corporate..............      (69)     (47)     (43)     (31)         (3)          --
                             -------  -------  -------  -------     -------        ------
   Funds from operations...  $49,311  $41,995  $36,447  $32,729     $10,440        $5,129
   Company's share of funds
    from operations........    56.48%   55.28%   53.89%   52.58%      53.52%          100%
                             -------  -------  -------  -------     -------        ------
   Company's funds from
    operations.............  $27,851  $23,215  $19,641  $17,209     $ 5,587        $5,129
                             =======  =======  =======  =======     =======        ======
</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 to continue the Company's growth,
  funds from operations in excess of distributions, principal reductions and
  capital improvement expenditures should be invested in assets expected to
  generate returns on investment to the Company commensurate with the
  Company's investment objectives and policies.
 
                                       3
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of National Golf Properties, Inc.
 
  We have audited the consolidated financial statements and financial
statement schedule of National Golf Properties, Inc. (the "Company") as listed
in Item 14(a)(1) and (2) of this Form 10-K. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of National Golf Properties, Inc. as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
    
  As described in Note 1(a), the consolidated financial statements have been
restated for the allocation of minority interest.      
 
                                          COOPERS & LYBRAND L.L.P.
 
Los Angeles, California
February 4, 1998
 
                                       4
<PAGE>
 
                         NATIONAL GOLF PROPERTIES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>      
<CAPTION>
                                                              DECEMBER 31,
                                                            ------------------
                                                              1997      1996
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
Property
  Land..................................................... $ 72,339  $ 63,049
  Buildings................................................  181,571   147,678
  Ground improvements......................................  301,814   263,803
  Furniture, fixtures and equipment........................   35,589    30,531
  Construction in progress.................................   10,569    10,733
                                                            --------  --------
                                                             601,882   515,794
  Less: accumulated depreciation...........................  (94,872)  (73,031)
                                                            --------  --------
    Net property...........................................  507,010   442,763
Cash and cash equivalents..................................    1,698    11,224
Investments................................................    1,215       286
Mortgage notes receivable..................................    2,200     2,971
Investment in joint venture................................    8,004       --
Due from affiliate.........................................    4,524       --
Other assets, net..........................................   10,663    12,701
                                                            --------  --------
    Total assets........................................... $535,314  $469,945
                                                            ========  ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable.............................................. $299,032  $229,949
Accounts payable and other liabilities.....................    5,385     3,134
Due to affiliate...........................................      --        641
                                                            --------  --------
    Total liabilities......................................  304,417   233,724
                                                            --------  --------
Minority interest..........................................   96,007    98,551
                                                            --------  --------
Commitments and contingencies (Note 7)
Stockholders' Equity:
  Preferred stock, $.01 par value, 5,000,000 shares
   authorized--none issued.................................      --        --
  Common stock, $.01 par value, 40,000,000 shares
   authorized, 12,408,195 and 12,303,720 shares issued and
   outstanding at December 31, 1997 and 1996,
   respectively............................................      124       123
  Additional paid in capital...............................  139,222   142,265
  Accumulated deficit......................................   (1,360)   (1,360)
  Unamortized restricted stock compensation................   (3,096)   (3,358)
                                                            --------  --------
    Total stockholders' equity.............................  134,890   137,670
                                                            --------  --------
    Total liabilities and stockholders' equity............. $535,314  $469,945
                                                            ========  ========
</TABLE>       
 
   The accompanying notes are an integral part of these financial statements.
 
                                       5
<PAGE>
 
                         NATIONAL GOLF PROPERTIES, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                     FOR THE YEAR ENDED
                                                        DECEMBER 31,
                                                 ----------------------------
                                                   1997      1996      1995
                                                 --------  --------  --------
<S>                                              <C>       <C>       <C>
Revenues:
  Rent from affiliate........................... $ 71,087  $ 57,291  $ 45,339
  Rent..........................................    3,229     1,607       592
  Equity in income from joint venture...........      119       --        --
  Gain on sale of properties....................      158     1,199     1,893
                                                 --------  --------  --------
    Total revenues..............................   74,593    60,097    47,824
                                                 --------  --------  --------
Expenses:
  General and administrative....................    5,336     4,734     4,258
  Depreciation and amortization.................   24,758    19,124    14,027
                                                 --------  --------  --------
    Total expenses..............................   30,094    23,858    18,285
                                                 --------  --------  --------
  Operating income..............................   44,499    36,239    29,539
Other income (expense):
  Interest income from affiliates...............      --      1,683     2,884
  Interest income...............................      364       427     1,260
  Gain on insurance proceeds....................    2,231       --        --
  Other income..................................      521       238       114
  Interest expense..............................  (19,810)  (14,067)   (8,793)
                                                 --------  --------  --------
Income before provision for taxes and minority
 interest.......................................   27,805    24,520    25,004
Provision for taxes.............................     (223)     (256)     (352)
                                                 --------  --------  --------
Income before minority interest.................   27,582    24,264    24,652
Income applicable to minority interest..........  (12,003)  (10,852)  (11,366)
                                                 --------  --------  --------
Net income...................................... $ 15,579  $ 13,412  $ 13,286
                                                 ========  ========  ========
Basic earnings per share........................ $   1.26  $   1.19  $   1.25
Weighted average number of shares...............   12,368    11,317    10,622
Diluted earnings per share...................... $   1.25  $   1.17  $   1.25
Weighted average number of shares...............   12,512    11,420    10,643
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       6
<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,
 1994................... 10,621,975   $106   $117,900   $ (1,360)    $(3,512)  $113,134
 Amortization of
  restricted stock......        --     --         --         --          943        943
 Reduction for minority
  interest..............        --     --      (2,558)       --          --      (2,558)
 Distributions paid
  ($1.59 per share).....        --     --      (3,614)   (13,286)        --     (16,900)
 Allocation for minority
  interest in the
  Operating Partnership.        --     --       2,393        --          --       2,393
 Net income.............        --     --         --      13,286         --      13,286
                         ----------   ----   --------   --------     -------   --------
Balance at December 31,
 1995................... 10,621,975    106    114,121     (1,360)     (2,569)   110,298
 Amortization of
  restricted stock......        --     --         --         --        1,089      1,089
 Issuance of stock
  for acquisitions......  1,577,820     16     40,771        --          --      40,787
 Issuance of restricted
  stock.................     82,000      1      1,878        --       (1,878)         1
 Exercise of stock
  options...............     21,925    --         446        --          --         446
 Distributions paid
  ($1.65 per share).....        --     --      (4,840)   (13,412)        --     (18,252)
 Allocation for minority
  interest in the
  Operating Partnership.        --     --     (10,111)       --          --     (10,111)
 Net income.............        --     --         --      13,412         --      13,412
                         ----------   ----   --------   --------     -------   --------
Balance at December 31,
 1996................... 12,303,720    123    142,265     (1,360)     (3,358)   137,670
 Amortization of
  restricted stock......        --     --         --         --        1,532      1,532
 Issuance of restricted
  stock.................     52,000    --       1,840        --       (1,840)       --
 Forfeiture of
  restricted stock......    (20,000)   --        (570)       --          570        --
 Exercise of stock
  options...............     72,475      1      1,438        --          --       1,439
 Distributions paid
  ($1.69 per share).....        --     --      (5,332)   (15,579)        --     (20,911)
 Allocation for minority
  interest in the
  Operating Partnership.        --     --        (419)       --          --        (419)
 Net income.............        --     --         --      15,579         --      15,579
                         ----------   ----   --------   --------     -------   --------
Balance at December 31,
 1997................... 12,408,195   $124   $139,222   $ (1,360)    $(3,096)  $134,890
                         ==========   ====   ========   ========     =======   ========
</TABLE>      
 
   The accompanying notes are an integral part of these financial statements.
 
                                       7
<PAGE>
 
                         NATIONAL GOLF PROPERTIES, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                     FOR THE YEAR ENDED
                                                        DECEMBER 31,
                                                ------------------------------
                                                  1997      1996       1995
                                                --------  ---------  ---------
<S>                                             <C>       <C>        <C>
Cash flows from operating activities:
 Net income.................................... $ 15,579  $  13,412  $  13,286
 Adjustments to reconcile net income to net
  cash provided by operating activities:
  Depreciation and amortization................   24,758     19,124     14,027
  Amortization of restricted stock.............    1,532      1,089        943
  Minority interest in earnings................   12,003     10,852     11,366
  Distributions from joint venture, net of
   equity in income............................      124        --         --
  Gain on insurance proceeds...................   (2,231)       --         --
  Gain on sale of properties...................     (158)    (1,199)    (1,893)
  Other adjustments............................       71          5       (101)
  Changes in assets and liabilities:
   Other assets................................    1,863       (591)       122
   Accounts payable and other liabilities......    2,480        866       (478)
   Due from/to affiliate.......................     (445)       659       (889)
                                                --------  ---------  ---------
    Net cash provided by operating activities..   55,576     44,217     36,383
                                                --------  ---------  ---------
Cash flows from investing activities:
 Purchase of held-to-maturity securities.......      --         --    (402,910)
 Proceeds from sale of held-to-maturity
  securities...................................      --         --     412,870
 Purchase of available-for-sale securities.....   (7,623)    (5,644)   (22,620)
 Proceeds from sale of available-for-sale
  securities...................................    6,694      6,167     21,811
 Proceeds from mortgage notes receivable.......      732     25,472        --
 Purchase of property and related assets.......  (89,487)   (90,368)   (85,165)
 Purchase of property and related assets from
  affiliates...................................      --      (4,937)       --
 Investment in joint venture...................   (8,128)       --         --
 Proceeds from sale of properties and related
  assets.......................................    3,404        829        --
 Payments for covenants not to compete.........      --         --          (5)
                                                --------  ---------  ---------
    Net cash used by investing activities......  (94,408)   (68,481)   (76,019)
                                                --------  ---------  ---------
Cash flows from financing activities:
 Principal payments on notes payable...........  (83,300)  (111,952)   (14,159)
 Proceeds from notes payable...................  147,150    173,299     88,500
 Loan costs....................................     (106)      (530)      (940)
 Repurchase of OP Units........................      --        (116)       --
 Proceeds from stock options exercised.........    1,439        446        --
 Cash distributions............................  (20,911)   (18,252)   (16,902)
 Limited partners' cash distributions..........  (14,966)   (14,496)   (13,860)
                                                --------  ---------  ---------
    Net cash provided by financing activities..   29,306     28,399     42,639
                                                --------  ---------  ---------
Net increase (decrease) in cash and cash
 equivalents...................................   (9,526)     4,135      3,003
Cash and cash equivalents at beginning of
 period........................................   11,224      7,089      4,086
                                                --------  ---------  ---------
Cash and cash equivalents at end of period..... $  1,698  $  11,224  $   7,089
                                                ========  =========  =========
Supplemental cash flow information:
 Interest paid................................. $ 18,729  $  13,646  $   8,503
 Taxes paid....................................      261        265        386
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       8
<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 acquires and owns golf courses located throughout the United States.
At December 31, 1997, the Company leased all but five 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 5.4% of the Company's outstanding Common Stock and
approximately 38.4% 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 58.4% 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. 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
(the "OP Limited Partners") and received units of limited partnership interest
in the Operating Partnership (the "OP Units"). Their interest 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 adjusted for the
OP Limited Partners' proportionate share of net income of the Company and any
additional contributions or distributions to the OP Limited Partners.
 
  An OP 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. OP Limited
Partners have the right, exercisable once in any twelve-month period, to sell
up to one-third of their OP Units or exchange up to the greater of 75,000 OP
Units or one-third of their OP Units to the Company.
 
  In order for the Company to maintain its qualification as a 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 an OP Unit is convertible into a share of Common Stock,
the conversion of the majority of the OP Units owned by David G. Price is
restricted by the Company and the ownership limitations in order to preserve
its REIT status.
    
  The accompanying consolidated balance sheets and statements of stockholders' 
equity have been restated to reflect an accounting allocation for reporting 
purposes from additional paid in capital to minority interest for the 
OP Limited Partners' interest in the net assets of the Company after giving
effect to their exchange rights of OP Units into the Company's Common Stock.
While the OP Limited Partners have not indicated such a desire to convert their
OP Units, generally accepted accounting principles require the reporting of such
exchange rights "as if converted." This reallocation had no effect on earnings
per share or results of operations or allocations of net income to the general
partner and OP Limited Partners of the Operating Partnership. The reallocation
at December 31, 1997, 1996 and 1995 was approximately $78.1 million, $77.7
million, and $67.6 million, respectively.     
 
  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 market.
 
 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.
 
                                      9
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
 d) Concentration of Credit Risk
 
  Concentration of credit risk with respect to the Company's portfolio of 123
golf courses is limited due to the golf courses being geographically
diversified and located in 26 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, 1997, 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, 1997 and 1996, the Company had cash accounts in excess of FDIC
insured limits.
 
 e) Property
 
  Property is carried at the lower of cost or net realizable value.
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>
 
  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 a permanent 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 a permanent 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. Management believes no permanent 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.
 
 f) Income Taxes
 
  The Company qualifies as a real estate investment trust ("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 and complies with other
requirements. The Company paid distributions to stockholders of $1.69 per
share in 1997, of which $1.49 represents ordinary income, $0.05 represents
capital gains (20% tax rate) and $0.15 represents return of capital on a tax
basis. On a book basis, calculated using basic earnings per share, $0.43 per
share represents return of capital. In addition, on January 9, 1998, the
Company declared a quarterly distribution for the fourth quarter of 1997 of
$0.43 per share to stockholders of record on January 30, 1998, which will be
paid on February 13, 1998. The Company may be subject to federal alternative
minimum tax in 1997. The Company is also subject to state income and franchise
taxes in certain states in which it operates. Therefore, a tax provision has
been reflected for these income, franchise, and alternative minimum taxes.
 
 g) Revenue Recognition
 
  The Company recognizes rental revenue on an accrual basis over the terms of
the Leases.
 
                                      10
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
 h) Intangible Assets
 
  Included in other assets are intangible assets which consist of covenants
not to compete, goodwill and other intangibles. Intangible assets are carried
at cost less accumulated amortization and are amortized on a straight-line
basis. The covenants are amortized over their contractual lives which range
from three to 30 years. Goodwill, arising from golf course acquisitions, is
amortized over the life of the Leases (15 to 20 years). Other intangibles are
amortized over periods from one to ten years. The Company assesses whether
there has been a permanent impairment in 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 a permanent 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. Management believes no
permanent impairment in the carrying value of its intangible assets has
occurred. Accumulated amortization at December 31, 1997 and 1996, was
approximately $4,318,000 and $4,310,000, respectively.
 
 i) 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.
 
 j) Fair Value of Financial Instruments
 
  To meet the reporting requirements of Statement of Financial Accounting
Standards ("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.
 
 k) Earnings Per Share
 
  In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies the
existing computational guidelines under Accounting Principles Board ("APB")
Opinion No. 15, "Earnings Per Share." It is effective for financial statements
issued for periods ending after December 15, 1997. Among other changes, SFAS
No. 128 eliminates the presentation of primary earnings per share and replaces
it with basic earnings per share for which common stock equivalents are not
considered in the computation. It also revises the computation of diluted
earnings per share. The Company has adopted SFAS No. 128 and there is no
material impact to the Company's earnings per share, financial condition, or
results of operations. The Company's earnings per share have been restated for
all periods presented to be consistent with SFAS No. 128.
 
                                      11
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
 
 k) Earnings Per Share--(Continued)
 
  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. The
incremental shares for the years ended December 31, 1997, 1996 and 1995 were
143,697, 103,365 and 20,816, respectively.
 
 l) Accounting for Stock--Based Compensation
 
  The Company measures compensation cost for their plans using the accounting
principles prescribed by 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.
 
 m) Year 2000
 
  There is no material impact anticipated to the Company's earnings per share,
financial condition, or results of operations due to upgrading the Company's
computer systems for the year 2000.
 
(2) PROPERTY ACQUISITIONS AND SALES
 
  In 1997, the Company purchased nine golf courses for an aggregate initial
investment of approximately $79.2 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, except for Spanish Hills, are leased to AGC pursuant to long-
term triple net leases. Spanish Hills is leased to Camarillo Golf, LLC
pursuant to a long-term triple net lease. Camarillo Golf, LLC subleases
Spanish Hills to AGC.
 
<TABLE>
<CAPTION>
   ACQUISITION                                                                INITIAL
      DATE                   COURSE NAME                   LOCATION          INVESTMENT
   -----------               -----------                   --------        --------------
                                                                           (IN THOUSANDS)
   <S>           <C>                                 <C>                   <C>
      1/2/97     Stonecreek Golf Course              Phoenix, Arizona         $ 9,447
     1/10/97     Tamarack Golf Club                  Naperville, Illinois       5,393
     4/10/97     Baymeadows Golf Club                Jacksonville, Florida      4,563
      5/1/97     The Golf Club at Bradshaw Farm      Woodstock, Georgia         6,603
     7/31/97     Longwood Golf Club                  Houston, Texas             9,706
     8/12/97     Eagle Brook Country Club            Geneva, Illinois          10,440
    10/10/97     Gettysvue Polo, Golf & Country Club Knoxville, Tennessee       6,303
    10/17/97     Oakhurst Country Club               Clayton, California        9,665
    10/24/97     Spanish Hills Country Club          Camarillo, California     17,051
                                                                              -------
                 Total Initial Investment.................................    $79,171
                                                                              =======
</TABLE>
 
  On May 23, 1997, the Company sold Stonebridge Country Club in New Orleans,
Louisiana for cash of approximately $1.1 million. The Company recognized a
gain of approximately $156,000.
 
  On September 12, 1997, the Company sold Skyline Woods Country Club in
Elkhorn, Nebraska for cash of $2.5 million. The Company recognized a gain of
$2,000.
 
  The Company recognized a gain on insurance proceeds of approximately
$2,231,000 due to a fire completely destroying a clubhouse at one of the Golf
Courses. The Company is applying the insurance proceeds to rebuild the
clubhouse.
 

                                      12
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(3) INVESTMENTS
 
<TABLE>
<CAPTION>
                                       DECEMBER 31,
                                 -------------------------
                                     1997         1996
                                 ------------- -----------
                                  COST  MARKET COST MARKET MATURITY
                                 ------ ------ ---- ------ --------
                                      (IN THOUSANDS)
   <S>                           <C>    <C>    <C>  <C>    <C>
   Available-for-sale
    securities:
     Commercial Paper..........  $  --  $  --  $ 86  $ 86   1/1997
     Corporate Note............     --     --   200   200   3/1997
     Commercial Paper..........     107    107  --    --    1/1998
     Corporate Note............     200    200  --    --    1/1998
     U.S. Government and Agency
      Obligation...............     908    908  --    --    1/1998
                                 ------ ------ ----  ----
       Total...................  $1,215 $1,215 $286  $286
                                 ====== ====== ====  ====
</TABLE>
 
  In 1997 and 1996, available-for-sale securities were sold resulting in
proceeds of $6,694,000 and $6,167,000, respectively. There were no gross
realized gains or losses in 1997 and 1996.
 
(4) MORTGAGE NOTES RECEIVABLE
 
  The Company had fixed-term options to acquire four golf courses (the "Option
Golf Courses") in exchange for OP Units. The Operating Partnership made
participating mortgage loans of approximately $25.2 million at the time of the
Offering (the "Participating Mortgage Loans") to David G. Price and one of his
affiliates (the other partner in the affiliate is Richard C. Price, the
President of the Company at the time the Participating Mortgage Loans were
made) that owned the Option Golf Courses and were collateralized by first
mortgage liens on such Option Golf Courses. Interest was payable monthly and
the interest rate for 1996 was 9.28%. During 1996, the Participating Mortgage
Loans were paid off and the Company exercised the options on the Option Golf
Courses.
 
  On March 13, 1995, the Company sold Hidden Hills Country Club in Stone
Mountain, Georgia for approximately $3.2 million. The Company provided seller
financing in the form of a mortgage loan in the amount of $2.2 million at an
initial interest rate of 11% per annum and a maturity date of March 2000 (the
"Hidden Hills Mortgage"). Interest income from the Hidden Hills Mortgage for
the years ended December 31, 1997, 1996 and 1995 was $242,000, $242,000 and
approximately $194,000, respectively.
 
  On January 19, 1996, the Company sold Wootton Bassett Golf Club in
Wiltshire, United Kingdom for approximately $2 million. The Company provided
seller financing in the form of a mortgage loan in the amount of approximately
$900,000 at an interest rate of 6% per annum and a maturity date of January
1999 (the "Wootton Bassett Mortgage"). Interest income from the Wootton
Bassett Mortgage for the years ended December 31, 1997 and 1996 was
approximately $8,000 and $47,000, respectively. In April 1997, the Wootton
Bassett Mortgage was paid in full.
 
  The market value of mortgage notes receivable at December 31, 1997 and 1996
is estimated to be approximately $2,409,000 and $3,200,000, respectively,
based on current interest rates for comparable loans.
 
                                      13
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(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.
 
(6) NOTES PAYABLE
 
  Notes payable consist of the following:
 
<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                              INTEREST   INTEREST    -----------------
    TYPE OF COLLATERAL          RATE      PAYMENT      1997     1996   MATURITY
    ------------------        -------- ------------- -------- -------- --------
                                                      (IN THOUSANDS)
   <S>                        <C>      <C>           <C>      <C>      <C>
   Uncollateralized note.....   7.43%     Monthly    $    --  $  5,500  1/1997
   Uncollateralized note.....   7.64%     Monthly         --     6,240  1/1997
   Uncollateralized note.....   7.73%     Monthly         --     3,850  1/1997
   Uncollateralized note.....   8.25%     Monthly         --     9,300  1/1997
   Collateralized note.......                             --        50  5/1997
   Uncollateralized note.....   6.88%     Monthly      17,000      --   1/1998
   Uncollateralized note.....   6.92%     Monthly       5,000      --   1/1998
   Uncollateralized note.....   6.95%     Monthly      33,000      --   1/1998
   Uncollateralized note.....   7.01%     Monthly       5,500      --   1/1998
   Uncollateralized note.....   7.12%     Monthly       9,500      --   1/1998
   Uncollateralized note.....   7.13%     Monthly      10,000      --   1/1998
   Uncollateralized note.....   8.50%    Quarterly      7,000      --   1/1998
   Uncollateralized note.....   6.88%                   4,000      --   2/1998
   Collateralized note.......   5.50%    Quarterly      4,500    4,500  2/1999
   Collateralized note.......                           1,447      --   8/2000
   Collateralized note.......   5.50%    Quarterly        646      809  5/2001
   Collateralized note.......   6.60%    Quarterly     20,000   20,000  7/2001
   Collateralized note.......                           3,587      --  10/2004
   Uncollateralized notes....   8.68%  Semi-annually   48,705   50,000 12/2004
   Uncollateralized notes....   8.73%  Semi-annually   49,369   50,000  6/2005
   Uncollateralized notes....   7.90%  Semi-annually   40,000   40,000  6/2006
   Uncollateralized note.....                           2,779    2,579  7/2006
   Uncollateralized notes....   8.00%  Semi-annually   35,000   35,000 12/2006
   Uncollateralized note.....   8.00%    Quarterly      1,999    2,121  1/2008
                                                     -------- --------
                                                     $299,032 $229,949
                                                     ======== ========
</TABLE>
 
                                      14
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(6) NOTES PAYABLE--(CONTINUED)
 
  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>
   1998..........................................................    $  3,059
   1999..........................................................       9,918
   2000..........................................................       8,486
   2001..........................................................      26,013
   2002..........................................................      98,145
   Thereafter....................................................     153,411
                                                                     --------
                                                                     $299,032
                                                                     ========
</TABLE>
 
  The note agreements contain, among other things, covenants restricting the
sale of property and certain financial ratios and reporting requirements.
 
  The Company currently has a $100 million credit facility with a group of
four commercial banks, which terminates in April 2002. The Company has two
interest rate options under the credit facility depending upon the length of
time the advances are outstanding. For advances which will be outstanding for
less than a month, the advances bear interest at prime. At December 31, 1997,
such rate was 8.5%. For advances which will be outstanding for one month or
more, the advances bear maximum interest at a floating rate equal to LIBOR
plus a spread of 1.125%. The spread will be reduced upon the Company's receipt
of specified credit ratings. There were outstanding advances of $91 million
under this credit facility as of December 31, 1997. The Company intends to
roll over the advances due in 1998 to a future period.
 
  In connection with the purchase of Eagle Brook Country Club, 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 shall be paid
or accrued on the outstanding principal balance. Thereafter, interest shall
accrue on the outstanding principal balance at the rate of 6% per annum. The
interest rate used to discount the note is 6%. The discount is being amortized
over the first year of the note using the effective interest method. The
discounted note balance at December 31, 1997 was approximately $1,447,000. The
unamortized discount balance at December 31, 1997 was approximately $53,000.
 
  In connection with the purchase of Gettysvue Polo, Golf & Country Club, 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 shall be 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 is 6%. The discount is being amortized over the first year
of the note using the effective interest method. The discounted note balance
at December 31, 1997 was approximately $3,587,000. The unamortized discount
balance at December 31, 1997 was approximately $163,000.
 
  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%. The Operating Partnership applied the
net proceeds from the $75 million notes to repay bank debt and to partially
finance the acquisition of two golf courses.
 
                                      15
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(6) NOTES PAYABLE--(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%. With respect to the $50
million first note series, the Operating Partnership received $30 million in
December 1994 and $20 million in January 1995. With respect to the $50 million
second note series, the Operating Partnership received $50 million in June
1995. The Operating Partnership applied the net proceeds from the $100 million
notes to repay bank debt, to finance future acquisitions of golf courses and
related facilities and properties, and for general partnership purposes.
 
  In connection with the combined purchase of Monterey Country Club and Palm
Valley Country Club, the Company entered into an eleven-year, non-interest
bearing, uncollateralized note for $4,000,000 with the seller of the
properties. Based on the borrowing rates available to the Company for debt
with similar terms and average maturities, the interest rate used to discount
the note is 7.75%. The discount is being amortized over the life of the loan
using the effective interest method. The discounted note balance at December
31, 1997 was approximately $2,779,000. The unamortized discount balance at
December 31, 1997 was approximately $1,221,000.
 
  An OP Limited Partner, who owns or controls 75,003 OP Units, is the holder
of a promissory note for approximately $2 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 OP
Limited Partner. The interest rate is 8% per annum with a maturity date in
January 2008. The Company made interest payments in 1997 and 1996 of
approximately $166,000 and $175,000, respectively.
 
  The market value of notes payable at December 31, 1997 and 1996 is estimated
to be approximately $310,830,000 and $235,095,000, respectively, based on
current interest rates for comparable loans. The net book value at December
31, 1997 of the assets collateralizing the notes payable is $59.7 million.
 
(7) COMMITMENTS AND CONTINGENCIES
 
  The Company is required under the Leases to pay for various remaining
capital improvements totaling approximately $10.2 million, which will be paid
during the next two years. Any subsequent capital improvements to these golf
courses are the responsibility of the Lessees. However, during 1997, AGC
requested that the Company provide additional funding of approximately $16.4
million in capital improvements intended to add value to the properties and
reposition the facilities for enhanced revenue growth. The Independent
Committee of the Company's Board of Directors approved such additional
funding. The $16.4 million will be paid during the next two years.
 
  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,
1997, there was a net book value of approximately $2,954,000 of improvements
at this property included in buildings, ground improvements and furniture,
fixtures and equipment on the 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, 1997,
1996 and 1995, the ground lease expense was approximately $413,000, $351,000,
and $369,000, respectively.
 
  Also, the Company leases approximately 14 acres 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.
 
                                      16
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(8) LEASE RENTAL AGREEMENTS
 
  Future minimum 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>
   1998..........................................................   $   74,690
   1999..........................................................       74,690
   2000..........................................................       74,690
   2001..........................................................       74,690
   2002..........................................................       74,690
   Thereafter....................................................      649,992
                                                                    ----------
                                                                    $1,023,442
                                                                    ==========
</TABLE>
 
  The minimum rent for the first year for each golf course under the Leases is
initially set at a fixed amount. Thereafter, with respect to the Leases for
the Initial Golf Courses, minimum 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"). For these Leases, 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, 1997, 1996 and 1995 was approximately $5,920,000,
$4,289,000, and $3,731,000, respectively.
 
(9) 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
$1,532,000, $1,089,000, and $943,000, for the years ended December 31, 1997,
1996, and 1995, respectively.
 
                                      17
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(9) STOCK OPTIONS AND AWARDS--(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, 1997,
1996 and 1995:
 
<TABLE>
<CAPTION>
                                                   NUMBER OF WEIGHTED AVERAGE
                                NUMBER OF SHARES-- SHARES--  OPTION EXERCISE
                                 RESTRICTED STOCK   OPTIONS       PRICE
                                ------------------ --------- ----------------
   <S>                          <C>                <C>       <C>
   Outstanding at December 31,
    1994.......................      189,500        518,400       $20.32
     Vested....................      (46,500)           --           --
     Cancelled.................          --         (17,300)       20.38
                                     -------        -------       ------
   Outstanding at December 31,
    1995.......................      143,000        501,100       $20.32
     Granted...................       70,000         40,000        25.88
     Vested....................      (46,500)           --           --
     Cancelled.................          --         (34,075)       21.70
     Exercised.................          --         (21,925)       20.38
                                     -------        -------       ------
   Outstanding at December 31,
    1996.......................      166,500        485,100       $20.68
     Granted...................       50,000            --           --
     Vested....................      (56,500)           --           --
     Forfeited.................      (20,000)       (20,000)       25.88
     Cancelled.................          --             --           --
     Exercised.................          --         (72,475)       19.86
                                     -------        -------       ------
   Outstanding at December 31,
    1997.......................      140,000        392,625       $20.57
                                     =======        =======       ======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                WEIGHTED AVERAGE
                                                      NUMBER OF OPTION EXERCISE
                                                       SHARES        PRICE
                                                      --------- ----------------
   <S>                                                <C>       <C>
   Options exercisable at:
     December 31, 1997...............................  371,375       $20.44
     December 31, 1996...............................  327,575       $20.23
     December 31, 1995...............................  236,800       $20.30
</TABLE>
 
  The range of exercise prices for the options outstanding at December 31,
1997 is $18.50 through $25.875 with a weighted average remaining contractual
life of 5.9 years. The range of exercise prices for options exercisable at
December 31, 1997 is $18.50 through $25.875 with a weighted average remaining
contractual life of 5.7 years.
 
  As of December 31, 1997, a total of 780,475 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.
 
                                      18
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(9) STOCK OPTIONS AND AWARDS--(CONTINUED)
 
  The following table summarizes the stock option transactions pursuant to the
1997 Plan for the year ended December 31, 1997:
<TABLE>
<CAPTION>
                                                                        WEIGHTED
                                                                NUMBER  AVERAGE
                                                                  OF     OPTION
                                                                SHARES  EXERCISE
                                                                OPTIONS  PRICE
                                                                ------- --------
   <S>                                                          <C>     <C>
   Granted..................................................... 22,500   $30.06
                                                                ------   ------
   Outstanding at December 31, 1997............................ 22,500   $30.06
                                                                ======   ======
</TABLE>
 
  The exercise price for the options outstanding at December 31, 1997 is
$30.06 with a remaining contractual life of 9.8 years.
 
  As of December 31, 1997, a total of 777,500 additional shares remain
reserved for issuance under the 1997 Plan. There were 800,000 shares
originally reserved for issuance under the 1997 Plan.
 
  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
Company's 1995 Independent Director Equity Participation Plan for the years
ended December 31, 1997 and 1996:
 
<TABLE>
<CAPTION>
                                                    NUMBER OF WEIGHTED AVERAGE
                                 NUMBER OF SHARES-- SHARES--  OPTION EXERCISE
                                  RESTRICTED STOCK   OPTIONS       PRICE
                                 ------------------ --------- ----------------
   <S>                           <C>                <C>       <C>
   Granted......................       12,000        24,000        $23.42
                                       ------        ------        ------
   Outstanding at December 31,
    1996........................       12,000        24,000        $23.42
   Granted......................        2,000         8,000         31.50
                                       ------        ------        ------
   Outstanding at December 31,
    1997........................       14,000        32,000        $25.44
                                       ======        ======        ======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                WEIGHTED AVERAGE
                                                      NUMBER OF OPTION EXERCISE
                                                       SHARES        PRICE
                                                      --------- ----------------
   <S>                                                <C>       <C>
   Options exercisable at:
     December 31, 1997...............................  24,000        $23.42
     December 31, 1996...............................  16,000        $20.94
</TABLE>
 
  The range of exercise prices for the options outstanding at December 31,
1997 is $19.75 through $31.50 with a weighted average remaining contractual
life of 8.5 years. The range of exercise prices for options exercisable at
December 31, 1997 is $19.75 through $28.375 with a weighted average remaining
contractual life of 8 years.
 
  As of December 31, 1997, a total of 102,000 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.
 
                                      19
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(9) STOCK OPTIONS AND AWARDS--(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 1997 and 1996 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,
                                              ---------------------------------
                                                    1997             1996
                                              ---------------- ----------------
                                              (IN THOUSANDS, EXCEPT PER SHARE)
   <S>                                            <C>               <C>
   Net income, as reported...................     $15,579          $13,412
   Net income, pro forma.....................     $15,501          $13,387
   Basic earnings per share, as reported.....     $  1.26          $  1.19
   Basic earnings per share, pro forma.......     $  1.25          $  1.18
   Diluted earnings per share, as reported...     $  1.25          $  1.17
   Diluted earnings per share, pro forma.....     $  1.24          $  1.17
</TABLE>
 
  The weighted average fair value of options granted during 1997 and 1996 are
$7.10 and $6.23, respectively. The fair value of each option grant issued in
1997 and 1996 is estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: (a)
dividend yield of 1.6% in 1997 and 1.3% in 1996, (b) expected volatility of
the Company's stock of 21.5% in 1997 and 19.6% in 1996, (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 1997 and 1996.
 
(10) 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 10% 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, 1997, 1996 and 1995 the Company's
contributions to the 401(k) Plan were approximately $21,000, $14,000, and
$13,000, respectively.
 
(11) DEFERRED COMPENSATION PLAN
 
  During 1997, the Company established a non-qualified deferred compensation
plan under which key executives of the Company may elect to defer receiving up
to 100% of their compensation in any one year until a later year. The
participants' contributions to the deferred compensation plan were invested in
the Company's Common Stock or additional investment options. The assets and
income from the deferred compensation trust are recorded on the Company's
books.
 
                                      20
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(12) RELATED PARTY TRANSACTIONS
 
  The Company has in the past and will continue to identify golf courses it
seeks to acquire for the purpose of leasing such 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.
 
(13) STATEMENT OF CASH FLOWS--SUPPLEMENTAL DISCLOSURES
 
  Non-cash transactions for the year ended December 31, 1997 include
approximately $5 million of golf course acquisitions which were financed by
notes payable.
 
  Non-cash transactions for the year ended December 31, 1996 include (i)
approximately $40.8 million of golf course acquisitions which were financed by
the issuance of 1,577,820 shares of Common Stock; (ii) the assumption of
approximately $25.2 million of debt; (iii) approximately $1.3 million in
capital improvements accrued but not paid; (iv) approximately $1.5 million of
golf course acquisitions which were financed by the issuance of 61,339 OP
Units; and (v) approximately $900,000 in seller financing related to the sale
of Wootton Bassett Golf Club by the Company.
 
  Non-cash transactions for the year ended December 31, 1995 include
approximately $2.3 million of golf course acquisitions which were financed by
a note payable and approximately $2.2 million in seller financing related to
the sale of a golf course by the Company.
 
(14) OTHER DATA
 
  AGC is the lessee of all but five 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.
 
                                      21
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(14) OTHER DATA--(CONTINUED)
 
  The following table sets forth certain condensed financial information
concerning AGC.
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                                1997     1996
                                                              -------- --------
                                                               (IN THOUSANDS)
   <S>                                                        <C>      <C>
   Current assets............................................ $ 79,692 $ 57,511
   Non-current assets........................................  147,423  131,654
                                                              -------- --------
   Total assets.............................................. $227,115 $189,165
                                                              -------- --------
   Total current liabilities................................. $ 59,670 $ 50,993
   Total long-term liabilities...............................   97,766   68,041
   Minority interest.........................................      501      466
   Total shareholders' equity................................   69,178   69,665
                                                              -------- --------
   Total liabilities and shareholders' equity................ $227,115 $189,165
                                                              ======== ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                          FOR THE YEAR ENDED
                                                             DECEMBER 31,
                                                      --------------------------
                                                        1997     1996     1995
                                                      -------- -------- --------
                                                            (IN THOUSANDS)
   <S>                                                <C>      <C>      <C>
   Total revenues.................................... $525,232 $439,567 $359,066
   Net income........................................ $ 19,180 $ 14,275 $  9,682
</TABLE>
 
(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
  Summarized quarterly financial data for the years ended December 31, 1997
and 1996 is as follows (in thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                    QUARTER ENDED
                                      -----------------------------------------
    FISCAL 1997                       MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
    -----------                       -------- ------- ------------ -----------
   <S>                                <C>      <C>     <C>          <C>
   Revenues.......................... $17,449  $18,731   $19,335      $19,078
   Operating income.................. $10,317  $11,479   $11,494      $11,209
   Net income........................ $ 3,278  $ 4,087   $ 3,752      $ 4,462
   Basic earnings per share.......... $  0.27  $  0.33   $  0.30      $  0.36
   Diluted earnings per share........ $  0.26  $  0.33   $  0.30      $  0.36
<CAPTION>
                                                    QUARTER ENDED
                                      -----------------------------------------
    FISCAL 1996                       MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
    -----------                       -------- ------- ------------ -----------
   <S>                                <C>      <C>     <C>          <C>
   Revenues.......................... $13,114  $13,844   $16,034      $17,105
   Operating income.................. $ 7,767  $ 8,279   $ 9,818      $10,375
   Net income........................ $ 3,034  $ 3,339   $ 3,401      $ 3,638
   Basic earnings per share.......... $  0.29  $  0.31   $  0.29      $  0.30
   Diluted earnings per share........ $  0.28  $  0.31   $  0.29      $  0.29
</TABLE>
 
                                      22
<PAGE>
 
                        NATIONAL GOLF PROPERTIES, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
(16) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
 
  The pro forma financial information set forth below is presented as if the
1997 acquisitions (Note 2) had been consummated as of January 1, 1996.
 
  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, 1996, 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,
                                                            -------------------
                                                              1997      1996
                                                            --------- ---------
   <S>                                                      <C>       <C>
   Revenues from rental property........................... $  78,124 $  66,288
   Net income.............................................. $  15,142 $  12,271
   Basic earnings per share................................ $    1.22 $    1.08
   Diluted earnings per share.............................. $    1.21 $    1.07
</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.
 
(17) SUBSEQUENT EVENTS (UNAUDITED)
 
  On January 9, 1998, the Company declared a quarterly distribution for the
fourth quarter of 1997 of $0.43 per share to stockholders of record on January
30, 1998, which will be paid on February 13, 1998.
 
                                      23
<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/ William C. Regan  
Date:  September 1, 1998                   By: ______________________________ 
                                                  WILLIAM C. REGAN 
                                                  VICE PRESIDENT - CONTROLLER
                                                  AND TREASURER       
         
          

                                      24