SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended July 26, 1998

                         Commission file number 333-9763

                                 ASC East, Inc.
                       (Formerly American Skiing Company)
             (Exact name of registrant as specified in its charter)

                                   Maine 7990
          (State or other jurisdiction of (Primary Standard Industrial
           incorporation or organization) Classification Code Number)

                                   01-0503382
                                (I.R.S. Employer
                             Identification Number)

                            Sunday River Access Road
                               Bethel, Maine 04217
                                 (207) 824-8100
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)

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

                                                    Name of exchange on
Title of Each Class                                   which registered)
     None                                                   None

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

                                                    (Name of exchange on
Title of Each Class                                    which registered)
     None                                                   None

The registrant meets the conditions set forth in General  Instruction  (I)(1)(a)
and (b) of  Form  10-K  and is  therefor  filing  this  Form  with  the  reduced
disclosure format provided for therein.

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  and  Exchange Act of 1934
during the  preceding  12 months (or  shorter  period  that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for at least the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-X 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 November 9, 1998,  there was no established  public trading market for the
shares of the Registrant's  common stock and no shares of common stock were held
by non-affiliates of the Registrant.

As of November 9, 1998,  978,300  shares of the  Registrant's  common stock were
outstanding.


<PAGE>



            Form 10-K Annual Report, for the year ended July 26, 1998

                  ASC East, Inc. and Consolidated Subsidiaries

                                Table of Contents

                                   Part I                                  Page

Item 1. Business. ...........................................................1

Item 2.  Properties. ........................................................8

Item 3.  Legal. .............................................................8

Item 4.   Submission of Matters to a Vote of Security Holders. ..............9

                                     Part II

Item 5.   Market for Registrant's Common Equity and Related Stockholder
                  Matters. ..................................................9

Item 6.   Selected Financial Data. ..........................................10

Item 7.   Management's Discussion and Analysis of Financial Condition
                        and Results of Operations. . . ......................10

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk ........14

Item 8.   Financial Statements and Supplementary Data. ......................15

Item 9.   Changes in and Disagreements with Accountants on Accounting and
                     Financial Disclosure. ..................................16

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant. ...............16

Item 11.  Executive Compensation. ...........................................16

Item 12.  Security Ownership of Certain Beneficial Owners and Management. ...16

Item 13.  Certain Relationships and Related Transactions. ...................16

                                     Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K. ..17

Signatures ..................................................................21


<PAGE>



                                     PART I

                                     Item 1
                                    Business

         The  presentation  in this Item has been  reduced in scope  pursuant to
General Instruction (I) of Form 10K.

The Company

          The Company is a direct,  wholly owned  subsidiary of American  Skiing
Company (the "Parent"),  a publicly traded company (NYSE: "SKI") and the largest
operator of alpine resorts in the United  States.  The Company owns and operates
six ski resorts in the northeastern United States. The Company's resorts include
Sunday River and Sugarloaf in Maine;  Attitash Bear Peak in New  Hampshire;  and
Killington, Mount Snow/Haystack and Sugarbush in Vermont. The Company's revenues
and  earnings  before  interest   expense,   income  taxes,   depreciation   and
amortization  ("EBITDA"),  excluding the stock compensation charge, for its 1998
Fiscal year were $240.2 million and $53.4 million, respectively.

         The Company's  resorts include several of the top resorts in the United
States,  including:  (i)  Killington,  the fourth  largest  resort in the United
States with over 1.0 million skier visits in the 1997-98 ski season;  (ii) three
of the four largest resorts in the Northeast (Killington, Sunday River and Mount
Snow/Haystack)  in the 1997-98 ski season;  and (iii) Sugarloaf,  the number one
resort in the Northeast  according to the September  1997 Snow Country  magazine
survey.

         In  addition  to  operating   alpine  resorts,   the  Company  develops
mountainside  real estate which  complements  the  expansion of its  on-mountain
operations.  The Company has created a unique interval  ownership  product,  the
Grand  Summit  Hotel,  in  which  individuals  purchase   quartershare  interval
interests  while the  Company  retains  ownership  of core hotel and  commercial
properties.  The initial sale of quartershare  units typically  generates a high
profit  margin,  and the  Company  derives  a  continuing  revenue  stream  from
operating the hotel's  retail,  restaurant  and  conference  facilities and from
renting  quartershare  interval  interests when not in use by their owners.  The
Company is developing  alpine resort villages at prime locations  within five of
its  resorts  owned by the Company or the Parent  designed to fit that  resort's
individual  characteristics.  The Company  currently  operates  six Grand Summit
Hotels -- two hotels at Sunday River and one hotel each at Attitash, Mount Snow,
Sugarloaf  and  Killington.   Two  additional  Grand  Summit  Hotels  are  under
construction at resorts owned by the Company's  Parent,  at The Canyons in Utah,
and Steamboat in Colorado. The Company also operates golf courses at its resorts
and conducts other off-season activities which accounted for approximately 13.9%
of the Company's resort revenues for fiscal 1998.

         The  Company's  primary  strength  is its  ability  to  improve  resort
operations by integrating  investments in on-mountain capital  improvements with
the  development  of  mountainside  real  estate.  Since  1994,  the Company has
increased  skier visits by 10.7% in the  aggregate for the three resorts that it
has owned for more than two seasons. In addition,  the Company has increased its
market  share  of  skier  visits  in  the   northeastern   United   States  from
approximately  21.8% in the  1995-96  ski season to  approximately  25.2% in the
1997-98 ski season  (after  giving pro forma  effect to its  acquisition  of the
Killington/Pico, Mount Snow/Haystack and Sugarloaf ski resorts).

                                       1
<PAGE>

Resorts

         Killington.

          Killington,  located in central Vermont,  is the largest ski resort in
the northeast and the fifth largest in the United States,  with over 1.0 million
skier visits in 1997-98.  Killington is a  seven-mountain  resort  consisting of
approximately 1,200 acres with 205 trails serviced by 33 lifts. The resort has a
4,241-foot  summit and a 3,150-foot  vertical drop. The resort's base facilities
include  eight  full-service  ski  lodges,  including  one located at the top of
Killington  Peak. In December 1996,  the Company  acquired the Pico Mountain ski
resort located adjacent to Killington and integrated the two resorts. Management
believes  the size and  diversity  of  skiable  terrain  at  Killington  make it
attractive to all levels of skiers and one of the most widely  recognized of the
Company's resorts with regional, national and international clientele.

         The on-mountain  accommodations at Killington  consist of approximately
5,100 beds, including 532 quartershare  interests at the New Grand Summit Hotel.
The   off-mountain  bed  base  in  the  greater   Sherburne,   Vermont  area  is
approximately 12,000 beds. Killington also owns and operates 16 retail shops, 12
rental and repair shops, a travel and reservation  agency and a cable television
station. At the base of Pico Mountain,  the Company owns a well-developed retail
village and a health club.  Killington is a year-round  resort offering complete
golf amenities  including an 18-hole  championship golf course, a golf school, a
pro shop, and a driving range.

         Since its  acquisition  in June 1996,  the Company has  invested  $25.6
million in capital  improvements to update  Killington's  snowmaking,  trail and
lift systems,  and to develop base  facilities and real estate  potential at the
base areas.  Major  improvements  and enhancements to the resort completed since
June 1996 include (i)  installation of two high-speed quad lifts,  and upgrading
of  two  additional  lifts  to  high-speed   quads,  (ii)  installation  of  one
eight-passenger  high-speed  gondola  to  service  the  Peak  Restaurant  at the
Killington  summit and to replace the old  Killington  Peak double chair,  (iii)
construction of a new children's center and related base area improvements,  and
(iv) a major water and sewer system expansion.

         In December 1997, the Company  completed a land exchange with the state
of Vermont whereby Killington acquired 1,050 acres of undeveloped land centrally
located in its principal base area.  The Company's  three-year  capital  program
includes the  interconnection  of lift and trail systems  between the Killington
and Pico resorts. The interconnection of the two mountains is expected to result
in a 16% increase in lift capacity and an  additional  110 acres (9%) of skiable
terrain.

         Sunday River.

         Sunday   River,   located  in  the  western   mountains  of  Maine  and
approximately a three-hour  drive from Boston,  is one of New England's  largest
ski resorts with over  550,000  skier  visits in 1997-98.  Extending  over eight
interconnected mountain peaks, its facilities consist of approximately 654 acres
of  skiable  terrain  and 126  trails  serviced  by 18 lifts.  The  resort has a
3,140-foot  summit and a 2,340-foot  vertical drop. The Company  believes Sunday
River has one of the most modern lift systems in the Northeast. Sunday River has
four base lodges, one of which is located at the top of North Peak.

                                       2
<PAGE>

         The on-mountain accommodations at Sunday River consist of approximately
5,850 beds including 726 condominium  units, 648 quartershare units at the Grand
Summit  Resort Hotel and 580  quartershare  units at the new Jordan Grand Resort
Hotel. The off-mountain bed base in greater Bethel,  Maine totals  approximately
2,000 beds.  The resort owns and  operates  five ski shops,  seven  full-service
restaurants, four cafeteria-style restaurants and six bars.

         Since  1981,   the  Company   has   continually   invested  in  capital
improvements  at Sunday River to expand and improve its  on-mountain  facilities
and in real estate  development.  Sunday River's 1998 capital program  included:
(i) installation of a new high-speed quad-lift on Barker Mountain which replaces
an  earlier  lift,  (ii)  installation  of 150 new tower  snow  guns to  enhance
snowmaking,  (iii) five new  grooming  vehicles,  (iv) a new welcome  center for
condo check-ins and ticket sales, and a new learn to ski/ride  discovery center,
and  (v)  significant  upgrades  of  facilities.  A  Robert  Trent  Jones,  Jr.,
championship  golf course is  currently  under  construction  for a planned 2001
opening.  Management believes that Sunday River has significant growth potential
with  over  325  acres  of  land  at the  base  of the  new  Jordan  Bowl  area.
Additionally,  there  are over  4,000  acres of  undeveloped  land  owned by the
Company and 3,000 acres for which the Company  holds  purchase  options that are
suitable for development as skiable terrain.


         Mount Snow/Haystack.

          Mount Snow, located in Brattleboro,  Vermont is the second largest ski
resort in the  Northeast  with over 600,000  skier  visits in 1997-98..  A large
percentage  of the  skier  base  for  Mount  Snow  derives  from  Massachusetts,
Connecticut and New York. The resort  consists of two mountains  (Mount Snow and
Haystack) separated by approximately three miles, which have been combined under
single  management.  Its facilities  consist of 134 trails and approximately 763
acres of skiable  terrain  serviced  by 26 lifts.  The  resort has a  3,580-foot
summit, a 1,700-foot vertical drop, five full-service base lodges.

         Mount Snow's  on-mountain  bed base  currently  consists of 1,960 beds,
including 544 units at the resort's new Grand Summit Hotel. The off-mountain bed
base in the greater Dover, Vermont area has approximately 7,300 beds. The resort
owns and operates eight retail shops,  four rental and repair shops, a pro shop,
a country club and a nightclub.  Mount Snow also  headquarters the Company-owned
"Original Golf School," and operates an 18-hole golf course,  eight golf schools
throughout  the East  Coast,  a  mountain  bike  school,  a 92-room  hotel and a
low-voltage  local television  station.  Since its acquisition in June 1996, the
Company has invested  approximately $15.0 million in capital improvements to the
resort, including the installation of two high-speed quad chairlifts.

                                       3
<PAGE>

         The Company is  expanding  Mount  Snow's  lodges to provide  additional
space for guest  services,  food and  beverage  services,  retail  sales,  and a
childrens'  center.  During the summer of 1998, a 20,000  square foot  Discovery
Center was constructed to service new skiers and snowboarders.  In addition, the
Company  opened a new  restaurant and over 10,000 square feet of retail space in
the Grand Summit Hotel.

         Sugarloaf.

          Sugarloaf is located in Carrabassett  Valley,  Maine and was ranked as
the number one overall ski resort in the East by the September 1997 Snow Country
magazine survey.  Sugarloaf is a single mountain with approximately  1,400 acres
of terrain and 126 trails covering  approximately  530 acres, of which 490 acres
have  snowmaking  coverage  serviced by 14 lifts including a new high-speed quad
chair to service lower mountain  terrain and an additional fixed grip-quad chair
accessing  the  snowfields.  There are  approximately  870  additional  acres of
off-trail skiable terrain. The mountain has a 4,237-foot summit and a 2,820-foot
vertical drop. Sugarloaf offers one of the largest  ski-in/ski-out base villages
in the Northeast, containing numerous restaurants, retail shops and an abundance
of  lodging.  Sugarloaf  is  widely  recognized  for  its  challenging  terrain,
including its snowfields,  which represent the only lift-serviced above-treeline
skiing in the Northeast. As a destination resort,  Sugarloaf has a broad market,
including areas as distant as New York, New Jersey, Pennsylvania and Canada.

         Sugarloaf operates a year-round  conference center, a cross-country ski
facility and an 18-hole championship golf course designed by Robert Trent Jones,
Jr.,  which is rated by both Golf Digest and Golf magazines as one of the top 25
resort courses in the United States. Sugarloaf's slope-side ski village consists
of its base lodge, two hotels,  banquet facilities for up to 800 people,  retail
stores,  a rental and repair shop, a sports and fitness  club,  870  condominium
units  and  vacation  homes,  restaurants  and an  extensive  recreational  path
network.

         Sugarbush.

         Sugarbush,  located in Vermont's Mad River  Valley,  features the three
highest  mountain  peaks of any single  resort in the East.  Extending  over six
mountain peaks,  its facilities  consist of 432 acres of skiable terrain and 112
trails serviced by 18 lifts. The resort has a 4,135-foot summit and a 2,650-foot
vertical  drop.  The  mountains are serviced by three base lodges and two summit
lodges.

                                       4
<PAGE>

         The on-mountain  accommodations  at Sugarbush  consist of approximately
2,200  beds.  The  off-mountain  bed base  within  the Mad River  Valley  totals
approximately   6,600  beds.  The  resort   operates  three  ski  shops,   three
full-service restaurants and four cafeteria-style  restaurants. The Company also
owns  and  operates  the  46-unit  Sugarbush  Inn,  manages   approximately  200
condominium units, and owns and operates a championship golf course as well as a
sports center and a conference center.

         Since the  acquisition of Sugarbush by the Company in October 1995, the
Company has invested $23.7 million in capital improvements to expand and improve
its on-mountain  facilities.  The most recently completed  improvements  include
four  high-speed quad  chairlifts,  a 44% increase in snowmaking  capacity,  the
creation of new glade skiing terrain, and numerous base area improvements.

         Attitash Bear Peak.

         Attitash  Bear  Peak,   located  in  the  Mt.  Washington  Valley,  New
Hampshire, is one of New Hampshire's largest ski resorts.  Covering two mountain
peaks,  its  facilities  consist of 273 acres of skiable  terrain  and 60 trails
serviced  by 13 lifts.  The resort  has a  2,350-foot  summit  and a  1,750-foot
vertical  drop.  The  resort  benefits  from its  location  in the  heart of New
Hampshire  ski country and its proximity to the Town of North Conway and the Mt.
Washington  Valley tourist area, and is widely  recognized as a  family-oriented
resort.

         The  on-mountain  accommodations  of  Attitash  Bear  Peak  consist  of
approximately  2,000  beds.  In 1997 the  Grand  Summit  Hotel at  Attitash  was
completed.  It consists of 143 rooms,  2 restaurants,  a lounge,  a health club,
outdoor heated year round pool and 9 conference  rooms  including a 5,600 square
foot  ballroom.  The  off-mountain  bed base in the Mt.  Washington  Valley area
totals  approximately  16,000 beds. The resort operates three base lodges,  four
ski shops, two full-service restaurants,  three cafeteria-style  restaurants and
two bars.

         Since  its   acquisition   in  July  1994,  the  Company  has  invested
approximately  $12.4 million in resort related capital  improvements at Attitash
Bear Peak. The summer of 1998 capital  program  included the  installation  of a
high-speed quad lift on Attitash  Mountain and the Attitash  Adventure Center, a
20,000  square foot base  building  housing the  Discovery  Center for beginning
skiers and riders, enhanced space for all children's programs, adaptive programs
and snowboarders. The resort's three-year capital improvement program includes a
championship golf course,  additional lift upgrades and further additions to the
summer operations.

                                       5
<PAGE>

Resort Operations

         The  Company's  resort  revenues  are  derived  from a wide  variety of
sources including lift ticket sales,  food and beverage,  retail sales including
rental and repair,  skier development,  lodging and property  management,  golf,
other summer  activities and  miscellaneous  revenue sources.  Lift ticket sales
represent  the  single  largest  source  of  resort   revenues  and  represented
approximately 44.1% of total resort revenues for fiscal 1998.

         The following  chart reflects the Company's  sources of resort revenues
across certain  revenue  categories as well as the percentage of resort revenues
constituted by each category for the fiscal year ended July 26, 1998.

<TABLE>
<CAPTION>

                                                                  Fiscal Year Ended July 26, 1998
                                                             Resort Revenues             Percentage of
Revenue Category                                             (in millions)             Resort Revenues
----------------                                             -------------             ---------------
<S>                                                          <C>                        <C>   
Lift Tickets . . . . . . . . . . . . . . . . . . .           $ 79.2                      44.1%
Food and Beverage  . . . . . . . . . . . . . . . .             24.8                      13.8%
Retail Sales   . . . . . . . . . . . . . . . . . .             24.9                      13.9%
Skier development  . . . . . . . . . . . . . . . .             11.6                       6.5%
Golf, other summer activities and miscellaneous  .             15.4                       8.6%
Lodging and property . . . . . . . . . . . . . . .             23.5                      13.1%
                                                               ---                       -----
Total Resort Revenues . . . . . . . . . . . .                $179.4                     100.0%

</TABLE>

Real Estate Development

         The  Company  has been  developing  alpine  resort real estate for over
fifteen  years  as part of its  integrated  resort  and real  estate  investment
strategy.  Since 1983, the Company has sold over 1,600 units of residential real
estate at Sunday River  (including  condominiums,  townhouses  and  quartershare
interval ownership interests). The three components of the Company's real estate
development  strategy are (i) the Grand Summit quartershare hotel concept,  (ii)
development  of  alpine  resort  villages,  and (iii)  resort-specific  discrete
projects.  The Company  believes it has a  significant  real estate  development
pipeline over the next 10 to 15 years.

                                       6
<PAGE>

         The Company's real estate development program generated $105 million in
purchase  commitments in fiscal 1998, compared with $10.4 million in fiscal 1996
and $38.7 million in fiscal 1997. The Company opened three 200-room Grand Summit
Hotels at its New England resorts and commenced construction of three new hotels
at western resorts owned by the Parent on the strength of very high pre-sales.

         The  Company's  strategy  for real  estate  development  calls  for the
completion  of at least 12  projects  over  the  next 36  months.  Four of these
projects  are the new Grand Summit  Hotels in New England,  where the Company is
selling out the  remaining  inventory.  More than 50% of the  inventory in those
hotels is  currently  sold,  with over $41 million in contracts  established  to
date.

         The next component of the real estate development plan is completion of
three hotels  currently under  construction at The Canyons in Utah and Steamboat
in  Colorado.  The final  western  hotel  under  construction  is the  Company's
prototype condominium hotel at The Canyons called Sundial Lodge.

         The remaining  five projects  include a Grand Summit Hotel at Heavenly,
located in the Park Avenue Redevelopment  District in downtown South Lake Tahoe,
and  condominium  hotels based upon the Company's  Sundial Lodge prototype to be
constructed at The Canyons, Heavenly, Steamboat and Sunday River.

         These  12  projects  will  make  up the  first  phase  in  Management's
comprehensive development strategy, which envisions the full development of five
alpine resort villages at Sunday River,  Killington,  Steamboat, The Canyons and
Heavenly.  Each of these villages is currently in master  planning and ranges in
size from approximately one million square feet of development at Heavenly to as
much as five million  square feet of development at The Canyons over the next 10
years. Pricing strategy within each of these villages is carefully  orchestrated
to build  pricing  momentum as  development  progresses.  A key measure for this
development  program is revenue per unit sold,  which is expected to increase as
the villages  gain critical  mass.  Each resort  village  reflects the Company's
carefully  crafted plaza design  concept,  which creates an energy center at the
heart of each resort village.

                                       7
<PAGE>

                                Item 2 Properties

         The  presentation  in this Item has been  reduced in scope  pursuant to
General Instruction (I) of Form 10K.

         The following table summarizes  certain key statistics of the Company's
resorts:

<TABLE>
<CAPTION>

                              Skiable    Vertical                          Snowmaking              1997-98*
                              Terrain      Drop                 Total       Coverage      Ski        Skier
Resort (Year Acquired)        (acres)     (feet)    Trails      Lifts     (% of acres)   Lodges     Visits
                                                             (high-speed)                           (000s)
<S>                            <C>         <C>        <C>       <C>          <C>           <C>       <C>  
Killington (1996)              1,200       3,150      205       33(6)        59.8%         8         1,077
Sunday River (1980)              654       2,340      126       18(4)         93.3         4           552
Mount Snow/Haystack (1996)       763       1,700      134       26(3)         66.0         5           602
Sugarloaf (1996)               1,400       2,820      126       14(2)         35.0         1           358
Sugarbush (1995)                 432       2,650      112       18(4)         66.1         5           388
Attitash Bear Peak (1994)        273       1,750       60       11(1)         89.7         2           233
                            ------------            -------- ------------               --------- ------------
     Total                     4,722                  763      122(21)                      25       3,210

</TABLE>

         See the Item 1 Section entitled  "Business-Resorts" for a more detailed
description of the Company's resorts.

                                     Item 3
                                Legal Proceedings

         The Company  currently  and from time to time is involved in litigation
arising in the  ordinary  course of its  business.  The Company does not believe
that  it is  involved  in  any  litigation  that  will,  individually  or in the
aggregate,  have a material adverse effect on its financial condition or results
of operations or cash flows.

         Each of the Company's  subsidiaries  which operate resorts have pending
claims and are regularly subject to suits with respect to personal injury claims
related principally to skiing activities at such resort. Each of these operating
companies  maintains  liability insurance that the Company considers adequate to
insure claims related to usual and customary risks associated with the operation
of a ski resort.  The Company operates a captive  insurance  company  authorized
under the laws of the State of Vermont,  which  provides  liability and workers'
compensation coverage for its resorts located in Vermont.

                                       8
<PAGE>

                                     Item 4
               Submission of Matters to a Vote of Security Holders

         Not applicable.

                                     Item 5
  Market for the Registrant's Common Stock and Related Security Holder Matters.

Market Information

         There has been no  established  public trading market for shares of the
Company's common stock (the "Common Stock") and there can be no expectation that
such a market will develop and, therefore, holders of Common Stock may be unable
to resell  shares of Common Stock due to the lack of a market.  The Company does
not intend to register its Common Stock or list the Common Stock on any exchange
or on any automated dealer quotation system.

Recent Sales of Unregistered Securities

         No equity securities were sold during fiscal 1998.

Holders

         As of October 23, 1998, there was one holder of record of Common Stock.

Dividend Policy

         The Company has not declared or paid any cash  dividends on its capital
stock. The Company currently intends to retain earnings,  if any, to support its
capital  improvement and growth  strategies and does not anticipate  paying cash
dividends  on its  Common  Stock in the  foreseeable  future.  Payment of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account  various  factors,  including the Company's  financial
condition,  operating results,  current and anticipated cash needs and plans for
capital  improvements and expansion.  The Indenture  governing the Company's 12%
Senior Subordinated Note due 2002 contains certain  restrictive  covenants that,
among  other   things,   limit  the  payment  of  dividends  or  the  making  of
distributions on equity interests of the Company.

                                       9
<PAGE>

                                     Item 6
                             Selected Financial Data

         Omitted  pursuant  to the reduced  disclosure  format  permitted  under
General Instruction (I) of Form 10-K.

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

         The  presentation  in this Item has been  reduced in scope  pursuant to
General Instruction (I) of Form 10-K.

Results of Operations of the Company.

         The  following  table sets forth,  for the periods  indicated,  certain
operating data of the Company as a percentage of revenues.

<TABLE>
<CAPTION>
                                                                          Fiscal Year Ended
                                                            --------------------------------------------
                                                              July 28, 1996  July 27, 1997  July 26, 1998
                                                            --------------------------------------------
<S>                                                               <C>           <C>         <C>  
Revenues:
     Resort ................................................       86.5%         95.2%        74.7%
     Real estate ...........................................       13.5           4.8         25.3
                                                                  -----         -----         -----
          Total revenues ...................................      100.0         100.0        100.0
                                                                  -----         -----         -----
Operating expenses:
   Resort ..................................................       56.9          62.6         49.5
   Cost of real estate sold                                         8.0           3.9         17.7
   Marketing, general and administrative ...................       15.4          14.9         10.6
   Stock compensation charge . . . . . . . . . . . . . . . .         --            --          1.4
   Depreciation and amortization ...........................        9.2          10.4          8.9
                                                                  -----         -----         -----
          Total operating expenses .........................       89.5          91.8         88.1
                                                                  -----         -----         -----
Income from operations .....................................       10.5           8.2         11.9
Commitment fee .............................................        2.0            --           --
Interest expense ...........................................        6.4          13.5         10.9
                                                                  -----         -----         -----
Income (loss) before provision for income taxes
     and minority interest in loss of subsidiary ...........        2.1          (5.3)         1.0
Provision (benefit) for income taxes .......................        5.3          (2.1)         0.4
                                                                  -----         -----         -----
Income (loss) before minority interest in loss of
     subsidiary ............................................       (3.2)         (3.2)         0.6
Minority interest in loss of subsidiary ....................        0.2           0.1           --
                                                                  -----         -----         -----
Net income (loss) from continuing operations................       (3.0)%        (3.1)%        0.6%
                                                                  -----         -----         -----
Extraordinary expense                                                                          1.9%
                                                                  -----         -----         -----

Net income (loss) available to common shareholders                 (3.0)%        (3.1)%       (1.3)%
</TABLE>

                                       10
<PAGE>

         Year ended July 26,  1998  ("Fiscal  1998")  versus Year Ended July 27,
1997 ("Fiscal 1997")

         Resort revenues  increased $12.6 million or 7.6% from $166.8 million to
$179.4  million.  This  increase is primarily  attributable  to skier days which
increased 6.1% from  3,026,000 to 3,210,000,  as well as the opening of four new
retail locations, a new restaurant and three new hotels in fiscal 1998.

         Real Estate revenues increased $52.3 million from $8.5 million to $60.8
million.  This increase is  attributable  to the completion of the Company's new
Grand Summit Hotels at Killington, Mount Snow and Sunday River, and the closings
of quartershare unit sales in those projects.

         Cost of resort  operations  increased  $9.2 million or 8.4% from $109.7
million to $118.9 million.  The increase is primarily  attributable to increased
skier visits and new restaurants, retail outlets and hotels as outlined above.

         Cost of real  estate  operations  increased  $35.6  million  from  $6.8
million to $42.4  million due to increased  sales and also to  non-capitalizable
costs associated with future projects currently under development.

         Marketing,  general and administrative  costs decreased $0.7 million or
2.7% from $26.1  million in fiscal  1997 to $25.4  million in fiscal  1998.  The
decrease is  primarily  attributable  to the  assumption  of certain  corporate,
marketing and administrative  expenses by the Company's parent,  American Skiing
Company, beginning in November, 1997.

         In Fiscal 1998,  the  Company's  Parent  incurred a stock  compensation
charge  associated with the grant of non-qualified  stock options to certain key
members of senior  management.  A portion  of the  Parent's  stock  compensation
charge ($3.3 million) was allocated to ASC East based on an approximation of the
actual time the management  employees  comprising the stock compensation  charge
spent on ASC East-related activities during the year ended July 26, 1998.

         Depreciation and amortization  expense  increased $3.1 million or 16.9%
from $18.3 million to $21.4 million,  due primarily to capital expenditures made
in the summer of 1997.

         Interest expense  increased $2.6 million or 11.0% from $23.7 million to
$26.3 million, due primarily to increased levels of debt outstanding  associated
with  completed  but  unsold  quartershare  units and with  increased  levels of
capital expenditures.

         The provision for income taxes increased by $4.6 million from a benefit
of $3.6 million to a provision of $1.0 million. This increase is attributable to
the increase in income before taxes which  increased from a loss of $9.4 million
to income of $2.4 million.

         The  extraordinary  loss  recorded  by the  Company  relates  to  early
retirement of the Company's  revolving  line of credit,  subordinated  notes and
indebtedness related to the acquisition of Sugarbush.

                                       11
<PAGE>

Fiscal  Year Ended July 27,  1997  Compared  to Fiscal  Year Ended July 28, 1996
("Fiscal 1996").

         Resort  revenues  in fiscal 1997 were  $166.8  million,  an increase of
$103.3  million,  or 162.8%,  as compared to resort revenues of $63.5 million in
fiscal  1996.  This  increase  was due  primarily  to the  addition of the S-K-I
resorts in June 1996,  which accounted for $106.6  million,  which was offset by
$3.2 million  attributable  to a decrease in revenues due to the  divestiture of
the  Cranmore  ski resort and an  increase in resort  revenues at the  Company's
other resorts.

         Revenues from real estate  operations in fiscal 1997 were $8.5 million,
a decrease of $1.4 million,  or 14.7%,  as compared to revenues from real estate
operations  of $9.9 million in fiscal 1996.  This  decrease was due primarily to
all  quartershare  units at the Summit Hotel at Sunday River being fully sold by
July 1996. The Company has completed  construction  of the Grand Summit Hotel at
the Attitash Bear Peak ski resort and began closing on  quartershare  unit sales
at that  project  on April 6,  1997.  As of July 27,  1997 the  Grand  Summit at
Attitash Bear Peak had $5.0 million in quartershare unit sales.

         Cost of  resort  operations  in  fiscal  1997 was  $109.7  million,  an
increase of $68.0 million,  or 162.5%,  as compared to cost of resort operations
of $41.8 million in fiscal 1996. This increase was due primarily to the addition
of the S-K-I resorts.

         Cost of real  estate  operations  in fiscal 1997 was $6.8  million,  an
increase  of $1.0  million,  or  17.2%,  as  compared  to  cost  of real  estate
operations   of  $5.8  million  in  fiscal  1996.   This  increase  was  due  to
pre-construction activities on the hotel projects that began construction in the
fourth quarter of the year ended July 27, 1997 and costs related to the sales of
quartershares at the Grand Summit at Attitash Bear Peak.

         Marketing,  general  and  administrative  expenses  in fiscal 1997 were
$26.1  million,  an  increase  of $14.8  million,  or  131.0%,  as  compared  to
marketing,  general and administrative expenses of $11.3 million in fiscal 1996.
This increase was due to the addition of the S-K-I resorts, which account for an
increase of $11.9 million.  The remaining difference of $2.9 million is due to a
decrease in expense of $0.5 million due to the  divestiture  of the Cranmore ski
resort and an increase in expense of $3.4  million  due to  increased  marketing
activity at the pre-merger resorts.

         Depreciation  and  amortization  expenses  in fiscal  1997  were  $18.3
million,  an increase of $11.5 million,  or 169.7%,  as compared to depreciation
and amortization  expenses of $6.8 million in fiscal 1996. This increase was due
primarily to the addition of the S-K-I resorts, which account for an increase of
$10.2 million.  The remainder of the increase results from capital  improvements
and the  amortization of goodwill and prepaid loan fees that did not exist prior
to the acquisition of the S-K-I resorts.

         Interest  expense in fiscal  1997 was $23.7  million an increase of $19
million or 505% as compared to interest  expense of $4.7 million in fiscal 1996.
This increase was due to increased indebtedness  associated with the acquisition
of the S-K-I Resorts,  and the Company's  extensive  capital programs during the
summer of 1996.

                                       12
<PAGE>

          Cautionary  Statement for Purposes of the "Safe Harbor"  Provisions of
the Private Securities Litigation Reform Act Of 1995

         The  above  information  includes   forward-looking   statements,   the
realization  of which  may be  impacted  by the  factors  discussed  below.  The
forward-looking  statements  are made pursuant to the safe harbor  provisions of
the Private  Securities  Litigation Reform Act of 1995 (the "Act").  This report
contains forward looking statements that are subject to risks and uncertainties,
including,  but not  limited to,  uncertainty  as to future  financial  results,
substantial leverage of the Company, the capital intensive nature of development
of the Company's ski resorts;  rapid and  substantial  growth that could place a
significant strain on the Company's management, employees and operations; demand
for and  costs  associated  with  real  estate  development;  change  in  market
conditions  affecting the interval ownership  industry;  regulation of marketing
and  sales  of the  Company's  quartershare  interests;  seasonality  of  resort
revenues;  fluctuations in operating  results;  dependence on favorable  weather
conditions;  competition;  regional and national economic  conditions;  laws and
regulations  relating  to the  Company's  land use,  development,  environmental
compliance  and  permitting  obligations;  renewal  or  extension  terms  of the
Company's  leases and  permits;  the adequacy of water  supply;  and other risks
detailed  from time to time in the  Company's  filings with the  Securities  and
Exchange  Commission.  These risks could cause the Company's  actual results for
fiscal year 1998 and beyond to differ  materially  from those  expressed  in any
forward looking statements made by, or on behalf of, the Company.  The foregoing
list of factors  should  not be  construed  as  exhaustive  or as any  admission
regarding  the  adequacy of  disclosures  made by the Company  prior to the date
hereof or the effectiveness of said Act.

                                       13
<PAGE>

                                     Item 7A
           Quantitative and Qualitative Disclosures about Market Risk


         The  Company's  market risk  sensitive  instruments  do not subject the
Company to material  market  risk  exposures,  except for such risks  related to
interest rate  fluctuations.  As of July 26, 1998 the Company has long term debt
and subordinated  notes outstanding with a carrying value of $241 million and an
estimated fair value of $256 million.

         The Company has entered into two interest rate protections  agreements.
These agreements are in connection with the Company's Senior Credit Facility and
effectively swap variable interest rate borrowings to fixed rate borrowings. The
total amount of the Senior Credit Facility that is effected by this agreement is
$29.3 million.  The rate for this portion of the Senior Credit Facility is fixed
at is 5.68% plus an incremental rate based on the Company's leverage and expires
November 17, 2005.  Total  borrowings under the Senior Credit Facility are $60.8
million,  leaving  $31.5  million  at a  variable  rate  and,  depending  on the
Company's leverage, the interest rate will be LIBOR plus 2.5% to 3.5%.

         Fixed interest rate debt outstanding as of July 26, 1998, excluding the
Senior Credit  Facility debt, was $179.9  million,  carries an average  interest
rate of 10.90% and matures as follows: $7.0 million in fiscal 1999, $7.3 million
in fiscal 2000,  $30.3 million in fiscal 2001, $5.4 million in fiscal 2002, $2.6
million in fiscal 2003, and $127.2 million in fiscal 2004 and after.

         The Company has also entered into two noncancelable  interest rate swap
agreements.  The notional amount of both  agreements is $120 million.  The first
swap agreement matures on July 15, 2001 and from this swap agreement the Company
receives  interest  at a rate of 12% per annum and pays  interest  at a variable
rate  based on the  notional  amount  of the swap  agreement.  The  second  swap
agreement  expires July 15, 2006 and requires the Company pay interest at a rate
of 9% and receive  interest at a variable  rate based on the notional  amount of
the swap agreement. The two variable portions of the swap agreements offset each
other until July 15, 2001.  After that date, the Company will be paying interest
at a fixed rate of 9% and receiving  interest at a variable  rate.  The variable
rate of  interest  the  Company  would  receive is based on the six month  LIBOR
which, as of November 9, 1998, was 5.19%.

                                       14
<PAGE>



                                     Item 8
                              Financial Statements

Selected Quarterly Operating Results

         The following  table presents  certain  unaudited  quarterly  financial
information  of the Company for the eight  quarters  ended July 26, 1998. In the
opinion of the Company's  management,  this information has been prepared on the
same basis as the Consolidated  Financial Statements appearing elsewhere in this
Form 10-K and  includes all  adjustments  (consisting  only of normal  recurring
adjustments) necessary to present fairly the financial results set forth herein.
Results of operations for any previous  quarters are not necessarily  indicative
of results for any future period.
<TABLE>
<CAPTION>

Quarter Ended

                                 Oct. 27,    Jan. 26,  Apr. 27,  Jul. 27,  Oct. 26,    Jan., 25,   Apr. 28,  Jul. 26,
                                   1996        1997     1997        1997    1997        1998        1998       1998
                                                                       (in thousands)

<S>                            <C>         <C>       <C>       <C>         <C>         <C>        <C>       <C>    
Revenues:
Resort ......................  $ 11,728    $59,418   $86,601   $  9,071    $13,655     $70,849    $83,694   $11,184
Real estate .................     1,569      1,740     2,674      2,485        810       7,890     39,990    12,092
                                -------    -------   -------   --------    --------    -------   -------   --------
Total revenues ..............    13,297     61,158    89,275     11,556     14,465      78,739    123,684    23,276
                                -------    -------   -------   --------    --------    -------   -------   --------

Operating expenses:
  Cost of operations ........    15,034     38,995    42,163     13,547     17,533      44,202    42,888     14,305
  Cost of real estate sold ..     1,032        935     2,913      1,933        925       5,223    27,311      8,971
  Marketing, general and
    administrative ..........     4,792      7,709     9,097      4,528      6,540       7,256     5,965      5,639
 Stock compensation charge ..        --         --        --         --      3,271          --        --        --
 Depreciation and
    amortization ............     1,527      7,344     8,075      1,347      1,450       8,151    10,092     1,746
                                -------    -------   -------   --------    --------    -------   -------   --------
Total operating expenses ....    22,385     54,983    62,248     21,355     29,719      64,832    86,256    30,661
                                -------    -------   -------   --------    --------    -------   -------   --------
Income (loss) from operations  $( 9,088)   $ 6,175   $27,027   $ (9,799)  ($15,254)    $13,907   $37,428   ($7,385)
                                -------    -------   -------   --------    --------    -------   -------   --------
</TABLE>

                                       15
<PAGE>


                                     Item 9
       Changes in and Disagreements with Accountants over Accounting and
                             Financial Disclosures

         None

                                    PART III

                                     Item 10
                        Directors and Executive Officers

         Omitted  pursuant  to the reduced  disclosure  format  permitted  under
Instruction (I) of Form 10-K.

                                     Item 11
                             Executive Compensation

        Omitted pursuant to the reduced disclosure format permitted under
Instruction (I) of Form 10-K.

                                     Item 12
         Security Ownership of Certain Beneficial Owners and Management

        Omitted pursuant to the reduced disclosure format permitted under
Instruction (I) of Form 10-K.

                                     Item 13
                 Certain Relationships and Related Transactions

         Omitted  pursuant  to the reduced  disclosure  format  permitted  under
Instruction (I) of Form 10-K.

                                       16
<PAGE>

                                     PART IV

                                     Item 14
        Exhibits, Financial Statements Schedules and Reports on Form 8-K

          (a) Documents filed as part of this report:                      Page

1.        Index to financial  statements,  financial  statement  
          schedules,  and supplementary data, filed as part of this report:

         Report of Independent Accountants ...................               F-1

         Consolidated Balance Sheet  .........................               F-2

         Consolidated Statement of Operations ................               F-3

         Consolidated Statement of Changes
            in Shareholders' Equity ..........................               F-4

         Consolidated Statement of Cash Flows ................               F-5

         Notes to Consolidated Financial Statements ..........               F-7

2.   Financial Statement Schedules
                  All  other   schedules  are  omitted   because  they  are  not
                  applicable  or  the  required  information  is  shown  in  the
                  consolidated financial statements or notes thereto.

      3.   Exhibits filed as part of this report: ............

Exhibit
No.                Description



3.1       Articles of Incorporation of the Company, as amended  (incorporated by
          reference to Exhibit 3.1 of the  Company's  Registration  Statement on
          Form S-4, Registration No. 333-9763)

3.2       By-laws of the Company  (incorporated  by  reference to Exhibit 3.2 to
          the Company's  Registration  Statement on Form S-1,  Registration  No.
          333-9763).

10.1      Loan and  Security  Agreement  dated as of October 1, 1984,  among the
          State  of  Vermont  (acting  by and  through  the  Vermont  Industrial
          Development  Authority),   Sherburne  Corporation,  Proctor  Bank  and
          BankBoston,  N.A.  (incorporated  by reference to Exhibit 10.16 to the
          Company's   Registration  Statement  on  Form  S-4,  Registration  No.
          333-9763).

10.2      Loan and  Security  Agreement  dated as of October 1, 1984,  among the
          State  of  Vermont  (acting  by and  through  the  Vermont  Industrial
          Development Authority), Mount Snow, Ltd., Proctor Bank and BankBoston,
          N.A.  (incorporated  by  reference  to Exhibit  10.17 to the  Parent's
          Registration Statement on Form S-1 Registration No. 333-33483).

10.3      Indenture  dated  October 24, 1990,  between  Killington  Ltd. and The
          Howard Bank, as trustee  (representative of indentures with respect to
          similar indebtedness aggregating  approximately $2,995,000 in original
          principal  amount and  maturing  at  various  times from 2015 to 2016)
          (incorporated   by  reference  to  Exhibit   10.19  to  the  Company's
          Registration Statement on Form S-4, Registration No. 333-9763).

                                       17
<PAGE>

10.4      Indenture  dated  as of June  28,  1996  among  the  Company,  certain
          Subsidiaries and United States Trust Company of New York,  relating to
          Series  A and  Series  B 12%  Senior  Subordinated  Notes  Due  2006 (
          incorporated by reference to Exhibit 4.1 to the Company's Registration
          Statement on Form S-4, Registration No. 333-9763).

10.5      Form of Subordinated  Debenture Due 2002 from L.B.O.  Holding, Inc. to
          former shareholders of Mt. Attitash Lift Corporation  (incorporated by
          reference to Exhibit 10.34 to the Company's  Registration Statement on
          Form S-4, Registration No. 333-9763).

10.6      Purchase Agreement dated as of April 13, 1994, among Mt. Attitash Lift
          Corporation,  certain of its  shareholders  and L.B.O.  Holding,  Inc.
          (incorporated   by  reference  to  Exhibit   10.35  to  the  Company's
          Registration Statement on Form S-4, Registration No. 333-9763).

10.7      Stock  Purchase  Agreement  dated August 17, 1994,  between  Sugarloaf
          Mountain  Corporation  and S-K-I Ltd.  (incorporated  by  reference to
          Exhibit  10.36 to the  Company's  Registration  Statement on Form S-4,
          Registration No. 333-9763).

10.8      Acquisition  Agreement  dated May 16,  1995,  among  Sugarbush  Resort
          Holdings, Inc., Sugarbush Resort Corporation,  Snowridge,  Inc., Sugar
          Ridge,   Inc.,   Sugarbush  Inn  Corporation  and  Bev  Ridge,   Inc.,
          (incorporated   by  reference  to  Exhibit   10.38  to  the  Company's
          Registration Statement on Form S-4, Registration No. 333-9763).

10.9      Lease dated October 15, 1980,  among H. Donald Penley,  Joseph Penley,
          Albert  Penley and Sunday River Skiway  Corporation  (incorporated  by
          reference to Exhibit 10.40 to The Company's  Registration Statement on
          Form S-4, Registration No. 333-9763).

10.10     Lease/Option  dated  July 19,  1984,  between  John  Blake and  L.B.O.
          Holding,  Inc.  (incorporated  by  reference  to Exhibit  10.41 to The
          Company's   Registration  Statement  on  Form  S-4,  Registration  No.
          333-9763).

10.11     Lease Agreement dated as of July 1, 1993, between Snowridge,  Inc. and
          Mountain Water Company  (incorporated by reference to Exhibit 10.42 to
          The Company's  Registration  Statement on Form S-4,  Registration  No.
          333-9763).

10.12     Lease Agreement dated as of March 1, 1988, between Snowridge, Inc. and
          Mountain  Wastewater  Treatment,  Inc.,  (incorporated by reference to
          Exhibit  10.43 to The  Company's  Registration  Statement on Form S-4,
          Registration No. 333-9763).

10.13     Lease  dated  November  10,  1960,  between  the State of Vermont  and
          Sherburne Corporation (predecessor to Killington,  Ltd.) (incorporated
          by reference to Exhibit 10.44 to The Company's  Registration Statement
          on Form S-4, Registration No. 333-9763).

                                       18
<PAGE>

10.14     Lease  Agreement  dated  as of June  21,  1994,  between  the  Town of
          Wilmington and Mount Snow, Ltd.  (incorporated by reference to Exhibit
          10.46  to  The   Company's   Registration   Statement   on  Form  S-4,
          Registration No. 333-9763).

10.15     Lease Agreement dated April 24, 1995, between Sargent,  Inc. and Mount
          Snow,  Ltd.  (incorporated  by  reference  to  Exhibit  10.47  to  The
          Company's   Registration  Statement  on  Form  S-4,  Registration  No.
          333-9763).

10.16     Agreement between Sugarloaf  Mountain  Corporation and the Inhabitants
          of the Town of Carrabassett  Valley,  Maine,  concerning the Sugarloaf
          Golf Course dated June 3, 1987  (incorporated  by reference to Exhibit
          10.52  to  The   Company's   Registration   Statement   on  Form  S-4,
          Registration No. 333-9763).

10.17     Agreement  dated  July  26,  1995,   among   Bombardier   Corporation,
          Killington,  Ltd., Mount Snow, Ltd., Waterville Valley Ski Area, Ltd.,
          Bear Mountain, Ltd., and Sugarloaf Mountain Corporation  (incorporated
          by reference to Exhibit 10.55 to The Company's  Registration Statement
          on Form S-4, Registration No. 333-9763).

10.18     Purchase  and  Sale  Agreement  dated as of  August  30,  1996,  among
          Waterville  Valley Ski Area,  Ltd.,  Cranmore,  Inc.,  the Company and
          Booth  Creek Ski  Acquisition  Corp.  (incorporated  by  reference  to
          Exhibit  10.61 to the  Company's  Registration  Statement on Form S-4,
          Registration No. 333-9763).

10.19     Purchase  and Sale  Agreement  dated as of  October  16,  1996,  among
          Sherburne Pass Mountain Properties,  LLC, Pico Mountain Sports Center,
          LLC,  Pico  Mountain  Operating  Company,  LLC,  Harold  L. and  Edith
          Herbert,  and  Pico  Ski  Area  Management  Company  (incorporated  by
          reference to Exhibit 10.62 to the Company's  Registration Statement on
          Form S-4, Registration No. 333-9763).

                                       19
<PAGE>

10.20     Loan and Security  Agreement  dated as of August 1, 1997,  among Grand
          Summit Resort Properties, Inc., the lenders listed therein and Textron
          Financial  Corporation,   as  Administrative  Agent  for  the  lenders
          (incorporated   by  reference   to  Exhibit   10.71  to  the  Parnet's
          Registration Statement on Form S-1, Registration No. 333-33483).

10.21     $2,750,000  Subordinated Promissory Note dated November, 1996 by Booth
          Creek Ski Acquisition  Corp.,  Waterville Valley Ski Resort,  Inc. and
          Mount  Cranmore  Ski Resort,  Inc.,  to the Company  (incorporated  by
          reference to Exhibit 10.72 to the Parent's  Registration  Statement on
          Form S-1, Registration No. 333-33483).

10.22     Letter of Agreement  dated August 27, 1996,  among SKI Ltd and certain
          shareholders  of  Sugarloaf  Mountain  Corporation   (incorporated  by
          reference to Exhibit 10.63 to the Company's  Registration Statement on
          Form S-4, Registration No. 333-9763).

10.23     Amended and Restated  Credit  Agreement dated as of November 12, 1997,
          among the Company,  certain Subsidiaries as Borrowers and the Company,
          ASC West and certain  Subsidiaries  as  Guarantors,  the Lenders party
          thereto,  BankBoston,  N.A.  as Agent for the  Lenders and DLJ Capital
          Funding,  Inc. as Documentation Agent for the Lenders (incorporated by
          reference to Exhibit 1 to the Parent's quarterly report on Form 10-Q/A
          for the quarter ended October 26, 1997).

10.24     First Amendment to Amended and Restated  Credit  Agreement dated as of
          July 20, 1998,  among the Company,  certain  Subsidiaries as Borrowers
          and the Company and certain  Subsidiaries  as Guarantors,  the lenders
          party thereto and BankBoston, N.A. as agent for the lenders.

10.25     ISDA Master Lease Agreement between  BankBoston,  N.A. and the Company
          dated as of May 12, 1998.

10.26     Credit Support Annex to ISDA Master Agreement between BankBoston, N.A.
          and the Company dated as of May 12, 1998.

10.27     Form of  Master  Lease  Agreement  dated  as of  various  dates  among
          BancBoston  Leasing,  Inc.  as  Lessor  and  Heavenly  Valley  Limited
          Partnership,  Killington,  Ltd., Mount Snow, Ltd., ASC Leasing,  Inc.,
          Steamboat Ski & Resort  Corporation,  and Sunday River Skiway Corp. as
          Lessees.

10.28     Purchase and Development  Agreement by and among the Parent,  American
          Skiing  Company  Resort  Properties,   Inc.,  and  Marriott  Ownership
          Resorts, Inc., dated as of July 22, 1998.

11.1      Computation of earnings per share.

24.1      Power of Attorney

27.1      Financial Data Schedule.
                                       20
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the Company has duly caused this instrument to be signed on its behalf
by the undersigned,  thereunto duly authorized,  in the Town of Bethel, State of
Maine, on this 9th day of November 1998.


                                    ASC East, Inc.

                                    By:  /s/ Leslie B. Otten
                                          ------------------------------
                                          Leslie B. Otten
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)

                                    By:  /s/ Christopher E. Howard
                                           ------------------------------
                                           Christopher E. Howard
                                           Senior Vice President,
                                           Chief Administrative Officer, 
                                           General Counsel, Clerk and 
                                           Chief Financial Officer, 
                                           (Principal Financial Officer)

                                    By:  /s/ Christopher D. Livak
                                           ------------------------------
                                          Christopher D. Livak
                                          Vice President-Accounting
                                          (Principal Accounting Officer)

                                    By:  /s/ Christopher E. Howard, 
                                              attorney-in-fact
                                            ------------------------------
                                             Gordon M. Gillies, Director





                                       21
<PAGE>


                        Report of Independent Accountants


To the Board of Directors and Shareholders of ASC East, Inc.

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material  respects,  the financial position of
ASC East, Inc. and its  subsidiaries at July 27, 1997 and July 26, 1998, and the
results of their  operations and their cash flows for each of the three years in
the period ended July 26, 1998 in conformity with generally accepted  accounting
principles.  These financial  statements are the responsibility of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.




PricewaterhouseCoopers LLP
October 14, 1998

                                      F-1

<PAGE>

<TABLE>
<CAPTION>

Consolidated Balance Sheet
(in thousands, except share and per share amounts)

                                                                                  July 27,        July 26,
                                                                                    1997            1998
<S>                                                                               <C>             <C>        
Assets
Current assets
  Cash and cash equivalents ..................................................    $     2,634     $     4,157

  Restricted cash ............................................................          2,812           1,769
  Accounts receivable ........................................................          3,801           7,138
  Inventory ..................................................................          7,282          10,226
  Prepaid expenses ...........................................................          1,579           1,705
  Deferred financing costs ...................................................          1,338             875
  Deferred income taxes ......................................................            422           1,289
                                                                                -------------- ---------------

    Total current assets .....................................................         19,868          27,159

Property and equipment, net ..................................................        242,617         296,756
Real estate developed for sale ...............................................         23,540          38,023
Goodwill .....................................................................         10,664          19,702
Intangible assets ............................................................              -           2,050
Deferred financing costs .....................................................          6,996           5,768
Long-term investments ........................................................          3,507           2,202
Other assets .................................................................          4,998           4,691
Due from affiliate ...........................................................          1,260               -
                                                                                -------------- ---------------

    Total assets .............................................................    $   313,450     $   396,351
                                                                                -------------- ---------------

Liabilities and Shareholders' Equity
Current liabilities
  Current portion of long-term debt ..........................................    $    33,248     $    27,645
  Current portion of subordinated notes and debentures .......................              -             455
  Accounts payable and other current liabilities .............................         25,738          26,557
  Deposits and deferred revenue ..............................................          4,379           3,574
  Demand note, Principal Shareholder .........................................          1,933           1,846
  Due to affiliates ..........................................................              -          17,132
                                                                                -------------- ---------------

    Total current liabilities ................................................         65,298          77,209

  Long-term debt, excluding current portion ..................................         46,833          85,045
  Subordinated notes and debentures, excluding current portion ...............        149,749         127,497
  Other long-term liabilities ................................................          6,932           7,313
  Deferred income taxes ......................................................         28,514          26,873
                                                                                -------------- ---------------

    Total liabilities ........................................................        297,326         323,937

Commitments, lease contingencies and contingent liabilities (Note 13)

Shareholders' Equity
Common stock, par value of $.01 per share; 1,000,000 shares authorized;
  978,300 issued and outstanding .............................................             10              10
Additional paid-in capital ...................................................          3,762          63,136
Retained earnings ............................................................         12,352           9,268
                                                                                -------------- ---------------

    Total shareholders' equity ...............................................         16,124          72,414
                                                                                -------------- ---------------

    Total liabilities and shareholders' equity ...............................    $   313,450     $   396,351
                                                                                -------------- ---------------
</TABLE>
                                      F-2
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statement of Operations
(in thousands, except share and per share amounts)

                                                                                Year Ended
                                                                    ----------------------------------------
                                                                       July 28,      July 27,      July 26,
                                                                         1996          1997          1998
<S>                                                                 <C>            <C>           <C>       
Net revenues:
   Resort ......................................................    $    63,489    $  166,818    $  179,382
   Real estate .................................................          9,933         8,468        60,782
                                                                    ------------  ------------  ------------

      Total net revenues .......................................         73,422       175,286       240,164
                                                                    ------------  ------------  ------------

Operating expenses:
   Resort ......................................................         41,799       109,739       118,928
   Real estate .................................................          5,844         6,813        42,430
   Marketing, general and administrative .......................         11,289        26,126        25,400
   Stock compensation charge ...................................              -             -         3,271
   Depreciation and amortization ...............................          6,783        18,293        21,439
                                                                    ------------  ------------  ------------

      Total operating expenses .................................         65,715       160,971       211,468
                                                                    ------------  ------------  ------------

Income from operations .........................................          7,707        14,315        28,696
                                                                    ------------  ------------  ------------

Other expenses:
   Commitment fee ..............................................          1,447             -             -
   Interest expense ............................................          4,699        23,707        26,273
                                                                    ------------  ------------  ------------

Income (loss) before provision (benefit) for income
  taxes and minority interest in loss of subsidiary ............          1,561       (9,392)         2,423

Provision (benefit) for income taxes ...........................          3,906       (3,613)         1,043
Minority interest in loss of subsidiary ........................          (108)             -             -
                                                                    ------------  ------------  ------------

Income (loss) from continuing operations .......................        (2,237)       (5,779)         1,380
                                                                    ------------  ------------  ------------

Extraordinary loss, net of income tax benefit of $2,854 ........              -             -         4,464
                                                                    ------------  ------------  ------------

Net loss .......................................................    $   (2,237)    $ (5,779)      $  (3,084)

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

Basic and diluted loss per share (Note 2):
   Continuing operations .......................................    $    (2.37)    $   (5.91)     $    1.41

   Extraordinary loss ..........................................              -             -        (4.56)
                                                                    ------------  ------------  ------------

   Net loss ....................................................    $    (2.37)    $   (5.91)     $  (3.15)
                                                                                         
                                                                    ------------  ------------  ------------
Weighted average shares outstanding ............................            942           978           978
                                                                    ------------  ------------  ------------


</TABLE>

                                      F-3
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statement of Changes in Shareholders' Equity
(In thousands, except share amounts)

                                                                                     Additional
                                                        Common stock                   paid-in            Retained
                                                  Shares             Amount            capital            earnings            Total

<S>                                                  <C>             <C>            <C>                 <C>                <C>     
Balance at July 31, 1995 ......................      116,737         $  116         $    1,660          $ 28,726           $ 30,502

   Net loss ...................................            -              -                  -            (2,237)            (2,237)

   Distributions to Principal Shareholder .....            -              -                  -            (8,358)            (8,358)

   Contributions ..............................            -              -              1,020                  -              1,020

   Conversion of affiliate company common stock
       to common stock ........................      822,431          (106)                106                  -                  -

   Issuance of shares of common stock .........       39,132              -                976                  -                976
                                               -----------------  -----------------  -----------------  -----------------  ---------

Balance at July 28, 1996 ......................      978,300             10              3,762             18,131             21,903

   Net loss ...................................            -              -                  -            (5,779)            (5,779)
                                               -----------------  -----------------  -----------------  -----------------  ---------

Balance at July 27, 1997 ......................      978,300             10              3,762             12,352             16,124

   Capital contributions from Parent ..........            -              -             59,374                  -             59,374

   Net loss ...................................            -              -                  -            (3,084)            (3,084)
                                               -----------------  -----------------  -----------------  -----------------  ---------

Balance at July 26, 1998 ......................      978,300         $   10         $   63,136          $   9,268          $  72,414
                                               -----------------  -----------------  -----------------  -----------------  ---------

</TABLE>




                                      F-4
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statement of Cash Flows
(In thousands)

                                                                                     Year Ended
                                                                       ---------------------------------------
                                                                        July 28,      July 27,      July 26,
                                                                          1996          1997          1998

<S>                                                                    <C>           <C>            <C>      
Cash flows from operating activities:
   Net loss .......................................................... $  (2,237)    $  (5,779)     $ (3,084)
   Adjustments  to  reconcile  net  loss  to  net  cash  
      provided  by  operating activities:
      Minority interest in loss of subsidiary ........................      (108)             -             -
      Depreciation and amortization                                         6,783        18,293        21,439
      Amortization of discount on subordinated notes and debentures
        and other liabilities ........................................        435         3,300         1,520
      Income tax expense on conversion of S corporation to C 
      corporation ....................................................      5,552             -             -
      Deferred income taxes ..........................................    (1,940)       (3,332)       (1,954)
      Stock compensation charge ......................................          -             -         3,271
      Extraordinary loss on write-off of deferred financing costs ....          -             -         2,232
      Gain on sale of assets .........................................          -             -         (323)
      Decrease (increase) in assets:
        Restricted cash and investments held in escrow ...............          -        12,587         1,043
        Accounts receivable ..........................................        481       (1,343)       (3,337)
        Inventory ....................................................      (373)       (2,257)       (2,944)
        Prepaid expenses .............................................      (648)         1,792         (126)
        Real estate developed for sale ...............................      2,523      (21,976)      (14,483)
        Other assets .................................................      (836)           528           110
        Due to/from affiliate ........................................          -       (1,260)        16,170
      Increase (decrease) in liabilities:
        Accounts payable and other current liabilities ...............    (3,601)         6,794           819
        Deposits and deferred revenue ................................        944           838         (805)
        Other long-term liabilities ..................................        490       (2,270)           381
                                                                       -----------   -----------   -----------

      Net cash provided by operating activities ......................      7,465         5,915        19,929
                                                                       -----------   -----------   -----------

Cash flows from investing activities:
   Payments for purchases of businesses, net of cash acquired ........   (97,079)       (5,359)             -
   Long-term investments .............................................      (450)           836         1,305
   Capital expenditures ..............................................   (25,054)      (21,638)      (64,152)
   Proceeds from sale of property and equipment ......................          -         2,626           732
   Cash payments on note receivable ..................................          -           250           100
   Proceeds from sale of businesses ..................................          -        14,408             -
   Other .............................................................          -       (1,964)             -
                                                                       -----------   -----------   -----------

      Net cash used in investing activities .......................... $(122,583)     $ (10,841)    $ (62,015)
                                                                       -----------   -----------   -----------

</TABLE>
                                      F-5
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statement of Cash Flows
(In thousands) (Continued)

                                                                                  Year Ended
                                                                    ----------------------------------------
                                                                     July 28,      July 27,      July 26,
                                                                       1996          1997          1998

<S>                                                                 <C>           <C>           <C>        
Cash flows from financing activities:
   Net proceeds from (repayment of) Old Credit Facility .........   $    40,301   $    14,766   $  (59,623)
   Net borrowings under New Credit Facility .....................             -             -        30,332
   Net repayment of line of credit ..............................       (5,776)             -             -
   Net repayment of revolving credit loan .......................      (17,101)             -             -
   Proceeds from (repayment of) subordinated notes and
   debentures, net of investments held in escrow ................       121,126             -      (23,223)
   Deferred financing costs .....................................       (8,485)         (470)       (1,495)
   Proceeds from (repayment of) long-term debt ..................      (11,806)       (6,654)        49,075
   Payments on demand note, Principal Shareholder ...............             -       (3,267)          (87)
   Advances to Principal Shareholder ............................         (156)             -
   Distributions to Principal Shareholder .......................       (3,158)             -             -
   Capital contributions.........................................         1,020             -        48,630
   Issuance of shares of common stock ...........................           976             -             -
                                                                    ------------  ------------  ------------

      Net cash provided by financing activities .................       116,941         4,375        43,609
                                                                    ------------  ------------  ------------

      Net increase (decrease) in cash and cash equivalents ......         1,823         (551)         1,523

Cash and cash equivalents, beginning of year ....................         1,362         3,185         2,634
                                                                    ------------  ------------  ------------

Cash and cash equivalents, end of year ..........................   $     3,185    $    2,634     $   4,157
                                                                    ------------  ------------  ------------

Supplemental disclosures of cash flow information:
   Cash paid for interest .......................................   $     2,408    $   20,975     $   6,686
   Cash paid (refunded) for income taxes ........................            15       (1,492)             -

Supplemental schedule of noncash investing and financing activities:
   Property acquired under capitalized leases ...................   $       435    $    7,802     $   3,309
   Notes payable issued for purchase of assets ..................             -             -         6,418
   Liabilities assumed associated with purchased companies ......        58,497         1,626             -
   Deferred tax liability associated with purchased companies ...        28,372             -             -
   Purchase price adjustments ...................................             -         4,341             -
   Purchase price adjustments related to deferred taxes .........             -                       1,226
   Note payable issued for distribution to Principal Shareholder          5,200             -             -
   Note receivable received for sale of resorts .................             -         2,750             -
   Intangible asset assumed to purchase subsidiary ..............             -             -         1,883

</TABLE>
                                      F-6

<PAGE>

Notes to Consolidated Financial Statements

1.       Basis of Presentation

         ASC East is organized as a holding company and operates through various
         subsidiaries.   ASC  East  and  its  subsidiaries  (collectively,   the
         "Company")  operate in two  business  segments,  ski  resorts  and real
         estate  development.  The  Company  is  a  wholly-owned  subsidiary  of
         American Skiing Company (the "Parent"). ASC East operates the following
         resorts: Sugarloaf and Sunday River in Maine, Attitash Bear Peak in New
         Hampshire,  and  Killington,   Mount  Snow/Haystack  and  Sugarbush  in
         Vermont.  The Company performs its real estate development  through its
         wholly-owned subsidiary, Grand Summit Resort Properties, Inc. ("GSRP").

         The Company was  originally  formed on December 7, 1995,  at which time
         the entity operated under the name American  Skiing  Company.  Prior to
         June 28, 1996,  the Company was a combined  group of separate  entities
         which were wholly-owned by Les Otten (the "Principal Shareholder").  On
         June  28,  1996,  the  Principal   Shareholder  exchanged  all  of  the
         outstanding  shares of the  combined  group for  939,168  shares of the
         Company's stock (the "Exchange").  Contemporaneously with the Exchange,
         the Company  purchased  all the  outstanding  shares of common stock of
         S-K-I  Limited,   Inc.   ("S-K-I")  for  $18.00  per  share.  Upon  the
         acquisition  of S-K-I,  the companies  from the combined  group and the
         S-K-I companies were formed into a consolidated  entity. In conjunction
         with the  Exchange and the  acquisition  of S-K-I,  the Company  issued
         39,132 shares of common stock,  representing a 4% minority  interest in
         the Company,  to an institutional  investor in a private offering.  The
         fair  market  value of the  common  stock was  $976,000  at the date of
         issuance and was recorded as additional paid-in capital.

         The  Company's  Parent was formed on June 17, 1997,  when the Principal
         Shareholder  exchanged  his 96%  ownership  interest in the Company for
         100% of the  common  stock  of the  Parent.  In  conjunction  with  the
         formation of the Parent,  the Parent recorded the 4% minority  interest
         in the Company.  On January 26, 1998, the Parent and the holders of the
         minority  interest in the Company entered into an agreement whereby the
         Parent issued 615,022 shares of common stock in exchange for all shares
         of the Company held by the minority  shareholders.  In connection  with
         the Parent's  exchange of its common  stock for the minority  interest,
         the  Company  recorded  additional  paid-in  capital  of $8.5  million,
         representing  the excess of the fair market value of the Parent's stock
         exchanged on January 26, 1998 over the  carrying  value of the minority
         interest.

          The  Company's  Parent  consummated  an initial  public  offering (the
          "Offering")  on November 6, 1997. The Parent sold 14.75 million shares
          of common stock in the Offering at a price of $18.00 per share.


2.       Summary of Significant Accounting Principles

         Principles of Consolidation
         The accompanying consolidated financial statements include the accounts
         of ASC East and its subsidiaries. All significant intercompany accounts
         and transactions have been eliminated.

          Fiscal  Year  The  Company's  fiscal  year  is  a  fifty-two  week  or
          fifty-three week period ending on the last Sunday of July. The periods
          for 1996, 1997 and 1998 consisted of fifty-two weeks.

         Cash and Cash Equivalents

          The  Company  considers  all highly  liquid  debt  instruments  with a
          remaining maturity of three months or less to be cash equivalents.

                                      F-7
<PAGE>

2.       Summary of Significant Accounting Principles (continued)

         Restricted Cash

         Restricted  cash  represents  deposits that relate to pre-sales of real
         estate developed for sale held in escrow and guest advance deposits for
         lodging  reservations.  The cash will be  available to the Company when
         the real estate units are sold or the lodging services are provided.

         Inventories

         Inventories  are stated at the lower of cost  (first-in,  first-out) or
         market,  and  consist  primarily  of retail  goods,  food and  beverage
         products and mountain operating supplies.

         Property and Equipment

         Property  and  equipment  are  carried  at  cost,  net  of  accumulated
         depreciation. Depreciation is calculated using the straight-line method
         over the assets'  estimated useful lives which range from 9 to 40 years
         for  buildings,  3 to 12 years for  machinery and  equipment,  10 to 50
         years for  leasehold  improvements  and 5 to 30 years for  lifts,  lift
         lines and trails.  Assets under capital  leases are amortized  over the
         shorter of their useful lives or their  respective  lease lives. Due to
         the seasonality of the Company's  business,  the Company records a full
         year of depreciation  relating to its operating  assets over the second
         and third quarters of its fiscal year.

         Real Estate Developed for Sale

         The Company  capitalizes as real estate developed for sale the original
         acquisition cost of land,  direct  construction and development  costs,
         property taxes, interest incurred on costs related to real estate under
         development,   and  other   related  costs   (engineering,   surveying,
         landscaping,  etc.) until the property  reaches its  intended  use. The
         cost of sales for  individual  parcels of real  estate or  quartershare
         units within a project is  determined  using the  relative  sales value
         method. Selling costs are charged to expense in the period in which the
         related  revenue is  recognized.  Interest  capitalized  on real estate
         development  projects during fiscal years 1996,  1997, and 1998 totaled
         $0, $473,000, and $2.4 million, respectively.

         Intangible Assets

         Intangible  assets consist of goodwill and tradenames.  The Company has
         classified  as  goodwill  the  excess of fair  value of the net  assets
         (including   tax   attributes)   of  companies   acquired  in  purchase
         transactions.   Intangible  assets  are  recorded  net  of  accumulated
         amortization  in the  accompanying  consolidated  balance sheet and are
         amortized using the  straight-line  method over their estimated  useful
         lives as follows:

                  Goodwill                  40 years
                  Tradenames                40 years

         Deferred Financing Costs

         Costs incurred in connection  with the issuance of debt are included in
         deferred financing costs, net of accumulated amortization. Amortization
         is  calculated  using  the  straight-line  method  over the  respective
         original lives of the applicable issues.  Amortization calculated using
         the straight-line  method is not materially different from amortization
         that would have resulted from using the interest method.


                                      F-8
<PAGE>


2.       Summary of Significant Accounting Principles (continued)

         Long-Term Investments

         Long-term  investments  are  comprised  of  U.S.  Treasury  Securities,
         Obligations of U.S. Government  corporations and agencies and corporate
         bonds.  It is  management's  intent  to  hold  these  securities  until
         maturity.  These  securities  are  carried  at  amortized  cost,  which
         approximates  quoted  market values at July 27, 1997 and July 26, 1998.
         Contractual  maturities  relating to these  investments range from less
         than one year to five years at July 26, 1998.

         Long-Lived Assets

         The Company  evaluates  potential  impairment of long-lived  assets and
         long-lived  assets to be disposed of in  accordance  with  Statement of
         Financial  Accounting Standards No. 121, "Accounting for the Impairment
         of  Long-Lived  Assets and for  Long-Lived  Assets to Be  Disposed  Of"
         ("SFAS  121").   SFAS  121   establishes   procedures   for  review  of
         recoverability   and   measurement  of  impairment  if  necessary,   of
         long-lived assets,  goodwill, and certain identifiable intangibles held
         and used by an entity.  SFAS 121 requires that those assets be reviewed
         for  impairment  whenever  events or  circumstances  indicate  that the
         carrying  amount  of an  asset  may not be  recoverable.  SFAS 121 also
         requires that long-lived assets and certain identifiable intangibles to
         be disposed of be  reported  at the lower of their  carrying  amount or
         fair  value  less  estimated  selling  costs.  As  of  July  26,  1998,
         management  believes  that  there  has not been any  impairment  of the
         Company's  long-lived assets,  real estate developed for sale, goodwill
         or other identifiable intangibles.

         Revenue Recognition

         Resort  revenues  include  sales  of lift  tickets,  tuition  from  ski
         schools, golf course fees and other recreational activities, sales from
         restaurants, bars and retail shops, and real estate rentals. Daily lift
         ticket revenue is recognized on the day of purchase. Lift ticket season
         pass revenue is recognized in equal amounts over the ski season,  which
         is the  Company's  second and third  quarters of its fiscal  year.  The
         Company's remaining revenue is generally recognized as the services are
         performed.  Real estate revenues are recognized  under the full accrual
         method when title has been transferred. Amounts received from pre-sales
         of real estate are  recorded as deposits  and  deferred  revenue in the
         accompanying   consolidated   balance   sheet   until  the  revenue  is
         recognized.

         Interest

         Interest  is expensed as  incurred  except  when it is  capitalized  in
         conjunction with major capital  additions and real estate developed for
         sale.  The amounts of interest  capitalized  are determined by applying
         current   interest   rates  to  the  funds   required  to  finance  the
         construction.  During 1996,  1997 and 1998, the Company  incurred total
         interest  cost  of $5.1  million,  $24.3  million,  and  $28.9  million
         respectively,   of  which   $444,000,   $575,000   and  $2.6   million,
         respectively,  have been capitalized to property and equipment and real
         estate developed for sale.

         Employee Benefits

         As of July 27, 1997, the Company  maintained a number of profit sharing
         and savings plans  pursuant to Section  401(k) of the Internal  Revenue
         Code. In August 1997, the Parent  established the ASC 401(k) Retirement
         Plan  pursuant  to Section  401(k) of the  Internal  Revenue  Code (the
         "Plan") and subsequently  rolled the previously existing plans into the
         Plan. The Plan allows  employees to defer up to 15% of their income and
         provides for the matching of participant  contributions at the Parent's
         discretion.  The Parent  made no  contributions  to the profit  sharing
         plans for 1996, 1997 and 1998.  Contributions  to the savings plans for
         1996  and  1997  totaled  $87,000  and  $301,000,  respectively,  while
         contributions to the Plan for 1998 totaled $217,000.

                                      F-9
<PAGE>


2.       Summary of Significant Accounting Principles (continued)

         Advertising Costs

         Advertising  costs are  expensed the first time the  advertising  takes
         place.  At July  27,  1997  and July  26,  1998,  advertising  costs of
         $384,000 and $153,000,  respectively, were recorded in prepaid expenses
         in the accompanying consolidated balance sheet. Advertising expense for
         the years ended July 28, 1996, July 27, 1997 and July 26, 1998 was $5.7
         million, $5.2 million and $5.8 million, respectively.

         Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that affect amounts and  disclosures  reported in the
         accompanying  consolidated  financial statements.  Actual results could
         differ from those estimates.

         Seasonality

         The occurrence of adverse weather  conditions during key periods of the
         ski season could adversely affect the Company's  operating results.  In
         addition,  the Company's  revenues are highly seasonal in nature,  with
         the majority of its revenues historically being generated in the second
         and third fiscal quarters,  of which a significant  portion is produced
         in two key weeks - the Christmas and Presidents' Day vacation weeks.

         Earnings Per Share

         In February  1997,  the  Financial  Accounting  Standards  Board issued
         Statement of Financial  Accounting  Standards  No. 128,  "Earnings  Per
         Share"  ("SFAS  128").  This  pronouncement   supersedes  the  previous
         methodology  for the  calculation  of earnings per share as promulgated
         under APB Opinion No. 15. SFAS 128 requires presentation of "basic" and
         "diluted"  earnings per share.  The Company  adopted SFAS 128 in fiscal
         1998 and all prior periods presented were retroactively  restated.  For
         the years ended July 28, 1996,  July 27, 1997 and July 26, 1998,  basic
         and diluted earnings per share are the same.

         Fair Value of Financial Instruments

         The recorded  amounts for cash and cash  equivalents,  restricted cash,
         accounts  receivable and accounts payable and other current liabilities
         approximate fair value due to the short-term  nature of these financial
         instruments.  The fair value of amounts outstanding under the Company's
         Senior Credit Facility and certain other debt instruments  approximates
         their  recorded  values in all  material  respects,  as  determined  by
         discounting  future cash flows at current  market  interest rates as of
         July 26,  1998.  The fair value of the  Company's  Senior  Subordinated
         Notes has been estimated using quoted market values.  The fair value of
         the Company's other  subordinated  debentures have been estimated using
         discounted cash flow analyses based on current borrowing rates for debt
         with similar maturities and ratings.


                                      F-10
<PAGE>


2.       Summary of Significant Accounting Principles (continued)

          The  estimated  fair values of the Senior  Subordinated  Notes and the
          other subordinated debentures at July 26, 1998 are presented below (in
          thousands):

                                                    Carrying            Fair
                                                     amount             value

                  12% Senior Subordinated Notes     $ 117,002         $ 134,400
                  Other subordinated debentures     $   10,950        $   8,667


         Income Taxes

         The Company  utilizes the asset and liability  method of accounting for
         income  taxes,  as set  forth  in  Statement  of  Financial  Accounting
         Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109
         requires the recognition of deferred tax assets and liabilities for the
         expected future tax consequences of temporary  differences  between the
         financial statement and tax bases of assets and liabilities,  utilizing
         currently  enacted  tax rates.  The effect of any future  change in tax
         rates is recognized in the period in which the change occurs.

         As  described in Note 10,  certain of the  Company's  subsidiaries  had
         previously  elected to be taxed under the provisions of Subchapter S of
         the Internal Revenue Code of 1986, as amended,  with income or loss and
         credits passed through to the Principal  Shareholder.  Concurrent  with
         the acquisition of S-K-I, the subsidiaries' election to be treated as S
         corporations terminated.

         Reclassification

          Certain  amounts in the prior year  financial  statements  and related
          notes  have  been   reclassified  to  conform  with  the  fiscal  1998
          presentation.


3.       Business Acquisitions and Divestments

         S-K-I Acquisition and Purchase of a Minority Interest
         On June 28, 1996, the Company  acquired all the  outstanding  shares of
         common  stock of S-K-I  (the  "S-K-I  Acquisition")  for  approximately
         $104.6  million,   including  direct  costs  and  liabilities   assumed
         (excluding deferred taxes) of $58.5 million. The significant  companies
         purchased  in the S-K-I  Acquisition  included  SKI  Insurance  and the
         Killington,  Mount  Snow/Haystack,  Waterville Valley and Sugarloaf ski
         resorts.  Subsequent  to the  S-K-I  Acquisition,  all  companies  were
         wholly-owned  , except for  Sugarloaf,  which was 51% owned.  The S-K-I
         Acquisition  was accounted for using the purchase  method of accounting
         and, accordingly, the results of operations subsequent to June 28, 1996
         are included in the accompanying consolidated financial statements.

         Amortization  of  goodwill  charged to  depreciation  and  amortization
         amounted to $14,000,  $217,000 and  $274,000  for 1996,  1997 and 1998,
         respectively. Accumulated amortization of goodwill amounted to $231,000
         and $505,000 at July 27, 1997 and July 26, 1998, respectively.

         Pursuant  to a consent  decree with the U.S.  Department  of Justice in
         connection  with the S-K-I  Acquisition,  the  Company  sold the assets
         constituting  the Mt. Cranmore and Waterville  Valley resorts for $17.2
         million on November 27, 1996.


                                      F-11
<PAGE>


3.       Business Acquisitions and Divestments (continued)

         The following  unaudited pro forma financial  information  presents the
         consolidated  results of  operations as if the S-K-I  Acquisition,  the
         divestitures of Mt. Cranmore and Waterville Valley, the purchase of the
         remaining 49% minority  interest of Sugarloaf,  and the  termination of
         the S  Corporation  status of  certain  of the  Company's  wholly-owned
         subsidiaries  had  occurred on July 31, 1995 (in  thousands  except per
         share amounts):

                                                    Year ended
                                                   July 28, 1996
                                                   
                Revenues                         $   171,666
                                                  --------------

                Net loss                         $    (3,785)
                                                  --------------

                Net loss per share               $     (3.87)
                                                  --------------


         These pro forma  results have been  prepared for  comparative  purposes
         only and do not purport to be  indicative  of the results of operations
         which actually would have resulted had the transactions occurred on the
         date indicated.

         Other Acquisitions

         On August 30, 1996,  the Company  purchased  the remaining 49% minority
         interest in Sugarloaf, for $2.0 million in cash. In connection with the
         purchase, the Company recorded a liability in the amount of $492,000 to
         provide for contingent  consideration  that may be paid pursuant to the
         purchase   agreement.   During  1998,   the  Company  paid   contingent
         consideration  of $331,000.  The remaining  balance of the liability at
         July 26, 1998 of $161,000 is included in other long-term liabilities in
         the  accompanying  consolidated  balance sheet.  In connection with the
         purchase of Sugarloaf,  the Company paid certain debt in advance of its
         maturity and incurred a prepayment penalty of $600,000.  The prepayment
         penalty  is   recorded  in   interest   expense  in  the   accompanying
         consolidated statement of operations for the year ended July 27, 1997.

         In November 1996, the Company purchased the Pico Ski Resort for a total
         purchase  price of $5.0  million.  The purchase  price  includes a cash
         payment of $3.4 million and assumed liabilities of $1.6 million.

                                      F-12
<PAGE>


4.       Property and Equipment

         Property and equipment consists of the following (in thousands):

                                                    July 27,         July 26,
                                                      1997             1998

Buildings and grounds                             $     69,635     $     99,530
Machinery and equipment                                 61,218           55,435
Lifts and lift lines                                    60,769          103,064
Trails                                                  11,667           11,952
Land improvements                                       18,096           14,972
                                                 --------------  ---------------

                                                       221,385          284,953
 
Less - accumulated depreciation and amortization        36,940           55,753
                                                 --------------  ---------------

                                                       184,445          229,200

Land                                                    49,160           50,772
Construction-in-process                                  9,012           16,784
                                                 --------------  ---------------

Property and equipment, net                        $   242,617      $   296,756
                                                 --------------  ---------------



         Property and equipment includes  approximately  $10.7 million and $17.7
         million of machinery and equipment and lifts held under capital  leases
         at July 27, 1997 and July 26, 1998, respectively.  At July 27, 1997 and
         July  26,  1998,  related  accumulated  amortization  on  property  and
         equipment under capital leases was approximately  $2.3 million and $3.5
         million, respectively.  Amortization expense for property and equipment
         under capital leases was approximately  $493,000, $1.6 million and $1.9
         million for 1996, 1997 and 1998,  respectively.  Total depreciation and
         amortization  expense  relating to all property and  equipment was $6.7
         million,  $16.6  million  and $19.9  million  for 1996,  1997 and 1998,
         respectively.


5.       Note Receivable

         In connection  with the sale of Mt.  Cranmore and Waterville  Valley in
         November 1996, the Company  received a promissory note in the amount of
         $2.8  million.  Interest  on the note is  charged  at a rate of 12% per
         annum and is payable semi-annually on December 31 and June 30. The note
         is payable in annual  installments  ranging  from  $100,000 to $350,000
         beginning in January  1997 through  January  2003,  with the  remaining
         balance  to be paid in June 2004.  The  balance of the note at July 27,
         1997 and July 26, 1998 was $2.5 million and $2.4 million, respectively,
         and is  included  in  other  assets  in the  accompanying  consolidated
         balance sheet.


                                      F-13
<PAGE>


6.       Demand Note, Shareholder

         In June 1996, prior to the S-K-I Acquisition,  the Company delivered to
         the Principal Shareholder a demand note in the principal amount of $5.2
         million  for the amount  expected  to become  payable by the  Principal
         Shareholder  in 1996 and 1997 for  income  taxes  with  respect  to the
         Company's  income  as an S  corporation  through  the date of the S-K-I
         Acquisition.  The demand note is unsecured  and bears  interest at 5.4%
         per  annum,  the  applicable  federal  rate in  effect  at the  time of
         issuance. The amount in the accompanying  consolidated balance sheet on
         July 26, 1998 of $1.8  million  will remain  payable  until all related
         open tax years are closed.


7.       Long-Term Debt

         Long-term debt consists of (dollar amounts in thousands):
<TABLE>
<CAPTION>

                                                                                     July 27,         July 26,
                                                                                       1997             1998

<S>                          <C>                                                      <C>             <C>      
Senior Credit Facility (Note 9)                                                       $ 55,067        $  60,762

Real estate  development  note  payable  with a face value of $55,000.  The note
bears interest at 10% per annum which is accrued monthly. Principal and interest
on the note are payable as real estate  quartershares  are sold.  Any  remaining
principal  and  accrued   interest  are  due  in  January  2001.   The  note  is
collateralized by substantially all real estate developed for sale of GSRP.                  -           31,411

Note  payable  with a face value of $2,250.  The note bears  interest  at 9% per
annum which is payable monthly beginning January 1998 for a
15-year term.  The principal is due in full in December 2012.                                -            2,250

Subordinated  debentures  issued  with an  original  face value of  $2,151.  The
initial coupon rate is 6% per annum and is adjusted  annually in accordance with
the agreement. Interest is payable annually in
May beginning in 1995.  The debentures mature in April 2002.                             1,777            1,844

Note payable with a face value of $1,600.  Interest is payable monthly beginning
January 1998 for a 30-year term. The interest rate is 7% per annum for the first
10 years,  8.44% per annum for the  second 10 years and 10.55% per annum for the
final 10 years. The principal is due in full in December 2027.                               -            1,600


Vermont Industrial Development Bonds, with interest rates that fluctuate between
4.03% and 4.50%.  Principal is due in varying  installments  through 1999 and is
collateralized by certain machinery, equipment and real estate.                         1,005              520
 

Note payable with a face value of $8,500 to finance the  acquisition of land for
a hotel at the Attitash  Bear Peak resort.  The note bore  interest at a rate of
9.5% per annum. The debt was paid in full in
fiscal 1998.                                                                            4,250                -


</TABLE>

                                      F-14
<PAGE>


7.       Long-Term Debt (continued)

<TABLE>
<CAPTION>
                                                                                     July 27,         July 26,
                                                                                       1997             1998

<S>                                                                                  <C>            <C>     
Note  payable  with an  original  face  value of  $6,120  (a  discount  has been
reflected  based on an imputed  interest  rate of 9.5%) and an interest  rate of
6.25%.  Interest  was  payable  quarterly  beginning  in June 1995.  A principal
payment  of $620  was made in  November  1995 and the  remaining  principal  and
accrued   interest   outstanding  were  due  in  December  1999.  The  note  was
collateralized by certain assets as defined in the loan agreement. In connection
with the prepayment of this debt,  the Company  recorded an  extraordinary  loss
before income tax benefit of $325 representing the unamortized original issue 
discount.                                                                            $ 5,128        $      -


Note payable in the amount of $2,311.  The note bore  interest at the greater of
9% or prime  plus 1%,  which  was due in June of each  year  beginning  in 1995.
Principal  payments of $154 were due in June  beginning  in 1997 and the balance
was due in June 2003.
The Company paid this debt in full in fiscal 1998 prior to its maturity.               2,158                -

Note payable with face value of $1,000 to finance the purchase
of a retail store.  The note does not accrue interest.  The principal
is due as follows: $300 in August 1998; $200 in August 1999;
$200 in August 2000 and $300 in August 2001.                                               -            1,000

Obligations under capital leases                                                       7,840           11,542

Other notes payable                                                                    2,856            1,761
                                                                                --------------   --------------

                                                                                      80,081          112,690
                                                                                --------------   --------------

Less: current portion                                                                 33,248           27,645
                                                                                --------------   --------------

Long-term debt, excluding current portion                                            $46,833        $  85,045
                                                                                            
                                                                                --------------   --------------


</TABLE>

                                      F-15

<PAGE>


7.       Long-Term Debt (continued)

         The carrying  values of the above debt  instruments  approximate  their
         respective  fair  values  in  all  material  respects,   determined  by
         discounting  future cash flows at current  market  interest rates as of
         July 26, 1998.

         The  non-current  portion of  long-term  debt  matures  as follows  (in
thousands):

2000 ......................................................        $       6,974
2001 ......................................................               30,055
2002 ......................................................                5,169
2003 ......................................................                1,817
2004 and thereafter .......................................               43,026
Interest related to capitalized leases ....................              (1,656)
Debt discount .............................................                (340)
                                                                 ---------------

                                                                    $     85,045
                                                                 ---------------


         At July 26,  1998,  the  Company  had  letters  of  credit  outstanding
totaling $928,000.

8.       Subordinated Notes and Debentures

         On June 25, 1996, in connection with the S-K-I Acquisition, the Company
         issued $120.0 million of 12% Senior  Subordinated  Notes (the "Notes"),
         $39.1 million of 13.75% Subordinated  Discount Notes (the "Subordinated
         Notes") and 39,132  shares of its common stock in a private  placement.
         Pursuant  to a  registration  rights  agreement,  the  Company  filed a
         registration  statement  with respect to an offer to exchange the Notes
         and  Subordinated  Notes  for a new  issue  of  notes  of  the  Company
         registered  under the Securities Act of 1933, with identical terms. The
         registration statement became effective in November 1996. The Notes and
         Subordinated  Notes are general  unsecured  obligations of the Company,
         subordinated in right of payment to all existing and future senior debt
         of the  Company,  including  all  borrowings  of the Company  under the
         Senior Credit Facility.  The Notes and  Subordinated  Notes mature July
         15, 2006 and January 15, 2007, respectively,  and will be redeemable at
         the option of the Company,  in whole or in part, at any time after July
         15, 2001. The Company incurred  deferred  financing costs totaling $7.9
         million in connection  with the issuance of the Notes and  Subordinated
         Notes  which  are  recorded  as  deferred   financing   costs,  net  of
         accumulated  amortization,  in the  accompanying  consolidated  balance
         sheet.  Amortization expense included in the accompanying  consolidated
         statement of  operations  for the years ended July 28,  1996,  July 27,
         1997 and July 26,  1998  amounted to $58,000,  $781,000  and  $712,600,
         respectively.

         The Notes were issued with an original  issue discount of $3.4 million.
         Interest on the Notes is payable  semi-annually  on January 15 and July
         15 of each year,  commencing on January 15, 1997.  Interest  expense on
         the Notes  amounted to $1.1  million in 1996 and $14.6  million in both
         1997 and 1998.


                                      F-16
<PAGE>


8.       Subordinated Notes and Debentures (continued)

         Concurrently  with the Parent's  Offering,  the Company  solicited  and
         received  the  required  consent from the holders of the Notes to amend
         the Notes indenture to permit the  consummation of the Offering without
         requiring  the Company to make a Change of Control  Offer (as defined).
         In  connection  with such  consent  solicitation,  the  Company  paid a
         customary consent payment to the consenting holders of the Notes.

         The  Company  entered  into  two   noncancelable   interest  rate  swap
         agreements (the "Swap Agreements") with BankBoston, N.A. ("BankBoston")
         with an effective  date of February 9, 1998 (the  "Effective  Date") to
         manage the interest rate risk associated  with the Notes.  The notional
         amount of both Swap  Agreements of $120.0  million is equal to the face
         value of the Notes. The first Swap Agreement  matures on July 15, 2001,
         the date on which the related  Notes  first  become  redeemable  at the
         option of the Company.  The second Swap  Agreement  matures on July 15,
         2006,  the date on which the related Notes  mature.  From the Effective
         Date through July 15, 2001, the Swap Agreements  effectively reduce the
         Company's cash outflow relating to the payment of interest on the Notes
         from 12% to 9.01%, with the Company's payment of interest to BankBoston
         at 9.01% of the notional amount and BankBoston's payment of interest to
         the Company at 12% of the  notional  amount.  The  reduction in the net
         cash  outflow  for   interest   had  no  impact  on  the   accompanying
         consolidated  statement  of  operations  as the net swap  receipt  from
         BankBoston  of $1.6  million  for the period  from the  Effective  Date
         through July 26, 1998 is included in other long-term liabilities in the
         accompanying  consolidated  balance  sheet.  The  Company  will  accrue
         interest  expense on the cumulative net swap receipt over the period of
         the first Swap  Agreement.  This other long-term  liability,  including
         accrued  interest  thereon,  will be  amortized as a credit to interest
         expense over the period from July 15, 2001 to July 15, 2006.  Under the
         second Swap Agreement,  which will remain in effect for the period from
         July 15, 2001 to July 15, 2006, the Company will make interest payments
         to BankBoston  at 9.01% of the notional  amount while  BankBoston  will
         make interest  payments back to the Company at the LIBOR rate in effect
         at that time.  Depending on the LIBOR rate in effect  during the second
         Swap  Agreement,  the Company's  interest rate exposure and its related
         impact  on  interest  expense  and net cash  outflow  may  increase  or
         decrease  from the fixed  rate under the Notes of 12%.  The  Company is
         exposed  to  credit  loss in the event of  nonperformance  by the other
         party  to  the  Swap  Agreements;   however,   nonperformance   is  not
         anticipated.

         The  Subordinated  Notes were issued with an original issue discount of
         $19.0  million.  Under  the  terms of the  indenture,  interest  on the
         Subordinated   Notes  was  not  to  accrue  prior  to  July  15,  2001;
         thereafter,  interest was to accrue at the rate of 13.75% per annum and
         was to be payable semi-annually on January 15 and July 15 of each year,
         commencing on January 15, 2002.  Interest  expense on the  Subordinated
         Notes amounted to $206,000, $2.9 million and $1.4 million in 1996, 1997
         and 1998,  respectively.  The shares of common  stock  issued  with the
         Subordinated  Notes  represented 4% of the Company's total common stock
         outstanding and were valued at $976,000 as of June 28, 1996.

         On  January  26,  1998,  the  Parent  and the  holders of the 4% of the
         outstanding shares of the Company entered into an agreement whereby the
         Parent issued 615,022 shares of its common stock in exchange for all of
         the Company 's common stock shares not owned by the Parent.


                                      F-17
<PAGE>


8.       Subordinated Notes and Debentures (continued)

         A portion of the proceeds from the Senior Credit Facility (Note 9) were
         used to redeem all of the outstanding Subordinated Notes. The indenture
         relating to the  Subordinated  Notes  provided for a  redemption  price
         equal to 113.75% of the carrying value of the Subordinated Notes on the
         redemption date. The Company recorded an extraordinary  loss before any
         benefit for income taxes of  approximately  $4.3 million related to the
         prepayment of the  Subordinated  Notes and $1.0 million  related to the
         write-off of deferred financing costs. These  extraordinary  losses are
         included in the accompanying  consolidated  statement of operations for
         the year ended July 26, 1998.

          Other subordinated debentures owed by the Company at July 26, 1998 are
          due as follows (in thousands):

                              Interest     Principal
    Year                      Rate            Amount

    1999                       6%            $      455
    2000                       6%                   673
    2001                       8%                   525
    2002                       8%                   549
    2003                       8%                 1,074
    2004                       8%                 1,466
    2010                       8%                 1,292
    2012                       6%                 1,155
    2013                       6%                 1,065
    2015                       6%                 1,500
    2016                       6%                 1,196
                                           ------------

                                               $ 10,950
                                           ------------





9.       Senior Credit Facility

         In connection  with the Parent's  Offering,  the Company entered into a
         new credit  facility (the "East  Facility") with BankBoston on November
         12, 1997 and repaid the indebtedness  under the Company's then existing
         credit  facility (the "Old Credit  Facility").  In connection  with the
         repayment of the Old Credit Facility,  the Company  wrote-off  deferred
         financing  costs of $1.2 million and incurred  prepayment  penalties of
         $433,000. These amounts are included in the total extraordinary loss in
         the accompanying  consolidated statement of operations. On November 13,
         1997, BankBoston,  as agent, syndicated the East Facility to a group of
         participating lenders (the "Banks").

         Under the terms of the East Facility,  the Company is able to borrow up
         to $65.0 million which consists of a six-year revolving credit facility
         in the amount of $35.0 million and an  eight-year  term facility in the
         amount of $30.0 million.


                                      F-18
<PAGE>


9.       Senior Credit Facility (continued)

         The revolving  facility is subject to an annual  requirement  to reduce
         the outstanding  debt to a balance of not more than $10.0 million for a
         period  of 30  days.  The  maximum  availability  under  the  revolving
         facility  will be reduced over the term of the East Facility by certain
         prescribed   amounts.   The  term  facility  amortizes  at  a  rate  of
         approximately 1.0% of the principal amount for the first six years with
         the remaining portion of the principal due in two  substantially  equal
         installments  in years seven and eight.  Beginning  July 1999, the East
         Facility  requires  mandatory  prepayment  of 50% of excess  cash flows
         during any period in which the ratio of the Company's total senior debt
         to earnings before interest  expense,  income taxes,  depreciation  and
         amortization  ("EBITDA") exceeds 3.50 to 1. In no event,  however, will
         such mandatory  prepayments  reduce the revolving  facility  commitment
         below $35.0 million.  The East Facility contains  affirmative  negative
         and  financial  covenants  including  maintenance  of debt  to  EBITDA,
         minimum net worth,  EBITDA to interest  expense,  and cash flow to debt
         service financial ratios.

          At July 26,  1998,  the  revolving  portion of the East  Facility  had
          outstanding  borrowings of $28.0 million under LIBOR  contracts  which
          bear interest at rates ranging from 8.09% to 8.48% per annum.  At July
          26, 1998, the East Facility had outstanding borrowings of $1.0 million
          in Money Market  accounts  which bear  interest at rates  ranging from
          8.06% to 8.47%. The balance of the borrowings  outstanding at year end
          of $537,000 bear interest at the greater of BankBoston's  base rate or
          the Federal Funds Rate plus 1% per annum. At July 26, 1998, the LIBOR,
          Money Market and Base rates were 8.16%, 8.06% and 9.5%,  respectively.
          At  July  26,  1998,  the  term  portion  of  the  East  Facility  had
          outstanding  borrowings  of $30.0 million which bear interest at rates
          ranging from 8.59% to 8.98%.  Both the  revolving and term portions of
          the East Facility accrue interest daily and pay interest quarterly, in
          arrears,  commencing  January 31,  1998.  At July 26,  1998,  interest
          accrued for the East Facility was $1.2  million.  The East Facility is
          collateralized by substantially all the assets of the Company,  except
          for the assets of the real estate development subsidiary, which is not
          a borrower under the East Facility.

         In November  1997,  the Company paid financing fees with respect to the
         East Facility of 1.75% of the total  commitment,  or $1.3 million.  The
         Company has capitalized these fees and certain other debt related costs
         and is  amortizing  them  over  the term of the  East  Facility.  Total
         unamortized  financing  fees relating to the East Facility  recorded in
         deferred financing costs in the accompanying consolidated balance sheet
         were $1.3 million at July 26, 1998.


                                      F-19
<PAGE>

10.      Guarantors of Debt

          The  12%   Senior   Subordinated   Notes   due  2006  are   fully  and
          unconditionally  guaranteed by the Company and all of its subsidiaries
          with the exception of Ski Insurance,  Killington West, Ltd.,  Mountain
          Water Company,  Uplands Water Company, and Club Sugarbush,  Inc., (the
          non-guarantors).   The   guarantor   subsidiaries   are   wholly-owned
          subsidiaries   of  the   Company   and  the   guarantees   are   full,
          unconditional,  and  joint  and  several.  Certain  1997 data has been
          reclassified  to  conform  with  the  fiscal  1998  presentation.  The
          guarantor  information  for the years ended July 26, 1998 and July 27,
          1997, is as follows:

          
    Statement of Operations for the year ended July 26, 1998 (in thousands)

<TABLE>
<CAPTION>

                                                          ASC East       Guarantor         Non-       Elimination    Consolidated
                                                                       Subsidiaries     Guarantor       Entries        ASC East
                                                                                       Subsidiaries

<S>                                                      <C>             <C>            <C>            <C>              <C>        
Net revenues:
   Resort ..........................................     $     2,771     $   176,455    $     1,777    $   (1,621)      $   179,382
   Real estate .....................................               -          60,782              -              -           60,782
                                                        ------------- --------------- -------------- -------------- ----------------

      Total net revenues ...........................           2,771         237,237          1,777        (1,621)          240,164
                                                        ------------- --------------- -------------- -------------- ----------------

Operating expenses:
   Resort ..........................................             717         119,010            822        (1,621)          118,928
   Real estate .....................................               -          42,430              -              -           42,430
   Marketing, general and administrative ...........           3,138          22,230             32              -           25,400
   Stock compensation charge .......................           3,271               -              -              -            3,271
   Depreciation and amortization ...................           1,463          19,916             60              -           21,439
                                                        ------------- --------------- -------------- -------------- ----------------

      Total operating expenses .....................           8,589         203,586            914        (1,621)          211,468
                                                        ------------- --------------- -------------- -------------- ----------------

Income (loss) from operations ......................         (5,818)          33,651            863              -           28,696
                                                        ------------- --------------- -------------- -------------- ----------------

Other expenses:
   Commitment fee ..................................               -               -              -              -                -
   Interest expense ................................          16,971           9,320           (18)              -           26,273
                                                        ------------- --------------- -------------- -------------- ----------------

Income (loss) before provision (benefit) for income
  taxes and minority interest in loss of subsidiary         (22,789)          24,331            881              -            2,423

Provision (benefit) for income taxes ...............         (6,662)           7,239            466              -            1,043
Minority interest in loss of subsidiary ............               -               -              -              -                -
                                                        ------------- --------------- -------------- -------------- ----------------

Income (loss) from continuing operations ...........        (16,127)          17,092            415              -            1,380
                                                        ------------- --------------- -------------- -------------- ----------------

Extraordinary loss, net of income tax benefit ......           4,266             198              -              -            4,464
                                                        ------------- --------------- -------------- -------------- ----------------

  Net loss .........................................    $  (20,393)      $    16,894     $      415     $        -       $  (3,084)
                                                        ------------  --------------- -------------- -------------- ----------------
</TABLE>
                                      F-20
<PAGE>

Balance Sheet at July 26, 1998
(in thousands)
<TABLE>
<CAPTION>


                                                              ASC East       Guarantor    Non Guarantor  Elimination   Consolidated
                                                                            Subsidiaries   Subsidiaries    Entries       ASC East
<S>                                                          <C>            <C>          <C>            <C>            <C>       
Assets
Current assets
  Cash and cash equivalents ...........................      $     179      $   2,994    $      984     $        -     $    4,157
  Restricted cash .....................................              -          1,745            24              -          1,769
  Accounts receivable .................................            689         10,526         1,690        (5,767)          7,138
  Inventory ...........................................          1,562          8,664             -              -         10,226
  Prepaid expenses ....................................              -          1,705             -              -          1,705
  Deferred financing costs ............................            875              -             -              -            875
  Deferred income taxes ...............................              -          1,289             -              -          1,289
  Investment in subsidiaries ..........................        146,252        117,698             -      (263,950)              -
                                                         -------------- -------------- -------------  ------------- --------------

    Total current assets ..............................        149,557        144,621         2,698      (269,717)         27,159

Property and equipment, net ...........................             50        295,994           712              -        296,756
Real estate developed for sale ........................              -         38,023             -              -         38,023
Goodwill ..............................................         17,513          2,189             -              -         19,702
Intangible assets .....................................              -          2,050             -              -          2,050
Deferred financing costs ..............................          5,768              -             -              -          5,768
Long-term investments .................................              -              -         2,202              -          2,202
Other assets ..........................................              -          4,691             -              -          4,691
Due from affiliate ....................................              -              -             -              -              -
                                                         -------------- -------------- -------------  ------------- --------------

    Total assets ......................................   $    172,888   $    487,568             $    $ (269,717)   $    396,351
                                                                                              5,612
                                                         -------------- -------------- -------------  ------------- --------------

   Liabilities and Shareholders' Equity
Current liabilities
  Current portion of long-term debt ...................   $     21,062   $      8,546    $        -   $    (1,963)   $     27,645
  Current portion of subordinated notes and debentures               -            455             -              -            455
  Accounts payable and other current liabilities ......          1,502         25,800           515        (1,260)         26,557
  Deposits and deferred revenue .......................            521          3,039            14              -          3,574
  Demand note, Principal Shareholder ..................              -          1,846             -              -          1,846
  Due to affiliates ...................................       (55,540)         72,779         (107)              -         17,132
                                                         -------------- -------------- -------------  ------------- --------------

    Total current liabilities .........................       (32,455)        112,465           422        (3,223)         77,209

  Long-term debt, excluding current portion ...........         39,700         47,841            48        (2,544)         85,045
  Subordinated notes and debentures, excluding current         
  portion .............................................        117,002         10,495             -              -        127,497
  Other long-term liabilities .........................          1,715          2,366         3,232              -          7,313
  Deferred income taxes ...............................        (8,187)         35,615         (555)              -         26,873
                                                         -------------- -------------- -------------  ------------- --------------

    Total liabilities .................................        117,775        208,782         3,147        (5,767)        323,937


Shareholders' Equity
Common stock, par value of $.01 per share;
  1,000,000 shares authorized; 978,300 issued and              
  outstanding .........................................             10            181             2          (183)             10
Additional paid-in capital ............................         63,136        228,158         1,651      (229,809)         63,136
Retained earnings .....................................        (8,033)         50,447           812       (33,958)          9,268
                                                         -------------- -------------- -------------  ------------- --------------

    Total shareholders' equity ........................         55,113        278,786         2,465      (263,950)         72,414
                                                         -------------- -------------- -------------  ------------- --------------

    Total liabilities and shareholders' equity ........   $    172,888   $    487,568    $    5,612    $ (269,717)   $    396,351
                                                         -------------- -------------- -------------  ------------- --------------
</TABLE>

                                      F-21
<PAGE>

Statement of Cash Flows for the year ended July 26, 1998
(in thousands)
<TABLE>
<CAPTION>
                                                              ASC East      Guarantor   Non- Guarantor   Elimination   Consolidated
                                                                          Subsidiaries   Subsidiaries      Entries       ASC East

<S>                                                          <C>             <C>            <C>           <C>              <C>      
Net loss ................................................... $ (20,393)      $  16,893      $     416     $       -        $ (3,084)
Adjustments to reconcile net loss to net cash provided by 
  operating activities:
   Depreciation and amortization ...........................      1,463         19,916             60             -           21,439
   Amortization of discount on subordinated notes and
   debentures and other liabilities ........................      1,425             95              -             -            1,520
   Deferred income taxes ...................................        430        (2,503)            119             -          (1,954)
   Stock compensation charge ...............................      3,271              -              -             -            3,271
   Extraordinary loss on write-off of deferred financing          
   costs ...................................................      2,232              -              -             -            2,232
   Gain on sale of assets ..................................          -          (323)              -             -            (323)
   Decrease (increase) in assets:
     Restricted cash and investments held in escrow ........          -          1,060           (17)             -            1,043
     Accounts receivable ...................................      (548)        (6,692)          (604)         4,507          (3,337)
     Inventory .............................................    (1,278)        (1,666)              -             -          (2,944)
     Prepaid expenses ......................................        365          (491)              -             -            (126)
     Real estate developed for sale ........................          -       (14,483)              -             -         (14,483)
     Other assets ..........................................        250          (140)              -             -              110
     Due to/from affiliate .................................    (3,461)         19,772          (141)             -           16,170
   Increase (decrease) in liabilities:
     Accounts payable and other current liabilities ........      (687)          1,373            133             -              819
     Deposits and deferred revenue .........................       (16)          (788)            (1)             -            (805)
     Other long-term liabilities ...........................      1,223            126          (968)             -              381
                                                             -----------  ------------- --------------  ------------  --------------

   Net cash provided by operating activities ...............   (15,724)         32,149        (1,003)         4,507           19,929
                                                             -----------  ------------- --------------  ------------  --------------

Long-term investments ......................................          -              -          1,305             -            1,305
Capital expenditures .......................................      1,278       (60,923)              -       (4,507)         (64,152)
Proceeds from sale of property and equipment ...............          -            569            163             -              732
Cash payments on note receivable ...........................          -            100              -             -              100
                                                             -----------  ------------- --------------  ------------  --------------

   Net cash used in investing activities ...................      1,278       (60,254)          1,468       (4,507)         (62,015)
                                                             -----------  ------------- --------------  ------------  --------------

Net proceeds from (repayment of) Old Credit Facility .......   (59,623)              -              -             -         (59,623)
Net borrowings under New Credit Facility ...................     30,332              -              -             -           30,332
Proceeds from (repayment of) subordinated notes and
debentures, net of investments held in escrow ..............   (23,223)              -              -             -         (23,223)
Deferred financing costs ...................................    (1,495)              -              -             -          (1,495)
Proceeds from (repayment of) long-term debt ................     34,986         14,107           (18)             -           49,075
Payments on demand note, Principal Shareholder .............          -           (87)              -             -             (87)
Capital contribution .......................................     33,630         15,000              -             -           48,630
                                                             -----------  ------------- --------------  ------------  --------------

   Net cash provided by financing activities ...............     14,607         29,020           (18)             -           43,609
                                                             -----------  ------------- --------------  ------------  --------------

   Net increase (decrease) in cash and cash equivalents ....        161            915            447             -            1,523

   Cash and cash equivalents, beginning of year                     18          2,079            537             -            2,634
                                                             -----------  ------------- --------------  ------------  --------------
   Cash and cash equivalents, end of year                   $      179     $    2,994     $      984    $        -        $   4,157
                                                             -----------  ------------- --------------  ------------  --------------
</TABLE>
                                      F-22
<PAGE>
Statement of Operations for the year ended July 27, 1997
(in thousands)
<TABLE>
<CAPTION>


                                                           ASC East        Guarantor         Non-       Eliminating    Consolidated
                                                                         Subsidiaries     Guarantor       Entries        ASC East
                                                                                         Subsidiaries
<S>                                                          <C>         <C>              <C>           <C>            <C>          
Net revenues:

   Resort                                                    $     644   $     165,328    $    2,514    $    (1,668)   $     166,818
   Real Estate                                                       -           8,468             -               -           8,468
                                                        --------------- --------------- -------------  -------------- --------------

      Total net revenues                                           644         173,796         2,514         (1,668)         175,286
                                                        --------------- --------------- -------------  -------------- --------------

Operating expenses:
   Resort                                                          618         108,496         2,293         (1,668)         109,739
   Real estate                                                       -           6,813             -               -           6,813
   Marketing, general and administrative                         5,740          20,260           126               -          26,126
   Depreciation and amortization                                 1,359          16,915            19               -          18,293
                                                        --------------- --------------- -------------  -------------- --------------

      Total operating expenses                                   7,717         152,484         2,438         (1,668)         160,971
                                                        --------------- --------------- -------------  -------------- --------------

Income (loss) from operations                                  (7,073)          21,312            76               -          14,315
                                                        --------------- --------------- -------------  -------------- --------------

Other expenses:
   Commitment fee                                                    -               -             -               -               -
   Interest expense                                             15,790          10,324       (2,407)               -          23,707
                                                        --------------- --------------- -------------  -------------- --------------

Income (loss) before provision (benefit) for income
  taxes and minority interest in loss of subsidiary           (22,863)          10,988         2,483               -         (9,392)

Provision (benefit) for income taxes                           (8,850)           4,282           955               -         (3,613)
Minority interest in loss of subsidiary                              -               -             -               -               -
                                                        --------------- --------------- -------------  -------------- --------------

Net loss                                               $      (14,013)      $    6,706    $    1,528      $        -      $  (5,779)
                                                       ---------------- --------------- ------------- --------------- --------------

</TABLE>
                                      F-23
<PAGE>

Balance Sheet at July 27, 1997
(in thousands)
<TABLE>
<CAPTION>

                                                             ASC East      Guarantor         Non       Eliminating   Consolidated
                                                                          Subsidiaries    Guarantor      Entries       ASC East
                                                                                        Subsidiaries
<S>                                                          <C>             <C>         <C>             <C>           <C>        
Assets
Current assets
  Cash and cash equivalents                                  $      18       $  2,079    $       537      $      -      $    2,634
  Restricted cash                                                     -         2,805              7             -           2,812
  Accounts receivable                                               141         3,570          1,041         (951)           3,801
  Inventory                                                         284         6,998              -             -           7,282
  Prepaid expenses                                                  366         1,169             44             -           1,579
  Deferred financing costs                                        1,338             -              -             -           1,338
  Deferred tax assets                                                 -           422              -             -             422
  Investment in subsidiaries                                    120,118       138,800              -     (258,918)               -
                                                           ------------- -------------  ------------- -------------  --------------

    Total current assets                                        122,265       155,843          1,629     (259,869)          19,868

Property and equipment, net                                       1,328       240,501            788             -         242,617
Real estate developed for sale                                        -        23,540              -             -          23,540
Goodwill                                                         10,664             -              -              -         10,664
Intangible assets                                                     -             -              -             -               -
Deferred financing costs                                          6,996             -              -             -           6,996
Long-term investments                                                 -             -          3,507             -           3,507
Other assets                                                        349         4,649              -             -           4,998
Due from affiliate                                               54,928        77,669         30,935     (162,272)           1,260
                                                           ------------- -------------  ------------- -------------  --------------

    Total assets                                             $  196,530      $502,202    $    36,859    $(422,141)     $   313,450
                                                           ============= =============  ============= =============  ==============

Liabilities and Shareholders' Equity
Current liabilities
  Current portion of long-term debt                          $   25,067      $  9,019    $       113    $    (951)     $    33,248
  Accounts payable and other current liabilities                  2,198        23,208            340           (8)          25,738
  Deposits and deferred revenue                                     537         3,810             32             -           4,379
  Demand note, Principal Shareholder                                  -         1,933              -             -           1,933
  Due to affiliates                                                 250       162,109           (87)     (162,272)               -
                                                           ------------- -------------  ------------- -------------  --------------
    Total current liabilities                                    28,052       200,079            398     (163,231)          65,298

  Long-term debt, excluding current portion                      30,000        16,767             66             -          46,833
  Subordinated notes and debentures, excluding current          138,799        10,950              -             -         149,749
  portion
  Other long-term liabilities                                       492         2,241          4,199             -           6,932
  Deferred income taxes                                         (8,703)        37,119             98             -          28,514
                                                           ------------- -------------  ------------- -------------  --------------

    Total liabilities                                           188,640       267,156          4,761     (163,231)         297,326

Shareholders' Equity
Common stock, par value of $.01 per share;
  1,000,000 shares authorized; 978,300 issued and                    10           181              2         (183)              10
outstanding
Additional paid-in capital                                        3,762       209,876         30,383     (240,259)           3,762
Retained earnings                                                 4,118        24,989          1,713      (18,468)          12,352
                                                           ------------- -------------  ------------- -------------  --------------

    Total shareholders' equity                                    7,890       235,046         32,098     (258,910)          16,124
                                                           ------------- -------------  ------------- -------------  --------------

    Total liabilities and shareholders' equity                $ 196,530     $ 502,202       $ 36,859   $ (422,141)     $   313,450
                                                           ============= =============  ============= =============  ==============

</TABLE>
                                      F-24
<PAGE>

Statement of Cash Flows for the year ended July 27, 1997
(in thousands)

<TABLE>
<CAPTION>

                                                                 ASC East      Guarantor       Non-      Eliminating  Consolidated
                                                                             Subsidiaries   Guarantor      Entries      ASC East
                                                                                           Subsidiaries


<S>                                                               <C>          <C>           <C>           <C>         <C>        
Net loss                                                          $(14,013)    $   6,706     $   1,528     $       -   $   (5,779)

Adjustments to reconcile net loss to net cash provided 
 by operating activities:
   Depreciation and amortization                                      1,359       16,915            19             -        18,293
   Amortization of discount on subordinated notes and
   debentures and other liabilities                                   2,957          343             -             -         3,300
   Deferred income taxes                                            (8,850)        4,499         1,019             -       (3,332)
   Decrease (increase) in assets:
     Restricted cash and investments held in escrow                  14,497      (1,903)           (7)             -        12,587
     Accounts receivable                                              (141)      (1,167)         (986)           951       (1,343)
     Inventory                                                        (284)      (1,988)            15             -       (2,257)
     Prepaid expenses                                                 (366)        2,720         (562)             -         1,792
     Real estate developed for sale                                       -     (21,976)             -             -      (21,976)
     Other assets                                                     (349)          270           607             -           528
     Investment in subsidiaries                                           -          411         (411)             -             -
     Due to/from affiliate                                          (6,657)        7,805       (2,408)             -       (1,260)
   Increase (decrease) in liabilities:                                                                                           -
     Accounts payable and other current liabilities                     399        7,392          (46)         (951)         6,794
     Deposits and deferred revenue                                      537        1,055         (754)             -           838
     Other long-term liabilities                                          -      (1,709)         (561)             -       (2,270)
                                                                ------------ ------------  ------------ ------------- -------------

   Net cash provided by operating activities                       (10,911)       19,373       (2,547)             -         5,915
                                                                ------------ ------------  ------------ ------------- -------------

Payments for purchase of business                                   (2,000)      (3,359)             -             -       (5,359)
Long-term investments                                                     -            -           836             -           836
Capital expenditures                                                (1,367)     (20,272)             1             -      (21,638)
Proceeds from sale of property and equipment                              -        2,301           325             -         2,626
Cash payments on note receivable                                          -          250             -             -           250
Proceeds from sale of business                                            -       14,408             -             -        14,408
Other                                                                     -      (1,964)             -             -       (1,964)
                                                                ------------ ------------  ------------ ------------- -------------

   Net cash used in investing activities                            (3,367)      (8,636)         1,162             -      (10,841)
                                                                ------------ ------------  ------------ ------------- -------------


Net proceeds from senior credit facility                             14,766            -             -             -        14,766
Deferred financing costs                                              (470)            -             -             -         (470)
Proceeds from long-term debt                                              -        4,692           636             -         5,328
Payments of long-term debt                                                -     (11,962)          (20)             -      (11,982)
Payments on demand note, Principal Shareholder                            -      (3,267)             -             -       (3,267)
                                                                ------------ ------------  ------------ ------------- -------------

   Net cash provided by financing activities                         14,296     (10,537)           616             -         4,375
                                                                ------------ ------------  ------------ ------------- -------------

   Net increase (decrease) in cash and cash equivalents                  18          200         (769)             -         (551)

   Cash and cash equivalents, beginning of year                           -        1,879         1,306             -         3,185
                                                                ------------ ------------  ------------ ------------- -------------

   Cash and cash equivalents, end of year                         $      18    $   2,079     $     537     $       -     $   2,634
                                                                ------------ ------------  ------------ ------------- -------------

</TABLE>

                                      F-25
<PAGE>
          The  guarantor-related  information  for the year ended July 28,  1996
          represents  Non-Guarantor   information  as  the  Non-Guarantors  were
          inconsequential. The guarantor information for the year ended July 28,
          1996 is as follows:


                                        Non-Guarantor
                                            As of
                                        July 28, 1996
                                        -------------


          Current assets                $1,380,000
          Non-current assets             7,200,000
                                         ---------
          Total Assets                  $8,580,000
                                         =========
          Current liabilities           $1,226,000
          Non-current liabilities        4,847,000
                                         ---------
          Total liabilities             $6,073,000
                                         =========
                    
                                        Non-Guarantor
                                      For the Year Ended
                                        July 28, 1996
                                       ----------------

          Revenues                         280,000
          Cost of Sales                    147,000
                                         ---------
          Operating Income              $  133,000
          Net Income                    $   67,300
                                         =========

          The summarized  information  shown above for the  Non-Guarantors as of
          July  28,  1996  and for the  year  then  ended  gives  effect  to the
          acquisition of the Non-Guarantors of S-K-I, which were acquired by the
          Company on June 28, 1996.

                                      F-26
<PAGE>

11.      Income Taxes

         Prior to the formation of the Company's Parent in May of 1997, ASC East
         and its subsidiaries  filed separate income tax returns.  Effective for
         the year  ended  July 27,  1997,  the  Company  joined in the filing of
         consolidated  federal  and state tax  returns  with the  Parent and its
         subsidiaries.  Income tax expense or benefit for the year is determined
         for each subsidiary of the Parent as if it had filed a separate federal
         and state income tax return.  An amount payable to, or receivable from,
         the  Parent  is  determined  based on the tax  expense  or tax  benefit
         determined in each subsidiary's separate income tax return calculation.
         The Company had a net amount due from the Parent of $0 and $1.2 million
         at July 27, 1997 and July 26, 1998, respectively, related to tax losses
         generated  by ASC East and its  subsidiaries  and used to increase  the
         taxable loss of the Parent and its subsidiaries. The amount due at July
         26,  1998  is  included  in  due  to  affiliates  in  the  accompanying
         consolidated balance sheet.

         Prior to June 28, 1996,  certain  companies  that comprised the Company
         (the "S Corporations")  had elected to be taxed under the provisions of
         Subchapter  S of  the  Internal  Revenue  Code  of  1986,  as  amended.
         Accordingly,  no income tax  provision or  liability  has been made for
         these  companies  for the period  July 31, 1995 to June 26,  1996.  For
         federal and state income tax purposes,  taxable income, losses, and tax
         credits  were  passed  through to the  Principal  Shareholder,  who was
         individually  responsible  for reporting  his share of such items.  The
         Company distributed to the Principal  Shareholder amounts sufficient to
         pay his personal income taxes based on the S Corporations' earnings.

         In conjunction with the S-K-I Acquisition,  the S Corporations  changed
         from S Corporation status to C Corporation  status (the  "Conversion").
         As a result, the income or loss of the former S Corporations subsequent
         to June 28, 1996 will be subject to  corporate  income tax.  The income
         tax provisions  described below include the income taxes related to the
         former  S  Corporations  since  June  29,  1996.  At  the  time  of the
         Conversion,  a net deferred tax  liability of $5.6 million was recorded
         through the income tax  provision.  This  deferred  tax  liability  was
         primarily  comprised of the tax effect of the  cumulative  book and tax
         basis  differences  of  property  and  equipment  at  the  time  of the
         Conversion.

         Deferred  income taxes reflect the tax impact of temporary  differences
         between the amounts of assets and liabilities  for financial  reporting
         purposes  and such  amounts as  measured  by tax laws and  regulations.
         Under SFAS 109, the benefit associated with future deductible temporary
         differences and operating loss or credit carryforwards is recognized if
         it is more likely than not that a benefit  will be  realized.  Deferred
         tax expense  (benefit)  represents  the change in the net  deferred tax
         asset or liability balance.


                                      F-27
<PAGE>


11.      Income Taxes (continued)

          The  provision  (benefit)  for  income  taxes  charged  to  continuing
          operations was as follows (in thousands):
<TABLE>
<CAPTION>

                                                                              Year ended
                                                            -------------------------------------------
                                                               July 28,       July 27,       July 26,
                                                                 1996           1997           1998

Current tax provision
<S>                                                          <C>            <C>            <C>         
   Federal ............................................      $          -   $          -   $          -
   State ..............................................                 -              -              -
                                                             -------------  -------------  -------------
                                                                        -              -              -
                                                             -------------  -------------  -------------

Deferred tax provision (benefit)
   Federal ............................................           (1,330)        (2,815)          1,131
   State ..............................................             (316)          (798)           (88)
                                                             -------------  -------------  -------------

                                                                  (1,646)        (3,613)          1,043
                                                             -------------  -------------  -------------

Change in tax status from S Corporation
  to C Corporation ....................................             5,552              -              -
                                                             -------------  -------------  -------------

Total provision (benefit) .............................       $     3,906    $   (3,613)    $     1,043
                                                             -------------  -------------  -------------

</TABLE>



                                      F-28
<PAGE>


11.      Income Taxes (continued)

          Deferred tax  liabilities  (assets) are  comprised of the following at
          July 27, 1997 and July 26, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                           July 27,         July 26,
                                                                             1997             1998

<S>                                                                       <C>              <C>         
Property and equipment basis differential .......................         $     40,040     $     40,855
Other ...........................................................                  907              890
                                                                        ---------------  ---------------

Gross deferred tax liabilities ..................................               40,947           41,745
                                                                        ---------------  ---------------

Tax loss and credit carryforwards ...............................             (16,766)         (13,514)
Capitalized cost ................................................                (543)            (935)
Stock compensation charge .......................................                    -            1,149
Original issue discount on Subordinated Notes ...................              (1,212)                -
Reserves and accruals ...........................................              (1,361)          (1,377)
Other ...........................................................                (228)          (1,274)
                                                                        ---------------  ---------------

Gross deferred tax assets .......................................             (20,110)         (18,244)

Valuation allowance .............................................                7,255            2,083
                                                                        ---------------  ---------------

                                                                          $     28,092     $     25,584
                                                                        ---------------  ---------------

</TABLE>

         The  provision  (benefit)  for income taxes  differs from the amount of
         income tax determined by applying the applicable U.S.  statutory income
         tax rate of 35% to income (loss) before provision  (benefit) for income
         taxes and minority  interest in loss of  subsidiary  as a result of the
         following differences (in thousands):

<TABLE>
<CAPTION>
                                                                              Year ended
                                                                   ----------------------------------------
                                                                    July 28,      July 27,      July 26,
                                                                      1996          1997          1998

<S>                                                                <C>           <C>           <C>        
Income tax provision (benefit) at the statutory U.S. tax rates ..  $       546   $   (3,271)   $       848
Increase (decrease) in rates resulting from:
   Change in tax status from S Corporation to C Corporation .....        5,552             -             -
   Income from S Corporations not taxable for corporate
     income tax purposes ........................................      (2,371)             -             -
   State taxes, net .............................................            -         (798)          (88)
   Change in valuation allowance ................................            -            71             -
   Stock compensation charge ....................................            -             -           238
   Nondeductible items ..........................................           41           243           307
   Other ........................................................          138           142         (262)
                                                                   ------------  ------------  ------------

Income tax provision (benefit) at the effective tax rates .......  $     3,906   $   (3,613)   $     1,043

                                                                   ------------  ------------  ------------
</TABLE>
                                      F-29
<PAGE>

11.      Income Taxes (continued)

         At July 26, 1998,  the Company has federal net  operating  loss ("NOL")
         carryforwards  of  approximately  $28.5 million which expire in varying
         amounts through the year 2013. Internal Revenue Code Section 382 limits
         the amount of net operating loss carryforwards incurred before a change
         in  ownership,  as defined,  that can be used annually  against  income
         generated  after the change in  ownership.  As a result of the Parent's
         Offering  in  November  1997,  the  Company  experienced  a  change  in
         ownership.   The  Parent's  consolidated  tax  group's  overall  annual
         limitation  under  Section  382  is  approximately  $15.0  million.  In
         addition,  certain  subsidiaries have separate  pre-change losses which
         are subject to lower annual limitations as a result of previous changes
         in ownership.  Subsequent changes in ownership could further affect the
         limitations in future years.

         In addition to the limitations under Section 382,  approximately  $11.4
         million of the  federal NOL  carryovers  are from the  separate  return
         years, as defined in the  regulations of the Internal  Revenue Code, of
         certain  subsidiaries (or  sub-groups),  and may only be used to offset
         each subsidiary's (or sub-group)  contribution to consolidated  taxable
         income in future years.

         A valuation  allowance is provided when it is more likely than not that
         some  portion or all of the  deferred  tax assets will not be realized.
         Management  believes  that the  valuation  allowance of $2.1 million at
         July 26, 1998 is  appropriate  because,  due to the change of ownership
         and resulting annual  limitations,  the Company will not be able to use
         all the potential tax benefits  from existing NOLs and  investment  tax
         credits as of July 26, 1998.

         The Parent, as the common agent for the consolidated group, has elected
         to treat a substantial  portion of the loss  carryforwards  acquired in
         the  acquisition  of  Sugarloaf  as expiring  immediately  prior to its
         purchase of Sugarloaf.  Due to the  limitations  on loss  carryforwards
         discussed  above,  the Company did not expect to utilize any of the tax
         benefits  associated with these loss carryforwards and a full valuation
         allowance was  established.  In computing the deferred tax  liabilities
         (assets)  as of July 26,  1998,  both  the  asset  related  to the loss
         carryforward  and  the  corresponding  valuation  allowance  have  been
         eliminated. The election was made to avoid a reduction in the tax basis
         of Sugarloaf's stock when the loss carryforwards expire.


12.      Related Party Transactions

          In fiscal 1998, the Company's  Parent incurred certain common expenses
          that  were  allocable  to  ASC  East,  including  stock  compensation,
          marketing,  management  information systems and other overhead related
          costs.  The total  allocation of these costs charged to the Company of
          $4.3 million for the year ended July 26, 1998 is included in the stock
          compensation   charge  and  marketing,   general  and   administrative
          components in the accompanying statement of operations. The allocation
          of the stock compensation charge is based on management's  analysis of
          the actual time spent by such employees on ASC East-related activities
          during the period. The marketing,  management  information systems and
          other overhead related cost were allocated to the Company based on the
          estimate of amounts  benefiting ASC East. It is  management's  opinion
          that the methods  used to allocate the stock  compensation  charge and
          other common costs are reasonable.

         The Principal Shareholder's wife is employed by the Company as director
         of retail  purchasing and is actively  involved in the Company's retail
         sales  activities.  During  fiscal 1996,  1997 and 1998,  the Principal
         Shareholder's wife received total compensation of $55,000,  $52,000 and
         $52,000,  respectively.  During the first  quarter of fiscal 1998,  the
         Parent granted the Principal Shareholder's wife fully vested options to
         purchase  up to 20,060  shares of Common  Stock at a price of $2.00 per
         share.

         Western Maine Leasing Co., a corporation  wholly-owned by the Principal
         Shareholder,  leases heavy  equipment to the Company  under  short-term
         leases.  In fiscal  1996,  1997 and 1998,  payments  under such  leases
         totaled $37,000, $24,000 and $17,000, respectively.


                                      F-30
<PAGE>


12.      Related Party Transactions (continued)

         The Company  provides  lodging  management  services for Ski Dorm, Inc.
         ("Ski Dorm"), a corporation owned by the Principal  Shareholder and his
         mother,  which owns a ski dorm located  near the Sunday  River  resort.
         During fiscal 1996, 1997 and 1998,  payments by Ski Dorm to the Company
         totaled $90,000,  $258,000 and $2,000,  respectively.  In addition, Ski
         Dorm issued to the Company a  promissory  note in 1995 with a principal
         amount of $265,000, of which $250,000 was outstanding at July 26, 1998.
         This  note  is  secured  by a  mortgage  on  real  estate  and  related
         improvements owned by Ski Dorm.  Interest on the note is charged at the
         prime rate plus 1 1/2% and principal  and any accrued  interest are due
         in December 1999.


13.      Commitments, Lease Contingencies and Contingent Liabilities

         The Company leases  certain land and facilities  used in the operations
         of its resorts under several operating lease arrangements.  These lease
         arrangements  expire at various  times from the year 2010  through  the
         year 2060.  Lease  payments  are  generally  based on a  percentage  of
         revenues.  Total rent expense under these operating  leases as recorded
         in resort operating expenses in the accompanying consolidated statement
         of operations  for 1996,  1997 and 1998 was $744,000,  $2.2 million and
         $933,000, respectively.

         Significant  portions of the land  underlying  certain of the Company's
         ski resorts are leased or subleased by the Company or used  pursuant to
         renewable permits or licenses. If any such lease,  sublease,  permit or
         license  were to be  terminated  or not  renewed  upon  expiration,  or
         renewed  on  terms  materially  less  favorable  to  the  Company,  the
         Company's  ability to possess and use the land subject  thereto and any
         improvements  thereon would be adversely  affected,  perhaps  making it
         impossible  for  the  Company  to  operate  the  affected   resort.   A
         substantial  portion  of  the  land  constituting  skiable  terrain  at
         Attitash  Bear Peak,  Sugarbush and Mount  Snow/Haystack  is located on
         federal  land  that is used  under the  terms of the  permits  with the
         United States Forest Service (the "Forest Service").  Generally,  under
         the terms of such permits,  the Forest  Service has the right to review
         and comment on the location, design and construction of improvements in
         the permit  area and on many  operational  matters.  The permits can be
         terminated  or  modified  by the  Forest  Service  to serve the  public
         interest. A termination or modification of any of the Company's permits
         could have a material  adverse  effect on the results of  operations of
         the  Company.   The  Company  does  not  anticipate  any   limitations,
         modifications,   or  non-renewals  which  would  adversely  affect  the
         Company's operations.

         In addition to the leases  described  above,  the Company is  committed
         under  several  operating  and capital  leases for various  facilities,
         machinery and  equipment.  Rent expense under all operating  leases was
         $994,000,  $4.2 million and $4.6 million for the years ended 1996, 1997
         and 1998, respectively.


                                      F-31
<PAGE>


13.      Commitments, Lease Contingencies and Contingent Liabilities (continued)

         Future  minimum lease  payments for lease  obligations at July 26, 1998
are as follows (in thousands):

                                     Capital         Operating
                                     leases           leases

1999                               $   3,652        $   9,484
2000                                   3,523            8,783
2001                                   2,998            3,170
2002                                   2,239              882
2003 and thereafter                    1,679            2,214
                                  --------------   --------------

   Total payments                     14,091     $     24,533
                                  --------------

   Less interest                                        2,549
                                                   --------------

   Present value of net minimum payments               11,542

   Less current portion                                 4,516
                                                   --------------

   Long-term obligations                            $   7,026
                                                   --------------


          In the fourth quarter of fiscal 1998, the Company and its Parent began
          construction  on  two  hotel  projects  at  The  Canyons  and  one  at
          Steamboat.  Total  construction  costs under these three  projects are
          estimated to be $190.0 million.  Two of these hotel projects are being
          financed through a $145.0 million  construction loan facility with TFC
          Textron and a $30.0 million  bridge  financing  arrangement  (See Note
          18).  The Company  expects to finance  substantially  all of the third
          hotel project  through an additional  construction  loan facility with
          the  balance  financed  under a bridge loan  arrangement.  The Company
          anticipates  repaying the bridge loans with the proceeds from an $85.0
          million  subordinated  debt, private placement  financing  arrangement
          ("Private  Placement   Financing")  which  the  Company  is  currently
          pursuing.  In the event the  Company is unable to obtain  the  Private
          Placement  Financing,  the Company will seek alternative  financing or
          reduce its future  real  estate  development,  and will be required to
          refinance the bridge loans.

          On July 22, 1998, the Company and its Parent entered into an agreement
          with Marriott Ownership Resorts, Inc. ("Marriott") for the future sale
          of  land  parcels  at the  Company's  Killington,  Sunday  River,  The
          Canyons,  Steamboat and Heavenly  resorts (the "Marriott  Agreement").
          Under the  Marriott  Agreement,  Marriott  intends to  develop  luxury
          vacation  ownership  properties  at  each of the  five  aforementioned
          properties. In accordance with the Marriott Agreement, the Company has
          granted to Marriott  certain  development and marketing  rights at the
          related resorts.  In return, the Company will receive proceeds for the
          sale of the land parcels and will receive a percentage of the Marriott
          sales of the luxury vacation ownership properties. The land parcels to
          be sold had not been  identified  as of July 26,  1998.  Prior to year
          end, the Company received a cash deposit of $1.6 million from Marriott
          relating to the future land sales. The deposit is recorded as deposits
          and deferred revenue in the accompanying consolidated balance sheet at
          July 26, 1998.

         Certain  claims,  suits and  complaints  associated  with the  ordinary
         course of  business  are  pending  or may arise  against  the  Company,
         including all of its direct and indirect  subsidiaries.  In the opinion
         of management,  all matters are adequately  covered by insurance or, if
         not  covered,  are without  merit or are of such kind,  or involve such
         amounts as would not have a material effect on the financial  position,
         results of  operations  and cash flows of the  Company if  disposed  of
         unfavorably.



                                      F-32
<PAGE>


15.      Business Segment Information

          The Company currently operates in two business  segments,  Resorts and
          Real Estate. Data by segment is as follows:
<TABLE>
<CAPTION>

                                                               Year ended
                                                July 28,       July 27,        July 26,
                                                  1996           1997            1998
<S>                                             <C>             <C>            <C>       
Net revenues:
   Resorts ...............................      $    63,489     $  166,818     $  179,382
   Real estate ...........................            9,933          8,468         60,782
                                              -------------- --------------  -------------

                                                $    73,422     $  175,286     $  240,164
                                              -------------- --------------  -------------

Income from operations:
   Resorts ...............................      $     3,680    $    19,642    $    16,051
   Real estate ...........................            4,089          1,655         18,352
   Corporate .............................             (62)        (6,982)        (5,707)
                                              -------------- --------------  -------------

                                                $     7,707    $    14,315    $    28,696
                                              -------------- --------------  -------------

Depreciation and amortization:
   Resorts ...............................      $     6,678    $    16,973    $    19,561
   Real estate ...........................                -              -            385
   Corporate .............................              105          1,320          1,493
                                              -------------- --------------  -------------

                                                $     6,783    $    18,293    $    21,439
                                              -------------- --------------  -------------

Capital expenditures:
   Resorts ...............................      $    25,054    $    21,638    $    64,152
   Real estate ...........................            3,321         28,789         56,913
                                              -------------- --------------  -------------

                                                $    28,375    $    50,427     $  121,065
                                              -------------- --------------  -------------

Identifiable assets:
   Resorts ...............................                      $  262,623     $  273,081
   Real estate ...........................                          30,249         96,908
   Corporate .............................                          20,156         25,073
                                                             --------------  -------------

                                                                $  313,028     $  395,062
                                                             --------------  -------------


</TABLE>

                                      F-33
<PAGE>


16.      Quarterly Financial Information (Unaudited)

<TABLE>
          Following is a summary of unaudited quarterly  information (amounts in
          thousands, except per share amounts):
<CAPTION>

                                                       First        Second        Third        Fourth
                                                      Quarter       Quarter      Quarter       Quarter
Year ended July 27, 1997:

<S>                                                    <C>           <C>          <C>           <C>     
Net sales                                              $ 13,297      $ 61,158     $ 89,275      $ 11,556
Income (loss) from operations ......................    (9,088)         6,175       27,027       (9,799)
Income (loss) from continuing operations ...........   (10,293)           383       13,079       (8,948)
Net income (loss) ..................................   (10,293)           383       13,079       (8,948)

Basic and diluted earnings (loss) per share:
   Net income (loss) ...............................    (10.52)          0.39                     (9.15)
                                                                                     13.37

Year ended July 26, 1998:

Net sales ..........................................     14,465        78,739      123,684        23,276
Income (loss) from operations ......................   (15,254)        13,907       37,428       (7,385)
Extraordinary loss, net of income tax benefits .....          -         4,464            -             -
Income (loss) from continuing operations ...........   (13,528)         4,497       19,313       (8,902)
Net income (loss) ..................................   (13,528)            33       19,313       (8,902)

Basic and diluted earnings (loss) per share:
  Continuing operations ............................    (13.83)          4.59        19.75        (9.10)
  Extraordinary loss ...............................          -        (4.56)            -             -
  Net income (loss) ................................    (13.83)          0.03        19.75        (9.10)

</TABLE>



                                      F-34
<PAGE>


17.      Subsequent Event (Unaudited)

         Real Estate Development Financing

         On September 25, 1998, Grand Summit Resort Properties  ("GSRP") entered
         into a $145 million  construction  loan  facility with TFC Textron (the
         "Textron Facility).  The Textron Facility bears interest at the rate of
         prime plus 1.5% per annum,  payable  monthly in  arrears,  subject to a
         9.25%  floor,  and matures on  September  24,  2002.  The  principal is
         payable  based  on 80% of the  net  proceeds  from  the  sales  of GSRP
         quartershare units at the time of each closing. The Textron Facility is
         secured  by  mortgages  against  the  project  sites and is  subject to
         customary  covenants,  representations  and warranties for this type of
         construction facility.

         On September 30, 1998,  the Company  entered into a $30 million  credit
         arrangement  with  BankBoston and Morgan Stanley  Capital  Funding (the
         "Bridge  Financing").  The Bridge Financing bears interest at a rate of
         14% per annum,  payable  monthly in arrears  and matures on December 4,
         1998. The Bridge Financing is collateralized by security  interests in,
         and mortgages on,  substantially  all assets  financed under the credit
         arrangement.  Management expects to repay the Bridge Financing with the
         proceeds  from  an $85  million  subordinated  debt  private  placement
         financing arrangement, which the Company is currently pursuing.


                                      F-34
<PAGE>