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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended June 30, 2001

OR

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

For the transition period of _________ to _________

Commission File Number 1-14645

THOUSAND TRAILS, INC.

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|                                                               |  |                                      |               
|-------------------------------------------------------------- |  | ------------------------------------ | --------------
|Delaware                                                       |  | 75-2138671                          
|                                                               |  |                                     
|(State or other Jurisdiction of
Incorporation or Organization) |  | (IRS Employer Identification No.)   
|                                                              
|2711 LBJ Freeway,
Suite 200, Dallas, Texas                     |  | 75234                               
|                                                               |  |                                     
|(Address of Principal Executive Office)                        |  | (Zip Code)                          
|                                                              
|Registrants Telephone Number, Including Area Code:            |  |                                      | (972) 243-2228
|                                                               |  |                                      |               
|Securities registered pursuant to Section 12(b) of the Act:    |  |                                     
|                                                              
|Title of each class                                            |  | Name of exchange on
which registered
|                                                               |  |                                     
|Common Stock, par value
$.01 per share                         |  | American Stock Exchange             
|                                                              
|Securities registered pursuant to Section 12(g) of the Act:    |  | None                                





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

Yes [X] No [  ]

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

At September 21, 2001, the latest practicable date, the aggregate market value
of voting common stock of the Registrant held by nonaffiliates was $17.1
million.

At September 21, 2001, there were 8,170,390 shares of Common Stock, $.01 par
value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III (Items 10-13) is incorporated by reference
from the Registrants definitive Proxy Statement for the Registrants 2001
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission (the SEC) pursuant to Regulation 14A.

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TABLE OF CONTENTS



|                                              |                                                                                               |                                                 |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|Part I                                       
|                                              | Item 1. Business                                                                             
|                                              | Item 2. Properties                                                                           
|                                              | Item 3. Legal Proceedings                                                                    
|                                              | Item 4. Submission of Matters to a Vote of Shareholders                                      
|Part II                                      
|                                              | Item 5. Market for Registrants Common Equity and Related Shareholder Matters                
|                                              | Item 6. Selected Financial Data                                                              
|                                              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                              | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|                                              | Item 8. Financial Statements and Supplementary Data                                          
|                                              |                                                                                               | REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS       
|                                              |                                                                                               | Consolidated Balance Sheets                    
|                                              |                                                                                               | Consolidated Statements of Operations          
|                                              |                                                                                               | Consolidated Statements of Shareholders Equity
|                                              |                                                                                               | Consolidated Statements of Cash Flows          
|                                              |                                                                                               | Notes to Consolidated Financial Statements     
|                                              |                                                                                               | Schedule II - Valuation and Qualifying Accounts
|                                              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|Part III                                     
|                                              | Item 10. Directors and Executive Officers of the Registrant                                  
|                                              | Item 11. Executive Compensation                                                              
|                                              | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                              | Item 13. Certain Relationships and Related Transactions                                      
|Part IV                                      
|                                              | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES                                   
|EX 10.1 - Loan Agreement dated July 1, 2001  
|EX-10.32 - Sample Form of Membership Contract
|EX-11.1 - Computation of Per Share Earnings  
|EX-22.1 - Subsidiaries of the Registrant     
|EX-23.1 - Consent of Arthur Andersen LLP     



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INDEX TO
ANNUAL REPORT ON FORM 10-K

|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                       |  | Page
|           |  |                                                                                       |  |     
|           |  | Part I                                                                                |  |     
|          
|Item 1.    |  | Business                                                                              |  | 4   
|          
|          
|          
|          
|Item 2.    |  | Properties                                                                            |  | 13  
|          
|          
|          
|          
|Item 3.    |  | Legal Proceedings                                                                     |  | 17  
|          
|          
|          
|          
|Item 4.    |  | Submission of Matters to a Vote of Shareholders                                       |  | 17  
|          
|           |  | Part II                                                                               |  |     
|          
|Item 5.    |  | Market for Registrants Common Equity and Related Shareholder Matters                 |  | 18  
|          
|          
|          
|          
|Item 6.    |  | Selected Financial Data                                                               |  | 20  
|          
|          
|          
|          
|Item 7.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  | 21  
|          
|          
|          
|          
|Item 7A    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 36  
|          
|          
|          
|          
|Item 8.    |  | Financial Statements and Supplementary Data                                           |  | 37  
|          
|          
|          
|          
|Item 9.    |  | Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure  |  | 69  
|          
|           |  | Part III                                                                              |  |     
|          
|Item 10.   |  | Directors and Executive Officers of the Registrant                                    |  | 70  
|          
|          
|          
|          
|Item 11.   |  | Executive Compensation                                                                |  | 70  
|          
|          
|          
|          
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 70  
|          
|          
|          
|          
|Item 13.   |  | Certain Relationships and Related Transactions                                        |  | 70  
|          
|           |  | Part IV                                                                               |  |     
|          
|Item 14.   |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  | 71  
|          
|Signatures |  |                                                                                       |  | 76  

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Part I




Item 1. Business

OVERVIEW

General.Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(the Company) own and operate a system of 59 membership-based campgrounds
located in 17 states and British Columbia, Canada, serving 117,000 members as
of June 30, 2001. Through its subsidiaries, the Company also provides a
reciprocal use program for members of approximately 300 recreational facilities
and manages 241 public campgrounds for the United States (U.S) Forest
Service. The Companys principal executive office is located at 2711 LBJ
Freeway, Suite 200, Dallas, Texas, 75234; its telephone number is (972)
243-2228; and its home page on the Internet is
www.thousandtrails.com.

The Company entered the membership campground business in 1991 with the
acquisition of 100% of the capital stock of National American Corporation, a
Nevada corporation (collectively with its subsidiaries, NACO) and 69% of the
capital stock of Thousand Trails, Inc., a Washington corporation (Trails).
The Company subsequently increased its ownership in Trails to 100% and merged
Trails into the Company. In December 1999, the Company acquired 100% of the
capital stock of Leisure Time Resorts of America, Inc., a Washington
corporation (Leisure Time). The Company and Leisure Time were incorporated
in 1984, NACO was incorporated in 1967, and Trails was incorporated in 1969.
In 1996, the Company, then known as USTrails Inc., reincorporated in the state
of Delaware and changed its name to Thousand Trails, Inc.

Current Business Strategy.The Companys current business strategy is to
improve its campground operations and stabilize its campground membership base
through increased sales and marketing efforts and the acquisition of members
through the purchase of other membership campground operations. The Company
believes there is a viable market for campground memberships and that it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company has also acquired
members through the purchase of Leisure Time and believes it may be possible to
acquire additional members through the purchase of other membership campground
operations, many of whom are experiencing financial difficulties.

Over the past several years, the Companys membership base has been declining,
although the Company has been successful in slowing the rate of this decline.
In response to this attrition, the Company has downsized its business by
closing and disposing of campgrounds and decreasing campground operating costs
and general and administrative expenses. The Company intends to continue to
keep the size of its campground system in an appropriate relation to the size
of its membership base. In this regard, if the membership continues to
decline, or other opportunities arise consistent with the needs of the members,
the Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. At the same time, the Company has expanded its sales
and marketing efforts with a view to stopping the membership decline. The
Company has also acquired members through the purchase of Leisure Time and it
intends to explore the possible acquisition of additional members through the
purchase of other membership campground organizations. The Company believes
that the ultimate size of its
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campground system and the amounts realized from future asset sales will depend
principally upon the degree to which the Company can successfully implement
this strategy.

CAMPGROUND OPERATIONS

Campgrounds.The Company and its subsidiaries own and operate a network of 59
membership-based campgrounds located in 17 states and British Columbia, Canada.
The Company owns and operates a network of 32 of these campgrounds under the
Thousand Trails logo, NACO owns and operates a network of 20 of these
campgrounds under the NACO logo, and Leisure Time owns and operates a network
of 7 of these campgrounds under the Leisure Time logo. The 59 campgrounds
contain a total of approximately 9,900 acres and 18,100 campsites.

Members using the campgrounds may bring their own recreational vehicles
(RVs), tents or other sleeping equipment, rent travel trailers or cabins
located at the campgrounds or visit for the day. As of June 30, 2001, there
were approximately 70,000 campground members in the Thousand Trails system,
32,000 campground members in the NACO system, and 15,000 campground members in
the Leisure Time system. Approximately 43% of the NACO members and
approximately 65% of the Thousand Trails members possess the right to use the
campgrounds in both networks. Similarly, approximately 19% of the Leisure Time
members possess the right to use the campgrounds in either the Thousand Trails
or NACO system. The largest percentage of campground members reside in
California (approximately 32%). Large numbers of campground members also
reside in Washington, Oregon, and Texas.

Memberships provide the members family access to the Companys network of
campgrounds, but do not convey a deeded interest in the campgrounds with the
exception of six campgrounds in which members received deeded undivided
interests in the campground. A member also does not possess the right to use a
specific campsite, trailer, or cabin, or the right to control further
development or operation of a campground.

In the six campgrounds in which members have received deeded undivided
interests, the Company retains the entire fee interest in the common amenities,
such as the lodge, recreational facilities, and other buildings, and an
undivided interest in the campsites to the extent the interest has not been
sold to the members.

Depending upon member usage, the campgrounds are open year-round or on a
seasonal basis. The campgrounds feature campsites with electrical, water, and
in some cases, sewer connections for RVs, restroom and shower facilities,
rental trailers or cabins, and other recreation amenities. At each campground,
a manager and staff provide security, maintenance, and recreational programs
that vary by location.

The Company derives other campground revenue from renting campsites to members
for extended vacations and from renting trailers, cabins, and sports equipment
to members. The Company also sells food and other items to members from
convenience stores located at the campgrounds, provides members access to
laundry facilities and game machines, and charges members a fee for storing RVs
and providing food service.

Existing Membership.At June 30, 2001, the Company had 117,000 campground
members. The majority of these members have been members for over 10 years.
The Companys membership

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base has declined over the past five fiscal years, although the Company has
been successful in slowing the rate of this attrition. While the acquisition
of Leisure Time increased the size of the membership base, the Company expects
that, notwithstanding new sales, the membership base will continue to decline
at the rate of approximately 2% per year. The Company attributes this
attrition principally to its aging membership base, of whom approximately 50%
are senior citizens. Moreover, the Company estimates that the memberships sold
in recent fiscal years will have an expected life that is shorter than the
expected life of the memberships previously sold by the Company. To stop the
continuing decline in its membership base, the Company must increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground organizations, such as the acquisition
of Leisure Time.

Membership Sales.The Companys membership sales declined significantly in the
early 1990s when the Company decreased its sales and marketing efforts as a
result of increasing marketing costs and other factors. Over the past five
years, the Company has been rebuilding its sales and marketing organization
with a view to stopping the decline in its membership base. In an effort to
improve its membership sales, the Company has been working to increase the
number of prospects that attend its sales presentations. In this regard, the
Company entered into a joint marketing arrangement with Fleetwood Industries,
Inc. (Fleetwood), the largest manufacturer of RVs. Under this marketing
arrangement, purchasers of Fleetwood RVs receive a temporary membership and are
invited to visit one of the Companys campgrounds. Purchasers of new Fleetwood
RVs accounted for approximately 12% of sales in fiscal 2001 and approximately
10% of sales in fiscal 2000 and 1999. The Company has entered into a similar
marketing arrangement with a major RV insurance company and a large RV dealer
in Florida, and it plans to seek other similar alliances. The Company has also
entered into reciprocal sales agreements with several other companies in an
effort to increase sales.

The Companys current membership products offer the consumer a choice of
membership options that depend principally on the number of campgrounds the
purchaser is able to use. Membership sales prices range from $3,995 to $6,995.
The Company currently requires a down payment of at least $495 and will
finance the balance for periods of up to 48 months. In addition to the sales
price, the memberships require payment of annual dues, which averaged $378 on
new sales in fiscal 2001. During fiscal 2001, 2000 and 1999, the Company sold
approximately 4,500, 3,700, and 4,200 new memberships, respectively. The
average sales price was $2,549 in fiscal 2001, $2,298 in fiscal 2000, and
$1,254 in fiscal 1999. During fiscal 2001, approximately 400 of the new
membership contracts resulted from the reciprocal sales agreements discussed
above, compared with approximately 125 contracts in fiscal 2000.

In addition to the sale of new memberships discussed above, since fiscal 2000,
the Company has also marketed membership upgrades to its existing members,
which has provided a short-term increase in membership sales revenues. In
fiscal 2001, the Company sold approximately 800 membership upgrades to existing
members of Leisure Time at an average price of $2,995, compared with
approximately 1,700 upgrades at an average price of $2,895 during fiscal 2000.
During fiscal 2001, the Company began marketing similar membership upgrades to
the existing members of Thousand Trails and NACO and sold approximately 2,200
upgrades at an average price of $2,995. During fiscal 2001, the Company also
began offering existing Thousand Trails and NACO members access to Leisure Time
campgrounds for a fee, which resulted in approximately 6,800 contracts at an
average price of $235. During the last quarter of fiscal 2001, the Company
began offering existing Leisure Time members access to Thousand Trails
and NACO campgrounds for a fee, which resulted in approximately 300 contracts
at an average price of $1,999.

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The Company has the capacity to sell approximately 64,000 additional new
campground memberships in the future, assuming the sale of ten memberships for
each existing campsite. Further downsizing of the Companys business would
reduce this capacity.

Most memberships are transferable with payment of a transfer fee to the
Company. The membership contracts, however, prohibit the sale of a membership
for a profit.

Marketing.The Company believes that camping is a popular and growing activity
in the United States. The Company believes this is reflected in sales of RVs
and camping equipment as well as campground use. Moreover, the Company
believes the aging of the baby boomers will have a positive effect on sales of
RVs and camping equipment, and lead to more family camping.

While most campers use national or state parks, the Company believes it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company believes that many
campers are amenity campers, whose needs match the benefits provided by the
Companys campgrounds, such as pools, lodges, sport courts, and recreational
activities. The Company believes that the needs of amenity campers are not
being met by underfunded national and state campgrounds. In addition, the
Company believes that it can differentiate its campgrounds and services from
other campgrounds by emphasizing the quality of its facilities and the benefits
and services available at its campgrounds.

Dues.The Companys campground members, including members who own a deeded
undivided interest in a campground, pay annual dues ranging generally from $50
to $800. The annual dues collected from campground members constitute general
revenue of the Company. The Company uses the dues to fund its operating
expenses, including corporate expenses and the maintenance and operation of the
campgrounds. However, the membership agreements do not require the Company to
use the dues for any specific purpose.

The average annual dues paid by the Companys campground members were $360 for
fiscal 2001, $355 for fiscal 2000, and $357 for fiscal 1999. The increase in
average annual dues paid in fiscal 2001 resulted primarily from the annual
increase in dues implemented by the Company in accordance with the terms of the
membership agreements. In addition, the Companys new members generally pay
annual dues at a higher level than the older members retiring from the system.
The decrease in average annual dues in fiscal 2000 resulted primarily from the
acquisition of Leisure Times members who paid lower average annual dues than
the Companys other members.

The membership agreements generally permit the Company to increase annually the
amount of each members dues by either (i) the percentage increase in the
consumer price index (CPI) or (ii) the greater of 10% or the percentage
increase in the CPI. The Company, however, may not increase the dues on
existing contracts of senior citizens and disabled members who notify the
Company of their age or disability and request that their dues be frozen. At
the present time, approximately 37% of the members have requested that their
dues be frozen because of their age or disability. The Company estimates that
approximately 50% of the campground members are senior citizens eligible to
request that their dues be frozen. The Company is unable to estimate
when or if a significant number of these members will request that their dues
be frozen in the future.

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Maintenance and Improvements.The Company makes annual capital and maintenance
expenditures to maintain and improve the campgrounds. During fiscal 2001, the
Company spent $6.0 million on major maintenance, repairs, and capital
improvements at the campgrounds and anticipates that it will spend an
additional $5.9 million on such items in fiscal 2002. The Company may be
required to spend greater amounts on such items in future years as the
facilities age.

In addition to the planned expenditures at the campgrounds, during fiscal 2002,
the Company intends to spend approximately $2.0 million to upgrade its computer
system.

Resort Parks International.Members whose membership includes use of a Leisure
Time or NACO campground may join a reciprocal program operated by Resort Parks
International, Inc. (RPI), a wholly owned subsidiary of the Company. The RPI
program offers members reciprocal use of approximately 300 participating
recreational facilities. Members of these participating facilities pay a fee
to RPI that entitles them to use any of the participating facilities, subject
to the limitation that they cannot use an RPI facility located within 125 miles
of their home facility. As of June 30, 2001, there were approximately 62,000
RPI members, of which approximately 43,000 were members of campgrounds not
affiliated with the Company.

Campground Management.Thousand Trails Management Services, Inc. (Trails
Management), a wholly owned subsidiary of the Company, manages 241 public
campgrounds for the U.S. Forest Service and other entities containing a total
of approximately 6,100 campsites. Pursuant to its management contracts, Trails
Management incurs the expenses of operating the campgrounds and receives the
related revenues, net of a fee paid to the U.S. Forest Service or other entity.
These management contracts typically have five-year terms.

SEGMENT FINANCIAL INFORMATION

Segment financial information for the campground, reciprocal use and campground
management operations is set forth in Note 17 to the consolidated financial
statements included in Item 8.

ASSET SALES

During fiscal 2001, 2000, and 1999, the Company sold certain of its real estate
assets and received proceeds of $1.7 million, $74,000, and $2.2 million,
respectively. In fiscal 2001, the Company sold one campground for proceeds of
$1.4 million, and in fiscal 1999, the Company sold a large tract of undeveloped
land for proceeds of $2.0 million. Over the next several years, the Company
intends to dispose of the remaining assets that it holds for sale, the
campgrounds that were closed following the acquisition of Leisure Time, any
campgrounds that are closed in the future if the Company downsizes and other
undeveloped, excess acreage associated with the campgrounds. The sale of
campgrounds requires addressing the rights of members associated with such
campgrounds. The impact of these rights is uncertain and could adversely
affect the availability or timing of sale opportunities or the ability of the
Company to realize recoveries from asset sales. In addition, although the
Company has successfully sold assets during the past several years, no
assurance exists that the Company will be able to locate a buyer for any of the
remaining assets or that sales on acceptable terms can be effected.

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CONTRACTS RECEIVABLE

The Company sells campground memberships on the installment basis creating
contracts receivable. Interest accrues on the unpaid balance of the contracts
receivable at fixed rates, which vary depending upon the size of the down
payment and the length of the contract. The contracts receivable bear interest
at rates ranging generally from 5.5% to 19.5%, with a weighted average stated
interest rate of 14% as of June 30, 2001. Monthly installment payments range
generally from $20 to $243 over the term of the contracts receivable, which can
be up to ten years. The terms of the newer contracts receivable, however, have
averaged three years or less. As of June 30, 2001, the Companys portfolio of
contracts receivable had an aggregate principal balance of $9.9 million and an
average remaining term of 35 months.

After declining for several years, the Companys portfolio of contracts
receivable increased by $2.2 million in fiscal 2001 due primarily to an
increase in the number of financed sales, and by $4.3 million in fiscal 2000
due primarily to the acquisition of Leisure Time. During fiscal 2001 and 2000,
the Company financed the sale of approximately 33% and 35%, respectively, of
new campground memberships. The portfolio of contracts receivable may grow in
the future if sales volume continues to increase and new members elect to
finance their purchase; otherwise, the portfolio of contracts receivable will
decline as collections are made.

At June 30, 2001, 96% of the campground members had paid for their memberships
in full, compared with 97% at June 30, 2000.

SEASONALITY

The Company experiences its most significant demand for working capital between
May and October of each year, which coincides with the highest level of
operating expenses. During the summer, operating expenses increase
significantly because the peak usage of the campgrounds requires seasonal
workers and increased maintenance and operating expenses. In addition, the
majority of the Companys sales and marketing efforts occur during the spring
and summer. On the other hand, most dues collection activity for campground
members occurs during the months of November through April, which is a period
of relatively lower expenses.

GOVERNMENT REGULATION

To operate its campgrounds, the Company must comply with zoning ordinances,
master plans for shoreline use and environmental statutes. The Company has
complied in all material respects with the discretionary permits and approvals
regulating its existing operations.

In addition, to construct improvements at its campgrounds, the Company has
usually been required to obtain permits that are typically non-discretionary
and routinely issued such as building and sanitary sewage permits. The Company
has generally resolved problems concerning the issuance of such permits through
design, operating or engineering solutions negotiated with local government
officials.

The Companys campgrounds are also subject to a variety of federal and state
environmental statutes and regulations. Environmental issues may exist at some
of the campgrounds concerning underground storage tanks, sewage treatment
plants and septic systems, and waste
Page 9Table of Contents

disposal. Management believes that these issues will not have a material
adverse impact on the Companys operations or financial position, as the
Company has conducted environmental testing to identify and correct a number of
these problems, and has removed substantially all underground storage tanks.
The Company does not possess insurance or indemnification agreements with
respect to any environmental liability that it may incur.

Most of the states in which the Company does business have laws regulating
campground membership sales. These laws generally require comprehensive
disclosure to prospective purchasers, and give purchasers the right to rescind
their purchase for three-to-five days after the date of sale. Some states have
laws requiring the Company to register with a state agency and obtain a permit
to market.

In some states, including California, Oregon and Washington, laws place
limitations on the ability of the owner of a campground to close the campground
unless the members at the campground receive access to a comparable campground.
In these states, members from campgrounds that have been closed by the Company
were reassigned to other campgrounds located in the same general area as the
closed campgrounds. The impact of the rights of members under these laws is
uncertain and could adversely affect the implementation of, and the benefits or
recoveries that may be available from, additional downsizing of the Companys
business.

The government authorities regulating the Companys activities have broad
discretionary power to enforce and interpret the statutes and regulations that
they administer, including the power to enjoin or suspend sales activities,
require or restrict construction of additional facilities and revoke licenses
and permits relating to business activities. The Company monitors its sales
and marketing programs and debt collection activities to control practices that
might violate consumer protection laws and regulations or give rise to consumer
complaints. The Company believes that it has conducted its sales and marketing
programs and debt collection activities in substantial compliance with all
applicable federal and state laws and regulations.

Certain consumer rights and defenses that vary from jurisdiction to
jurisdiction may affect the Companys portfolio of contracts receivable.
Examples of such laws include state and federal consumer credit and
truth-in-lending laws requiring the disclosure of finance charges, and usury
and retail installment sales laws regulating permissible finance charges. The
Company believes that it has complied in all material respects with these laws.

In certain states, as a result of government regulations and provisions in
certain of the membership agreements, the Company is prohibited from selling
more than 10 memberships per campsite. At the present time, these restrictions
do not preclude the Company from selling memberships in any state. However,
these restrictions may limit the Companys ability to downsize by closing
campgrounds and reassigning members to other campgrounds. In addition,
membership agreements or understandings, or governmental interpretations
thereof, may limit the Companys ability to expand or modify the type of
business activities conducted at the campgrounds.

In a decision to which the Company was not a party, the Mississippi Supreme
Court ruled that the Mississippi Timeshare Rules apply to the sale of
campground memberships in Mississippi. The Company has discussed the
ramifications of these rules with the Mississippi state agency responsible for
the administration of these rules. The Company does not believe that the
agency

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will require the Company to rescind any sales of campground memberships because
of the decision; however, the agency has the power to do so. The Company has
sold $15.9 million of campground memberships in Mississippi.

COMPETITION

Based on an internally conducted analysis, the Company estimates there are
approximately 15,000 privately owned campgrounds in the United States today, of
which approximately 500 are membership campgrounds. The balance of the
campgrounds are generally open to the public and usually charge fees based on
the length of stay. The 500 membership campgrounds have approximately 400,000
members, of which 117,000 are the Companys members. This information was
derived from a review of publicly available directories of campgrounds,
including those of the Companys competitors. During this analysis, the
Company identified duplicative directory entries and compiled an estimate of
the total number of campgrounds and members.

Several companies compete directly with the Companys campground operations.
For example, Resorts USA, Inc., which does business as Outdoor World, sells
memberships to its system of
14 campgrounds, Travel America, Inc. sells memberships to its system of 38
campgrounds and Western Horizons RV Resorts, Inc. sells memberships to its
system of 18 campgrounds. Other companies or individuals operate the balance
of the membership campgrounds. The Companys direct competitors generally
offer their members reciprocal use of other campgrounds through affiliations,
such as RPI or Coast to Coast Resorts. Over the past several years, many of
the Companys direct competitors have experienced financial difficulties, and
several have filed for bankruptcy.

The vast majority of the campgrounds in the United States are operated for the
public by federal, state and local governments. Although these public
campgrounds are used by most campers, in recent years, many of the public
campgrounds have experienced overcrowding and increased user fees. The
Companys campgrounds also compete indirectly with timeshare resorts and other
types of recreational land developments that do not involve camping.

The Companys campground operations compete on the basis of location and the
quality of facilities and services offered at the campgrounds. The Company
believes it has a significant opportunity to compete for campers interested in
higher quality facilities and higher level of service than is typically
available at public campgrounds or competing private campgrounds. (see
Marketing).

Trails Management competes directly with approximately five other companies in
bidding for contracts to manage public campgrounds for the U.S. Forest Service
and other entities. Trails Management currently has contracts to manage 241 of
the approximately 3,000 campgrounds operated for the U.S. Forest Service and
other entities by private companies.

RPIs primary competitors are Coast to Coast Resorts and Resorts of
Distinction. Coast to Coast Resorts, the largest reciprocal use system, has
approximately 360 affiliated campgrounds and more than 178,000 members.
Resorts of Distinction, a reciprocal use system owned by its affiliated
campgrounds, has approximately 50 affiliated campgrounds and 25,000 members.
Both RPI and Coast to Coast Resorts operate vacation clubs offering travel and
lodging discounts and services to their members.

Page 11



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##### Table of Contents



EMPLOYEES

As of June 30, 2001, the Company had 860 full-time employees, 135 part-time
employees and 1,400 seasonal employees. Due to the seasonal nature of the
Companys business, the Company has a greater number of employees during the
summer months. The Company does not have any collective bargaining agreements
with its employees and considers its relations with employees to be
satisfactory.

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##### Table of Contents






Item 2. Properties

Offices.The Company leases office space at 2711 LBJ Freeway, Suite 200,
Dallas, Texas 75234. NACO leases office space at 2325 Highway 90, Gautier,
Mississippi 39553. RPI leases office space at 3711 Long Beach Blvd., Suite
110, Long Beach, California 90807.

Campgrounds.The Company currently operates 59 campgrounds in 17 states and
British Columbia, Canada. The locations of these campgrounds are shown on the
map on page 14. The amenities presently available at each campground are
listed on the chart beginning on page 15. The Company owns 58 of these
campgrounds and leases the LaConner campground and portions of the Lake
Tawakoni and Snowflower campgrounds. The Company owns the campgrounds free and
clear of any monetary liens or encumbrances. The Company has sold undivided
interests to members at six of the campgrounds. Of the 59 campgrounds, 36
operate all year, 11 operate year-round but provide only limited services
during the off-season, and 11 operate seasonally only. One campground is
temporarily closed due to flood damage.

Other.The Company owns various parcels of undeveloped real estate (not
related to its campground operations) that it intends to sell over time.

Page 13



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##### Table of Contents



MAP OF CAMPGROUND RESORTS

Page 14



---



##### Table of Contents



CAMPGROUND FACILITIES AND AMENITIES

Page 15



---



##### Table of Contents



CAMPGROUND FACILITIES AND AMENITIES

Page 16



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##### Table of Contents






Item 3. Legal Proceedings

The Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Companys
financial position, operations or cash flows.




Item 4. Submission of Matters to a Vote of Shareholders

None.

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##### Table of Contents






Part II




Item 5. Market for Registrants Common Equity and Related Shareholder Matters

Market and Trading. The Companys common stock (the Common Stock) is
publicly traded on the American Stock Exchange under the symbol TRV.
Historically, the Common Stock has not traded every day and the trading volume
has often been small. The following table sets forth, for the fiscal periods
indicated, the high and low sales prices as reported on the American Stock
Exchange.

LINE GRAPH



|               |  |      |       |      |  |      |       |     |  |  |       |  |  |  |       | 
|-------------- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|               |  | 2001 |       | 2000
|               |  |      |       |     
|               |  | High |       | Low  |  | High |       | Low
|               |  |      |       |      |  |      |       |    
|First Quarter  |  |      | 4.875 |      |  |      | 4.500 |     |  |  | 4.875 |  |  |  | 4.250 | 
|              
|              
|              
|              
|Second Quarter |  |      | 5.125 |      |  |      | 4.625 |     |  |  | 5.000 |  |  |  | 4.375 | 
|              
|              
|              
|              
|Third Quarter  |  |      | 6.100 |      |  |      | 4.800 |     |  |  | 5.125 |  |  |  | 4.625 | 
|              
|              
|              
|              
|Fourth Quarter |  |      | 6.300 |      |  |      | 5.100 |     |  |  | 4.875 |  |  |  | 4.375 | 

As of September 21, 2001 the Companys Common Stock was held by 38 holders of
record. Moreover, security position listings available to the Company listed
approximately 470 beneficial holders of Common Stock.

Absence of Dividends. Since inception, the Company has not paid any dividends
and, at the present time, it has no plans to pay dividends.

Page 18



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##### Table of Contents



Transfer Restrictions.The Companys Common Stock is subject to transfer
restrictions designed to avoid an ownership change within the meaning of
Section 382 of the Internal Revenue Code of 1986, as amended (the Code).
These transfer restrictions are designed to help assure that the Companys net
operating loss carryforwards (NOLs), which are estimated to total $7.9
million at June 30, 2001, will continue to be available to offset future
taxable income. Section 382 of the Code limits the use of NOLs and other tax
benefits by a company that has undergone an ownership change.

Such restrictions are set forth in Article IX of the Companys Restated
Certificate of Incorporation. Article IX generally restricts, until June 30,
2011 (or earlier in certain events), direct or indirect transfer of Common
Stock that would without the approval of the Board of Directors of the Company
(i) increase to more than 4.75% the percentage ownership of Common Stock of any
person who at any time during the preceding three-year period did not own more
than 4.75% of the Common Stock, (ii) increase the percentage of Common Stock
owned by any person that during the preceding three-year period owned more than
4.75% of the Common Stock or by any group of persons treated as a 5 Percent
Shareholder (as defined in the Code but substituting 4.75% for 5 Percent),
or (iii) cause an ownership change of the Company. Article IX provides that
any direct or indirect transfer of Common Stock in violation of Article IX is
void ab initioas to the purported transferee, and the purported transferee
will not be recognized as the owner of shares acquired in violation of Article
IX for any purpose, including for purposes of voting and receiving dividends or
other distributions in respect of Common Stock. Any shares purportedly
acquired in violation of Article IX will be transferred to a trustee who will
be required to sell them.

Generally, the transfer restrictions contain several exceptions. For example,
the restrictions will not prevent a transfer if, in the determination of the
Board of Directors of the Company, the transfer does not result in any greater
aggregate increase in Common Stock ownership by 5% shareholders. Also, the
restrictions will not prevent a transfer if the purported transferee obtains
the approval of the Board of Directors of the Company, which approval shall be
granted or withheld in the sole and absolute discretion of the Board of
Directors, after considering all facts and circumstances including, but not
limited to, future events deemed by the Board of Directors to be relevant.
Finally, the transfer restrictions only apply with respect to the amount of
Common Stock purportedly transferred in excess of the threshold established in
the transfer restrictions.

The transfer restrictions (i) may have the effect of impeding the attempt of a
person or entity to acquire a significant or controlling interest in the
Company, (ii) may render it more difficult to effect a merger or similar
transaction even if such transaction is favored by a majority of the
shareholders and (iii) may serve to make a change in management more difficult.
The purpose of the transfer restrictions is to preserve tax benefits, however,
not to insulate the Company or management from change. The Company believes
the tax benefits of the transfer restrictions outweigh any anti-takeover effect
they may have.

The application of these transfer restrictions to any particular shareholder
will depend on the shareholders ownership of Common Stock, determined after
applying numerous attribution rules prescribed by the Code and related
regulations, and will also depend on the history of trading of the Common
Stock.

Page 19



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##### Table of Contents






Item 6. Selected Financial Data

(dollars in thousands, except per share amounts and statistical data)

|                                     |                                                                  |                                   |   |                             |        |         |   |         |        |      |   |         |        |  |   |         |        |  |   |         |         |  
|------------------------------------ | ---------------------------------------------------------------- | --------------------------------- | - | --------------------------- | ------ | ------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | - | ------- | ------- | -
|                                     |                                                                  |                                   |   | For the year ended June 30,
|                                     |                                                                  |                                   |   |                            
|                                     |                                                                  |                                   |   | 2001                        |        | 2000(1) |   | 1999    |        | 1998 |   | 1997   
|                                     |                                                                  |                                   |   |                             |        |         |   |         |        |      |   |        
|Statement of Operations Data         |                                                                  |                                   |   |                             |        |         |   |         |        |      |   |         |        |  |   |         |        |  |   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Total revenue                                                    |                                   | $ | 79,396                      |        |         | $ | 70,771  |        |      | $ | 67,925  |        |  | $ | 75,509  |        |  | $ | 77,181  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Membership dues                                                  |                                   |   | 40,080                      |        |         |   | 37,495  |        |      |   | 36,455  |        |  |   | 37,330  |        |  |   | 39,945  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other campground revenue                                         |                                   |   | 17,849                      |        |         |   | 16,731  |        |      |   | 15,585  |        |  |   | 14,204  |        |  |   | 16,812  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Membership contracts originated                                  |                                   |   | 22,903                      |        |         |   | 13,912  |        |      |   | 5,480   |        |  |   | 3,867   |        |  |   | 3,362   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Membership sales revenue                                         |                                   |   | 9,540                       |        |         |   | 5,564   |        |      |   | 3,959   |        |  |   | 3,227   |        |  |   | 2,894   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest income                                                  |                                   |   | 1,951                       |        |         |   | 1,509   |        |      |   | 2,008   |        |  |   | 2,635   |        |  |   | 3,726   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest expense and amortization                                |                                   |   | 1,013                       |        |         |   | 1,427   |        |      |   | 2,957   |        |  |   | 4,599   |        |  |   | 9,084   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Income (loss) from operations before
taxes and minority interest |                                   |   | 6,429                       |        |         |   | 5,458   |        |      |   | 7,915   |        |  |   | 15,716  |        |  |   | 7,169   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Net income                                                       |                                   |   | 4,276                       |        |         |   | 9,249   |        |      |   | 5,571   |        |  |   | 24,879  |        |  |   | 6,799   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends paid(2)                                                |                                   |   |                            |        |         |   |        |        |      |   |        |        |  |   |        |        |  |   |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends per common share(2)                                    |                                   |   |                            |        |         |   |        |        |      |   |        |        |  |   |        |        |  |   |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Income per share data  basic:                                   |                                   |   |                             |        |         |   |         |        |      |   |         |        |  |   |         |        |  |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                  | Net income                        |   |                             | .52    |         |   |         | 1.16   |      |   |         | .73    |  |   |         | 3.36   |  |   |         | .94     |  
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                  | Weighted average number of shares |   |                             | 8,107  |         |   |         | 7,981  |      |   |         | 7,630  |  |   |         | 7,407  |  |   |         | 7,223   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Income per share data  diluted:                                 |                                   |   |                             |        |         |   |         |        |      |   |         |        |  |   |         |        |  |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                  | Net income                        |   |                             | .50    |         |   |         | 1.08   |      |   |         | .66    |  |   |         | 2.96   |  |   |         | .88     |  
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                  | Weighted average number of shares |   |                             | 8,598  |         |   |         | 8,594  |      |   |         | 8,475  |  |   |         | 8,398  |  |   |         | 7,704   |  
|                                    
|                                    
|                                    
|                                    
|Balance Sheet Data (at end of year): |                                                                  |                                   |   |                             |        |         |   |         |        |      |   |         |        |  |   |         |        |  |   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                        |                                   |   | 9,016                       |        |         |   | 2,420   |        |      |   | 2,197   |        |  |   | 13,631  |        |  |   | 1,343   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Receivables, net                                                 |                                   |   | 7,588                       |        |         |   | 5,775   |        |      |   | 2,184   |        |  |   | 4,181   |        |  |   | 7,517   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Campground properties                                            |                                   |   | 47,191                      |        |         |   | 48,150  |        |      |   | 36,941  |        |  |   | 37,991  |        |  |   | 42,764  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Properties at unrelated resorts                                  |                                   |   | 70                          |        |         |   | 70      |        |      |   | 75      |        |  |   | 1,092   |        |  |   | 1,530   |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                  | Total assets                      |   |                             | 83,949 |         |   |         | 74,515 |      |   |         | 56,804 |  |   |         | 74,262 |  |   |         | 63,302  |  
|                                    
|                                    
|                                    
|                                    
|                                     | PIK Notes, including deferred gain(3)                            |                                   |   |                            |        |         |   |        |        |      |   |        |        |  |   | 32,973  |        |  |   | 29,393  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Borrowings under Credit Agreement(3)                             |                                   |   |                            |        |         |   | 9,614   |        |      |   | 10,887  |        |  |   |        |        |  |   | 14,097  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Long-term debt(3)                                                |                                   |   |                            |        |         |   | 7,043   |        |      |   | 8,787   |        |  |   | 32,973  |        |  |   | 38,230  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                  | Shareholders equity (deficit)    |   |                             | 22,435 |         |   |         | 18,109 |      |   |         | 9,648  |  |   |         | 2,754  |  |   |         | (22,168 | )
|                                    
|                                    
|                                    
|                                    
|Statistical Data (at end of year):   |                                                                  |                                   |   |                             |        |         |   |         |        |      |   |         |        |  |   |         |        |  |   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Number of operating campgrounds                                  |                                   |   | 59                          |        |         |   | 63      |        |      |   | 53      |        |  |   | 53      |        |  |   | 55      |        
|                                    
|                                    
|                                    
|                                    
|                                     | Number of campsites                                              |                                   |   | 18,100                      |        |         |   | 19,000  |        |      |   | 17,700  |        |  |   | 17,700  |        |  |   | 18,400  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Number of members                                                |                                   |   | 117,000                     |        |         |   | 119,000 |        |      |   | 106,000 |        |  |   | 111,000 |        |  |   | 120,000 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Average annual dues per member                                   |                                   | $ | 360                         |        |         | $ | 355     |        |      | $ | 357     |        |  | $ | 351     |        |  | $ | 344     |        
|                                    
|                                    
|                                    
|                                    
|                                     | Average cost per camper night                                    |                                   | $ | 19.33                       |        |         | $ | 18.72   |        |      | $ | 17.62   |        |  | $ | 18.23   |        |  | $ | 18.13   |        



---

|(1) |  | The historical Selected Financial Data for fiscal 2000 and 2001
includes the operating results of Leisure Time from December 16, 1999,
the date of acquisition.                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Since inception, the Company has not paid any dividends and, at the
present time, it has no plans to pay dividends.                                                                    
|   
|   
|   
|   
|(3) |  | Long-term debt includes only the long-term portions of the 12%
Senior Subordinated Pay-In-Kind Notes Due 2003 (PIK Notes) and the
Credit Agreement with Foothill Capital Corporation.

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##### Table of Contents






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

In this Managements Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans and conditions for periods after June 30,
2001. All of these statements are forward-looking statements made pursuant to
the safe harbor provisions of Section 21 (E) of the Securities Exchange Act of
1934, as amended. These statements are not historical and involve risks and
uncertainties. The Companys actual financial condition, results of
operations, cash flows, and business strategies, plans, and conditions for
future periods may differ materially due to several factors, including but not
limited to the Companys ability to control costs, campground market conditions
and other factors affecting the Companys sales and marketing plan, the actual
rate of decline in the campground membership base, the actual use of the
campgrounds by members and guests, the effects on members and guests of the
Companys efforts to downsize its business, the Companys success in collecting
its contracts receivable and selling assets, the Companys success in acquiring
members through the purchase of other membership campground operations and the
other factors affecting the Companys operations described in this report.

LIQUIDITY AND CAPITAL RESOURCES

Current Business Strategy.The Companys current business strategy is to
improve its campground operations and stabilize its campground membership base
through increased sales and marketing efforts and the acquisition of members
through the purchase of other membership campground operations. The Company
believes there is a viable market for campground memberships and that it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company has also acquired
members through the purchase of Leisure Time, and it believes it may be
possible to acquire additional members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.

Over the past several years, the Companys membership base has been declining,
although the Company has been successful in slowing the rate of this decline.
In response to this attrition, the Company has downsized its business by
closing and disposing of campgrounds and decreasing campground operating costs
and general and administrative expenses. The Company intends to continue to
keep the size of its campground system in an appropriate relation to the size
of its membership base. In this regard, if the membership base continues to
decline, or other opportunities arise consistent with the needs of the members,
the Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. At the same time, the Company has expanded its sales
and marketing efforts with a view to stopping the membership decline. The
Company has also acquired members through the purchase of Leisure Time, and it
intends to explore the possible acquisition of additional members through the
purchase of other membership campground organizations. The Company believes
that the ultimate size of its campground system and the amounts realized from
future asset sales will depend principally upon the degree to which the Company
can successfully implement this strategy.

Page 21



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##### Table of Contents



Acquisition of Leisure Time. On December 16, 1999, the Company acquired all of
the outstanding capital stock of Leisure Time, which currently owns and
operates seven membership campgrounds in Washington and Oregon serving
approximately 15,000 members. Leisure Time operates a separate system of
campgrounds from the Companys other membership-based campground systems.

In February 2001, the Company completed its consolidation of Leisure Times
operations by closing one NACO campground and three Leisure Time campgrounds in
the Northwest. The Company closed these campgrounds to eliminate excess
inventory in the Northwest resulting from the acquisition. Members at the
closed campgrounds were offered use of substitute campgrounds in the same
general area with equal or better amenities. In April 2001, the Company sold
one of the closed campgrounds to an unrelated third party for $1.4 million.
The Company recorded a gain of $250,000 on the sale.

The operating results of Leisure Time are included in the operating results of
the Company commencing December 16, 1999. The acquisition has been accretive
to earnings in the current fiscal year as the Company has reduced expenses by
consolidating administrative functions, closing campgrounds and implementing
other cost saving measures. However, because Leisure Times members and
campgrounds are similar to the Companys, the increase in members resulting
from the acquisition is not expected to affect the overall rate at which the
Companys membership base is declining.

Cash.On June 30, 2001, the Company had approximately $9.0 million of cash and
cash equivalents, an increase of $6.6 million during fiscal 2001. During the
year ended June 30, 2001, the Companys operating activities produced $17.7
million of cash, its investing activities used $1.5 million of cash and its
financing activities used $9.6 million of cash. The Companys investing
activities consisted of $3.3 million in capital expenditures at the
campgrounds, partially offset by $1.7 million in proceeds from the sale of
assets. The Companys financing activities consisted primarily of a $9.6
million reduction in outstanding debt under the Credit Agreement (as amended,
the Credit Agreement) between the Company and Foothill Capital Corporation
(Foothill), and the purchase of 23,500 shares of Common Stock for $116,000,
partially offset by $170,000 in proceeds from the exercise of employee stock
options.

With respect to the Companys operating activities, for fiscal 2001, the
principal sources of operating cash were $69.8 million from operations, $6.5
million in principal and interest collections on contracts receivable and
invested cash, and $15.9 million from sales of campground memberships.
Principal uses of operating cash for fiscal 2001 were $44.3 million in
operating expenses, $11.6 million in administrative expenses (including general
and administrative expenses and corporate member services costs), $14.4 million
in membership origination costs and marketing expenses, $3.0 million in
insurance premiums and $622,000 in income taxes.

Through the normal course of operations, in March 2001, the Company repaid all
outstanding borrowings under the Credit Agreement with Foothill, and it
terminated the Credit Agreement on June 30, 2001. Shortly thereafter, the
Company established a $15.0 million revolving, secured line of credit (Line of
Credit) with Union Bank of California, N.A. (Union Bank). As of the date of
this report, the Company had no outstanding borrowings under the Line of
Credit.

Page 22



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##### Table of Contents



During the year ended June 30, 2000, the Companys operating activities
produced $14.1 million of cash, its investing activities used $9.0 million of
cash and its financing activities used
$4.9 million of cash. In fiscal 2000, the Companys material investing and
financing activities related primarily to capital expenditures, the acquisition
of Leisure Time and repayment of debt. During the year ended June 30, 1999,
the Companys operating activities produced $11.8 million of cash, its
investing activities used $0.7 million of cash, and its financing activities
used
$22.6 million of cash. In fiscal 1999, the Companys material investing and
financing activities related primarily to capital expenditures, partially
offset by the proceeds from assets sales, and the redemption of the PIK Notes
and related borrowings under the Credit Agreement with Foothill.

The Company expects that its
capital expenditures will increase in fiscal 2002, compared with
fiscal 2001, because the Company will
make a one-time expenditure of $2.0 million to upgrade its computer system.
However, since the Company has repaid all of its outstanding debt, the Company
believes its cash reserves will continue to increase during fiscal 2002. The
amount of cash the Company is able to accumulate will depend on a number of
factors including its ability to control costs, its success in collecting its
contracts receivable and selling assets, and the other factors affecting the
Companys operations described in this report. Based upon its current business
plan, the Company believes that future cash flows provided from operations,
asset sales and borrowings available under the Line of Credit will be adequate
for the Companys operating and other cash requirements.

Contracts Receivable.As of June 30, 2001, the Company on a consolidated basis
owned
$9.9 million of contracts receivable related to the sale of campground
memberships (see Contracts Receivable in Item 1). Because of low interest
rates available in the marketplace during fiscal 2000 and 1999, some members
chose to prepay their accounts, and the Company received principal payments of
$673,000 and $723,000, respectively, in excess of scheduled payments.
Depending upon market conditions, the Company may continue to experience such
prepayments in the future.

Allowance for Doubtful AccountsThe Companys allowance for doubtful accounts was 23% of gross contracts
receivable at
June 30, 2001, compared with 25% and 30% of gross contracts receivable at June
30, 2000 and 1999, respectively. The cancellation rate as a percentage of
average contracts receivable was 5% for fiscal 2001 and 2000, compared with 8%
for fiscal 1999. In fiscal 2000 and 1999, the Company experienced lower
contract losses than anticipated on contracts receivable generated from
membership sales at Thousand Trails and NACO campgrounds and, as a result, the
Company reduced the allowance for doubtful accounts relating to these contracts
by $435,000 and $886,000, respectively. However, because of uncertainty
surrounding the collection of Leisure Times contracts receivable, the Company
increased Leisure Times allowance for doubtful accounts by $184,000 in fiscal
2000.

The allowance for doubtful accounts is an estimate of the contracts receivable
that will cancel in the future and is determined based on historical
cancellation rates and other factors deemed relevant to the analysis. In
fiscal 1999, the Companys cancellation rate was approximately 8% (consistent
with the prior three fiscal years). The cancellation rate improved to 5% in
fiscal 2000 and 2001. The Company reduced the allowance for doubtful accounts
in fiscal 2000 and 1999 after applying the cancellation rate at year-end to the
maturities of the then-outstanding portfolio

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and taking into account the uncertainties associated with its business. During
these years, the contracts receivable portfolio also declined faster than
projected primarily because collections each year exceeded estimates. As a
result, using the same methodology and considering the same factors deemed
relevant to the analysis, the Company reduced the allowance to approximately
30% of the portfolio in fiscal 1999, 25% in fiscal 2000, and 23% in fiscal
2001.

The Company does not presently anticipate any further adjustments to the
allowance for doubtful accounts on the contracts receivable. However, the
allowance and the rate at which the Company provides for future losses on its
contracts receivable could be increased or decreased in the future based on the
Companys actual collection experience.

Other AllowancesIn connection with the purchase of NACO and Trails, the Company recorded an
allowance for interest discount to increase to 14.75%, the weighted average
yield on the contracts receivable then owned by NACO and Trails. The allowance
for interest discount was amortized using the effective interest method over
the respective terms of the contracts, and was fully amortized in fiscal 2000.
Additionally, in connection with the purchase of NACO and Trails, the Company
recorded an allowance for future collection costs, which was amortized as a
reduction of general and administrative expenses based on cash collected on the
related portfolio, and was fully amortized in fiscal 2000. The Company also
purchased contracts receivable from certain third parties and recorded a
valuation allowance to record the contracts receivable at the purchase price.
This valuation allowance was amortized as an increase to interest income over
the respective term of the contracts, and was fully amortized in fiscal 2000.

Change in ReceivablesThe net balance of contracts receivable increased by approximately $1.8 million
during fiscal 2001, primarily as a result of an increase in financed sales,
partially offset by $4.5 million in cash collections.

Campground Properties.The Companys campground properties consist of land,
buildings and other equipment used in administration and operations as well as
assets held for sale. Campground properties decreased by $1.1 million in
fiscal 2001 due primarily to the sale of one campground and $2.7 million of
depreciation on property and equipment, partially offset by
$2.3 million of capital expenditures.

As discussed above, in fiscal 2001, the Company closed four campgrounds in
connection with the consolidation of Leisure Times operations and reclassified
$2.6 million from campground land and buildings and equipment to assets held
for sale.

The Company makes annual capital and maintenance expenditures to maintain and
improve the campgrounds.During fiscal 2001, the Company spent $6.0 million on
major maintenance, repairs and improvements at the campgrounds. The Company
anticipates that it will spend an additional $5.9 million on such items in
fiscal 2002, which will be funded by existing cash and cash provided by
operations. The Company may be required to spend greater amounts in future
years as the facilities age.

During the periods presented, the Company also owned lot inventory, buildings
and equipment and land held for sale at certain resorts not related to the
campground operations. Over the past several years, the Company has sold
substantially all of the assets it owns at these resorts.

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At June 30, 2001, the Company had a $1.9 million liability for obligations
created by reports that it filed with the Department of Housing and Urban
Development (HUD) at one resort not related to the campground operations,
which remain substantially incomplete. A person who purchased a lot when a HUD
report was in effect may allege that the failure to make timely improvements
constitutes a breach of his or her agreement with the Company and could seek
damages from the Company or rescission of the lot purchase. Approximately 45
persons purchased lots from the Company when HUD reports in effect described
improvements that the Company has not yet constructed. An insignificant number
of persons have asserted claims against the Company for the failure to make
these improvements.

Other Assets.Other current assets decreased by $103,000 during fiscal 2001.
The decrease was due primarily to a $184,000 decrease in accounts receivable,
$56,000 decrease in dues receivable and a $16,000 decrease in inventory levels,
partially offset by a $135,000 increase in prepaid expenses, consisting of
marketing and insurance costs.

Other assets increased by $131,000 in fiscal 2001 due primarily to an increase
in workers compensation deposits.

Borrowings.

Line of Credit with Union BankOn July 1, 2001, the Company established a $15.0 million Line of Credit with
Union Bank. Borrowings under the Line of Credit carry an interest rate of
prime minus 0.75%. The Company may borrow, repay and reborrow under the Line
of Credit from time to time, provided, however, that for at least one day
during each twelve-month period, the principal amount outstanding under the
Line of Credit must be not more than $5.0 million. All borrowings under the
Line of Credit will mature on July 1, 2003. The Company anticipates using the
Line of Credit for general working capital purposes, although it is permitted
under the terms of the Line of Credit to use up to $5.0 million for
acquisitions from time to time. The Company currently has no borrowings
outstanding under the Line of Credit.

The Companys ability to borrow under the Line of Credit for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Line of Credit, including certain
covenants respecting minimum tangible net worth, minimum adjusted EBITDA (as
defined) and minimum total debt to adjusted EBITDA. The Line of Credit
prohibits the Company from borrowing from other sources.

The Company has granted liens on substantially all of its assets, other than
its real estate, to secure its obligations under the Line of Credit. In
addition, the Companys principal subsidiaries have guaranteed the Companys
obligations under the Line of Credit and have granted liens on substantially
all of their assets, other than their real estate, to secure their guarantees.

Credit Agreement with FoothillThrough the normal course of operations, in March 2001, the Company repaid all
outstanding borrowings under its Credit Agreement with Foothill, and it
terminated the Credit Agreement on June 30, 2001. During the periods
presented, borrowings under the Credit Agreement accrued interest at prime plus
 .25% per annum, subject to a minimum interest rate of 7% per annum.

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PIK Note RedemptionIn December 1998, the Company redeemed all $34.8 million principal amount of
its 12% Senior Subordinated Pay-in-Kind Notes Due 2003 (PIK Notes)
outstanding and paid $1.7 million of accrued interest.

Deferred Revenues and Expenses.Deferred revenues of $47.8 million and $34.1
million at June 30, 2001 and 2000, respectively, include $15.5 million of
membership dues collections relating to future periods, $30.2 million and $16.8
million, respectively, of campground membership sales revenues to be recognized
in future periods, and $2.2 million and $1.8 million, respectively, of other
deferred revenues related primarily to RPIs operations and Trails Management.
Deferred membership selling expenses of $8.9 million and $5.2 million at
June 30, 2001 and 2000, respectively, represent incremental direct selling
costs to be recognized in future periods.

General Liability Insurance.Commencing July 1, 1998, the Company obtained
insurance covering general liability losses up to an annual limit of $27.0
million, with no self-insured deductible. Prior to this date, the Companys
insurance program covered general liability losses up to an annual limit of
$26.8 million, but required the Company to pay the first $250,000 per
occurrence, with an annual aggregate exposure of $2.0 million. The Company has
provided a liability for estimated known and unknown claims related to
uninsured general liability risks based on actuarial estimates. At June 30,
2001 and 2000, the Companys recorded liability for estimated losses related to
uninsured general liability claims totaled $577,000 and $650,000, respectively.

Employee Health Insurance.The Company provides medical and dental benefits
for its employees under employee benefit plans (collectively, the Plans) that
are funded primarily through employer and employee contributions. The Company
has purchased stop loss insurance that protects the Plans against claims in
excess of set policy amounts. The Company has provided a liability for
estimated uninsured claims of $709,000 and $817,000 at June 30, 2001 and 2000,
respectively. This liability is based on actuarial estimates of amounts needed
to fund expected uninsured claims, as well as premium payments and
administrative costs of the Plans.

Workers Compensation Insurance.Commencing July 1, 1998, the Company obtained
insurance covering workers compensation claims with no self-insured
deductible. Prior to this date, the Companys insurance program required the
Company to pay up to $250,000 per occurrence and to deposit funds with the
insurance company to pay claims in excess of the estimated claims that were
covered by the amounts originally paid by the Company. These deposits were
generally expensed in the years the deposits were made because the Company
anticipated that the deposits would be used to cover claims. In fiscal 2001
and 2000, the Company increased its reserves for workers compensation claims by
$160,000 and $138,000, respectively, because the Company estimates that it will
be required to pay additional amounts in future periods to cover claims not
covered by the deposits originally made by the Company.

Recently Issued Accounting Pronouncements.The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivatives
and Similar Financial Instruments for Hedging Activities, in fiscal 2001.
However, the adoption of SFAS No. 133 did not have a material impact on the
Companys financial position because the Company does not currently use
derivative instruments. In June 2001, the Financial Accounting Standards
Board

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issued SFAS No. 141 and SFAS No. 142, Business Combinations and Goodwill and
Other Intangible Assets, respectively. SFAS 141 supercedes Accounting
Principles Board Opinion No. 16 and eliminates pooling-of-interests accounting
on a prospective basis. It also provides guidance on purchase accounting
related to the recognition of intangible assets and accounting for negative
goodwill. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only method. SFAS No. 141 and SFAS No.
142 are effective for all business combinations completed after June 30, 2001.
Companies are required to adopt SFAS No. 142 for fiscal years beginning after
December 15, 2001. The Company does not believe that SFAS No. 141 and SFAS No.
142 will have a material effect on their results of operations or financial
position for the current period.

Market Risk.Item 305 of Regulation S-K requires disclosure of material risks,
as defined in Item 305, related to market risk sensitive financial instruments.
As defined, the Company currently has market risk sensitive instruments
related to interest rates.

The Company does not have significant exposure to changing interest rates on
invested cash because the Company invests available cash in certificates of
deposit and investment grade commercial paper that have maturities of three
months or less. The interest rate market risk implicit in these investments at
any given time is low, as the investments mature within three months.

The Company had $9.9 million of contracts receivable at June 30, 2001, which
have a weighted average stated interest rate of 14% and an average remaining
term of 35 months. The Company does not have significant exposure to changing
interest rates related to the contracts receivable because the interest rate on
the contracts receivable are fixed.

The Company has not undertaken any actions to cover interest rate market risk
and is not a party to any interest rate market risk management activities.

The Company also receives revenues from its Canadian subsidiary and exchanges
them into U.S. Dollars at exchange rates that fluctuate with market conditions;
however, such revenues are not material to the Companys operations.

Interest Rate Sensitivity.A hypothetical ten percent change in market
interest rates over the next year would not materially impact the Companys
earnings or cash flow. A hypothetical ten percent change in market interest
rates would not have a material effect on the fair value of the Companys
contracts receivable or its short-term cash investments.

The Company currently has no outstanding borrowing under its Line of Credit
with Union Bank. If, however, it becomes necessary for the Company to borrow
under its Line of Credit, the Companys sensitivity to changes in interest
rates would increase because borrowings under the Line of Credit bear interest
at prime minus .75%.

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RESULTS OF OPERATIONS

The following discussion and analysis are based on the historical results of
operations of the Company for the years ended June 30, 2001, 2000, and 1999.
The financial information set forth below should be read in conjunction with
the Companys consolidated financial statements included in Item 8.

Net Income.The Company reported net income of $4.3 million or $.50 per
diluted share on revenues of $79.4 million for the year ended June 30, 2001.
This compares with net income of $9.2 million or $1.08 per diluted share on
revenues of $70.8 million for the year ended
June 30, 2000, and net income of $5.6 million or $.66 per diluted share on
revenues of $67.9 million for the year ended June 30, 1999.

Income before taxes was $6.4 million for fiscal 2001, compared with $5.5
million in fiscal 2000. Net income for fiscal 2000 included a net deferred
income tax benefit of $5.8 million, partially offset by a $1.4 million tax
provision, resulting from the elimination of the valuation allowance for the
Companys net deferred tax assets.

The Companys revenues increased by $8.6 million in fiscal 2001, compared with
fiscal 2000, due primarily to increases in membership sales revenue, dues
revenue and other campground revenue, partially offset by a decrease in other
income. Increases in campground operating costs and selling and marketing
expenses during fiscal 2001 were partially offset by a decrease in interest
expense, as a result of decreased debt levels.

The Companys revenues increased by $2.8 million in fiscal 2000, compared with
fiscal 1999, due primarily to increased dues revenue from the acquisition of
Leisure Times members and increased membership sales revenue. Revenues
increased in fiscal 2000, compared with fiscal 1999, even though gains from
asset sales were $1.1 million lower and interest income was $559,000 lower in
fiscal 2000. Due to reductions in debt levels, the Companys interest costs
were also lower by $1.5 million in fiscal 2000. However, the unfavorable
impact from the net deferral of sales revenues and expenses was $4.2 million
higher in fiscal 2000, reflecting an increase in the level of sales activity,
and campground operating expenses were $3.3 million higher due to the
acquisition of Leisure Times campgrounds. In addition, net income for fiscal
2000 included the income tax benefit discussed above.

The table on the following page shows separately the results of the campground
operations, Trails Managements operations and RPIs operations, without any
allocation of corporate expenses, as well as corporate expenses and other
revenues and expenses in the aggregate, for the years ended June 30, 2001, 2000
and 1999.

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Thousand Trails, Inc. and Subsidiaries
Summary of Operating Results
(Dollars in thousands)

|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|------------------------------------------------------------------------ | -------------------------------------------- | - | ------------------- | ------- | ---- | - | ------ | ------- | - | - | ------ | ------- | -
|                                                                         |                                              |   | Year ended June 30,
|                                                                         |                                              |   |                    
|                                                                         |                                              |   | 2001                |         | 2000 |   | 1999  
|                                                                         |                                              |   |                     |         |      |   |       
|Campground Operations                                                    |                                              |   |                     |         |      |   |        |         |   |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership dues                              |   | $                   | 40,080  |      |   | $      | 37,495  |   |   | $      | 36,455  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Campground revenues                          |   |                     | 17,849  |      |   |        | 16,731  |   |   |        | 15,585  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Cost of campground revenues                  |   |                     | (8,793  | )    |   |        | (8,095  | ) |   |        | (7,401  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Operating expenses                           |   |                     | (35,184 | )    |   |        | (32,158 | ) |   |        | (29,998 | )
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|Contribution from campground operations                                  |                                              |   | 13,952              |         |      |   | 13,973 |         |   |   | 14,641 |        
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |        
|Sales                                                                    |                                              |   |                     |         |      |   |        |         |   |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership contracts originated              |   |                     | 22,903  |      |   |        | 13,912  |   |   |        | 5,480   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred revenue                   |   |                     | (13,363 | )    |   |        | (8,348  | ) |   |        | (1,521  | )
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|                                                                         | Membership sales revenue                     |   |                     | 9,540   |      |   |        | 5,564   |   |   |        | 3,959   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership origination costs                 |   |                     | (9,905  | )    |   |        | (7,614  | ) |   |        | (4,152  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred origination costs         |   |                     | 3,739   |      |   |        | 3,112   |   |   |        | 440     |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Marketing expenses                           |   |                     | (5,650  | )    |   |        | (4,026  | ) |   |        | (2,046  | )
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|Loss on sales                                                            |                                              |   | (2,276              | )       |      |   | (2,964 | )       |   |   | (1,799 | )      
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |        
|Trails Management                                                        |                                              |   |                     |         |      |   |        |         |   |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                                     |   |                     | 3,082   |      |   |        | 2,508   |   |   |        | 2,271   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                                     |   |                     | (3,332  | )    |   |        | (2,545  | ) |   |        | (2,135  | )
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|(Loss) Contribution from Trails Management                               |                                              |   | (250                | )       |      |   | (37    | )       |   |   | 136    |        
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |        
|Resort Parks International                                               |                                              |   |                     |         |      |   |        |         |   |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                                     |   |                     | 3,713   |      |   |        | 3,706   |   |   |        | 3,576   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                                     |   |                     | (1,820  | )    |   |        | (1,844  | ) |   |        | (1,963  | )
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|Contribution from RPI                                                    |                                              |   | 1,893               |         |      |   | 1,862  |         |   |   | 1,613  |        
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|                                                                         | Other income                                 |   |                     | 2,616   |      |   |        | 2,880   |   |   |        | 2,739   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Corporate member services                    |   |                     | (1,233  | )    |   |        | (1,333  | ) |   |        | (1,253  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | General and administrative expense           |   |                     | (9,776  | )    |   |        | (9,634  | ) |   |        | (9,431  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Other                                        |   |                     | 168     |      |   |        | 374     |   |   |        | 227     |  
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|                                                                         |                                              |   | (8,225              | )       |      |   | (7,713 | )       |   |   | (7,718 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Income before interest income and expense,
gain on asset sales and taxes |                                              |   | 5,094               |         |      |   | 5,121  |         |   |   | 6,873  |        
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  
|                                                                         | Interest income                              |   |                     | 1,951   |      |   |        | 1,509   |   |   |        | 2,008   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Interest expense                             |   |                     | (1,013  | )    |   |        | (1,427  | ) |   |        | (2,957  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Gain on asset sales                          |   |                     | 397     |      |   |        | 4       |   |   |        | 1,105   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Reduction in allowance for doubtful accounts |   |                     |        |      |   |        | 251     |   |   |        | 886     |  
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |        
|Income before taxes                                                      |                                              | $ | 6,429               |         |      | $ | 5,458  |         |   | $ | 7,915  |        
|                                                                         |                                              |   |                     |         |      |   |        |         |   |   |        |         |  

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Operating Income.During each of the years ended June 30, 2001 and 2000, the
Company achieved a positive contribution from operations of $5.1 million,
compared with $6.9 million in the year ended June 30, 1999. Despite a
decrease in contributions from campground operations, Trails Management, and
other income, operating income remained stable in fiscal 2001 because of the
decrease in the negative contribution from the Companys sales operations.
Operating income declined in fiscal 2000 primarily because of declines in the
contributions from campground operations and Trails Management and a higher
loss from sales operations. For this purpose, the contribution from operations
is defined as income before interest income and expense, gain on asset sales,
reduction in the allowance for doubtful accounts, nonrecurring income and
expenses and taxes. See the table on the previous page for the elements of the
contribution from operations and the Companys income before taxes for the
historical periods presented.

Campground Operations.The Companys operations are highly seasonal. The
Company receives the majority of the dues revenue from its members during the
winter, which are recognized as income ratably during the year. However, the
Company incurs a higher level of operating expenses during the summer. In
addition, a majority of the Companys sales and marketing efforts occur during
the summer.

The operating results of Leisure Time are included in the operating results of
the Company for the entire fiscal 2001, compared with only six and one-half
months (from December 16, 1999) for fiscal 2000.

Campground dues revenue was $40.1 million for the year ended June 30, 2001,
compared with $37.5 million and $36.5 million for the years ended June 30, 2000
and 1999, respectively. The $2.6 million (7%) increase in dues revenue in
fiscal 2001 was due primarily to the addition of $4.7 million in dues paid by
the members of Leisure Time and the effect of the annual dues increase,
partially offset by the loss of campground members during the year. In fiscal
2000, Leisure Time members paid $1.9 million in dues.

Other campground revenues were $17.8 million for the year ended June 30, 2001,
compared with $16.7 million and $15.6 million for the years ended June 30, 2000
and 1999, respectively. The $1.1 million (7%) increase in other campground
revenues in fiscal 2001 resulted primarily from $860,000 of revenue from
Leisure Times campgrounds, compared with $290,000 in fiscal 2000, and a
greater emphasis on ancillary revenue at all campgrounds. The $1.1 million
(7%) increase in other campground revenues in fiscal 2000 resulted primarily
from the revenue from Leisure Times campgrounds and an increase in revenue
from the extended stay program at certain campgrounds. The related expenses
were $8.8 million, $8.1 million and $7.4 million for fiscal 2001, 2000 and
1999, respectively. The increase in related expenses in fiscal 2001 was due
primarily to $379,000 in expenses related to Leisure Times campgrounds,
compared with $176,000 in the prior year, and increases in the cost of labor
and operating supplies. The increase in expenses in fiscal 2000 was due
primarily to the expenses related to Leisure Times campgrounds and an increase
in labor costs.

Campground operating expenses were $35.2 million for the year ended June 30,
2001, compared with $32.2 and $30.0 million for the years ended June 30, 2000
and 1999, respectively. The
$3.0 million (9%) increase in campground operating expenses in fiscal 2001 was
due in part to operating expenses of $3.4 million relating to Leisure Times
campgrounds, compared with
$1.5 million in the prior year. The increase in the current year was also due
in part to

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a $693,000 (12%) increase in utility costs at the Companys other campgrounds,
principally in Southern California where such costs increased $379,000, which
accounts for 55% of the total increase in utility costs. Labor costs at the
Companys other campgrounds increased $255,000 during the current year,
primarily due to wage increases. The $2.2 million (7%) increase in campground
operating expenses in fiscal 2000 resulted primarily from the additional
operating expenses relating to Leisure Times campgrounds and an increase in
maintenance expenses.

As discussed above, in fiscal 2001, the Company completed its consolidation of
Leisure Times operations and closed four campgrounds. The Company intends to
continue to keep the size of its campground system in an appropriate relation
to the size of its membership base. In this regard, if the membership base
continues to decline, or other opportunities arise consistent with the needs of
the members, the Company may close and dispose of additional campgrounds and it
will seek to decrease other expenses. Although the Company believes that the
anticipated changes should result in lower future operating expenses, no
assurance can be given that such changes will not reduce revenues by an amount
in excess of the expense reductions.

For the year ended June 30, 2001, the Company originated membership contracts
of
$22.9 million, compared with $13.9 million and $5.5 million in the years ended
June 30, 2000 and 1999, respectively. In fiscal 2001, the Company sold a
greater number of new membership contracts at a higher average price per
contract and a greater number of membership upgrades to its existing members,
compared with the prior years. In the current year, the Company completed the
upgrade program offered to Leisure Times existing members, and began marketing
a similar product to the existing members of Thousand Trails and NACO.

For the year ended June 30, 2001, the Company originated approximately 4,500
new membership contracts at an average price of $2,549, compared with
approximately 3,700 new membership contracts at an average price of $2,298, and
approximately 4,200 new membership contracts at an average price of $1,254, for
the years ended June 30, 2000 and 1999, respectively. The Company also
originated approximately 3,000 upgrade contracts at an average price of $2,995
in fiscal 2001, compared with approximately 1,700 upgrade contracts at an
average price of $2,895 in fiscal 2000. In February 2001, the Company began
offering existing Thousand Trails and NACO members access to the Leisure Time
campgrounds for a fee, which resulted in approximately 6,800 contracts at an
average price of $235 in the current year. In
April 2001, the Company began offering existing Leisure Time members access to
the Thousand Trails and NACO campgrounds for a fee, which resulted in
approximately 300 contracts at an average price of $1,999 in the current year.

The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate, net of any related allowances, on
a straight-line basis over the expected life of the memberships sold. For the
years ended June 30, 2001, 2000 and 1999, the Company recognized campground
membership sales revenue of $9.5 million, $5.6 million and $4.0 million,
respectively. Membership sales revenue includes revenues of $7.2 million,
$3.9 million and $3.1 million, respectively, that were deferred in prior
periods. Moreover, for fiscal 2001, 2000 and 1999, the Company deferred
revenues of $20.6 million, $12.3 million and $4.6 million, respectively, which
will be recognized in future periods. In the current year, the Company
recognized $2.2 million in sales revenue related to Leisure Time, compared with
$619,000 in the prior year.

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Selling expenses directly related to the sale of campground memberships,
substantially all of which are sales commissions, are deferred and recognized
as expenses on a straight-line basis over the expected life of the memberships
sold. All other selling and marketing costs are recognized as expenses in the
period incurred. For the years ended June 30, 2001, 2000 and 1999, the Company
recognized selling expenses of $6.2 million, $4.5 million and $3.7 million,
respectively. These amounts include expenses of $2.1 million, $998,000 and
$730,000, respectively, that were deferred in prior periods. Moreover, for
fiscal 2001, 2000 and 1999, the Company deferred expenses of $5.9 million, $4.1
million and $1.2 million, respectively, which will be recognized in future
periods. In fiscal 2001, the Company recognized selling and marketing expenses
of $983,000 related to Leisure Time, compared with $865,000 in fiscal 2000.

Although the Companys sales results are improving, selling and marketing
expenses exceeded sale revenues by $2.3 million, $3.0 million and $1.8 million,
for the years ended June 30, 2001, 2000 and 1999, respectively. These expenses
exceeded sales revenue primarily because the Company deferred more sales
revenue than selling expenses. In addition, in fiscal 1999, these expenses
exceeded sales revenue, in part, because the relatively low volume of sales did
not cover fixed costs.

The Companys selling and marketing efforts require significant expense, the
majority of which must be expensed in the current period, while the related
sales revenues are generally deferred and recognized on a straight-line basis
over the expected life of the memberships sold. As a consequence, the Company
expects that its selling and marketing expenses will continue to exceed its
campground membership sale revenues. This disparity will increase as the
Company grows campground membership sales.

The Companys selling and marketing efforts during the past three fiscal years
have not produced the level of sales needed to stop the continuing decline in
the Companys membership base, although the Company has been successful in
slowing the rate of this decline. If the Company is not able to increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground operations similar to the acquisition
of Leisure Time, the membership base will continue to decline, which will
decrease the Companys revenues. Decreases in revenues that are not offset by
sufficient expense reductions could have a material adverse impact on the
Companys business and results of operations.

Trails Management.Trails Management, a wholly owned subsidiary of the
Company, manages 241 public campgrounds for the U.S. Forest Service and other
entities. For the year ended
June 30, 2001, these operations produced a net loss of $250,000 on revenues of
$3.1 million. This compares with a net loss of $37,000 on revenues of $2.5
million for the year ended
June 30, 2000, and a net contribution of $136,000 on revenues of $2.3 million
for the year ended June 30, 1999. The increase in revenues in fiscal 2001 was
due primarily to higher usage of the campgrounds, in addition to a new contract
entered into during the second quarter of fiscal 2001, which increased by 72
the number of campgrounds managed. The increase in revenues in fiscal 2000 was
due primarily to new contracts entered into that year, which increased the
number of campgrounds managed. However, increases in expenses, principally
start up costs associated with the new contracts, labor and utilities, more
than offset the increases in revenues, resulting in losses in fiscal 2001 and
2000.

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Resort Parks International.RPI, a wholly owned subsidiary of the Company,
charges its members a fee for a membership that entitles them to use any of the
recreational facilities participating in RPIs reciprocal use system, subject
to certain limitations. For the years ended June 30, 2001 and 2000, RPIs
operations produced a net contribution of $1.9 million on revenues of $3.7
million. This compares with a net contribution of $1.6 million on revenues of
$3.6 million for the year ended June 30, 1999. Revenue from new membership
sales and sales of directories increased in fiscal 2001, but these increases
were offset by decreases in revenue from membership renewals, while expenses
remained constant between the two periods.

The slight increase in RPIs contribution in fiscal 2000, compared with 1999,
resulted primarily from lower operating expenses, which were attributable to
lower communication costs and a decrease in the cost of operating supplies,
partially offset by an increase in labor costs. RPI is working to introduce
new products to increase its revenues and maintain its contribution margin;
however, there is no assurance that these efforts
will be successful.

Other Income.Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of writtenoff contracts and delinquent dues,
subscription fees received from members who subscribe to the Companys member
magazine, fees charged to members for making more than five operator-assisted
reservations in a given year, lot sales and fees received from third parties
for billing and collection services

Other income was $2.6 million for the year ended June 30, 2001, compared with
$2.9 million for the year ended June 30, 2000, and $2.7 million for the year
ended June 30, 1999. The decrease in other income in fiscal 2001 was due
primarily to a $312,000 decrease in fees received from third parties for
billing and collection services after a primary customer terminated its
contract with the Company in September 2000, and a $408,000 decrease in other
miscellaneous income, which in fiscal 2000 included $183,000 from the
settlement of a property insurance claim. These decreases were partially
offset by an increase in the collection of delinquent dues. The increase in
other income during fiscal 2000 was due primarily to an increase in transfer
fees and servicing fees, partially offset by a decrease in the collection of
written-off contracts and delinquent dues. Leisure Time contributed $248,000
in other income in fiscal 2001, compared with $86,000 in fiscal 2000.

General and Administrative Expenses.General and administrative expenses were
$9.8 million for the year ended June 30, 2001, compared with $9.6 million for
the year ended June 30, 2000, and $9.4 million for the year ended June 30,
1999. General and administrative expenses increased in fiscal 2001 due
primarily to increases in labor costs and credit card processing fees,
partially offset by decreases in third-party legal fees. General and
administrative expenses increased in fiscal 2000 due primarily to increases in
labor costs, rental expense, credit card processing fees and approximately
$77,000 in expenses related to the acquisition of Leisure Time that could not
be capitalized as part of the cost of acquisition. These increases were
partially offset by decreases in third-party legal fees, professional expenses
and depreciation. General and administrative expenses directly related to
Leisure Time were $127,000 in fiscal 2001, compared with $268,000 in fiscal
2000.

General and administrative expenses include costs related to collecting the
contracts receivable and membership dues of $2.3 million, $2.2 million and $2.1
million for the years ended

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June 30, 2001, 2000 and 1999, respectively. In fiscal 2000 and 1999, these
collection costs were reduced by $98,000 and $136,000, respectively, as a
result of the amortization of the allowance for collection costs related to the
contracts receivable (see Liquidity and Capital Resources  Contracts
Receivable). Collection costs related to Leisure Times contracts receivable
were $287,000 in fiscal 2001, compared with $139,000 in fiscal 2000. The
Company anticipates that its overall collection costs will continue to increase
if the contracts receivable portfolio continues to grow, resulting from an
increase in financed new sales.

Corporate Member Services.Corporate member services include the reservation
and member support services performed at the corporate office, as well as the
costs incurred to produce the Companys member magazine. These costs declined
to $1.2 million for the year ended
June 30, 2001, from $1.3 million for the years ended June 30, 2000, and 1999.
The decrease in expenses in fiscal 2001 was due primarily to a decrease in
labor and communications expenses, partially offset by an increase in
production and postage costs for the Companys member magazine.

Interest Income and Expense.Interest income increased to $2.0 million for the
year ended
June 30, 2001, compared with $1.5 million for the year ended June 30, 2000, and
$2.0 million for the year ended June 30, 1999. The increase in fiscal 2001 was
due primarily to increases in interest earned on the Companys growing
portfolio of contracts receivable and invested cash. The decrease in fiscal
2000 was due primarily to decreases in interest earned on the Companys
portfolio of contracts receivable, which declined during that year prior to the
acquisition of Leisure Time. Also included in interest income is amortization
of the allowance for interest discount and valuation allowance related to the
contracts receivable, of which $229,000 was amortized during fiscal 2000, and
$181,000 was amortized during fiscal 1999 (see Liquidity and Capital Resources
 Contracts Receivable). The interest discount and valuation allowances were
fully amortized at June 30, 2000. The Companys portfolio of contracts
receivable increased with the acquisition of Leisure Time, and has continued to
grow as a result of the increase in membership sales, approximately 33% of
which are sold on an installment basis. As a result, the interest earned on
the Companys portfolio of contracts receivable is expected to increase
compared with historical levels.

Interest expense decreased to $1.0 million for the year ended June 30, 2001,
from $1.4 million for the year ended June 30, 2000, and $3.0 million for the
year ended June 30, 1999. The decreases in interest expense in fiscal 2001 and
2000 were due primarily to decreases in debt levels from year to year.
Interest expense for fiscal 2001 includes a $150,000 fee resulting from early
termination of the Companys Credit Agreement with Foothill.

Interest expense for the year ended June 30, 1999, includes amortization of the
deferred gain related to the PIK Notes, which reduced interest expense by
$150,000.

The Company reduced its outstanding debt by $9.6 million during fiscal 2001,
$1.3 million during fiscal 2000, and by $23.8 million during fiscal 1999. At
June 30, 2001, the Company had no outstanding borrowings. Interest expense is
expected to decline in the future as the Company funds its day-to-day
activities with cash from operations. However, the Companys ability to fund
its operations with internally generated cash will be limited if new members
elect to finance the purchase of their memberships in significant amounts. In
addition, the Company would likely borrow under the Line of Credit if it
acquires new members through the purchase of other membership campground
operations, similar to the acquisition of Leisure Time.

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Gains on Asset Sales.During the years ended June 30, 2001, 2000 and 1999, the
Company sold certain of its real estate assets and recognized related gains of
$397,000, $4,000 and $1.1 million, respectively. In fiscal 2001, the Company
sold one campground for proceeds of $1.4 million, and recorded a gain of
$250,000 on the sale. In fiscal 1999, the Company sold a large tract of
undeveloped land for proceeds of $2.0 million, and recorded a gain of $993,000
on the sale. Over the next several years, the Company intends to dispose of
the remaining assets that it holds for sale, the campgrounds that were closed
following the acquisition of Leisure Time, any campgrounds that are closed in
the future if the Company downsizes and other undeveloped, excess acreage
associated with the campgrounds. The sale of campgrounds requires addressing
the rights of members associated with such campgrounds. The impact of these
rights is uncertain and could adversely affect the availability or timing of
sale opportunities or the ability of the Company to realize recoveries from
asset sales. In addition, although the Company has successfully sold assets
during the past three years, no assurance exists that the Company will be able
to locate a buyer for any of the remaining assets or that sales on acceptable
terms can be effected.

Reduction in the Allowance for Doubtful Accounts.In fiscal 2000 and 1999, the
Company reduced the allowance for doubtful accounts on the contracts receivable
by $251,000 and $886,000, respectively. The adjustments were made because the
Company experienced lower contract losses than anticipated in these years (see
Liquidity and Capital Resources Contracts Receivable).

Income Taxes.The Company accounts for income taxes in accordance with SFAS No.
109, Accounting for Income Taxes. This standard requires, among other
things, recognition of future tax benefits, measured by enacted tax rates,
attributable to deductible temporary differences between financial statement
and income tax bases of assets and liabilities and to tax net operating loss
carryforwards (NOLs), to the extent that realization of such benefits is more
likely than not.

The Companys current provision for income taxes was $891,000, $621,000 and
$40,000 for the years ended June 30, 2001, 2000 and 1999, respectively. The
provisions for fiscal 2001 and 2000 include amounts for federal alternative
minimum taxes as well as state income taxes in the various states where the
Company conducts its business. The provision for fiscal 1999 relates primarily
to state income taxes. With the exception of the alternative minimum tax
amounts, the Company does not have federal income taxes payable on a
consolidated basis due to its NOLs, which are estimated to total $7.9 million
at June 30, 2001, and expire in years 2010 to 2014. Prior to net operating
loss deductions, the Company had taxable income of $13.0 million in fiscal 2001
and $7.0 million in fiscal 2000, and a taxable loss of $2.1 million in fiscal
1999.

The tax provision for the year ended June 30, 2001 also includes a net deferred
tax provision of $1.3 million. The tax provision for the year ended June 30,
2000 includes a $5.8 million deferred income tax benefit resulting from the
reversal of the valuation allowance for the Companys net deferred tax assets
(see Note 10 to the consolidated financial statements included in Item 8) and a
net deferred tax provision of $1.4 million. The tax provision for the year
ended June 30, 1999, also includes a net deferred tax provision of $2.3
million, which consists of $2.7 million in deferred income tax expense and a
$401,000 deferred income tax benefit resulting from a reduction in the
valuation allowance for the Companys net deferred tax assets. The adjustments
to the valuation allowance will have no effect on current or future income tax
payments, but will

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result in higher future tax provisions in the periods the related deferred tax
assets are realized. The Company reduced the valuation allowance in fiscal
1999 and eliminated the valuation allowance in fiscal 2000 because it expects
to generate sufficient taxable income during the carryforward period to realize
the net deferred tax assets. No increases in current levels of income are
required to do so. Although the Company has experienced a declining membership
base, it does not expect the net effect of such a decline to prevent the
realization of the net deferred tax assets over such period.

Inflation.During the past three fiscal years, the Companys results have not
been affected materially by inflation. However, in fiscal 2001, the Companys
results were affected adversely by rising utility costs at the Companys
campgrounds, principally in Southern California. Should the rate of inflation
increase in the future, or should utility costs continue to rise, the Companys
expenses are likely to increase at a greater rate than it can increase the
annual dues paid by campground members because the Company cannot increase the
dues on existing contracts of senior citizens and disabled members who notify
the Company of their age or disability and request that their dues be frozen.
At the present time, approximately 37% of the members have requested that their
dues be frozen because of their age or disability (see Campground Operations 
Dues).




Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company does not currently have any derivative financial instruments, which
include futures, forwards, interest rate swaps, option contracts and other
financial instruments with similar characteristics. However, the Company does
have other financial instruments containing market risk. Management believes
that the market risk associated with the Companys financial instruments as of
June 30, 2001 is not significant. The information required by Item 305 of
Regulation S-K is contained in Item 7  Managements Discussion and Analysis
of Financial Condition and Results of Operations under the headings Market
Risk and Interest Rate Sensitivity.

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Item 8. Financial Statements and Supplementary Data

|                                                                                                 |                                                 |  |    |    | 
|------------------------------------------------------------------------------------------------ | ----------------------------------------------- |  | -- | -- | 
|Consolidated Financial Statements Index                                                          |                                                 |  |    |   
|                                                                                                
|Report of Independent Public Accountants                                                         |                                                 |  | 38 |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Consolidated Balance Sheets  June 30, 2001 and 2000                                             |                                                 |  | 39 |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Consolidated Statements of Operations for the years ended
June 30, 2001, 2000 and 1999           |                                                 |  | 40 |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Consolidated Statements of Shareholders Equity for the years
ended June 30, 2001, 2000 and 1999 |                                                 |  | 41 |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Consolidated Statements of Cash Flows for the years ended
June 30, 2001, 2000 and 1999           |                                                 |  | 42 |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Notes to Consolidated Financial Statements                                                       |                                                 |  | 44 |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Financial Statement Schedule:                                                                    |                                                 |  |    |   
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                 | Schedule II  Valuation and Qualifying Accounts |  |    | 68 | 

All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes hereto.

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Thousand Trails, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Thousand
Trails, Inc. (a Delaware corporation) and subsidiaries (the Company) as of
June 30, 2001 and 2000, and the related consolidated statements of operations,
shareholders equity and cash flows for each of the three years in the period
ended June 30, 2001. These financial statements and the schedule referred to
below are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Thousand Trails, Inc. and
subsidiaries as of June 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2001, in conformity with accounting principles generally accepted in the United
States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not a part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Dallas, Texas,
     September 5, 2001

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Thousand Trails, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)

|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |        |        |  |  | 
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------------------------------------ | ------ | -------- | ------ | ------ | ------ |  |  | 
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        | June 30,
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |         
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        | 2001     |        | 2000  
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                   |                                                                                                                                                                                                            |                            |        | Assets                               |        |          |        |        |        |  |  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Current Assets                                     |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash and cash equivalents                                                                                                                                                                                  |                            | $      | 9,016                                |        |          | $      | 2,420  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of receivables, net of allowance of
$1.0 million and $.9 million, respectively                                                                                                             |                            |        | 2,096                                |        |          |        | 1,668  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of deferred membership selling expenses                                                                                                                                                    |                            |        | 2,886                                |        |          |        | 1,387  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of net deferred tax assets                                                                                                                                                                 |                            |        | 6,885                                |        |          |        | 3,780  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Inventories                                                                                                                                                                                                |                            |        | 1,221                                |        |          |        | 1,237  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other current assets                                                                                                                                                                                       |                            |        | 765                                  |        |          |        | 868    |       
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                   |                                                                                                                                                                                                            | Total Current Assets       |        |                                      | 22,869 |          |        |        | 11,360 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Restricted cash                                                                                                                                                                                            |                            |        | 646                                  |        |          |        | 1,320  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Receivables, net of allowances and discount of $1.3
million and $1.0 million, respectively                                                                                                                 |                            |        | 5,492                                |        |          |        | 4,107  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Campground land                                                                                                                                                                                            |                            |        | 20,696                               |        |          |        | 22,981 |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Buildings and equipment, net of accumulated                                                                                                                                                                |                            |        |                                      |        |          |        |        |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | depreciation of $21.8 million and $20.1 million,
respectively                                                                                                                                              |                            |        | 21,256                               |        |          |        | 22,396 |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Assets held for sale                                                                                                                                                                                       |                            |        | 5,600                                |        |          |        | 2,965  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Deferred membership selling expenses                                                                                                                                                                       |                            |        | 6,030                                |        |          |        | 3,790  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net deferred tax assets                                                                                                                                                                                    |                            |        | 995                                  |        |          |        | 5,362  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other assets                                                                                                                                                                                               |                            |        | 365                                  |        |          |        | 234    |       
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|Total Assets                                       |                                                                                                                                                                                                            | $                          | 83,949 |                                      |        | $        | 74,515 |       
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |        |       
|                                                   |                                                                                                                                                                                                            |                            |        | Liabilities and Shareholders Equity |        |          |        |        |        |  |  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Current Liabilities                                |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts payable                                                                                                                                                                                           |                            | $      | 2,775                                |        |          | $      | 1,904  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accrued interest                                                                                                                                                                                           |                            |        |                                     |        |          |        | 103    |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other accrued liabilities                                                                                                                                                                                  |                            |        | 8,021                                |        |          |        | 7,498  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of long-term debt                                                                                                                                                                          |                            |        |                                     |        |          |        | 2,571  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accrued construction cost                                                                                                                                                                                  |                            |        | 1,888                                |        |          |        | 1,888  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current portion of deferred revenue                                                                                                                                                                        |                            |        | 27,668                               |        |          |        | 21,977 |       
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                   |                                                                                                                                                                                                            | Total Current Liabilities  |        |                                      | 40,352 |          |        |        | 35,941 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Long-term debt                                                                                                                                                                                             |                            |        |                                     |        |          |        | 7,043  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Deferred revenue                                                                                                                                                                                           |                            |        | 20,158                               |        |          |        | 12,106 |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other liabilities                                                                                                                                                                                          |                            |        | 1,004                                |        |          |        | 1,316  |       
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                   |                                                                                                                                                                                                            | Total Liabilities          |        |                                      | 61,514 |          |        |        | 56,406 | 
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|Commitments
and Contingencies
Shareholders Equity |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Preferred stock, $.01 par value, 1,500,000 shares
authorized, none issued or outstanding                                                                                                                   |                            |        |                                      |        |          |        |        |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Common stock, $.01 par value, 15,000,000 shares
authorized, 8,167,123 and 7,980,592 shares issued and
outstanding, respectively, after deducting 206,705 and
190,736 shares held in Treasury, respectively |                            |        | 82                                   |        |          |        | 80     |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Additional paid-in capital                                                                                                                                                                                 |                            |        | 21,132                               |        |          |        | 21,080 |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Retained earnings (accumulated deficit)                                                                                                                                                                    |                            |        | 1,362                                |        |          |        | (2,914 | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accumulated other comprehensive loss                                                                                                                                                                       |                            |        | (141                                 | )      |          |        | (137   | )     
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|                                                   |                                                                                                                                                                                                            | Total Shareholders Equity |        |                                      | 22,435 |          |        |        | 18,109 | 
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |       
|Total Liabilities and Shareholders Equity         |                                                                                                                                                                                                            | $                          | 83,949 |                                      |        | $        | 74,515 |       
|                                                   |                                                                                                                                                                                                            |                            |        |                                      |        |          |        |        |       

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

Page 39



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##### Table of Contents






Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)

|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |        |  
|---------------------------------------------- | ----------------------------------------- | - | ---------------------------- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                               |                                           |   | For the years ended June 30,
|                                               |                                           |   |                             
|                                               |                                           |   | 2001                         |        | 2000 |   | 1999  
|                                               |                                           |   |                              |        |      |   |       
|Revenues                                       |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                              
|                                              
|                                              
|                                              
|Membership contracts originated                |                                           | $ | 22,903                       |        |      | $ | 13,912 |        |   | $ | 5,480  |       
|                                              
|                                              
|                                              
|                                              
|Change in deferred revenue                     |                                           |   | (13,363                      | )      |      |   | (8,348 | )      |   |   | (1,521 | )     
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                               | Membership sales revenue                  |   |                              | 9,540  |      |   |        | 5,564  |   |   |        | 3,959  |  
|                                              
|                                              
|                                              
|                                              
|Membership dues                                |                                           |   | 40,080                       |        |      |   | 37,495 |        |   |   | 36,455 |       
|                                              
|                                              
|                                              
|                                              
|Other campground revenue                       |                                           |   | 17,849                       |        |      |   | 16,731 |        |   |   | 15,585 |       
|                                              
|                                              
|                                              
|                                              
|Trails Management revenue                      |                                           |   | 3,082                        |        |      |   | 2,508  |        |   |   | 2,271  |       
|                                              
|                                              
|                                              
|                                              
|RPI membership fees                            |                                           |   | 3,713                        |        |      |   | 3,706  |        |   |   | 3,576  |       
|                                              
|                                              
|                                              
|                                              
|Interest income                                |                                           |   | 1,951                        |        |      |   | 1,509  |        |   |   | 2,008  |       
|                                              
|                                              
|                                              
|                                              
|Gain on asset sales                            |                                           |   | 397                          |        |      |   | 4      |        |   |   | 1,105  |       
|                                              
|                                              
|                                              
|                                              
|Other income                                   |                                           |   | 2,784                        |        |      |   | 3,254  |        |   |   | 2,966  |       
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                               | Total Revenues                            |   |                              | 79,396 |      |   |        | 70,771 |   |   |        | 67,925 |  
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|Expenses                                       |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                              
|                                              
|                                              
|                                              
|Campground operating expenses                  |                                           |   | 43,977                       |        |      |   | 40,253 |        |   |   | 37,399 |       
|                                              
|                                              
|                                              
|                                              
|Membership origination costs                   |                                           |   | 9,905                        |        |      |   | 7,614  |        |   |   | 4,152  |       
|                                              
|                                              
|                                              
|                                              
|Change in deferred origination costs           |                                           |   | (3,739                       | )      |      |   | (3,112 | )      |   |   | (440   | )     
|                                              
|                                              
|                                              
|                                              
|Marketing expenses                             |                                           |   | 5,650                        |        |      |   | 4,026  |        |   |   | 2,046  |       
|                                              
|                                              
|                                              
|                                              
|Trails Management expenses                     |                                           |   | 3,332                        |        |      |   | 2,545  |        |   |   | 2,135  |       
|                                              
|                                              
|                                              
|                                              
|RPI membership expenses                        |                                           |   | 1,820                        |        |      |   | 1,844  |        |   |   | 1,963  |       
|                                              
|                                              
|                                              
|                                              
|Corporate member services                      |                                           |   | 1,233                        |        |      |   | 1,333  |        |   |   | 1,253  |       
|                                              
|                                              
|                                              
|                                              
|Interest expense and amortization              |                                           |   | 1,013                        |        |      |   | 1,427  |        |   |   | 2,957  |       
|                                              
|                                              
|                                              
|                                              
|General and administrative expenses            |                                           |   | 9,776                        |        |      |   | 9,634  |        |   |   | 9,431  |       
|                                              
|                                              
|                                              
|                                              
|Reduction in allowance for doubtful accounts   |                                           |   |                             |        |      |   | (251   | )      |   |   | (886   | )     
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                               | Total Expenses                            |   |                              | 72,967 |      |   |        | 65,313 |   |   |        | 60,010 |  
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|Income Before Income Taxes                     |                                           |   | 6,429                        |        |      |   | 5,458  |        |   |   | 7,915  |       
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                  |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  current            |   |                              | (891   | )    |   |        | (621   | ) |   |        | (40    | )
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax (provision) benefit  deferred |   |                              | (1,262 | )    |   |        | 4,412  |   |   |        | (2,304 | )
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|Net Income                                     |                                           | $ | 4,276                        |        |      | $ | 9,249  |        |   | $ | 5,571  |       
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|Net Income per Share  Basic                   |                                           | $ | .52                          |        |      | $ | 1.16   |        |   | $ | .73    |       
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|Net Income per Share  Diluted                 |                                           | $ | .50                          |        |      | $ | 1.08   |        |   | $ | .66    |       
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|Shares Used to Calculate Net Income Per Share: |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                                     |   |                              | 8,107  |      |   |        | 7,981  |   |   |        | 7,630  |  
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       
|                                               | Diluted                                   |   |                              | 8,598  |      |   |        | 8,594  |   |   |        | 8,475  |  
|                                               |                                           |   |                              |        |      |   |        |        |   |   |        |       

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

Page 40



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##### Table of Contents






Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Shareholders Equity
(Dollars in thousands)

|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|-------------------------- |  | ------------ | --------- | ------ |  | ------- | -- | -------- |  | ------------ | ------ | ------------- |  | -------- | ------- | ----------- |  | - | ---- | - |  | - | ------ | -
|                           |  | Common Stock |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  | Retained |         | Accumulated |  |   |      |  
|                           |  |              |           |        |  |         |    |          |  | Additional   |        | Earnings      |  | Other    |         |             |  |  
|                           |  | Number of    |           |        |  |         |    | Paid-In  |  | (Accumulated |        | Comprehensive |  |          |         |            
|                           |  | Shares       |           | Amount |  | Capital |    | Deficit) |  | Loss         |        | Total        
|                           |  |              |           |        |  |         |    |          |  |              |        |              
|Balance, June 30, 1998     |  |              | 7,437,083 |        |  | $       | 74 |          |  | $            | 20,551 |               |  | $        | (17,734 | )           |  | $ | (137 | ) |  | $ | 2,754  |  
|                          
|                          
|                          
|                          
|Issuance of common shares  |  |              | 662,245   |        |  |         | 7  |          |  |              | 1,332  |               |  |          |        |             |  |   |     |   |  |   | 1,339  |  
|                          
|                          
|                          
|                          
|Purchase of treasury stock |  |              | (3,200    | )      |  |         |    |          |  |              | (14    | )             |  |          |         |             |  |   |      |   |  |   | (14    | )
|                          
|                          
|                          
|                          
|Other comprehensive loss   |  |              |          |        |  |         |   |          |  |              |       |               |  |          |        |             |  |   | (2   | ) |  |   | (2     | )
|                          
|                          
|                          
|                          
|Net income                 |  |              |          |        |  |         |   |          |  |              |       |               |  |          | 5,571   |             |  |   |     |   |  |   | 5,571  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|Comprehensive income       |  |              |          |        |  |         |   |          |  |              |       |               |  |          |        |             |  |   |     |   |  |   | 5,569  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|Balance, June 30, 1999     |  |              | 8,096,128 |        |  |         | 81 |          |  |              | 21,869 |               |  |          | (12,163 | )           |  |   | (139 | ) |  |   | 9,648  |  
|                          
|                          
|                          
|                          
|Issuance of common shares  |  |              | 74,364    |        |  |         | 1  |          |  |              | 61     |               |  |          |        |             |  |   |     |   |  |   | 62     |  
|                          
|                          
|                          
|                          
|Purchase of treasury stock |  |              | (189,900  | )      |  |         | (2 | )        |  |              | (850   | )             |  |          |        |             |  |   |     |   |  |   | (852   | )
|                          
|                          
|                          
|                          
|Other comprehensive loss   |  |              |          |        |  |         |   |          |  |              |       |               |  |          |        |             |  |   | 2    |   |  |   | 2      |  
|                          
|                          
|                          
|                          
|Net income                 |  |              |          |        |  |         |   |          |  |              |       |               |  |          | 9,249   |             |  |   |     |   |  |   | 9,249  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|Comprehensive income       |  |              |          |        |  |         |   |          |  |              |       |               |  |          |        |             |  |   |     |   |  |   | 9,251  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|Balance, June 30, 2000     |  |              | 7,980,592 |        |  |         | 80 |          |  |              | 21,080 |               |  |          | (2,914  | )           |  |   | (137 | ) |  |   | 18,109 |  
|                          
|                          
|                          
|                          
|Issuance of common shares  |  |              | 210,031   |        |  |         | 2  |          |  |              | 168    |               |  |          |        |             |  |   |     |   |  |   | 170    |  
|                          
|                          
|                          
|                          
|Purchase of treasury stock |  |              | (23,500   | )      |  |         |   |          |  |              | (116   | )             |  |          |        |             |  |   |     |   |  |   | (116   | )
|                          
|                          
|                          
|                          
|Other comprehensive income |  |              |          |        |  |         |   |          |  |              |       |               |  |          |        |             |  |   | (4   | ) |  |   | (4     | )
|                          
|                          
|                          
|                          
|Net income                 |  |              |          |        |  |         |   |          |  |              |       |               |  |          | 4,276   |             |  |   |     |   |  |   | 4,276  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|Comprehensive income       |  |              |          |        |  |         |   |          |  |              |       |               |  |          |        |             |  |   |     |   |  |   | 4,272  |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  
|Balance, June 30, 2001     |  |              | 8,167,123 |        |  | $       | 82 |          |  | $            | 21,132 |               |  | $        | 1,362   |             |  | $ | (141 | ) |  | $ | 22,435 |  
|                           |  |              |           |        |  |         |    |          |  |              |        |               |  |          |         |             |  |   |      |   |  |   |        |  

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

Page 41



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##### Table of Contents






Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)

|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|------------------------------------------------ | -------------------------------------------------------------- |  | ---------------------------- | ------- | ---- |  | ---- | ------- | - |  | ------- | ------- | -
|                                                 |                                                                |  | For the years ended June 30,
|                                                 |                                                                |  |                             
|                                                 |                                                                |  | 2001                         |         | 2000 |  | 1999
|                                                 |                                                                |  |                              |         |      |  |     
|                                                 | CASH FLOWS FROM OPERATING ACTIVITIES:                          |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Collections of principal on receivables                        |  | $                            | 4,508   |      |  | $    | 3,562   |   |  | $       | 4,167   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Interest received                                              |  |                              | 1,951   |      |  |      | 1,387   |   |  |         | 1,909   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Interest paid                                                  |  |                              | (1,013  | )    |  |      | (1,427  | ) |  |         | (2,988  | )
|                                                
|                                                
|                                                
|                                                
|                                                 | General and administrative and corporate member services costs |  |                              | (11,631 | )    |  |      | (11,640 | ) |  |         | (10,233 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash collected from operations, including deferred revenue     |  |                              | 69,761  |      |  |      | 65,502  |   |  |         | 61,590  |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash from sales of memberships                                 |  |                              | 15,902  |      |  |      | 10,747  |   |  |         | 4,424   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Expenditures for campground operations                         |  |                              | (44,338 | )    |  |      | (41,387 | ) |  |         | (38,269 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Expenditures for sales and marketing                           |  |                              | (14,430 | )    |  |      | (10,661 | ) |  |         | (6,151  | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Expenditures for insurance premiums                            |  |                              | (3,013  | )    |  |      | (2,083  | ) |  |         | (2,038  | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of income taxes                                        |  |                              | (622    | )    |  |      | (212    | ) |  |         | (507    | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Other, net                                                     |  |                              | 674     |      |  |      | 265     |   |  |         | (69     | )
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                 | Net cash provided by operating activities                      |  |                              | 17,749  |      |  |      | 14,053  |   |  |         | 11,835  |  
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                 | CASH FLOWS FROM INVESTING ACTIVITIES:                          |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital expenditures                                           |  |                              | (3,253  | )    |  |      | (1,322  | ) |  |         | (2,935  | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Acquisition of Leisure Time                                    |  |                              |        |      |  |      | (7,727  | ) |  |         |        |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from asset sales                                      |  |                              | 1,738   |      |  |      | 74      |   |  |         | 2,246   |  
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                 | Net cash used in investing activities                          |  |                              | (1,515  | )    |  |      | (8,975  | ) |  |         | (689    | )
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                 | CASH FLOWS FROM FINANCING ACTIVITIES:                          |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Net (repayments) borrowings under Credit Agreement             |  |                              | (9,614  | )    |  |      | (1,273  | ) |  |         | 10,887  |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Redemption of PIK Notes                                        |  |                              |        |      |  |      |        |   |  |         | (34,792 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of notes                                               |  |                              | (78     | )    |  |      | (2,792  | ) |  |         |        |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of treasury stock                                     |  |                              | (116    | )    |  |      | (852    | ) |  |         | (14     | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Issuance of common stock                                       |  |                              | 170     |      |  |      | 62      |   |  |         | 1,339   |  
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                 | Net cash used in financing activities                          |  |                              | (9,638  | )    |  |      | (4,855  | ) |  |         | (22,580 | )
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                |  | 6,596                        |         |      |  | 223  |         |   |  | (11,434 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | CASH AND CASH EQUIVALENTS                                      |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Beginning of period                                            |  |                              | 2,420   |      |  |      | 2,197   |   |  |         | 13,631  |  
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  
|                                                 | End of period                                                  |  | $                            | 9,016   |      |  | $    | 2,420   |   |  | $       | 2,197   |  
|                                                 |                                                                |  |                              |         |      |  |      |         |   |  |         |         |  

continued 

Page 42



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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)

|                                                                                   |                                                                          |  |                              |        |      |  |      |        |   |  |   |        |  
|---------------------------------------------------------------------------------- | ------------------------------------------------------------------------ |  | ---------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                   |                                                                          |  | For the years ended June 30,
|                                                                                   |                                                                          |  |                             
|                                                                                   |                                                                          |  | 2001                         |        | 2000 |  | 1999
|                                                                                   |                                                                          |  |                              |        |      |  |     
|Reconciliation of net income to net cash provided by
operating activities:         |                                                                          |  |                              |        |      |  |      |        |   |  |   |       
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Net Income                                                               |  | $                            | 4,276  |      |  | $    | 9,249  |   |  | $ | 5,571  |  
|                                                                                   |                                                                          |  |                              |        |      |  |      |        |   |  |   |        |  
|Adjustments to reconcile net income to net cash
provided by operating activities  |                                                                          |  |                              |        |      |  |      |        |   |  |   |       
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Depreciation                                                             |  |                              | 2,703  |      |  |      | 2,662  |   |  |   | 2,604  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Bad debt provision                                                       |  |                              | 933    |      |  |      | 904    |   |  |   | 187    |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Amortization of interest yield, collection costs and
valuation allowance |  |                              |       |      |  |      | (229   | ) |  |   | (316   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Amortization of PIK Note deferred gain                                   |  |                              |       |      |  |      |       |   |  |   | (150   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase in deferred sales revenue                                       |  |                              | 13,364 |      |  |      | 8,348  |   |  |   | 1,522  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase in deferred membership origination costs                        |  |                              | (3,739 | )    |  |      | (3,112 | ) |  |   | (441   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Gain on asset sales                                                      |  |                              | (397   | )    |  |      | (3     | ) |  |   | (1,105 | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Reduction of bad debt allowances, net                                    |  |                              |       |      |  |      | (251   | ) |  |   | (886   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Reduction of deferred tax valuation allowance                            |  |                              |       |      |  |      | (5,807 | ) |  |   |       |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase in deferred income tax provision                                |  |                              | 1,262  |      |  |      | 1,394  |   |  |   | 2,304  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Decrease (increase) in restricted cash                                   |  |                              | 674    |      |  |      | 265    |   |  |   | (69    | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | (Increase) decrease in receivables                                       |  |                              | (2,745 | )    |  |      | (1,283 | ) |  |   | 2,929  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | (Increase) decrease in other assets                                      |  |                              | (13    | )    |  |      | 2,182  |   |  |   | 139    |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase (decrease) in accounts payable                                  |  |                              | 871    |      |  |      | (194   | ) |  |   | (371   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | (Decrease) increase in accrued interest                                  |  |                              | (103   | )    |  |      | (7     | ) |  |   | 274    |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase (decrease) in other liabilities                                 |  |                              | 668    |      |  |      | (66    | ) |  |   | (365   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Other, net                                                               |  |                              | (5     | )    |  |      | 1      |   |  |   | 8      |  
|                                                                                   |                                                                          |  |                              |        |      |  |      |        |   |  |   |        |  
|                                                                                   | Total adjustments                                                        |  |                              | 13,473 |      |  |      | 4,804  |   |  |   | 6,264  |  
|                                                                                   |                                                                          |  |                              |        |      |  |      |        |   |  |   |        |  
|                                                                                   | Net cash provided by operating activities                                |  | $                            | 17,749 |      |  | $    | 14,053 |   |  | $ | 11,835 |  
|                                                                                   |                                                                          |  |                              |        |      |  |      |        |   |  |   |        |  

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

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Thousand Trails, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2001

NOTE 1  NATURE OF OPERATIONS

Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the Company) own and operate 59 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 300 recreational
facilities and manages 241 public campgrounds for the U.S. Forest Service and
other entities. Operating revenues consist primarily of membership sales,
membership dues received from campground members, fee revenue from members of
the reciprocal use program, management fees from the campground management
operations and guest fees and revenues received from the campground and other
operations.

The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: Coast
Financial Services, Inc., National American Corporation and its subsidiaries
(NACO), Resort Parks International, Inc. (RPI), Thousand Trails (Canada),
Inc., Thousand Trails Management Services, Inc. (Trails Management) and,
commencing December 16, 1999, Leisure Time Resorts of America, Inc. (Leisure
Time). See Note 3  Business Combination.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue RecognitionThe Company sells campground memberships pursuant to membership contracts that
give purchasers the right to use one or more of the Companys campgrounds, but
do not convey a deeded interest in the campgrounds. Until 1990, the Company
also sold campground memberships that gave purchasers an undivided fractional
interest in one of six campgrounds. A membership requires the payment of an
upfront membership fee and permits the members family to use one or more of
the Companys campgrounds for an initial period, subject to renewal each year
upon payment of annual dues. Previously, the Company sold residential lots at
certain resorts not related to the campground operations.

The Company has offered financing on campground memberships for a period of up
to
48 months with a down payment of at least 25% of the sales price. Beginning in
January 1999, the minimum down payment was changed to $495, regardless of sales
price. The Company has also offered financing on the sale of lots for periods
up to five years with a down payment of at least 10% of the sales price.
However, during the periods presented, the majority of the Companys campground
memberships were not financed for more than three years, and all sales of lots
were on cash terms.

Sales revenue from the sale of lots and campground memberships that convey a
deeded interest in real estate is recognized upon execution of a sales contract
and receipt of a down payment of at least 10% of the sales price. Sales
revenue from the sale of campground memberships that do not convey a deeded
interest in real estate, net of any related allowances, is recognized on a

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straight-line basis over the expected life of the memberships sold. In
addition, costs directly related to the sale of such campground memberships are
deferred and recognized as selling expenses on a straight-line basis over the
expected life of the memberships sold.

The annual dues paid by campground members are used to fund the Companys
operating expenses, including corporate expenses and the maintenance and
operation of the campgrounds. The membership contracts generally permit the
Company to increase annually the amount of each members dues by either (i) the
percentage increase in the consumer price index (CPI) or (ii) the greater of
10% or the percentage increase in the CPI. The Company, however, may not
increase the dues on existing contracts of senior citizens and disabled members
who notify the Company of their age or disability and request that their dues
be frozen. At the present time, approximately 37% of the members have
requested that their dues be frozen because of their age or disability. The
Company estimates that approximately 50% of the campground members are senior
citizens eligible to request that their dues be frozen. The Company is unable
to estimate when or if a significant number of these members will request that
their dues be frozen in the future. Annual dues are recognized as revenue
ratably over 12 months as services are provided, and are recorded net of an
allowance to provide for uncollectible amounts. Dues paid in advance are
deferred as unearned revenue.

Trails Management manages public campgrounds for the U.S. Forest Service and
other entities. Pursuant to its management contracts, Trails Management incurs
the expenses of operating the campgrounds and receives the related revenues,
net of a fee paid to the U.S. Forest Service or other entity. Revenues
primarily consist of fees paid by visitors to the campgrounds. Fees paid in
advance are deferred as unearned revenue.

RPI offers its members reciprocal use of approximately 300 participating
recreational facilities. Members of these participating facilities pay a fee to
RPI that entitles them to use any of the participating facilities, subject to
certain limitations. RPI provides the member a directory of participating
facilities and a membership card. Participating facilities allow RPI members
access for an additional fee, which is not shared with RPI. RPI membership
fees are recognized as revenue when the directory and membership card are sent
to the member. Fees paid in advance for multiple-year memberships are deferred
as unearned revenue.

Cash and Cash EquivalentsThe Company considers demand accounts and short-term investments with
maturities of three months or less when purchased to be cash equivalents.

Restricted CashRestricted cash generally consists of deposits to collateralize performance
bonds and letters of credit in the ordinary course of business.

ReceivablesBefore the Company acquired certain subsidiaries in 1991, the Company purchased
contracts receivable from them and recorded the contracts receivables at the
selling companys carrying value. In connection with the Companys acquisition
of these subsidiaries, the Company recorded the contracts receivable then owned
by the subsidiaries at their fair value, which was net of an allowance for
interest discount to increase the weighted average yield on the contracts to
14.75%, the current market yield at the time of acquisition. The allowance for
interest discount was amortized using the effective interest method over the
respective terms of the

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contracts, and was fully amortized at June 30, 2000. In addition, the Company
recorded an allowance for future collection costs associated with the
collection of the contracts receivable portfolio. This allowance was amortized
as a reduction of general and administrative expense based on cash collected on
the related portfolio, and was fully amortized at June 30, 2000. The Company
also recorded a valuation allowance in connection with purchases of contracts
receivable from third parties, to record the contracts receivable at the
purchase price. The valuation allowance was amortized over the respective
terms of the contracts as an increase to interest income, and was fully
amortized at June 30, 2000. In connection with the acquisition of Leisure Time,
the Company recorded the contracts receivable owned by Leisure Time at their
face value, less an allowance for doubtful accounts.

Interest income is recognized on purchased contracts receivable based upon the
effective yield at which they were purchased and on other contracts receivable
at their stated rates based on the outstanding principal balances.

Allowance for Doubtful AccountsThe Company provides an allowance for future cancellations of contracts
receivable. The allowance is based on managements estimate of future contract
cancellations considering the Companys historical cancellation rates as well
as other factors deemed relevant to the analysis. The allowance is reviewed on
a periodic basis with changes in managements estimates recognized in the
period known. The Company presently believes that the allowance for doubtful
accounts is adequate. However, if cancellations occur at a different rate than
is presently anticipated, it may be necessary for the Company to revise its
estimates and increase or decrease the allowance, which would affect the
Companys operating results and financial condition.

Campground Land and Assets Held for SaleCampground land and assets held for sale is recorded at the lower of
cost or estimated net realizable value. The Company classifies assets
as held for sale at the time a determination is made to dispose of
certain campground properties and the related land and other fixed assets.

Buildings, Equipment and DepreciationBuildings and equipment are recorded at cost. The costs of betterments and
improvements which extend the useful life of the asset are capitalized whereas
the costs of maintenance and repairs which do not extend the useful life of the
asset are expensed in the period incurred. Depreciation is recorded using the
straight-line method over the estimated useful lives of the assets which range
from three to thirty years.

Income TaxesThe Company recognized certain revenues and expenses in periods which differ
for tax and financial reporting purposes.

Principles of ConsolidationAll significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the years
ended June 30, 2001, 2000 and 1999.

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Use of EstimatesThe accompanying consolidated financial statements were prepared in conformity
with accounting principles generally accepted in the United States (GAAP).
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.

Recently Issued Accounting PronouncementsThe Company adopted Statement of Financial Accounting Standards (SFAS) No.
133, Accounting for Derivatives and Similar Financial Instruments for Hedging
Activities, in fiscal 2001. However, the adoption of SFAS No. 133 did not
have a material impact on the Companys financial position because the Company
does not currently use derivative instruments. In June 2001, the Financial
Accounting Standards Board issued SFAS No. 141 and SFAS No. 142, Business
Combinations and Goodwill and Other Intangible Assets, respectively. SFAS
141 supercedes Accounting Principles Board Opinion No. 16 and eliminates
pooling-of-interests accounting on a prospective basis. It also provides
guidance on purchase accounting related to the recognition of intangible assets
and accounting for negative goodwill. SFAS No. 142 changes the accounting for
goodwill from an amortization method to an impairment-only method. SFAS No.
141 and SFAS No. 142 are effective for all business combinations completed
after June 30, 2001. Companies are required to adopt SFAS No. 142 for fiscal
years beginning after December 15, 2001. The Company does not believe that
SFAS No. 141 and SFAS No. 142 will have a material effect on their results of
operations or financial position for the current period.

ReclassificationsCertain reclassifications have been made to prior period information to conform
to the current period presentation.

NOTE 3  BUSINESS COMBINATION

On December 16, 1999, the Company acquired all of the outstanding capital stock
of Leisure Time for $7.7 million in cash. In addition, the Company paid in
full all of the outstanding real estate debt on Leisure Times campgrounds,
which totaled approximately $2.3 million.

The acquisition of Leisure Time was accounted for as a purchase transaction;
accordingly, operating results for Leisure Time are reported from the date of
acquisition. No goodwill was recorded on the acquisition because the purchase
price did not exceed the estimated values of the identifiable assets received
less liabilities assumed.

Leisure Time currently owns and operates seven membership campgrounds in
Washington and Oregon serving approximately 15,000 members. The Company closed
three Leisure Time campgrounds in February 2001. Leisure Time operates a
separate system of campgrounds from the Companys other membership-based
campground systems.

NOTE 4  COMPREHENSIVE INCOME

Comprehensive income includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners, as well
as net income reported on the

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income statement. The Company lists items of other comprehensive income by
their nature in its financial statements and presents the accumulated balance
of such items separately from retained earnings and additional paid-in capital
in the equity section of its consolidated balance sheet.

Currently, the Companys only item of other comprehensive income is its foreign
currency translation adjustment. The Company translates the balance sheet of
its Canadian subsidiary into U.S. dollars at exchange rates in effect at the
balance sheet date. Profit and loss accounts are translated monthly at
exchange rates in effect at that time. There is no tax effect on items of
other comprehensive income.

The following table provides statements of comprehensive income for the years
ended
June 30, 2001 and 2000 (dollars in thousands):

|                            |                                               |   |                             |    |      |   |       |   | 
|--------------------------- | --------------------------------------------- | - | --------------------------- | -- | ---- | - | ----- | - | 
|                            |                                               |   | For the year ended June 30,
|                            |                                               |   |                            
|                            |                                               |   | 2001                        |    | 2000
|                            |                                               |   |                             |    |     
|Net Income                  |                                               | $ | 4,276                       |    |      | $ | 9,249 |  
|                           
|                           
|                           
|                           
|Other Comprehensive Income: |                                               |   |                             |    |      |   |       |  
|                           
|                           
|                           
|                           
|                            | Foreign Currency
      Translation Adjustment |   |                             | (4 | )    |   |       | 2 | 
|                            |                                               |   |                             |    |      |   |       |  
|Comprehensive Income        |                                               | $ | 4,272                       |    |      | $ | 9,251 |  
|                            |                                               |   |                             |    |      |   |       |  

NOTE 5  NET INCOME PER SHARE

The table below sets forth the information necessary to compute basic and
diluted net income per share for the years ended June 30, 2001, 2000 and 1999,
including a summary of the components of the numerators and denominators of the
basic and diluted net income per share computations for the periods presented
(dollars and shares in thousands, except per share amounts):

|                                            |  |                             |       |      |  |      |       |  |  |   |       | 
|------------------------------------------- |  | --------------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                            |  | For the year ended June 30,
|                                            |  |                            
|                                            |  | 2001                        |       | 2000 |  | 1999
|                                            |  |                             |       |      |  |     
|Net Income                                  |  | $                           | 4,276 |      |  | $    | 9,249 |  |  | $ | 5,571 | 
|                                            |  |                             |       |      |  |      |       |  |  |   |       | 
|Weighted Average Number of
Shares  Basic   |  |                             | 8,107 |      |  |      | 7,981 |  |  |   | 7,630 | 
|                                           
|                                           
|                                           
|                                           
|Dilutive Options                            |  |                             | 491   |      |  |      | 613   |  |  |   | 824   | 
|                                           
|                                           
|                                           
|                                           
|Dilutive Warrants                           |  |                             |      |      |  |      |      |  |  |   | 21    | 
|                                            |  |                             |       |      |  |      |       |  |  |   |       | 
|Weighted Average Number of
Shares  Diluted |  |                             | 8,598 |      |  |      | 8,594 |  |  |   | 8,475 | 
|                                            |  |                             |       |      |  |      |       |  |  |   |       | 
|Net Income Per Share  Basic                |  | $                           | .52   |      |  | $    | 1.16  |  |  | $ | .73   | 
|                                            |  |                             |       |      |  |      |       |  |  |   |       | 
|Net Income Per Share  Diluted              |  | $                           | .50   |      |  | $    | 1.08  |  |  | $ | .66   | 
|                                            |  |                             |       |      |  |      |       |  |  |   |       | 

Since inception, the Company has not paid any dividends and, at the present
time, it has no plans to pay dividends.

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NOTE 6  RECEIVABLES

Contracts Receivable

The components of contracts receivable as of June 30, 2001 and 2000, are
summarized as follows (dollars in thousands):

|                                |                                 |   |          |       |      |   |        |       | 
|------------------------------- | ------------------------------- | - | -------- | ----- | ---- | - | ------ | ----- | 
|                                |                                 |   | June 30,
|                                |                                 |   |         
|                                |                                 |   | 2001     |       | 2000
|                                |                                 |   |          |       |     
|Contracts receivable            |                                 |   |          |       |      |   |        |      
|                               
|                               
|                               
|                               
|                                | Memberships/undivided interests |   | $        | 9,803 |      |   | $      | 7,656 | 
|                               
|                               
|                               
|                               
|                                | Lots                            |   |          | 9     |      |   |        | 25    | 
|                                |                                 |   |          |       |      |   |        |       | 
|                                |                                 |   | 9,812    |       |      |   | 7,681  |      
|                               
|                               
|                               
|                               
|Allowance for doubtful accounts |                                 |   | (2,289   | )     |      |   | (1,928 | )    
|                                |                                 |   |          |       |      |   |        |       | 
|                                |                                 |   | 7,523    |       |      |   | 5,753  |      
|                               
|                               
|                               
|                               
|Interest receivable             |                                 |   | 65       |       |      |   | 22     |      
|                                |                                 |   |          |       |      |   |        |       | 
|                                |                                 | $ | 7,588    |       |      | $ | 5,775  |      
|                                |                                 |   |          |       |      |   |        |       | 

Contracts ReceivableContracts receivable bear interest at rates ranging generally from 5.5% to
19.5%, with a weighted average stated rate of 14% and 13% at June 30, 2001 and
2000, respectively. The obligors weighted average equity in the contracts
receivable at June 30, 2001 and 2000, was 50% and 57%, respectively. As of
June 30, 2001, 96% of the campground members and 99% of purchasers of lots had
paid for their membership or lot in full.

The Company has no obligation to refund moneys received or to provide further
services to purchasers in the event a contract is canceled for the purchasers
nonperformance of contractual obligations. Contracts receivable related to
undivided interests and lot sales are secured by deeds of trust on the related
real estate. The Company does not require campground members to provide
collateral or other security for related contracts receivable.

Allowance for Doubtful AccountsIn fiscal 2000 and 1999, the Company reduced the allowance for doubtful
accounts on the contracts receivable by $251,000 and $886,000, respectively.
These adjustments were made because the Company experienced lower contract
losses than anticipated in these years.

The allowance for doubtful accounts is an estimate of the contracts receivable
that will cancel in the future and is determined based on historical
cancellation rates and other factors deemed relevant to the analysis. The
Company does not presently anticipate any further adjustments to the allowance
for doubtful accounts on the contracts receivable. However, the allowance and
the rate at which the Company provides for future losses on its contracts
receivable could be increased or decreased in the future based on the Companys
actual collection experience.

Allowance for Interest DiscountAmortization of the allowance for interest discount totaled $98,000 and
$136,000 for the years ended June 30, 2000 and 1999, respectively, which
increased interest income. This allowance was fully amortized at June 30, 2000.

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Allowance for Collection CostsAmortization of the allowance for collection costs totaled $98,000 and $136,000
for the years ended June 30, 2000 and 1999, respectively, which decreased
general and administrative expense. This allowance was fully amortized at June
30, 2000.

Valuation AllowanceAmortization of the valuation allowance totaled $33,000 and $45,000 for the
years ended
June 30, 2000 and 1999, respectively, which increased interest income. This
allowance was fully amortized at June 30, 2000.

At June 30, 2001, scheduled future receipts on contracts receivable are as
follows (dollars in thousands):

|           |       |   |                     |       |      |   |       |   |  |   |       |       | 
|---------- | ----- | - | ------------------- | ----- | ---- | - | ----- | - |  | - | ----- | ----- | 
|           |       |   | Memberships and     |       |      |   |       |   |  |   |      
|           |       |   | Undivided Interests |       | Lots |   | Total
|           |       |   |                     |       |      |   |      
|2002       |       | $ | 3,093               |       |      | $ | 6     |   |  | $ | 3,099 |      
|          
|          
|          
|          
|2003       |       |   | 2,821               |       |      |   | 1     |   |  |   | 2,822 |      
|          
|          
|          
|          
|2004       |       |   | 2,220               |       |      |   | 1     |   |  |   | 2,221 |      
|          
|          
|          
|          
|2005       |       |   | 1,143               |       |      |   | 1     |   |  |   | 1,144 |      
|          
|          
|          
|          
|2006       |       |   | 365                 |       |      |   |      |   |  |   | 365   |      
|          
|          
|          
|          
|Thereafter |       |   | 226                 |       |      |   |      |   |  |   | 226   |      
|           |       |   |                     |       |      |   |       |   |  |   |       |      
|           | Total |   | $                   | 9,868 |      |   | $     | 9 |  |   | $     | 9,877 | 
|           |       |   |                     |       |      |   |       |   |  |   |       |      

The Company operates 59 campgrounds located in 17 states and British Columbia,
Canada. The largest percentage of campground members (approximately 32%)
reside in California and, as of June 30, 2001, contracts receivable from
members who purchased memberships in California totaled approximately $2.8
million. A large percentage of members (approximately 28%) also reside in
Washington and Oregon and, as of June 30, 2001, contracts receivable from
members who purchased memberships in Washington and Oregon totaled $2.8 million
and $1.3 million, respectively.

NOTE 7  CAMPGROUND PROPERTIES

Campground properties consisted of the following as of June 30, 2001 and 2000
(dollars in thousands):

|                                                                       |  |          |         |      |  |   |         |  
|---------------------------------------------------------------------- |  | -------- | ------- | ---- |  | - | ------- | -
|                                                                       |  | June 30,
|                                                                       |  |         
|                                                                       |  | 2001     |         | 2000
|                                                                       |  |          |         |     
|Assets held for sale                                                   |  | $        | 5,530   |      |  | $ | 2,895   |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Campground land at campgrounds where right-to-use
memberships are sold |  |          | 18,603  |      |  |   | 20,888  |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Campground land at campgrounds where undivided
interest were sold      |  |          | 2,093   |      |  |   | 2,093   |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Property and equipment                                                 |  |          | 41,344  |      |  |   | 41,982  |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Construction in progress                                               |  |          | 1,194   |      |  |   | 146     |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Accumulated depreciation                                               |  |          | (21,573 | )    |  |   | (19,854 | )
|                                                                       |  |          |         |      |  |   |         |  
|                                                                       |  | $        | 47,191  |      |  | $ | 48,150  |  
|                                                                       |  |          |         |      |  |   |         |  

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The Company sells campground memberships that give members the right to use one
or more of the Companys campgrounds but do not convey a deeded interest in the
campgrounds. Until 1990, the Company also sold campground memberships that
gave members a deeded undivided interest in one of six campgrounds. At the six
campgrounds where undivided interests were sold, the Company is not required to
seek the consent of the campground members to sell or encumber the Companys
interest in the campgrounds.

As of June 30, 2001 and 2000, the Company owned the following property at
resorts not related to the campground operations (dollars in thousands):

|                   |  |          |    |      |  |   |    | 
|------------------ |  | -------- | -- | ---- |  | - | -- | 
|                   |  | June 30,
|                   |  |         
|                   |  | 2001     |    | 2000
|                   |  |          |    |     
|Land held for sale |  | $        | 70 |      |  | $ | 70 | 

NOTE 8  DEFERRED REVENUE AND DEFERRED SELLING EXPENSES

Deferred revenue was comprised of the following as of June 30, 2001 and 2000
(dollars in thousands):

|                            |  |          |        |      |  |   |        | 
|--------------------------- |  | -------- | ------ | ---- |  | - | ------ | 
|                            |  | June 30,
|                            |  |         
|                            |  | 2001     |        | 2000
|                            |  |          |        |     
|Deferred revenue -          |  |          |        |      |  |   |        | 
|                           
|                           
|                           
|                           
|Campground membership sales |  | $        | 30,175 |      |  | $ | 16,812 | 
|                           
|                           
|                           
|                           
|Campground membership dues  |  |          | 15,466 |      |  |   | 15,466 | 
|                           
|                           
|                           
|                           
|Other                       |  |          | 2,185  |      |  |   | 1,805  | 
|                            |  |          |        |      |  |   |        | 
|                            |  | $        | 47,826 |      |  | $ | 34,083 | 
|                            |  |          |        |      |  |   |        | 

Components of the change in deferred membership selling expenses and deferred
membership sales revenue are as follows (dollars in thousands):

|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |        |  
|------------------------------------------------------- | ------------------------------------ | - | ---------------------------- | ------ | ---- | - | ------ | ------ | - | - | ----- | ------ | -
|                                                        |                                      |   | For the years ended June 30,
|                                                        |                                      |   |                             
|                                                        |                                      |   | 2001                         |        | 2000 |   | 1999  
|                                                        |                                      |   |                              |        |      |   |       
|Deferred membership selling expenses,
beginning of year |                                      | $ | 5,177                        |        |      | $ | 2,065  |        |   | $ | 1,625 |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred                             |   |                              | 5,880  |      |   |        | 4,110  |   |   |       | 1,170  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Recognized                           |   |                              | (2,141 | )    |   |        | (998   | ) |   |       | (730   | )
|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |       
|                                                        | Increase in deferral                 |   |                              | 3,739  |      |   |        | 3,112  |   |   |       | 440    |  
|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |       
|Deferred membership selling expenses, end
of year       |                                      |   | 8,916                        |        |      | $ | 5,177  |        |   | $ | 2,065 |       
|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |       
|Deferred membership sales revenue,
beginning of year    |                                      |   | 16,812                       |        |      | $ | 8,464  |        |   | $ | 6,943 |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Membership contracts originated      |   |                              | 22,903 |      |   |        | 13,912 |   |   |       | 5,480  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Less provision for doubtful accounts |   |                              | (781   | )    |   |        | (709   | ) |   |       |       |  
|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |       
|                                                        | Membership contracts originated, net |   |                              | 22,122 |      |   |        | 13,203 |   |   |       | 5,480  |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Membership revenue recognized        |   |                              | (8,759 | )    |   |        | (4,855 | ) |   |       | (3,959 | )
|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |       
|                                                        | Increase in deferral                 |   |                              | 13,363 |      |   |        | 8,348  |   |   |       | 1,521  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Deferred membership sales revenue,
end of year          |                                      | $ | 30,175                       |        |      | $ | 16,812 |        |   | $ | 8,464 |       
|                                                        |                                      |   |                              |        |      |   |        |        |   |   |       |       

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NOTE 9  LONG-TERM DEBT

Line of Credit with Union Bank

On July 1, 2001, the Company established a $15.0 million revolving, secured
line of credit (Line of Credit) with Union Bank of California, N.A. (Union
Bank). Borrowings under the Line of Credit carry an interest rate of prime
minus 0.75%. The Company may borrow, repay and reborrow under the Line of
Credit from time to time, provided, however, that for at least one day during
each twelve-month period, the principal amount outstanding under the Line of
Credit must be not more than $5.0 million. All borrowings under the Line of
Credit will mature on
July 1, 2003. The Company anticipates using the Line of Credit for general
working capital purposes, although it is permitted under the terms of the Line
of Credit to use up to $5.0 million for acquisitions from time to time. The
Company currently has no borrowings outstanding under the Line of Credit.

The Companys ability to borrow under the Line of Credit for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Line of Credit, including certain
covenants respecting minimum tangible net worth, minimum adjusted EBITDA (as
defined) and minimum total debt to adjusted EBITDA. The Line of Credit
prohibits the Company from borrowing from other sources.

The Company has granted liens on substantially all of its assets, other than
its real estate, to secure its obligations under the Line of Credit. In
addition, the Companys principal subsidiaries have guaranteed the Companys
obligations under the Line of Credit and have granted liens on substantially
all of their assets, other than their real estate, to secure their guarantees.

Credit Agreement with Foothill

Through the normal course of operations, in March 2001, the Company repaid all
outstanding borrowings under the Credit Agreement (as amended, the Credit
Agreement) between the Company and Foothill Capital Corporation (Foothill),
and it terminated the Credit Agreement on June 30, 2001. During the periods
presented, borrowings under the Credit Agreement accrued interest at prime plus
 .25% per annum, subject to a minimum interest rate of 7% per annum.

PIK Note Redemption

In December 1998, the Company redeemed all $34.8 million principal amount of
12% Senior Subordinated Pay-in-Kind Notes Due 2003 (PIK Notes) outstanding
and paid $1.7 million of accrued interest.

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Balance Sheet Presentation

Balance sheet presentation of the current and long-term components of the
Companys outstanding debt as of June 30, 2001 and 2000, is reflected below
(dollars in thousands):

|                                   |  |      |   |      |  |   |       | 
|---------------------------------- |  | ---- | - | ---- |  | - | ----- | 
|                                   |  | 2001 |   | 2000
|                                   |  |      |   |     
|Current portion of long-term debt: |  |      |   |      |  |   |       | 
|                                  
|                                  
|                                  
|                                  
|Borrowings under Credit Agreement  |  | $    |  |      |  | $ | 2,571 | 
|                                  
|                                  
|                                  
|                                  
|Long-term debt:                    |  |      |   |      |  |   |       | 
|                                  
|                                  
|                                  
|                                  
|Borrowings under Credit Agreement  |  |      |  |      |  |   | 7,043 | 
|                                   |  |      |   |      |  |   |       | 
|Total debt                         |  | $    |  |      |  | $ | 9,614 | 
|                                   |  |      |   |      |  |   |       | 

NOTE 10  INCOME TAXES

The Company and its subsidiaries have entered into tax sharing agreements,
pursuant to which they file federal income tax returns on a consolidated basis
and allocate tax benefits and liabilities as provided in the agreements. The
agreements provide generally that a subsidiary will reimburse or be reimbursed
by the Company in an amount equal to 100% of any tax amounts that would have
been due or refundable, calculated as if the subsidiary were a stand-alone
taxpayer.

The differences, expressed as a percentage of pretax income, between statutory
and effective federal income tax rates are as follows:

|                                 |  |                              |      |      |  |      |        |    |  |  |      |  
|-------------------------------- |  | ---------------------------- | ---- | ---- |  | ---- | ------ | -- |  |  | ---- | -
|                                 |  | For the years ended June 30,
|                                 |  |                             
|                                 |  | 2001                         |      | 2000 |  | 1999
|                                 |  |                              |      |      |  |     
|Federal statutory tax rate       |  |                              | 34.0 | %    |  |      | 34.0   | %  |  |  | 34.0 | %
|                                
|                                
|                                
|                                
|Provision for state income taxes |  |                              | 1.1  |      |  |      | 5.3    |    |  |  |     |  
|                                
|                                
|                                
|                                
|Nonqualified stock options       |  |                              | (2.0 | )    |  |      | (2.7   | )  |  |  |     |  
|                                
|                                
|                                
|                                
|Other permanent differences      |  |                              | .4   |      |  |      | .5     |    |  |  | .3   |  
|                                
|                                
|                                
|                                
|Change in deferred tax valuation |  |                              |     |      |  |      | (106.5 | )  |  |  | (4.7 | )
|                                 |  |                              |      |      |  |      |        |    |  |  |      |  
|                                 |  |                              | 33.5 | %    |  |      | (69.4  | )% |  |  | 29.6 | %
|                                 |  |                              |      |      |  |      |        |    |  |  |      |  

At June 30, 2001, the Company had estimated net operating tax loss
carryforwards (NOLs) of $7.9 million, expiring in years 2010 through 2014, as
follows (dollars in thousands):

| |  |             |      |          |  |   |       | 
| |  | ----------- | ---- | -------- |  | - | ----- | 
| |  | Year ending |      | Amount  
| |  | June 30,    |      | expiring
| |  |             |      |         
| |  |             | 2010 |          |  | $ | 140   | 
|
|
|
|
| |  |             | 2011 |          |  |   | 5,655 | 
|
|
|
|
| |  |             | 2014 |          |  |   | 2,069 | 
| |  |             |      |          |  |   |       | 
| |  |             |      |          |  | $ | 7,864 | 
| |  |             |      |          |  |   |       | 

The NOLs available for future utilization were generated by a combination of
operating losses and interest expense. Since 1995, the Company has instituted
a number of cost-cutting moves, including closing and disposing of campgrounds
and decreasing campground operating costs and

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general and administrative expenses. In addition, the Company has reduced its
debt load and related interest expense. The Company has generated book income
before taxes of at least
$5.4 million in each of the last three years. In assessing the likelihood of
utilization of existing NOLs, management considered the Companys historical
results and the current operating environment.

A reconciliation of the Companys income before taxes for financial statement
purposes to taxable income (loss) for the three years ended June 30, 2001 is as
follows (dollars in thousands):

|                                                     |                                       |   |                             |       |      |   |       |        |   |   |         |         |  
|---------------------------------------------------- | ------------------------------------- | - | --------------------------- | ----- | ---- | - | ----- | ------ | - | - | ------- | ------- | -
|                                                     |                                       |   | For the year ended June 30,
|                                                     |                                       |   |                            
|                                                     |                                       |   | 2001                        |       | 2000 |   | 1999 
|                                                     |                                       |   |                             |       |      |   |      
|Income before taxes for financial
statement purposes |                                       | $ | 6,429                       |       |      | $ | 5,458 |        |   | $ | 7,915   |        
|                                                    
|                                                    
|                                                    
|                                                    
|Temporary differences related to:                    |                                       |   |                             |       |      |   |       |        |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sales of membership contracts         |   |                             | 7,048 |      |   |       | 1,800  |   |   |         | 1,079   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest expense related to PIK Notes |   |                             |      |      |   |       |       |   |   |         | (10,313 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Contracts receivable                  |   |                             | (479  | )    |   |       | 1,127  |   |   |         | 966     |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Gain on sale of assets                |   |                             | 885   |      |   |       | 39     |   |   |         | (131    | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                 |   |                             | (591  | )    |   |       | (1,093 | ) |   |         | (1,659  | )
|                                                     |                                       |   |                             |       |      |   |       |        |   |   |         |        
|Total temporary differences                          |                                       |   | 6,863                       |       |      |   | 1,873 |        |   |   | (10,058 | )      
|                                                     |                                       |   |                             |       |      |   |       |        |   |   |         |        
|Permanent difference related to:                     |                                       |   |                             |       |      |   |       |        |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Non-qualified stock options           |   |                             | (381  | )    |   |       | (447   | ) |   |         |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                 |   |                             | 69    |      |   |       | 74     |   |   |         | 74      |  
|                                                     |                                       |   |                             |       |      |   |       |        |   |   |         |        
|Total permanent differences                          |                                       |   | (312                        | )     |      |   | (373  | )      |   |   | 74      |        
|                                                     |                                       |   |                             |       |      |   |       |        |   |   |         |        
|Taxable income                                       |                                       | $ | 12,980                      |       |      | $ | 6,958 |        |   | $ | (2,069  | )      
|                                                     |                                       |   |                             |       |      |   |       |        |   |   |         |        

Temporary differences for each of the years presented are primarily related to
revenue recognition on membership contracts, interest expense deductions, gains
on collections of the contracts receivable portfolio and gains on asset sales.

For financial statement purposes, the Company recognizes revenue from the sale
of membership contracts, and expenses directly related to the sale, over the
expected life of the membership. For tax purposes, in fiscal year 1999, the
revenue and directly related expenses were recognized in the year of sale. In
fiscal 2001 and 2000, for tax purposes, the Company elected to recognize
revenue from the sale of membership contracts using the installment method,
whereby revenue is recognized as cash is collected. The temporary difference
related to the sale of membership contracts increased taxable income by $7.0
million, $1.8 million, and $1.1 million in the years ended June 30, 2001, 2000,
and 1999, respectively.

Deductions for interest expense related to the PIK Notes were deferred for tax
purposes until the PIK Notes were redeemed in December 1998. The temporary
difference related to interest expense on the PIK Notes decreased taxable
income by $10.3 million in the year ended
June 30, 1999.

The tax basis in the contract receivable portfolio is different than the basis
for financial statement purposes, primarily as a result of elections made for
tax purposes and a difference in the timing of deductions for bad debt expense.
The temporary difference related to basis differences in the

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contract receivable portfolio decreased taxable income by $479,000 in the year
ended
June 30, 2001, and increased taxable income by $1.1 million and $966,000 in the
years ended June 30, 2000, and 1999, respectively.

The tax basis in the Companys property, plant and equipment is different than
the basis for financial statement purposes due to the timing of depreciation
expense deductions, elections made for tax purposes and write-downs of assets
used in the operation of resorts not related to the campground operations. As
a result, when assets are sold, the gain or loss for tax purposes is different
than the gain or loss for book purposes. The temporary difference related to
basis differences in assets sold increased taxable income by $885,000 and
$39,000 in the years ended June 30, 2001 and 2000, respectively, and decreased
taxable income by $131,000 in the year ended June 30, 1999.

Other temporary differences, which primarily relate to the timing of payments
for accrued expenses, reduced taxable income by $591,000, $1.1 million and $1.7
million in the years ended June 30, 2001, 2000 and 1999, respectively.

Permanent differences consist primarily of taxable expenses created by the
exercise of non-qualified stock options and a reduction in taxable expenses
related to non-deductible meals and entertainment expenses. The permanent
difference related to non-qualified stock options decreased taxable income by
$381,000 and $447,000 in the years ended June 30, 2001 and 2000, respectively.
The permanent difference related to non-deductible meals and entertainment
expenses increased taxable income by $69,000 in the year ended June 30, 2001,
and $74,000 in the years ended June 30, 2000 and 1999, respectively.

The components of deferred income taxes as of June 30, 2001 and 2000, were as
follows (dollars in thousands):

|                                         |  |      |        |      |  |   |        |  
|---------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                         |  | 2001 |        | 2000
|                                         |  |      |        |     
|Deferred Tax Assets  Federal            |  |      |        |      |  |   |        |  
|                                        
|                                        
|                                        
|                                        
|Net operating loss carryforwards (NOLs)  |  | $    | 2,675  |      |  | $ | 7,104  |  
|                                        
|                                        
|                                        
|                                        
|Membership sales                         |  |      | 7,228  |      |  |   | 3,956  |  
|                                        
|                                        
|                                        
|                                        
|Alternative minimum tax credit carryover |  |      | 1,868  |      |  |   | 1,563  |  
|                                        
|                                        
|                                        
|                                        
|Unpaid expenses                          |  |      | 1,719  |      |  |   | 1,729  |  
|                                        
|                                        
|                                        
|                                        
|Restructuring costs                      |  |      | 1,338  |      |  |   | 1,397  |  
|                                        
|                                        
|                                        
|                                        
|Deferred revenue                         |  |      | 450    |      |  |   | 423    |  
|                                        
|                                        
|                                        
|                                        
|Bad debt provision                       |  |      | 842    |      |  |   | 1,102  |  
|                                        
|                                        
|                                        
|                                        
|Other                                    |  |      | 235    |      |  |   | 333    |  
|                                         |  |      |        |      |  |   |        |  
|                                         |  |      | 16,355 |      |  |   | 17,607 |  
|                                         |  |      |        |      |  |   |        |  
|Deferred Tax Liabilities  Federal       |  |      |        |      |  |   |        |  
|                                        
|                                        
|                                        
|                                        
|Property basis differences               |  |      | (6,032 | )    |  |   | (6,480 | )
|                                        
|                                        
|                                        
|                                        
|Purchase discount amortization           |  |      |       |      |  |   | (46    | )
|                                        
|                                        
|                                        
|                                        
|Installment sales                        |  |      | (2,603 | )    |  |   | (1,733 | )
|                                         |  |      |        |      |  |   |        |  
|                                         |  |      | (8,635 | )    |  |   | (8,259 | )
|                                         |  |      |        |      |  |   |        |  
|Deferred Tax Asset (Liability)  State   |  |      | 160    |      |  |   | (206   | )
|                                         |  |      |        |      |  |   |        |  
|                                         |  |      |        |      |  |   |        |  
|Net deferred tax assets                  |  | $    | 7,880  |      |  | $ | 9,142  |  
|                                         |  |      |        |      |  |   |        |  

Prior to fiscal 1998, the Company provided a valuation allowance for the amount
by which deferred tax assets exceeded deferred tax liabilities. However, the
Company periodically

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assesses the realizability of its deferred tax assets and considers whether it
is more likely than not that the tax benefits will be realized. The ultimate
realization of the deferred tax assets is dependent upon the Company having
future taxable income during the periods in which the NOLs may be utilized and
other deferred tax assets become deductible.

At the end of fiscal 1998, managements assessment, which considered scheduled
reversals of deferred tax assets and liabilities, projected future taxable
income, and the carryforward periods of the Companys NOLs, was that it is more
likely than not that the Company would realize the benefits of a significant
portion of the net deferred tax assets. As a result, at June 30, 1998, the
Company reduced the valuation allowance by $10.0 million, resulting in net
deferred tax assets after valuation allowance of $10.0 million. In fiscal 1999
the Company reduced the valuation allowance by $401,000, as a result of the
current tax deduction provided by the redemption of the PIK Notes. Prior to
the redemption, the Company deferred deducting the interest expense on the PIK
Notes for tax purposes because interest was paid by issuing additional PIK
Notes. The valuation allowance associated with the PIK Note interest deduction
was reduced after the redemption because the Company determined that it is more
likely than not that it would realize the tax benefits of those deductions. At
June 30, 2000, the Company reversed the remaining
$5.8 million of the valuation allowance because management believes that it is
more likely than not that the Company will generate sufficient taxable income
to realize the net deferred tax assets based upon the current estimates of
future taxable income. The ultimate realization of these income tax benefits
will require aggregate taxable income of approximately $20.9 million during the
carryforward period, $13.0 million of which should be realized for the year
ended
June 30, 2001. The Company will not have to increase current levels of income
to generate this aggregate taxable income over such period. Although the
Company has experienced a declining membership base, it does not expect the net
effect of such decline to prevent the realization of the net deferred tax
assets.

NOTE 11  COMMITMENTS AND CONTINGENCIES

Commitments

Lease CommitmentsThe Company leases equipment and facilities under noncancelable operating
leases with terms in excess of one year. At June 30, 2001, the Companys
future obligations under noncancelable operating leases were as follows
(dollars in thousands):

| |  |             |      |        |  |   |         | 
| |  | ----------- | ---- | ------ |  | - | ------- | 
| |  | Year ending |      |        |  |  
| |  | June 30,    |      | Amount
| |  |             |      |       
| |  |             | 2002 |        |  | $ | 650,298 | 
|
|
|
|
| |  |             | 2003 |        |  |   | 277,728 | 
|
|
|
|
| |  |             | 2004 |        |  |   | 135,804 | 
|
|
|
|
| |  |             | 2005 |        |  |   | 122,143 | 
|
|
|
|
| |  |             | 2006 |        |  |   | 108,312 | 

Accrued Construction CostsThe Company had recorded liabilities of $1.9 million at both June 30, 2001 and
2000, for amounts necessary to complete improvements provided in a registration
statement filed with the U.S. Department of Housing and Urban Development at a
resort not related to the campground

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operations. The costs of such improvements are based upon engineering
estimates and are classified as a current liability in the accompanying
consolidated balance sheets.

Contingencies

General Liability InsuranceCommencing July 1, 1998, the Company obtained insurance covering general
liability losses up to an annual limit of $27.0 million, with no self-insured
deductible. Prior to this date, the Companys insurance covered general
liability losses up to an annual limit of $26.8 million, but required the
Company to pay the first $250,000 per occurrence, with an annual aggregate
exposure of $2.0 million. The Company has provided a liability for estimated
known and unknown claims related to uninsured general liability risks based on
actuarial estimates. As of June 30, 2001 and 2000, the Companys recorded
liability for estimated losses related to uninsured general liability claims
totaled $577,000 and $650,000, respectively, which is included in other
liabilities in the accompanying consolidated balance sheets.

Employee Health InsuranceThe Company has employee benefit plans that are funded primarily through
employer and employee contributions (see Note 16).

Workers Compensation InsuranceCommencing July 1, 1998, the Company obtained insurance covering workers
compensation claims with no self-insured deductible. Prior to this date, the
Companys insurance program required the Company to pay up to $250,000 per
occurrence and to deposit funds with the insurance company to pay claims in
excess of the estimated claims that were covered by the amounts originally paid
by the Company. These deposits were generally expensed in the years the
deposits were made because the Company anticipated that the deposits would be
used to cover claims. In fiscal 2001 and 2000, the Company increased its
reserves for workers compensation claims by $160,000 and $138,000,
respectively, because the Company estimates that it will be required to pay
additional amounts in future periods to cover claims not covered by the
deposits originally made by the Company.

Declining Membership BaseThe Company derives a significant portion of its ongoing operating revenue from
its campground members (93% in fiscal 2001). The Companys membership base has
declined over the past five fiscal years, although the Company has been
successful in slowing the rate of this attrition. While the acquisition of
Leisure Time increased the size of the membership base, the Company expects
that, notwithstanding new sales, the membership base will continue to decline
at the rate of approximately 2% per year. The Company attributes this
attrition principally to its aging membership base, of whom approximately 50%
are senior citizens. Moreover, the Company estimates that the memberships sold
in recent fiscal years will have an expected life that is shorter than the
expected life of the memberships previously sold by the Company. To stop the
continuing decline in its membership base, the Company must increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground organizations, similar to the
acquisition of Leisure Time.

Environmental IssuesCertain environmental issues may exist at some of the Companys campgrounds
concerning underground storage tanks, sewage treatment plants and septic
systems, and waste disposal.

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Management has reviewed these issues and believes that they will not have a
material adverse impact on the Companys operations or financial position.

LitigationThe Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Companys
operations or financial position.

NOTE 12  SHAREHOLDERS EQUITY

The Company had shares of Common Stock outstanding as follows:

|              |             |  |           |          |  
|------------- | ----------- |  | --------- | -------- | -
|June 30, 1998 |             |  | 7,437,083 |         
|             
|             
|             
|             
|              | Issuances   |  |           | 662,245  |  
|             
|             
|             
|             
|              | Repurchases |  |           | (3,200   | )
|              |             |  |           |         
|June 30, 1999 |             |  | 8,096,128 |         
|             
|             
|             
|             
|              | Issuances   |  |           | 74,364   |  
|             
|             
|             
|             
|              | Repurchases |  |           | (189,900 | )
|              |             |  |           |         
|June 30, 2000 |             |  | 7,980,592 |         
|             
|             
|             
|             
|              | Issuances   |  |           | 210,031  |  
|             
|             
|             
|             
|              | Repurchases |  |           | (23,500  | )
|              |             |  |           |         
|June 30, 2001 |             |  | 8,167,123 |         
|              |             |  |           |         

Transfer of Common Stock is subject to restrictions designed to avoid an
ownership change within the meaning of Section 382 of the Internal Revenue
Code of 1986, as amended (the Code). Such restrictions are set forth in
Article IX of the Companys Restated Certificate of Incorporation. Article IX
generally restricts, until June 30, 2011 (or earlier in certain events), direct
or indirect transfer of Common Stock that would without the approval of the
Board of Directors of the Company (i) increase to more than 4.75% the
percentage ownership of Common Stock of any person who at any time during the
preceding three-year period did not own more that 4.75% of the Common Stock,
(ii) increase the percentage of Common Stock owned by any person that during
the preceding three-year period owned more than 4.75% of the Common Stock, or
by any group of persons treated as a 5 Percent Shareholder (as defined in the
Code but substituting 4.75% for 5 Percent), or (iii) cause an ownership
change of the Company. Article IX provides that any direct or indirect
transfer of Common Stock in violation of Article IX is void ab initioas to the
purported transferee, and the purported transferee will not be recognized as
the owner of shares acquired in violation of Article IX for any purpose,
including for purposes of voting and receiving dividends or other distributions
in respect of Common Stock. Any shares purportedly acquired in violation of
Article IX will be transferred to a trustee who will be required to sell them.

The Companys Restated Certificate of Incorporation provides for the issuance
of 15,000,000 shares of Common Stock, par value of $.01 per share. In
addition, the Companys Restated Certificate of Incorporation provides for the
issuance of 1,500,000 shares of preferred stock, par value $.01 per share, none
of which have been issued to date.

The Company has granted stock options to the Companys CEO and other key
employees and non-employee directors (see Note 15).

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Since inception, the Company has not paid any dividends and, at the present
time, it has no plans to pay dividends.

NOTE 13  SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of non-cash investing and financing activities
required by SFAS
No. 95 Statement of Cash Flows are presented below for the years ended June
30, 2001, 2000 and 1999 (dollars in thousands):

|                                                   |  |                             |  |      |  |      |   |  |  |   |  |  |  |  |   |  |  |   |       | 
|-------------------------------------------------- |  | --------------------------- |  | ---- |  | ---- | - |  |  | - |  |  |  |  | - |  |  | - | ----- | 
|                                                   |  | For the year ended June 30,
|                                                   |  |                            
|                                                   |  | 2001                        |  | 2000 |  | 1999
|                                                   |  |                             |  |      |  |     
|Non-cash payment of PIK Note interest (see Note 9) |  |                             |  |      |  |      |   |  |  |   |  |  |  |  |   |  |  |   |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|PIK Notes issued in lieu of cash interest payment  |  | $                           |  |      |  |      |  |  |  | $ |  |  |  |  |  |  |  | $ | 1,969 | 

NOTE 14  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Companys financial instruments as of June 30,
2001 and 2000, as well as their carrying amounts as reported in the
accompanying consolidated balance sheets, are as follows (dollars in
thousands):

|                                  |  |               |        |               |  |        |       |            |  |   |        |   |  |   |       | 
|--------------------------------- |  | ------------- | ------ | ------------- |  | ------ | ----- | ---------- |  | - | ------ | - |  | - | ----- | 
|                                  |  | June 30, 2001 |        | June 30, 2000
|                                  |  |               |        |              
|                                  |  | Carrying      |        |               |  |        |       | Carrying   |  |   |        |  
|                                  |  | Amount        |        | Fair Value    |  | Amount |       | Fair Value
|                                  |  |               |        |               |  |        |       |           
|Financial Assets:                 |  |               |        |               |  |        |       |            |  |   |        |   |  |   |       | 
|                                 
|                                 
|                                 
|                                 
|Cash and cash equivalents         |  | $             | 9,016  |               |  | $      | 9,016 |            |  | $ | 2,420  |   |  | $ | 2,420 | 
|                                 
|                                 
|                                 
|                                 
|Restricted cash                   |  |               | 646    |               |  |        | 646   |            |  |   | 1,320  |   |  |   | 1,320 | 
|                                 
|                                 
|                                 
|                                 
|Contracts receivable              |  |               | 9,877  |               |  |        |       |            |  |   | 7,703  |   |  |   |       | 
|                                 
|                                 
|                                 
|                                 
|Less: allowances and discount     |  |               | (2,289 | )             |  |        |       |            |  |   | (1,928 | ) |  |   |       | 
|                                  |  |               |        |               |  |        |       |            |  |   |        |   |  |   |       | 
|                                  |  |               | 7,588  |               |  |        | 7,775 |            |  |   | 5,775  |   |  |   | 5,800 | 
|                                 
|                                 
|                                 
|                                 
|Financial Liabilities:            |  |               |        |               |  |        |       |            |  |   |        |   |  |   |       | 
|                                 
|                                 
|                                 
|                                 
|Borrowings under Credit Agreement |  |               |       |               |  |        |      |            |  |   | 9,614  |   |  |   | 9,614 | 

The following methods and assumptions were used to estimate the fair value of
each class of the Companys financial instruments as of June 30, 2001 and 2000,
for which it is practical to estimate that value.

Cash and Cash Equivalents and Restricted CashThe carrying amount approximates fair value because of the short maturity of
these instruments.

Borrowings Under Credit AgreementThe carrying amount approximates fair value because the borrowings under the
Credit Agreement bear a market rate of interest.

Contracts ReceivableThe fair value of contracts receivable was estimated by discounting the future
cash flows using the current rates at which the Company estimates a similar
loan portfolio would be purchased by
a willing third party, after considering risk factors regarding collectibility
and future collection costs.

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Significant estimates and present value calculations were used by the Company
for purposes of this disclosure. Changes in assumptions or estimation
methodologies may have a material effect on these estimated fair values.
Additionally, lack of uniform valuation methodologies introduces a greater
degree of subjectivity to these estimated values.

The Company did not have any financial instruments as of the balance sheet
dates presented that were held for trading purposes.

NOTE 15  STOCK OPTIONS AND WARRANTS

Stock Options

CEO OptionsAt their annual meeting in November 1996, the shareholders of the Company
approved the grant to the Companys CEO of options to purchase 664,495 shares
of Common Stock at $0.69 per share. These options are 100% vested and are
exercisable for a period of ten years while the CEO is in the employ of the
Company, subject to certain exceptions. The exercise of the options, however,
is subject to restrictions designed to prevent an ownership change for
federal tax purposes (see Note 12). As of the date of this report, 444,927 of
these options have been exercised.

Subsequent to year-end, the Company granted its CEO 600,000 additional options
under the
2001 Stock Option and Restricted Stock Purchase Plan. The options were
approved by the Board of Directors and will be voted upon by the shareholders
at their annual meeting.

1991 Employee PlanEffective December 31, 1991, the Company adopted the 1991 Employee Stock
Incentive Plan (the 1991 Employee Plan) to enable the Company and its
subsidiaries to attract, retain and motivate their officers, employees and
directors. Awards under the 1991 Employee Plan may take various forms,
including (i) shares of Common Stock, (ii) options to acquire shares of Common
Stock (Options), (iii) securities convertible into shares of Common Stock,
(iv) stock appreciation rights, (v) phantom stock or (vi) performance units.
Options granted under the 1991 Employee Plan may be (i) incentive stock options
(ISOs), which have certain tax benefits and restrictions, or (ii)
non-qualified stock options (Non-qualified Options), which do not have any
tax benefits and have few restrictions.

The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1991 Employee Plan until December 30, 2001. The
recipient of an award duly granted on or prior to such date may thereafter
exercise or settle it in accordance with its terms, although the Company may
not issue any shares of Common Stock pursuant to any award after December 30,
2011.

The Board of Directors may amend or terminate the 1991 Employee Plan at any
time and in any manner, provided that (i) an amendment or termination may not
affect an award previously granted without the recipients consent, and (ii) an
amendment will not be effective until the shareholders approve it if any
national securities exchange or securities association that lists any of the
Companys securities requires shareholder approval or if Rule 16b-3 requires
shareholder approval.

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The Company reserved 291,780 shares of Common Stock for issuance under the 1991
Employee Plan. To date, options for 164,281 shares are outstanding under the
1991 Employee Plan and options for 127,499 shares have been exercised. 159,281
of the outstanding options are fully vested and the remaining 5,000 options
will vest in May 2002. The options have a term of ten years from the date of
grant.

1993 Employee PlanOn December 2, 1993, the Company adopted the 1993 Stock Option and Restricted
Stock Purchase Plan (the 1993 Employee Plan) in order to enable the Company
and it subsidiaries to attract, retain and motivate their officers and
employees. Awards under the 1993 Employee Plan are restricted to (i) awards of
the right to purchase shares of Common Stock (Stock Awards), or (ii) awards
of Options, which may be either ISOs or Non-qualified Options. The purchase
price for any Stock Awards and the exercise price for any Non-qualified Options
may be less than the fair market value of the Common Stock on the date of
grant. The exercise price of any ISOs may not be less than the fair market
value of the Common Stock on the date of grant.

The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1993 Employee Plan until October 20, 2003. The
termination of the 1993 Employee Plan, however, will not alter or impair any
rights or obligations under any award previously granted under the plan.

The Board of Directors may amend or terminate the 1993 Employee Plan at any
time and in any manner, provided that (i) an amendment or termination may not
affect an award previously granted without the recipients consent, (ii) an
amendment will not be effective until the shareholders approve it if any
national securities exchange or securities association that lists any of the
Companys securities requires shareholder approval or if Rule 16b-3 requires
shareholder approval and (iii) the shareholders must approve any amendment
decreasing the minimum exercise price specified in the plan for any ISO granted
thereunder.

The Company reserved 285,919 shares of Common Stock for issuance under the 1993
Employee Plan. To date, options for 130,419 shares are outstanding under the
1993 Employee Plan and options for 153,000 shares have been exercised. 126,254
of the outstanding options are fully vested and the remaining 4,165 options
will vest in May 2002. The options have a term of ten years from the date of
grant.

1999 Employee PlanOn November 18, 1999, the Company adopted the 1999 Stock Option and Restricted
Stock Purchase Plan (the 1999 Employee Plan) in order to enable the Company
and it subsidiaries to attract, retain, and motivate their officers, employees
and directors. Awards under the 1999 Employee Plan are restricted to (i) Stock
Awards, or (ii) awards of Options, which may be either ISOs or Non-qualified
Options. The purchase price for any Stock Awards and the exercise price for
any Non-qualified Options may be less than the fair market value of the Common
Stock on the date of grant. The exercise price of any ISOs may not be less
than the fair market value of the Common Stock on the date of grant.

The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1999 Employee Plan until September 27, 2009. The
termination of the 1999 Employee Plan, however, will not alter or impair any
rights or obligations under any award previously granted under the plan.

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The Board of Directors may amend or terminate the 1999 Employee Plan at any
time and in any manner, provided that (i) an amendment or termination may not
affect an award previously granted without the recipients consent, (ii) an
amendment will not be effective until the shareholders approve it if any
national securities exchange or securities association that lists any of the
Companys securities requires shareholder approval and (iii) the shareholders
must approve any amendment decreasing the minimum exercise price specified in
the plan for any ISO granted thereunder.

The Company reserved 140,000 shares of Common Stock for issuance under the 1999
Employee Plan. To date, options for 50,000 shares are outstanding under the
1999 Employee Plan, none of which have been exercised. 15,000 of the
outstanding options are fully vested and the remaining 35,000 options will vest
at the rate of 33 1/3% beginning December 2002. The options have a term of ten
years from the date of grant.

Director PlanOn December 2, 1993, the Company adopted the 1993 Director Stock Option Plan
(the Director Plan), which provides for the grant of Non-qualified Options to
non-employee directors of the Company. The Company reserved 50,000 shares of
Common Stock for issuance under the Director Plan. To date, options for 40,000
shares are outstanding under the Director Plan, all of which are vested, and
options for 10,000 shares have been exercised. The options have a term of ten
years from the date of grant.

The Director Plan was a formula plan, pursuant to which each non-employee
director automatically received a grant of Non-qualified Options to purchase
5,000 shares of Common Stock on the day immediately after each annual meeting
of the shareholders at which directors are elected, beginning with the annual
meeting held in December 1993. If on any such day, the number of shares of
Common stock remaining available for issuance under the Director Plan was
insufficient for the grant of the total number of Non-qualified Options to
which all participants would otherwise be entitled, each participant received
Non-qualified Options to purchase a proportionate number of the available
number of remaining shares. The exercise price of each Non-qualified Option is
equal to the fair market value on the date of grant of such Option as
determined under the Director Plan. Generally, the Director Plan specifies
that such fair market value is the average trading price of the Common Stock
during the period beginning 45 days before the date of grant and ending 15 days
before the date of grant.

SFAS No. 123 DisclosuresSFAS No. 123 defines a fair value method of accounting for employee stock
options which provides for compensation cost to be charged to results of
operations at the grant date. The Company has adopted the disclosure-only
provisions of SFAS No. 123 and follows the accounting treatment prescribed by
Accounting Pronouncement Bulletin Opinion No. 25 (APB 25) in accounting for
stock options issued to its employees and directors. Accordingly, no
compensation cost was recognized in connection with the grant of options during
the periods presented. Had compensation cost for the stock options issued been
based on the fair value of the options at the grant dates, consistent with SFAS
No. 123, the Companys net income and net income per diluted share for the
years ended June 30, 2001, 2000 and 1999, would have been $4.2 million or $.49
per diluted share, $9.2 million or $1.08 per diluted share and $5.5 million or
$.65 per diluted share, respectively.

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Pro forma results under SFAS No. 123 for the years presented are not likely to
be representative of future pro forma results because, for example, additional
awards may be made in future years.

Set forth below is a summary of awards of stock options made by the Company
during the years ended June 30, 2001, 2000, and 1999, and awards outstanding as
of the end of those years:

|                                        |  |        |  |       |  |        |          |       |  |          |      |       |  |  |         |          |  |   |      |  |  |          |           |   |  |   |      | 
|--------------------------------------- |  | ------ |  | ----- |  | ------ | -------- | ----- |  | -------- | ---- | ----- |  |  | ------- | -------- |  | - | ---- |  |  | -------- | --------- | - |  | - | ---- | 
|                                        |  | 2001   |  | 2000  |  | 1999  
|                                        |  |        |  |       |  |       
|                                        |  |        |  |       |  |        |          |       |  | Weighted |      |       |  |  |         | Weighted |  |   |      |  |  | Weighted
|                                        |  |        |  |       |  |        |          |       |  | Average  |      |       |  |  |         | Average  |  |   |      |  |  | Average 
|                                        |  |        |  |       |  |        |          |       |  | Exercise |      |       |  |  |         | Exercise |  |   |      |  |  | Exercise
|                                        |  | Shares |  | Price |  | Shares |          | Price |  | Shares   |      | Price
|                                        |  |        |  |       |  |        |          |       |  |          |      |      
|Options outstanding,
beginning of year  |  |        |  |       |  |        | 756,768  |       |  | $        | 1.07 |       |  |  | 831,268 |          |  | $ | 1.05 |  |  |          | 1,191,495 |   |  | $ | .78  | 
|                                       
|                                       
|                                       
|                                       
|Options granted                         |  |        |  |       |  |        | 50,000   |       |  | $        | 4.75 |       |  |  |        |          |  |   |     |  |  |          | 55,200    |   |  | $ | 4.15 | 
|                                       
|                                       
|                                       
|                                       
|Options cancelled                       |  |        |  |       |  |        |         |       |  |          |     |       |  |  | (2,500  | )        |  | $ | 4.25 |  |  |          | (5,000    | ) |  | $ | .63  | 
|                                       
|                                       
|                                       
|                                       
|Options exercised                       |  |        |  |       |  |        | (202,500 | )     |  | $        | .69  |       |  |  | (72,000 | )        |  | $ | .72  |  |  |          | (410,427  | ) |  | $ | .71  | 
|                                        |  |        |  |       |  |        |          |       |  |          |      |       |  |  |         |          |  |   |      |  |  |          |           |   |  |   |      | 
|Options outstanding,
end of year        |  |        |  |       |  |        | 604,268  |       |  | $        | 1.50 |       |  |  | 756,768 |          |  | $ | 1.07 |  |  |          | 831,268   |   |  | $ | 1.05 | 
|                                        |  |        |  |       |  |        |          |       |  |          |      |       |  |  |         |          |  |   |      |  |  |          |           |   |  |   |      | 
|Options exercisable,
end of year        |  |        |  |       |  |        | 560,101  |       |  | $        | 1.25 |       |  |  | 738,435 |          |  | $ | .99  |  |  |          | 801,268   |   |  | $ | .83  | 
|                                        |  |        |  |       |  |        |          |       |  |          |      |       |  |  |         |          |  |   |      |  |  |          |           |   |  |   |      | 
|Shares available for
grant, end of year |  |        |  |       |  |        | 92,500   |       |  |          | n/a  |       |  |  | 142,500 |          |  |   | n/a  |  |  |          |          |   |  |   | n/a  | 
|                                        |  |        |  |       |  |        |          |       |  |          |      |       |  |  |         |          |  |   |      |  |  |          |           |   |  |   |      | 

The weighted-average fair value of stock options granted during the years ended
June 30, 2001 and 1999 was $1.81 and $1.74, respectively. No options were
granted during the year ended June 30, 2000. For the years ended June 30, 2001
and 1999, the value of each option grant was estimated as of the date of grant
using the Black-Scholes option pricing model with the following
weightedaverage assumptions: (1) a risk-free interest rate of 4.28% and 5.82%,
respectively, (2) an expected life of four years and three years, respectively
(3) expected volatility of 41.46% and 52.58%, respectively, and (4) no dividend
yield, as the Company has not paid any dividends since inception.

The following table summarizes information about the Companys stock options
outstanding as of June 30, 2001:

|                |  |               |         |                  |         |                     |  |                     |            |          |      |             |         |          |         |         |      |          |      |      |  |  |  | 
|--------------- |  | ------------- | ------- | ---------------- | ------- | ------------------- |  | ------------------- | ---------- | -------- | ---- | ----------- | ------- | -------- | ------- | ------- | ---- | -------- | ---- | ---- |  |  |  | 
|                |  |               |         |                  |         | Options Outstanding |  | Options Exercisable
|                |  |               |         |                  |         |                     |  |                    
|                |  |               |         |                  |         |                     |  |                     |            | Weighted |      | Weighted    |         |          |         |         |      | Weighted
|                |  |               |         |                  |         | Number              |  | Average             |            | Average  |      | Number      |         | Average 
|                |  |               |         |                  |         | Outstanding         |  | Remaining           |            | Exercise |      | Exercisable |         | Exercise
|Range of Prices |  | at 6/30/01    |         | Contractual Life |         | Price               |  | at 6/30/01          |            | Price   
|                |  |               |         |                  |         |                     |  |                     |            |         
|Option Plans:   |  |               |         |                  |         |                     |  |                     |            |          |      |             |         |          |         |         |      |          |      |     
|               
|               
|               
|               
|                |  | $.59 - $1.08  |         |                  | 257,000 |                     |  | 4.87 years          |            | $        | .77  |             |         |          | 257,000 |         |      | $        | .77  |     
|               
|               
|               
|               
|                |  | $3.71 - $4.25 |         |                  | 77,700  |                     |  | 7.39 years          |            | $        | 4.08 |             |         |          | 68,533  |         |      | $        | 4.05 |     
|               
|               
|               
|               
|                |  |               | $4.75   |                  |         | 50,000              |  |                     | 9.46 years |          | $    | 4.75        |         |          |         | 15,000  |      |          | $    | 4.75 | 
|               
|               
|               
|               
|CEO Options:    |  |               |         |                  |         |                     |  |                     |            |          |      |             |         |          |         |         |      |          |      |     
|               
|               
|               
|               
|                |  | $.69          |         |                  |         | 219,568             |  |                     | 5.08 years |          | $    | .69         |         |          |         | 219,568 | 1    |          | $    | .69  | 
|                |  |               |         |                  |         |                     |  |                     |            |          |      |             |         |          |         |         |      |          |      |     
|                |  |               | 604,268 |                  |         | 5.65 years          |  | $                   | 1.50       |          |      |             | 560,101 |          |         | $       | 1.25 |         
|                |  |               |         |                  |         |                     |  |                     |            |          |      |             |         |          |         |         |      |          |      |     

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Warrants

During fiscal 1999, the holders thereof exercised warrants to acquire 244,308
shares of Common Stock at $4.24 per share, and  warrants to acquire 7,510
shares of Common Stock at $1.625 per share.

NOTE 16  EMPLOYEE BENEFIT PLANS

Flexible Benefits Plan Trust FundEffective July 1, 1992, the Company established a trust (the Trust) to fund
the Companys employee benefit plans (collectively, the Plans). The Plans
include the Companys medical plan, dental plan, disability plan, life
insurance plan, and accidental death and dismemberment plan and any other
employee welfare benefit plan permissible under Section 3(1) of the Employee
Retirement Income Security Act of 1974. The Company has adopted a flexible
benefits plan established pursuant to Section 125 of the Code to furnish
eligible employees with a choice of receiving cash or certain statutory taxable
or non-taxable benefits under the plan.

The medical and dental benefits provided to the Companys employees under the
Plans are funded primarily through employer and employee contributions to the
Trust. In addition, the Company has purchased stop loss insurance which
protects the Plans against claims in excess of set policy amounts. The Company
has provided a liability for estimated future claims of $709,000 and $817,000
at June 30, 2001 and 2000, respectively, which is included in other liabilities
in the accompanying consolidated balance sheets. This liability is based on
actuarial estimates of amounts needed to fund expected claims, as well as
premium payments and administrative costs of the Plans.

The Company from time-to-time makes contributions to the Trust, which are
irrevocable. Trust assets may not revert to or inure to the benefit of the
Company. Neither the Company, administrator, nor trustee is responsible for
the adequacy of the Trust.

While the trustee has virtual plenary authority to manage and invest trust
assets, the trustee is required to use trust assets and income exclusively to
provide benefits under the Plans and to defray reasonable expenses of
administering the Plans.

Employee Savings TrustEffective July 1, 1994, the Company adopted the Thousand Trails, Inc. Employees
Savings Trust (the 401(k) Plan) for the purpose of establishing a
contributory employee savings plan exempt under Section 401(k) of the Code. An
eligible employee participating in this plan may contribute up to 15% of his or
her annual salary, subject to certain limitations. In addition, the Company
may make discretionary matching contributions as determined annually by the
Company. The Company made matching contributions totaling approximately
$150,000 for the year ended
June 30, 2001, and has committed to make matching contributions for the
calendar year ended December 31, 2001, in an amount equal to 45% of the
voluntary contributions made by each participant, up to 4% of the participants
annual compensation (or a maximum of 1.8% of the participants annual
compensation). Employer contributions are subject to a seven-year vesting
schedule.

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Non-Qualified Deferred Compensation PlanEffective April 23, 1998, the Company established the Thousand Trails, Inc.
Non-Qualified Deferred Compensation Plan (the Non-Qualified Plan) for the
purpose of establishing a deferred compensation plan for certain highly
compensated employees of the Company. An eligible employee participating in
this plan may contribute up to 10% of his or her annual salary subject to
certain limitations. In addition, the Company may make discretionary matching
contributions determined solely at the discretion of the Company. The Company
made matching contributions of approximately $15,000 for the year ended June
30, 2001, and has committed to make matching contributions for the calendar
year ended December 31, 2001, in an amount equal to 45% of the combined
voluntary contributions to the Non-Qualified Plan and 401(k) Plan made by each
participant, up to 4% of the participants annual compensation (or a maximum of
1.8% of the participants annual compensation). Employer contributions are
fully vested at the time the contributions are made.

Employee Stock Purchase PlanEffective August 1, 1999, the Company adopted the Thousand Trails, Inc.
Employee Stock Purchase Plan (the Stock Purchase Plan) to give employees and
non-employee directors of the Company an opportunity to purchase Common Stock
through payroll deductions. Under the terms of the Stock Purchase Plan,
participants may defer between 1% and 10% of their annual compensation, which
is used to purchase shares of Common Stock on a semi-annual basis. The
purchase price paid by participants is 85% of the closing price of the Common
Stock as reported by the American Stock Exchange on the date of purchase. The
Company pays the other 15% of the purchase price, plus commissions, and the
other costs of administering the Stock Purchase Plan. During the years ended
June 30, 2001 and 2000, employees purchased 7,531 and
2,364 shares of Common Stock. Pursuant to APB No. 25, the Company did not
record any expense in connection with this plan.

NOTE 17  SEGMENT REPORTING

The Company has three reportable segments: campgrounds, RPI, and Trails
Management. The campground segment generates a majority of the Companys
operating revenues. Each segment is differentiated by the products or services
it offers.

The campground segment consists of 59 membership-based campgrounds in 17 states
and British Columbia, Canada. Operations within the campground segment include
(i) the sale of memberships entitling the member to use campground facilities,
(ii) the sale of undivided interests related to fee simple sales of interests
in campground facilities, and (iii) net revenues earned from operations at the
campgrounds. Separate information regarding Canadian campground operations is
not presented as revenues and identifiable assets related to the Canadian
operations are less than 10% of the related consolidated amounts for the
periods presented.

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RPI sells memberships that allow members to use any of the approximately 300
recreational facilities participating in RPIs reciprocal use system, subject
to certain limitations. Operating revenue consists of annual membership fees
paid by members.

Trails Management manages 241 public campgrounds for the U.S. Forest Service
and other entities. Operating revenue consists of the campsite usage fees paid
by customers staying at the public campgrounds.

The Company evaluates performance based upon the income before income taxes for
each business segment. Identifiable assets are those assets used exclusively
in the operations of each business segment.

|                                  |  |                          |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------ | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Year ended June 30, 2001
|                                  |  |                         
|                                  |  |                          |        |     |  |            |       |           |  | Trails       |       | Corporate |  |   |        |  
|                                  |  | Campgrounds              |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                          |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                        | 57,929 |     |  | $          | 3,713 |           |  | $            | 3,082 |           |  | $ | 168    |   |  | $ | 64,892 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                          | 9,540  |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 9,540  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                          | 11,676 |     |  |            | 1,893 |           |  |              | (250  | )         |  |   | (6,890 | ) |  |   | 6,429  | 
|                                 
|                                 
|                                 
|                                 
|Identifiable assets               |  |                          | 65,563 |     |  |            | 193   |           |  |              | 272   |           |  |   | 17,921 |   |  |   | 83,949 | 
|                                 
|                                 
|                                 
|                                 
|Depreciation expense              |  |                          | 2,550  |     |  |            | 8     |           |  |              | 25    |           |  |   | 120    |   |  |   | 2,703  | 
|                                 
|                                 
|                                 
|                                 
|Capital expenditures              |  |                          | 2,339  |     |  |            |      |           |  |              | 225   |           |  |   | 689    |   |  |   | 3,253  | 

|                                  |  |                          |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------ | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Year ended June 30, 2000
|                                  |  |                         
|                                  |  |                          |        |     |  |            |       |           |  | Trails       |       | Corporate |  |   |        |  
|                                  |  | Campgrounds              |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                          |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                        | 54,226 |     |  | $          | 3,706 |           |  | $            | 2,508 |           |  | $ | 374    |   |  | $ | 60,814 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                          | 5,564  |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 5,564  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                          | 11,009 |     |  |            | 1,862 |           |  |              | (37   | )         |  |   | (7,376 | ) |  |   | 5,458  | 
|                                 
|                                 
|                                 
|                                 
|Identifiable assets               |  |                          | 61,780 |     |  |            | 242   |           |  |              | 312   |           |  |   | 12,181 |   |  |   | 74,515 | 
|                                 
|                                 
|                                 
|                                 
|Depreciation expense              |  |                          | 2,456  |     |  |            | 10    |           |  |              | 17    |           |  |   | 179    |   |  |   | 2,662  | 
|                                 
|                                 
|                                 
|                                 
|Capital expenditures              |  |                          | 1,289  |     |  |            |      |           |  |              | 11    |           |  |   | 22     |   |  |   | 1,322  | 

|                                  |  |                          |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------ | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Year ended June 30, 1999
|                                  |  |                         
|                                  |  |                          |        |     |  |            |       |           |  | Trails       |       | Corporate |  |   |        |  
|                                  |  | Campgrounds              |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                          |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                        | 52,040 |     |  | $          | 3,576 |           |  | $            | 2,271 |           |  | $ | 227    |   |  | $ | 58,114 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                          | 3,959  |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 3,959  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                          | 12,842 |     |  |            | 1,613 |           |  |              | 136   |           |  |   | (6,676 | ) |  |   | 7,915  | 
|                                 
|                                 
|                                 
|                                 
|Identifiable assets               |  |                          | 45,446 |     |  |            | 361   |           |  |              | 322   |           |  |   | 10,675 |   |  |   | 56,804 | 
|                                 
|                                 
|                                 
|                                 
|Depreciation expense              |  |                          | 2,265  |     |  |            | 19    |           |  |              | 17    |           |  |   | 303    |   |  |   | 2,604  | 
|                                 
|                                 
|                                 
|                                 
|Capital expenditures              |  |                          | 1,475  |     |  |            | 4     |           |  |              |      |           |  |   | 1,456  |   |  |   | 2,935  | 

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NOTE 18  INDEMNIFICATION ARRANGEMENTS

Under its By-laws, the Company must indemnify its present and former directors
and officers for the damages and expenses that they incur in connection with
threatened or pending actions, suits or proceedings arising because of their
status as directors and officers, provided that they acted in good faith and in
a manner that they reasonably believed to be in or not opposed to the best
interest of the Company (or with respect to any criminal action or proceeding,
provided that they had no reasonable cause to believe that their conduct was
unlawful). In connection with this indemnification obligation, the Company has
entered into indemnification agreements with its directors and officers.

The Company must advance funds to these individuals to enable them to defend
any such threatened or pending action, suit or proceeding. The Company cannot
release such funds, however, until it receives an undertaking by or on behalf
of the requesting individual to repay the amount if a court of competent
jurisdiction ultimately determines that such individual is not entitled to
indemnification.

NOTE 19  SELECTED QUARTERLY FINANCIAL DATA

The following table summarizes the unaudited consolidated quarterly results of
operations for fiscal 2001 and 2000 (dollars in thousands, except per share
amounts):

|                                               |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        | 
|---------------------------------------------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ |  |  | - | ------ | 
|                                               |  | First   |        | Second  |  | Third   |        | Fourth 
|                                               |  | Quarter |        | Quarter |  | Quarter |        | Quarter
|                                               |  |         |        |         |  |         |        |        
|Fiscal 2001                                    |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        | 
|                                              
|                                              
|                                              
|                                              
|Total revenues                                 |  | $       | 23,310 |         |  | $       | 17,084 |         |  | $ | 17,347 |  |  | $ | 21,655 | 
|                                              
|                                              
|                                              
|                                              
|Total expenses (before taxes)                  |  |         | 20,848 |         |  |         | 15,582 |         |  |   | 15,464 |  |  |   | 21,073 | 
|                                              
|                                              
|                                              
|                                              
|Net income                                     |  |         | 1,470  |         |  |         | 909    |         |  |   | 1,167  |  |  |   | 730    | 
|                                              
|                                              
|                                              
|                                              
|Net income per share  basic                   |  |         | .18    |         |  |         | .11    |         |  |   | .14    |  |  |   | .09    | 
|                                              
|                                              
|                                              
|                                              
|Net income per share  diluted                 |  |         | .17    |         |  |         | .11    |         |  |   | .13    |  |  |   | .09    | 
|                                              
|                                              
|                                              
|                                              
|Shares used to calculate net income per share: |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        | 
|                                              
|                                              
|                                              
|                                              
|Basic                                          |  |         | 8,010  |         |  |         | 8,084  |         |  |   | 8,166  |  |  |   | 8,167  | 
|                                              
|                                              
|                                              
|                                              
|Diluted                                        |  |         | 8,570  |         |  |         | 8,585  |         |  |   | 8,602  |  |  |   | 8,610  | 
|                                              
|                                              
|                                              
|                                              
|Fiscal 2000                                    |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        | 
|                                              
|                                              
|                                              
|                                              
|Total revenues                                 |  | $       | 19,833 |         |  | $       | 15,002 |         |  | $ | 16,004 |  |  | $ | 19,932 | 
|                                              
|                                              
|                                              
|                                              
|Total expenses (before taxes)                  |  |         | 17,696 |         |  |         | 13,526 |         |  |   | 14,511 |  |  |   | 19,580 | 
|                                              
|                                              
|                                              
|                                              
|Net income                                     |  |         | 1,294  |         |  |         | 894    |         |  |   | 868    |  |  |   | 6,193  | 
|                                              
|                                              
|                                              
|                                              
|Net income per share  basic                   |  |         | .16    |         |  |         | .11    |         |  |   | .11    |  |  |   | .78    | 
|                                              
|                                              
|                                              
|                                              
|Net income per share  diluted                 |  |         | .15    |         |  |         | .10    |         |  |   | .10    |  |  |   | .73    | 
|                                              
|                                              
|                                              
|                                              
|Shares used to calculate net income per share: |  |         |        |         |  |         |        |         |  |   |        |  |  |   |        | 
|                                              
|                                              
|                                              
|                                              
|Basic                                          |  |         | 7,983  |         |  |         | 7,978  |         |  |   | 7,981  |  |  |   | 7,981  | 
|                                              
|                                              
|                                              
|                                              
|Diluted                                        |  |         | 8,622  |         |  |         | 8,612  |         |  |   | 8,580  |  |  |   | 8,594  | 

The Companys operations are highly seasonal. The Company receives the
majority of the dues revenue from its members during the winter, which are
recognized as income ratably during the year. However, the Company incurs a
higher level of operating expenses during the summer. In addition, a majority
of the Companys sales and marketing efforts occur during the summer.

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Schedule II

Thousand Trails, Inc. and Subsidiaries
Valuation and Qualifying Accounts
(Dollars in thousands)

|                                  |  |       |         |           |  |            |       |            |  |      |       |  |  |        |       |            |  |   |       | 
|--------------------------------- |  | ----- | ------- | --------- |  | ---------- | ----- | ---------- |  | ---- | ----- |  |  | ------ | ----- | ---------- |  | - | ----- | 
|                                  |  |       |         |           |  | Balance at |       |            |  |      |       |  |  |        |       | Balance at
|Valuation and qualifying accounts |  | Year  |         | beginning |  |            |       |            |  |      |       |  |  | end of
|deducted from assets              |  | ended |         | of year   |  | Additions  |       | Deductions |  | year
|                                  |  |       |         |           |  |            |       |            |  |     
|Allowance for doubtful accounts   |  |       | 6/30/01 |           |  | $          | 1,928 |            |  | $    | 781   |  |  | $      | 420   |            |  | $ | 2,289 | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |       | 6/30/00 |           |  |            | 1,027 |            |  |      | 2,664 |  |  |        | 1,763 | (a)        |  |   | 1,928 | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |       | 6/30/99 |           |  |            | 2,136 |            |  |      | 186   |  |  |        | 1,295 | (a)        |  |   | 1,027 | 
|                                 
|                                 
|                                 
|                                 
|Allowance for uncollectible       |  |       | 6/30/01 |           |  |            | 2,344 |            |  |      | 2,684 |  |  |        | 2,553 |            |  |   | 2,475 | 
|                                 
|                                 
|                                 
|                                 
|dues receivable                   |  |       | 6/30/00 |           |  |            | 2,599 |            |  |      | 3,138 |  |  |        | 3,393 |            |  |   | 2,344 | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |       | 6/30/99 |           |  |            | 3,429 |            |  |      | 1,607 |  |  |        | 2,437 |            |  |   | 2,599 | 
|                                 
|                                 
|                                 
|                                 
|Allowance for interest discount,  |  |       | 6/30/01 |           |  |            |      |            |  |      |      |  |  |        |      |            |  |   |      | 
|                                 
|                                 
|                                 
|                                 
|collection costs and valuation    |  |       | 6/30/00 |           |  |            | 229   |            |  |      |      |  |  |        | 229   |            |  |   |      | 
|                                 
|                                 
|                                 
|                                 
|discount                          |  |       | 6/30/99 |           |  |            | 546   |            |  |      |      |  |  |        | 317   |            |  |   | 229   | 
|                                 
|                                 
|                                 
|                                 
|Deferred tax valuation allowance  |  |       | 6/30/01 |           |  |            |      |            |  |      |      |  |  |        |      |            |  |   |      | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |       | 6/30/00 |           |  |            | 5,807 |            |  |      |      |  |  |        | 5,807 | (b)        |  |   | 1     | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |       | 6/30/99 |           |  |            | 6,392 |            |  |      |      |  |  |        | 585   | (b)        |  |   | 5,807 | 



---

|(a) |  | Includes reductions in the allowance for doubtful accounts of $251 and
$886 in fiscal 2000 and 1999, respectively.   
|--- |  | ---------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(b) |  | Includes reductions in the deferred tax valuation allowance of $5,807
and $401 in fiscal 2000 and 1999, respectively.

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

None.

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Part III




Item 10. Directors and Executive Officers of the Registrant

The information required by this item will be included under the captions
Proposal I  Election of Directors, Board of Directors, Executive
Officers, and Section 16(a) Beneficial Ownership Reporting Compliance in the
Registrants definitive Proxy Statement for the Registrants 2001 Annual
Meeting of Stockholders, which will be filed with the SEC pursuant to
Regulation 14A, and is hereby incorporated by reference.




Item 11. Executive Compensation

The information required by this item will be included under the caption
Executive Compensation in the Registrants definitive Proxy Statement for the
Registrants 2001 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.




Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item will be included under the caption
Security Ownership in the Registrants definitive Proxy Statement for the
Registrants 2001 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.




Item 13. Certain Relationships and Related Transactions

The information required by this item will be included under the caption
Certain Transactions in the Registrants definitive Proxy Statement for the
Registrants 2001 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.

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Part IV




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



|(a) |  | Financial Statements
|--- |  | --------------------

The following documents are filed as part of this Report:



|    |  | Report of Independent Public Accounts for the years ended June 30, 2001,
2000 and 1999.         
|--- |  | ------------------------------------------------------------------------------------------------
|   
|    |  | Consolidated Balance Sheets as of June 30, 2001 and 2000.                                       
|   
|    |  | Consolidated Statements of Operations for the years ended June 30, 2001,
2000 and 1999.         
|   
|    |  | Consolidated Statements of Shareholders Equity for the years ended June
30, 2001, 2000 and 1999
|   
|    |  | Consolidated Statements of Cash Flows for the years ended June 30, 2001,
2000 and 1999.         
|   
|    |  | Notes to Consolidated Financial Statements.                                                     
|   
|    |  | Schedule II  Valuation and Qualifying Accounts.                                                
|   
|(b) |  | Reports on Form 8-K                                                                             

The Company did not file any Current Reports on Form 8-K during the quarter
ended
June 30, 2001.



|(c) |  | Exhibits
|--- |  | --------

The following documents are filed or incorporated by reference as exhibits to
this report:

|        |  |                                                                                                                                                                                                                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                            
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                            
|2.1     |  | Agreement and Plan of Merger, dated as of October 1, 1996, between
the Company and USTrails, Inc. (predecessor in interest to the
Company) (incorporated by reference to the proxy
statement/prospectus filed with the SEC on October 3, 1996 as part
of the Registration Statement on Form S-4, Registration Statement
No. 333-13339, File No. 1-14645 (the S-4 Registration
Statement).
|       
|       
|       
|       
|2.2     |  | Stock Purchase Agreement, dated November 30, 1999, between the
Company as Purchaser and Bernard O. Albertsen, et. al.,as Sellers
(incorporated by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K filed with the SEC on January 3, 2000, File No.
1-14645).                                                                                                           

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|        |  |                                                                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                              
|       
|       
|       
|       
|3.1     |  | Restated Certificate of Incorporation of the Company (incorporated by
reference to the proxy statement/prospectus filed with the SEC on
October 3, 1996 as part of the S-4 Registration Statement).                                                                                                                                          
|       
|       
|       
|       
|3.2     |  | Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Form 8-B Filed by the Company with
the SEC on
November 27, 1996, File No. 1-14645).                                                                                                                                                             
|       
|       
|       
|       
|4.1     |  | Registration Rights Agreement, dated as of June 12, 1992, regarding
the Companys Additional Series Secured Notes and the shares of
Common Stock issuable upon the exercise of certain warrants
(incorporated by reference to Exhibit 4.4 of the Companys Current
Report on Form 8-K filed with the SEC on June 25, 1992,
File No. 1-14645).
|       
|       
|       
|       
|10.1    |  | Loan Agreement, dated as of July 1, 2001, between the Company and
Union Bank of California, N. A.                                                                                                                                                                                                                                            
|       
|       
|       
|       
|10.2    |  | The Companys 1991 Employee Stock Incentive Plan (incorporated by
reference to Exhibit 10.40 to the Companys Annual Report on Form
10-K for the year ended June 30, 1992, File No. 1-14645).                                                                                                                                                
|       
|       
|       
|       
|10.3    |  | Amendment No. 1 to the Companys 1991 Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.8 to the Companys Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, File
No. 1-14645).                                                                                                                   
|       
|       
|       
|       
|10.4    |  | The Companys 1993 Stock Option and Restricted Stock Purchase Plan
(incorporated by reference to Exhibit 10.22 to the Companys
Registration Statement No. 33-73284 of Form S-2, originally filed
with SEC on December 22, 1993, File No. 1-14645).                                                                                          
|       
|       
|       
|       
|10.5    |  | Amendment No. 1 to the Companys 1993 Stock Option and Restricted
Stock Purchase Plan (incorporated by reference to Exhibit 10.9 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-14645).                                                                                                 
|       
|       
|       
|       
|10.6    |  | The Companys 1993 Director Stock Option Plan (incorporated by
reference to Exhibit 10.23 to the Companys Registration Statement
No. 33-73284 of Form S-2, originally filed with the SEC on December
22, 1993, File No. 1-14645).                                                                                                           
|       
|       
|       
|       
|10.7    |  | Amendment No. 1 to the Companys 1993 Director Stock Option Plan
(incorporated by reference to Exhibit 10.10 to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, File No. 1-14645).                                                                                                                     

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.8    |  | The Companys 1999 Stock Option and Restricted Stock Purchase Plan
(incorporated by reference to Exhibit 10.12 to the Companys Annual
Report on Form 10-K for the year ended June 30, 2000, File No.
1-14645).                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.9    |  | Stock Option Agreement, dated as of August 1, 1996 between the
Company and William J. Shaw (incorporated by reference to Exhibit
10.26 to the Form 8-B filed by the Company with the SEC on November
27, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.10   |  | Assumptions of Obligations, dated as of November 20, 1996, by the
Company assuming the obligations of USTrails Inc. 1991 Employee
Stock Incentive Plan, as amended; the USTrails Inc. 1993 Stock
Option and Restricted Stock Purchase Plan, as amended; the USTrails
Inc. 1993 Director Stock Option plan, as amended; and the Stock
Option Agreement, dated as of August 1, 1996, between USTrails and
William J. Shaw (incorporated by reference to Exhibit 10.27 to the
Form 8-B filed by the Company with the SEC on November 27, 1996,
File NO. 1-14645).
|       
|       
|       
|       
|10.11   |  | Employment Agreement dated as of May 11, 1995, between the Company
and William J. Shaw, and related Standby Letter of Credit, dated
September 22, 1995, issued by the Bank of California, N.A., for the
benefit of Mr. Shaw, and Letter, dated September 20, 1995, from the
Wyatt Company, regarding Mr. Shaws Employment Agreement
(incorporated by reference to Exhibit 10.25 to the Companys Annual
Report on Form 10-K for the year ended June 30, 1995, File No.
1-14645).                                                                             
|       
|       
|       
|       
|10.12   |  | Letter dated June 29, 1996, from William J. Shaw to the Company,
regarding Mr. Shaws election to receive the Enterprise Bonus
payable under his Employment Agreement, and Letter, dated July 8,
1996, from Deloitte & Touché LLP, regarding the computation of the
amount of the Enterprise Bonus payable to Mr. Shaw under his
Employment Agreement (incorporated by reference to Exhibit 10.30 to
the Companys Annual Report on Form 10-K for the year ended June 30,
1996, File No. 1-14645).                                                            
|       
|       
|       
|       
|10.13   |  | Amendment dated as of December 10, 1998 to the Employment Agreement
between the Company and William J. Shaw (incorporated by reference
to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for
the quarter ended December 31, 1998, File No. 1-14645).                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.14   |  | Amended and Restated Employment Agreement, dated as of September 10,
1992, among the Company, NACO, RPI, and William F. Dawson
(incorporated by reference to Exhibit 10.49 to the Companys Annual
Report on Form 10-K for the year ended June 30, 1993, File No.
1-14645), and Letter, dated December 1, 1995, from RPI to William F.
Dawson, regarding certain compensation arrangements (incorporated by
reference to Exhibit 10.4 to the Companys Quarterly Report on Form
10-Q for the quarter ended December 31, 1995, File
No. 1-14645).              

Page 73



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.15   |  | Amended and Restated Employment Agreement, dated as of December 2,
1992, among the Company, NACO, and Walter B. Jaccard (incorporated
by reference to Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended December 31, 1992, File No.
1-14645), and amendment dated November 15, 1994 (incorporated by
reference to Exhibit 10.30 to the Companys Annual Report on Form
10-K for the year ended June 30, 1995, File No. 1-14645), and
amendment dated December 7, 1995 (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report for the quarter ended
December 31, 1995, File No. 1-14645).
|       
|       
|       
|       
|10.16   |  | Employment Agreement, dated as of August 31, 1995, between the
Company and R. Gerald Gelinas (incorporated by reference to Exhibit
10.32 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1995, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|10.17   |  | Employment Agreement, dated as of October 15, 1999, between the
Company and Bryan D. Reed (incorporated by reference to Exhibit 10.1
to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                                                                              
|       
|       
|       
|       
|10.18   |  | Indemnification Agreement, dated as of February 18, 1992, between
the Company and Andrew Boas (incorporated by reference to Exhibit
10.23 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 1-14645), and schedule of substantially
identical Indemnification Agreements (incorporated by reference to
Exhibit 10.33 to the Companys Annual Report on Form 10-K for the
year ended June 30, 1995, File No. 1-14645).                                                                                                                                                                                    
|       
|       
|       
|       
|10.19   |  | Indemnification Agreement, dated as of September 1, 1995, between
Trails and William J. Shaw, and schedule of substantially identical
Indemnification Agreements (incorporated by reference to Exhibit
10.36 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                 
|       
|       
|       
|       
|10.20   |  | Indemnification Agreement, dated as of September 1, 1995, between
NACO and William J. Shaw, and schedule of substantially identical
Indemnification Agreements (incorporated by reference to Exhibit
10.37 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.21   |  | Indemnification Agreement, dated as of May 8, 1991, between the
Company and Donald W. Hair, and schedule of substantially identical
Indemnification Agreements (incorporated by reference to Exhibit
10.38 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.22   |  | Indemnification Agreement, dated as of November 20, 1996, between
the Company and William J. Shaw, and schedule of substantially
identical Indemnification Agreements (incorporated by reference to
Exhibit 10.39 to the Companys Registration Statement No. 333-19357
on Form S-1, Originally filed with the SEC on January 7, 1997, File
No. 1-14645).                                                                                                                                                                                                                                                                                     

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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                           
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.23   |  | Indemnification Agreement, dated as of October 15, 1999, between the
Company and Bryan D. Reed (incorporated by reference to Exhibit 10.2
to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-14645).                                                     
|       
|       
|       
|       
|10.24   |  | Trust Agreement, dated as of July 22, 1992, establishing the
Companys Flexible Benefits Plant Trust Fund (incorporated by
reference to Exhibit 10.45 to the Companys Annual Report on Form
10-K for the year ended June 30, 1992, File No. 1-14645).                                                    
|       
|       
|       
|       
|10.25   |  | Thousand Trails, Inc. Employee Savings Trust, dated as of July 1,
1994, between the Company and its subsidiaries and the Bank of
California, N.A., as trustee (incorporated by reference to Exhibit
10.42 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1994, File No. 1-14645).
|       
|       
|       
|       
|10.26   |  | Agreement for the Thousand Trails, Inc. Non-Qualified Deferred
Compensation Plan, effective April 23, 1998 (incorporated by
reference to Exhibit 10.56 to the Companys Annual Report on Form
10-K for the year ended June 30, 1998, File No. 1-14645).                                                   
|       
|       
|       
|       
|10.27   |  | Agreement for the Thousand Trails, Inc. Employee Stock Purchase
Plan, effective as of August 1, 1999 (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-8,
filed with the SEC on July 22, 1999).                                                                 
|       
|       
|       
|       
|10.28   |  | Tax Allocation Agreement, dated as of September 10, 1992, between
the Company and RPI (incorporated by reference to Exhibit 99.6 to
the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, File No. 1-14645).                                                              
|       
|       
|       
|       
|10.29   |  | Tax Allocation Agreement, dated as of July 1, 1991, between the
Company and NACO (incorporated by reference to Exhibit 10.44 to the
Companys Annual Report on Form 10-K for the year ended June 30,
1994, File No. 1-14645).                                                                             
|       
|       
|       
|       
|10.30   |  | Tax Allocation Agreement, dated as of July 1, 1991, between the
Company and Wilderness Management (incorporated by reference to
Exhibit 10.46 to the Companys Annual Report on Form 10-K for the
year ended June 30, 1994, File No. 1-14645).                                                            
|       
|       
|       
|       
|10.31   |  | Stockholder Agreement, dated as of April 5, 1999, between the
Company and Carl Marks Management Company, L.P et. al. (incorporated
by reference to Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, File
No. 1-14645).                                   
|       
|       
|       
|       
|10.32   |  | Sample form of current Membership Contract.                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|11.1    |  | Statement re: Computation of Per Share Earnings.                                                                                                                                                                                                                                                          
|       
|       
|       
|       
|22.1    |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|23.1    |  | Consent of Arthur Andersen LLP.                                                                                                                                                                                                                                                                           

Page 75



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##### Table of Contents






SIGNATURES

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

|                         |  |                                                                                                          
|------------------------ |  | ---------------------------------------------------------------------------------------------------------
|                         |  | Thousand Trails, Inc.
(Registrant)                                                                       
|                        
|Date: September 24, 2001 |  | By:      /s/ William J. ShawWilliam J. Shaw
Chairman of the Board, President,
and Chief Executive Officer
|                        
|Date: September 24, 2001 |  | By:      /s/ Bryan D. ReedBryan D. Reed
Chief Financial and Accounting Officer                           

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

|                                       |  |                         |  |                   
|-------------------------------------- |  | ----------------------- |  | ------------------
|Signature                              |  | Title                   |  | Date              
|                                       |  |                         |  |                   
|/s/ Andrew M. BoasAndrew M. Boas       |  | Director                |  | September 24, 2001
|                                      
|/s/ William P. KovacsWilliam P. Kovacs |  | Director                |  | September 24, 2001
|                                      
|/s/ Donald R. LeopoldDonald R. Leopold |  | Director                |  | September 24, 2001
|                                      
|/s/ H. Sean MathisH. Sean Mathis       |  | Director                |  | September 24, 2001
|                                      
|/s/ Douglas K. NelsonDouglas K. Nelson |  | Director                |  | September 24, 2001
|                                      
|/s/ William J. ShawWilliam J. Shaw     |  | Chairman of
  the Board |  | September 24, 2001

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##### Table of Contents



Index to Exhibits

|        |  |                                                                                                                                                                                                                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                            
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                            
|2.1     |  | Agreement and Plan of Merger, dated as of October 1, 1996, between
the Company and USTrails, Inc. (predecessor in interest to the
Company) (incorporated by reference to the proxy
statement/prospectus filed with the SEC on October 3, 1996 as part
of the Registration Statement on Form S-4, Registration Statement
No. 333-13339, File No. 1-14645 (the S-4 Registration
Statement).
|       
|       
|       
|       
|2.2     |  | Stock Purchase Agreement, dated November 30, 1999, between the
Company as Purchaser and Bernard O. Albertsen, et. al.,as Sellers
(incorporated by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K filed with the SEC on January 3, 2000, File No.
1-14645).                                                                                                           
|       
|       
|       
|       
|3.1     |  | Restated Certificate of Incorporation of the Company (incorporated
by reference to the proxy statement/prospectus filed with the SEC
on October 3, 1996 as part of the S-4 Registration Statement).                                                                                                                                                                                        
|       
|       
|       
|       
|3.2     |  | Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Form 8-B Filed by the Company with
the SEC on
November 27, 1996, File No. 1-14645).                                                                                                                                                                                                           
|       
|       
|       
|       
|4.1     |  | Registration Rights Agreement, dated as of June 12, 1992,
regarding the Companys Additional Series Secured Notes and the
shares of Common Stock issuable upon the exercise of certain
warrants (incorporated by reference to Exhibit 4.4 of the
Companys Current Report on Form 8-K filed with the SEC on June
25, 1992,
File No. 1-14645).                                              
|       
|       
|       
|       
|10.1    |  | Loan Agreement, dated as of July 1, 2001, between the Company and
Union Bank of California, N. A.                                                                                                                                                                                                                                                                                          
|       
|       
|       
|       
|10.2    |  | The Companys 1991 Employee Stock Incentive Plan (incorporated by
reference to Exhibit 10.40 to the Companys Annual Report on Form
10-K for the year ended June 30, 1992, File No. 1-14645).                                                                                                                                                                                              
|       
|       
|       
|       
|10.3    |  | Amendment No. 1 to the Companys 1991 Employee Stock Incentive
Plan (incorporated by reference to Exhibit 10.8 to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, File No. 1-14645).                                                                                                                                                                 
|       
|       
|       
|       
|10.4    |  | The Companys 1993 Stock Option and Restricted Stock Purchase Plan
(incorporated by reference to Exhibit 10.22 to the Companys
Registration Statement No. 33-73284 of Form S-2, originally filed
with SEC on December 22, 1993, File No. 1-14645).                                                                                                                                        
|       
|       
|       
|       
|10.5    |  | Amendment No. 1 to the Companys 1993 Stock Option and Restricted
Stock Purchase Plan (incorporated by reference to Exhibit 10.9 to
the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-14645).                                                                                                                                               
|       
|       
|       
|       
|10.6    |  | The Companys 1993 Director Stock Option Plan (incorporated by
reference to Exhibit 10.23 to the Companys Registration Statement
No. 33-73284 of Form S-2, originally filed with the SEC on December
22, 1993, File No. 1-14645).                                                                                                                                                         
|       
|       
|       
|       
|10.7    |  | Amendment No. 1 to the Companys 1993 Director Stock Option Plan
(incorporated by reference to Exhibit 10.10 to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, File No. 1-14645).                                                                                                                                                                   





---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.8    |  | The Companys 1999 Stock Option and Restricted Stock Purchase Plan
(incorporated by reference to Exhibit 10.12 to the Companys Annual
Report on Form 10-K for the year ended June 30, 2000, File No.
1-14645).                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.9    |  | Stock Option Agreement, dated as of August 1, 1996 between the
Company and William J. Shaw (incorporated by reference to Exhibit
10.26 to the Form 8-B filed by the Company with the SEC on November
27, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.10   |  | Assumptions of Obligations, dated as of November 20, 1996, by the
Company assuming the obligations of USTrails Inc. 1991 Employee
Stock Incentive Plan, as amended; the USTrails Inc. 1993 Stock
Option and Restricted Stock Purchase Plan, as amended; the USTrails
Inc. 1993 Director Stock Option plan, as amended; and the Stock
Option Agreement, dated as of August 1, 1996, between USTrails and
William J. Shaw (incorporated by reference to Exhibit 10.27 to the
Form 8-B filed by the Company with the SEC on November 27, 1996,
File NO. 1-14645).
|       
|       
|       
|       
|10.11   |  | Employment Agreement dated as of May 11, 1995, between the Company
and William J. Shaw, and related Standby Letter of Credit, dated
September 22, 1995, issued by the Bank of California, N.A., for the
benefit of Mr. Shaw, and Letter, dated September 20, 1995, from the
Wyatt Company, regarding Mr. Shaws Employment Agreement
(incorporated by reference to Exhibit 10.25 to the Companys Annual
Report on Form 10-K for the year ended June 30, 1995, File No.
1-14645).                                                                             
|       
|       
|       
|       
|10.12   |  | Letter dated June 29, 1996, from William J. Shaw to the Company,
regarding Mr. Shaws election to receive the Enterprise Bonus
payable under his Employment Agreement, and Letter, dated July 8,
1996, from Deloitte & Touché LLP, regarding the computation of the
amount of the Enterprise Bonus payable to Mr. Shaw under his
Employment Agreement (incorporated by reference to Exhibit 10.30 to
the Companys Annual Report on Form 10-K for the year ended June 30,
1996, File No. 1-14645).                                                            
|       
|       
|       
|       
|10.13   |  | Amendment dated as of December 10, 1998 to the Employment Agreement
between the Company and William J. Shaw (incorporated by reference
to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for
the quarter ended December 31, 1998, File No. 1-14645).                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.14   |  | Amended and Restated Employment Agreement, dated as of September 10,
1992, among the Company, NACO, RPI, and William F. Dawson
(incorporated by reference to Exhibit 10.49 to the Companys Annual
Report on Form 10-K for the year ended June 30, 1993, File No.
1-14645), and Letter, dated December 1, 1995, from RPI to William F.
Dawson, regarding certain compensation arrangements (incorporated by
reference to Exhibit 10.4 to the Companys Quarterly Report on Form
10-Q for the quarter ended December 31, 1995, File
No. 1-14645).              





---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.15   |  | Amended and Restated Employment Agreement, dated as of December 2,
1992, among the Company, NACO, and Walter B. Jaccard (incorporated
by reference to Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended December 31, 1992, File No.
1-14645), and amendment dated November 15, 1994 (incorporated by
reference to Exhibit 10.30 to the Companys Annual Report on Form
10-K for the year ended June 30, 1995, File No. 1-14645), and
amendment dated December 7, 1995 (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report for the quarter ended
December 31, 1995, File No. 1-14645).
|       
|       
|       
|       
|10.16   |  | Employment Agreement, dated as of August 31, 1995, between the
Company and R. Gerald Gelinas (incorporated by reference to Exhibit
10.32 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1995, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|10.17   |  | Employment Agreement, dated as of October 15, 1999, between the
Company and Bryan D. Reed (incorporated by reference to Exhibit 10.1
to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                                                                              
|       
|       
|       
|       
|10.18   |  | Indemnification Agreement, dated as of February 18, 1992, between
the Company and Andrew Boas (incorporated by reference to Exhibit
10.23 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 1-14645), and schedule of substantially
identical Indemnification Agreements (incorporated by reference to
Exhibit 10.33 to the Companys Annual Report on Form 10-K for the
year ended June 30, 1995, File No. 1-14645).                                                                                                                                                                                    
|       
|       
|       
|       
|10.19   |  | Indemnification Agreement, dated as of September 1, 1995, between
Trails and William J. Shaw, and schedule of substantially identical
Indemnification Agreements (incorporated by reference to Exhibit
10.36 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                 
|       
|       
|       
|       
|10.20   |  | Indemnification Agreement, dated as of September 1, 1995, between
NACO and William J. Shaw, and schedule of substantially identical
Indemnification Agreements (incorporated by reference to Exhibit
10.37 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.21   |  | Indemnification Agreement, dated as of May 8, 1991, between the
Company and Donald W. Hair, and schedule of substantially identical
Indemnification Agreements (incorporated by reference to Exhibit
10.38 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 1-14645).                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.22   |  | Indemnification Agreement, dated as of November 20, 1996, between
the Company and William J. Shaw, and schedule of substantially
identical Indemnification Agreements (incorporated by reference to
Exhibit 10.39 to the Companys Registration Statement No. 333-19357
on Form S-1, Originally filed with the SEC on January 7, 1997, File
No. 1-14645).                                                                                                                                                                                                                                                                                     





---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                           
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.23   |  | Indemnification Agreement, dated as of October 15, 1999, between the
Company and Bryan D. Reed (incorporated by reference to Exhibit 10.2
to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-14645).                                                     
|       
|       
|       
|       
|10.24   |  | Trust Agreement, dated as of July 22, 1992, establishing the
Companys Flexible Benefits Plant Trust Fund (incorporated by
reference to Exhibit 10.45 to the Companys Annual Report on Form
10-K for the year ended June 30, 1992, File No. 1-14645).                                                    
|       
|       
|       
|       
|10.25   |  | Thousand Trails, Inc. Employee Savings Trust, dated as of July 1,
1994, between the Company and its subsidiaries and the Bank of
California, N.A., as trustee (incorporated by reference to Exhibit
10.42 to the Companys Annual Report on Form 10-K for the year ended
June 30, 1994, File No. 1-14645).
|       
|       
|       
|       
|10.26   |  | Agreement for the Thousand Trails, Inc. Non-Qualified Deferred
Compensation Plan, effective April 23, 1998 (incorporated by
reference to Exhibit 10.56 to the Companys Annual Report on Form
10-K for the year ended June 30, 1998, File No. 1-14645).                                                   
|       
|       
|       
|       
|10.27   |  | Agreement for the Thousand Trails, Inc. Employee Stock Purchase
Plan, effective as of August 1, 1999 (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-8,
filed with the SEC on July 22, 1999).                                                                 
|       
|       
|       
|       
|10.28   |  | Tax Allocation Agreement, dated as of September 10, 1992, between
the Company and RPI (incorporated by reference to Exhibit 99.6 to
the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, File No. 1-14645).                                                              
|       
|       
|       
|       
|10.29   |  | Tax Allocation Agreement, dated as of July 1, 1991, between the
Company and NACO (incorporated by reference to Exhibit 10.44 to the
Companys Annual Report on Form 10-K for the year ended June 30,
1994, File No. 1-14645).                                                                             
|       
|       
|       
|       
|10.30   |  | Tax Allocation Agreement, dated as of July 1, 1991, between the
Company and Wilderness Management (incorporated by reference to
Exhibit 10.46 to the Companys Annual Report on Form 10-K for the
year ended June 30, 1994, File No. 1-14645).                                                            
|       
|       
|       
|       
|10.31   |  | Stockholder Agreement, dated as of April 5, 1999, between the
Company and Carl Marks Management Company, L.P et. al. (incorporated
by reference to Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, File
No. 1-14645).                                   
|       
|       
|       
|       
|10.32   |  | Sample form of current Membership Contract.                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|11.1    |  | Statement re: Computation of Per Share Earnings.                                                                                                                                                                                                                                                          
|       
|       
|       
|       
|22.1    |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|23.1    |  | Consent of Arthur Andersen LLP.